1 00:00:00,080 --> 00:00:02,840 Speaker 1: We bring you news and analysis every day on the 2 00:00:02,880 --> 00:00:06,840 Speaker 1: Bloomberg Surveillance Podcast. But now you can get the latest 3 00:00:06,880 --> 00:00:11,639 Speaker 1: news on demand whenever you want. Subscribe to Bloomberg News 4 00:00:11,640 --> 00:00:14,400 Speaker 1: Now to get the latest headlines at the click of 5 00:00:14,440 --> 00:00:18,880 Speaker 1: a button. Get informed on your schedule. You can listen 6 00:00:18,960 --> 00:00:22,680 Speaker 1: and subscribe to Bloomberg News Now on the Bloomberg Business App, 7 00:00:22,760 --> 00:00:27,720 Speaker 1: Bloomberg dot Com plus Apple, Spotify, and anywhere else you 8 00:00:27,800 --> 00:00:37,440 Speaker 1: get your podcasts. Search Bloomberg News Now and subscribe today. 9 00:00:37,800 --> 00:00:41,160 Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along 10 00:00:41,200 --> 00:00:45,000 Speaker 1: with Jonathan Farrow and Lisa Abramowitz. Join us each day 11 00:00:45,040 --> 00:00:49,520 Speaker 1: for insight from the best and economics, geopolitics, finance and investment. 12 00:00:49,960 --> 00:00:54,760 Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 13 00:00:55,000 --> 00:00:59,280 Speaker 1: anywhere you get your podcasts and always on Bloomberg dot Com, 14 00:00:59,320 --> 00:01:04,160 Speaker 1: the Bloomberg Criminal and the Bloomberg Business App. Kelsey Barrel 15 00:01:04,319 --> 00:01:06,160 Speaker 1: is probably gonna walk off the stage. Why don't you 16 00:01:06,200 --> 00:01:08,039 Speaker 1: got something to read here? John? I'm sorry I lost 17 00:01:08,040 --> 00:01:10,800 Speaker 1: the scriptures last night so hard. We're going to go 18 00:01:10,840 --> 00:01:13,280 Speaker 1: into this and right now for Global Wall Street, We're 19 00:01:13,280 --> 00:01:15,440 Speaker 1: gonna freeze time. We're gonna get through this for Bob 20 00:01:15,480 --> 00:01:17,880 Speaker 1: Michael and Kelsey Barrow, because they're the real deal. They're 21 00:01:18,000 --> 00:01:21,320 Speaker 1: JP Morgan Asset Management, And we're going to ask a 22 00:01:21,360 --> 00:01:25,039 Speaker 1: really delicate inside baseball question. So she can go back 23 00:01:25,080 --> 00:01:29,640 Speaker 1: to the new skyscraper on Park Avenue explain without addressing 24 00:01:29,920 --> 00:01:33,399 Speaker 1: your bank, your business. Mister Diamond would say, that's appropriate. 25 00:01:33,880 --> 00:01:37,640 Speaker 1: The decisions being made right now of my bond losses, 26 00:01:37,840 --> 00:01:41,119 Speaker 1: I have to mark to market versus I can hide 27 00:01:41,160 --> 00:01:42,199 Speaker 1: them somewhere else. 28 00:01:42,520 --> 00:01:46,080 Speaker 2: Go right, So we've been talking about the losses in 29 00:01:46,120 --> 00:01:48,400 Speaker 2: the bond market. I think it is important to put 30 00:01:48,400 --> 00:01:53,160 Speaker 2: into context though the majority of the pain was last year, right, 31 00:01:53,200 --> 00:01:55,680 Speaker 2: the US AD was down thirteen percent last year, down 32 00:01:55,720 --> 00:02:00,800 Speaker 2: two percent this year, But more recently we have seen 33 00:02:00,840 --> 00:02:04,000 Speaker 2: this backup in yields and this pain that's coming now. 34 00:02:04,080 --> 00:02:06,440 Speaker 3: I think the reason why the. 35 00:02:06,400 --> 00:02:08,440 Speaker 2: Stress in the banks has been a little bit less 36 00:02:08,800 --> 00:02:12,400 Speaker 2: acute this time around than in March is because of 37 00:02:12,440 --> 00:02:16,760 Speaker 2: the BTFP program. So the Bank Term Funding Program close 38 00:02:17,120 --> 00:02:20,920 Speaker 2: not exactly though, so BTFP. The Fed put that in 39 00:02:20,960 --> 00:02:23,280 Speaker 2: place in March, and I think if there's one thing 40 00:02:23,320 --> 00:02:26,800 Speaker 2: that really was crucial to turning the markets around at 41 00:02:26,840 --> 00:02:30,440 Speaker 2: a point where we were very stressed, We were very uncertain. 42 00:02:30,440 --> 00:02:32,200 Speaker 3: About how things would go in the future. 43 00:02:32,520 --> 00:02:36,919 Speaker 2: That BTFP program was important because banks can now pledge 44 00:02:36,960 --> 00:02:40,560 Speaker 2: those treasury securities and even though they have a price 45 00:02:40,639 --> 00:02:43,960 Speaker 2: in the marketplace of seventy or eighty dollars, they can 46 00:02:44,000 --> 00:02:47,600 Speaker 2: be pledged at par So there's been this stabilization factor 47 00:02:48,320 --> 00:02:51,160 Speaker 2: that was not there back during the March crisis. 48 00:02:51,240 --> 00:02:54,520 Speaker 4: So we're saying, is these unrealized losses get greater, they 49 00:02:54,560 --> 00:02:55,200 Speaker 4: matter less. 50 00:02:56,280 --> 00:02:58,520 Speaker 3: They are mattering less right now. 51 00:02:59,480 --> 00:03:01,560 Speaker 2: I think there is still stress though. 52 00:03:01,919 --> 00:03:03,560 Speaker 3: This is not the end of the story. 53 00:03:03,680 --> 00:03:06,720 Speaker 2: Right even though this facility is in place, people are 54 00:03:06,800 --> 00:03:09,200 Speaker 2: using it, there's one hundred and eight billion in the facility, 55 00:03:09,560 --> 00:03:12,560 Speaker 2: there still is going to be pressure on margins. You know, 56 00:03:12,639 --> 00:03:15,760 Speaker 2: it's not only about the mark to market losses, but 57 00:03:15,840 --> 00:03:20,240 Speaker 2: it's about the fact that net interest margins are under pressure. 58 00:03:20,600 --> 00:03:24,720 Speaker 2: So you know, as an investor in financials, you do 59 00:03:24,840 --> 00:03:30,040 Speaker 2: need to be very cautious about where you're investing, understanding 60 00:03:30,080 --> 00:03:32,480 Speaker 2: the portfolios and the balance sheets of the banks that 61 00:03:33,360 --> 00:03:37,600 Speaker 2: you are investing in, and being aware of the game changer. 62 00:03:37,720 --> 00:03:39,960 Speaker 3: That was the way the FED reacted back in March. 63 00:03:40,080 --> 00:03:43,240 Speaker 4: The bank's ability to finance, the economy curtailed by the 64 00:03:43,320 --> 00:03:45,400 Speaker 4: dynamics we're talking about. Are they constrained? 65 00:03:45,560 --> 00:03:45,760 Speaker 3: Yeah. 66 00:03:45,760 --> 00:03:47,960 Speaker 2: So if you look at the H eight data, and 67 00:03:48,000 --> 00:03:50,360 Speaker 2: I love to look at this every single week on Fridays, 68 00:03:50,400 --> 00:03:52,280 Speaker 2: I'm looking at Lisa because I know she looks at 69 00:03:52,320 --> 00:03:55,640 Speaker 2: it too, what you're going to see is that credit 70 00:03:55,760 --> 00:03:58,600 Speaker 2: has been contracting in the economy. If you look at 71 00:03:58,600 --> 00:04:01,560 Speaker 2: CNI lending over the last three and six months, it's negative. 72 00:04:02,120 --> 00:04:04,960 Speaker 2: If you look at the Senior Loan Officer Survey, it's 73 00:04:05,000 --> 00:04:08,880 Speaker 2: showing that there is tightness in credit conditions. And like 74 00:04:08,920 --> 00:04:11,880 Speaker 2: you mentioned, Lisa, this is exactly what the FED wanted, right, 75 00:04:12,360 --> 00:04:17,520 Speaker 2: They want to engineer tighter financial conditions. So I disagree 76 00:04:17,560 --> 00:04:20,720 Speaker 2: with the quote from Goulesby that he doesn't know where 77 00:04:20,720 --> 00:04:22,800 Speaker 2: this is coming from. I really do think that the 78 00:04:22,960 --> 00:04:27,840 Speaker 2: stems from the September FOMC meeting and the dot plot. Sure, 79 00:04:27,960 --> 00:04:31,400 Speaker 2: they shill still showed cuts next year, but what they 80 00:04:31,520 --> 00:04:34,680 Speaker 2: showed is a real policy rate that actually goes up 81 00:04:34,920 --> 00:04:37,960 Speaker 2: by fifty basis points next year. That is a very 82 00:04:38,440 --> 00:04:41,640 Speaker 2: HAWKUS message and the market is still trying to digest 83 00:04:41,720 --> 00:04:42,359 Speaker 2: that right now. 84 00:04:42,520 --> 00:04:45,359 Speaker 5: So if we're talking game theory, this is basically the idea. 85 00:04:45,400 --> 00:04:48,120 Speaker 5: From your perspective, it sounds like that the FED is 86 00:04:48,160 --> 00:04:51,960 Speaker 5: trying to signal hawkishness they can engineer the landing so 87 00:04:52,000 --> 00:04:55,000 Speaker 5: that then they can reverse course and cut rates. How 88 00:04:55,000 --> 00:04:58,000 Speaker 5: do you respond then to people, including what we heard 89 00:04:58,000 --> 00:05:01,120 Speaker 5: from Delip saying over at PGYM, there is a structural 90 00:05:01,240 --> 00:05:03,360 Speaker 5: change in the bond market where some of the long 91 00:05:03,400 --> 00:05:06,360 Speaker 5: standing price and sensitive buyers are no longer there. 92 00:05:07,400 --> 00:05:09,840 Speaker 2: So there has been a big repricing. And I think 93 00:05:09,839 --> 00:05:12,000 Speaker 2: this is why you need to look at this not 94 00:05:12,040 --> 00:05:15,360 Speaker 2: just from an emotional perspective, not just from you know, 95 00:05:15,400 --> 00:05:18,920 Speaker 2: the ping pong narrative, but also from a logical perspective. 