1 00:00:00,040 --> 00:00:03,279 Speaker 1: Let's get to our guest, Danielle di Martino, Booth, CEO 2 00:00:03,400 --> 00:00:07,160 Speaker 1: and chief strategists at Quill Intelligence. Daniel, I know you 3 00:00:07,200 --> 00:00:09,719 Speaker 1: can be quite the critic of the FED of the 4 00:00:10,080 --> 00:00:12,240 Speaker 1: sort of measured look is that a lots out of 5 00:00:12,240 --> 00:00:15,520 Speaker 1: the control the Ukraine War and the COVID lockdowns in 6 00:00:15,640 --> 00:00:19,319 Speaker 1: China and such. The basher mode, Uh, that is that 7 00:00:19,360 --> 00:00:21,920 Speaker 1: they've been way behind the curve one sense, as you're 8 00:00:21,920 --> 00:00:26,480 Speaker 1: in basher mode. Tell me. I mean, I wouldn't necessarily 9 00:00:26,480 --> 00:00:29,800 Speaker 1: say that I'm in basher mode, but right now the 10 00:00:29,840 --> 00:00:35,160 Speaker 1: nemesis of j PALE is housing inflation, shelter inflation that's 11 00:00:35,280 --> 00:00:38,559 Speaker 1: rising at a five rate um. You have to go back, 12 00:00:38,680 --> 00:00:41,680 Speaker 1: I think to get that high of an input to 13 00:00:43,280 --> 00:00:47,200 Speaker 1: of the composition of the consumer price index. There's every 14 00:00:47,200 --> 00:00:49,440 Speaker 1: reason to believe that that's going to rise up from five, 15 00:00:52,080 --> 00:00:53,960 Speaker 1: maybe a little bit lower than that in the months 16 00:00:53,960 --> 00:00:56,680 Speaker 1: that come in between now and the Midtroum elections. And 17 00:00:56,920 --> 00:00:59,600 Speaker 1: unlike food and energy costs, which you can say that 18 00:00:59,640 --> 00:01:02,360 Speaker 1: FED can control, this is something that lies at the 19 00:01:02,400 --> 00:01:05,040 Speaker 1: foot of the set. So rather than bashing, I'm just 20 00:01:05,080 --> 00:01:11,319 Speaker 1: identifying here, Well, mistakes have been made and this appears 21 00:01:11,400 --> 00:01:13,919 Speaker 1: to be a mistake from the FED in the past, 22 00:01:13,959 --> 00:01:16,400 Speaker 1: though we've still what the future to think about, what's 23 00:01:16,640 --> 00:01:18,560 Speaker 1: what's the action going to be taken to to get 24 00:01:18,600 --> 00:01:22,559 Speaker 1: things under control. Well, I think you know there there's 25 00:01:22,560 --> 00:01:28,240 Speaker 1: a nine basis point rate hike now baked into July seven. 26 00:01:28,680 --> 00:01:30,680 Speaker 1: So I think markets have taken a queue from the 27 00:01:30,680 --> 00:01:33,240 Speaker 1: Bank of Canada north of our border here in the 28 00:01:33,319 --> 00:01:35,880 Speaker 1: United States to say maybe the set has to go 29 00:01:36,200 --> 00:01:39,680 Speaker 1: beyond seventy five basis points. Bostick uh as you were 30 00:01:39,680 --> 00:01:42,399 Speaker 1: saying before the segment certainly alluded to as much that 31 00:01:42,520 --> 00:01:45,839 Speaker 1: anything and everything is on the table, and I think 32 00:01:45,840 --> 00:01:48,280 Speaker 1: the FED is going to have to consider that despite 33 00:01:48,280 --> 00:01:50,800 Speaker 1: the fact that they're hiking into a recession, they need 34 00:01:50,840 --> 00:01:54,920 Speaker 1: to be aggressive in addressing this inflation. And I guess 35 00:01:55,000 --> 00:01:57,000 Speaker 1: many would say it's it's the right thing. I mean, 36 00:01:57,040 --> 00:02:00,000 Speaker 1: if you listen to Lauretta Mester, she was saying, inflation 37 00:02:00,080 --> 00:02:02,960 Speaker 1: and really affects everything and everybody. You have to have 38 00:02:03,000 --> 00:02:06,559 Speaker 1: stable prices in order for the jobs market to be good. So, yes, 39 00:02:06,680 --> 00:02:11,560 Speaker 1: inflation is job one. Worrying about inflation is job to do. 40 00:02:11,600 --> 00:02:16,959 Speaker 1: You generally agree with that at this point, I think 41 00:02:17,000 --> 00:02:21,400 Speaker 1: we have to consider the aggregate of inflation and the 42 00:02:21,480 --> 00:02:24,880 Speaker 1: unemployment rate, which we call the misery index that's at 43 00:02:24,880 --> 00:02:30,360 Speaker 1: the highest level since the really two and and And 44 00:02:30,639 --> 00:02:35,200 Speaker 1: to her point, inflation right now is more detrimental to 45 00:02:35,280 --> 00:02:38,720 Speaker 1: the average US household then the unemployment rate is