WEBVTT - Surveillance: Chadha on 'The Wobble' 0:00:05.120 --> 0:00:08.480 This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along 0:00:08.520 --> 0:00:12.360 with Jonathan Farrell and Lisa Abramowitz. Join us each day 0:00:12.400 --> 0:00:16.840 for insight from the best an economics, geopolitics, finance and investment. 0:00:17.280 --> 0:00:22.119 Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 0:00:22.320 --> 0:00:26.600 anywhere you get your podcasts, and always on Bloomberg dot Com, 0:00:26.640 --> 0:00:29.800 the Bloomberg Terminal and the Bloomberg Business App. 0:00:29.840 --> 0:00:31.920 What is around a table here in New York? Binki Chata, 0:00:32.080 --> 0:00:34.159 chief global strategist, a head of UST allocation over at 0:00:34.159 --> 0:00:37.280 Deutsche Bank. Morning, Binkie, Good morning. I love a title 0:00:37.479 --> 0:00:40.520 in Southside Research, the wobble. Can we talk about the wobble? 0:00:41.000 --> 0:00:43.320 What is the wobble in the secuity market? What is that? 0:00:44.320 --> 0:00:48.360 The wobble is that, you know, we are basically overdue 0:00:48.479 --> 0:00:50.920 for a three to five percent pullback. 0:00:51.000 --> 0:00:54.720 It would be normal, believe it or not. 0:00:55.480 --> 0:00:59.000 We are now running in you know, ninety fifth percentile 0:00:59.120 --> 0:01:02.160 plus in terms of the duration, even though it seems 0:01:02.280 --> 0:01:05.160 rather short since March, since we had a three to 0:01:05.200 --> 0:01:08.679 five percent pullback. As I said, you know that's pretty normal. 0:01:09.040 --> 0:01:12.240 Three to five percent pullbacks happen every two to three months. 0:01:12.240 --> 0:01:15.280 So it's getting a bit extended. Number one. Number two, 0:01:16.600 --> 0:01:19.039 as you know, you know, the rise in positioning this 0:01:19.160 --> 0:01:22.800 time around has been you know, pretty vertical, especially on 0:01:23.160 --> 0:01:28.040 the discretionary investor side, and so it's an additional reason 0:01:28.240 --> 0:01:32.199 really for looking for you know, when that process is over. 0:01:32.400 --> 0:01:34.679 So I'm not. 0:01:36.760 --> 0:01:40.160 Being normative about this as do what should happen, but 0:01:41.200 --> 0:01:43.319 you know, if it when that does happen, we'll tell 0:01:43.360 --> 0:01:45.080 you that that part sort of played out. 0:01:45.400 --> 0:01:48.760 What is a chata process to buy on the dip? 0:01:48.880 --> 0:01:51.840 I'm fascinated you're sitting there like Ayce Greenberg years ago 0:01:51.840 --> 0:01:54.120 at Bear Strings, you got buy tickets over here, sell 0:01:54.160 --> 0:01:57.080 tickets over here. What's the chata process to buy in 0:01:57.120 --> 0:01:57.520 the dip? 0:01:58.320 --> 0:01:59.880 To buy on the dip? I mean, you have to 0:01:59.880 --> 0:02:02.320 have a view on what's the you know, the. 0:02:02.280 --> 0:02:07.520 Catalyst for a current three years out, not three years out, 0:02:07.600 --> 0:02:12.520 but you know what's driving a pullback. So the kind 0:02:12.520 --> 0:02:14.800 of pullback I'm talking about, it's really more sort of 0:02:14.800 --> 0:02:17.720 a consolidation and you know, sort of you want to 0:02:17.760 --> 0:02:22.560 see positioning rise gradually rather than vertically as it sort 0:02:22.560 --> 0:02:24.760 of did starting in late May. 0:02:26.639 --> 0:02:28.560 Does it make you nervous that everyone on your on 0:02:28.639 --> 0:02:32.079 Wall Street. All of your colleagues are revising upward their 0:02:32.080 --> 0:02:33.280 expectations for the S and P. 0:02:34.160 --> 0:02:35.320 It doesn't make me nervous. 0:02:35.720 --> 0:02:38.200 It's probably a little bit overdues the way I would 0:02:38.200 --> 0:02:40.960 put it. 0:02:41.240 --> 0:02:42.080 Okayl like welcome. 