00:00:00 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg Surveillance Podcast. Catch us live weekdays at seven am Eastern on Apple CarPlay or Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube. 00:00:27 Speaker 2: Joining us now, okay, here, she's been a very patient. You're watching the festivities again. Sarah will show images of the iconic Buckingham Palasis. We await some news from there. With the instabilities of British politics, I love you have a pro paragraph. I'm not going to waste time and read. But you talk about the dispersion with an investment grade bonds, they're winners and losers. Now, who's who. 00:00:53 Speaker 3: Say good morning? Lovely to be with you too. I mean, the fun thing is I never know what we're going to talk about, and I never know Tom. I never would have imagined you'd be wearing a Red Sox jersey. 00:01:03 Speaker 2: I've been watching a World Cup. I know That's why I. 00:01:06 Speaker 3: Might have thought Spain something. 00:01:08 Speaker 2: Oh no, we're doing Spanish music here, flat case. Yes, folks, we will play Macarina. You should have seen are doing the mac Karina years ago. Tell me about the spread it in a long time. 00:01:20 Speaker 3: There's absolutely winners and losers, And I think the two things that people should be focused on are number one, the fundamental. So we're moving away from last week, which was an economic heavy week if you had Tier one data and you had a lot of FED speak, a lot of focus on WASH. This week, we're moving solidly into earning season. We're in the FED blackout period, so don't expect any FED commentary. We've got a lot of earnings this week and next week. And I think the two drivers are the fundamentals. Investors are looking at what are the earnings, what are the returns going to be from these investments that companies are making. And then the second is the supply side. 00:01:53 Speaker 4: Tom. 00:01:54 Speaker 3: As you and Paul know, the issuance in the investment grade corporate bond market can be very lumpy. Week investment grade bond market priced forty five billion dollars, interestingly four times over subscribed, something like a two point three new issue concession. But if you look at those deals from last week alone, and there wasn't any hyperscaler issuance, the best performing deals ten tighter, the worst performing deals ten wider. It's really a function or what are expectations? 00:02:23 Speaker 2: Market's healthy. 00:02:24 Speaker 3: The market's healthy. I think there's a little bit of indigestion. You look at some of this issuance. We had nine issues that are greater than twenty billion dollars each this year. That's a big deal. You know, go back last year there was one of those. So the market's got a process. 00:02:38 Speaker 5: But you've had. 00:02:39 Speaker 3: Twelve consecutive weeks of inflows into the investment grade corporate bond market, and I agree with you, the market's healthy. 00:02:45 Speaker 6: Where do you guys find a cash to buy all these new deals? Like where does it come from? Literally when Morgan Stanley calls you your desk and says and you take down a big chunk and all your We just had. 00:02:56 Speaker 3: Steady inflows into our mutual funds, into our ETFs or ETFs in particular. We've also seen strong inflows from our into our institutional accounts. There's strong demand for fixed income here. And I think the answer pol is people like the yields here. You know, north of five and a quarter in investment grade high sixes low sevens for high yield bonds. You can get attractive yields and securitize credit as well. So I think investors are back to realizing there's yield and fixed income and that that's what drives the inflows. 00:03:23 Speaker 6: So talk to us about the high if I want to take more credit risk, do you guys support that or how do you guys think about the high yield and leverage loans and all that. 00:03:30 Speaker 2: Kind of stuff. 00:03:31 Speaker 3: Yeah, again, I think so, yes, absolutely. If I look at across our portfolios, you know, in our core plus strategies we've got about eight percent and high yield corporate bonds. 00:03:40 Speaker 5: So absolutely. 00:03:41 Speaker 3: But again I think what's really interesting, and I think this is another sign of the health of the market. Triple c's are lagging this year, so there's a lot of focus on individual credit analysis. 00:03:52 Speaker 2: So okay, forward into the end of the year, even into twenty twenty seven, and this is really important question for me. Are you investing for the coupon or is it actually a total return forward vision? 