WEBVTT - Stocks Extend September Rally as Gold Tops $3,800 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 --> 0:00:27.160 us live on YouTube. 0:00:27.440 --> 0:00:30.800 Joining us right now for a brief I believe she 0:00:30.880 --> 0:00:34.279 isn't shut down right now, She's started to trace data questions. 0:00:34.560 --> 0:00:36.960 Joined us as well in the blur of all this, 0:00:37.280 --> 0:00:41.440 in the articles, the rumors, the gossip, Henrietta, what are 0:00:41.479 --> 0:00:43.159 you focused on today? 0:00:44.640 --> 0:00:48.880 Coome Oneing guys, I really am focused on the two senators, 0:00:49.000 --> 0:00:52.840 Leader thone and Leader Schumer. The reality is, of all 0:00:52.920 --> 0:00:55.480 the operators in DC right now, they're the only ones 0:00:55.520 --> 0:00:59.880 that actually have the physical requirement to be Bipartisanan's going 0:00:59.920 --> 0:01:03.400 to anywhere between ten and twenty Democratic votes to keep 0:01:03.560 --> 0:01:06.280 his chamber open and the government open. And I think 0:01:06.319 --> 0:01:09.119 that means those two are the most important people in 0:01:09.160 --> 0:01:09.520 the room. 0:01:09.680 --> 0:01:11.640 I look forward to them getting together at some point. 0:01:11.760 --> 0:01:14.120 The Shoomer have the Democrats behind him or does they 0:01:14.120 --> 0:01:15.199 need to watch us back? 0:01:16.200 --> 0:01:18.399 I mean, to the extent that Democrats can line up 0:01:18.440 --> 0:01:22.880 behind anybody. Right now, I think Schumer is moving forward 0:01:22.959 --> 0:01:26.800 knowing that we're he to divert course and just cave 0:01:27.120 --> 0:01:27.520 right now. 0:01:27.560 --> 0:01:28.720 That would be disastrous. 0:01:28.920 --> 0:01:31.559 So the base of the party is pushing him towards 0:01:31.560 --> 0:01:34.920 his shutdown. Same especially with the House side. There's a 0:01:34.959 --> 0:01:38.000 real disparity between House and Senate staff right now, where 0:01:38.000 --> 0:01:40.200 House members are gung ho on a shutdown and the 0:01:40.240 --> 0:01:44.040 Senators are more hopeful that we can keep things open. 0:01:44.080 --> 0:01:47.080 But that's the usual dynamic. The House is a more 0:01:47.480 --> 0:01:48.639 rebel rouse sea bunch. 0:01:50.000 --> 0:01:52.919 Your odds right now are seventy percent that the government 0:01:53.000 --> 0:01:57.240 will shut down in midnight September thirtieth. If that happens, Henriette, 0:01:57.760 --> 0:02:01.600 is it worth ascribing blamed one party? Does any party care? 0:02:03.760 --> 0:02:06.200 I think that will play the blame game. 0:02:06.280 --> 0:02:08.720 You can see the polling shows that Republicans are going 0:02:08.760 --> 0:02:10.840 to blame Democrats, Diesel blame ours. 0:02:11.000 --> 0:02:12.760 Independents are relatively split. 0:02:12.880 --> 0:02:16.000 But the bottom line is the majority party is the 0:02:16.040 --> 0:02:18.360 Republican Conference. They own the House, the Senate, and the 0:02:18.360 --> 0:02:22.400 White House. So shutting down is going to require bipartisanship. 0:02:22.400 --> 0:02:25.200 Out of the Senate, that means that the senators are 0:02:25.200 --> 0:02:26.519 the ones that are most important. 0:02:27.480 --> 0:02:29.600 I think Democrats are. 0:02:29.560 --> 0:02:31.760 Going to be really upset unless they get some sort 0:02:31.800 --> 0:02:34.440 of a concession. And this time Schumer's illustrating that they're 0:02:34.480 --> 0:02:36.520 not going to fold the way that they usually do, 0:02:36.600 --> 0:02:39.400 and they're deciding that healthcare subsidies are really the fight 0:02:39.520 --> 0:02:42.360 to stand on right now. What's interesting to me is 0:02:42.360 --> 0:02:45.480 that they're not migrating to any of the broader issues 0:02:45.520 --> 0:02:48.920 with the Trump