0:02:43.320 --> 0:02:48.200 We are just reporting, basically, you know, the second quarter 0:02:48.440 --> 0:02:54.080 of pretty solid sequential growth in earnings. You know, so 0:02:54.200 --> 0:02:57.680 if this was GDP we were talking about, and you 0:02:57.720 --> 0:03:01.920 were getting strong growth two quarters in a row, I 0:03:01.960 --> 0:03:03.160 think it would have an impact. 0:03:03.480 --> 0:03:05.760 The equity market tends to look at things. 0:03:05.480 --> 0:03:08.960 On a year and year basis, so you know, the 0:03:09.040 --> 0:03:12.880 turning that makes the turning points very fuzzy to be 0:03:12.960 --> 0:03:18.080 able to tell. If you look at headline earnings growth 0:03:18.240 --> 0:03:22.079 year and year, yes, you know we are still running negative, 0:03:22.200 --> 0:03:24.120 but a lot of that just simply has to do 0:03:24.320 --> 0:03:27.840 with the oil prices from last year. You take energy 0:03:27.840 --> 0:03:31.280 earnings out, and you know, it's first quarter of positive 0:03:31.360 --> 0:03:37.320 growth year and year after four negative quarters. I think 0:03:37.640 --> 0:03:40.440 it's more important to look at earnings growth on a 0:03:40.520 --> 0:03:45.840 sequential basis and also on an underlying basis. And really, 0:03:45.880 --> 0:03:48.600 if you look at underlying earnings, which is taking out energy, 0:03:48.680 --> 0:03:52.280 taking out the financials loan loss provisions, we've had two 0:03:52.400 --> 0:03:57.280 quarters now or four percent plus growth. Yeah, and we 0:03:57.400 --> 0:03:59.440 only fell six and a half percent last year. 0:03:59.480 --> 0:04:00.400 So actually the line. 0:04:00.320 --> 0:04:02.680 Earnings are at a new high, and you know the 0:04:02.760 --> 0:04:04.120 narrative is about a recession. 0:04:04.320 --> 0:04:06.600 Well, some people are also pointing to small business optimism, 0:04:06.640 --> 0:04:09.560 which came out this morning earlier, the highest levels in 0:04:09.600 --> 0:04:12.600 eight months, right, so sort of edifying your view. How 0:04:12.680 --> 0:04:15.520 much do yields push against that? We were talking about 0:04:15.520 --> 0:04:19.040 what's more important for your equity called this week? Is 0:04:19.080 --> 0:04:20.520 it going to be CPI on Thursday or is it 0:04:20.560 --> 0:04:22.320 going to be the Treasury auctions? And how many people 0:04:22.360 --> 0:04:23.320 step up to buy them? 0:04:23.680 --> 0:04:28.159 Yeah, I think yields matter, but it's really been much 0:04:28.279 --> 0:04:31.679 more over the last eighteen months. It's really been much. 0:04:31.520 --> 0:04:35.080 More about the volatility or if the message coming out 0:04:35.160 --> 0:04:38.680 of the rates market, rather than the level of rates. 0:04:39.200 --> 0:04:41.520 So as long as we were talking about you know, 0:04:41.600 --> 0:04:44.960 twenty five basis points here and there, Yeah, this doesn't 0:04:44.960 --> 0:04:48.960 really impact my view. If we get a big acceleration 0:04:49.040 --> 0:04:52.320 and inflation and a big you know response from the 0:04:52.320 --> 0:04:57.000 Fed and uncertainty increases, then you know it's a bigger 0:04:57.000 --> 0:04:58.640 concerned and a bigger pullback. 0:04:58.640 --> 0:05:00.880 I would say, how many of these stocks are actually 0:05:00.880 --> 0:05:03.920 growth stocks anymore. I'm looking at their multiples and they've 0:05:03.920 --> 0:05:06.560 got pretty tidy growth multiples on them, but how many 0:05:06.600 --> 0:05:07.760 are actually delivering growth? 0:05:08.839 --> 0:05:12.640 So you know, I would say, you know, the focus 0:05:12.720 --> 0:05:16.400 shifts over the course of the cycle. What we've basically 0:05:16.480 --> 0:05:20.040 seen is, you know, the megacap growth in tech stocks. 