00:04:06 Speaker 5: So I think both. 00:04:07 Speaker 3: When you think about fixed income in general, the majority of your returns come from that carry or that couponh So the carry is the biggest predictor of what your future returns are. And you're looking at these yields, right now, I mean my expectation would be fixed income delivers the yields. I'm not looking for massive you know, capital appreciation from it, but you pick up your carry that's that's maybe that's not attractive if the equity market goes up thirty percent every year, but you know, six seven, eight percent returns in fixed income are I think, well. 00:04:40 Speaker 2: Exactly, Paul Mike dumb. Math is you make a coupon five and six percent and you drop two percent on top of that total return, and your way aboutnomenal. 00:04:49 Speaker 6: GD that's fine, that works out just nicely. I'm looking at the WRP function. K. I guess the market's pricing can maybe one rate hike, and that's kind of it. How do you think about it? 00:05:00 Speaker 3: So that's a great question. I think there's been so much focus on the inflation data, and last week we saw some softness finally of some deflation and disinflation and expectation that PCE is moving down in the direction closer to the Fed's target. On the other hand, the Fed inflation hasn't been at the FEDS target for the last five years, so the market still the Fed's been reluctant to call this bound of inflation transitory because they missed that last time. So that's a yeah, I hear you grumbling. That's a bad word, Tom. But so the Fed's been reluctant, but this actually does feel more transitory, and we think the Fed's on hold. 00:05:36 Speaker 5: How do you. 00:05:36 Speaker 2: Interpret farole Caasmin and company here? There was a wonderful tweet this week in our LinkedIn I can't remember which, which said, you know, since time began, we're running near a four percent inflation. Right, I'll cut them some slack. They had COVID, you know, they had a medical event. But are we supposed to get used to three and a half or four percent inflation? I just see that on my textbooks. 00:05:58 Speaker 3: No, I don't think we get used to three and a half or four percent? But is it two or two and a half? Yeah, I think that's more likely. 00:06:05 Speaker 6: So how are you guys looking at the markets these days? I mean, are you looking are you trying to screen for sectors, for factors? Where do you guys look for value these days? 00:06:14 Speaker 2: Yeah? 00:06:15 Speaker 3: We tend to do both top down and bottom up. From a top down perspective, we're looking at return expectations and where we can find yield from a bottom up perspective. It gets to my earlier point on dispersion and returns. We're looking for, you know, broadly across corporate America. Look at the investment grade corporate market. Margins are at twenty five year high. So we're going to see what earnings look like this week and next week. Last week from the banks, they were very strong. So we found opportunities in banks. We find some opportunities in some of these tech issuance, but a lot of it's really old fashioned, roll up your sleeve's bottom up issuance, you know, consumer debt. We find a lot of opportunity and securitize credit. 00:06:53 Speaker 2: So okay, here, thank you so much for JP Morgan. 00:06:57 Speaker 5: Stay with us. 00:06:58 Speaker 2: More from Bloomberg Surveys coming up after this. 00:07:09 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube. 00:07:21 Speaker 2: Joining us right now. This is really timy. This came up three times this week and Scott Diamond a Municipal Bonds cohed A municipal fixed income Gold and Sex asset management. I can you form an easily diversified portfolio of double texts or triple texts free bonds or is it just finally the institutions on the market. It's a little bit of both. 00:07:47 Speaker 7: So answer your first question, yes, you can do it, but it's going to help if you have an institution behind you. I think about the execution side from an institutional perspective, and I think very importantly from the credit research side from the institututional perspective. 00:08:01 Speaker 6: Talk to us about new issuance. I mean, your market's been crazy, record years of issuance in twenty twenty four, twenty five, how's twenty six. 00:08:09 Speaker 2: We're going to do it again. Wow, we're going to do it again. 