WEBVTT - Where’s the Volatility? 0:00:13.600 --> 0:00:17.120 Hello, and welcome to What Goes Up, a weekly markets podcast. 0:00:17.120 --> 0:00:19.360 My name is Mike Reagan. I'm a senior editor at 0:00:19.400 --> 0:00:24.040 Bloomberg and Ilana Hi reporter on the Cross Acid team. 0:00:24.239 --> 0:00:26.360 This week on the show, well, a few weeks ago, 0:00:26.400 --> 0:00:29.040 we talked about the U turn that had happened in markets, 0:00:29.080 --> 0:00:32.720 with some of the moves triggered by optimism about vaccines 0:00:32.840 --> 0:00:35.920 and the reopening of the economy reversing and going the 0:00:35.960 --> 0:00:39.319 other way. Well, strap on your chin straps because it's 0:00:39.320 --> 0:00:42.360 all going back the other way now. Value in cyclical 0:00:42.360 --> 0:00:45.440 stocks are outperforming once again and the yield curve is 0:00:45.440 --> 0:00:49.200 once again stepening. So what's going on? Is the new 0:00:49.240 --> 0:00:52.159 old the old new again? And can we expect these 0:00:52.159 --> 0:00:55.440 trends to continue? We'll get into it with Chris Gaffney, 0:00:55.480 --> 0:00:58.040 who's the head of World Markets at t I A 0:00:58.040 --> 0:01:01.200 A Bank and of Wars. Will close out the show 0:01:01.240 --> 0:01:03.440 with the craziest thing we saw in markets this week, 0:01:03.800 --> 0:01:06.120 And remember, if you see anything crazy, give us a 0:01:06.160 --> 0:01:09.479 call on the podcast hotline at six or six three 0:01:09.520 --> 0:01:12.640 to four, three four nine zero, leave us a voice, 0:01:12.640 --> 0:01:16.360 bail and maybe we'll play your craziest thing on the show. Well, 0:01:16.400 --> 0:01:19.040 don one thing that's crazy. Is this weather? This is 0:01:19.080 --> 0:01:21.560 the type of weather where an old guy like me 0:01:21.840 --> 0:01:25.040 is forced to ask the age old question. You're ready, 0:01:25.520 --> 0:01:32.200 I'm read well. I was actually just before we started chatting, 0:01:32.240 --> 0:01:35.399 I was reading a story from one of our colleagues 0:01:35.440 --> 0:01:37.680 and one of the quotes really struck me was about 0:01:37.720 --> 0:01:40.040 the heat wave that's hitting New York City this week 0:01:40.120 --> 0:01:43.400 where where I live, and it said all the cement 0:01:43.480 --> 0:01:45.800 is going to radiate heat indoors. It will be life, 0:01:46.200 --> 0:01:51.560 life threatening situation, which is my goodness, you just took 0:01:51.600 --> 0:01:55.280 this to a very dark place. I was hoping for 0:01:55.360 --> 0:02:00.680 some and now, well, the cement that's only to radiate 0:02:00.720 --> 0:02:02.960 heat indoors is that's the part that struck me. I 0:02:02.960 --> 0:02:05.680 probably shouldn't have read the second part. Didn't mean to 0:02:05.720 --> 0:02:08.280 scare you. Well. I like that your answer was grounded 0:02:08.440 --> 0:02:11.080 in well and well sourced reporting. They're not just not 0:02:11.200 --> 0:02:13.480 a nothing off the top of the head. For Wildonna, 0:02:13.600 --> 0:02:17.200 she comes with the actual reporting. My secret is, and Vildonna, 0:02:17.280 --> 0:02:20.160 this is something as a Jersey native you'll appreciate. My 0:02:20.200 --> 0:02:23.320 secret is Italian ice. I can take any type of 0:02:23.320 --> 0:02:25.480 weather as long as the Italian Ice store is open. 0:02:25.480 --> 0:02:26.840 And we got a good new one in town. So 0:02:27.320 --> 0:02:29.760 I don't think you've got as good of an Italian 0:02:29.840 --> 0:02:31.799 ice selection as we do here in New Jersey and 0:02:31.840 --> 0:02:35.440 New York. Are you talking about Rita's that's like New 0:02:35.520 --> 0:02:39.040 Jersey ridis is good. I'm talking about They're actually a 0:02:39.120 --> 0:02:41.639 friend of the family to Cosmos. They only have two stores. 0:02:41.680 --> 0:02:44.240 They've been making Italian ice, or as we call him, 0:02:44.280 --> 0:02:47.799 Philly Wooter ice w W O O D E R. 0:02:48.000 --> 0:02:49.400 What are ice s ide? No, no one knows what 0:02:49.440 --> 0:02:53.040 you're talking about, but in Philly they do uh hundred 0:02:53.040 --> 0:02:55.960 and five years they've been making Italian ice and Elizabeth 0:02:56.000 --> 0:02:57.960 and now new store. In a touching, I didn't mean 0:02:58.000 --> 0:02:59.840 this to be a plug for the Cosmos, but so 0:03:00.000 --> 0:03:02.520 me it. My friends, my local friends will laugh because 0:03:02.520 --> 0:03:04.400 I'm kind of obsessed with them. I I've got a 0:03:04.440 --> 0:03:06.480 bit of an Italian nice problem, but in this heat, 0:03:07.160 --> 0:03:09.160 it's the best remedy. Even if I don't know what 0:03:09.240 --> 0:03:11.320 the concrete is gonna start melting on us or something. 0:03:11.320 --> 0:03:13.640 You're telling me, honestly, you have me sold in the 0:03:13.639 --> 0:03:17.679 water ice water ice, What do I all? Right? Well, 0:03:17.720 --> 0:03:20.200 even with even with the melting concrete, that that should 0:03:20.200 --> 0:03:22.240 be enough to keep us. Cool, But let's bring in 0:03:22.240 --> 0:03:25.520 our guest, um first time on the show. As I said, 0:03:25.520 --> 0:03:28.040 he's from t I A A Back. His name is 0:03:28.440 --> 0:03:31.840 Chris Gaffney. Chris, welcome to the show. Thanks much. I 0:03:32.360 --> 0:03:35.840 appreciate you the invitation and I look forward to the 0:03:35.880 --> 0:03:38.800 discussion today. Yeah, Chris, I'm gonna start off with an 0:03:38.840 --> 0:03:42.000 easy question. I just want to know I'm not very 0:03:42.040 --> 0:03:45.640 familiar with the World Markets department of t I A Back. UM, 0:03:45.680 --> 0:03:48.040 I'm guessing note some four X services that that type 0:03:48.040 --> 0:03:50.600 of thing talk us through what what your your group 0:03:50.680 --> 0:03:53.360 does and what your role is there. So we offer 0:03:53.440 --> 0:03:58.080 individual investors the ability to invest into currencies um, both 0:03:58.120 --> 0:04:02.360 for transactional purposes and for an investments, and then precious metals. 0:04:02.400 --> 0:04:06.280 So I've run a currency and precious metals desk UM. 0:04:06.320 --> 0:04:09.960 It's kind of unique. You you know, the institutions play 0:04:10.000 --> 0:04:15.200 in that field a lot um, but typically investor individual investors, uh, 0:04:15.280 --> 0:04:18.599 you know, have a tougher time finding uh the availability 0:04:18.680 --> 0:04:22.760 of currency investments in and precious metals. So we're big 0:04:22.800 --> 0:04:27.360 on diversification obviously, so we we think they're they're good 0:04:27.360 --> 0:04:31.320 asset classes. And I've been in this uh doing this 0:04:31.480 --> 0:04:36.000 job for I guess, uh, thirty plus years, thirty five 0:04:36.080 --> 0:04:38.200 years now, so I've been in in a while, still 0:04:38.240 --> 0:04:42.440 a rookie, you huh. Yeah. And Chris, I was going 0:04:42.480 --> 0:04:45.080 to ask you. You and I chat from time to time, 0:04:45.200 --> 0:04:47.599 and I really enjoy our conversations. I always turned to 0:04:47.640 --> 0:04:50.240 you when something's going on with markets and I need 0:04:50.279 --> 0:04:52.480 an explainer, And so I was hoping you could sort 0:04:52.480 --> 0:04:54.920 of start us out just giving us a sense of 0:04:55.080 --> 0:04:57.000 how you're making sense with what's going on with the 0:04:57.040 --> 0:05:00.159 stock market, because coming into August, I remember, the was 0:05:00.440 --> 0:05:04.200 tons of fear about the sort of seasonal volatility factor. 0:05:04.279 --> 0:05:08.360 In August was supposed to be a much choppier month, 0:05:08.400 --> 0:05:11.640 and here we are, We're record highs. It's been sort 0:05:11.640 --> 0:05:14.039 of tranquil. So how are you making sense of everything 0:05:14.240 --> 0:05:18.000 that's going on? It's been great markets, I mean, and 0:05:18.279 --> 0:05:21.080 it all goes back to the economic environment here in 0:05:21.080 --> 0:05:24.080 the US. I mean, this is just a fantastic economic 0:05:24.200 --> 0:05:28.720 environment for companies, and and stock performance always goes back 0:05:28.880 --> 0:05:32.440 to the earnings to company earnings. So um, you know, 0:05:32.480 --> 0:05:36.520 we've got low interest rates, we've got um pent up demand, 0:05:36.640 --> 0:05:40.520 and then you've got extremely strong consumer and corporate balance sheets. 0:05:40.520 --> 0:05:44.640 So all those add up to markets that are you know, 0:05:45.200 --> 0:05:47.719 I use the words flogging higher because it's it's not 0:05:47.800 --> 0:05:51.160 a dramatic rise that we've seen. Certainly, the numbers are 0:05:51.160 --> 0:05:54.360 pretty eye popping when you compare it to you know, 0:05:54.440 --> 0:05:59.200 the depths of the fall. But uh um, you know 0:05:59.240 --> 0:06:04.239 we're just marching higher. Uh continually marching higher. And something 0:06:04.279 --> 0:06:07.320 you brought up about Choppingess, we we expected a lot 0:06:07.520 --> 0:06:10.479 more choppiness in these markets. I mean we we thought 0:06:10.600 --> 0:06:14.000 volatility was going to be pretty high, um with all 0:06:14.040 --> 0:06:16.640 the push pulls that we're seeing. But you know, we've 0:06:16.720 --> 0:06:20.400 we've really just seen a slow and steady increase in 0:06:20.480 --> 0:06:23.440 these markets, almost almost boring at times. I you know, 0:06:23.480 --> 0:06:26.039 I hate to use that because now we'll see a 0:06:26.080 --> 0:06:29.680 dramatic swing, but uh um, you know they've just been 0:06:29.720 --> 0:06:33.760 marching higher. Well, one shoppiness I'm guessing your team must 0:06:33.760 --> 0:06:36.359 have had their eye on was that that plunge and 0:06:36.440 --> 0:06:40.000 goal to start the week? Um, even before the week started. 0:06:40.040 --> 0:06:43.359 I guess what was it Sunday night? Uh? You know, yeah, 0:06:43.880 --> 0:06:47.400 the precious metals prices. You know, conspiracy theorists will tell 0:06:47.440 --> 0:06:49.640 you that, you know, they're they always move on the 0:06:49.640 --> 0:06:52.640 weekends because the markets are you know, uh, there's less 0:06:52.680 --> 0:06:54.839 liquidity out there, and the big moves always come on 0:06:54.880 --> 0:06:58.160 the weekends. And but honestly, we we you know, we 0:06:58.160 --> 0:07:01.200 we couldn't figure out exactly what drove that drop. Um 0:07:01.600 --> 0:07:04.279 maybe it was the jobs data, you know, the coming 0:07:04.320 --> 0:07:09.040 in stronger and um looking, you know, the the focus 0:07:09.040 --> 0:07:14.960 of investors shifted from a worry about you know, about 0:07:14.960 --> 0:07:19.360 a slowdown to act a strong labor, strong GDP growth, 0:07:19.440 --> 0:07:24.520 and that's not necessarily positive for for the precious metals. 0:07:24.520 --> 0:07:27.320 You know, gold is seen as a risk hedge and 0:07:27.480 --> 0:07:31.960 along with inflation hedge. So um, good strong markets, good 0:07:32.000 --> 0:07:36.200 strong labor growth probably weighed on the pricycle And Chris, 0:07:36.240 --> 0:07:39.280 you just mentioned you guys had thought that the market 0:07:39.360 --> 0:07:41.320 was going to be a lot more choppy. There's so 0:07:41.360 --> 0:07:44.280 many superlatives we can say about this market. One that 0:07:44.400 --> 0:07:47.080 has been standing standing out for me in recent days is, 0:07:47.400 --> 0:07:50.040 you know, we're up more than from the previous peak 0:07:50.080 --> 0:07:53.560 that we had reached before the pandemic. And so I'm 0:07:53.600 --> 0:07:57.520 just wondering why it's been so hard to call what's 0:07:57.560 --> 0:08:00.840 been going on with with the market, with stocks just 0:08:00.920 --> 0:08:06.160 continuing to I forget the word you used, trudge higher, Yes, 0:08:06.240 --> 0:08:10.640 slog higher. Yeah. Um, you know, I think it comes 0:08:10.680 --> 0:08:14.280 back to you know we expected shopping is because um, 0:08:14.400 --> 0:08:18.800 we're an unprecedented times obviously, and when when you're trying 0:08:18.840 --> 0:08:20.840 to project where the markets are going to go or 0:08:20.880 --> 0:08:25.000 even economic data, UM, you typically rely on models and 0:08:25.120 --> 0:08:30.200 the economic models. When when you have the dramatic shutdown 0:08:30.280 --> 0:08:34.800 of an economy and