Speaker 1: Well. Minneapolis Faded president Neil Kashgary said he was actually
Speaker 1: happy to see how chair J. Pale's Jackson the whole
Speaker 1: speech was received by markets. Of course, Micuts received that
Speaker 1: speech by selling off pretty heavily on Friday afternoon, joining
Speaker 1: us to discuss. Now we have Jonathan levin Bloomberg's market columnists,
Speaker 1: so Cash Gary happy that he saw global shares fall.
Speaker 1: It does sound brutal, but he does. He have a
Speaker 1: point when it comes to markets doubting the foods commitment.
Speaker 1: They're good to be with you, Paul. What I thought
Speaker 1: was interesting about this is just, you know, to to
Speaker 1: see a central bank or actually saying the quiet part
Speaker 1: out loud. You know, I think that in reality, this
Speaker 1: is just how monetary policy works, and we all kind
Speaker 1: of understand this. This is where the this don't fight
Speaker 1: the Fed mantra comes from. And central Marcus talk a
Speaker 1: lot about the importance of financial conditions. It's essentially a
Speaker 1: euphemism for we need to raise borrowing costs and make
Speaker 1: you feel poor in order to rein in him. For Asian,
Speaker 1: it's just rare to to see an active central banker
Speaker 1: say so as bluntly as as Cash Carry did. In
Speaker 1: this interview with odd Lots, Is it something that we
Speaker 1: want to hear? Do we want, you know, twelve people
Speaker 1: in a room telling our markets what they should be doing.
Speaker 1: I know that sounds, you know, like it's criticize criticizing him,
Speaker 1: but you you often don't hear FED officials talking actively
Speaker 1: about the level of the dollar or the level of markets,
Speaker 1: and and that, Yeah, I I think it's sort of
Speaker 1: just reflects where we are, at least in US markets. Right.
Speaker 1: So over the summer, coming off of the July the
Speaker 1: July lows, there was this sort of I've called it,
Speaker 1: sort of a vapid summer rally that wasn't really based
Speaker 1: based on much of anything but a lack of real
Speaker 1: fundamental news. And that summer rally ended up achieving the
Speaker 1: opposite of what the FED is trying to do. Right.
Speaker 1: It loosened up, Uh, it loosened up financial can editions
Speaker 1: a little bit. We're going to see if that has
Speaker 1: any consequences actual inflation numbers going forward. But as j Pal,
Speaker 1: the FECh chair made clear in Jackson Hole on Friday,
Speaker 1: you know, they are committed to this, to this fight.
Speaker 1: And I think that j Pal's message in a slightly
Speaker 1: more opaque, opaque fashion than what kash Gary just told us. Uh,
Speaker 1: you know, j Pale was coming out guns ablazing and saying, listen,
Speaker 1: we're doing this, We're serious about this. And I think
Speaker 1: that that he chose that format specifically because he perceived
Speaker 1: that that markets weren't getting the picture. Yeah, the famous
Speaker 1: saying is don't fight the fit. But to some degree
Speaker 1: did the FIT bring this upon itself? Because we've seen
Speaker 1: in the past a reaction to type of tantrums, more
Speaker 1: recently the FIT cold inflation transitory. The market doubted that
Speaker 1: the market was proven right. So can we pack some
Speaker 1: of the blame for this at the FIDGS door. Yeah,
Speaker 1: I mean, obviously this is a this is a different FED,
Speaker 1: but but uh, you know, a long time FED watchers
Speaker 1: grew up sort of reading the tea leaves. This, you know,
Speaker 1: for a long time, this was one of the most
Speaker 1: opaque institutions in the world, one of the most opaque
Speaker 1: and one of the most powerful, and a lot of
Speaker 1: people earned a living just you know, trying to read
Speaker 1: read the tea leaves. And it's kind of shocking, maybe
Speaker 1: even hard to understand that with this particular FED, at
Speaker 1: least in my humble opinion, there are no tea he
Speaker 1: leaves to read. They're they're sort of telling it as
Speaker 1: it is, and it has taken the market some adjusting
Speaker 1: to say, hey, maybe they aren't playing three dimensional chess.
Speaker 1: Maybe they're just telling us what they're gonna do and
Speaker 1: we should listen. Yeah, I mean, I absolutely get that,
Speaker 1: and you know, just trying to explain more than thinking
Speaker 1: behind the first question is that you know, there's millions
Speaker 1: of Asians distilled down into what markets are doing. If
Speaker 1: if the market thinks that companies can handle one cost
Speaker 1: input interest rates or one cost input, right, If if
Speaker 1: companies can handle that and their earnings are not, let's say,
Speaker 1: hit hard, then who's to say that the market at
Speaker 1: any given time is right or wrong. Market is what
Speaker 1: it is. Yeah, that's exactly right. I mean, obviously, an
Speaker 1: element of this is is p S and an element
Speaker 1: of this, at least in the stock market, is what
Speaker 1: people's earnings expectations are going to be. You know, I've
Speaker 1: been I've been of the opinion that p is we're
Speaker 1: a little rich for an extras rate environment that that
Speaker 1: looks like this anyway. But the broader picture is that
Speaker 1: there is significant earnings risk going forward. I don't think
Speaker 1: that that earnings risk is going to manifest itself right away,
Speaker 1: you know. I think a lot of people took heart
Speaker 1: in the in the fact that the latest quarters numbers
Speaker 1: out of the out of US, we're actually fairly strong.
Speaker 1: You might call them resilient or whatever. But this this
Speaker 1: is a process that takes time. People typically talk about
Speaker 1: a monetary policy lag of eighteen to twenty four months
Speaker 1: for the FEDS sort of wrecking ball to to do
Speaker 1: its thing, if you will. And uh so, you know,
Speaker 1: there's there's significant risk there. What is happening now in
Speaker 1: US markets is that, uh, you know, the job market
Speaker 1: remains remains strong, people are starting to spend down those
Speaker 1: pandemic savings. They're starting to turn to the credit cards
Speaker 1: and so forth, and that, you know, that creates a
Speaker 1: bit of a runway for consumption in the in the US,
Speaker 1: And that that being the case, it could really take
Speaker 1: you know, several quarters, well into three until we can
Speaker 1: really assess the earning situation and say the FED did
Speaker 1: its thing and it didn't do too much damage. Yeah,
Speaker 1: it shapes up as really interesting next six months, for sure. Jonathan,
Speaker 1: thanks very much for being with us. Jonathan Levin new
Speaker 1: is Bloomberg Market columnist,