WEBVTT - Bessent Launches Treasury Bid to Tame Yields 0:00:00.040 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.800 --> 0:00:17.880 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:21.960 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.320 --> 0:00:25.640 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:28.200 us live on YouTube within Thinn. 0:00:28.280 --> 0:00:31.080 This is the way we were all here, doctorson Thank 0:00:31.120 --> 0:00:33.000 you so much Bank of NASA, with all of his 0:00:33.720 --> 0:00:38.240 work over the years on international economics, Ned Phelps, who 0:00:38.280 --> 0:00:42.040 we miss every day. The laureate from your Columbia would say, 0:00:42.040 --> 0:00:46.360 what separates us is dynamism, and right now we have 0:00:46.440 --> 0:00:51.440 American exceptionalism because we have Ned Phelps dynamism. 0:00:51.960 --> 0:00:54.520 Can we do that with a forty trillion dollar deficit? 0:00:55.000 --> 0:00:59.160 Yeah, mister Pholps was so tuned into sources of growth 0:00:59.160 --> 0:01:02.800 and how to stimulate growth and you know. 0:01:02.680 --> 0:01:04.240 Through policy and what have you. 0:01:04.280 --> 0:01:08.200 But anyway, but we'll certainly all miss him. So I 0:01:08.200 --> 0:01:10.640 don't think it's a coincidence that we had this intervention 0:01:10.720 --> 0:01:12.720 in the bond market on the same day that I 0:01:12.760 --> 0:01:14.920 was announced that our national debt hit forty trillion. 0:01:15.800 --> 0:01:17.400 Someone obviously got some early. 0:01:17.160 --> 0:01:22.320 News debt debt that's everywhere, right, It's not just a 0:01:22.440 --> 0:01:26.080 US phenomena. You see global yields everywhere, Germany, Japan, everywhere, 0:01:26.280 --> 0:01:28.880 yields arise, and we're in the world washed with debt. 0:01:29.280 --> 0:01:31.520 It was fine when interest rates for zero one percent. 0:01:31.640 --> 0:01:33.520 All of a sudden we're looking at four or five percent, 0:01:33.640 --> 0:01:35.280 and it starts to get really messy. 0:01:35.400 --> 0:01:37.479 And that's sort of the big driver I think that's 0:01:37.480 --> 0:01:38.759 going through global markets right now. 0:01:39.280 --> 0:01:42.959 So are we in a higher interest rate environment for 0:01:43.000 --> 0:01:44.880 a longer? Is this the new normal? 0:01:45.120 --> 0:01:47.920 You know? Four seventy on the on the ten year, 0:01:47.960 --> 0:01:48.680 maybe even more. 0:01:49.240 --> 0:01:50.840 Well, I think for old timers, I guess we could 0:01:50.880 --> 0:01:52.320 say this is the old normal, right, this is the 0:01:52.640 --> 0:01:55.240 rates that held basically before the Great Financial Crisis. So 0:01:55.520 --> 0:01:57.440 you know, I think a lot of US old timers saying, well, okay, look, 0:01:57.440 --> 0:01:59.720 you can live with four or five percent, but I 0:01:59.720 --> 0:02:02.600 think that's great when that GP, for instance, was maybe 0:02:02.640 --> 0:02:06.160 sixty percent. Now got that GDP one hundred and plus percent, 0:02:06.200 --> 0:02:07.200 and all of a sudden. 0:02:08.919 --> 0:02:10.959 At the graph of that jet debt to GDP on 0:02:10.960 --> 0:02:13.079 the Bloomberg terminal, and back in like in the eighties, 0:02:13.160 --> 0:02:15.560 it was like forty percent. Now we're at one hundred 0:02:15.600 --> 0:02:19.160 and almost one hundred and thirty percent. That seems important 0:02:19.200 --> 0:02:20.600 to me, is it? 0:02:21.400 --> 0:02:21.720 Uh? 0:02:22.040 --> 0:02:23.600 We get away with a lot because we are the 0:02:23.720 --> 0:02:27.079 face that we're the world's reserve currency, at least for now. 0:02:27.320 --> 0:02:29.000 I'm not saying it's going to end any time in 0:02:29.000 --> 0:02:31.160 our lifetime, but you know, these things don't last forever. 