00:08:11 Speaker 7: We're running about five six percent ahead of what we had last year, and as you said, a record year in twenty five. We're seeing it in new money issuance, we're seeing an increase in refinancings. We're seeing it across multiple, multiple sectors. I don't look at this as a big concern. I actually think it's probably long overdue. We have municipalities that maybe haven't been investing as much as they should have been. An infrastructure they've had other things they've had to deal with, so it's good to see us Connie finally catching up. The big question in my mind is how's demand and will it be sufficient to take out Is all. 00:08:47 Speaker 6: This supply way on the performance of municipal bonds or has a demand been out there? 00:08:53 Speaker 7: It's impressively been out there so far. 00:08:56 Speaker 2: Year to date. 00:08:57 Speaker 7: If I think about commingled vehicles and that's mutual funds, that's ETFs, whether it's passive ETF, active ETF, they've taken in over fifty billion and inflows year to date. That's impressive. However, we still have another half a year to get through. Right, We've got some three hundred plus billion so far. When I pull the street, they're all saying the same thing. Second half is going to be heavy. So on my mind, is it going to be that stain steady demand that we've seen in the first half and if not, if it falters, then it could cause some good volatility in community space. 00:09:31 Speaker 2: Describe the actual track record of passive versus active municipal bond management. I think all of our listeners and viewers sort of get the equity dynamic there. What immuni bonds is the difference between a passive active performance. 00:09:46 Speaker 7: You know what, it can be quite meaningful leaning into active. You know, there are we all know, fifty states, right and all those states have lots of towns, So that means a lot of different issuers. To take a passive approach to that, in our view, you're leaving a lot of money on the table. If you look at the performance of active overpassive so far year to date, active is very much ahead of the passive options. 00:10:11 Speaker 6: How's credit quality out in the municipal bond market? You know, I don't read anything too much anymore about like you know, Illinois or show. 00:10:21 Speaker 2: Exactly it was eighteen percent four pal text. 00:10:24 Speaker 6: Free there was, So what's how is credit quality out there in municipal America? 00:10:29 Speaker 7: Let's see, Uh, overall, it's going to be really sound. We're coming out of COVID where a lot of moneys were handed out. We have rainy day funds that remain at all time highs. They're starting to get tapped as we would expect. We expect them to get tapped this year and into next year. But quite frankly, even if they do, they're still going to be probably well above where they were pre COVID levels. So for now credit looks really sound. 00:10:58 Speaker 2: Bloomberg surveillance across America, around the world, the way you choose to listen to us. Thank you so much for a wonderful June. We're deep into July. Scott Diamond of Golden Sachs, co Ed of Municipal Fixed Income. James Wilcock, is it ten Downing Street? The new Prime Minister at Buckingham Palace after seeing King Charles the Third we have word he may speak shortly. We'll continue to monitor the festivities in London. Paul Sweenie was Scott Diamond. I'm looking at your notes here. 00:11:26 Speaker 5: Scott. 00:11:26 Speaker 6: You say you now have an eleven person researcher team. 00:11:30 Speaker 5: What are these people look at? 00:11:32 Speaker 6: What's your research team looking at? How do they go out and look at it? I mean some municipality in the middle of Nebraska. 00:11:38 Speaker 5: What do they know about that? 00:11:39 Speaker 7: We love those municipalities in the middle of Nebraska. Listen, we have eleven folks. They are what I'm going to call generalists, So we have each of them assigned specific states and their municipalities. 00:11:52 Speaker 2: That's important. 00:11:53 Speaker 7: When you think about municipals, A lot of it comes down to politics and local politics, so let's make sure we keep our team focus on that. And then we've also asked them to get very deep in a specific sector. So one of them is going to be our expert in hospitals, one will be our expert in student housing or universities. That's how we kind of canvass the entire market for opportunities. 