0:05:20.040 --> 0:05:23.160 Their earnings turn around first and very strongly in the 0:05:23.200 --> 0:05:26.560 first quarter, and it was pretty V shaped move if 0:05:26.600 --> 0:05:30.880 you're looking quarter by quarter, and that's now sort of 0:05:31.200 --> 0:05:33.440 widening out, is the way I would put it. So 0:05:34.160 --> 0:05:38.040 you know, we're catch up. It is so first Tech 0:05:38.120 --> 0:05:41.280 caught up with everyone else who hadn't fallen by as much. 0:05:41.760 --> 0:05:45.039 And the two of really since late May megacap growth 0:05:45.040 --> 0:05:46.320 in tech and the rest of the S and P 0:05:46.440 --> 0:05:50.560 five hundred they've they've moved really in tandem. But it 0:05:50.640 --> 0:05:53.960 does mean that since megacap growth in tech earnings since 0:05:54.000 --> 0:05:57.160 and amaze very short period, but their earnings. 0:05:56.839 --> 0:05:57.520 Do grow faster. 0:05:57.760 --> 0:06:00.680 So actually, on a relative multiple basis, all the valuation 0:06:00.760 --> 0:06:01.279 is coming in. 0:06:01.560 --> 0:06:02.960 You might be annoyed with me for bringing up a 0:06:02.960 --> 0:06:05.000 single name, but I think everyone's fascinated by the move 0:06:05.040 --> 0:06:07.560 with Apple at the moment. Yeah, and for five straight 0:06:07.600 --> 0:06:10.800 days into today. Yes, they're trying to snap back this 0:06:10.839 --> 0:06:13.680 morning a bounce, but ultimately are they producing the growth? 0:06:13.920 --> 0:06:16.159 Can we have this the biggest waiting on the S 0:06:16.200 --> 0:06:18.799 and P five hundred, the biggest waiting on the NaSTA 0:06:18.880 --> 0:06:21.679 one hundred traded a multiple as something like thirty times 0:06:21.680 --> 0:06:24.440 forward earnings when it's not delivering any growth. 0:06:25.360 --> 0:06:25.720 Yeah. 0:06:25.760 --> 0:06:29.080 So, I mean, you know, as you know, I don't 0:06:29.080 --> 0:06:33.080 come and from evaluation perspective, what the signal is that 0:06:33.120 --> 0:06:34.560 you take away from that name at the moment and 0:06:34.600 --> 0:06:37.120 the way it's performed. Sure, but I think that's part 0:06:37.120 --> 0:06:41.680 of the process, you know, of sort of the rally 0:06:41.720 --> 0:06:45.719 that we've seen so of our broadening out. It's precisely 0:06:45.760 --> 0:06:49.560 that question that broadens the rally out because you. 0:06:49.480 --> 0:06:50.560 Know, if we are. 0:06:52.520 --> 0:06:55.000 You know, the market's running with the soft landing narrative, 0:06:55.040 --> 0:06:57.000 and if the soft landing is going to happen, then 0:06:57.000 --> 0:06:59.280 you're going to have cyclical growth and so you should 0:06:59.320 --> 0:07:01.839 be rotating and the market has you know, it's sort 0:07:01.839 --> 0:07:02.400 of sitting. 0:07:02.160 --> 0:07:04.320 In the middle now. I mean, we're moving in tandem. 0:07:04.320 --> 0:07:08.960 As I said after, you know, growth stocks just leading 0:07:08.960 --> 0:07:12.200 the charge, and at some point I would expect you know, 0:07:12.240 --> 0:07:13.160 the next case you. 0:07:13.200 --> 0:07:15.760 Got a wobble, the wobble, the chatt to wobble is 0:07:15.800 --> 0:07:18.720 in place. Does that mean you reset your sp X outlook? 0:07:18.920 --> 0:07:21.880 Oh no, no, no, we get five thousand this morning on pullback. 0:07:23.280 --> 0:07:25.200 I think that you know, it's important to keep in 0:07:25.240 --> 0:07:28.960 mind that we haven't fulfilled even the three percent correct 0:07:29.240 --> 0:07:36.400 you know, pullback yet, so we were down basically. I think, 0:07:36.560 --> 0:07:40.640 you know, a return of normality after this big repricing 0:07:40.680 --> 0:07:44.320 that we've had, you know, would be helpful just. 0:07:44.320 --> 0:07:46.200 For our listeners and viewers. John, I mean, can we 0:07:46.200 --> 0:07:48.120 get tried to go to five thousand today. 0:07:47.920 --> 0:07:51.960 With the wobble? Not today, but yes it is our 0:07:52.040 --> 0:07:53.000 soft lending target. 