96 00:05:19,200 --> 00:05:22,680 Speaker 2: You know, what do valuations look right like right now? 97 00:05:22,720 --> 00:05:25,920 Speaker 2: And what are the guardrails to those valuations. Look at 98 00:05:25,960 --> 00:05:28,600 Speaker 2: the five year five year real yield right now, it's 99 00:05:28,680 --> 00:05:32,880 Speaker 2: around two point three percent. That is the same or 100 00:05:32,920 --> 00:05:35,720 Speaker 2: the average rate that the five year five year real 101 00:05:35,760 --> 00:05:38,320 Speaker 2: yield was from two thousand and three to two thousand 102 00:05:38,360 --> 00:05:41,960 Speaker 2: and seven. So we've already repriced not just to the 103 00:05:42,000 --> 00:05:44,960 Speaker 2: pre COVID levels, but to the pre GFC levels. 104 00:05:45,000 --> 00:05:47,080 Speaker 3: So regime shift has really already happened. 105 00:05:47,279 --> 00:05:50,440 Speaker 2: In our view, it's actually an overshoot it, but it's 106 00:05:50,480 --> 00:05:51,239 Speaker 2: already happened. 107 00:05:51,320 --> 00:05:53,479 Speaker 5: Although I will just push back and I know that 108 00:05:53,520 --> 00:05:56,040 Speaker 5: you've been bullish on treasuries and talking about going back 109 00:05:56,080 --> 00:05:59,760 Speaker 5: down to three percent. Have you reconsidered that call at all, 110 00:06:00,120 --> 00:06:02,560 Speaker 5: especially in light of some of these structural changes. Yes, 111 00:06:02,600 --> 00:06:05,280 Speaker 5: we can talk about inflation, but towards the slock of 112 00:06:05,279 --> 00:06:08,800 Speaker 5: apologies putting out treasury auction sizes will increase on average 113 00:06:08,839 --> 00:06:12,159 Speaker 5: twenty three percent in twenty twenty four. We have evidence 114 00:06:12,320 --> 00:06:13,880 Speaker 5: that a lot of the central banks around the world 115 00:06:13,960 --> 00:06:17,400 Speaker 5: traditional buyers are no longer buying. Doesn't this change your 116 00:06:17,440 --> 00:06:18,680 Speaker 5: outlook more materially? 117 00:06:19,000 --> 00:06:23,040 Speaker 2: So the technicals do matter, particularly in the shorter term horizons, 118 00:06:23,240 --> 00:06:26,760 Speaker 2: but we do think ultimately the fundamentals and the valuations 119 00:06:27,040 --> 00:06:31,559 Speaker 2: are going to weigh over those technicals. 120 00:06:30,960 --> 00:06:33,000 Speaker 3: Over the medium term. Inflation. 121 00:06:33,240 --> 00:06:35,840 Speaker 2: Right now, the three month runrate on core PC is 122 00:06:35,920 --> 00:06:37,320 Speaker 2: two point one six percent. 123 00:06:37,680 --> 00:06:39,360 Speaker 3: I mean, we're at the FEDS target. 124 00:06:39,560 --> 00:06:42,360 Speaker 2: We're not in the nineteen seventies in the nineteen eighties 125 00:06:42,360 --> 00:06:45,320 Speaker 2: here in terms of the economic growth environment or the 126 00:06:45,360 --> 00:06:48,919 Speaker 2: inflation environment. I think that there has been a buyer 127 00:06:49,040 --> 00:06:50,520 Speaker 2: strike cut. 128 00:06:50,360 --> 00:06:52,680 Speaker 1: To the chase they're fighting. The last war is that 129 00:06:52,720 --> 00:06:56,120 Speaker 1: what you're saying. You're having coffee with Mike Feroli over 130 00:06:56,120 --> 00:06:59,440 Speaker 1: at JP Morgan. Can you guys agree Goolesby and the 131 00:06:59,440 --> 00:07:01,120 Speaker 1: rest of them are fighting the last war. 132 00:07:01,600 --> 00:07:05,160 Speaker 2: Yeah, they're fighting inflation that I think is already clearly 133 00:07:05,200 --> 00:07:09,400 Speaker 2: coming down. And I understand why they're going to wait 134 00:07:09,880 --> 00:07:13,960 Speaker 2: until it's painfully obvious. But in my mind that only 135 00:07:14,120 --> 00:07:18,320 Speaker 2: just reinforces the risk that hard landing should be much 136 00:07:18,360 --> 00:07:20,960 Speaker 2: more of a higher probability than soft landing, because the 137 00:07:21,000 --> 00:07:24,400 Speaker 2: FED is telling you, they're telling you we're not going 138 00:07:24,440 --> 00:07:28,240 Speaker 2: to stop until it's painfully obvious that the economy can't 139 00:07:28,240 --> 00:07:30,160 Speaker 2: handle it, and the housing market. You look at the 140 00:07:30,200 --> 00:07:33,080 Speaker 2: mortgage application data from yesterday, it clearly. 141 00:07:32,760 --> 00:07:33,480 Speaker 3: Can't handle it. 142 00:07:34,360 --> 00:07:36,240 Speaker 2: We think that the economy is not going to be 143 00:07:36,240 --> 00:07:37,960 Speaker 2: able to handle these rates, but the FED is going 144 00:07:38,000 --> 00:07:39,000 Speaker 2: to be the last to admit that. 145 00:07:39,480 --> 00:07:46,800 Speaker 4: Cassie Power that f Jpmokan Asset Managements Sarah Hunt joined 146 00:07:46,800 --> 00:07:48,480 Speaker 4: just now. Chief Market is trying to just to Aupine 147 00:07:48,480 --> 00:07:50,840 Speaker 4: sexon Woods. Sarah, good morning, good I always got to 148 00:07:50,920 --> 00:07:52,160 Speaker 4: energy with you at the end of the interview. We 149 00:07:52,200 --> 00:07:54,760 Speaker 4: should go there at the stop. Crude was dreadful yesterday 150 00:07:54,880 --> 00:07:57,840 Speaker 4: down almost six percent. I know that things at Cushing 151 00:07:57,880 --> 00:08:00,520 Speaker 4: looking a little bit better on the stock past side 152 00:08:00,560 --> 00:08:03,280 Speaker 4: of things. Gasoline demand really softest well, based on a 153 00:08:03,320 --> 00:08:04,960 Speaker 4: recent read. What do you make of the recent moves? 154 00:08:05,400 --> 00:08:07,240 Speaker 6: Well, I think I mean we talked about this last time. 155 00:08:07,280 --> 00:08:10,720 Speaker 6: If crude prices rise really quickly, then gasoline prices come 156 00:08:10,800 --> 00:08:12,520 Speaker 6: up commensurately, and then all of a sudden you do 157 00:08:12,560 --> 00:08:14,280 Speaker 6: have a backing down and demand. And I think part 158 00:08:14,280 --> 00:08:16,520 Speaker 6: of it was the demand numbers on gasoline. I think 159 00:08:16,560 --> 00:08:18,480 Speaker 6: part of it is also sort of the parallel to 160 00:08:18,520 --> 00:08:21,040 Speaker 6: the bond market, which is, all of a sudden, the 161 00:08:21,080 --> 00:08:22,960 Speaker 6: market's going well, if we do have a recession or 162 00:08:23,000 --> 00:08:25,200 Speaker 6: if the world is slowing down, then crude prices may 163 00:08:25,240 --> 00:08:27,000 Speaker 6: be too high. And part of the reason they're highest 164 00:08:27,040 --> 00:08:29,040 Speaker 6: because the statutis have taken some off the market. It's 165 00:08:29,040 --> 00:08:32,280 Speaker 6: not just a problem of higher demand and not enough supply. 166 00:08:32,520 --> 00:08:34,400 Speaker 6: But I think the supply side is going to stay 167 00:08:34,440 --> 00:08:37,080 Speaker 6: somewhat restricted, and I think that's really going to ultimately 168 00:08:37,120 --> 00:08:39,240 Speaker 6: be the longer term story. But you are going to 169 00:08:39,280 --> 00:08:41,560 Speaker 6: have these convulsive moves, and the stacks haven't caught up, 170 00:08:41,800 --> 00:08:43,559 Speaker 6: not all of them anyway. To the higher prices and 171 00:08:43,640 --> 00:08:46,160 Speaker 6: crude anyway, So I think that there is still some 172 00:08:46,320 --> 00:08:48,120 Speaker 6: room in there, but it is going to be a 173 00:08:48,200 --> 00:08:49,079 Speaker 6: volatile trade. 174 00:08:49,440 --> 00:08:52,760 Speaker 1: I'm calling this never ever Thursday because I'm looking at 175 00:08:52,840 --> 00:08:56,559 Speaker 1: bond charts that I've never ever thought about or imagined 176 00:08:56,679 --> 00:09:01,040 Speaker 1: or visualized mathematically. Folks, this is truly without ache. This 177 00:09:01,080 --> 00:09:06,280 Speaker 1: is truly original territory. How do equity participants react never 178 00:09:06,480 --> 00:09:08,120 Speaker 1: ever thing's in the bond market. 179 00:09:08,720 --> 00:09:11,440 Speaker 6: Well, I think it's problematic for the equity markets that 180 00:09:11,440 --> 00:09:13,920 Speaker 6: you're having such convulsive moves in the bond markets. And 181 00:09:13,960 --> 00:09:16,520 Speaker 6: I think that part of the issue with equities has 182 00:09:16,559 --> 00:09:18,719 Speaker 6: always been if rates do stay higher, what are we 183 00:09:18,800 --> 00:09:21,559 Speaker 6: discounting those cash flows at I don't disagree that technology 184 00:09:21,600 --> 00:09:23,240 Speaker 6: is one of the places that will actually do well 185 00:09:23,559 --> 00:09:25,520 Speaker 6: even in a higher rate environment, because you've got that 186 00:09:25,559 --> 00:09:27,520 Speaker 6: stability of earnings and they've also got a lot of 187 00:09:27,520 --> 00:09:29,640 Speaker 6: cash on their balance sheets. But I think that the 188 00:09:29,720 --> 00:09:31,600 Speaker 6: question of what everybody else is going to do and 189 00:09:31,640 --> 00:09:35,040 Speaker 6: how that's going to impact people's balance sheets. Corporations in Europe. 