administration, especially the one that's most impactful 0:02:48.960 --> 0:02:51.880 in polling data to the American public, which is opposition 0:02:52.000 --> 0:02:56.480 to the tariffs, that is widespread inflation prices, the economy, 0:02:56.560 --> 0:02:59.639 or where Trump is now polling materially underwater, which is 0:02:59.639 --> 0:03:03.320 a face from his election win. And I think that's 0:03:03.320 --> 0:03:06.240 something that the Democratic Party could very easily seize upon. 0:03:06.480 --> 0:03:09.960 But they're not doing that. They're focusing solely on healthcare. 0:03:10.840 --> 0:03:14.960 So if we get a shutdown, is there expectation how 0:03:15.000 --> 0:03:16.760 long it may last? Is this going to be something 0:03:16.800 --> 0:03:18.000 that people are going to really feel? 0:03:19.000 --> 0:03:20.440 Yeah, that's a good question, I would say. 0:03:20.480 --> 0:03:22.400 As a former staffer, I know that you get paid 0:03:22.400 --> 0:03:26.000 every other Friday, and so there is a seven hundred 0:03:26.000 --> 0:03:29.280 and fifty thousand person furlough announcement that's going to go 0:03:29.320 --> 0:03:31.560 out and a lot of those folks are paid every 0:03:31.600 --> 0:03:35.240 other Friday, so it might sound trite, but for a 0:03:35.280 --> 0:03:37.720 lot of these members, these are there individual staffers, and 0:03:37.720 --> 0:03:39.560 if they're going to miss a pace cycle on Friday, 0:03:39.560 --> 0:03:43.400 October tenth, that becomes a problem, especially Saturday, Sunday, Monday, 0:03:43.560 --> 0:03:45.440 when they've now gone three days without a pay stump. 0:03:45.480 --> 0:03:48.120 And we're not high paid workers up on the hills. 0:03:48.200 --> 0:03:51.240 So it's not just those guys, it's people across the country. 0:03:51.320 --> 0:03:53.400 You know, it's national Henry. 0:03:53.600 --> 0:03:55.880 This came up this weekend. Let me just ask it, 0:03:55.920 --> 0:04:00.280 with great respect for your encyclopedic knowledge of Capital Hill. 0:04:01.080 --> 0:04:05.160 Are we running a parliamentary government? Is it really? Prime 0:04:05.200 --> 0:04:06.080 Minister Trump? 0:04:07.720 --> 0:04:10.160 Yeah, I mean I think the president we if and 0:04:10.200 --> 0:04:12.680 when we shut down. The difference here is that he 0:04:12.760 --> 0:04:17.440 has demonstrated a clear willingness to use his authority to 0:04:17.680 --> 0:04:19.720 any extreme that he can come up with, and Russ 0:04:19.760 --> 0:04:22.920 Bott is reportedly having the time of his life right now. 0:04:23.120 --> 0:04:26.760 I think the shutdown, the fact that Congress has ceded 0:04:27.080 --> 0:04:30.800 control and authority over taxation is wild. And indeed, the 0:04:30.800 --> 0:04:33.400 Trump administration even made the argument to the Supreme Court 0:04:33.440 --> 0:04:37.560 recently that by not voting to repeal the president's International 0:04:37.600 --> 0:04:41.360 Economic Emergency power tariffs. They were actually giving him the 0:04:41.400 --> 0:04:44.760 authority to tariff or to tax the American public and 0:04:45.040 --> 0:04:46.720 correct me if I'm wrong, but I'm pretty sure we 0:04:46.800 --> 0:04:47.920 fought the British over this one. 0:04:48.080 --> 0:04:48.279 Phil. 0:04:48.520 --> 0:04:48.960 Yeah. 0:04:49.040 --> 0:04:52.840 Yeah, it started in Brooklyn andreetta give us some sense 0:04:52.880 --> 0:04:56.599 of admirals and generals flying in to meet, and I 0:04:56.600 --> 0:04:59.000 guess now the President is going to show up as well, 0:04:59.400 --> 0:05:02.000 discuss it. 0:05:02.040 --> 0:05:05.280 Seems like a pretty good campaign video to me. 0:05:05.800 --> 0:05:07.680 My understanding is that it's going to be recorded. 