0:07:53.280 --> 0:07:56.640 Thank you, Thank you for kind of fun pleasure. Thanks 0:07:56.680 --> 0:07:57.320 got to say it. 0:08:07.240 --> 0:08:09.240 We're gonna get a brief ound these markets right now. 0:08:09.280 --> 0:08:11.320 And I love what she says about August and summer 0:08:11.360 --> 0:08:16.280 mirror pandit with US Global Market Strategy JP Morgan Asset Management. 0:08:16.320 --> 0:08:18.920 You'd said, Tom, you're jogging in place. You sound like 0:08:18.960 --> 0:08:20.960 the entire King family, because that's what I do. I 0:08:21.080 --> 0:08:24.440 jog in place. What does jogging in place mean for 0:08:24.520 --> 0:08:26.640 a market that's been a moonshot since. 0:08:26.440 --> 0:08:28.960 October when we think about the market and the risks 0:08:29.000 --> 0:08:30.680 here going forward, there's not. 0:08:30.680 --> 0:08:32.120 A whole lot of upside risk here. 0:08:32.120 --> 0:08:34.360 But I think that the downside risk is somewhat limited 0:08:34.600 --> 0:08:35.480 because if we think. 0:08:35.280 --> 0:08:37.200 About where we are with the markets. 0:08:36.960 --> 0:08:40.280 We are in between in between the inflation spikes and 0:08:40.280 --> 0:08:43.120 the FED hikes, but also waiting for the economy and 0:08:43.200 --> 0:08:45.280 profits to sour. So I don't know that there is 0:08:45.320 --> 0:08:48.200 a whole lot of upside catalyst in a world where 0:08:48.400 --> 0:08:50.480 profits are just better than feared. We need to see 0:08:50.480 --> 0:08:52.440 some more out of the profits landscape in order to 0:08:52.440 --> 0:08:55.560 get some more upside from stocks that have already rallied 0:08:55.559 --> 0:08:59.120 really hard and that have already experienced in pretty high valuations. 0:08:59.360 --> 0:09:01.240 But at the same time time, until we see. 0:09:01.000 --> 0:09:03.640 Some more souring in profits in the economy, I think 0:09:03.640 --> 0:09:06.800 we're in an environment where stocks are essentially jogging in 0:09:06.880 --> 0:09:08.480 place where we are today. 0:09:08.640 --> 0:09:10.600 And that's not just for stocks. I think it's similar 0:09:10.640 --> 0:09:11.240 for yields. 0:09:11.600 --> 0:09:14.040 The pop and yields we've seen more recently, I would 0:09:14.040 --> 0:09:17.559 attribute that mostly to the pop and growth. Yes, there 0:09:17.640 --> 0:09:20.440 was a Fitch downgrade, Yes we're seeing some inflation break 0:09:20.520 --> 0:09:23.839 evens move a bit higher, But really it's all about growth. 0:09:23.880 --> 0:09:26.520 If we think about this higher yield environment since May, 0:09:26.760 --> 0:09:30.680 since the May FOMC meeting. So if we considered that environment, 0:09:30.720 --> 0:09:32.319 you know, I think that yields too for the rest 0:09:32.320 --> 0:09:34.360 of the year could kind of jog in place until 0:09:34.400 --> 0:09:34.800 next year. 0:09:34.920 --> 0:09:37.520 You're charm at JP Morgan. This is English major out 0:09:37.520 --> 0:09:40.240 of tough CFA, which I think is the coolest thing going. 0:09:40.480 --> 0:09:42.800 I can't imagine what the CFA was like for you 0:09:43.400 --> 0:09:46.880 coming out of that wonderful background. You write the documents 0:09:47.040 --> 0:09:51.120 at JP Morgan, You actually craft the documents that you're 0:09:51.120 --> 0:09:54.600 putting out. What are you writing right now about sixty forty? 0:09:55.160 --> 0:09:57.280 Right now, if we think about the sixty forty, it's 0:09:57.320 --> 0:09:59.520 had a huge rebound over the course of this year. 0:09:59.679 --> 0:10:01.480 Las year the sixty forty was dead. 0:10:01.720 --> 0:10:04.319 But I think what's important to think about with diversification 0:10:04.520 --> 0:10:07.839 is that markets and the economy look in opposite directions. 