190 00:09:35,040 --> 00:09:36,719 Speaker 6: I read a story this morning on Bloomberg that said 191 00:09:36,720 --> 00:09:39,880 Speaker 6: the corporations in Europe are finally back breaking down and 192 00:09:40,080 --> 00:09:42,120 Speaker 6: issuing bonds at higher rates than they would have a 193 00:09:42,160 --> 00:09:44,720 Speaker 6: year ago. So are people starting to accept that? And 194 00:09:44,720 --> 00:09:47,280 Speaker 6: if so, that's going to take some of the money 195 00:09:47,280 --> 00:09:48,839 Speaker 6: out of the income statement because they're going to be 196 00:09:48,880 --> 00:09:50,679 Speaker 6: paying higher price. So I think that some of that 197 00:09:50,760 --> 00:09:52,760 Speaker 6: is going to impact the earnings for next year. And 198 00:09:52,800 --> 00:09:55,280 Speaker 6: that's still what I don't think is really reflected through 199 00:09:55,280 --> 00:09:55,680 Speaker 6: next year. 200 00:09:55,800 --> 00:09:58,840 Speaker 1: The heart and soul of this is Q four into 201 00:09:58,920 --> 00:10:02,600 Speaker 1: next year. Do you go with a diversified virtual index 202 00:10:02,679 --> 00:10:06,840 Speaker 1: fund tight our squared approach or are you active and 203 00:10:07,120 --> 00:10:10,960 Speaker 1: take a less diversification approach, which is I got my 204 00:10:10,960 --> 00:10:12,560 Speaker 1: own opinion, But which do you think? 205 00:10:12,760 --> 00:10:15,600 Speaker 6: I think active? I mean that's also active, more narrow, 206 00:10:15,760 --> 00:10:18,120 Speaker 6: more narrow, and also looking at where you think there 207 00:10:18,200 --> 00:10:21,000 Speaker 6: might be some vulnerability, which indexes can't really do right 208 00:10:21,040 --> 00:10:23,320 Speaker 6: because they are going to rebalance the way they rebalance, 209 00:10:23,360 --> 00:10:25,200 Speaker 6: and I think that there are some places that are 210 00:10:25,200 --> 00:10:26,439 Speaker 6: going to continue to be vulnerable. 211 00:10:26,520 --> 00:10:28,800 Speaker 5: Do you think the Pond sell off has been coherent 212 00:10:28,840 --> 00:10:30,600 Speaker 5: with the other moves that we've seen in the markets. 213 00:10:32,160 --> 00:10:34,199 Speaker 6: You know, it's so hard on these very short term 214 00:10:34,200 --> 00:10:36,200 Speaker 6: moves to figure out is this a technical problem? Is 215 00:10:36,200 --> 00:10:38,120 Speaker 6: this a quant problem? Is where is this coming from? 216 00:10:38,240 --> 00:10:39,679 Speaker 6: Or where are these moves coming from and I think 217 00:10:39,679 --> 00:10:42,400 Speaker 6: it's very difficult to parse that out and say how 218 00:10:42,440 --> 00:10:44,360 Speaker 6: it interacts. But I do think that there are large 219 00:10:44,400 --> 00:10:47,320 Speaker 6: positioning changes, and when those happen, it's not always easy 220 00:10:47,320 --> 00:10:49,240 Speaker 6: to see. I mean, there's questions about whether or not 221 00:10:49,320 --> 00:10:51,600 Speaker 6: the boj was intervening right because the yen went through, 222 00:10:51,760 --> 00:10:53,680 Speaker 6: and was what did that happen? Or was that just 223 00:10:53,720 --> 00:10:56,160 Speaker 6: a technical level that everybody said, oh, one fifty, we're getting. 224 00:10:55,960 --> 00:10:57,959 Speaker 1: So close, we have to do something. So I'm not. 225 00:10:57,920 --> 00:11:00,560 Speaker 6: Really sure on those very short term moves go together, 226 00:11:00,760 --> 00:11:02,960 Speaker 6: but longer term they will start to make more sense. 227 00:11:03,000 --> 00:11:05,319 Speaker 6: Although you know, you've had correlations that are very different 228 00:11:05,320 --> 00:11:07,280 Speaker 6: over the last couple of years than normal, so make 229 00:11:07,320 --> 00:11:08,560 Speaker 6: more sense as a relative term. 230 00:11:08,600 --> 00:11:11,320 Speaker 5: The reason why I ask that is because if yields 231 00:11:11,320 --> 00:11:13,480 Speaker 5: stay at levels that we're seeing right now, if there 232 00:11:13,520 --> 00:11:16,240 Speaker 5: is something fundamental behind this or even structural when it 233 00:11:16,280 --> 00:11:20,360 Speaker 5: comes to price sensitive buyers newly priced sensitive buyers, how 234 00:11:20,400 --> 00:11:22,720 Speaker 5: much does that change the equation for you in the 235 00:11:23,040 --> 00:11:25,400 Speaker 5: equity sphere, I mean, aside from oil, aside from some 236 00:11:25,440 --> 00:11:29,280 Speaker 5: of these specific bets, is there a rethink about the 237 00:11:29,520 --> 00:11:33,439 Speaker 5: value proposition with some of the overweights you've had to equities. 238 00:11:33,760 --> 00:11:35,320 Speaker 6: Well, I think that you've been seeing that for the 239 00:11:35,360 --> 00:11:37,240 Speaker 6: last two years, right since or the last year and 240 00:11:37,280 --> 00:11:39,320 Speaker 6: a half, since the FED started raising rates. The question 241 00:11:39,360 --> 00:11:41,720 Speaker 6: has been with their bonds. Right, where am I going 242 00:11:41,760 --> 00:11:43,960 Speaker 6: with that? Because I'm now putting them back in a portfolio. 243 00:11:44,120 --> 00:11:46,760 Speaker 6: When you talk about the big price erosion from the 244 00:11:46,840 --> 00:11:49,600 Speaker 6: lows when the tenure was sitting at basically twenty basis 245 00:11:49,600 --> 00:11:52,199 Speaker 6: points the fact that we're now up at levels that. 246 00:11:52,160 --> 00:11:52,839 Speaker 1: Are over four. 247 00:11:53,400 --> 00:11:55,400 Speaker 6: I think people have been looking at that the whole time, 248 00:11:55,440 --> 00:11:57,080 Speaker 6: But the problem is that as they've been adding the 249 00:11:57,080 --> 00:11:59,160 Speaker 6: whole time, the prices have been coming down. So there's 250 00:11:59,200 --> 00:12:02,400 Speaker 6: a little bit of scorched earth on the bond side too, 251 00:12:02,440 --> 00:12:04,880 Speaker 6: because people have lost money in bonds and in ways 252 00:12:04,880 --> 00:12:06,839 Speaker 6: that they hadn't in the last couple in the last 253 00:12:06,920 --> 00:12:10,120 Speaker 6: several decades. So I think that there is absolutely room 254 00:12:10,160 --> 00:12:13,200 Speaker 6: for fixed income in people's portfolios. They are putting it back, 255 00:12:13,440 --> 00:12:16,720 Speaker 6: but that was traditionally where you had some participation anyway, 256 00:12:17,000 --> 00:12:19,280 Speaker 6: and I think that higher rates make that something that 257 00:12:19,320 --> 00:12:22,720 Speaker 6: people look at more seriously, especially as duration starts to 258 00:12:22,720 --> 00:12:24,520 Speaker 6: look a little higher priced than it was because you. 259 00:12:24,520 --> 00:12:27,400 Speaker 1: Were sitting high. 260 00:12:26,840 --> 00:12:28,480 Speaker 6: Rates on the low end, but on the short end, 261 00:12:28,520 --> 00:12:29,960 Speaker 6: but not on the long end, and that's starting to 262 00:12:30,000 --> 00:12:32,400 Speaker 6: change a little bit, not necessarily for the best for everyone. 263 00:12:32,600 --> 00:12:35,360 Speaker 4: Just pulled up a quick shart average FED funds going 264 00:12:35,520 --> 00:12:38,680 Speaker 4: back to the seventies averages four ninety three. I know 265 00:12:38,720 --> 00:12:41,719 Speaker 4: that's skewed by decade of zero, but the average is 266 00:12:41,760 --> 00:12:44,560 Speaker 4: four ninety three. Is anything on a long bond close 267 00:12:44,600 --> 00:12:46,880 Speaker 4: to five percent just to screaming buy based on history? 268 00:12:46,920 --> 00:12:48,400 Speaker 4: Or can you tell me that things are going to 269 00:12:48,400 --> 00:12:51,000 Speaker 4: be markedly different over the next couple of decades. 270 00:12:51,400 --> 00:12:53,800 Speaker 6: Well, I think if governments hadn't indebted themselves to the 271 00:12:53,840 --> 00:12:55,840 Speaker 6: extent that they have, then you could look at some 272 00:12:55,920 --> 00:12:57,880 Speaker 6: of those numbers and say we should have higher rates 273 00:12:57,920 --> 00:12:59,840 Speaker 6: on the long end, because that was also more historic. 274 00:13:00,080 --> 00:13:02,840 Speaker 6: But if I think about what that's going to cost governments, 275 00:13:03,120 --> 00:13:04,880 Speaker 6: I have to wonder whether or not they can keep 276 00:13:05,120 --> 00:13:08,000 Speaker 6: we can keep collectively keep rates that high. And I'm 277 00:13:08,040 --> 00:13:11,040 Speaker 6: not sure that we can control the long end as much. 278 00:13:11,080 --> 00:13:12,840 Speaker 6: But I do think that going back to what we 279 00:13:12,960 --> 00:13:14,840 Speaker 6: used to think of as more normalized, it's a little 280 00:13:14,840 --> 00:13:17,680 Speaker 6: bit difficult given the fact that we've got this massive 281 00:13:17,679 --> 00:13:20,000 Speaker 6: amount of government balance sheet that we didn't have twenty 282 00:13:20,080 --> 00:13:20,400 Speaker 6: years sgo. 283 00:13:20,600 --> 00:13:22,559 Speaker 4: This is a big question. It's difficult to answer, but 284 00:13:22,640 --> 00:13:25,320 Speaker 4: what is normal the last ten years, the ten years 285 00:13:25,320 --> 00:13:27,240 Speaker 4: before that? When we say things like normal, what is 286 00:13:27,280 --> 00:13:28,440 Speaker 4: normal that's going to be? 287 00:13:28,480 --> 00:13:30,400 Speaker 6: I think one of the biggest issues playing out going 288 00:13:30,440 --> 00:13:33,920 Speaker 6: forward is the more normal what happened after the Great 289 00:13:33,920 --> 00:13:36,000 Speaker 6: Financial Crisis and now that we've gotten this level of 290 00:13:36,080 --> 00:13:38,160 Speaker 6: balance sheets for governments, do we just stay here and 291 00:13:38,280 --> 00:13:40,120 Speaker 6: every time we have a problem we just keep adding 292 00:13:40,120 --> 00:13:42,600 Speaker 6: to them. And does that break something eventually or do 293 00:13:42,640 --> 00:13:44,520 Speaker 6: we go back to something that was before that? And 294 00:13:44,559 --> 00:13:46,080 