WEBVTT - Surveillance: Minerd's Legacy with Diamond 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.200 --> 0:00:13.039 with Jonathan Ferrell and Lisa A. Brawmowitz. Daily we bring 0:00:13.119 --> 0:00:17.159 you insight from the best and economics, finance, investment, and 0:00:17.239 --> 0:00:22.440 international relations. To find Bloomberg Surveillance on Apple Podcast, Suncloud, 0:00:22.800 --> 0:00:26.240 Bloomberg dot Com, and of course on the Bloomberg Terminal. 0:00:28.880 --> 0:00:32.880 I thought we would give you a window into Scott 0:00:33.000 --> 0:00:36.520 Minor's past, and the first thing I said is get 0:00:36.560 --> 0:00:40.280 me Bob Diamond. Bob, thank you so much for joining 0:00:40.360 --> 0:00:44.519 us today. Take us back before Barclays, the credit sweez 0:00:45.000 --> 0:00:48.800 and you add this young Turk making bond decisions. Why 0:00:48.920 --> 0:00:53.040 was Scott Minored special in the trenches of fixed income 0:00:53.400 --> 0:00:59.320 the tumult of Europe in the late eighties early nineties. Uh, 0:00:59.360 --> 0:01:02.080 First of all, I just already missed him terribly. He 0:01:02.160 --> 0:01:05.920 had the kindest soul of anyone I've ever worked with, 0:01:06.120 --> 0:01:08.840 um for every person who worked with and Tom. It 0:01:08.959 --> 0:01:11.800 actually went before that to Morgan Stanley. Scott and I 0:01:11.840 --> 0:01:15.520 were in Morgan Stanley, New York. I moved to London 0:01:15.560 --> 0:01:19.759 in in uh durun international fixed income trading, the trading 0:01:19.800 --> 0:01:23.160 outside the US. Scott was good enough to leave his 0:01:23.319 --> 0:01:25.919 unit and come and join my unit, which was pretty 0:01:25.920 --> 0:01:28.880 new at the time. And when I think back at 0:01:28.880 --> 0:01:32.720 the at the incredible transaction we did during that period. 0:01:33.160 --> 0:01:35.800 Not many people recall this, but we did the first 0:01:36.160 --> 0:01:42.240 European currency unit bond ever issued in Scott and I 0:01:42.280 --> 0:01:45.880 were at Morgan Stanley UM. Ironically the issuer was the 0:01:45.920 --> 0:01:49.240 Bank of England and it was certainly a precursor to 0:01:49.320 --> 0:01:52.160 all that came following that with a single currency and 0:01:52.200 --> 0:01:56.000 the introduction of the Euro. That was just to me 0:01:56.200 --> 0:01:58.960 just another example of how Scott was always at the 0:01:59.120 --> 0:02:01.800 very very fourth front of everything going on in the 0:02:01.840 --> 0:02:04.880 fixed income markets. The Scarlet fu and our FED coverage 0:02:05.080 --> 0:02:08.080 have always seen how he's supple, how he could change 0:02:08.120 --> 0:02:10.480 his mind. As I say, he had a train of 0:02:10.520 --> 0:02:13.320 thought like a cp A, not like some fancy cf 0:02:13.320 --> 0:02:17.600 A Macro Bologny. But the answer is Scott minored for 0:02:17.720 --> 0:02:22.360 you and others, including Googaneim had to manage risk. What 0:02:22.600 --> 0:02:26.280 was the key risk attribute that he had daily on 0:02:26.320 --> 0:02:30.600 the desk at Morgan Stanley and a credit suez UM 0:02:30.960 --> 0:02:33.520 I think of a time at credit suites. First of all, 0:02:33.560 --> 0:02:36.800 this this is a this is a man who loved 0:02:37.040 --> 0:02:41.480 studying the markets, studying the FED. Always had a grasp 0:02:41.600 --> 0:02:45.440 on the macro environment, the medium term, the long term, 0:02:45.520 --> 0:02:48.680 and all of his shorter term actions were based on those. 0:02:49.280 --> 0:02:51.520 What a lot of people forget is the actions he 0:02:51.560 --> 0:02:55.280 took in Scott was working for me as head of 0:02:55.280 --> 0:02:58.920 credit trading at CSFB in New York. You will recall 0:02:59.240 --> 0:03:01.000 that was the last time we had this kind of 0:03:01.600 --> 0:03:04.760 real strong rate increase, and at that time the victim 0:03:04.919 --> 0:03:08.239 was Orange County. UM, and I remember Scott coming into 0:03:08.280 --> 0:03:10.440 my office. We sat down with a group of traders. 0:03:10.440 --> 0:03:13.360 He was the first to recognize the problems in Orange County. 0:03:14.000 --> 0:03:17.639 By that afternoon, we had exited every position. UM. These 0:03:17.639 --> 0:03:21.720 were repo positions. All the money was returned to Orange County, 0:03:22.080 --> 0:03:25.480 and it triggered the liquidation of those repo positions across 0:03:25.560 --> 0:03:28.080 all the other dealers. And to me, it was the 0:03:28.200 --> 0:03:32.000 vision Scott had then and has always had his grasp 0:03:32.160 --> 0:03:34.639 of the macro and his grasp of what was right 0:03:35.000 --> 0:03:37.280 for the regulators as well as what was right for 0:03:37.400 --> 0:03:40.320 us at c SFB. And one of the things that 0:03:40.360 --> 0:03:44.120 goes unrecognized is the incredible execution. We're out of those 0:03:44.120 --> 0:03:47.640 positions by the afternoon of the first recognition of what 0:03:47.720 --> 0:03:50.080 was going on with the at the time, the Orange 0:03:50.080 --> 0:03:55.600 County debacle. Tremendous, tremendous professional the nimbleness that it takes 0:03:55.800 --> 0:03:58.120 to be able to do that, the conviction, but also 0:03:58.440 --> 0:04:00.880 what we've been talking about all years. He melity to 0:04:01.240 --> 0:04:05.000 change your mind, to move on a dime. How did 0:04:05.040 --> 0:04:08.640 he embody that in a way that really speaks volumes 0:04:08.680 --> 0:04:11.520 to you about what it takes to be successful in 0:04:11.720 --> 0:04:16.560 a very changing place, which is Wall Street. Um, you know, 0:04:16.600 --> 0:04:19.760 I think right to your point, Leasa. Interesting is his 0:04:19.880 --> 0:04:23.200 move from Morgan Stanley and CSFP, where he was trading 0:04:23.720 --> 0:04:26.799 and every night was marked to market and most days 0:04:26.839 --> 0:04:30.640 you were turning over your inventory. His evolution into the 0:04:30.680 --> 0:04:35.160 investment management side, I think was a critical factor for Scott. 0:04:35.680 --> 0:04:37.720 If he could be better at something than he was 0:04:37.760 --> 0:04:40.320 at taking risk in the fixed income markets, he was 0:04:40.360 --> 0:04:43.000 even better as an investor, and I think that was 0:04:43.040 --> 0:04:46.520 because he spent so much time truly studying what was 0:04:46.560 --> 0:04:49.120 going on with the FED and the other central banks, 0:04:49.560 --> 0:04:52.960 and he had such a firm grisp on policy, so 0:04:53.000 --> 0:04:56.640 that all of his micro decisions were based around a 0:04:56.720 --> 0:05:00.560 conviction of what was happening in the mac environment, but 0:05:00.600 --> 0:05:02.480 he never sat on it, Lisa, Just to your point, 0:05:02.760 --> 0:05:06.880 he studied it consistently day in and day out. And um, 0:05:07.200 --> 0:05:09.960 I don't know anyone in either the trading environment or 0:05:10.000 --> 0:05:14.560 the investment management environment that spent as much time doing research, 0:05:14.960 --> 0:05:17.719 you know, throughout his career, even in the very very 0:05:17.720 --> 0:05:21.600 senior position he was in more recently at Guggenheim. As 0:05:21.640 --> 0:05:24.280 we enter a new territory, a new era, some people 0:05:24.320 --> 0:05:26.800 are calling it where perhaps central banks are not going 0:05:26.800 --> 0:05:28.600 to be the tailwin that they were for so long. 0:05:29.360 --> 0:05:32.440 Is your view that Wall Street and trading desks more 0:05:32.520 --> 0:05:35.960 generally have that spirit more broadly, or do you think 0:05:36.000 --> 0:05:39.919 that perhaps there is a lack of that experience on 0:05:40.000 --> 0:05:42.719 some of the trading floors after all of the churn 0:05:42.960 --> 0:05:46.400 that we've seen in the past decades. Well, listen, there's 0:05:46.400 --> 0:05:49.960 no question that the experience of people that grew up 0:05:49.960 --> 0:05:52.320 on trading desks in the eighties and the nineties and 0:05:52.360 --> 0:05:55.600 the two thousands is very different than the most recent 0:05:55.720 --> 0:06:00.280 period since the financial crisis in two thousd and eight, 0:06:00.279 --> 0:06:03.400 it's kind of been a one way, one way um. Bet, 0:06:03.920 --> 0:06:05.520 I hate to use the word bet, but kind of 0:06:05.560 --> 0:06:10.760 directionally zero interest rates um doing everything that was was required, 0:06:10.800 --> 0:06:14.640 that all those efforts kind of redoubled or maybe troubled 0:06:14.960 --> 0:06:18.680 um during covid um, and it's clearly a different environment 0:06:18.760 --> 0:06:23.039 right now. So I think the skills of people that 0:06:23.080 --> 0:06:26.600 are getting marked to market every day, turning their inventory 0:06:26.640 --> 0:06:29.880 every day far more typical of the trading floors of 0:06:29.920 --> 0:06:32.159 the of the of the big banks and the hedge funds. 0:06:32.400 --> 0:06:35.360 Our skills are gonna be paramount going forward. You've lived 0:06:35.360 --> 0:06:38.360 this in technicolor, and you know, I think of this year, 0:06:38.400 --> 0:06:41.640 the challenges you've had an at merchant, like a lot 0:06:41.680 --> 0:06:43.880 of other people in the equity space, and the whole 0:06:43.880 --> 0:06:46.159 spack thing in crypto and all the rest of this. 0:06:46.839 --> 0:06:50.560 Are there young Scott Minors out there? Or are we 0:06:50.600 --> 0:06:53.800 moving so fast in a two and twenty bonus world 0:06:54.240 --> 0:06:59.440 immediate gratification that we're not building the future Scott minors 0:06:59.640 --> 0:07:02.359 because is a brain drain out of our major banks. 0:07:04.040 --> 0:07:05.839 I think you just hit the you know you, you 0:07:05.920 --> 0:07:08.400 hit it square on the head. Tom. It's up to 0:07:08.600 --> 0:07:12.280 us as the leaders, because there's definitely the wrought talent 0:07:12.360 --> 0:07:15.520 out there, and are we're providing an environment um where 0:07:15.560 --> 0:07:19.720 people can learn m as Scott learned through trading in 0:07:19.760 --> 0:07:22.880 the US, through trading in Europe, through both trading and 0:07:22.920 --> 0:07:25.880 being in the investment side of being a real student 0:07:25.920 --> 0:07:28.000 of the markets and doing the homework day in and 0:07:28.080 --> 0:07:30.800 day out, the research day in and day out, keeping 0:07:30.840 --> 0:07:33.800 the relationships with the FED, keeping the relationships with the 0:07:33.840 --> 0:07:37.520 regulators and the clients. Um. Yes, the talents out there, 0:07:37.520 --> 0:07:40.200 it's up to us as leaders to develop talent. A 0:07:40.240 --> 0:07:43.320 Bob Diamond, thank you so much for Thattlas Merchant Capital 0:07:43.360 --> 0:07:46.520 of Berkleys of Credit Suite and Morgan Stanley from a 0:07:46.520 --> 0:07:59.800 bit ago. Today the only word one working at Bank 0:07:59.840 --> 0:08:02.880 of America's Michael gape In their head of US Economics, 0:08:02.880 --> 0:08:05.240 and we're thrilled to bring him in. Uh this morning. 0:08:05.840 --> 0:08:09.560 Michael gape In, I've seen adjustments to Q three g 0:08:09.680 --> 0:08:15.600 d P. We've just seen important QUE four data. Is 0:08:15.680 --> 0:08:18.320 Q four growth a mystery to you or do you 0:08:18.360 --> 0:08:22.240 have a confidence in where you stand? It seems like well, 0:08:22.280 --> 0:08:25.080 first of all, good morning, happy holidays to everyone. It 0:08:25.120 --> 0:08:27.800 seems like growth will come in certainly less than what 0:08:27.880 --> 0:08:30.760 we had in the third quarter. You know, estimates are 0:08:30.840 --> 0:08:33.439 around one to one and a half percent, maybe a 0:08:33.480 --> 0:08:35.760 little closer to two, but it does think seem like 0:08:35.800 --> 0:08:39.880 we're moderating into year end, so i'd i'd say somewhere 0:08:39.880 --> 0:08:42.400 in that range is likely where we're going to end up. 0:08:43.200 --> 0:08:45.920 But it does, as I think um Mike mentioned, some 0:08:46.000 --> 0:08:48.840 of the momentum and personal spending and business spending seems 0:08:48.840 --> 0:08:51.360 to be slowing as we get into year end, So 0:08:51.400 --> 0:08:53.480 I do think the fourth quarter will be running around 0:08:53.559 --> 0:08:55.400 half of where we were in the third quarter that 0:08:55.600 --> 0:08:58.079 slowed down, and we're seeing it in the bond market now, 0:08:58.200 --> 0:09:01.120 the two year distancing out over where it was before 0:09:01.280 --> 0:09:05.760 four point three a solid floor basis point higher yield 0:09:05.800 --> 0:09:08.600 in the two year equities uh for actually on an 0:09:08.640 --> 0:09:12.680 odd day take it on the chin, is well, how 0:09:12.840 --> 0:09:18.480 far apart are the markets in economics now? Michael Gabon 0:09:20.160 --> 0:09:22.200 Not too far. I mean, I still think it's an 0:09:22.200 --> 0:09:26.240 open question of you know, will we have a recession, when, 0:09:26.280 --> 0:09:29.160 when will it be? How deep and long lasting might 0:09:29.200 --> 0:09:32.480 it be? So there will be some disconnect here between say, 0:09:32.480 --> 0:09:34.760 where equity markets are and bond markets are. It will 0:09:34.800 --> 0:09:38.000 be hard for equity markets to price in a downturn 0:09:38.040 --> 0:09:40.480 and kind of know where to revise earnings until we 0:09:40.559 --> 0:09:43.440 start to see some of that slippage and in the 0:09:43.520 --> 0:09:45.880 underlying data. So certainly that if you look at the 0:09:45.880 --> 0:09:48.320 bond market, it is expecting I would say, it is 0:09:48.360 --> 0:09:52.280 pricing in some mild recession in a FED that's forced 0:09:52.280 --> 0:09:54.440 to cut in the second half of the year. There's 0:09:54.480 --> 0:09:57.720 a little dislocation between that and in equity markets. But 0:09:58.200 --> 0:10:00.840 you know time worlds tell and in this regard, so 0:10:00.840 --> 0:10:03.560 I'd say, yeah, there is a gap, um and that 0:10:03.559 --> 0:10:05.720 that gap is gonna narrow at some point in the 0:10:05.800 --> 0:10:07.480 data is going to tell us one. I was speaking 0:10:07.480 --> 0:10:11.120 with Peter Sheer of Academy Securities yesterday and he called 0:10:11.160 --> 0:10:13.800 for outright deflation next year. He said that prices are 0:10:13.800 --> 0:10:16.360 going to fall, uh, and that inflation is going to 0:10:16.440 --> 0:10:20.800 fade away. How do you push back against that, Well, 0:10:20.840 --> 0:10:22.800 I think I think you pushed back and say, two 0:10:23.280 --> 0:10:26.760 seventy two jobs a month wage growth and you know 0:10:26.800 --> 0:10:29.040 in the four to four and a half percent range 0:10:29.120 --> 0:10:31.040 kind of expected at least through the first half of 0:10:31.040 --> 0:10:33.760 the year. Uh, it's going to be really tough to 0:10:33.800 --> 0:10:36.959 get deflation unless unless what I'd call it's a bit 0:10:36.960 --> 0:10:39.360 of a mirage that some of these good prices like 0:10:39.600 --> 0:10:43.920 use cars, new cars, household furnishings that those just retrace 0:10:44.040 --> 0:10:48.640 their entire pandemic rise in in twelve months, so that 0:10:48.720 --> 0:10:51.880 will bring headline inflation down a lot, But underneath, I 0:10:51.880 --> 0:10:55.600 would still expect services inflation to be firm, so persistent 0:10:55.679 --> 0:10:59.280 deflation really hard to see at this point. So I'd 0:10:59.280 --> 0:11:02.560 say it's probably be a composition story unless you think 0:11:02.559 --> 0:11:04.559 the economy is about to fall off a cliff and 0:11:04.600 --> 0:11:06.760 the unemployment rates going to I don't know the Larry 0:11:06.800 --> 0:11:10.000 Summers six to seven to eight percent range. Otherwise, I 0:11:10.000 --> 0:11:13.520 think it's probably more just a goods retracement story bringing 0:11:13.559 --> 0:11:16.120 overall inflation down, but I don't think that's where we 0:11:16.120 --> 0:11:18.680 would settle in. I've noticed a real shift in tone 0:11:18.720 --> 0:11:20.200 from a lot of the people we've been speaking with. 0:11:20.280 --> 0:11:22.760 There's new optimism about a soft landing that was not 0:11:22.840 --> 0:11:25.040 there about a month ago. Do you think that it's 0:11:25.080 --> 0:11:27.600 misplaced or do you think that there's real evidence of 0:11:27.800 --> 0:11:30.400 that becoming a greater chance of a reality based on 0:11:30.480 --> 0:11:34.959 some of the disinflationary action that we've seen with goods, 0:11:35.160 --> 0:11:38.000 Even though it perhaps hasn't trickled into services as much, 0:11:39.559 --> 0:11:42.080 I would say it hasn't the data flow in the 0:11:42.120 --> 0:11:45.240 mix and kind of the rolling over goods prices. We've 0:11:45.240 --> 0:11:48.000 all been expecting that it's it's it's been about kind 0:11:48.000 --> 0:11:50.640 of timing and when it would show up. Hasn't really 0:11:50.760 --> 0:11:55.680 changed my view on the likelihood of a recession in three, 0:11:55.840 --> 0:11:58.400 because as I think you're getting to it's it's really 0:11:58.400 --> 0:12:01.720 about the labor market, wage and lation and services, and 0:12:01.760 --> 0:12:04.679 the FED is not going to feel comfortable that inflation 0:12:04.720 --> 0:12:07.199 will be going back to two unless it removes and 0:12:07.280 --> 0:12:09.960 balances from from the labor market. I don't think that 0:12:10.000 --> 0:12:12.080 picture has changed. It did to Gape, and I'm not 0:12:12.160 --> 0:12:14.400 a fan of the Michigan data. It's coming out at 0:12:14.440 --> 0:12:16.640 nine o'clock, but you know, I'm learning to follow it 0:12:16.720 --> 0:12:18.199 more and more. And the one thing I get a 0:12:18.320 --> 0:12:22.400 value there is this odd step snapshot of the public 0:12:23.040 --> 0:12:26.360 of the inflation guestimate five to ten years out, which 0:12:26.440 --> 0:12:29.800 is called inflation expectations. It's sort of up in a 0:12:30.920 --> 0:12:35.199 seven level three ish. Are we becoming unanchored in our 0:12:35.240 --> 0:12:38.600 heart and soul out of Olivier Blanchard's wonderful new research, 0:12:39.120 --> 0:12:44.240 Are we actually becoming unanchored and towards a higher expected inflation? 0:12:45.520 --> 0:12:47.760 I don't think so. I think if we look across 0:12:47.960 --> 0:12:50.560 the University of Michigan data and the and the other 0:12:50.679 --> 0:12:54.600 data on expectations and market implied measures. I still think 0:12:54.640 --> 0:12:58.360 we're broadly consistent with low and stable something around around 0:12:58.360 --> 0:13:01.800 two percent. And I do think with today's PC data, 0:13:01.880 --> 0:13:04.640 the last couple of CPI reports, I think it'll be 0:13:04.720 --> 0:13:07.400 kind of built in that, Okay, inflation is coming down. 0:13:07.600 --> 0:13:10.520 So step step number one, right, gut inflation on a 0:13:10.640 --> 0:13:13.000 downward trend. Step two, let's see if we can get 0:13:13.000 --> 0:13:16.800 it around two percent. So I do think it'll it'll 0:13:16.840 --> 0:13:19.600 become more noticeable that the rate of inflation is slowing. 0:13:19.679 --> 0:13:23.520 I don't think long run inflation expectations are are inconsistent 0:13:23.600 --> 0:13:25.720 with what the Fed is trying to achieve. Michael Gabe 0:13:25.800 --> 0:13:33.000 and thank you so much. Well hunkred in his office 0:13:33.200 --> 0:13:35.360 right now trying not to go out as Jim Bianco, 0:13:35.440 --> 0:13:38.560 who are so pleased is willing to join as president 0:13:38.559 --> 0:13:41.079 of Bianco Research, who has had some stunning calls over 0:13:41.120 --> 0:13:43.840 this year, has really been a breath of fresh air 0:13:44.040 --> 0:13:47.760 in his real reassessment of free money and the lack 0:13:47.880 --> 0:13:50.120 of it. Jim, really, I want to start on one 0:13:50.120 --> 0:13:52.280 of the big questions ending this year, which is the 0:13:52.280 --> 0:13:54.960 discrepancy between bond markets and their expectations of what the 0:13:54.960 --> 0:13:56.760 FED is going to do, and with the Fed is 0:13:56.760 --> 0:13:59.040 saying they are going to do, which is raised rates 0:13:59.120 --> 0:14:02.080 a lot more than market A certain certainly allowing for 0:14:02.720 --> 0:14:05.880 can you end the year helping us to understand