0:02:31.760 --> 0:02:34.600 Before us, it was Stirling, there's gold before that. But 0:02:35.680 --> 0:02:37.960 we do have, you know, sort of this seniorage. We 0:02:38.000 --> 0:02:40.400 have this benefit, we get lower costs being this sort 0:02:40.440 --> 0:02:45.040 of the safe haven asset. But it's it's it's again, 0:02:45.080 --> 0:02:47.240 it's messy. It kind of I hate to kind of 0:02:47.600 --> 0:02:49.400 take this the kop up, but it works, though it 0:02:49.440 --> 0:02:51.720 doesn't at some point it's gonna be taking point. This 0:02:51.760 --> 0:02:54.679 may be for a warning sign. I don't think where 0:02:54.680 --> 0:02:56.440 things blow up, but this is why a warning sign. Hey, 0:02:56.520 --> 0:02:57.600 markets are paying attention. 0:02:57.760 --> 0:02:59.919 So the Bank of dan saw, how are you advising 0:03:00.160 --> 0:03:03.320 where we are one one, three months, six months out? 0:03:03.680 --> 0:03:06.720 Or does win thin look for an unexpected and unknown 0:03:06.840 --> 0:03:08.280 unknown you can't frame. 0:03:08.880 --> 0:03:13.520 That's yeah, that's uh. Look, there's so many uh bout that. 0:03:13.520 --> 0:03:15.399 That's my favorite phrase. But yes, we have so many 0:03:15.440 --> 0:03:17.639 known unknowns, but there's always the unknown unknown. 0:03:17.720 --> 0:03:20.400 But right now we've got The. 0:03:20.400 --> 0:03:23.239 Biggest unknown to me is you know where yield's going 0:03:23.240 --> 0:03:25.680 and what's the FED doing. I mean, I think mister 0:03:25.680 --> 0:03:27.359 Wharfs did not do the market as any favored by 0:03:28.080 --> 0:03:30.239 back in July, just saying repeating his mind. 0:03:30.480 --> 0:03:33.440 How far out the curve does the FED go? Textbooks 0:03:33.480 --> 0:03:37.440 tell me two years? Maybe inside the belly of the curve. 0:03:37.840 --> 0:03:40.280 All of a sudden that may change. She's got to 0:03:40.320 --> 0:03:42.840 talk about ten year, twenty year dynamics. 0:03:43.040 --> 0:03:45.080 Well, that's the problem with all these changes in the market. 0:03:45.120 --> 0:03:47.360 We're also getting a new FED chair who obviously wants 0:03:47.400 --> 0:03:50.120 to shake up communications, wants the market community. 0:03:50.760 --> 0:03:52.839 I just said this to two guests ago. We don't 0:03:53.000 --> 0:03:53.880 repeat it with you. 0:03:54.160 --> 0:03:58.240 We got massive forward guidance yesterday. 0:03:58.560 --> 0:03:59.120 That's right. 0:04:00.120 --> 0:04:04.320 Look, well we've all revealed the pain point for the Treasury, 0:04:04.400 --> 0:04:07.440 right I think you know, thirty year year yields above 0:04:07.680 --> 0:04:10.280 five percent, that's a pain point. Ten you're approaching five 0:04:10.320 --> 0:04:14.520 that's a pain point. So I expect more more intervention. 0:04:14.640 --> 0:04:16.520 I mean, this is sort of a shot across about 0:04:16.600 --> 0:04:18.599 is you know, one from two billion to four billion 0:04:18.720 --> 0:04:21.600 at least four billion of buybacks, you know, kind of 0:04:21.640 --> 0:04:23.800 small potatoes. But that's just one of many things that 0:04:23.800 --> 0:04:25.960 they can do, but again it's there. 0:04:26.600 --> 0:04:28.159 These are more tactical than strategic. 0:04:28.200 --> 0:04:30.599 I mean, what's underlying the bomb right now is still 0:04:30.880 --> 0:04:33.120 massive depthits you know, you point out forty trillion debt, 0:04:33.480 --> 0:04:38.040 massive private sector supply, AI hyper scales, all that high inflation, 0:04:38.720 --> 0:04:40.880 and we go back to FED who we don't really 0:04:40.920 --> 0:04:43.000 know that the reaction function yet, and that's something I 0:04:43.040 --> 0:04:45.040 think that would be really on mister Warshaw, you know, 0:04:45.080 --> 0:04:45.760 in the coming weeks. 