0:10:08.160 --> 0:10:11.400 Markets are very much forward looking. The economy is at 0:10:11.440 --> 0:10:13.839 best looking at where we are today, but also looking 0:10:13.880 --> 0:10:16.400 backward at the data we've already seen. And if we 0:10:16.440 --> 0:10:19.640 look at periods in history where the sixty forty has struggled, 0:10:19.920 --> 0:10:23.559 take two thousand and eight, take nineteen seventy four, if 0:10:23.559 --> 0:10:26.240 you look at the next year, nineteen seventy five, if 0:10:26.280 --> 0:10:28.440 we look at two thousand and nine, those were by 0:10:28.480 --> 0:10:32.199 no means good economic years, but you did see the 0:10:32.240 --> 0:10:34.120 markets rebound. I mean, two thousand and nine is a 0:10:34.120 --> 0:10:37.240 great example where you see markets bottom in March, we 0:10:37.360 --> 0:10:39.920 start to get out of recession in the summer, and 0:10:39.920 --> 0:10:43.559 actually the unemployment rate continues to rise until October. 0:10:43.600 --> 0:10:45.240 I think that's a helpful guidepost for. 0:10:45.200 --> 0:10:47.560 Where we are today, and that the market has priced 0:10:47.600 --> 0:10:49.480 in a whole lot of bad news and a lot 0:10:49.480 --> 0:10:51.800 of risks and threats, and we have yet to see 0:10:51.880 --> 0:10:54.000 all of them crystallize. But the market is already sort 0:10:54.000 --> 0:10:56.120 of looking a little bit beyond there, and that's a 0:10:56.120 --> 0:10:58.080 good environment for diversification. 0:10:58.480 --> 0:11:00.760 What do you say to a client who theoretically comes 0:11:00.840 --> 0:11:03.520 up to you and says, hold on, this time is different. 0:11:03.559 --> 0:11:06.280 Inflation's going to accelerate, These bonds are going to be worthless. 0:11:06.280 --> 0:11:09.600 It's going to wreck our evaluation of the stocks of 0:11:09.600 --> 0:11:13.240 the sockholdings that you currently have focused on. Something that's 0:11:13.280 --> 0:11:15.920 really problematic. We want to just hide in cash. I 0:11:15.920 --> 0:11:17.679 don't see how you could be calling for yields to 0:11:17.720 --> 0:11:20.000 go back down to something that was normal, What do 0:11:20.040 --> 0:11:20.600 you say to them. 0:11:21.160 --> 0:11:22.440 Ultimately, if we look at. 0:11:22.360 --> 0:11:24.960 Cash right now, clients love a guarantee. If you can 0:11:24.960 --> 0:11:27.680 get a guaranteed five percent in a CD, that seems great. 0:11:27.920 --> 0:11:29.480 But the reality is if you think about something like 0:11:29.520 --> 0:11:32.000 a six month CD, you have some reinvestment risk there. 0:11:32.000 --> 0:11:33.960 When we think about the arc of the year, and 0:11:34.080 --> 0:11:37.120 with yields where they are now with above trend growth, 0:11:37.160 --> 0:11:39.800 well above trend growth really for four quarters in a row, 0:11:40.160 --> 0:11:42.839 if we even start to see slightly subtrend growth, you're 0:11:42.840 --> 0:11:44.720 going to start to see yields come down. If we 0:11:44.760 --> 0:11:46.839 see inflation soften a little bit more, you're going to 0:11:46.880 --> 0:11:48.920 see yields come down. Doesn't mean they need to create 0:11:49.080 --> 0:11:50.960 this year, and again they could be jogging in place 0:11:51.000 --> 0:11:52.640 a bit. But as we head into next year and 0:11:52.640 --> 0:11:54.680 we look at that twelve month out look, yields can 0:11:54.720 --> 0:11:55.520 start to come down. 0:11:55.720 --> 0:11:57.480 So when you sit in cash, you have this. 0:11:57.520 --> 0:12:01.240 Opportunity cost where you're in come can potentially come down, 0:12:01.440 --> 0:12:03.839 but also you don't get the benefit of the upside 0:12:03.960 --> 0:12:06.720 within stepping out a little bit in the risk spectrum 0:12:06.720 --> 0:12:08.840 to bonds, you can potentially lock in income for a 0:12:08.880 --> 0:12:12.240 longer period of time, and in addition, have that potential 0:12:12.240 --> 0:12:13.239 for capital appreciation. 0:12:13.440 --> 0:12:15.439 We've been talking about the auctions this week and how 0:12:15.440 --> 0:12:17.840 the US Treasure Department is selling a greater amount of debt. 0:12:17.960 --> 0:12:20.240 Are you saying this is a good time to buy 0:12:20.400 --> 0:12:23.000 that four percent on a ten year yield to lock 0:12:23.040 --> 0:12:25.719 that in seems like a really nice opportunity. 