00:12:16 Speaker 6: How about talk to us about taxable minisile because I own municipal bonds in New Jersey because I live in a high tax jurisdiction, but I do it for the triple tax free treatment. Now you tell me there's a taxable municipal bond market, what are those people do? 00:12:29 Speaker 7: There is a taxable municipal bond market. It's probably eight to ten percent of the overall muni market. If you think about munis, I suspect the IRS is not a big fan, and so you have to check the boxes on what you're using the money for to issue tax exempt If you don't check the box, issue taxable munis. So they're quite popular with our institutional clients, think insurance or pension funds, and in some cases for some of our US residents, they may make sense there as well. 00:13:00 Speaker 6: So what's the area staying away from it? I hear sometimes higher education talk to us about that part of the world because I know it's facing funding pressures from the government, research funding and all that type of stuff, and maybe not as many kids are going to college talks about high ED. 00:13:16 Speaker 7: Yeah, it's very much a focus area for us. I hesitate to say we're staying away from it because, as I mentioned, there's a lot of issuers, there's a lot of universities, So it comes down to can you pick the right ones. State universities. I think they're doing just fine. The top tier Triple A ivy's also doing just fine despite some of the political pressure. Where we're seeing pressure is think of it as a smaller maybe liberal arts school somewhere around one thousand, two thousand kids, and they're having a tough time drawing those applicants in from a smaller applicant pool. 00:13:52 Speaker 5: So what's the. 00:13:53 Speaker 6: Sector here that screens particularly well for you guys? 00:13:56 Speaker 7: I tell you we're finding value in a number of different spots. One from a sector perspective, I would say school districts are starting to come under pressure, headline pressure. But if you find the right school district, you can get a lot of extra yield. For example, in New York last week in our New York ETF, a non rated school ban. Not many individuals will want to do the homework on a non rated offering. But for us, if we can get three percent for a one year piece of paper for a New York resident, that's like you suggest in the. 00:14:29 Speaker 2: New York ETF. How diversified is it? I'm like diversified. 00:14:34 Speaker 7: We've probably got about forty five to fifty in a new You're right, actually it's one hundred. 00:14:38 Speaker 2: I'm wrong again, a hundred. It's one hundred. Yeah, that's in near one hundred items in a portfolio. 00:14:43 Speaker 7: Yep, with a research team that will go through and make sure that they earn the right to stay in that portfolio. 00:14:48 Speaker 2: There. Thank you so much, Scott Diamond, greatly appreciate it. With Golvin Sachs, stay with us. More from Bloomberg Surveillance coming up after this. 00:15:05 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from seven to ten am. E's durn Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube. 00:15:18 Speaker 2: The American political landscape. It is tons of fun right now. Henrietta Trace joins us for a wonderful morning brief. Are we closer to the midterm elections than we think? 00:15:28 Speaker 1: Oh? 00:15:28 Speaker 8: We are right up on it, absolutely, especially when you think that they're leaving on Friday, they'll be gone for five weeks, They come back in for just a couple of days, and then they leave again for the entire month of October. So I think the legislative days are like twelve. 00:15:41 Speaker 2: How important is Senator McConnell's illness. 00:15:44 Speaker 8: It's extremely important when you think about the reconciliation package that they may want to pass. As the war perpetuates, as gas succeeds four dollars a gallon nationally and consumers continue to express that the president's war is unpopular. The tariffs are unpopular, is a problem. They're going to want to do something to show voters that they're paying attention. We all saw what happened with the housing bill. They're going to have a last fite at this in September, and if McConnell is not there and able to vote, that makes it really tough on members like Susan Collins and the other at risk members. 00:16:16 Speaker 6: What do you know about Senator McConnell his case, and then what happens if he's unable to vote or participate? 00:16:24 Speaker 2: What do we know about all that? 00:16:25 Speaker 8: Well, there's a couple options. I mean, certainly you could have a situation where Andy Wassheer, the governor in Kentucky, provides a stand in and the event of a vacancy. But anybody who's worked in the Senate or anybody who's been there for the last thirty years knows that Mitch McConnell is not going to go out voluntarily. So this is going to be a long standing issue as long as he makes that choice. 