0:04:45.800 --> 0:04:47.400 Well, I'll get one more in here because I had 0:04:47.400 --> 0:04:49.280 to go win thin nerd here. 0:04:49.360 --> 0:04:53.280 Yeah, very good heads up all the mucky MUCKs, including Tom. 0:04:53.320 --> 0:04:56.440 We're gonna be heading out to Wyoming next week and 0:04:56.440 --> 0:04:57.320 I'm not sure what's out there. 0:04:57.560 --> 0:05:00.520 I'm jealous some mountains never gotten the invite adviser. 0:05:00.640 --> 0:05:02.680 I don't know what do you expect to hear from 0:05:02.760 --> 0:05:04.200 FED chairman to Washing and do you think that'll be 0:05:04.360 --> 0:05:06.240 his comments may be influenced by this. 0:05:06.400 --> 0:05:07.400 The Treasury departments. 0:05:07.440 --> 0:05:09.240 You know, it's really it's a good question, Paul. 0:05:09.240 --> 0:05:10.599 You know he was asked about it the July FM 0:05:10.680 --> 0:05:12.960 seeing he said, I hadn't even thought about It's a blank. 0:05:12.720 --> 0:05:14.719 Page to you. Well, he's got a Ton to talk about. 0:05:14.720 --> 0:05:17.760 Now, he's you know, he's balancing this his reticence to 0:05:17.800 --> 0:05:20.680 give any sort of Ford guidance with the hunger that 0:05:20.680 --> 0:05:24.039 the markets have. And if things were sort of chugging along, okay, 0:05:24.120 --> 0:05:26.159 we're we're worrying more inflation or anything like this. I 0:05:26.160 --> 0:05:28.800 think saying keeping a trap shuit would probably be no, 0:05:28.839 --> 0:05:29.640 okay strategy. 0:05:29.640 --> 0:05:30.800 We're at this tipping point. 0:05:30.800 --> 0:05:33.240 We're in this these crosswords and use all these analogy 0:05:34.160 --> 0:05:36.120 you miss, but we're at this, you know, a time, 0:05:36.240 --> 0:05:38.600 very difficult time for markets, and to have a FED 0:05:38.640 --> 0:05:40.560 that's unwilling to do that sort of guidance is to 0:05:40.560 --> 0:05:44.159 me it is very uh nerve wracking, and that markets 0:05:44.200 --> 0:05:44.680 are showing that. 0:05:44.680 --> 0:05:46.440 Yeah, I gotta go nerd here, we gotta get back. 0:05:46.440 --> 0:05:48.600 I'm gonna pick up off of Ned Phelps to Robert 0:05:48.680 --> 0:05:53.200 Bundell at Columbia with wind in a few years ago. 0:05:53.960 --> 0:05:59.880 What's Donald Trump's trilemma? Columbia invented the trilemma standard for 0:06:00.120 --> 0:06:03.440 in exchange dynamics. I see Philippine pace so almost to 0:06:03.560 --> 0:06:06.719 sixty two. Every nation, France has a story and it's 0:06:06.800 --> 0:06:10.600 ugly as well. But what is the president's trilemma? 0:06:11.040 --> 0:06:13.479 Well, I'll throw this out there and I mean mention 0:06:13.600 --> 0:06:15.840 this relations that they the sudministration came up for the 0:06:15.839 --> 0:06:18.839 second term two of the There are many sort of 0:06:19.960 --> 0:06:22.159 legs of the table they want. But to me, the 0:06:22.200 --> 0:06:27.760 two things are are existent are week dollar and lower yields. 0:06:28.279 --> 0:06:30.640 Because if you're actively trying to weeken the dollar, and 0:06:30.680 --> 0:06:33.240 I think that's part of the whole Trump organization planned 0:06:33.279 --> 0:06:35.520 on shore manufacturing, want on shore manufacturing and get a 0:06:35.560 --> 0:06:39.760 week of dollar make it more competitive. But if you're 0:06:40.080 --> 0:06:42.440 a foreign investor and you're holding US treasure, you think 0:06:42.440 --> 0:06:44.320 about you holding US treasures, We all of a sudden 0:06:44.400 --> 0:06:46.120 a week of dollar is gonna eat intoy return. So 0:06:46.120 --> 0:06:48.840 you're gonna have to ask for a higher return for 0:06:48.920 --> 0:06:50.480 you know, the exchange rate risk and sort of the 0:06:50.480 --> 0:06:53.240 