who 0:14:05.960 --> 0:14:10.760 is right? Well that historically usually the market has been right, 0:14:10.840 --> 0:14:13.760 but in two it's been the Fed. The market has 0:14:13.800 --> 0:14:17.240 been dragged screaming and kicking to the belief that rates 0:14:17.240 --> 0:14:20.320 are going to go up. And while both the market 0:14:20.360 --> 0:14:22.720 and the FED are saying, you know, the terminal rate 0:14:22.720 --> 0:14:26.160 where they're gonna peak is around five, the market things 0:14:26.200 --> 0:14:28.440 are going to start cutting rates this year, where the 0:14:28.440 --> 0:14:30.640 FED has made it pretty much clear that they're not 0:14:30.680 --> 0:14:34.000 going to be cutting rates this year, and that discrepancy 0:14:34.120 --> 0:14:36.880 is going to pretty much I think drive you know, 0:14:37.160 --> 0:14:39.960 investing in the first half of twenty three. Are we 0:14:40.040 --> 0:14:43.200 going to get the pivot in? Or are we going 0:14:43.280 --> 0:14:47.360 to get the pivot in? If the market doesn't get 0:14:47.400 --> 0:14:50.400 the pivot which it is expecting, I think it's there's 0:14:50.400 --> 0:14:52.720 going to be some room for disappointment. I guess that 0:14:52.720 --> 0:14:54.400 there's another way of asking this, which is have we 0:14:54.480 --> 0:14:56.600 really gotten out of the woods with respect to some 0:14:56.680 --> 0:14:59.520 sort of more substantial financial disruption, or have we seen 0:14:59.560 --> 0:15:01.800 the bulk of it in terms of the rate move 0:15:01.960 --> 0:15:04.400 and the realization that we are we are in a 0:15:04.440 --> 0:15:08.320 new higher rate era. I think we've seen the bulk 0:15:08.360 --> 0:15:10.800 of the move. Yes, there's still more rate hikes to come. 0:15:10.840 --> 0:15:14.000 There can be as much as seventy more basis points 0:15:14.000 --> 0:15:17.640 more between now and say the spring. But yeah, I 0:15:17.720 --> 0:15:20.520 also think that whether or not we are in an 0:15:20.520 --> 0:15:24.560 era of higher rates, that's really the question. The market 0:15:24.600 --> 0:15:27.440 is still of some belief that in the next two 0:15:27.560 --> 0:15:30.280 years or so, inflation will settle back down to two 0:15:30.280 --> 0:15:33.040 percent and interest rates can go back down, you know, 0:15:33.160 --> 0:15:36.160 somewhere around two percent as well, and it can approximate 0:15:36.200 --> 0:15:39.000 something that we saw pre pandemic. Where I'm more of 0:15:39.040 --> 0:15:42.160 the camp that we're in a higher rate environment now 0:15:42.200 --> 0:15:45.280 that really when the Fed starts cutting, you'll get to 0:15:45.400 --> 0:15:47.560 three and a half and that will be pretty much 0:15:47.600 --> 0:15:51.000 at uh that's what what easing will be, or maybe 0:15:51.040 --> 0:15:53.800 three what's what easing will be in the future, and 0:15:53.840 --> 0:15:56.680 then in the next flare up rates will go higher 0:15:56.720 --> 0:15:59.600 from there. You know, Jimmyano, you've seen big shifts like 0:15:59.720 --> 0:16:03.000 let's to the Chicago Cubs landed dansby Cody Bellings. You're 0:16:03.000 --> 0:16:05.600 coming in, I mean, big shifts for the Cubs going 0:16:05.640 --> 0:16:08.440 into next year. The big shift in our world is 0:16:08.520 --> 0:16:12.240 Lisa alluded to, is money now costs something. We have 0:16:12.280 --> 0:16:15.680 a risk free rate, we have a legitimate sharp ratio. 0:16:16.320 --> 0:16:20.960 Explained to the ute how things change. Well, I think 0:16:21.000 --> 0:16:24.520 the big thing with that is that in two we 0:16:24.560 --> 0:16:27.000 saw that the total return in bonds, you know how 0:16:27.080 --> 0:16:29.800 much money you lost plus the income you got. Remember 0:16:29.800 --> 0:16:31.560 you started the year with no income, you started the 0:16:31.600 --> 0:16:34.000 year with pretty much the zero interest rate has been 0:16:34.040 --> 0:16:37.440 a record that we've not seen. Bank of America saying 0:16:37.440 --> 0:16:39.680 it's been a hundred and four years since we've seen 0:16:39.760 --> 0:16:42.680 these kind of losses in the bond market, and you're right. 