00:16:47 Speaker 6: I mean, it seems like the news flow for President Trump, the polling for President Trump are really really headwinds here. What's the Republican National Committee? Are they kind of framing this out? 00:17:01 Speaker 2: What do they hope will happen? 00:17:02 Speaker 5: What do they think will happen? 00:17:03 Speaker 6: Because this could be difficult for them. 00:17:04 Speaker 8: Yeah, Well, the hope is to just talk about Democrats as communists, is any word that they can throw at it. They talk about the far left, they talk about the populist wing of the party. And it's interesting because you see some very real similarities between those candidates and some of the agenda items that President Trump has, So it's a sort of a mixed bag. I would say that we should expect the Senate, the congressman on the Republican conference to trickle back into immigration and crime as core issues going into the election. 00:17:36 Speaker 6: And if you're the Democrats, I don't know. I guess I feel like I'm surprised they haven't taken this. It seems like it's on a silver platter for them here to just step up their rhetoric. I don't hear it. I don't see it, I don't feel it. I'm shocked that they haven't, because every poll says they should just be, you know, really on the offensive here. 00:17:55 Speaker 5: Oh. 00:17:56 Speaker 8: Absolutely, the president is inordinately unpopular, but both are Publican and the Democratic parties are also extremely unpopular, and Democrats are even less popular than Republicans. They've closed the gap. Instead of you know, eight or nine points more unpopular, it's three or four. But they don't have a core leader, and so there's no direct It's. 00:18:14 Speaker 2: Quite the upset of France with the penn coming back and an amazing presidential election coming up, or what we're witnessing right now, Sarah, give me the images of London right now, as you can on YouTube. Seven prime ministers in ten years, which argans back to Peel and I think Canning died in my history tells me appeals before Dsraelian Gladstone. Okay, it was, it was before that. It was back when the Tots last one. That's when it was total disarray in the United Kingdom. We're no different, are we We're no different. 00:18:46 Speaker 8: But you are like a human computer that is an amazing recollection of all of it. Yeah, no, we're no different. And people, the American public swings back and forth. And what happens is you get these big change elections. Voters vote for change, and then they realize once they get it, they don't actually like it, and they go back right in the other direction. 00:19:04 Speaker 2: So like eighteen ninety, like Grover Cleveland Alexander was president twice. It's like, that's a joke, Paul Grover Cleveland pitcher. Okay, I used to call them Grover Cleveland Alexander. Anyways, it's like the eighteen nineties, So we're just going to bounce around for the next decade. 00:19:19 Speaker 8: Well, I mean, I think it's very normal to see that in a midterm, especially when one party has such control over DC. The problem for Republicans here is not the Democrats are popular, it's that their margins are so slim. So you know, my black Swan event for this entire year has been what if one of the chambers flips hands just through attrition? You got sixty nine members retiring or moving on. Next year, they're going to be younger, They're going to be focused on AI. We're going to go through we are going through a decade of very real. 00:19:47 Speaker 2: Change funding the war. 00:19:49 Speaker 6: Does Condress have any say here? 00:19:51 Speaker 2: Excuse me? The Prime Minister coming out right now with Missus Burnham obligatory London Wait, I mean Henrietta. It is a pomp and circumstance. I remember the day Prime Minister Cameron after Brexit staggered out of the door of ten Downing Street with Lawrence the Cat to his right, and from that moment on, I would say John Ferrell leading her coverage in London. From that moment on, it's been chaos in the United Kingdom. 00:20:19 Speaker 8: It really has it. It's a constant turnover and how can anybody really hit their stride. This is an unpopular opinion. But I don't like turn limits because you need that institutional memory, you need that knowledge of how to work your room, create a deal. 00:20:33 Speaker 2: I mean, Paul the raindrover, there's like fourteen of those where you live in New Jersey. Yeah. Sure, it's like hot and cold running Raine drovers absolutely on the Jersey shore. So I guess no comments here, We would presume. I'm guessing they'll help me in the control room. Our Royal correspondent Robert Bragg is on top of this. We look for comments at ten Downing Street with our James Wilcock. At ten Downing Street, it's about