reputational risk that the that the US is is I 0:06:53.279 --> 0:06:56.000 think is growing. So those two, to me are it's 0:06:56.040 --> 0:06:59.200 more of a dilember right now, but it's it's it's 0:06:59.200 --> 0:07:01.800 something that it consists it and I think we're paying 0:07:01.839 --> 0:07:03.880 the price right now is that Marcus are really sort 0:07:03.880 --> 0:07:06.880 of flailing for some kind of anchor and you have 0:07:06.920 --> 0:07:08.600 to higher all pressures you throw in there, which is 0:07:08.640 --> 0:07:10.480 I think right, totally messing things up. 0:07:10.520 --> 0:07:13.120 Friend Crude ninety three fifty five of Bara Winton, Thank 0:07:13.160 --> 0:07:16.040 you so much at the Bank of NASA. 0:07:16.320 --> 0:07:17.080 Stay with us. 0:07:17.280 --> 0:07:20.520 More from Bloomberg Surveillance coming up after this. 0:07:27.760 --> 0:07:31.360 You're listening to the Bloomberg Surveillance podcast. Catch us Live 0:07:31.400 --> 0:07:34.560 weekday afternoons from seven to ten am Eastern Listen on 0:07:34.680 --> 0:07:38.040 Apple Karplay and Android Otto with the Bloomberg Business app, 0:07:38.240 --> 0:07:39.920 or watch US live on YouTube. 0:07:40.160 --> 0:07:43.240 George Conkalvas with us right now. I head of US 0:07:43.280 --> 0:07:47.200 macro Strategy. I'm FG securities. Have you ever seen anything 0:07:47.280 --> 0:07:50.360 like what we witnessed yesterday? We talked about it, but 0:07:50.440 --> 0:07:51.040 there it was. 0:07:52.080 --> 0:07:56.200 I mean, look, if you think about Augusts are always 0:07:56.320 --> 0:07:59.240 kind of sneaky. They come out their sleep sleepy time 0:07:59.280 --> 0:08:00.840 here is in August, and then you get these sort 0:08:00.840 --> 0:08:02.800 of kind of headline shocks. 0:08:03.120 --> 0:08:03.840 And if you think. 0:08:03.720 --> 0:08:07.400 About the August is that we had post financial crisis, 0:08:07.440 --> 0:08:10.880 post European crisis, Like there was financial reasons why August 0:08:10.960 --> 0:08:14.400 would get like volatile. Now we're shifting to the sovereigns 0:08:14.400 --> 0:08:17.120 in the limelight. So like the sovereigns now are really 0:08:17.160 --> 0:08:20.320 developed markets in US included are now having to kind 0:08:20.320 --> 0:08:22.440 of fend for themselves and like, that's like the big 0:08:22.440 --> 0:08:24.440 shif that's happened in the last fifteen twenty years. And 0:08:24.480 --> 0:08:26.200 I think that's kind of what we saw yesterday. 0:08:26.680 --> 0:08:31.360 So as head of US micro strategy here, what are 0:08:31.360 --> 0:08:31.880 we doing here? 0:08:31.880 --> 0:08:33.520 I mean, we've got. 0:08:32.480 --> 0:08:39.000 Interest rates markedly higher, stocks hitting all time highs seemingly 0:08:39.080 --> 0:08:39.640 every day. 0:08:41.040 --> 0:08:43.080 Where are we allocating capital these days? 0:08:43.320 --> 0:08:43.480 Now? 0:08:43.559 --> 0:08:48.040 So look, we're being mindful of the focus on the 0:08:48.080 --> 0:08:50.920 long term sector of the rates market. And if you 0:08:51.000 --> 0:08:53.760 really go back and you look at what's been driving 0:08:54.000 --> 0:08:56.240 this move, a lot of it is termed premium, the 0:08:56.240 --> 0:08:58.800 additional yield compensation that we need for long term rates. 0:08:59.360 --> 0:09:01.720 For the first time in many, many, many years, you 0:09:01.760 --> 0:09:04.400 are getting compensated for the like in the bomb market again, right, 0:09:04.440 --> 0:09:07.120 So you have to pick your spots, and I think 0:09:07.320 --> 0:09:09.640 like dollar cost averaging in on every acid class, including 0:09:09.640 --> 0:09:10.640 the bomb market, makes sense. 