0:16:43.000 --> 0:16:46.600 I mean I'm a little bit surprised too that if 0:16:46.600 --> 0:16:49.400 you if you told me in January the worst market 0:16:49.400 --> 0:16:51.000 in a hundred and four years, I would have thought 0:16:51.040 --> 0:16:53.360 that we would have had a lot more financial disruption 0:16:53.960 --> 0:16:57.160 then we've had so far. Maybe that's a sign that 0:16:57.320 --> 0:16:59.920 you know, rates are not as deletarious as we think 0:17:00.080 --> 0:17:04.040 they can go even higher. But nevertheless, I think as 0:17:04.080 --> 0:17:06.240 we're move into twenty three, we're gonna start the year 0:17:06.560 --> 0:17:08.480 with a coupon. We're gonna start the year with an 0:17:08.480 --> 0:17:11.880 interest rate. So if prices go down, you've got a cushion. 0:17:11.960 --> 0:17:14.640 Now you've got an interest rate that we haven't seen 0:17:14.680 --> 0:17:17.240 in fifteen years. But does it mean you know, you 0:17:17.280 --> 0:17:20.000 go back to eighteen and everything that happened there earlier 0:17:20.000 --> 0:17:21.840 in the year, folks who did the collapse of Russia 0:17:21.880 --> 0:17:23.399 after the war in Ukraine and what it did. The 0:17:23.480 --> 0:17:26.879 JP Morgan is really uh something. Let's drag it forward, 0:17:27.000 --> 0:17:31.440 Jim to seventy four and we were agreeded in seventy 0:17:31.480 --> 0:17:35.960 five with up up up. Can stocks stunned this year 0:17:36.480 --> 0:17:41.080 and do a seventy five or two? Sure? And they 0:17:41.119 --> 0:17:43.880 need one thing to do that. They need signs that 0:17:43.960 --> 0:17:47.640 inflation is after all transitory, it is on its way 0:17:47.680 --> 0:17:51.040 back to two percent without our recession, that that's its 0:17:51.119 --> 0:17:54.360 natural long run rate, and it's going to stay there. 0:17:54.440 --> 0:17:57.520 If you see something like that, the Fed can settle down, 0:17:57.840 --> 0:18:00.679 the market can take off then at that point, but 0:18:00.880 --> 0:18:04.879 if inflation is not on it's way to two, the 0:18:04.920 --> 0:18:07.880 market will struggle. I've argued that inflation in the post 0:18:07.880 --> 0:18:11.159 pandemic era, inflation is this story is the game and 0:18:11.200 --> 0:18:13.280 it will continue to be and whether or not it 0:18:13.320 --> 0:18:18.960 goes back to two on its own naturally, inflation is 0:18:18.960 --> 0:18:21.200 the story as everyone is saying that it is. How 0:18:21.240 --> 0:18:24.320 important is today's read the last inflation ryd that we 0:18:24.359 --> 0:18:27.560 get of two as we get a sense of where 0:18:27.560 --> 0:18:31.119 the consumer is ending the year. I think, you know 0:18:31.119 --> 0:18:33.439 we're gonna get PC, and the Fed is focused on 0:18:33.560 --> 0:18:37.800 core PC and they've made Chairman Polls made the case 0:18:38.280 --> 0:18:42.479 that neutral is getting the interest rates, all interest rates 0:18:42.480 --> 0:18:46.760 sustainably above uh core PCs rate, which should be about 0:18:46.840 --> 0:18:49.200 four point five or four point six. When we get 0:18:49.200 --> 0:18:51.200 the number, well, now that all of a sudden, that 0:18:51.400 --> 0:18:55.800 puts that interest rate or interest rates within that possibility 0:18:55.800 --> 0:18:58.520 of getting above the inflation rates, something they haven't been 0:18:58.960 --> 0:19:01.560 this whole cycle. So if we see that four point 0:19:01.640 --> 0:19:04.080 five four point six and we see a trending lower, 0:19:04.320 --> 0:19:06.960 we could be getting a lot closer to at least neutral. 0:19:06.960 --> 0:19:10.360 According to the fat Jim Biancle, thank you so much 0:19:10.560 --> 0:19:14.680 from Chicago, Stay warm, Mr Bianco. Bianco Research providing weather 0:19:14.720 --> 0:19:27.600 forecast for blue mood expiens. This is a joy right now. 0:19:27.640 --> 0:19:30.400 I usually when I'm giving speeches, I'll say something like 0:19:30.480 --> 0:19:34.960 you know, the two great things in America antibiotics, air conditioning, 0:19:35.320 --> 0:19:37.879 and the other great thing is what Brian Kelly invented. 0:19:37.920 --> 0:19:40.680 He is the points guy and whatever you say, he's 0:19:40.680 --> 0:19:45.840 a pinata for the industry. Brian Kelly changed how we travel. 0:19:46.240 --> 0:19:48.560 No way to butt Brian. I did it, Brian Kelly. 0:19:48.600 --> 0:19:52.160 The other day I took a family member business class 0:19:52.760 --> 0:19:57.080 the Philippines twenty one thousand dollars. I did the Brian 0:19:57.200 --> 0:20:01.400 Kelly pixie dust and I paid fifth d six dollars 0:20:01.440 --> 0:20:04.480 for that trip with a lot of miles. Are those 0:20:04.600 --> 0:20:07.280 kind of things gonna happen next year? Are we still 0:20:07.280 --> 0:20:10.800 going to get the mileage pop next year? Absolutely? The 0:20:10.800 --> 0:20:13.280 airlines depend on the mileage programs. You know, they sold 0:20:13.359 --> 0:20:15.680 billions of dollars worth of miles, you know, to kind 0:20:15.680 --> 0:20:18.399 of survive over the pandemic. So the loyalty programs are 0:20:18.400 --> 0:20:20.760 alive and well, but as you kind of hinted at, 0:20:21.040 --> 0:20:23.959 their increasing the amount of miles that you need for 0:20:24.000 --> 0:20:26.320 each trip. So what I recommend to people, instead of 0:20:26.359 --> 0:20:30.240 holding your miles long term, use them now. And UH 0:20:30.320 --> 0:20:34.000 airlines like United now you cancel your mileage reservations for free. 0:20:34.320 --> 0:20:37.080 So what I say during storms like this. Use your 0:20:37.119 --> 0:20:40.080 frequent Flyer miles as a backup option. If your flight 0:20:40.200 --> 0:20:42.520 is canceled on one airline, use your miles to fly 0:20:42.560 --> 0:20:45.840 out on another. Brian, what's so important to me is 0:20:45.880 --> 0:20:49.359 the idea interviewed. The interview with airline types, which is 0:20:49.359 --> 0:20:52.919 their optimistic. But I don't see a lot of thrill 0:20:53.240 --> 0:20:56.200 about investing in the business. They come off the pandemic 0:20:56.280 --> 0:21:00.240 lows and that are you optimistic on American a dation 0:21:00.359 --> 0:21:03.760 out of this horrific pandemic? I am, because you know, 0:21:03.760 --> 0:21:07.240 when you look at the generations millennials, gen Z, people 0:21:07.280 --> 0:21:11.000 want to travel. You know, wealth and luxury are these 0:21:11.080 --> 0:21:14.639 days defined by having great experiences, and luxury travel is 0:21:14.680 --> 0:21:18.560 seeing a huge increase from pre pandemic. I don't see that, 0:21:18.760 --> 0:21:21.320 you know, showing any signs of slowing down. So I 0:21:21.400 --> 0:21:23.679 think long term the travel industry will be okay. But 0:21:24.080 --> 0:21:25.960 you know, every industry right now, there's just so many 0:21:26.040 --> 0:21:29.760 question marks with what's going to happen in twenty three unemployment, 0:21:29.760 --> 0:21:32.960 et cetera. But I'm bullish on travel. Maybe bullish on 0:21:33.000 --> 0:21:36.000 travel for the companies that arrange it, not necessarily the 0:21:36.040 --> 0:21:38.520 experience of travel for the consumer. We were speaking with 0:21:38.520 --> 0:21:41.280 Elane Becker over at count and she basically was saying 0:21:41.280 --> 0:21:43.240 people are going to pay more to get less. How 0:21:43.280 --> 0:21:46.320 much you seeing that reflected in what's available the perks, 0:21:46.359 --> 0:21:49.359 whether it's access to clubs, to lounges, whether it's how 0:21:49.359 --> 0:21:51.480 many points you can use as you're alluding to for 0:21:51.520 --> 0:21:54.119 each flight. Well, you bring up a good point with 0:21:54.160 --> 0:21:57.919 the airline lounges. So starting in March, m X Platinum 0:21:57.960 --> 0:22:00.359 members will no longer be able to bring in ESTs 0:22:00.480 --> 0:22:04.400 for free into those Centurion lounges. There's so many lines 0:22:04.480 --> 0:22:08.640 to get into the lounges. Airports are packed, so, uh, 0:22:08.720 --> 0:22:11.000