0:12:26.120 --> 0:12:28.839 The window for the bond market has been extended over 0:12:28.880 --> 0:12:31.079 the course of the summer. It is, of course a 0:12:31.679 --> 0:12:33.960 setback in terms of that recovery that we were hoping 0:12:34.000 --> 0:12:36.960 to see throughout this year, but it does extend that 0:12:37.000 --> 0:12:39.760 window of opportunity from an entry point standpoint. One of 0:12:39.800 --> 0:12:42.720 the biggest challenges that investors are dealing with today is price. 0:12:43.000 --> 0:12:45.679 Where do you find something at a reasonable valuation? Now, 0:12:45.720 --> 0:12:47.680 I will fully concede that if we look at debt 0:12:47.720 --> 0:12:51.520 and deficits over the next decade plus, with deficits coming 0:12:51.520 --> 0:12:54.120 in at five and a half to seven percent on average, 0:12:54.160 --> 0:12:56.600 that is historically high, and we are going to deal 0:12:56.679 --> 0:12:58.960 with it a yield problem over time. But I think 0:12:59.240 --> 0:13:02.280 given the economic backdrop in the near term, this is 0:13:02.320 --> 0:13:03.360 a pretty good entry point. 0:13:03.400 --> 0:13:06.880 What does it sell right now to high net worth 0:13:07.000 --> 0:13:11.120 people about cash at a five percent yield? Are they 0:13:11.120 --> 0:13:13.040 comfortable with that, or they're saying, wait a minute, why 0:13:13.080 --> 0:13:14.120 can't we buy more Apple. 0:13:14.760 --> 0:13:17.120 You see that clients are comfortable with it because again, 0:13:17.240 --> 0:13:19.280 you haven't had that type of yield in so long. 0:13:19.559 --> 0:13:21.120 But I think getting back to your question about the 0:13:21.160 --> 0:13:24.040 sixty forty and how we broaden out that allocation, we're 0:13:24.080 --> 0:13:27.120 also seeing that people realize this is not a market 0:13:27.160 --> 0:13:29.719 for easy money. It's not just that you're going to 0:13:29.760 --> 0:13:31.800 experience data that's going to go up. So people have 0:13:31.840 --> 0:13:34.559 to be a little bit more discerning in how they're investing, 0:13:34.760 --> 0:13:36.640 you know, not only around the world, but in terms 0:13:36.679 --> 0:13:39.680 of types of vehicles, thinking about alternatives to enhance different 0:13:39.720 --> 0:13:44.160 outcomes for income diversification, capital appreciation. So I think that 0:13:44.200 --> 0:13:45.840 people are really sharpening their cells, and. 0:13:45.880 --> 0:13:49.640 This time active management wins into twenty twenty four, active 0:13:49.679 --> 0:13:51.160 management will beat index. 0:13:51.440 --> 0:13:53.520 Take a look at profits, take a look at companies. 0:13:53.600 --> 0:13:56.599 Even within the same sectors or industries, you're seeing a 0:13:56.640 --> 0:13:59.800 lot of differentiation in terms of how management is handling 0:14:00.080 --> 0:14:03.880 higher prices, higher wages, more headwinds thrown at them. 0:14:03.920 --> 0:14:05.760 So certainly it is a time to pick. 0:14:05.920 --> 0:14:09.240 And choose which managers and which management of companies are 0:14:09.320 --> 0:14:10.840 doing the right things in this environment. 0:14:10.960 --> 0:14:12.720 Mur thank you. It's going to see you more pandit 0:14:12.760 --> 0:14:19.000 the f JP Morgan as in management, this is. 0:14:18.960 --> 0:14:21.480 An important interview with our question, our interview of the 0:14:21.560 --> 0:14:25.800 day in fixed income and all that means across equities, commodities, 0:14:26.200 --> 0:14:29.400 in foreign exchange. Rob Waldner is out of the vintage 0:14:29.480 --> 0:14:32.840 of Newtonian calculus that would be engineering at top East 0:14:32.880 --> 0:14:35.720 Coast schools with a heritage back two hundred years. He's 0:14:35.760 --> 0:14:40.040 Princeton civil