0:09:11.320 --> 0:09:14.120 So again, on a two year I can get four 0:09:14.160 --> 0:09:15.680 to twenty if I want to go out a little 0:09:15.679 --> 0:09:15.880 bit more. 0:09:15.880 --> 0:09:16.480 In a ten year, I. 0:09:16.480 --> 0:09:20.600 Get four seventy. Am I spending any time at all 0:09:20.600 --> 0:09:21.640 in a corporate bond market? 0:09:22.240 --> 0:09:26.120 I mean, look, I think in general, Okay, so if 0:09:26.120 --> 0:09:29.800 we kind of zoom out again. We're in an environment 0:09:29.840 --> 0:09:33.480 where sovereigns are competing for capital for the first time 0:09:33.840 --> 0:09:36.720 with the private sector. That's a that's a big dynamic 0:09:36.760 --> 0:09:39.280 we all talk about all the time. The crowding out 0:09:39.320 --> 0:09:41.880 effect is now a real palpable thing. We're actually seeing 0:09:41.880 --> 0:09:47.000 crowding out between the AI issuance versus sovereigns. So I 0:09:47.040 --> 0:09:49.200 think you have as long as you're being compensated for it. 0:09:49.280 --> 0:09:52.119 And then yeah, IG has a place in people's portfolios. 0:09:52.360 --> 0:09:54.200 But when spreads you're super tight, you want to be 0:09:54.240 --> 0:09:55.079 defensive a little bit. 0:09:55.160 --> 0:09:57.640 The George Michael Darta and ed Yard Any both say, 0:09:57.640 --> 0:09:59.559 you know what rates are back to normal within a 0:09:59.640 --> 0:10:04.120 spect and all that our dumbest listener, that's me. 0:10:04.679 --> 0:10:07.160 Okay, the listeners and viewers who are. 0:10:07.040 --> 0:10:10.400 Not sophisticated, would you know they think Operation Twist is 0:10:10.679 --> 0:10:15.400 Chubby Checker. The answer is, they know forty trillions in 0:10:15.520 --> 0:10:19.360 number number. They know the interest expense is what it is. Yes, 0:10:19.559 --> 0:10:24.360 I'm looking at the Fibonacci, the log Fibonacci of the 0:10:24.400 --> 0:10:27.880 move yesterday, and we're already a third of the way 0:10:27.920 --> 0:10:31.160 back to where we were before. The best bombshell yields 0:10:31.200 --> 0:10:34.720 are going up this morning three basis points. What happens 0:10:34.720 --> 0:10:38.760 when he has to reintervene as he intervened yesterday up 0:10:38.800 --> 0:10:39.320 the ante. 0:10:39.600 --> 0:10:41.640 Yeah, look, I think this is this is obviously a 0:10:41.720 --> 0:10:45.360 very delicate balance, and I think we need to be 0:10:45.600 --> 0:10:48.240 careful in trying to call it a twist or yield 0:10:48.240 --> 0:10:52.200 curve controls. I mean, this is a operation mentords market 0:10:52.200 --> 0:10:54.920 function and liquidity for the treasure market. It could have 0:10:54.960 --> 0:10:58.280 an outside move again because of the sleepy August environment 0:10:58.320 --> 0:11:00.719 that we're in. So plus or minus two or three 0:11:00.720 --> 0:11:02.079 basis points, we're not going to make a big deal 0:11:02.120 --> 0:11:05.320 about it. That ten big move yesterday was significant. So 0:11:05.360 --> 0:11:08.000 that kind of shows you where positioning was were people 0:11:08.040 --> 0:11:10.120 were scared to actually be invested in the long term 0:11:10.120 --> 0:11:13.800 sector and they got a rude awakening yesterday. Let's see 0:11:13.800 --> 0:11:15.840 if we grind back up, if we unwind this whole. 0:11:16.000 --> 0:11:19.640 I'm seeing on the Bloomberg terminal, Boss Sweeney, we are 0:11:20.640 --> 0:11:21.920 that guy. Yeah. 0:11:22.000 --> 0:11:24.400 Look, so look, if that were to continue, I think 0:11:24.440 --> 0:11:27.720 that that's going to have a date with Kevin Warsh 0:11:27.800 --> 0:11:30.720 next week with Jackson Hole and how that gets characterized 0:11:30.760 --> 0:11:33.160 around what's the view on the FED on rates? 0:11:33.320 --> 0:11:35.480 What do you expect to hear from mister Walsh next week? 0:11:35.920 --> 0:11:38.680 So, I mean we really So there's really three options. 