than 46 00:02:38,760 --> 00:02:41,080 Speaker 1: the labor market is. The problem is that there's a 47 00:02:41,080 --> 00:02:45,880 Speaker 1: feedback mechanism between these two variables, and as households pull 48 00:02:45,960 --> 00:02:48,960 Speaker 1: back on spending for discretionary items because they have to 49 00:02:49,000 --> 00:02:53,440 Speaker 1: cover the cost of escalating essential inflation, you naturally end 50 00:02:53,520 --> 00:02:58,240 Speaker 1: up curtailing the business cycle and causing bankruptcies. And Danielle, 51 00:02:58,680 --> 00:03:02,440 Speaker 1: in an era of high levels rising rights, I know 52 00:03:02,520 --> 00:03:05,160 Speaker 1: you've got some concerns about the future of the credit markets. 53 00:03:05,360 --> 00:03:09,120 Speaker 1: Can you lay that out for us? Well, actually, yesterday 54 00:03:09,160 --> 00:03:11,840 Speaker 1: on the terminal there was a great story about triple 55 00:03:11,919 --> 00:03:16,000 Speaker 1: B rated US corporate debt. I believe it's somewhere around 56 00:03:16,000 --> 00:03:18,799 Speaker 1: three point two trillion dollars in outstanding and by far 57 00:03:18,840 --> 00:03:22,919 Speaker 1: the largest portion of the U S debt markets. And 58 00:03:23,320 --> 00:03:25,519 Speaker 1: the concern, and this was the concern that also preceded 59 00:03:25,600 --> 00:03:28,240 Speaker 1: that the pandemic. This is this is prior to COVID 60 00:03:28,280 --> 00:03:31,919 Speaker 1: news even hitting is that there the US economy is 61 00:03:31,960 --> 00:03:35,920 Speaker 1: susceptible to a wave of downgrade, taking this triple B tronche, 62 00:03:35,960 --> 00:03:39,680 Speaker 1: which is the lowest investment grade rating right above junk 63 00:03:40,080 --> 00:03:43,160 Speaker 1: into junk territory, and the ripple effects that it might 64 00:03:43,200 --> 00:03:46,720 Speaker 1: have across global credit market. And we're beginning to see 65 00:03:46,800 --> 00:03:51,440 Speaker 1: the vestiges of this. We had thirteen large company bankruptcy 66 00:03:51,480 --> 00:03:55,840 Speaker 1: filings uh B C y on on the terminal. Can 67 00:03:56,040 --> 00:03:57,960 Speaker 1: you can track that in the month of June. We 68 00:03:58,080 --> 00:04:00,120 Speaker 1: only had one in February, so they really are are 69 00:04:00,160 --> 00:04:02,800 Speaker 1: picking up back up the pace one and it's the 70 00:04:03,240 --> 00:04:06,040 Speaker 1: potential for the credit cycle to bleed into the equity market. 71 00:04:06,560 --> 00:04:08,800 Speaker 1: And that's one of the things I'm watching the most quickly, 72 00:04:09,080 --> 00:04:11,640 Speaker 1: the most closer right now. So is it a safe 73 00:04:11,640 --> 00:04:13,440 Speaker 1: bet now? I mean, if you're trying to put money 74 00:04:13,440 --> 00:04:16,279 Speaker 1: to work, to to bed on recession, to bed on 75 00:04:16,320 --> 00:04:19,600 Speaker 1: a steepening of the yield curve and short short duration 76 00:04:20,000 --> 00:04:23,680 Speaker 1: treasuries and other bonds and go along the long end, 77 00:04:25,200 --> 00:04:26,880 Speaker 1: I think right now, your your trade is is a 78 00:04:26,920 --> 00:04:30,240 Speaker 1: flattener um. In fact, we at Quill Intelligence, we've been 79 00:04:30,279 --> 00:04:34,719 Speaker 1: looking back at the longest spans of inverted yield curves 80 00:04:34,839 --> 00:04:37,400 Speaker 1: uh in the post Vulker era. Of course, Paul Volker 81 00:04:37,720 --> 00:04:40,640 Speaker 1: slammed the yield curve into inversion and kept it there 82 00:04:41,320 --> 00:04:44,000 Speaker 1: for for quite some time. And your most recent, uh, 83 00:04:44,160 --> 00:04:47,280 Speaker 1: your most recent benchmark there is is the nine months 84 00:04:47,320 --> 00:04:51,479 Speaker 1: period in between and two thousand when the two's tends 85 00:04:51,920 --> 00:04:54,520 Speaker 1: on the treasury yield curve remained inverted. And that was 86 00:04:54,560 --> 00:04:56,280 Speaker 1: some of the chatter that I was hearing today. The 87 00:04:56,760 --> 00:04:59,280 Speaker 1: move in the euro dollar market was the largest forty 88 00:04:59,320 --> 00:05:05,400 Speaker 1: basis point since just today. Not correct me if I'm wrong, 89 00:05:05,440 --> 00:05:07,800 Speaker 1: but I'm placing you in my mind, and the recession 90 00:05:07,920 --> 00:05:11,400 Speaker 1: is inevitable. Camp how long, how deep? And when do 91 00:05:11,440 --> 00:05:13,440 Speaker 1: you think this is going to happen? And is that 92 00:05:13,480 --> 00:05:16,680 Speaker 1: going to break the back of inflation? I think the 93 00:05:16,760 --> 00:05:19,160 Speaker 1: National europe of Economic Research and in fact Bank of 94 00:05:19,160 --> 00:05:21,480 Speaker 1: America came out today and basically said the same thing. 