engineering. And that is a rigor about statics 0:14:40.080 --> 0:14:43.360 in dynamics that he brings to fixed income right now. 0:14:43.560 --> 0:14:47.160 This is not statics in the fixed income market. What 0:14:47.320 --> 0:14:49.520 is the dynamic of all the algebra and the math 0:14:49.560 --> 0:14:52.560 of fixed income right now? What's the dynamic that you're 0:14:52.600 --> 0:14:53.200 focused on? 0:14:53.480 --> 0:14:55.480 Well, Tom, you were talking about it earlier in the 0:14:55.560 --> 0:14:59.400 second in the show, which is the news around disinflation 0:14:59.800 --> 0:15:02.560 and and almost sort of seems like deflationary sort of 0:15:02.640 --> 0:15:06.479 vibes that we have out there. So we're getting USCPI 0:15:06.600 --> 0:15:10.800 data on Thursday, we get Chinese data tonight. Chinese data 0:15:10.840 --> 0:15:12.720 CPI is likely to come in negative year and ear 0:15:13.760 --> 0:15:16.120 us I think the Bloomberg consensus is will get a 0:15:16.160 --> 0:15:18.440 point two on core and point two on headline month 0:15:18.480 --> 0:15:21.280 and month. So the data is starting to come in 0:15:21.280 --> 0:15:25.320 as we've been anticipating, very disinflationary, and it looks like 0:15:26.600 --> 0:15:28.320 you know, in certain areas like China and the trade 0:15:28.400 --> 0:15:31.880 data we got overnight feels more like deflationary. And I 0:15:31.920 --> 0:15:33.520 think that's what's going on in the bond market here 0:15:33.600 --> 0:15:37.560 is people are finally realizing or looking at that and thinking, hey, 0:15:37.960 --> 0:15:39.720 if I can get a five and a half percent 0:15:39.880 --> 0:15:43.880 for investment grade bond portfolio, and we are in a 0:15:43.920 --> 0:15:48.600 dissinflationary environment where really where growth is going to be 0:15:49.040 --> 0:15:52.640 you know, mediocre, That sounds pretty good, right, So that's 0:15:52.640 --> 0:15:53.680 where the buyers come from. 0:15:53.760 --> 0:15:56.560 So there's a tug of war right now between disinflationary 0:15:56.600 --> 0:15:59.800 forces and additional tracery supply. You don't think that Tracey 0:15:59.800 --> 0:16:02.880 is apply wins out. You don't think it's as important 0:16:02.880 --> 0:16:05.080 as the disinflationary forces when it comes to what this 0:16:05.120 --> 0:16:06.000 bond mark is going to. 0:16:05.960 --> 0:16:09.760 Take day to day. The turury supply can drive things, 0:16:09.880 --> 0:16:11.440 and I think you were talking about it earlier. That's 0:16:11.480 --> 0:16:14.640 probably part of what revalue things last week is looking 0:16:14.640 --> 0:16:17.360 forward to that supply. But we know that in any 0:16:17.760 --> 0:16:22.760 medium term. You know, month type horizon supply is not 0:16:22.840 --> 0:16:27.160 the driver. It's the macro forces that are the drive yields. 0:16:27.360 --> 0:16:29.440 So have you been buying this bond sell off? 0:16:30.400 --> 0:16:34.080 We have been, Yeah, we have been. We are positive unduration. 0:16:34.400 --> 0:16:36.720 We've been looking at this treasury if you want to 0:16:36.760 --> 0:16:38.520 talk about the treurgy for a second. You know, we 0:16:38.560 --> 0:16:40.000 think the tenure has been in this three and a 0:16:40.040 --> 0:16:42.480 half to four percent range. I'm actually getting a little 0:16:42.480 --> 0:16:46.040 more positive that. So thinking about that here is a 0:16:46.040 --> 0:16:50.120 great buying opportunity because one, as I said, you have 0:16:50.160 --> 0:16:56.600 a disinflation environment with relatively moderate real growth and so 0:16:56.640 --> 0:16:58.320 that in the medium sure, that's quite good. And then 0:16:58.360 --> 0:16:59.960 if I start to think about the risks in there, 0:17:00.640 --> 0:17:03.520 the risk scenarios are that the FED overstays it's welcome here. 0:17:03.960 --> 0:17:06.199 You know, we have several FED members saying they think 0:17:06.240 --> 0:17:08.560 they need to hike again even though we believe we're 0:17:08.560 --> 0:17:13.000 in a disinflationary environment. That could be quite negative for 0:17:13.160 --> 0:17:17.399 the growth outlook. That could create you know, a dislocation, 0:17:17.800 --> 0:17:19.560 and that would be very positive for the treasury market. 