Speaker 6: I don't know what the answer is, And I think 295 00:13:46,120 --> 00:13:47,720 Speaker 6: that that tension is part of what's going to be 296 00:13:47,720 --> 00:13:49,880 Speaker 6: playing out going forward in both the bond and the 297 00:13:49,880 --> 00:13:52,000 Speaker 6: equity markets, because it definitely had an effect on the 298 00:13:52,000 --> 00:13:54,000 Speaker 6: equity markets as well. You can't say that it didn't 299 00:13:54,040 --> 00:13:55,080 Speaker 6: with multiples where they are right now. 300 00:13:55,080 --> 00:13:56,600 Speaker 4: You can feel that tension at the moment because you 301 00:13:56,600 --> 00:13:58,400 Speaker 4: get these yields that people have been wanting for a 302 00:13:58,440 --> 00:14:00,520 Speaker 4: long long time lease and there is just that refusal 303 00:14:00,559 --> 00:14:03,160 Speaker 4: to jump in. Sara Hunt, chief Market Strategies to Alpine 304 00:14:03,200 --> 00:14:04,000 Speaker 4: sexon book. 305 00:14:13,440 --> 00:14:16,760 Speaker 1: Joining us hugely qualified. Peter Scheer had a macro Strategy 306 00:14:17,120 --> 00:14:21,560 Speaker 1: Academy Securities. He's enjoyed these kind of moves before Bank 307 00:14:21,600 --> 00:14:25,120 Speaker 1: of America before they blew it up. Bob Sinch in 308 00:14:25,200 --> 00:14:29,080 Speaker 1: Foreign Exchange really experienced. And a guy Ryan heard, a 309 00:14:29,080 --> 00:14:32,200 Speaker 1: guy named David Goldman who was in my book. David 310 00:14:32,240 --> 00:14:35,160 Speaker 1: Goldman told me, once look at the tranches, and you 311 00:14:35,280 --> 00:14:38,280 Speaker 1: nail this in your note, and everybody's looking at worry 312 00:14:38,360 --> 00:14:42,040 Speaker 1: read distress South African ran blah blah blah, and the 313 00:14:42,160 --> 00:14:47,280 Speaker 1: David Goldman tranch is the quality stuff up here? You 314 00:14:47,440 --> 00:14:52,480 Speaker 1: write about previously deemed safe assets. How close are we 315 00:14:52,840 --> 00:14:57,960 Speaker 1: are we to those better tranches of credit being previously 316 00:14:58,080 --> 00:14:59,560 Speaker 1: deemed safe assets? 317 00:14:59,720 --> 00:15:01,680 Speaker 7: Yes? And you know, I've always looked at this world 318 00:15:01,720 --> 00:15:03,880 Speaker 7: of you know, you've got high yield than IG and 319 00:15:03,920 --> 00:15:06,880 Speaker 7: treasure has always been that safe asset, super safe, And 320 00:15:06,920 --> 00:15:08,920 Speaker 7: it feels like something's cracking. I think this time we're 321 00:15:08,920 --> 00:15:10,120 Speaker 7: going to be okay. I think we're going to get 322 00:15:10,120 --> 00:15:12,120 Speaker 7: the ten year back below four forty because we're going 323 00:15:12,200 --> 00:15:15,600 Speaker 7: to see kind of a really quick gap lower in 324 00:15:15,680 --> 00:15:17,800 Speaker 7: yields as data comes up weak. But I do think 325 00:15:17,840 --> 00:15:20,160 Speaker 7: something is cracked. And for the first time in my lifetime, 326 00:15:20,160 --> 00:15:22,880 Speaker 7: people are actually questioning the trajectory of where treasuries are 327 00:15:22,880 --> 00:15:24,840 Speaker 7: going to be. And that is very concerning to me 328 00:15:24,960 --> 00:15:28,120 Speaker 7: because every financial bubble that we've ever had has always 329 00:15:28,120 --> 00:15:30,280 Speaker 7: come when it's a safe asset that breaks. It's never 330 00:15:30,320 --> 00:15:33,400 Speaker 7: the risky assets. It's when a safe asset breaks. And 331 00:15:33,440 --> 00:15:35,320 Speaker 7: we had a whiff of that in the past kind 332 00:15:35,320 --> 00:15:35,960 Speaker 7: of week or two. 333 00:15:36,160 --> 00:15:38,200 Speaker 4: It was a test yesterday, though, and I think the 334 00:15:38,280 --> 00:15:41,240 Speaker 4: test is always for developed markets, when bad things happen 335 00:15:41,280 --> 00:15:44,680 Speaker 4: to we buy treasuries. Something negative happened, We've got a 336 00:15:44,720 --> 00:15:48,000 Speaker 4: soft ADP report for whatever that's worth. We bought treasuries. 337 00:15:48,280 --> 00:15:50,280 Speaker 4: Isn't that a decent stress test just to understand that 338 00:15:50,320 --> 00:15:52,920 Speaker 4: if things do go south in the economy, this still works. 339 00:15:53,000 --> 00:15:53,120 Speaker 1: You know. 340 00:15:53,160 --> 00:15:54,600 Speaker 7: I think there's a lot of ebbs and flows. So 341 00:15:54,640 --> 00:15:57,360 Speaker 7: everyone got so barish on treasuries. People were piling into it. 342 00:15:57,440 --> 00:15:59,240 Speaker 7: People have tried to buy treasures. I've liked them since 343 00:15:59,240 --> 00:16:02,240 Speaker 7: four to twenty five, four forty so people were very reluctant. 344 00:16:02,600 --> 00:16:04,880 Speaker 7: So we finally had a bit of that capitulation trade. 345 00:16:05,000 --> 00:16:06,920 Speaker 7: Right now. I think as weak data comes out, we're 346 00:16:06,920 --> 00:16:09,000 Speaker 7: going to see treasure yields go lower, and then we're 347 00:16:09,000 --> 00:16:10,720 Speaker 7: going to get back to thinking, Okay, what is really 348 00:16:10,760 --> 00:16:12,880 Speaker 7: the long term trade? And I think that's probably now 349 00:16:12,960 --> 00:16:13,640 Speaker 7: higher yields. 350 00:16:13,880 --> 00:16:16,400 Speaker 4: You think there's a limit to how much bonds can rally, 351 00:16:16,480 --> 00:16:18,280 Speaker 4: yields can fall on negative data? 352 00:16:18,680 --> 00:16:21,560 Speaker 7: I think right now, Yes, I think this overlying fear 353 00:16:21,640 --> 00:16:25,960 Speaker 7: that DC no longer cares about our debt trajectory is problematic. 354 00:16:26,040 --> 00:16:28,800 Speaker 7: I think if you look at the US as a creditor, 355 00:16:29,040 --> 00:16:30,600 Speaker 7: we don't seem to care about the debt. We don't 356 00:16:30,600 --> 00:16:32,800 Speaker 7: seem to even necessarily want to pay the debt. There's 357 00:16:32,880 --> 00:16:35,360 Speaker 7: all these kind of weird messages coming out of DC, 358 00:16:35,480 --> 00:16:36,920 Speaker 7: and I think that's going to weigh on the market. 359 00:16:37,080 --> 00:16:39,920 Speaker 5: When you said that the longer term trade is higher yields, 360 00:16:40,360 --> 00:16:41,520 Speaker 5: how much higher? 361 00:16:41,600 --> 00:16:41,760 Speaker 8: Right? 362 00:16:41,800 --> 00:16:44,400 Speaker 5: And what are we talking about at a time when 363 00:16:44,400 --> 00:16:46,320 Speaker 5: you say that something has cracked, that the sell off 364 00:16:46,320 --> 00:16:48,840 Speaker 5: that we've seen so far has something sort of damaging 365 00:16:48,880 --> 00:16:49,480 Speaker 5: inherent in it. 366 00:16:49,960 --> 00:16:51,520 Speaker 7: So I think you're right. When we were talking about 367 00:16:51,520 --> 00:16:53,200 Speaker 7: no one could figure out why we kept moving wider 368 00:16:53,240 --> 00:16:55,160 Speaker 7: every day, right, Yields kept going higher and higher. So 369 00:16:55,200 --> 00:16:56,720 Speaker 7: there is I think a lot of things at motion. 370 00:16:56,800 --> 00:16:59,080 Speaker 7: You have China no longer buying treasuries. I think you've 371 00:16:59,080 --> 00:17:01,240 Speaker 7: got our supply issue. The only thing I think that 372 00:17:01,240 --> 00:17:04,280 Speaker 7: it's really going to prevent treasuries from next year breaking 373 00:17:04,280 --> 00:17:06,960 Speaker 7: about five percent or higher is DC kind of getting 374 00:17:07,000 --> 00:17:09,440 Speaker 7: its act together, starting to put forward budgets, starting to 375 00:17:09,440 --> 00:17:14,080 Speaker 7: put forward something that resembles, you know, fiscal responsibility. If 376 00:17:14,119 --> 00:17:16,359 Speaker 7: we don't get that, I think people are losing faith 377 00:17:16,359 --> 00:17:18,199 Speaker 7: in that, and that's really problematic. 378 00:17:18,400 --> 00:17:20,119 Speaker 5: But when you say that basically we're going to get 379 00:17:20,119 --> 00:17:22,560 Speaker 5: a drift lower and then when people start to understand 380 00:17:22,560 --> 00:17:25,440 Speaker 5: that they're going to go higher again, isn't there sort 381 00:17:25,480 --> 00:17:27,720 Speaker 5: of a self limiting feature to this? You said, you know, 382 00:17:27,840 --> 00:17:30,960 Speaker 5: something cracked in terms of where we were going, the 383 00:17:31,000 --> 00:17:33,240 Speaker 5: speed we were moving. Aren't we going to get some 384 00:17:33,280 --> 00:17:36,240 Speaker 5: sort of bigger financial accident like everyone's been saying, if 385 00:17:36,240 --> 00:17:38,320 Speaker 5: we lead to you know, yields of five percent on 386 00:17:38,359 --> 00:17:40,200 Speaker 5: the tenure on a persistent basis. 