0:11:38.760 --> 0:11:38.880 Right. 0:11:38.880 --> 0:11:40.679 You can kind of stick to the script, which is 0:11:41.080 --> 0:11:44.120 it's a symposium around digital YEP, and the market's not 0:11:44.160 --> 0:11:46.280 going to like that. You can do a version of that, 0:11:46.320 --> 0:11:50.000 and then towards the end of the open remarks mentioned 0:11:50.000 --> 0:11:53.520 something about current macro conditions, what the FET's thinking is 0:11:53.559 --> 0:11:56.559 without giving too much forward guidance, or maybe we finally 0:11:56.600 --> 0:12:00.320 get Kevin Warsh coming out and laying out what is 0:12:00.400 --> 0:12:02.360 his framework, what does he look at? What is he 0:12:02.440 --> 0:12:05.480 thinking about? Like the path, because that's what the market's 0:12:05.559 --> 0:12:07.560 yearning for, because if you got that, you'd have a 0:12:07.559 --> 0:12:10.600 pretty big rally in every asset class, rates, equities, and credit. 0:12:11.000 --> 0:12:12.800 No reasonably that's gonna happen, though, right, I don't think 0:12:12.840 --> 0:12:13.480 it's gonna happen. 0:12:13.800 --> 0:12:16.839 I think I think it somewhere between option two. 0:12:17.120 --> 0:12:18.880 Yeah, George think us so much. 0:12:18.920 --> 0:12:22.000 George Conkab has had a USMC OR strategy on a 0:12:22.200 --> 0:12:23.199 movable story. 0:12:23.240 --> 0:12:28.959 To say the least. He's with MUFG Securities. Stay with us. 0:12:29.200 --> 0:12:32.439 More from Bloomberg Surveillance coming up after this. 0:12:39.679 --> 0:12:43.280 You're listening to the Bloomberg Surveillance podcast. Catch US Live 0:12:43.360 --> 0:12:46.480 weekday afternoons from seven to ten am Eastern Listen on 0:12:46.600 --> 0:12:50.240 Applecarplay and Android Auto with the Bloomberg Business app, or 0:12:50.400 --> 0:12:51.880 watch US Live on YouTube. 0:12:52.120 --> 0:12:53.320 It's just one stock. 0:12:53.400 --> 0:12:56.560 It's there's an affinity to the CFA program because in 0:12:56.600 --> 0:12:59.680 the accounting of the CFA you use. John Deere is 0:12:59.720 --> 0:13:03.280 one of the representative textbook companies. No I never understood 0:13:03.280 --> 0:13:04.160 equipment leasing. 0:13:04.280 --> 0:13:04.679 He did. 0:13:05.000 --> 0:13:08.680 Robert Teeter joins his chief investment strategist and equipment leasing 0:13:08.720 --> 0:13:10.199 at Silvercrest. 0:13:09.600 --> 0:13:13.080 Asset John Deere. The beginning of the year, there. 0:13:12.960 --> 0:13:16.679 Must be five reasons not to buy it. John Deere 0:13:16.880 --> 0:13:22.120 is up twenty seven percent with a pop this morning 0:13:22.840 --> 0:13:24.120 this year, and. 0:13:24.120 --> 0:13:28.280 Yet there were five reasons not to buy it. January first, Well, 0:13:28.400 --> 0:13:28.880 I think one. 0:13:28.800 --> 0:13:32.079 Are the really interesting things going on here. That story 0:13:32.120 --> 0:13:34.120 is one of them. That the healthcare news is another. 0:13:34.360 --> 0:13:37.079 You know, people are looking for a second story. You know, 0:13:37.120 --> 0:13:39.360 the AI story has been around for a while. It's 0:13:39.480 --> 0:13:42.480 very exciting, it's very powerful. But when you look ahead 0:13:42.480 --> 0:13:44.120 the next year, as people tend to do when we 0:13:44.160 --> 0:13:46.840 get into August here and start thinking ahead, you know 0:13:46.920 --> 0:13:48.520 what our next year's number is going to be like, 0:13:48.559 --> 0:13:50.920 they'll be great, but will they be higher than this year? 0:13:51.000 --> 0:13:53.000 Higher earnings growth, And so I think people are looking 0:13:53.040 --> 0:13:55.880 for other places to put capital. We've seen that in 0:13:55.960 --> 0:13:58.080 small cap doing well