a mile back coming out of the Acclaim Gate. My grandfather had a puzzle of bucking impalace. Yeah, we would sit there. He'd sit there with his third old Fashion and I would complete the puzzle. But it's coming down now. We'll see here, folks. For those of you on radio, it's as beautiful as you can imagine, thanks to the Royal drone that's helping out with the camera. Do they go down the mall or I don't think they worry about traffic on whatever the other they're good. I think yes, we're going down the Acclaim mall down towards the arch and all symbolism of eighteenth and nineteenth century London. Of course, remember this from the funeral for Queen Elizabeth as well. We'll continue to monitor that and we continue with the Duchess Henrietta trace with this as well. Is it a special relationship with London. I don't sense it right now. 00:21:50 Speaker 8: It's hard to sense right now. One thing that I think about a lot is the fact that we're currently in violation of our trade deal with the UK. I think this is underappreciated, but os tariffs are set to expire this week and the President has to migrate into new rates. One of the things that we agreed to with the UK because of our special relationship was a very low ten percent reciprocal tariff rate. But now, of course every other nation on earth also has a ten percent terifrate, which means we are in violation of our own trade deal that we reached with the UK to give them preferential treatment. They don't have that right now. They're staying calm about it for the last one hundred and fifty days. But Friday we're going to have a different landscape on the trade. 00:22:28 Speaker 6: Shront and that's not even on the burner anywhere for most folks. I think at this point, you say there's twelve effective working days for this Congress and the remainder of the year. Did they have any agenda to get anything done here? I mean, is there something that has to get done? 00:22:42 Speaker 2: Earth? 00:22:43 Speaker 8: Well, the one thing that has to get done is that we do need to avoid a shutdown on October first. 00:22:47 Speaker 2: Okay, we're back to a shutdown. 00:22:49 Speaker 8: Basically, Yeah, we are. And last time we saw what Dems did. They shut down the government for what forty three days or something, So they're playing with fire. Republicans are trying to get out in front of that. They have a bill that they entered is very early to pass, a cr that will extend us past the election, so they know to be anxious about it. That's the one thing we really have to pass. There's an optimistic hope that we would get a reconciliation bill, but I'm only at thirty percent on that. 00:23:13 Speaker 2: So what is your summary right now, middle July? As you say they're taking off five years or whatever coming up here? Do the Democrats still take the House. 00:23:24 Speaker 8: Yeah, I'm at ninety at large. Yes, I feel pretty comfortable with it, and it's just historically correct to think that one party control would alienate. 00:23:32 Speaker 2: So how do you respond to Terry Haynes's articulate essays at Pangaea saying Henrietta Treys is right, that's the zeitgeist. But are the Democrats that fragile with the Terry Haynes butt I think if. 00:23:47 Speaker 8: You want to say, but the better way to do it is to talk about what the margins are going to be. So Democrats are not going to get thirty, but they're going to get twelve. 00:23:55 Speaker 5: Six, they'll get eight. 00:23:56 Speaker 2: What about in the Senate? 00:23:57 Speaker 8: The Senate, I'm at sixty percent that Republicans hold as we're seeing it to your point earlier, I mean, Democrats barely have a main candidate. We are just a couple of weeks out from the election. Early voting starts September fifteenth. You know, Kit Tempser needed to get this out. 00:24:12 Speaker 2: How I ask a root question. I actually read two articles on the main disaster of the Republican Susan Collins and the forty seven people. It's like the traditional kind of politicians we used to have. I have such an admiration for mister Cohen and mister Mitchell of Maine, both of who folks grew up dirt poor and achieved. It's like those people. It's like William Gohen and George Mitchell, like May and Margaret Chase Smith, who I remember. It's gone. Yeah, where are those candidates? 