387 00:17:40,080 --> 00:17:42,199 Speaker 7: I don't think we get a financial accident necessarily. It 388 00:17:42,240 --> 00:17:43,960 Speaker 7: depends on how rapid it is. So one I think 389 00:17:43,960 --> 00:17:45,639 Speaker 7: we get back to that four forty. I don't think 390 00:17:45,640 --> 00:17:47,560 Speaker 7: we get back to four percent because, like you say, 391 00:17:47,560 --> 00:17:50,160 Speaker 7: we've had this experience. I think it's a six month 392 00:17:50,160 --> 00:17:52,359 Speaker 7: to a year long experiment where we start seeing what 393 00:17:52,359 --> 00:17:54,639 Speaker 7: happens with the election, what the trajectory of the debt is. 394 00:17:54,640 --> 00:17:56,560 Speaker 7: If people lose faith in that, then I think you 395 00:17:56,600 --> 00:17:59,199 Speaker 7: go rapidly above five point fifty. You start testing that, 396 00:17:59,560 --> 00:18:01,120 Speaker 7: and that's where you get the force selling. The reason 397 00:18:01,200 --> 00:18:04,359 Speaker 7: I'm always concerned about safe assets is twofold one people 398 00:18:04,400 --> 00:18:06,960 Speaker 7: own them in huge size and their portfolios because they 399 00:18:06,960 --> 00:18:09,600 Speaker 7: were never worried about losses. If you start worrying about losses, 400 00:18:09,800 --> 00:18:11,960 Speaker 7: that causes force selling. And the other part is what 401 00:18:12,000 --> 00:18:13,919 Speaker 7: does the banking system own a lot of And if 402 00:18:13,960 --> 00:18:16,199 Speaker 7: the banking system, which is always levered, owns a lot 403 00:18:16,240 --> 00:18:18,080 Speaker 7: of treasuries and you see this never ending push to 404 00:18:18,160 --> 00:18:20,200 Speaker 7: yields higher, I think you see some force selling and 405 00:18:20,240 --> 00:18:22,240 Speaker 7: risk management there. So I don't think we're there yet, 406 00:18:22,680 --> 00:18:24,600 Speaker 7: but I think that's the trigger that we've kind of 407 00:18:24,600 --> 00:18:27,600 Speaker 7: got just a sniff of this time around. And go 408 00:18:27,680 --> 00:18:30,359 Speaker 7: back even with housing, right, we had housing bubble. You know, 409 00:18:30,400 --> 00:18:32,480 Speaker 7: it's broke a little bit in early two thousand and seven, 410 00:18:32,600 --> 00:18:34,960 Speaker 7: late two thousand and seven. The ultimate prom didn't hit 411 00:18:35,040 --> 00:18:36,000 Speaker 7: until two thousand and eight. 412 00:18:36,320 --> 00:18:37,920 Speaker 4: Pete, you're making me want to just go and hide 413 00:18:38,000 --> 00:18:40,680 Speaker 4: under a rock. What on Earth do I own? If 414 00:18:40,680 --> 00:18:41,560 Speaker 4: that's your round book. 415 00:18:41,800 --> 00:18:44,320 Speaker 7: So for now I'm actually bullish early enough, right, I 416 00:18:44,320 --> 00:18:46,240 Speaker 7: do think we're going to get this weak economic data. 417 00:18:46,680 --> 00:18:49,199 Speaker 7: I think oil is way overdone. I think we're going 418 00:18:49,240 --> 00:18:51,880 Speaker 7: to get this relief trade. Okay, there's not this inflation pressure, 419 00:18:52,080 --> 00:18:54,640 Speaker 7: you'll start drifting back to four forty. We send stocks hire, 420 00:18:54,680 --> 00:18:57,119 Speaker 7: everyone's underweight again, so we have to suck out that 421 00:18:57,240 --> 00:18:59,920 Speaker 7: kind of pessimism. Then once everyone gets bullish again, I 422 00:19:00,040 --> 00:19:00,880 Speaker 7: can get really very. 423 00:19:00,960 --> 00:19:03,199 Speaker 5: Position in struct Kay, what are you talking about? Are 424 00:19:03,240 --> 00:19:05,600 Speaker 5: you basically saying that there is a bubble in treasuries 425 00:19:05,640 --> 00:19:08,480 Speaker 5: it's going to burst with catastrophic implications to build on 426 00:19:08,520 --> 00:19:09,600 Speaker 5: what John was talking about. 427 00:19:09,720 --> 00:19:11,240 Speaker 7: I don't know if it will or not, but that's 428 00:19:11,280 --> 00:19:14,320 Speaker 7: all of a sudden became awareness of everyone and DC 429 00:19:14,440 --> 00:19:16,439 Speaker 7: can fix this, right, DC can get its act together. 430 00:19:17,040 --> 00:19:18,960 Speaker 7: I just think everyone's kind of grimacing because no one 431 00:19:18,960 --> 00:19:20,919 Speaker 7: really believes DC is going to get its act together. 432 00:19:21,840 --> 00:19:23,760 Speaker 7: But I think that's really the hope is something comes 433 00:19:23,800 --> 00:19:26,399 Speaker 7: through and DC starts going back to the days where 434 00:19:26,600 --> 00:19:28,920 Speaker 7: you run a budget deficit when times are torough, but 435 00:19:28,960 --> 00:19:30,480 Speaker 7: when times are good you try and cut it back. 436 00:19:31,119 --> 00:19:34,240 Speaker 4: Let's finish it. What does this mean for portfolio construction? 437 00:19:34,640 --> 00:19:36,520 Speaker 4: A lot of people listening might sit down with a 438 00:19:36,520 --> 00:19:39,320 Speaker 4: financial advisor and they've given the same old spiel. What 439 00:19:39,320 --> 00:19:41,600 Speaker 4: we're going to do is split up this portfolio sixty 440 00:19:41,840 --> 00:19:44,439 Speaker 4: forty and they're going to go on to explain why 441 00:19:44,840 --> 00:19:46,119 Speaker 4: doesn't that all go out the window. 442 00:19:46,440 --> 00:19:48,000 Speaker 7: I think you have to be very careful and you're 443 00:19:48,000 --> 00:19:51,399 Speaker 7: looking for constantly risk management. Right what looks overdone? What 444 00:19:51,480 --> 00:19:53,800 Speaker 7: doesn't look overdone? You the two year seems safe, But 445 00:19:53,800 --> 00:19:55,280 Speaker 7: I think there's no value in the two year. At 446 00:19:55,320 --> 00:19:57,080 Speaker 7: four ninety, there was a lot of value in the tenure. 447 00:19:57,080 --> 00:19:59,199 Speaker 7: I think down at four forty you want to expose that. 448 00:19:59,240 --> 00:20:01,480 Speaker 7: But as YO start shrinking and getting to these narrow 449 00:20:01,520 --> 00:20:03,960 Speaker 7: ends of the range, take them off, take some bets there. 450 00:20:04,080 --> 00:20:06,080 Speaker 7: I think you want to expose yourself to equity risk 451 00:20:06,160 --> 00:20:10,160 Speaker 7: right now, you know you really start making sure those exposures. 452 00:20:10,200 --> 00:20:11,359 Speaker 7: Where do you want to be in the world, And 453 00:20:11,400 --> 00:20:13,439 Speaker 7: I think outside the US could be interested. I continue 454 00:20:13,440 --> 00:20:15,000 Speaker 7: to look at emerging markets. I think you see a 455 00:20:15,040 --> 00:20:17,840 Speaker 7: lot of trends there that are beneficial for emerging markets 456 00:20:17,840 --> 00:20:18,520 Speaker 7: over US. 457 00:20:18,640 --> 00:20:21,520 Speaker 1: There is acclaimed and he wrote a great one volume 458 00:20:21,560 --> 00:20:25,840 Speaker 1: on financial history. Chris Whalen, our Christopher Whalen, and he 459 00:20:25,920 --> 00:20:28,200 Speaker 1: had a note last night which goes to the heart 460 00:20:28,280 --> 00:20:31,000 Speaker 1: of the bid walking away and fixed income. It's the 461 00:20:31,040 --> 00:20:34,520 Speaker 1: Whalen's silence, and that is you've got a piece to 462 00:20:34,600 --> 00:20:38,200 Speaker 1: sell and you get on the phone and there's nobody 463 00:20:38,240 --> 00:20:40,879 Speaker 1: on the other side of the transaction. How close are 464 00:20:40,960 --> 00:20:42,320 Speaker 1: we to the Whalen silence? 465 00:20:43,160 --> 00:20:45,280 Speaker 7: I think we had again whiffs of that right the 466 00:20:45,320 --> 00:20:48,240 Speaker 7: treasury market perfect, and that's all we've had so far. 467 00:20:48,440 --> 00:20:50,439 Speaker 7: And I think though across all assets, you look at 468 00:20:50,440 --> 00:20:52,760 Speaker 7: what's going on with oil, we've gone to this electronic 469 00:20:52,800 --> 00:20:56,000 Speaker 7: algo driven trading. So I think there's this perception of 470 00:20:56,040 --> 00:20:59,400 Speaker 7: liquidity and there's no depth of liquidity. So the ability 471 00:20:59,400 --> 00:21:02,520 Speaker 7: for Marcus to move very quickly is very high because 472 00:21:02,560 --> 00:21:04,840 Speaker 7: we have this fake or full equidity where everyone's scrambling 473 00:21:04,840 --> 00:21:07,200 Speaker 7: around trying to make their penny or eighth of a point, 474 00:21:07,400 --> 00:21:10,000 Speaker 7: and the reality is big moves push us very quickly. 475 00:21:10,680 --> 00:21:14,600 Speaker 4: Bottle it clinic a big what if, A lot of 476 00:21:14,600 --> 00:21:16,600 Speaker 4: worries for a lot of people who might be listening 477 00:21:16,600 --> 00:21:18,760 Speaker 4: to some of this fada, but ultimately buying risk in 478 00:21:18,800 --> 00:21:19,840 Speaker 4: the short term right. 479 00:21:19,720 --> 00:21:22,040 Speaker 3: By risking shortload the boot. 480 00:21:22,080 --> 00:21:23,719 Speaker 7: But I would say this does remind me a bit 481 00:21:23,760 --> 00:21:25,520 Speaker 7: when I was trading the credit to rib of indices 482 00:21:25,680 --> 00:21:27,640 Speaker 7: back in two thousand and seven, where you would just gap. 483 00:21:27,680 --> 00:21:29,920 Speaker 7: You would go from sixty basis points to sexty eight 484 00:21:29,960 --> 00:21:32,280 Speaker 7: basis points, knowing you why, and then you look and 485 00:21:32,320 --> 00:21:34,480 Speaker 7: you traded around sixty eight. And that's the sort of 486 00:21:34,560 --> 00:21:36,200 Speaker 7: moves I think we've been getting in these markets. Whether 487 00:21:36,240 --> 00:21:38,560 Speaker 7: it's oil, whether it's trades, you get these gap moves, 488 00:21:38,680 --> 00:21:41,840 Speaker 7: you air pocket. Everyone tries to make some semblance of it, 489 00:21:41,920 --> 00:21:42,359 Speaker 7: but it's. 490 00:21:42,320 --> 00:21:45,360 Speaker 1: Just one day option. Thing is that the new portfolio insurance. 491 00:21:45,800 --> 00:21:47,920 Speaker 7: You know, people are definitely pushing on that, and I 492 00:21:47,920 --> 00:21:49,840 Speaker 7: think it's the opposite of portfolio insurance. I think it's 493 00:21:49,960 --> 00:21:53,679 Speaker 7: used heavily to drive markets, push gamma trades, and I 494 00:21:53,680 --> 00:21:55,879 Speaker 7: think everyone forgets that it can be used on the 495 00:21:55,960 --> 00:21:58,280 Speaker 7: downside just as easily as is in the upside. This 496 00:21:58,320 --> 00:22:00,480 Speaker 7: isn't like some of the other trades which for bullies 497 00:22:00,480 --> 00:22:02,400 Speaker 7: so only like we saw with the ape stocks. This 498 00:22:02,440 --> 00:22:04,679 Speaker 7: is really the ability to push direction, and I think 499 00:22:04,720 --> 00:22:07,600 Speaker 7: they can lean on markets down as easily as. 500 00:22:07,560 --> 00:22:09,800 Speaker 4: Up pay This was great. Always walk away from our 501 00:22:09,800 --> 00:22:12,439 Speaker 4: conversations with tons to think about. Put a share of 502 00:22:12,480 --> 00:22:13,440 Speaker 4: accountomy securities. 503 00:22:17,520 --> 00:22:20,480 Speaker 1: Kevin Tyne, enjoin us here, what's important about our senior 504 00:22:20,520 --> 00:22:24,160 Speaker 1: automobiles and analysts for Bloomberg Intelligence? And he's kept count 505 00:22:24,200 --> 00:22:26,800 Speaker 1: He's got a woodmark in his garage, folks of the 506 00:22:26,920 --> 00:22:29,400 Speaker 1: number of times he's put the screw down the Chrysler 507 00:22:29,880 --> 00:22:32,840 Speaker 1: distributor when he's changing the plugs. Kevin Tyne and the 508 00:22:32,840 --> 00:22:35,480 Speaker 1: real thing in the auto, Kevin, I've been dying to 509 00:22:35,640 --> 00:22:38,919 Speaker 1: ask you, and it's in the zeitgeist. When are we 510 00:22:39,040 --> 00:22:43,160 Speaker 1: done buying one hundred thousand dollars Evy vehicles that weigh 511 00:22:43,200 --> 00:22:46,200 Speaker 1: the size of a Hummer H two. When does that 512 00:22:46,320 --> 00:22:47,280 Speaker 1: party end? 513 00:22:49,200 --> 00:22:52,360 Speaker 9: I think very soon. Well, I looked at it, and 514 00:22:53,520 --> 00:22:57,720 Speaker 9: you know, look, the production launch and the new EV's 515 00:22:57,800 --> 00:23:01,520 Speaker 9: coming out are set through twenty twenty four and probably beyond. 516 00:23:01,920 --> 00:23:03,520 Speaker 9: But I think what you're going to get as an 517 00:23:03,520 --> 00:23:06,280 Speaker 9: inflection point is if you don't or if the automakers 518 00:23:06,320 --> 00:23:10,160 Speaker 9: don't start to see, you know, real demand and real 519 00:23:10,240 --> 00:23:14,359 Speaker 9: profitability in that drive train type. I think you're going 520 00:23:14,440 --> 00:23:16,960 Speaker 9: to start to see by twenty twenty five, twenty six, 521 00:23:17,000 --> 00:23:20,399 Speaker 9: and plans beyond that start to shift. To something a 522 00:23:20,400 --> 00:23:23,080 Speaker 9: little bit more practical, and we've been saying that might 523 00:23:23,119 --> 00:23:27,959 Speaker 9: be the plug in hybrid makes a re emergence, you know, 524 00:23:28,000 --> 00:23:30,760 Speaker 9: with battery technology. Maybe that's a fifty to one hundred 525 00:23:30,760 --> 00:23:34,879 Speaker 9: mile range in electric with the you know, range extending 526 00:23:36,040 --> 00:23:39,119 Speaker 9: internal combustion or hybrid engine on top of it. You know, 527 00:23:39,160 --> 00:23:41,360 Speaker 9: so you're talking about four hundred miles of range which 528 00:23:41,359 --> 00:23:44,639 Speaker 9: out without the anxiety of where to charge or the 529 00:23:44,800 --> 00:23:48,479 Speaker 9: you know this charging infrastructure that isn't quite ready. 530 00:23:48,800 --> 00:23:50,879 Speaker 1: Yeah, I got any more questions on this, but I 531 00:23:50,920 --> 00:23:53,200 Speaker 1: believe there's a Lisa help me here. There's a strike 532 00:23:53,280 --> 00:23:55,919 Speaker 1: still going on. Yes, it's just been buried by the news. 533 00:23:56,000 --> 00:23:57,879 Speaker 1: I mean, there's no other way to put it. What's 534 00:23:57,880 --> 00:23:59,879 Speaker 1: the new new on the UAW strike. 535 00:24:01,160 --> 00:24:03,520 Speaker 9: Yeah. Look, from my view, I think what you're going 536 00:24:03,600 --> 00:24:07,720 Speaker 9: to get is a big number for the UAW, but 537 00:24:07,920 --> 00:24:10,040 Speaker 9: not a whole lot else. And I think that's probably 538 00:24:10,040 --> 00:24:14,080 Speaker 9: what the issues are. The artomakers can't hide their profitability 539 00:24:14,080 --> 00:24:16,720 Speaker 9: over the past ten years, and this mixshift to truck 540 00:24:16,720 --> 00:24:19,560 Speaker 9: from car has been very profitable for them, you know, 541 00:24:19,840 --> 00:24:22,520 Speaker 9: and everybody sees it, right, But at the same time 542 00:24:22,640 --> 00:24:25,760 Speaker 9: they've done that with fewer units so I think on 543 00:24:25,800 --> 00:24:28,920 Speaker 9: the one hand, the manufacturers are saying, Okay, we can 544 00:24:28,960 --> 00:24:31,880 Speaker 9: give you a share of those profits, but we can't 545 00:24:31,920 --> 00:24:35,000 Speaker 9: guarantee that we're going to be growing in size. And 546 00:24:35,040 --> 00:24:37,960 Speaker 9: I think what a big number does, whether it's a 547 00:24:38,040 --> 00:24:41,480 Speaker 9: thirty percent or somewhere in that ballpark, what it does. 548 00:24:41,520 --> 00:24:45,040 Speaker 9: It also enables the union to go and show that 549 00:24:45,400 --> 00:24:48,520 Speaker 9: contract to some of the non union, whether it's pure 550 00:24:48,520 --> 00:24:55,400 Speaker 9: PLAYEV manufacturers or transplants in the US that are operating 551 00:24:55,440 --> 00:24:58,360 Speaker 9: with non union labor, to say, look what we did 552 00:24:58,400 --> 00:25:00,480 Speaker 9: for our membership. Because at the end of the day, 553 00:25:01,000 --> 00:25:04,160 Speaker 9: if the UAW wants to increase its member base, they 554 00:25:04,280 --> 00:25:07,400 Speaker 9: can't keep going back to GM, Ford and Stillantis. They're 555 00:25:07,440 --> 00:25:10,240 Speaker 9: not growing in that way, right, So if this is 556 00:25:10,280 --> 00:25:12,840 Speaker 9: about increasing your membership for the UAW, you're going to 557 00:25:12,920 --> 00:25:15,000 Speaker 9: have to go knock on some other doors. And I 558 00:25:15,000 --> 00:25:19,760 Speaker 9: think a backhanded way that the legacy automakers, the domestic 559 00:25:20,080 --> 00:25:23,439 Speaker 9: for GM and STILLANTIS brands can do it is to say, 560 00:25:23,600 --> 00:25:26,080 Speaker 9: here's your big number, but we got to have the 561 00:25:26,119 --> 00:25:29,119 Speaker 9: flexibility to get out of some capacity going forward. But 562 00:25:29,240 --> 00:25:31,240 Speaker 9: go show this to some of those other plants and 563 00:25:31,280 --> 00:25:33,080 Speaker 9: see what they say, Kevin. 564 00:25:32,880 --> 00:25:35,560 Speaker 5: We're getting some sense from the auto manufacturers of just 565 00:25:35,600 --> 00:25:37,680 Speaker 5: how much the strikes have been costing them. General Motors 566 00:25:37,680 --> 00:25:39,879 Speaker 5: came out yesterday and said it already has cost them 567 00:25:39,920 --> 00:25:43,240 Speaker 5: about two hundred million dollars since the strike began. We've 568 00:25:43,240 --> 00:25:46,280 Speaker 5: heard from Ford talking about the f one fifty deliveries 569 00:25:46,280 --> 00:25:49,040 Speaker 5: and how much they've been plunging on the heels of 570 00:25:49,119 --> 00:25:52,600 Speaker 5: a number of shuttering factories. I'm just wondering at what 571 00:25:52,680 --> 00:25:56,399 Speaker 5: point we can expect this to precede price rises in 572 00:25:56,440 --> 00:25:59,240 Speaker 5: some of the cars that they deliver with the justification 573 00:26:00,080 --> 00:26:01,840 Speaker 5: really they've got to compensate for these costs. 574 00:26:02,640 --> 00:26:06,240 Speaker 9: Yeah, and look that production is not necessarily all lost. 575 00:26:06,320 --> 00:26:10,840 Speaker 9: It'll shift to the next quarter or into twenty twenty four. 576 00:26:11,560 --> 00:26:13,879 Speaker 9: But it's exactly that. And this is what we've seen 577 00:26:14,040 --> 00:26:17,480 Speaker 9: and it didn't really start just with production disruptions during 578 00:26:17,480 --> 00:26:20,520 Speaker 9: the pandemic. You know, the automakers have been moving to 579 00:26:20,560 --> 00:26:26,400 Speaker 9: this smaller model, you know, more trucks, higher transaction prices, 580 00:26:26,520 --> 00:26:29,760 Speaker 9: fewer units, so it isn't so much about scale anymore. 581 00:26:30,240 --> 00:26:33,400 Speaker 9: And this is another part of that where there's inventory 582 00:26:33,440 --> 00:26:36,880 Speaker 9: on the ground, probably not quite enough, but ultimately all 583 00:26:36,920 --> 00:26:40,679 Speaker 9: it does is firm up prices and the increased cost 584 00:26:40,920 --> 00:26:44,000 Speaker 9: although you know, maybe the labor portion of cost of 585 00:26:44,000 --> 00:26:47,639 Speaker 9: goods going forward is minimal after the contract, but at 586 00:26:47,680 --> 00:26:50,800 Speaker 9: the end of the day, it's going to remove affordability 587 00:26:50,800 --> 00:26:53,439 Speaker 9: from the consumer, right because automakers are going to have 588 00:26:53,440 --> 00:26:57,040 Speaker 9: to continue to keep supply and demand tight and move 589 00:26:57,240 --> 00:27:01,000 Speaker 9: up market to be profitable on the operations. So that's 590 00:27:01,119 --> 00:27:02,760 Speaker 9: really going to hurt the consumer at the end. 591 00:27:02,680 --> 00:27:03,080 Speaker 7: Of the day. 592 00:27:03,240 --> 00:27:06,159 Speaker 5: Kevin I was reading about bid which is becoming the 593 00:27:06,359 --> 00:27:09,240 Speaker 5: biggest electric vehicle maker in China, and I was reading 594 00:27:09,240 --> 00:27:12,080 Speaker 5: about how they grew up out of first imitating Toyota 595 00:27:12,359 --> 00:27:15,200 Speaker 5: and then becoming so efficient that even Toyota was trying 596 00:27:15,240 --> 00:27:17,359 Speaker 5: to understand exactly how they were doing it. 597 00:27:17,400 --> 00:27:18,280 Speaker 3: How does the US. 598 00:27:18,119 --> 00:27:21,520 Speaker 5: Compete with China, all things being equal, without tariffs, without 599 00:27:21,560 --> 00:27:25,399 Speaker 5: some other guards between the two industries, if there's a 600 00:27:25,520 --> 00:27:26,960 Speaker 5: very different playing field. 601 00:27:27,480 --> 00:27:29,480 Speaker 9: Yeah, it's going to be it's going to be very difficult. 602 00:27:29,680 --> 00:27:35,760 Speaker 9: Look though, the macroeconomic the government influence varies region by region. 603 00:27:36,640 --> 00:27:39,320 Speaker 9: You know, so the subsidies that you had and bid, 604 00:27:39,440 --> 00:27:41,399 Speaker 9: you know, back in the day that's a company that 605 00:27:41,560 --> 00:27:44,480 Speaker 9: was you know, direct subsidy from the government was well 606 00:27:44,480 --> 00:27:48,080 Speaker 9: over a billion dollars probably over forty thousand dollars per vehicle. 607 00:27:48,800 --> 00:27:52,760 Speaker 9: We won't do that here, so you know, it's it'll 608 00:27:52,800 --> 00:27:54,280 Speaker 9: be difficult to keep them out. And the other thing 609 00:27:54,320 --> 00:27:56,480 Speaker 9: I think that's going to happen is if we're going 610 00:27:56,520 --> 00:27:59,639 Speaker 9: to get a rush of Chinese built evs in this country, 611 00:27:59,640 --> 00:28:02,119 Speaker 9: they're going to go directly to the dealer network, where 612 00:28:02,600 --> 00:28:05,040 Speaker 9: we have this sort of perception now that the direct 613 00:28:05,119 --> 00:28:08,919 Speaker 9: sales model what Tesla does or Revine and Lucid is 614 00:28:08,960 --> 00:28:10,879 Speaker 9: the way to go. I think those companies are going 615 00:28:10,960 --> 00:28:16,000 Speaker 9: to achieve immediate distribution sale scale by going to the 616 00:28:16,040 --> 00:28:18,720 Speaker 9: dealer base and saying like, will you sell our product, 617 00:28:19,359 --> 00:28:22,320 Speaker 9: as opposed to trying to deliver it directly to the consumer, 618 00:28:22,720 --> 00:28:27,240 Speaker 9: which has issues with when you get paid for those vehicles. Right, 619 00:28:27,240 --> 00:28:29,480 Speaker 9: you can't book that revenue till you deliver them, But 620 00:28:29,520 --> 00:28:31,600 Speaker 9: if you deliver them to the dealership, you can, right, 621 00:28:31,600 --> 00:28:35,120 Speaker 9: so your gross margin stays firm and you have instant 622 00:28:35,160 --> 00:28:38,760 Speaker 9: scale in terms of distribution. So it could happen very quickly, 623 00:28:39,440 --> 00:28:41,360 Speaker 9: although there's still a lot of hurdles to get over 624 00:28:41,560 --> 00:28:45,480 Speaker 9: for really China small manufacturers or EV manufacturers to get 625 00:28:45,480 --> 00:28:46,200 Speaker 9: into this country. 626 00:28:46,200 --> 00:28:47,920 Speaker 4: Hey, Kevin. Just to wrap things up, and I've touched 627 00:28:47,960 --> 00:28:49,880 Speaker 4: on this briefly, but what are the odds that some 628 00:28:49,920 --> 00:28:52,960 Speaker 4: of these manufacturers just don't get this transition done. They 629 00:28:53,040 --> 00:28:54,400 Speaker 4: look into the future and they throw them in the 630 00:28:54,400 --> 00:28:56,720 Speaker 4: town and say this isn't going to happen. 631 00:28:57,480 --> 00:29:00,560 Speaker 9: Yeah, And look, I don't know that that's not a 632 00:29:00,880 --> 00:29:04,320 Speaker 9: binary bet of bankruptcy or not bankruptcy, or you exist 633 00:29:04,360 --> 00:29:05,080 Speaker 9: or you don't exist. 634 00:29:05,080 --> 00:29:05,160 Speaker 1: Oh. 635 00:29:05,200 --> 00:29:10,640 Speaker 9: Absolutely, there's certainly a scenario where you know, legacy automakers 636 00:29:10,680 --> 00:29:15,600 Speaker 9: or global automakers leave that drive train business to the 637 00:29:15,720 --> 00:29:19,680 Speaker 9: niche manufacturers, to Tesla to and it's a smaller part 638 00:29:19,720 --> 00:29:23,120 Speaker 9: of the market, you know, certainly here but maybe in 639 00:29:23,160 --> 00:29:25,680 Speaker 9: other countries. And what you can get is to say, like, 640 00:29:26,080 --> 00:29:28,040 Speaker 9: and Toyota has been saying this the whole time, is like, 641 00:29:28,240 --> 00:29:31,360 Speaker 9: there needs to be options, right, So internal combustion will 642 00:29:31,360 --> 00:29:33,840 Speaker 9: work in some regions or for some people. So will 643 00:29:34,280 --> 00:29:36,880 Speaker 9: plug in hybrids, So will gas hybrid, so will electric. 644 00:29:36,960 --> 00:29:40,200 Speaker 9: Maybe hydrogen is an option too, you know, So I 645 00:29:40,240 --> 00:29:44,040 Speaker 9: think that if it's about climate, right, there needs to 646 00:29:44,080 --> 00:29:47,240 Speaker 9: be options. If it's about capitalism, you know, that gets. 647 00:29:47,040 --> 00:29:49,400 Speaker 4: A little bitcisely that Kevin. You know where I'm going 648 00:29:49,400 --> 00:29:51,360 Speaker 4: with this. If it's about climate, it's not about massive 649 00:29:51,440 --> 00:29:54,080 Speaker 4: SUVs that just happen to be electric. Let's you know, 650 00:29:54,480 --> 00:29:58,720 Speaker 4: let's face it, so it's not about climate precisely, Kevin 651 00:29:58,760 --> 00:29:59,680 Speaker 4: sign it, thank you, sir. 652 00:30:00,040 --> 00:30:14,800 Speaker 10: Limpegan Tenochens, a gentleman from western Michigan outside Green Rapids 653 00:30:14,800 --> 00:30:18,160 Speaker 10: on the fields of Michigan, joins us snow Bill heisig 654 00:30:18,160 --> 00:30:22,320 Speaker 10: and Bill, you know the last the thing that we've seen. 655 00:30:22,160 --> 00:30:24,239 Speaker 1: For the last thirty six hours. I actually thought of you, 656 00:30:24,880 --> 00:30:27,240 Speaker 1: and yet people of nuke. Gingrich has identified it as 657 00:30:27,320 --> 00:30:32,000 Speaker 1: four percent of GDP. We went from Lincoln Southwest of 658 00:30:32,080 --> 00:30:35,240 Speaker 1: your family's heritage to ninety six percent of the GOP 659 00:30:35,440 --> 00:30:39,120 Speaker 1: in crisis. How do you people get back control of 660 00:30:39,120 --> 00:30:42,720 Speaker 1: the party, How do you get back control of the narrative. 661 00:30:44,480 --> 00:30:46,360 Speaker 8: That's a great question. In fact, I happened to see 662 00:30:47,400 --> 00:30:52,479 Speaker 8: former Speaker Gingridge last night at a dinner. But it 663 00:30:52,560 --> 00:30:55,400 Speaker 8: is it is interesting. I do have to comment. You know, 664 00:30:55,440 --> 00:30:59,680 Speaker 8: you played Senator Blumenthal's quote, and yes, the house is 665 00:30:59,720 --> 00:31:01,600 Speaker 8: a bit of a mess right now. But I would 666 00:31:01,600 --> 00:31:04,760 Speaker 8: just point out those who live in glass sentence shouldn't 667 00:31:04,760 --> 00:31:09,840 Speaker 8: throw stones, all right, because they have not done anything 668 00:31:10,400 --> 00:31:14,000 Speaker 8: anything when it comes to the appropriations bills until this year, 669 00:31:14,080 --> 00:31:19,000 Speaker 8: and it was only when the House threatened and really 670 00:31:19,040 --> 00:31:21,680 Speaker 8: pushed this whole notion that we needed to pass those 671 00:31:21,680 --> 00:31:25,600 Speaker 8: swellove appropriations bills that they actually passed anything out of committee. 672 00:31:25,640 --> 00:31:29,560 Speaker 8: So I'm glad to see that people are realizing that 673 00:31:29,640 --> 00:31:33,760 Speaker 8: these massive Christmas tree omnibus bills are a horrible way 674 00:31:33,800 --> 00:31:37,920 Speaker 8: of moving forward. But yes, we've got a mess in 675 00:31:37,960 --> 00:31:41,360 Speaker 8: the House. We can't do anything until we pick a speaker, 676 00:31:41,800 --> 00:31:44,720 Speaker 8: and hopefully that that's going to come sooner rather than later. 677 00:31:44,760 --> 00:31:46,200 Speaker 8: But I'm not sure that we're there yet. 678 00:31:46,920 --> 00:31:49,600 Speaker 1: I look, Congressman at the joy that America has it. 679 00:31:49,640 --> 00:31:52,600 Speaker 1: Maybe we ought to have some successful small business people 680 00:31:52,640 --> 00:31:56,160 Speaker 1: in Congress. You're one of them. You're the gravel of Michigan, 681 00:31:56,640 --> 00:31:59,480 Speaker 1: run and gravel, moving it out, building things in that 682 00:32:00,240 --> 00:32:04,000 Speaker 1: How do we take advantage in this crisis of a 683 00:32:04,040 --> 00:32:08,400 Speaker 1: beleaguered small business. I think it's been ignored here for 684 00:32:08,520 --> 00:32:09,520 Speaker 1: weeks and weeks. 685 00:32:11,120 --> 00:32:13,520 Speaker 8: First of all, you got to stop crushing them. And 686 00:32:13,560 --> 00:32:16,040 Speaker 8: whether it's at local level, state level. You know, I'm 687 00:32:16,080 --> 00:32:19,640 Speaker 8: a former state legislator. I know what can happen on 688 00:32:19,720 --> 00:32:23,200 Speaker 8: the regulatory side as well as the tax side, and 689 00:32:23,240 --> 00:32:27,240 Speaker 8: certainly here at the federal level that that is writ large. 690 00:32:27,280 --> 00:32:32,560 Speaker 8: But we also know the inflation impact has been massive, 691 00:32:32,560 --> 00:32:34,600 Speaker 8: and I was interested in hearing I think it was 692 00:32:34,680 --> 00:32:38,520 Speaker 8: Kathy who is on just prior to me, talking about 693 00:32:38,520 --> 00:32:42,200 Speaker 8: this soft landing hard landing situation. A lot of us 694 00:32:42,240 --> 00:32:44,479 Speaker 8: would argue that the FED was late to the table 695 00:32:45,240 --> 00:32:48,720 Speaker 8: in starting to move those interest rates up, and now 696 00:32:48,720 --> 00:32:51,600 Speaker 8: we've been paying. We've been paying a massive price literally 697 00:32:51,680 --> 00:32:54,240 Speaker 8: for that on the way down. But we've got to stop. 698 00:32:54,280 --> 00:32:57,560 Speaker 8: We got to stop this tax and regulatory crushing, plus 699 00:32:57,600 --> 00:33:01,080 Speaker 8: the rhetoric, right, I mean, it's you know, small business 700 00:33:01,320 --> 00:33:04,800 Speaker 8: drives the economy in so many places, and place like Michigan. 701 00:33:04,880 --> 00:33:08,400 Speaker 8: All right, we're watching the UAW strikes and those kinds 702 00:33:08,400 --> 00:33:10,200 Speaker 8: of things, but we've got to make sure the small 703 00:33:10,200 --> 00:33:11,040 Speaker 8: businesses listen. 704 00:33:11,880 --> 00:33:14,000 Speaker 1: The news flow we've had. I think this has been 705 00:33:14,040 --> 00:33:16,600 Speaker 1: way under reported my anecdotes in New York City, a 706 00:33:16,640 --> 00:33:20,120 Speaker 1: small business is getting absolutely crushed. There's no other way 707 00:33:20,160 --> 00:33:20,600 Speaker 1: to put it. 708 00:33:20,680 --> 00:33:23,040 Speaker 5: There is a real concern here being pushed and pulled 709 00:33:23,080 --> 00:33:25,760 Speaker 5: on both the side of inflation, a tight labor market 710 00:33:25,840 --> 00:33:29,480 Speaker 5: and also higher rates so you can't borrow cheaply. But Congressman, 711 00:33:29,560 --> 00:33:31,120 Speaker 5: I would love your sense just to build on what 712 00:33:31,120 --> 00:33:33,440 Speaker 5: you're talking about. Kelsey Barrow was on. She was talking 713 00:33:33,520 --> 00:33:36,360 Speaker 5: about how a hard landing looks more likely a lot 714 00:33:36,400 --> 00:33:39,520 Speaker 5: of people, and I would guess that that actually, perversely 715 00:33:39,840 --> 00:33:43,160 Speaker 5: might be a benefit to the US fiscal profile because 716 00:33:43,160 --> 00:33:46,120 Speaker 5: that will lead to lower interest expenses. Right now, people 717 00:33:46,160 --> 00:33:48,120 Speaker 5: are looking at the fact that there is no leader 718 00:33:48,160 --> 00:33:50,320 Speaker 5: in the House and attributing part of the move and 719 00:33:50,360 --> 00:33:53,920 Speaker 5: the treasury market to that, saying that dysfunction in Congress 720 00:33:54,280 --> 00:33:57,680 Speaker 5: is allowing yields to keep climbing as the fiscal profile 721 00:33:57,760 --> 00:34:00,560 Speaker 5: of this nation gets called into question. Important is it 722 00:34:00,600 --> 00:34:02,320 Speaker 5: to you to make sure that there is at least 723 00:34:02,360 --> 00:34:06,240 Speaker 5: a functioning, at least a cross a discussion among representatives. 724 00:34:07,040 --> 00:34:09,520 Speaker 8: Yeah, we have to have that. And look, I believe 725 00:34:09,600 --> 00:34:12,680 Speaker 8: a number of my colleagues, some of them were chasing cameras, 726 00:34:13,040 --> 00:34:18,319 Speaker 8: others of them had actual policy issues, and they erroneously, 727 00:34:18,360 --> 00:34:21,000 Speaker 8: in my opinion, thought they would be able to move 728 00:34:21,080 --> 00:34:24,839 Speaker 8: this process along more effectively and faster by shutting down 729 00:34:24,880 --> 00:34:28,160 Speaker 8: the government. My experience both in twenty thirteen, with the 730 00:34:28,160 --> 00:34:31,400 Speaker 8: Obama administration twenty eighteen, going into twenty nineteen with the 731 00:34:31,440 --> 00:34:35,080 Speaker 8: Trump administration, that isn't the case. So that was bad 732 00:34:35,200 --> 00:34:39,120 Speaker 8: tactics on that part. But how do we restore confidence? 733 00:34:39,280 --> 00:34:42,359 Speaker 8: That's a key thing. We've got to get unified and 734 00:34:42,560 --> 00:34:45,520 Speaker 8: quit the circular firing squad in the House of Representatives. 735 00:34:45,600 --> 00:34:48,000 Speaker 8: But we do have long term issues that we have 736 00:34:48,080 --> 00:34:51,120 Speaker 8: to have to address. I have a bill that would 737 00:34:51,160 --> 00:34:54,759 Speaker 8: call for a debt commission, a fiscal commission that is 738 00:34:54,800 --> 00:34:57,120 Speaker 8: going to look at all of the various trust funds. 739 00:34:57,800 --> 00:35:00,640 Speaker 8: It would be something that couldn't be amended, it would 740 00:35:00,680 --> 00:35:03,000 Speaker 8: be forced to be taken out of a vote taken 741 00:35:03,080 --> 00:35:06,359 Speaker 8: both in the House and Senate, and it allows us 742 00:35:06,400 --> 00:35:09,400 Speaker 8: to address that seventy percent of all the federal spending 743 00:35:09,440 --> 00:35:12,640 Speaker 8: that happens on autopilot. I don't touch it as a 744 00:35:12,680 --> 00:35:15,359 Speaker 8: House member of the House. The Senators don't touch it. 745 00:35:15,400 --> 00:35:17,560 Speaker 8: The White House doesn't do anything with it. It's just 746 00:35:17,640 --> 00:35:21,120 Speaker 8: on autopilot. And if we don't wrestle that dragging down 747 00:35:21,120 --> 00:35:23,320 Speaker 8: to the ground and have an open and honest conversation 748 00:35:23,440 --> 00:35:25,799 Speaker 8: with the American people, then we're going to be in 749 00:35:25,880 --> 00:35:27,919 Speaker 8: real trouble if we see any of those bond rates 750 00:35:27,920 --> 00:35:29,879 Speaker 8: continue to go up because we're knocking on the door 751 00:35:29,880 --> 00:35:33,160 Speaker 8: of eight hundred billion dollars in interest alone right now. 752 00:35:33,280 --> 00:35:36,880 Speaker 5: Congrisspannon, how much of an obstacle is the former President 753 00:35:36,920 --> 00:35:40,319 Speaker 5: Trump to getting some sort of real discussion like this 754 00:35:40,600 --> 00:35:43,279 Speaker 5: put forward, considering the fact that he was one of 755 00:35:43,320 --> 00:35:48,279 Speaker 5: the people pushing for a shutdown, pushing for basically just 756 00:35:48,680 --> 00:35:50,880 Speaker 5: make it not happen, don't pay the bills until you 757 00:35:50,920 --> 00:35:51,640 Speaker 5: get what you want. 758 00:35:52,040 --> 00:35:54,279 Speaker 8: Yeah, well, it's not helpful at the end of the day. 759 00:35:54,320 --> 00:35:57,960 Speaker 8: Like I said, I think that is that's an erroneous strategy. 760 00:35:58,520 --> 00:36:02,760 Speaker 8: It doesn't work. What getting back though to that long 761 00:36:02,880 --> 00:36:06,320 Speaker 8: term issue. You know, both President Biden and President Trump 762 00:36:06,360 --> 00:36:09,280 Speaker 8: had said you can't look at some of those massive 763 00:36:09,360 --> 00:36:12,440 Speaker 8: drivers of our automatic spending. That's a mistake as well. 764 00:36:12,800 --> 00:36:15,759 Speaker 8: And I'm glad to see we've actually had this bipartisan bill. 765 00:36:15,880 --> 00:36:18,720 Speaker 8: It was seven Republicans, seven Democrats who are the original 766 00:36:18,760 --> 00:36:22,359 Speaker 8: co sponsors of me as author to to set up 767 00:36:22,400 --> 00:36:25,880 Speaker 8: this commission, you know, and that ultimately it doesn't matter 768 00:36:25,960 --> 00:36:30,000 Speaker 8: what the politics is trying to dictate out there on 769 00:36:30,080 --> 00:36:32,600 Speaker 8: either side of the aisle. The realities are what we 770 00:36:32,719 --> 00:36:36,000 Speaker 8: have to deal with here as policymakers. And I hope 771 00:36:36,000 --> 00:36:38,600 Speaker 8: my colleagues will step up and actually be policymakers and 772 00:36:38,640 --> 00:36:39,400 Speaker 8: honest brokers. 773 00:36:39,600 --> 00:36:42,680 Speaker 4: Congressman, thanks for your inside this morning, your perspective. Thank you, Sir, 774 00:36:42,680 --> 00:36:45,480 Speaker 4: Congressman Bill Haisanga that of Michigan. 775 00:36:45,560 --> 00:36:49,360 Speaker 1: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, and 776 00:36:49,520 --> 00:36:53,680 Speaker 1: anywhere else you get your podcasts. Listen live every weekday 777 00:36:53,960 --> 00:36:58,560 Speaker 1: starting at seven am Eastern. Bloomberg dot Com, the iHeartRadio 778 00:36:58,600 --> 00:37:02,359 Speaker 1: app tune In, and the Bloomberg Business app. You can 779 00:37:02,480 --> 00:37:06,279 Speaker 1: watch us live on Bloomberg Television and always. I'm the 780 00:37:06,280 --> 00:37:10,560 Speaker 1: Bloomberg Terminal. Thanks for listening. I'm Tom Keen, and this 781 00:37:11,200 --> 00:37:11,880 Speaker 1: is Bloomberg