this year, and we see that 0:13:58.120 --> 0:14:00.320 in some of these powerful moves outside of it AI 0:14:00.400 --> 0:14:02.080 where you get a little bit of a catalyst and 0:14:02.120 --> 0:14:04.280 people are very quick to jump in and say this 0:14:04.360 --> 0:14:06.040 is a spot where I could be for the next year. 0:14:06.440 --> 0:14:09.080 So earnings for twenty twenty six are going to be 0:14:09.160 --> 0:14:13.760 twenty for the year twenty percent plus, you know, maybe 0:14:14.520 --> 0:14:17.079 double digits next year ten eleven, twelve, thirteen percent. With 0:14:17.160 --> 0:14:21.120 something like that, Can the market perform next year with 0:14:21.240 --> 0:14:23.640 a slower rate of growth for earnings? 0:14:23.840 --> 0:14:25.760 I think it can in the path that it has 0:14:25.840 --> 0:14:28.360 the past few weeks, meaning the broader market doing a 0:14:28.360 --> 0:14:30.520 bit better than the S and P, maybe some of 0:14:30.560 --> 0:14:32.960 the AI and tech stuff starting to go sideways for 0:14:33.000 --> 0:14:35.080 a bit and getting some of this capital flowing into 0:14:35.080 --> 0:14:37.320 other areas. And when you do the math on market 0:14:37.320 --> 0:14:39.280 cap of some of these huge tech names, even if 0:14:39.280 --> 0:14:41.640 you're just rebalancing a little bit out of those into 0:14:41.640 --> 0:14:44.200 something else, it gives a long runway for some of 0:14:44.200 --> 0:14:46.280 these other names to perform for a while, so I 0:14:46.280 --> 0:14:48.560 think the market can continue to perform. I'll just be 0:14:48.600 --> 0:14:50.000 a little bit broader market. 0:14:50.200 --> 0:14:52.040 What do you make of these higher yields we're seeing 0:14:52.120 --> 0:14:55.360 not just in the US treasures but around the world, Japan. 0:14:55.920 --> 0:14:57.040 In Europe and so on. 0:14:57.880 --> 0:15:00.680 What's going on out there with Is it higher rates 0:15:00.680 --> 0:15:01.440 for longer out there? 0:15:01.440 --> 0:15:01.840 Do you think? 0:15:01.960 --> 0:15:04.520 I think it is mostly because we don't have a 0:15:04.560 --> 0:15:07.320 clean resolution to oil price, and if you just chart 0:15:07.360 --> 0:15:11.360 oil price versus CPI, it's been very meaningful and we 0:15:11.400 --> 0:15:13.480 don't know when that's going to go away. I do 0:15:13.560 --> 0:15:16.440 think that the yields are really important here that you know, 0:15:16.480 --> 0:15:18.360 the yield on the tenure is something you should put, 0:15:18.400 --> 0:15:20.440 you know, front and center on your screen and monitor. 0:15:20.640 --> 0:15:22.880 We now know a really critical level kind of around 0:15:22.920 --> 0:15:25.240 four to seventy five on the tenure. As you said, 0:15:25.240 --> 0:15:27.600 we're going in the wrong direction today. If you get 0:15:27.600 --> 0:15:30.040 back up there again, that starts to look really interesting. 0:15:30.080 --> 0:15:32.560 Okay, cut to the chase. What is it Thursday? Already? 0:15:32.640 --> 0:15:34.240 Now we're ones? You know Thursday? 0:15:34.320 --> 0:15:36.080 There are Is it really like claims? 0:15:36.080 --> 0:15:36.320 Today? 0:15:36.400 --> 0:15:37.120 Day Friday? 0:15:37.120 --> 0:15:39.760 I can't even keep track? Sweets in charge of keeping track? 0:15:40.000 --> 0:15:41.040 Are you here tomorrow. 0:15:41.240 --> 0:15:44.560 No, please, Robert, I'll be here if you want me. 0:15:46.040 --> 0:15:48.880 I look at where we are in the emotion. 0:15:49.240 --> 0:15:52.520 I hear in restaurants people come up and all that is, 0:15:52.560 --> 0:15:55.960 I got cash, and I'm happy having cash. They yield 0:15:56.040 --> 0:15:58.840 and all that. But we all know instinctively we're not 0:15:58.840 --> 0:16:01.480 supposed to be in cash. So what do you do 0:16:02.000 --> 0:16:03.320 if you're scared stiff? 