00:24:48 Speaker 8: Well, they're not in Maine this cycle, but they are elsewhere. You know, think about Roy Cooper in North Carolina, just doing it sort of the old fashioned way, tons of fundraising, very popular, very moderate. And you have a similar dynamic in Kentucky as we talked about with Andy Mashi. Those members do exist, but this one is wild. 00:25:09 Speaker 4: You know. 00:25:09 Speaker 8: For another classic candidate, look at Mary Peltol in Alaska. Couldn't make a better candidate, and it's very homegrown, native to the state, works with the local community, loves to fish. 00:25:22 Speaker 2: Missus Keen emails and she goes, what's Henrietta's look today? What do you wear? Who are you wearing this morning? 00:25:26 Speaker 8: My daughter picked this out for me. She is in the green room with me. 00:25:31 Speaker 2: We'd love to meet her as well. The cars are back at ten Downing Street. I thought they were going to talk at New Bond Street to see the new air Mez store. The new Mason that hair Mez put air Mez put together a five different stores. It's the talk of London right now. But they've gone to ten Downing Street where they will meet members of the Labor Party, the for Americans, the Paul, the move in move out thing, move out, move in thing. It's shockingly a is it. It's like literally cardboard boxes going out the back door off camera. 00:26:06 Speaker 5: If you're lucky they don't take. 00:26:07 Speaker 2: Lawrence a Cat. We'll have to see on that. But this pageantry is extraordinary. From Westminster Abbey, Downing Street is away from the traffic flow. It's I'm going to say, I'm guessing north about three blocks and you're sort of Paul. You're walking along as a tourist, and all of a sudden it's oh, that's it, that's it. 00:26:28 Speaker 6: And it's just I recognize this TV shot. 00:26:31 Speaker 2: Exactly and it's two buildings are Henri and have you been there? Have you been to ten Downing. 00:26:36 Speaker 3: I haven't been to the outside. 00:26:37 Speaker 8: I haven't been to the inside. 00:26:38 Speaker 2: Did you meet Lawrence a Cat? I did not meet Lawrence a Cat. 00:26:41 Speaker 8: But I do imagine all of the cast of Love actually walking by something. 00:26:49 Speaker 7: Assuming kind of building When I passed it to it, I was like, oh is this? 00:26:51 Speaker 2: This is this Prime Minister Burden greeting his supporters, many of course from his Northern Great break. 00:27:02 Speaker 5: Stay with us. 00:27:03 Speaker 2: More from Bloomberg Surveillance coming up after this. 00:27:14 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us Live on YouTube. 00:27:26 Speaker 2: I was in termin joins the Straight Now vice chair Global Macro dout your bank. I look, I was on at your note and then I look at SPX down two percent. We've got a massive drawdown on two percent, but the anks there seems so much greater than a pullback a two percent from record eyes. 00:27:44 Speaker 4: I hear you, Tolman, and so good to be here and this morning already we're trying to bounce a bit with these ceasefire hopes. I think the major part of it is positioning, especially on tech. It's starting to get a bit crowded, a bit like the October to February periods. Big each Other is eight thousand used to be very exciting for people as a target now it's almost conservative. So with everything going on in the chip sector and the semis, we're questioning the whole rotation. But I think down the line will still be all right. 00:28:18 Speaker 6: So what is your top call right here when you think about global macro here? What are we doing here? What's your top convision call? 00:28:26 Speaker 5: It's getting trickier and trickier. 00:28:27 Speaker 4: I think the one top call is that the crowded trade off earlier summer shortening US rates versus going long EURO rates, that's going to continue to be unwound and there'll be a pain trade there. And when wash first walked in talking tough, keeping long end in control through that, people really believe that that would send US rates higher and higher, and that Europe would go through sum adult drums Well not exactly playing out on US data on Europe. Germany finally going through delivering key reforms. So I think that spread between German European space and US will continue to titan. 00:29:09 Speaker 6: We kind of came into the the year thinking week US dollar and I think that was kind of working. And then a war, Yeah, then a war started, a ran, then we saw and then we got the d X Y index back up close to one on one here, what do you call the dollar here? 00:29:27 Speaker 4: That's a bit stock poll so on its own If it's a bit, depends on yet again the Ai trades. If US exceptions then comes back, then all these calls of one ten, one eleven dollars maybe back. If we go through these choppy times more rotation, then my official cerebellus call of one twenty has more chance. One thing a higher euro software dollar really needs is Asia currencies beyond China to join Japan, Korea, Taiwan. Those are way too cheap and one godle that may finally come if Japan repatriation the headlines of last Friday and then Takaichi emphasizing it again, if Japanese money finally flows into their own assets. 