0:05:07.839 --> 0:05:12.960 It's going to be you know, workshops, photoshopped, photop set out. 0:05:13.240 --> 0:05:15.640 I saw one report that said it's a photo app. 0:05:15.680 --> 0:05:21.960 You agree with that? Yes, all right, I guess this 0:05:22.040 --> 0:05:26.200 is I feel like angry beaversa Nickelodeon. This is nuts. 0:05:26.279 --> 0:05:29.400 This is not a trace. Thank you so much, greatly 0:05:29.480 --> 0:05:33.719 appreciate it. Stay with us. More from Bloomberg Surveillance coming 0:05:33.800 --> 0:05:34.800 up after this. 0:05:42.040 --> 0:05:45.640 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:05:45.680 --> 0:05:48.880 weekday afternoons from seven to ten am Eastern Listen on 0:05:48.920 --> 0:05:52.599 Applecarplay and Android Auto with the Bloomberg Business app, or 0:05:52.760 --> 0:05:54.240 watch us live on YouTube. 0:05:54.480 --> 0:05:58.040 Conversation of the Day for those clipping coupons, James karen Cio, 0:05:58.160 --> 0:06:02.520 process of solutions, More Stanley. Okay, you walk in, you say, hey, stupid, 0:06:02.680 --> 0:06:05.159 look at the five year total return on bonds. I 0:06:05.240 --> 0:06:09.080 took a big index like bond fun flat. But if 0:06:09.120 --> 0:06:12.120 you come in even three years you get a legit 0:06:12.320 --> 0:06:15.839 six point eight percent total return. Where we're going to 0:06:15.839 --> 0:06:19.240 be in twelve months if the marketing machine of Wall Street, 0:06:19.400 --> 0:06:22.640 not including Morgan Stanley, is going to be saying, OMG, 0:06:22.880 --> 0:06:24.560 bonds are great, do we need to get out in 0:06:24.600 --> 0:06:25.080 front of that? 0:06:25.440 --> 0:06:26.520 Bonds have always been great. 0:06:27.320 --> 0:06:29.960 So the coupon on bonds today, what people talk about 0:06:30.000 --> 0:06:33.679 as the all in yield, is actually reasonably decent today. 0:06:33.720 --> 0:06:36.640 So you're getting about an investment grade credit. You're getting 0:06:36.640 --> 0:06:39.839 about a five little bit more than a five percent yield. 0:06:39.839 --> 0:06:42.719 If you put a portfolio together correctly, and if you 0:06:42.800 --> 0:06:45.120 pick the right bonds, you might actually get a little 0:06:45.120 --> 0:06:46.800 bit of total return on top of that. You could 0:06:46.800 --> 0:06:49.840 be getting somewhere around six percent returns. What's wrong with that? 0:06:50.040 --> 0:06:51.760 In the investment grade credit space? 0:06:51.839 --> 0:06:52.000 Right? 0:06:52.040 --> 0:06:53.920 If you add some high yield to that, you can 0:06:53.960 --> 0:06:55.080 even get a little bit more. 0:06:55.480 --> 0:06:55.560 So. 0:06:55.600 --> 0:06:57.520 The bottom line is is that we do think that 0:06:57.560 --> 0:07:00.440 default risks are going to be relatively low because we 0:07:00.520 --> 0:07:02.799 do not have a very strong view for a recession. 0:07:02.839 --> 0:07:05.719 We think recesion probabilities are low, so we're happy to 0:07:05.720 --> 0:07:09.880 clip the all in coupon yield. But people will argue 0:07:09.920 --> 0:07:12.160 that spreads are very tight, and they're right. 0:07:13.440 --> 0:07:16.520 Spreads are tight, but they've been tight for a while here, 0:07:16.920 --> 0:07:19.800 and the best performer in US fixed to come has 0:07:19.840 --> 0:07:22.480 been US high yield. So what does that say about 0:07:22.800 --> 0:07:24.640 I guess the markets wanting to take that credit risk. 0:07:24.760 --> 0:07:27.160 So I always like to say that just because spreads 0:07:27.160 --> 0:07:29.480 are tight is not a reason for them to widen. 0:07:29.680 --> 0:07:32.280 There has to be a catalyst for these spreads to widen. 0:07:32.640 --> 0:07:35.520 Spreads are going to naturally tighten as long as there's 0:07:35.560 --> 0:07:39.360 not some bad news or recession or some geopolitical event 0:07:39.400 --> 0:07:42.320 that comes through into the markets. But just because they're tight, 0:07:42.360 --> 0:07:44.480 they can stay tight for a long period of time, 0:07:44.520 --> 0:07:46.320 and I think sometimes that's what people mistake. 0:07:46.520 --> 0:07:50.960 If they're tight, the yield of caring garbage to the 0:07:51.040 --> 0:07:55.600 full faith in credit US can the US yields come down, 0:07:56.200 --> 0:07:59.520 so that spreads indirectly widen. 0:08:00.640 --> 0:08:03.160 So we would think that both happen at the same time. 0:08:03.200 --> 0:08:03.680 As us. 0:08:04.200 --> 0:08:06.880 They both come down, right, So I don't think there's 0:08:06.920 --> 0:08:09.680 a lot more room for spreads to tighten. And when 0:08:09.720 --> 0:08:11.520 we say spreads tightening, what we're meaning is that you're 0:08:11.520 --> 0:08:12.960 getting the additional. 0:08:12.520 --> 0:08:14.720 Total return out of your corporate. 0:08:14.320 --> 0:08:18.960 Bonds relative to US treasuries, what we call the excess return. 0:08:19.160 --> 0:08:21.280 We think that both are going to come down together. 0:08:21.360 --> 0:08:23.840 So I think within fixed income, what you're looking to 0:08:23.880 --> 0:08:25.200 get is the coupon these. 0:08:25.160 --> 0:08:29.840 Days, Federal Reserve they cut rates once here, how do 0:08:29.880 --> 0:08:31.480 you think the cadence is going to be here going 0:08:31.480 --> 0:08:32.080 forward for them? 0:08:32.360 --> 0:08:34.439 So I think it's two more times this year. January 0:08:34.480 --> 0:08:35.280 is a possibility. 0:08:35.320 --> 0:08:37.880 I think we end with the Fed funds policy rate 0:08:38.000 --> 0:08:40.400 upper end of the band at three and a half percent. 0:08:41.559 --> 0:08:43.520 I think there are a couple of things going on. 0:08:43.600 --> 0:08:46.720 It's beyond just an insurance cut for labor. I think 0:08:46.760 --> 0:08:49.280 some of it too, is also to address liquidity concerns 0:08:49.280 --> 0:08:50.200 and the balance sheet. 0:08:50.480 --> 0:08:51.680 The Fed's balance. 0:08:51.320 --> 0:08:54.920 Sheet through quantitative tightening has been coming down quite a bit. 0:08:54.960 --> 0:08:57.360 It's about six point six trillion right now, which is 0:08:57.440 --> 0:09:00.839 low relative in the past few years. The overnight repo 0:09:01.000 --> 0:09:03.679 rates are actually starting to come up, go up in 0:09:03.760 --> 0:09:07.040 price because bank reserves are starting to falter a bit, 0:09:07.160 --> 0:09:09.640 so if there is a shock event to the markets, 0:09:10.000 --> 0:09:14.200 you need to have these overnight rates lower. And I 0:09:14.200 --> 0:09:17.080 think that's partially the story here as well, not just 0:09:17.120 --> 0:09:17.880 the labor market. 0:09:18.480 --> 0:09:21.080 Jim, what are your team, What are you guys seeing 0:09:21.160 --> 0:09:23.000 in terms of best value out there? Where do you 0:09:23.000 --> 0:09:24.520 see some value out there? 0:09:25.160 --> 0:09:27.880 So within the fixed income space, we've been tilted. 0:09:28.040 --> 0:09:29.000 York bets that. 0:09:31.520 --> 0:09:34.360 Within the fixed income space, we've been looking primarily at 0:09:34.400 --> 0:09:37.400 the high yield space and also bank loans. So bank 0:09:37.440 --> 0:09:40.120 loans are it's almost like floating rate high yield, and 0:09:40.160 --> 0:09:42.839 in some ways it's a shorter term reset on that. 0:09:43.240 --> 0:09:45.400 What I would say is that despite the fact that. 0:09:45.360 --> 0:09:48.040 We think rates are coming down, we think that short 0:09:48.160 --> 0:09:53.000 term high yield credit bank loans in particular actually have 0:09:53.120 --> 0:09:56.480 more room to appreciate in price value over time as 0:09:56.480 --> 0:09:58.520 default risks stay relatively low. 0:09:59.120 --> 0:10:00.400 A lot of people like yield. 