0:16:03.840 --> 0:16:06.960 Yeah, So we've been encouraging people to check back in 0:16:07.040 --> 0:16:08.280 on those long term goals. 0:16:08.320 --> 0:16:08.480 You know. 0:16:08.520 --> 0:16:10.160 One of the things that can happen when you've had 0:16:10.160 --> 0:16:12.560 a long bawl run like we've had, is that portfolios 0:16:12.600 --> 0:16:14.160 can get a little bit of an allied balance in 0:16:14.200 --> 0:16:16.280 the other direction, a little too much equity. And we've 0:16:16.320 --> 0:16:20.040 been encouraging people to pull back and rebalance. Their tax 0:16:20.120 --> 0:16:21.800 might be an issue, other things might be an issue, 0:16:21.800 --> 0:16:24.240 but have a game plan. And on the cash side, 0:16:24.280 --> 0:16:26.520 you're right, the yields are so much better now it's 0:16:26.560 --> 0:16:29.000 not as big of a penalty to have some money 0:16:29.000 --> 0:16:31.440 in cash. But I would say job number one, rebalance 0:16:31.480 --> 0:16:34.080 back to target. Job number two, make sure you're diversified 0:16:34.080 --> 0:16:36.280 across sectors, because we think people will be looking for 0:16:36.320 --> 0:16:39.400 other places to deploy capital. Next year, and job number 0:16:39.400 --> 0:16:41.200 three make sure that the cash is working for you 0:16:41.240 --> 0:16:43.600 and that you're getting a decent yield because they are available. 0:16:44.440 --> 0:16:48.760 Can stocks continue to perform if rates continue to at 0:16:48.800 --> 0:16:50.760 these high levels, maybe even higher from here? 0:16:51.160 --> 0:16:52.720 I think that's the real test. 0:16:52.880 --> 0:16:54.880 So I thought it was kind of a brilliant move 0:16:54.920 --> 0:16:56.560 by Treasury to just put a little bit of an 0:16:56.600 --> 0:16:59.359 announcement out there. Small amount is not really a consequential 0:16:59.400 --> 0:17:02.040 dollar amount, but it sets a marker, and the market 0:17:02.280 --> 0:17:04.040 for me is now I think, you know, on the 0:17:04.080 --> 0:17:06.040 ten year, four seventy five, And so if we get 0:17:06.040 --> 0:17:08.000 back up there and start testing that again, I think 0:17:08.040 --> 0:17:09.240 ebodies will struggle. 0:17:09.760 --> 0:17:12.400 Then before you leave the studio, we're going to get there. 0:17:12.640 --> 0:17:15.439 We're four seventy one und up. I mean this is 0:17:15.520 --> 0:17:16.879 moving in real time, folks. 0:17:16.920 --> 0:17:19.840 I mean most people Robert two, they don't care about this, 0:17:20.359 --> 0:17:22.800 But the fact is it's reversing. 0:17:22.720 --> 0:17:25.959 Rapidly, reversing rapidly. And I think what was so brilliant 0:17:25.960 --> 0:17:27.880 about the move is it was such a small move. 0:17:27.960 --> 0:17:29.560 So if you do get a bit of a fail 0:17:29.600 --> 0:17:31.760 and you get yields back up to four seventy five here, 0:17:31.800 --> 0:17:33.680 they can sort of put it off as well, this 0:17:33.800 --> 0:17:36.120 was just a small technical adjustment, not a big deal. 0:17:36.440 --> 0:17:38.240 But it tells you whether it's important or not, and 0:17:38.280 --> 0:17:39.280 I think it is important. 0:17:39.800 --> 0:17:41.200 Is it the beginning of it, like it's Tom was 0:17:41.240 --> 0:17:45.240 suggesting a policy by the Treasury here to keep moving 0:17:45.240 --> 0:17:48.360 into this bond market and trying to move this yields lower. 0:17:48.480 --> 0:17:49.960 I'm not sure where that came from, whether it was 0:17:49.960 --> 0:17:53.280 from the President was, whether it's from the Treasury itself. 0:17:54.320 --> 0:17:55.679 Is this a Was that a one. 0:17:55.560 --> 0:17:58.800 Time play yesterday? You think it's something more sustainable. 0:17:58.320 --> 0:18:00.439