0:17:19.720 --> 0:17:22.040 So in other words, when we're talking about these auctions 0:17:22.040 --> 0:17:25.080 this week, are you basically saying yes, let's go. I 0:17:25.080 --> 0:17:27.199 can't wait to load up on both ten year and 0:17:27.280 --> 0:17:28.200 thirty year treasuries. 0:17:28.680 --> 0:17:30.440 I think that you know, this is a great time 0:17:30.440 --> 0:17:32.360 to buy fixed income and if you want to buy treasuries, 0:17:32.400 --> 0:17:34.240 if that's your asset of choice. 0:17:34.359 --> 0:17:36.119 So who is coming in and joining you? 0:17:36.320 --> 0:17:38.840 Are you seeing more institutions who are doing the same 0:17:38.880 --> 0:17:41.360 thing that you are or is it still the international 0:17:41.359 --> 0:17:43.320 buyer still the same buyer base, and that we're all 0:17:43.359 --> 0:17:44.800 just making a lot of noise over nothing. 0:17:45.760 --> 0:17:49.400 Well, you have the same buyer base, The same international 0:17:49.440 --> 0:17:52.360 buyer base is still there. You know, fixed income flows 0:17:52.880 --> 0:17:56.000 have not turned incredibly positive yet, but you know we 0:17:56.040 --> 0:17:57.160 think that's likely to come. 0:17:57.359 --> 0:17:59.960 Can we talk about the new floor in global fixed income? 0:18:00.200 --> 0:18:00.320 Now? 0:18:00.359 --> 0:18:03.440 The POH is pulling back, the ACP has pulled back, 0:18:03.480 --> 0:18:05.359 the Federal Reserve has taken rates to five and a 0:18:05.400 --> 0:18:07.560 half percent, and people think maybe they only come back 0:18:07.600 --> 0:18:10.240 to maybe four three and a half something in between. 0:18:10.480 --> 0:18:12.479 What is the new floor for global fixed income? If 0:18:12.520 --> 0:18:14.640 you get into trouble, what do you runny down too? 0:18:14.880 --> 0:18:16.560 Just in terms of years? What are the limits of 0:18:16.560 --> 0:18:19.280 that running because people don't think it's zero anymore? What 0:18:19.440 --> 0:18:19.680 is it? 0:18:20.640 --> 0:18:23.440 Well, we'll have to see where that pans out. And 0:18:23.480 --> 0:18:25.920 it depends on what a recession looks like. 0:18:25.800 --> 0:18:27.359 How far we get back to developed thoughts on. 0:18:27.480 --> 0:18:30.159 But you know, we think that it's something in the 0:18:30.240 --> 0:18:33.680 range of sort of two, a more normalized Yeld curve 0:18:34.000 --> 0:18:36.560 would see, you know, a more steep Yeel curve. And 0:18:36.600 --> 0:18:38.879 if short rates get down to one, you're talking about 0:18:38.920 --> 0:18:40.439 ten years at two two and a quarter, you. 0:18:40.440 --> 0:18:42.960 Think short rates will potentially come back down to one. 0:18:42.800 --> 0:18:45.760 In a recessionary type environment. 0:18:45.840 --> 0:18:48.840 Yeah, interesting because least the kind of pushback I've heard 0:18:48.880 --> 0:18:50.920 is that perhaps you come down to three and a 0:18:50.960 --> 0:18:53.439 half four something like that. I think it was Mike 0:18:53.480 --> 0:18:55.520 Gapan's point over at Bank for America. 0:18:55.520 --> 0:18:58.240 The essentially inflation would be stickier for longer, and that 0:18:58.280 --> 0:19:00.240 would keep the FED at a higher level that we're 0:19:00.280 --> 0:19:02.320 going to go back to the low rate kind of environment. 0:19:02.320 --> 0:19:05.879 And I just wonder how much this is really the 0:19:05.920 --> 0:19:08.119 polls of the debate right now, people who believe we're 0:19:08.160 --> 0:19:10.040 going back to the environment we were in before and 0:19:10.080 --> 0:19:12.600