00:30:12 Speaker 5: That may strengthen the eye. How would that happen? That's why I quote a godo. It hasn't happened for a long time. 00:30:17 Speaker 4: This time guarant is pushing it and giving some gimmick, giving some carets. 00:30:21 Speaker 5: But I hear your skepticism. 00:30:23 Speaker 2: How can you model forward given just as a general statement, a war or two wars. I just the certitude, I mean, I mean, I get the idea. People have to sell a message but how can you do it given the headlines I'm seeing from Friday? 00:30:42 Speaker 5: I completely hear you. 00:30:43 Speaker 4: That's why, as long as world growth stays as high as it is, given all this war uncertainty, et cetera, I think the right trad will continue to be a bit frustratingly SEL it's not going to do it won't grip to one eleventh. It's not going to soften to one seventeen either. It's going to be quantity chop chop chop FX. Unfortunately, G three, G four FX won't be the place to be Emerging markets carry, especially on high oil exporters that may continue to work your Brazils or Mexicos, that that may be the place to be in FX. 00:31:18 Speaker 6: We've now heard from our Federal Reserve chairman a few times here inflation is intolerable in his mind. The message seems to be fighting inflation is job one. How do you view kind of what we've heard from our new Fed chairman. 00:31:33 Speaker 5: So far is a passing the test? 00:31:37 Speaker 4: First of all these CPIS and PPI data also helped I think deep inside he wants to talk tough, not talk much, get it all forward guidance and end up not touching it. I'm not too sure he's too keen to hike his Other Hapkish members like Hamak on Friday will continue to help him as well. Is If data continents to come like they did the past week, I think we may end up with no hikes at all. Though I have to respect my Matt Zetti as always, I have to emphasize the official call is two hikes, okay, I. 00:32:11 Speaker 2: Mean that's where we want to go. I mean within the combine and David folk Artzlando put together. There's Matthew Losetti. He hangs out. He's over at the Treaty, the Time Warner Building. Yep, they renamed it. I'm still calling it the building, the Deutgia Bank Building. Madeloisetti is over there, framing out an economy with a huge bull market attached. Do you just say, I think a banking chatted. Do you just say forward motion and enjoy it while it's while it's going. 00:32:43 Speaker 4: Love Matt, respect him, but compared to him, I have a bit more more of a sympathy to the K economy arguments as well, so on his own, you know, for one percent four point point one percent all the AI arguments AI inflation arguments. Yes, I do hear them. More people in this wonderful country still live paycheck to paycheck. All this tight economy won't help with their mortgages. So that's why at the end of the day, doatche bankings of democracy. I'm not too sure about those two hikes coming in. 00:33:13 Speaker 6: So what is in your mind where the AI trade today? Because we see just used to we just buying anybody who's spending money, who's spending the capex, The hyperscalers and the chips, I guess are still a nice way to play it. But how are you guys think about how do you think about the AI trade? Because people trying to figure out winners on losership. 00:33:30 Speaker 4: Yeah, it's becoming like Magnitizum seven doesn't doesn't necessarily cut it anymore. 00:33:35 Speaker 5: I think we will. 00:33:36 Speaker 4: The rotation that I begin with will continue, The polishing shots will continue a little bit. I'm not sure World Cup right, I'm not sure we're in the even sixty fifth seventeenvin Idiot or my dear Tom's Red Sox. I'm not even sure you're in the sixth seventh inning. This has legs, but Paul earnings are important. What keeps going this binky story is earnings delivering, and this time around Skahni's delivered price action didn't. TSMC delivered price action didn't. I think this Google Wednesday is very important, followed by Microsoft and Apple. If Google again slams it, it's the winner anyway. But despite that price action so so, August may be a bit more nasty for coust positioning than people told in tone. 00:34:20 Speaker 2: Thank you so much, first cheer Glow. 00:34:23 Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday seven to ten am Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal