WEBVTT - Surveillance: Earnings Bar with Bitterly 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg's Surveillance Podcast. I'm Tom Keane, along 0:00:09.200 --> 0:00:13.039 with Jonathan Ferrell and Lisa A. Brawmowitz Jaily. We bring 0:00:13.119 --> 0:00:17.159 you insight from the best and economics, finance, investment, and 0:00:17.239 --> 0:00:22.400 international relations. To find Bloomberg Surveillance on Apple podcast, SoundCloud, 0:00:22.800 --> 0:00:26.240 Bloomberg dot Com, and of course, on the Bloomberg terminal. 0:00:29.400 --> 0:00:32.239 Right now, Kristen barely joins us, and she has an 0:00:32.240 --> 0:00:37.760 exceptionally important single sentence of courage in her research. Note 0:00:37.880 --> 0:00:42.800 anytime the index has sold off by more than the 0:00:42.920 --> 0:00:47.760 three year future return has an average of forty Kristen, 0:00:47.840 --> 0:00:50.080 this is off the bounce. How do you know when 0:00:50.080 --> 0:00:54.600 to step in and go along? It's it's a really 0:00:54.760 --> 0:00:57.480 really hard decision, and we can understand why people are 0:00:57.600 --> 0:01:00.600 naturally nervous given everything that's going on. But I think 0:01:00.640 --> 0:01:03.000 for those investors that are able to take a long 0:01:03.080 --> 0:01:06.240 term view, and three years isn't necessarily a long term view, 0:01:06.280 --> 0:01:09.920 the data is in your favor and and time it's 0:01:09.920 --> 0:01:13.000 certainly on your side. So exactly as you said, Tom, 0:01:13.040 --> 0:01:15.600 the three year forward return. Any time that we've seen 0:01:15.640 --> 0:01:18.000 the SMP five hundred sell off by more than twenty 0:01:18.040 --> 0:01:21.520 five percent has always been positive and has averaged a 0:01:21.560 --> 0:01:27.960 to Google return of five years. It's actually talk to 0:01:28.200 --> 0:01:31.200 times on your side. There are buying opportunities here. Talk 0:01:31.280 --> 0:01:33.800 to us at City Group about the huge advantage you have. 0:01:33.840 --> 0:01:36.000 And I'm gonna pick on Jim Suva today, but there's 0:01:36.040 --> 0:01:38.920 Horrowits and the rest of them. You've got the security 0:01:39.080 --> 0:01:43.640 analysts talking day today today with the corporations. Now ban 0:01:43.720 --> 0:01:46.160 came out of Bank of America said business is good 0:01:46.280 --> 0:01:50.240 J and J is giving some form of decent forward guidance. 0:01:50.480 --> 0:01:54.480 What are you hearing from your research staff about corporations 0:01:54.520 --> 0:01:58.520 are weathering this moment? Yeah, so we've been coming into 0:01:58.600 --> 0:02:00.560 Q three earnings and you will talking about this a 0:02:00.600 --> 0:02:03.440 little bit earlier. The bar has been revised down and 0:02:03.480 --> 0:02:05.560 said pretty low, so we could see some of those 0:02:05.600 --> 0:02:07.840 counter trend rallies on the back of it. But what 0:02:07.880 --> 0:02:10.880 are we watching and what are we listening for in earnings? 0:02:10.919 --> 0:02:13.359 All about the consumer? So obviously that was a key 0:02:13.400 --> 0:02:17.080 point in financial earnings, just listening to is the consumer strong? 0:02:17.160 --> 0:02:19.960 Are they continuing to spend? I think there's a nuance 0:02:20.000 --> 0:02:23.200 here though, so as we see credit card balances increase, 0:02:23.560 --> 0:02:26.400 as we're looking at spending patterns. There's a big difference 0:02:26.400 --> 0:02:29.560 between nominal and real numbers here, and so inflation is 0:02:29.600 --> 0:02:33.400 impacting our consumers. They are impacting spending patterns, and so 0:02:33.480 --> 0:02:36.560 inflation benefits top line revenue growth. So we have to 0:02:36.560 --> 0:02:39.160 get down to those unit numbers and see whether they're 0:02:39.200 --> 0:02:41.600 spending on the same things and whether they're buying the 0:02:41.639 --> 0:02:44.359 same quantity. And that's something that can flow through to 0:02:44.440 --> 0:02:47.560 earnings and put pressure in on Q four and going 0:02:47.560 --> 0:02:50.520 into as well. Christen, I'm still stuck on the first 0:02:50.520 --> 0:02:54.880 point here talking about history and not necessarily predicting the future, 0:02:55.160 --> 0:02:57.560 but being a guide for perhaps it is a good 0:02:57.560 --> 0:02:59.680 time to invest just based on how much stocks have 0:02:59.720 --> 0:03:02.680 gone down, And I do ask is this time different? 0:03:02.720 --> 0:03:04.919 I mean, does that give you enough conviction in its 0:03:04.960 --> 0:03:07.639 own right to go all in with risk if you 0:03:07.720 --> 0:03:10.880 have a longer time horizon. So to be fair here, 0:03:10.880 --> 0:03:14.200 and so we are actually defensively positioned. We're fully invested, 0:03:14.200 --> 0:03:17.359 but defensively positioned in this market. We believe that these 0:03:17.400 --> 0:03:21.800 markets require patients, diversification and discipline, so we don't want 0:03:21.880 --> 0:03:25.320 investors all in cash, and so in our portfolios we're 0:03:25.360 --> 0:03:28.480 actually overweight fixed income. Ever since we saw. I mean 0:03:28.520 --> 0:03:31.320 the tenure right now at four percent for investors who 0:03:31.320 --> 0:03:33.240 are in cash, and you even look out at six 0:03:33.280 --> 0:03:36.440 months te bills yielding close to four percent. We want 0:03:36.440 --> 0:03:39.880 to basically increase those yields and see opportunities and fixed 0:03:39.920 --> 0:03:44.920 income in investment, grade, in in government, in munis, and 0:03:45.000 --> 0:03:48.000 even in prefers where we see some opportunity as opposed 0:03:48.000 --> 0:03:51.320 to going long financial stocks. Getting that yield and preferreds 0:03:51.360 --> 0:03:54.400 of high single digits is something that's attractive and can 0:03:54.400 --> 0:03:57.560 combat some of the impacts of inflation. So how much 0:03:57.600 --> 0:03:59.720 are you going to the long end of the curve? 0:03:59.800 --> 0:04:01.480 And I go there because a lot of people have 0:04:01.560 --> 0:04:04.560 been hesitant saying, yeah, perhaps skills are close to their peak, 0:04:04.600 --> 0:04:06.800 but not quite yet, because we have seen the whole 0:04:06.800 --> 0:04:11.160 curve shift up again and again again. It depends on 0:04:11.200 --> 0:04:13.160 the risk applicate of the investor. I would say the 0:04:13.200 --> 0:04:15.760 sweet spot right now, because we could continue to see 0:04:15.760 --> 0:04:19.080 some volatility is probably out about two to five years. 0:04:19.360 --> 0:04:22.159 And most of our investors are long individual bonds, so 0:04:22.200 --> 0:04:24.520 that ability to be able to hold. And we have 0:04:24.600 --> 0:04:26.640 to remember that even just two years ago we had 0:04:26.680 --> 0:04:29.840 forty of the world's government dead was negative yielding so 0:04:29.920 --> 0:04:33.160 seeing some of these yields out five years pit mid 0:04:33.200 --> 0:04:36.560 single digits and slightly more is an area where we're 0:04:36.560 --> 0:04:39.159 comfortable and we're comfortable holding and withstanding some of that 0:04:39.240 --> 0:04:42.000 mark to market movement. Yeah, but in the bills portfolio 0:04:42.160 --> 0:04:44.360 right now, I think of the great Margie Patella on this. 0:04:44.920 --> 0:04:47.800 How do you judge between forget about sixty theory, it's 0:04:47.839 --> 0:04:50.520 all gone down in flames. How do you judge between 0:04:50.600 --> 0:04:54.680 bonds and equities? Our equity has given your enthusiasm the 0:04:54.720 --> 0:04:58.720 new bond. Yeah, so I think this is why we're 0:04:58.760 --> 0:05:02.120 actually pretty balanced, are in pretty defensive. So we do 0:05:02.240 --> 0:05:03.919 think that we are going to see pe grades. We 0:05:03.960 --> 0:05:05.800 do think that we are going to see peak inflation. 0:05:05.960 --> 0:05:07.880 But what you're going to see dominate over the next 0:05:07.880 --> 0:05:11.000 couple of months is volatility, and so you will see 0:05:11.240 --> 0:05:14.160 these type of counter trend rallies. Like we mentioned. If 0:05:14.160 --> 0:05:16.839 you are playing that long game, there are certainly opportunities, 0:05:16.960 --> 0:05:19.320 But if you're someone who's looking right at the short term, 0:05:19.600 --> 0:05:21.960 what you want to have is that balance. Because Q 0:05:22.200 --> 0:05:25.160 four so Q four in U S equities going back 0:05:25.200 --> 0:05:29.599 to Night of the Time has generated positive returns and 0:05:29.640 --> 0:05:32.080 an average of four point four percent it is the 0:05:32.120 --> 0:05:35.359 best quarter for US equities of any quarter throughout the 0:05:35.440 --> 0:05:38.159 year if we have some surprises and earnings as well. 0:05:38.320 --> 0:05:40.279 But where do you want to be positioned there? You 0:05:40.279 --> 0:05:42.640 want to be positioned in dividend growers. You want to 0:05:42.680 --> 0:05:45.200 be positioned in sectors that will be able to withstand 0:05:45.200 --> 0:05:47.560 the recession. This is why you hear a lot about healthcare. 0:05:47.760 --> 0:05:49.960 Health Care is a sector that's been able to consistently 0:05:49.960 --> 0:05:53.520 grow earnings the past four recessions at a clip. THEMA 0:05:53.720 --> 0:05:57.279 eight percent. Consumer staples is supposed to five percent, So 0:05:57.360 --> 0:05:59.880 you're not searching too much there, but you still have 0:06:00.000 --> 0:06:04.000 exclosure to equities. What about high quality big tech? I 0:06:04.040 --> 0:06:06.320 mean we're coming into that season. I think it's October 0:06:07.440 --> 0:06:09.599 is when we get Apple learn is what about big tech? 0:06:10.640 --> 0:06:13.359 So high quality big tex you were talking about this thrilier. 0:06:13.400 --> 0:06:15.599 We have to look at the international exposure, We have 0:06:15.680 --> 0:06:18.200 to look at at the pressure in terms of just 0:06:18.279 --> 0:06:22.080 how strong the dollar is. Overall. That being said, in technology, 0:06:22.120 --> 0:06:26.559 there's a huge difference between profitable tech and unprofitable tech. 0:06:26.760 --> 0:06:29.360 When we think of unprofitable tech, I like to think 0:06:29.360 --> 0:06:31.560 of that as a call option on an unknown future. 0:06:31.960 --> 0:06:34.760 So in long term secular bowl markets and low interest 0:06:34.880 --> 0:06:37.960 rate environments that call option on an unknown future is 0:06:38.040 --> 0:06:40.880 much more palatable than in this type of market conditions. 0:06:40.920 --> 0:06:43.440 So even when I was talking about the dividend growers, 0:06:43.480 --> 0:06:46.719 these types of companies exist within technology as well, and 0:06:46.760 --> 0:06:48.719 you could make the argument that a lot of the 0:06:48.760 --> 0:06:51.200 profitable tech we're going to be looking for those signs 0:06:51.240 --> 0:06:53.480 of not only margin compression, but we're also going to 0:06:53.560 --> 0:06:55.760 be looking for signs of durable demand. Which of these 0:06:55.800 --> 0:06:59.719 companies continue to have durable demand, whether that's a partner 0:07:00.279 --> 0:07:03.080 that's in software. Christen, awesome to hear from you, as 0:07:03.080 --> 0:07:10.640 always Christin Piddley that a city Global West Management. Let 0:07:10.720 --> 0:07:13.240 us continue right now, and we do so and celebrate 0:07:13.240 --> 0:07:17.560 the holiday season. We begin Thanksgiving with Jerome Schneider, Managing Director. 0:07:17.600 --> 0:07:20.600 I had a short term portfolio management an adviser and 0:07:20.640 --> 0:07:25.600 Thanksgiving dinner at Pimco and here on Bloomberg Surveillance as well. 0:07:25.720 --> 0:07:29.000 How's your year been? Short term paper is a place 0:07:29.080 --> 0:07:32.800 to hide, right, It's busy, It's quite busy, and absolutely 0:07:32.800 --> 0:07:34.520 short term paper is a place to hide. I think 0:07:34.560 --> 0:07:38.040 the nuances a short term paper really are with the 0:07:38.040 --> 0:07:40.320 story is about for two thousand twenty two in actually 0:07:40.360 --> 0:07:43.240 two thousand twenty three, folks, as you've highlighted before is 0:07:43.320 --> 0:07:46.320 cash is not necessarily as democratic as people would like 0:07:46.360 --> 0:07:49.000 to think. And well cash is king the crown jewel 0:07:49.040 --> 0:07:50.600 of how you want to think about it is really 0:07:51.040 --> 0:07:54.160 more nuanced than that. Yes, bank deposits are some cases 0:07:54.600 --> 0:07:58.280 slowly moving. Higher T bills may offer some attraction, but 0:07:58.320 --> 0:08:00.920 the reality is they're treating act quite rich in some 0:08:00.960 --> 0:08:04.400 cases thirty to fifty basis points through benchmark rates, meaning 0:08:04.600 --> 0:08:07.400 what the FED is expected to be at. So there's 0:08:07.440 --> 0:08:09.720 other value if you actually want to be more appropriately 0:08:10.320 --> 0:08:13.640 highlighting and thinking where interest rates should be headed based 0:08:13.720 --> 0:08:17.360 upon Fed expectation. PIMCO meeting that you have out there, 0:08:17.400 --> 0:08:20.600 the tenant meeting, whatever the legendary meeting is, what do 0:08:20.680 --> 0:08:24.360 you say about the short term space and dollar ill 0:08:24.440 --> 0:08:29.240 liquidity worldwide? There was no other theme, Well, there's there's 0:08:29.240 --> 0:08:31.480 a reality of what we're thinking about is that we 0:08:31.520 --> 0:08:34.640 are facing a change where people need to digest the 0:08:34.720 --> 0:08:38.000 changing cost of capital, and the notion of liquidity is 0:08:38.040 --> 0:08:41.520 one that has been more prolific. People are concerned about 0:08:41.559 --> 0:08:44.200 liquidity has been sort of a call word, if you will, 0:08:44.480 --> 0:08:47.000 but it means very different things to very different people, 0:08:47.040 --> 0:08:49.079 and I think that's the consequence of when we want 0:08:49.120 --> 0:08:52.920 to think about the marketplace. You have macro economic liquidity, 0:08:53.000 --> 0:08:56.280 you have liquidity concerns driven to quantitative tightening. You have 0:08:57.040 --> 0:09:00.199 haircut concerns and marginal requirement concerns, which we've clearly it's 0:09:00.200 --> 0:09:03.439 seen within England, and more importantly as the as the 0:09:03.520 --> 0:09:06.880 economy progresses to more of a state of concerns about growth, 0:09:07.080 --> 0:09:11.240 then we're gonna see other tightening, ratchets of illiquidity and haircuts. 0:09:11.280 --> 0:09:13.040 Those are the liquidity fact thats we really need to 0:09:13.080 --> 0:09:15.600 be paying attention to. So from a starting place at 0:09:15.640 --> 0:09:19.360 PIMCO and everybody else, we have relatively judicious high amounts 0:09:19.400 --> 0:09:23.199 of liquidity, preventative liquidity, defensive liquidity. But the key then 0:09:23.240 --> 0:09:24.760 comes into how do you use it? How do you 0:09:24.760 --> 0:09:28.600 think about it opportunistically given the uncertain outcome, given the 0:09:28.640 --> 0:09:33.080 growth environment, given the slow GDP but perhaps shallow but 0:09:33.200 --> 0:09:36.360 longer recession that we think at PIMCO, And then ultimately 0:09:36.559 --> 0:09:38.839 how do we then extrapolate that to value in the future. 0:09:38.880 --> 0:09:41.559 So it's all about really how does liquidity translate to 0:09:41.640 --> 0:09:45.599 volatility within the marketplace and how do investors absorb that 0:09:45.720 --> 0:09:47.920 volatility properly? The problem for a lot of people in 0:09:47.920 --> 0:09:49.960 the market right natural roum, as you know, is when 0:09:49.960 --> 0:09:52.280 you expect that to be liquidity in an act of 0:09:52.320 --> 0:09:55.440 class where there should be liquidity and then there is not. Right. 0:09:55.679 --> 0:09:57.120 Can you talk to us about what's happening in the 0:09:57.120 --> 0:09:59.360 treasury market? We know that last week the Treasury reached 0:09:59.360 --> 0:10:01.160 out to a group of individual is to try to 0:10:01.280 --> 0:10:02.959 he has this connection with a group of individuals in 0:10:03.000 --> 0:10:04.800 the market. They spake to they try and get feedback 0:10:04.840 --> 0:10:06.920 about what's going gone. One thing they asked about was 0:10:06.960 --> 0:10:09.800 whether they should buy back certain securities to improve the 0:10:09.840 --> 0:10:12.360 liquidity and the functioning of the market. What do you 0:10:12.360 --> 0:10:14.720 say back to that there's there's This has actually been 0:10:14.760 --> 0:10:16.839 top of mind, not just simply over the past few months, 0:10:16.880 --> 0:10:19.160 and we published a paper at PINCO sort of highlighting this, 0:10:19.440 --> 0:10:21.960 suggesting some all to all trading and actually elicited some 0:10:22.000 --> 0:10:26.120 pretty positive constructive dialogue within the marketplace. That's a function 0:10:26.200 --> 0:10:28.520 aspect of where you want to think about where the 0:10:28.559 --> 0:10:32.000 market and how the market is digesting actual functional, high 0:10:32.080 --> 0:10:35.400 quality assets is a concern, but it's also an opportunity 0:10:35.440 --> 0:10:38.360 for investors those investors they can really think about how 0:10:38.400 --> 0:10:41.440 to maneuver around these higher cost of capital and more importantly, 0:10:41.520 --> 0:10:43.920 the opportunity sets because of the wider bit offers. So 0:10:43.960 --> 0:10:47.080 what I would suggest is, yes, it's a transformation from 0:10:47.160 --> 0:10:48.760 what we've been used to over the past one to 0:10:48.800 --> 0:10:51.040 two decades. And it is a concern when you think 0:10:51.040 --> 0:10:53.280 about some of the curtailments that you have more regulatory 0:10:53.400 --> 0:10:56.200 and sort of functional framework, But as an active manager, 0:10:56.240 --> 0:10:58.960 you're going to incorporate it and find opportunities to incorporate it. 0:10:59.080 --> 0:11:01.520 And it just might simply mean that, yes, there's more 0:11:01.600 --> 0:11:04.200 volatile volatility, but you're gonna have to be more convicted 0:11:04.240 --> 0:11:06.559 and have longer holding periods. So there are two different 0:11:06.559 --> 0:11:09.120 things here. There's one about the treasury possibly buying back debt, 0:11:09.240 --> 0:11:13.000 and then there's investors acting as liquidity providers and stepping 0:11:13.040 --> 0:11:15.719 in and the all to all and disintermediating banks. Is 0:11:15.760 --> 0:11:17.160 that what you're saying that if the banks were not 0:11:17.200 --> 0:11:20.280 necessarily the ones that were there, and you had a 0:11:20.280 --> 0:11:22.960 platform where you could really make markets in real time, 0:11:23.320 --> 0:11:26.280 that that would possibly be a more effective way providing 0:11:26.280 --> 0:11:28.920 liquidity to this market. Well, I think liquidity in general 0:11:28.960 --> 0:11:31.679 isn't necessarily a democratic process. And so when you think 0:11:31.760 --> 0:11:34.640 about it, there's different layers of liquidity within the marketplace, 0:11:34.800 --> 0:11:37.079 and we're suggesting is you have more degrees of freedom 0:11:37.320 --> 0:11:39.840 than maybe perhaps that's better for the market liquidity as 0:11:39.880 --> 0:11:42.160 you go for it. It doesn't necessarily mean that people 0:11:42.200 --> 0:11:43.880 have a view or a more constructive you are a 0:11:43.920 --> 0:11:46.000 less CONSTRUCTI view of where the market is headed. The 0:11:46.040 --> 0:11:47.960 market is the market, but when we think about it, 0:11:48.080 --> 0:11:50.400 that broader based landscape is we're really trying to head 0:11:50.400 --> 0:11:51.920 in that regard. I mean, while the Bank of America 0:11:51.960 --> 0:11:55.440 Fund Manager survey showed that investors are holding the highest 0:11:55.480 --> 0:11:58.240 cash piles going back to two thousand and one, and 0:11:58.240 --> 0:12:00.720 we hear that from everyone. You know, cash is your friend. 0:12:00.800 --> 0:12:02.640 You want to be liquid, you want to be nimble. 0:12:03.160 --> 0:12:05.559 Is your experience, And it's just flooding in that people 0:12:05.600 --> 0:12:07.959 are coming to you and basically just saying, please give 0:12:08.080 --> 0:12:09.800 us anything you can to give us a sense of 0:12:09.840 --> 0:12:12.240 what our income could be, how to be safe, and 0:12:12.320 --> 0:12:14.520 you're sort of overwhelmed or is it not really the case? 0:12:14.559 --> 0:12:16.160 You know? Where the problem is LESA is that people 0:12:16.200 --> 0:12:18.920 are focused on looking and driving in the rear view 0:12:18.920 --> 0:12:21.840 mirror and the reality is that as you're thinking about 0:12:21.960 --> 0:12:24.840 where it is to come, they're so focused on what 0:12:24.960 --> 0:12:27.560 has happened in the past one to two quarters they 0:12:27.559 --> 0:12:30.600 don't necessarily have the ability to look out the front 0:12:30.600 --> 0:12:33.440 window and see the opportunity set that perhaps that cash 0:12:33.679 --> 0:12:36.400 and more importantly fixed income provides in this landscape. One 0:12:36.400 --> 0:12:38.520 of the concerns that you have is obviously growth. One 0:12:38.520 --> 0:12:40.720 of the concerns you have is sort of does the 0:12:40.840 --> 0:12:44.760 risk parity element of having interest rate exposure duration offset 0:12:44.840 --> 0:12:48.040 some credit risk taking and broader risk taking with inequity markets, 0:12:48.040 --> 0:12:50.400 And maybe those correlations don't hold at this moment, but 0:12:50.559 --> 0:12:53.320 if they do re emerge, then there's some different opportunity sets. 0:12:53.360 --> 0:12:56.240 And the higher, the higher rate of environment we're finding 0:12:56.240 --> 0:12:58.559 in right now is actually the setting of the table 0:12:58.640 --> 0:13:00.720 or something that's very different than we had for the 0:13:00.760 --> 0:13:04.520 past few years, in decades. So don't keep looking in 0:13:04.559 --> 0:13:06.720 the review mirror. Ultimately, in that review mirror is not 0:13:06.760 --> 0:13:10.199 just two quarters, it's a decade's worth of zero rights 0:13:10.240 --> 0:13:13.360 negative rights QA. When I hear you talk and I 0:13:13.400 --> 0:13:15.199 get the sense that you think this is something that's 0:13:15.200 --> 0:13:17.839 going to hang around, well just one year, twelve months, 0:13:17.840 --> 0:13:19.640 that this is something we need to adjust to. It's 0:13:19.640 --> 0:13:21.280 going to be unlikely that we get back to a 0:13:21.360 --> 0:13:23.400 zero rate level for you know, in a flat yolk 0:13:23.400 --> 0:13:25.720 curve like we've been witnessing. Is a two year note 0:13:25.720 --> 0:13:27.960 at twenty five basis points seems to be something that's 0:13:28.240 --> 0:13:30.040 out in the past. But what I do think is 0:13:30.040 --> 0:13:31.800 going to happen is that when you see where we 0:13:31.800 --> 0:13:33.439 are at least for the next one to two years, 0:13:33.640 --> 0:13:36.480 a higher inflationary print. When you're a PC that might 0:13:36.559 --> 0:13:39.400 level out about three point five percent closer to two percent. 0:13:39.640 --> 0:13:41.320 That means front and rates are probably going to be 0:13:41.320 --> 0:13:43.480 in this vicinity for some period of time, and investors 0:13:43.480 --> 0:13:46.319 should be comfortable with that. In that notion obviously has 0:13:46.720 --> 0:13:50.079 onset effects of what happens with equity markets, risk taking, 0:13:50.080 --> 0:13:52.959 and things like that, but fundamentally, this is a higher 0:13:53.000 --> 0:13:55.520 rate level and investors need to think about the value 0:13:55.559 --> 0:13:57.719 of fixed income in this environment, not just because of 0:13:57.800 --> 0:14:01.120 higher rates, but because of its complementary effects to total 0:14:01.160 --> 0:14:03.480 portfolio alt Well, that's where I wanted to go to 0:14:03.480 --> 0:14:06.280 to short term, guy, let's go we could long term. 0:14:06.520 --> 0:14:10.440 Does the actually assumption shift we've been going from eight 0:14:10.440 --> 0:14:13.280 percent to six percent? Good news? In terms of cash 0:14:13.280 --> 0:14:15.960 imputed into plans. Are we going the other way now 0:14:16.360 --> 0:14:19.800 where we're gonna have a higher actuarial assumption of our 0:14:19.840 --> 0:14:23.280 retirement plans? Yeah, Tom. Ultimately, investors are gonna look for 0:14:23.440 --> 0:14:26.360 different sources of how to produce total return. What we've 0:14:26.360 --> 0:14:29.280 focused on is declining interest rates happened over the previous 0:14:29.280 --> 0:14:32.360 three decades with simply that lower rates spread on higher 0:14:32.400 --> 0:14:36.600 capital appreciation opportunities. That calculus has fundamentally changed, and so 0:14:36.640 --> 0:14:39.880 the total return composition is not just on capital appreciation. 0:14:40.240 --> 0:14:42.920 It's on the ability to carry and earn income with 0:14:43.000 --> 0:14:45.240 us through dividend income or income from bonds in the 0:14:45.280 --> 0:14:48.600 traditional sense. And that is quite honestly one of the 0:14:48.680 --> 0:14:51.480 things that investors who are maybe new to the markets 0:14:51.560 --> 0:14:53.480 or the past decades so need to be thinking about. 0:14:53.640 --> 0:14:55.720 So a lot of factors are putting us back into 0:14:55.760 --> 0:14:59.160 a more traditional nineteen seventies, eighties and early nineties mindset, 0:14:59.560 --> 0:15:02.800 not only how to trade markets from a liquid perspective, 0:15:02.800 --> 0:15:05.880 but also how to think about constructing portfolios. When was 0:15:05.920 --> 0:15:08.120 the last time we sat around the table together? Isn't 0:15:08.120 --> 0:15:10.960 this nice? It's going to see? It was more and 0:15:10.960 --> 0:15:13.720 more in town for the Yankees, t k no, no, no, 0:15:13.920 --> 0:15:17.960 just just happened to the Yankees are playing that he's 0:15:18.000 --> 0:15:20.520 in town. Total coincidence. Okay, I'm sorry to accuse you 0:15:20.560 --> 0:15:22.520 for being in town for the Yankees. I'm here to 0:15:22.600 --> 0:15:26.400 give tricky advice. Of course, Jo Schnyder and Pimcoke great 0:15:26.400 --> 0:15:38.720 to see it. Let's talk about the raped market. We 0:15:38.720 --> 0:15:41.040 can talk about QT, and let's talk about Sterling. We'll 0:15:41.080 --> 0:15:43.680 do that with Kit Juke's chief FX strategistics sock Gen. 0:15:44.040 --> 0:15:46.320 Kit help me out here. So when a report that 0:15:46.440 --> 0:15:51.040 QT gets delayed, Sterling climbs to session highs through one fourteen. 0:15:51.320 --> 0:15:53.800 On the pushback from the Bank of England, sterling falls 0:15:54.080 --> 0:15:56.480 to session those Kit am I to believe that QT 0:15:57.320 --> 0:16:02.360 is somehow sterling negative if and delaying QUT is somehow 0:16:02.480 --> 0:16:05.200 sterling positive based on a price action, That's what it's 0:16:05.200 --> 0:16:07.680 telling me. What do you make of that? I think 0:16:07.800 --> 0:16:09.560 the price actually tells you. By the time you've had 0:16:09.560 --> 0:16:12.360 two conflicting messages within one morning, the second one coming 0:16:12.360 --> 0:16:15.920 at the start of a guilt auction, everybody's looking at 0:16:15.920 --> 0:16:18.360 the UK and said, please, please, please, can you get 0:16:18.760 --> 0:16:22.200 the messaging right to us? We are all confused because 0:16:22.520 --> 0:16:24.640 you know what, what we need for the currency, what 0:16:24.680 --> 0:16:26.680 we need for the market, is for the volatility to 0:16:26.760 --> 0:16:30.480 go away, for everything to calm down, and to put 0:16:30.520 --> 0:16:33.600 this kind of period of massive uncertainty behind us. So 0:16:34.160 --> 0:16:37.680 contradictory reports just don't help in that regard at this 0:16:37.720 --> 0:16:39.920 point in time. I mean, the most confusing thing of all. 0:16:40.000 --> 0:16:42.160 Next would be and that, although they're not planning on 0:16:42.200 --> 0:16:44.560 delaying the start of QUT, if they go on and 0:16:44.600 --> 0:16:46.560 do it anyway because of the volatility and the guilt 0:16:46.560 --> 0:16:48.240 market at some point in the next couple of weeks, 0:16:48.760 --> 0:16:51.720 and then we'll then we're full circle. I thought you 0:16:51.760 --> 0:16:53.480 maybe some people should say less. I thought, you know, 0:16:53.640 --> 0:16:56.320 today was really lovely and it was very indeterminate. It 0:16:56.360 --> 0:16:58.160 was like, we need to wait, we need to wait. Now. 0:16:58.240 --> 0:17:01.880 What what do you do with a straw dollar reality, 0:17:02.080 --> 0:17:05.280 given the unsettled nous of your note? Can you go 0:17:05.440 --> 0:17:08.080 the other way and call finally week dollar or do 0:17:08.160 --> 0:17:11.240 you just sit here? I wish I could, But that's 0:17:11.240 --> 0:17:12.800 why I think that what we do is we get 0:17:12.840 --> 0:17:16.040 stuck with less volatility. I mean, you know that there 0:17:16.040 --> 0:17:18.080 are two problems with with looking for a week dollar. 0:17:18.200 --> 0:17:19.960 One is you just have to embrace the idea that 0:17:20.440 --> 0:17:22.359 we're going to have the softest of soft landings in 0:17:22.359 --> 0:17:24.960 the United States and everything's going to be fine and lovely, 0:17:25.000 --> 0:17:28.199 and the equity bulls are right. And the difficulty with 0:17:28.280 --> 0:17:31.520 that is if the economy doesn't slow, they'll they'll hike more, 0:17:31.640 --> 0:17:34.400 not less, and we're going to get a very very 0:17:34.480 --> 0:17:37.360 inverted curve by Christmas at this rate. So that that's 0:17:37.400 --> 0:17:39.400 the first tip, and the second one, frankly is still 0:17:39.680 --> 0:17:42.840 Russia Ukraine. The whole problem that we have out there 0:17:42.880 --> 0:17:45.159 that how how do I turn around in Europe and 0:17:45.200 --> 0:17:46.960 say I want to sell the dollar? Shall I buy? 0:17:47.119 --> 0:17:48.800 Shall I buy the pound? Shall I buy the euro? 0:17:49.359 --> 0:17:53.199 When I'm getting newspaper reports about Yeah, if we have 0:17:53.280 --> 0:17:55.680 cold days in the middle of winter in January February, 0:17:55.760 --> 0:17:57.440 you're gonna have to light slow going to go out 0:17:57.880 --> 0:17:59.840 um that that you know, have we priced that in 0:18:00.000 --> 0:18:03.840 properly yet? I'm not sure? So it could We could 0:18:03.920 --> 0:18:06.240 get stuck here, I guess that's the that's the end 0:18:06.240 --> 0:18:09.000 conclusion of that until we get the next trend, and 0:18:09.040 --> 0:18:11.520 the next trend might be kicked off by the next 0:18:11.600 --> 0:18:14.640 leg up. Inten you not just quickly. Jordan Rochester resign 0:18:14.720 --> 0:18:17.200 yesterday of Nomura, and he was talking about how, yeah, 0:18:17.280 --> 0:18:19.600 central banks are important, but really it's about the economic 0:18:19.600 --> 0:18:22.520 trajectory and right now, more of an austerity kind of 0:18:22.560 --> 0:18:25.800 approach from fiscal policymakers in the UK will lead to 0:18:26.040 --> 0:18:29.359 a deeper recession and that means a more negative outcome 0:18:29.440 --> 0:18:32.400 for the pound. Is that the kind of rash now 0:18:32.520 --> 0:18:35.080 that you think is what you should be following? How 0:18:35.200 --> 0:18:38.480 much is the economy really the main driver here? I 0:18:38.480 --> 0:18:40.919 think the economy becomes one once we start focusing on 0:18:40.920 --> 0:18:43.920 the policy because it's not as important and the economy 0:18:43.960 --> 0:18:46.040 is heading into a recession that could last a long time. 0:18:46.359 --> 0:18:49.600 And yes, to the extent of that, you know that 0:18:49.680 --> 0:18:51.680 there's a sort of a wisdom out there that says 0:18:51.760 --> 0:18:54.119 what you need to do when your financial position as 0:18:54.119 --> 0:18:57.840 a country, your fiscal positions poor, is tighten fiscal policy 0:18:57.880 --> 0:19:00.800 really aggressively, and you know in the hope that will 0:19:00.840 --> 0:19:03.919 improve it as opposed to get yourself any chance of 0:19:03.960 --> 0:19:06.680 growing out of your fiscal problems. Then then we start 0:19:06.680 --> 0:19:10.000 looking more like Japan every second, and so you know 0:19:10.280 --> 0:19:13.160 that that's pretty scary for a country like the UK 0:19:13.240 --> 0:19:16.359 with the current account deficit and for sterling so yeah, 0:19:16.400 --> 0:19:19.280 it's not a great picture. Um. I think the only 0:19:19.280 --> 0:19:22.679 piece about Sterling right now is you know we're priced 0:19:22.720 --> 0:19:24.760 for a lot of bad news. Sterling can be held 0:19:24.760 --> 0:19:27.320 down here. I don't know how much further it can 0:19:27.320 --> 0:19:31.440 fall unless something really negative happens. What I still can't 0:19:31.480 --> 0:19:35.959 see is the policies that would let the economy do 0:19:36.040 --> 0:19:39.440 better than expected and people start looking around and saying, hey, 0:19:39.720 --> 0:19:41.440 you know this thing a cheap asset that I want 0:19:41.440 --> 0:19:45.760 to buy. Final question, can Arsenal win the league? No, 0:19:46.440 --> 0:19:49.560 it's flat out no. Are you saying no because you're 0:19:49.600 --> 0:19:52.960 worried that if you say yes, it won't happen. I'm 0:19:53.000 --> 0:19:55.200 saying no because Manchester City of the best side in 0:19:55.240 --> 0:20:02.920