0:10:00.480 --> 0:10:03.280 We do too, but we also like the bank loan debt, 0:10:03.320 --> 0:10:05.200 and we also like to barbel that by owning some 0:10:05.200 --> 0:10:07.120 short term, high quality government bonds too. 0:10:07.200 --> 0:10:08.800 I don't want to get you in trouble, but there's 0:10:08.840 --> 0:10:11.800 just so much respect from Karen for your application of 0:10:11.880 --> 0:10:18.280 physics to our coupon market. Jim Karen on private credit 0:10:18.720 --> 0:10:23.360 in the liquidity premium, help me here with the lock 0:10:23.440 --> 0:10:26.880 up that's going on in private equity and particularly your 0:10:26.920 --> 0:10:28.080 world private credit. 0:10:28.320 --> 0:10:31.120 Yeah, so in the private credit space, this has been 0:10:31.240 --> 0:10:33.600 an area that's become i'd say a lot more democratized, 0:10:33.640 --> 0:10:35.400 so a lot more entrants have come in. So we 0:10:35.480 --> 0:10:39.000 have a lot of you know, non bank players in 0:10:39.040 --> 0:10:41.680 the markets right now trying to accumulate a lot of 0:10:41.720 --> 0:10:44.920 these assets to basically create funds so that people can 0:10:44.960 --> 0:10:47.240 invest in these things. This has created a bit of 0:10:47.240 --> 0:10:49.400 an overcrowding in that space, like. 0:10:49.559 --> 0:10:52.160 A bit of a two thousand and five over time. 0:10:52.320 --> 0:10:56.160 I wouldn't necessarily say a two thousand and five overcrowding, 0:10:56.240 --> 0:10:59.120 but it is basically the valuations I think at this 0:10:59.200 --> 0:11:01.520 point are getting a little bit stretched. So you do 0:11:01.679 --> 0:11:04.320 have to be very specific and very particular, and be 0:11:04.400 --> 0:11:08.840 very picky about what you're putting into your private credit portfolios. 0:11:09.160 --> 0:11:12.080 If your people, the Rocket scient is working with you, 0:11:12.120 --> 0:11:14.600 they are a lot of kel tech. He only hires that. Well, 0:11:14.640 --> 0:11:17.559 Harvey Muddy's got some token Harvey mud guys is well, 0:11:17.600 --> 0:11:20.720 good morning, West Coast listening early early morning. So you 0:11:20.760 --> 0:11:23.320 do a trench analysis. I'm going to go to David 0:11:23.320 --> 0:11:26.520 Goldbin the Giant Bank of America years ago on the 0:11:26.720 --> 0:11:30.840 private credit tranches. Is the risk the garbage or is 0:11:30.880 --> 0:11:34.600 the real risk the premium tranches where they come down 0:11:34.679 --> 0:11:35.400 five points. 0:11:35.440 --> 0:11:37.480 So it's a really good question because you get the 0:11:37.600 --> 0:11:40.920 yield by owning the lower quality credit stuff what. 0:11:40.920 --> 0:11:42.400 You refer to as garbage. 0:11:42.960 --> 0:11:45.960 It's French and it's French, but you also need to 0:11:46.000 --> 0:11:48.360 balance that with some of the higher the higher quality 0:11:48.360 --> 0:11:51.400 credit stuff is actually really good. I mean that's actually 0:11:51.480 --> 0:11:54.040 very very solid. So you are taking the risk on 0:11:54.080 --> 0:11:56.480 the lower quality credit, but you're not going to get 0:11:56.520 --> 0:11:58.360 the yield that's attractive for people to. 0:11:58.320 --> 0:11:59.880 Buy unless you have some of that. 0:12:00.320 --> 0:12:03.760 So it's really about managing that portfolio and doing the 0:12:03.760 --> 0:12:07.080 bottoms up analysis on every individual company that you're putting in. 0:12:07.679 --> 0:12:11.440 So private credit is a broad term, but per manager, 0:12:11.880 --> 0:12:14.240 per fund, that's what we have to talk about, and 0:12:14.280 --> 0:12:16.640 that's what we have to be very very idiosyncratic when 0:12:16.640 --> 0:12:17.200 we think about this. 0:12:17.679 --> 0:12:19.959 Jim Keron, thank you so much. She's the Mortgan Stanley 0:12:20.280 --> 0:12:25.000 investment process of solutions. With some terse comments there, stay 0:12:25.000 --> 0:12:35.960 with us. More from Bloomberg Surveillance coming up after this. 0:12:35.960 --> 0:12:39.880 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:12:39.880 --> 0:12:43.199 starting at seven am Eastern on Applecarplay and Android Auto 0:12:43.320 --> 0:12:46.280 with the Bloomberg Business App. You can also listen live 0:12:46.360 --> 0:12:49.960 on Amazon Alexa from our flagship New York station, Just 0:12:50.000 --> 0:12:53.760 say Alexa play Bloomberg eleven thirty work out Asina. 0:12:53.480 --> 0:12:55.800 Joins us right now, It's real she could be with 0:12:55.880 --> 0:12:58.880 us today on this booming equity market. Laurie, lots of 0:12:58.920 --> 0:13:02.560 back and forth here as you write for RBC Capital Markets. 0:13:02.880 --> 0:13:06.280 What is the distinction of the debate right now on 0:13:06.520 --> 0:13:07.520 owning equities? 0:13:08.160 --> 0:13:10.439 Well, thanks for having me, Tom. Look, I think that 0:13:10.880 --> 0:13:12.560 you know, I probably have the best color for you 0:13:12.640 --> 0:13:14.720 this morning from what folks in the UK are thinking. 0:13:14.800 --> 0:13:18.080 That's where I spent last week, and there was, you know, 0:13:18.120 --> 0:13:20.400 sort of a discussion about funds flows, right and if 0:13:20.400 --> 0:13:22.200 you want to sort of fade the US, where do 0:13:22.240 --> 0:13:24.600 you go? And what I told folks was that if 0:13:24.600 --> 0:13:27.000 you look at the EPFR data, what we're seeing verily 0:13:27.040 --> 0:13:29.079 clearly is that there's kind of a lack of conviction 0:13:29.200 --> 0:13:31.280 on what the alternatives are. So whether you're looking at 0:13:31.360 --> 0:13:34.920 Latin or China or Japan or even Europe. Frankly, you've 0:13:34.960 --> 0:13:37.160 had all these sort of attempts for flows to turn 0:13:37.200 --> 0:13:40.120 positive and then they tend to peter out. The European 0:13:40.160 --> 0:13:42.520 ones and the German ones lasted longer than everything else. 0:13:43.280 --> 0:13:45.040 What's funny to me, too, is if you look at 0:13:45.040 --> 0:13:48.440 the global x US category that's had the best flows 0:13:48.480 --> 0:13:50.719 this year, over the last no SA six months or so, 0:13:50.760 --> 0:13:52.800 but even that looks like it's starting to fade. 0:13:52.880 --> 0:13:54.640 So what we see is just sort of a real. 0:13:54.520 --> 0:13:57.439 Kind of lack of lack of conviction on exactly where 0:13:57.480 --> 0:13:58.720 to focus geographically. 0:13:58.920 --> 0:14:00.959 So that trade we saw in early in the year 0:14:01.040 --> 0:14:04.079 to rest of world has that in fact faded? 0:14:04.080 --> 0:14:04.520 Do you think? 0:14:04.679 --> 0:14:04.760 So? 0:14:04.880 --> 0:14:06.520 If you look, we have one chart in our weekly 0:14:06.559 --> 0:14:08.320 and we tend to put the weekly out on Mondays, 0:14:08.360 --> 0:14:10.680 and we look at US relative to non US on 0:14:10.720 --> 0:14:13.320 the MSCI data, and it's just been tracking, you know, 0:14:13.400 --> 0:14:15.600 sort of sideways over the last few months. There's been 0:14:15.600 --> 0:14:18.960 a little bit of strength in the US recently, you know. 0:14:19.240 --> 0:14:22.360 I think what's interesting is that global x US trade, 0:14:22.720 --> 0:14:25.120 even there, the flows have been faltering. I mean, it's 0:14:25.640 --> 0:14:28.800 a time of year when seasonally equities tend to be weak, 0:14:28.840 --> 0:14:32.000 and we actually did a seasonality of fundslow data earlier 0:14:32.000 --> 0:14:33.840 this year, and you tend to see the flows fade 0:14:33.840 --> 0:14:35.440 at this point as well. So maybe this is just 0:14:35.480 --> 0:14:37.440 a market frankly that's getting a little bit tired. 0:14:38.160 --> 0:14:40.560 Our friends in the UK and London, are they concerned 0:14:40.560 --> 0:14:42.600 about valuations here in this US market? Yeah? 0:14:42.640 --> 0:14:44.440 That would I would say, you know, the number one 0:14:44.520 --> 0:14:47.000 question that I felt like I heard from people is 0:14:47.040 --> 0:14:49.240 just kind of what's sentiment like in the US. People 0:14:49.280 --> 0:14:51.120 just kind of wanted to know what investors are thinking 0:14:51.160 --> 0:14:53.240 over here, and you know, kind of how that compared. 0:14:53.440 --> 0:14:55.280 By the end of the week. I got a good 0:14:55.320 --> 0:14:57.440 sense of that, which is the UK investors seemed to 0:14:57.440 --> 0:14:59.680 be a bit more cautious than the US investors. But 0:14:59.680 --> 0:15:02.920 I would say number one issue people were proactively bringing 0:15:03.000 --> 0:15:03.840 up was valuation. 0:15:04.160 --> 0:15:05.080 And you know, my. 0:15:05.400 --> 0:15:08.080 UK clients are are fantastic macro thinker, so this is 0:15:08.080 --> 0:15:09.560 not a knock on them. But there was kind of 0:15:09.600 --> 0:15:13.000 no one specific thing beyond that that they were pointing at. 0:15:13.040 --> 0:15:16.080 It was just things seem really elevated, things seem really high. 0:15:16.360 --> 0:15:17.960 Was kind of how the conversation started. 0:15:18.400 --> 0:15:20.960 Are there certain sectors that when you go over to 0:15:21.240 --> 0:15:25.120 the UK or that your clients want to speak about, 0:15:25.160 --> 0:15:28.080 whether it's tech or financials or healthy. I mean, is 0:15:28.160 --> 0:15:29.960 there certain sectors they want to focus on? 0:15:30.200 --> 0:15:32.720 You know, It's funny, Paul, usually financials, but I can't 0:15:32.720 --> 0:15:35.680 even remember one meeting where the client's proactively brought it up. 0:15:36.400 --> 0:15:38.320 You know, I think I took it there eventually because 0:15:38.320 --> 0:15:41.400 it's a sector I like. Normally, I would say, as 0:15:41.400 --> 0:15:44.960 a general rule, it's always tech, it's always consumer, and 0:15:45.000 --> 0:15:47.440 healthcare often tends to be in focus as well. I 0:15:47.440 --> 0:15:49.880 think for technology, you know, it just has to do 0:15:49.960 --> 0:15:52.360 with where the global opportunity set sits, so that's a 0:15:52.360 --> 0:15:54.320 big part of it. Obviously tech is a big sort 0:15:54.360 --> 0:15:56.560 of workhourse, but healthcare was really in focus. 0:15:56.640 --> 0:15:58.560 Lest I do to be sure I'm talking from a 0:15:58.600 --> 0:16:03.400 technical analyst standpoint, is a fundamental type? What is your 0:16:03.640 --> 0:16:07.000 setup where you say I have to get off this 0:16:07.080 --> 0:16:11.800 bull market? Is it's not fed chat? I'm pretty negative 0:16:11.800 --> 0:16:14.840 on that. Is it like earnings? Miss? 0:16:14.920 --> 0:16:17.440 I think earnings is huge, you know, I do think 0:16:17.480 --> 0:16:21.520 if you related to earnings is the fundamental economic backdrop. 0:16:21.560 --> 0:16:24.400 Whereas if you look at you know, that's a feeder, right, 0:16:24.480 --> 0:16:26.680 revenues really matter a great deal for earning. 0:16:26.720 --> 0:16:28.360 There's a second time. Let's stop there. This is the 0:16:28.360 --> 0:16:31.120 second time we've heard this in like six days. How 0:16:31.120 --> 0:16:38.360 do you analyze revenue dynamics? Starting with JP Moregan October fourteenth. 0:16:37.480 --> 0:16:40.520 So you know, I can't say on that company specifically, 0:16:40.560 --> 0:16:42.680 but when I do sort of my modeling, Tom and 0:16:43.240 --> 0:16:45.880 in my earnings model, the revenue line is very much 0:16:45.880 --> 0:16:47.680 a quant driven model. So we have kind of five 0:16:47.720 --> 0:16:51.800 different components, and with revenues, the two most impactful macro 0:16:51.920 --> 0:16:56.280 variables are GDP and CPI, and so we're looking at 0:16:56.280 --> 0:16:58.760 real GDP and then CPI. We break them out separately, 0:16:59.200 --> 0:17:02.000 and both of the if you take the assumptions up, 0:17:02.080 --> 0:17:03.640 it's going to goose your revenue number. 0:17:04.040 --> 0:17:06.440 I mean, I can't emphasize, folks, which you just heard there, 0:17:06.560 --> 0:17:09.480 how important it is. This goes back to Tom Gelvin 0:17:09.520 --> 0:17:12.640 and DLJ, and I'm sure Tom would say people before him, 0:17:12.960 --> 0:17:15.199 but revenue It's one of the first things I did 0:17:15.280 --> 0:17:19.840 when I came to Bloomberg. Revenue analysis is really important. 0:17:19.840 --> 0:17:22.680 Susie Welcher that essay in the Wall Street Journal or 0:17:23.040 --> 0:17:27.119 her former husband, Jack Welch, was brilliant on unit price 0:17:27.560 --> 0:17:29.560 dynamics of revenue, Paul. 0:17:29.880 --> 0:17:32.240 So, Laurie, Tom and I've been talking about it this morning. 0:17:32.480 --> 0:17:35.200 We might have a government shutdown tomorrow night at twelve 0:17:35.240 --> 0:17:38.000 oh one am. 0:17:38.080 --> 0:17:39.639 What does that mean historically for market? 0:17:39.840 --> 0:17:42.639 So it's interesting. I did run over the weekend. I 0:17:42.640 --> 0:17:44.840 looked at the betting market data on I think it's 0:17:45.000 --> 0:17:48.800 WSL predict that you guys all run, and it's this 0:17:48.880 --> 0:17:50.560 great little widget. You know, you can go and see 0:17:50.600 --> 0:17:52.359 what betting markets are pricing on all these you know, 0:17:52.440 --> 0:17:55.919 kind of stock market sensitive issues. And I noticed that 0:17:55.960 --> 0:17:59.679 the betting market data was starting to reflect higher probability 0:17:59.720 --> 0:18:01.679 of a shut down last week, right around when the 0:18:01.680 --> 0:18:04.360 market was wobbling. Now, I don't want you to over 0:18:04.440 --> 0:18:06.760 extrapolate there. I didn't get a single question from clients 0:18:06.800 --> 0:18:08.880 on it last week. I got a question from one trader, 0:18:09.600 --> 0:18:11.560 and some of us macro folks at RBC have been 0:18:11.560 --> 0:18:13.600 writing about it right because it is in the headlines 0:18:13.640 --> 0:18:16.960 a bit. This is a really, really tough thing to 0:18:17.080 --> 0:18:20.399 analyze and parse out exactly how it's impacted stocks in 0:18:20.440 --> 0:18:22.320 the past. If you just look at when the days 0:18:22.520 --> 0:18:25.119 when the government's actually been shut and what stocks have 0:18:25.200 --> 0:18:27.560 done the two words you want to remembered are mixed 0:18:27.560 --> 0:18:30.040 and mild. In the seventies they tended to go down 0:18:30.119 --> 0:18:32.720 more recently up, but it's been very mild overall. 0:18:32.960 --> 0:18:35.600 Laurie, thank you so much, greatly appreciate it. You the 0:18:35.640 --> 0:18:37.000 Herod's in London. 0:18:36.680 --> 0:18:38.840 I didn't make it there, no fun. I was just 0:18:38.880 --> 0:18:40.879 working the whole time and went to sleep early. 0:18:41.359 --> 0:18:44.760 I've done that. There's like key throw hotel work, no 0:18:44.960 --> 0:18:48.280 hotel U key throw lub and they go, how was London? 0:18:48.520 --> 0:18:52.680 What did you love? And I'm like, you threw hotel work? 0:18:52.800 --> 0:18:55.040 The client lunches were the highlight because then I actually 0:18:55.040 --> 0:18:56.560 got to have you know, local food. 0:18:56.640 --> 0:18:58.240 Your full engless breakfast. Come on. 0:18:58.840 --> 0:19:01.040 No, my hotel had a nice buffet though, but I 0:19:01.040 --> 0:19:03.040 had I had peas at lunch and I had some 0:19:03.240 --> 0:19:03.880 somefish and chaw. 0:19:03.920 --> 0:19:07.200