absolutely stopping everything, um, and then 0:08:34.880 --> 0:08:39.720 the fairly rapid recovery, those models just don't work. Um. 0:08:40.120 --> 0:08:43.200 So you know, trying to project where we're gonna be 0:08:43.520 --> 0:08:47.080 trying to even even free cash flows. I mean, you 0:08:47.120 --> 0:08:49.880 know when when companies have to shut down and then 0:08:50.000 --> 0:08:54.560 start back up. Um. You know, the the base effect 0:08:54.640 --> 0:08:58.040 on is one item that you know, the numbers were 0:08:58.080 --> 0:09:00.200 so bad that of course they're going to be really 0:09:00.280 --> 0:09:04.280 good on the recovery. Um. But another thing is the comparisons. 0:09:04.320 --> 0:09:06.880 You you just can't make those comparisons, and it's kind 0:09:06.880 --> 0:09:10.120 of thrown the models out of wax. So uh, projections. 0:09:10.360 --> 0:09:13.120 I think most people thought economists weren't going to be 0:09:13.160 --> 0:09:17.679 able to really dial in where we were going. But uh, um, 0:09:17.720 --> 0:09:20.959 it's I'm glad to say we've been marching steadily high, 0:09:21.360 --> 0:09:24.720 you know. Chris I'm wonder the perspective of some of 0:09:24.800 --> 0:09:29.160 your clients, UM, who might be internationally focused. UM. You know, obviously, 0:09:29.200 --> 0:09:31.240 one of the big themes we heard a lot about 0:09:31.320 --> 0:09:33.520 earlier this year and and sort of at the beginning 0:09:33.559 --> 0:09:36.000 of the year, UM was a lot of people were 0:09:36.000 --> 0:09:40.040 bracing for sort of an outperformance of international equities outside 0:09:40.040 --> 0:09:42.760 of the US. UM. To some degree, we've kind of 0:09:42.760 --> 0:09:44.480 seen that, you know, I'm looking at the Bloomberg screen 0:09:44.520 --> 0:09:48.319 here of developed markets, US is about eleventh place out 0:09:48.320 --> 0:09:50.080 of twenty four. You know, there's a lot of European 0:09:50.200 --> 0:09:54.360 markets Austria, Sweden, Netherlands, France that mark doing doing better. 0:09:54.760 --> 0:09:57.199 What's kind of what's kind of the sentiment at this 0:09:57.240 --> 0:10:00.600 stage of the year in the game, is there has 0:10:00.640 --> 0:10:03.640 that bullishness for sort of the rest of the world 0:10:03.880 --> 0:10:08.720 worn off. I don't think so, you know, but personally 0:10:08.800 --> 0:10:12.440 I'm still bullish on your And it's really about the reopening. 0:10:12.480 --> 0:10:15.000 You know, the US was first to really really well. 0:10:15.080 --> 0:10:17.199 China was first, but then the US came in and 0:10:17.800 --> 0:10:22.920 reopened and uh, you know, with our vaccine policy or vaccinations, 0:10:22.920 --> 0:10:25.840 although it's stalled out now, we were able to reopen 0:10:25.880 --> 0:10:29.480 more quickly than Europe. Europe was a little slower to reopen, 0:10:29.920 --> 0:10:34.280 so you know, we we probably hit that reopening UM 0:10:34.720 --> 0:10:38.840 surge faster than Europe. And and I still think Europe 0:10:38.880 --> 0:10:42.319 is gonna gonna come back. And I think there's opportunities 0:10:42.360 --> 0:10:48.920 also valuations just favor UM some other UM, other markets 0:10:48.960 --> 0:10:51.959 besides the US. And then on top of all of that, 0:10:52.000 --> 0:10:55.120 you've got the dollar. And you know, anytime you you 0:10:55.200 --> 0:10:59.280 invest internationally, unless you had your currency exposure, you're also 0:10:59.400 --> 0:11:02.439 investing in the currency of of that market that you're 0:11:02.480 --> 0:11:06.040 investing in. So UM. You know, the dollar going into 0:11:06.120 --> 0:11:10.439 this UH was very strong and its not even stronger 0:11:10.520 --> 0:11:12.560 at the beginning of the pandemic because we saw a 0:11:12.559 --> 0:11:15.959 lot of safe haven buying of the US dollar. International 0:11:16.280 --> 0:11:20.320 investors into the dollar came to treasuries. UM we're still 0:11:20.320 --> 0:11:23.079 seeing them. The tenure market yesterday was was bought by 0:11:23.480 --> 0:11:27.760 UH central banks, so UM and and outside