95 00:05:21,640 --> 00:05:24,520 Speaker 1: I think they're going to backdate this to January of two. 96 00:05:24,880 --> 00:05:28,000 Speaker 1: But because Americans have been blowing through their savings and 97 00:05:28,120 --> 00:05:32,320 Speaker 1: using credit cards to subsidize their spending, I think that 98 00:05:32,400 --> 00:05:35,520 Speaker 1: this could be a more drawn out recession that that 99 00:05:35,720 --> 00:05:39,800 Speaker 1: draws into three simply because the U S midterm election 100 00:05:39,839 --> 00:05:44,000 Speaker 1: season is upon us. The swing voter Senator Joe Mansion 101 00:05:44,040 --> 00:05:47,000 Speaker 1: of West Virginia today basically came out and said, because 102 00:05:47,000 --> 00:05:49,400 Speaker 1: inflations printing north of nine percent, we're gonna have to 103 00:05:49,440 --> 00:05:52,920 Speaker 1: revisit the details of any legislation build back better in 104 00:05:52,960 --> 00:05:55,760 Speaker 1: the Biden administration, and they're not planning on touching that 105 00:05:55,800 --> 00:05:58,160 Speaker 1: maybe until the end of September. That puts us in 106 00:05:58,200 --> 00:06:00,520 Speaker 1: the midterm elections. So when I going to see any 107 00:06:00,520 --> 00:06:03,240 Speaker 1: more stimulus checks out of the United States government really 108 00:06:03,320 --> 00:06:08,640 Speaker 1: until best case scenario the first quarter. And that's assuming 109 00:06:08,680 --> 00:06:11,240 Speaker 1: that if the Republicans sweep Congress, the House, and the Senate, 110 00:06:11,480 --> 00:06:14,520 Speaker 1: that they're willing to write more stimulus checks. So if 111 00:06:14,560 --> 00:06:17,200 Speaker 1: this does stretch out a bit, rather than a short 112 00:06:17,240 --> 00:06:20,960 Speaker 1: and shallow recession, a longer one, what's the best way 113 00:06:21,000 --> 00:06:24,440 Speaker 1: to put money to work? Now, you know, that's a 114 00:06:24,560 --> 00:06:28,479 Speaker 1: very good question, and some of the oldest, wisest, most 115 00:06:28,600 --> 00:06:33,680 Speaker 1: veteran investors are sitting on record piles of cash. But 116 00:06:33,720 --> 00:06:36,080 Speaker 1: a lot of companies are not cutting their dividends. A 117 00:06:36,080 --> 00:06:39,640 Speaker 1: lot of companies have sufficient cash flows to see them 118 00:06:39,640 --> 00:06:42,840 Speaker 1: through what's to come. Pricing power is king in an 119 00:06:42,839 --> 00:06:46,760 Speaker 1: inflationary environment, and investors should be aware of that. After 120 00:06:46,839 --> 00:06:49,120 Speaker 1: margin calls come and go. I think that there's a 121 00:06:49,120 --> 00:06:50,640 Speaker 1: good there's gonna be a good bit in the gold 122 00:06:50,640 --> 00:06:54,359 Speaker 1: market as well. Danielle, very quickly, we do have earning 123 00:06:54,360 --> 00:06:57,279 Speaker 1: season kicking off JP Morgan and Morgan Stanley the first 124 00:06:57,279 --> 00:06:59,400 Speaker 1: out of the blocks this week. Twenty seconds. What do 125 00:06:59,400 --> 00:07:04,200 Speaker 1: you expect. I expect for them to be disappointments. Trading 126 00:07:04,279 --> 00:07:06,280 Speaker 1: volumes are not what they need to be. And I'll 127 00:07:06,320 --> 00:07:09,440 Speaker 1: be watching one line item, and that is credit card lending. 128 00:07:09,800 --> 00:07:12,520 Speaker 1: That is people spending to take cash out of their 129 00:07:12,560 --> 00:07:15,400 Speaker 1: credit cards, major line item for all the biggest banks 130 00:07:15,400 --> 00:07:17,560 Speaker 1: in the first quarter. I'll be looking for a repeat 131 00:07:17,600 --> 00:07:21,280 Speaker 1: of that in the second all right, daniel Di Martino, Booth, 132 00:07:21,280 --> 00:07:24,800 Speaker 1: CEO and chief strategist at Quill Intelligence, Thanks so much 133 00:07:24,840 --> 00:07:26,239 Speaker 1: for joining us with your thoughts today.