investors, so 0:11:28.000 --> 0:11:31.680 we're still seeing some of that. UM. The dollar declined 0:11:31.920 --> 0:11:34.920 over over last year, but so far this year it's 0:11:34.920 --> 0:11:39.560 starting to move higher again. So UM, I still think 0:11:39.600 --> 0:11:42.280 that we're going to see a dollar decline, and mainly 0:11:42.400 --> 0:11:46.480 due to interest rate differentials. UM. But UM, I do 0:11:46.559 --> 0:11:50.000 think there's opportunities overseas still, although the US market is 0:11:50.040 --> 0:12:01.600 still I think gonna gonna Marke car And speaking of 0:12:01.840 --> 0:12:04.760 international markets, I think you and your team are favorable 0:12:04.800 --> 0:12:07.840 towards China or and correct me if I'm wrong, But 0:12:07.840 --> 0:12:10.160 but I'm wondering if you think what's been happening and 0:12:10.200 --> 0:12:12.520 playing out with China over the last couple of weeks 0:12:12.559 --> 0:12:15.760 really is more of a localized event or maybe something 0:12:15.800 --> 0:12:18.440 that could potentially spill over into other parts of the world. 0:12:18.520 --> 0:12:22.480 And how are you thinking about the Chinese markets. I 0:12:22.520 --> 0:12:26.400 think there are randan by whichever you want to call it. 0:12:26.440 --> 0:12:30.360 The Chinese currency UM is still a goodbye. I think 0:12:30.400 --> 0:12:33.280 that it's it's a currency that will continue to perform 0:12:33.360 --> 0:12:36.920 if if the if the government of China lets it UM. 0:12:37.520 --> 0:12:41.160 I think that the Chinese markets, I mean, I mean 0:12:41.200 --> 0:12:44.280 it's it's the second largest some by some measures, the 0:12:44.360 --> 0:12:49.560 largest economy. UM. The delta baron is certainly probably having 0:12:49.600 --> 0:12:52.440 an impact there and so we could see some slow down. 0:12:52.520 --> 0:12:57.000 But uh, specifically on the regulation, I think it's you know, 0:12:57.080 --> 0:12:59.000 you can look at it two ways. It's it's either 0:12:59.080 --> 0:13:02.000 the Chinese government and being heavy handed and trying to 0:13:02.040 --> 0:13:05.880 get control UM of their economy, which in a way, 0:13:06.160 --> 0:13:08.760 you know, you understand that the governments want to control 0:13:08.840 --> 0:13:12.040 what's going on in their economy. Um, but you know, 0:13:12.320 --> 0:13:14.640 are they going to go too far and try to 0:13:14.679 --> 0:13:17.520 take it back into the communist I don't believe that. 0:13:17.640 --> 0:13:21.520 I I think that they'll continue to walk this tight 0:13:21.640 --> 0:13:25.120 rope between capitalism and communism and and try to keep 0:13:25.160 --> 0:13:28.040 their markets free and open. Uh as as much as 0:13:28.080 --> 0:13:31.720 they are. You could argue that they're not, but uh UM, 0:13:32.080 --> 0:13:34.880 I think the regulation is just a sign of a 0:13:35.040 --> 0:13:39.280 maturing economy and a maturing market. They know that in 0:13:39.360 --> 0:13:43.120 order to truly take their place among the world stage, 0:13:43.679 --> 0:13:47.320 investors have to rely and and trust on economic data, 0:13:47.480 --> 0:13:51.679 trust on company reports, trust that there's no fraud, if 0:13:51.720 --> 0:13:54.200 you will. And so some of the regulations that they're 0:13:54.200 --> 0:13:58.000 passing UM are actually positive and I think a sign 0:13:58.120 --> 0:14:01.840 that they are trying to you know, mature that market 0:14:01.880 --> 0:14:06.040 and trying to um be able to give investors confidence. Now, 0:14:06.240 --> 0:14:10.920 obviously it's caused the the opposite impact. Investors have worried 0:14:10.960 --> 0:14:13.640 that they're going to come in and maybe take control 0:14:13.720 --> 0:14:18.920 of certain industries, and that's certainly a concern and could 0:14:19.000 --> 0:14:22.400 grow into something bigger. UM. But right now, I think 0:14:22.400 --> 0:14:26.440 the Chinese economy continues to do very well, growing at 0:14:26.440 --> 0:14:29.040 a good clip, and as long as they don't get 0:14:29.040 --> 0:14:32.440 too heavy handed, I think it will continue. They've got 0:14:32.520 --> 0:14:37.920 just a huge consumer demand in China. UM got good 0:14:38.120 --> 0:14:41.800 uh good exports into the rest of Asia and in 0:14:41.840 --> 0:14:45.320 the US and Europe. So as the US and Europe recovers, 0:14:45.680 --> 0:14:50.120 I think China continues to do well. Yeah, the regulation, 0:14:50.320 --> 0:14:52.400 I mean that's made all the headlines, all all these 0:14:52.440 --> 0:14:54.400 every day you wake up to a new sort of 0:14:54.400 --> 0:14:57.000 crackdown on some industry in China, and and to me, 0:14:57.120 --> 0:15:00.800 that strikes me as at least for now dominantly a 0:15:00.880 --> 0:15:05.160 domestic risk to say Chinese assets, you know, equities, especially 0:15:05.320 --> 0:15:08.040 UM maybe to some degree to the equiporate bod market. 0:15:08.080 --> 0:15:11.040 But one thing I've read this week out of China 0:15:11.120 --> 0:15:13.920 that construct me is maybe something that the rest of 0:15:14.040 --> 0:15:16.560 the world needs to worry about, is the credit credit 0:15:16.600 --> 0:15:20.320 expansion credit and China growing at at sort of the 0:15:20.320 --> 0:15:23.720 weakest pace since the height of the pandemic. And I 0:15:23.760 --> 0:15:27.280 know this is something that a lot of internationally focused 0:15:27.320 --> 0:15:31.160 investors look at, is the credit impulse in China. UM 0:15:31.960 --> 0:15:35.880 as sort of a symbol of You know, for years 0:15:35.960 --> 0:15:38.320 we've all been focused on experts out of China, but 0:15:38.360 --> 0:15:40.400 you have to start thinking about that domestic demand, the 0:15:40.400 --> 0:15:43.800 imports into China, that consumer demand, like you talked about, 0:15:44.240 --> 0:15:47.080 is credit expansion in China, anything that you keep your 0:15:47.080 --> 0:15:49.200 eye on, is it any you know? Does this slowdown? 0:15:49.200 --> 0:15:52.480 Where are you at all? Yeah? It certainly does, because 0:15:53.000 --> 0:15:57.920 obviously the world runs on credit. Consumers, especially UM run 0:15:57.960 --> 0:16:02.760 on credit, so UM, you know, slowdown would mean our 0:16:02.800 --> 0:16:07.200 our would signal maybe a possible slowdown in the overall economy. 0:16:07.560 --> 0:16:12.040 Some of that is due to though them raining in 0:16:12.240 --> 0:16:17.480 some of the UM credit markets and tightening down control 0:16:17.600 --> 0:16:20.440 on some of the credit uh that that was going 0:16:20.480 --> 0:16:25.560 on there. So you know, slowdown isn't necessarily really concerning 0:16:25.600 --> 0:16:27.800 to me right now, but certainly keeping an eye on it. 0:16:27.880 --> 0:16:31.360 And it absolutely is something we we monitor across the 0:16:31.360 --> 0:16:34.440 global economy. It's one of the things that UM drives 0:16:34.480 --> 0:16:38.440 currency obviously and demand for currency, so certainly something we 0:16:38.440 --> 0:16:40.920 we monitor. And just to bring us back to the 0:16:41.000 --> 0:16:44.560 US and speaking of consumers, my team and I were 0:16:44.600 --> 0:16:47.800 looking at some research reports of just consumer behavior and 0:16:48.160 --> 0:16:51.120 credit card spending and Apple mobility data and some of 0:16:51.120 --> 0:16:54.040 those things just over the last week, over the last 0:16:54.080 --> 0:16:56.960 two weeks with the delta variant, and it's sort of 0:16:57.000 --> 0:17:00.440 a mixed picture right now. You know, you have reopenings obviously, 0:17:00.440 --> 0:17:02.800 but then at the same time mask man needs in 0:17:02.840 --> 0:17:05.480 certain areas and so on. So how should we be 0:17:05.560 --> 0:17:09.359 thinking about the delta variant, especially as it relates to 0:17:09.800 --> 0:17:13.399 the market. So yeah, I think the delta variant is 0:17:13.440 --> 0:17:17.160 really the largest risk to the to the markets right now. Um. 0:17:17.680 --> 0:17:22.480 And you know, as as we see UM hospitalizations climb, 0:17:23.160 --> 0:17:26.400 although you know they seem to be peaking now, it's 0:17:26.400 --> 0:17:30.960 certainly something that that concerns the market now. You know, 0:17:31.040 --> 0:17:35.120 I think Southwest recently announced that their bookings are down 0:17:35.160 --> 0:17:38.919 because of the delta variant. And if we start to 0:17:38.960 --> 0:17:44.280 see restrictions more restrictions and and um not, I don't 0:17:44.320 --> 0:17:46.560 think we're going to get the lockdowns. I just don't 0:17:46.560 --> 0:17:50.600 think uh of the public is going to uh going 0:17:50.680 --> 0:17:54.479 to go that route. Um, they're they're gonna um, you know, 0:17:54.560 --> 0:17:57.800 we we we've seen in St. Louis where I live, 0:17:58.440 --> 0:18:00.960 a big rise in in covid it in Missouri was 0:18:01.000 --> 0:18:03.919 one of the big hot states. So um, you know, 0:18:03.960 --> 0:18:07.000 we're starting to wear masks again. And and starting some 0:18:07.040 --> 0:18:11.400 of those, but the the more harsher lockdowns and closings 0:18:11.400 --> 0:18:13.680 that I don't think we're gonna get there, but it's 0:18:13.720 --> 0:18:16.520 certainly a risk and uh, you know, it's something that 0:18:16.560 --> 0:18:18.960 we're going to have to continue to deal with. Uh. 0:18:19.000 --> 0:18:21.920 And you know, the booster may be good or or 0:18:22.040 --> 0:18:25.840 just getting those those vactination rates up I think is 0:18:25.880 --> 0:18:31.080 the key and hopefully we'll we'll see that increase. You know, Chris, 0:18:31.119 --> 0:18:33.040 I wanted to get back to that that notion of 0:18:33.040 --> 0:18:35.119 of FX. You know, you made a great point that obviously, 0:18:35.200 --> 0:18:37.960 when you know, take an equity position in the in 0:18:38.040 --> 0:18:40.720 an overseas market, you're you're taking on that FX risk too. 0:18:41.600 --> 0:18:43.800 It's a bit of a pretty interesting year for the dollar, 0:18:43.840 --> 0:18:45.800 you know. I'm looking at this sort of the dollar 0:18:45.960 --> 0:18:49.000 versus all the major g T and currencies. It's pretty 0:18:49.040 --> 0:18:52.280 strongly against all of them on the year. But it's 0:18:52.280 --> 0:18:55.320 been kind of a wild ride, you know that the 0:18:55.359 --> 0:18:58.280 looking at the Bloomberg Dollar Index, it you know, started 0:18:58.320 --> 0:19:01.560 the first say court of the year very strong, that 0:19:01.680 --> 0:19:04.600 it came back down the sort of flat line. Now 0:19:04.640 --> 0:19:06.880 it's back up again near the highs of the year. 0:19:07.640 --> 0:19:09.720 I'm wondering. You know, I always think of that that 0:19:10.080 --> 0:19:13.000 what they call the dollar smile theory. You know that 0:19:13.040 --> 0:19:16.000 it dollar does real well sort of in when the 0:19:16.040 --> 0:19:18.320 world's going to hell and everything's risk off, but then 0:19:18.320 --> 0:19:21.800 it also does really well when you know things are 0:19:21.800 --> 0:19:23.640 going well, but the U s seems to be doing 0:19:23.720 --> 0:19:25.840 even better than than the rest of the world. Is 0:19:25.840 --> 0:19:28.040 it that latter part that we're seeing now in the 0:19:28.080 --> 0:19:30.359 dollar strength and walk us through kind of what you 0:19:30.400 --> 0:19:32.879 think has been pushing the and pulling the dollar around 0:19:32.880 --> 0:19:37.000 this year? Uh? Well, this year, Yeah, it's definitely about 0:19:37.000 --> 0:19:41.160 the rebound and the US. The strong gains we saw 0:19:41.200 --> 0:19:45.680 in the US that that attracts investors, It attracts international investors, 0:19:45.680 --> 0:19:48.240 and of course to buy the stock market in the US, 0:19:48.280 --> 0:19:51.240 they have to buy dollars. So um, I think it's 0:19:51.359 --> 0:19:54.800 all about the strength we've seen so far this year 0:19:54.880 --> 0:19:59.280 is all about, um, the the equity performance and investors 0:19:59.320 --> 0:20:01.879 coming into the US and in the out performance maybe 0:20:01.920 --> 0:20:07.560 of of of our economy and early recovery. The main 0:20:07.640 --> 0:20:10.800 thing we look at for for currencies, though, one of 0:20:10.800 --> 0:20:14.879 the main things is interest rate differentials, and um, you know, 0:20:14.960 --> 0:20:17.520 we were in an odd place over the past uh, 0:20:17.880 --> 0:20:21.560 a few years, probably probably five to seven years where um, 0:20:21.640 --> 0:20:25.840 you know, the dollar was in US interest rates were 0:20:25.840 --> 0:20:30.679 actually lower. UM, are are higher than most of the 0:20:30.720 --> 0:20:34.000 rest of the world. So um, you know the interest rates. 0:20:34.240 --> 0:20:37.560 When when the US interest rates are higher, US investments 0:20:37.640 --> 0:20:41.000 usually are risk free, they're they're the cream of the crops. 0:20:41.080 --> 0:20:43.320 So usually the interest rates in the US are a 0:20:43.359 --> 0:20:46.800 little lower than the rest of the world. UM. That 0:20:46.800 --> 0:20:51.240 that changed, and with the Europe going negative interest rates 0:20:51.320 --> 0:20:54.119 and and a lot of you know, Japan going negative 0:20:54.160 --> 0:20:57.359 interest rates, we saw the US interest rates higher and 0:20:57.400 --> 0:21:00.400 that caused this dollar strength, and it caused a five 0:21:00.480 --> 0:21:03.800 or six years of dollar strength. UM that started to 0:21:03.800 --> 0:21:09.360 reverse last year. The mentality was, um, US was gonna start, um, 0:21:09.440 --> 0:21:12.040 you know, keep rates lower for longer. We kept hearing 0:21:12.080 --> 0:21:14.320 Paul say lower for longer, lower for longer. The US 0:21:14.440 --> 0:21:16.240 rates are gonna stay down here and the rest of 0:21:16.280 --> 0:21:19.679 the world starting to HiPE rates. UM. I think we're 0:21:19.680 --> 0:21:23.719 gonna get back to that thinking. Um, as the US 0:21:23.880 --> 0:21:27.040 holds holds the line on on interest rates, we're already 0:21:27.040 --> 0:21:29.800 starting to see you know, Norway and and some of 0:21:29.840 --> 0:21:33.040 the other Australia and New Zealand start talking about raising rates, 0:21:33.080 --> 0:21:36.720 even Canada. So as you see these other countries start 0:21:36.840 --> 0:21:40.040 raising interest rates and interest rate ferential is gonna switch 0:21:40.160 --> 0:21:43.880 back to the foreign currency. So that is is one 0:21:43.920 --> 0:21:47.000 of the things that I'm basing my thought that the 0:21:47.080 --> 0:21:50.760 dollar um will start sliding again as as you see 0:21:50.760 --> 0:21:54.480 those interest rates different will start to change. So UM, 0:21:55.040 --> 0:21:58.360 I think the dollar UM. You know, it's strong right now, 0:21:58.400 --> 0:22:00.680 and if if we see of some of these risks 0:22:00.680 --> 0:22:02.840 that we talked about come back, I think you'll see 0:22:02.880 --> 0:22:07.199 safe haven flows. Um. But again, in my opinion, you know, 0:22:07.240 --> 0:22:09.840 there's there's other markets that are going to start performing 0:22:09.880 --> 0:22:12.400 well as they come out of the pandemic, and that's 0:22:12.400 --> 0:22:15.080 going to help their currency. So I think the dollar 0:22:15.119 --> 0:22:19.120 will start to define again towards the end of the year. Mike, 0:22:19.200 --> 0:22:25.600 can I admit something embarrassing? Oh? Absolutely. I've asked Chris 0:22:25.680 --> 0:22:29.840 to to define interest rate differentials at least thirty different 0:22:29.840 --> 0:22:32.160 times for me, and every single time, I'm like, yep, 0:22:32.280 --> 0:22:34.800 I got it. But that was a really great explanation. 0:22:35.520 --> 0:22:39.360 I was hoping for something really embarrassing. Vildata like this embarrassing, 0:22:40.760 --> 0:22:43.560 like you're wearing bell bottom jeans or something. I don't 0:22:43.560 --> 0:22:46.440 know that that that's not just if I can It's 0:22:46.480 --> 0:22:49.040 not just straight interest rates. I mean, you know, you 0:22:49.080 --> 0:22:52.040 can go to Brazil and get you know, some pretty 0:22:52.119 --> 0:22:54.919 high interest rates, but they have high inflation also, So 0:22:54.960 --> 0:22:56.600 you have to look at the real interest rate. You 0:22:56.600 --> 0:22:59.760 have to look at the difference between UM between the 0:23:00.280 --> 0:23:04.359