1 00:00:02,520 --> 00:00:07,040 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:09,200 --> 00:00:12,080 Speaker 2: This is a breaking news update from Bloomberg. 3 00:00:12,880 --> 00:00:16,880 Speaker 3: Instant reaction and analysis from our three thousand journalists and 4 00:00:16,920 --> 00:00:18,919 Speaker 3: analysts around the world. 5 00:00:19,320 --> 00:00:21,520 Speaker 4: The Chairman of the Federal Reserve wrapping up the main 6 00:00:21,520 --> 00:00:24,160 Speaker 4: news conference, depressed, doing their best to make that interesting. 7 00:00:24,520 --> 00:00:26,560 Speaker 4: The Chairman doing his best to make it boring, and 8 00:00:26,600 --> 00:00:29,200 Speaker 4: I think he was fairly successful. Your equity market this 9 00:00:29,240 --> 00:00:31,720 Speaker 4: afternoon looks like this equity is positive by just a 10 00:00:31,800 --> 00:00:33,680 Speaker 4: tenth of one percent on the S and P five 11 00:00:33,760 --> 00:00:36,199 Speaker 4: hundred in the bond market on a two year, ten year, 12 00:00:36,240 --> 00:00:38,000 Speaker 4: thirty year we look like this on a ten year 13 00:00:38,040 --> 00:00:40,640 Speaker 4: maturity yield to lower by a single basis point four 14 00:00:40,720 --> 00:00:43,600 Speaker 4: twenty seven ninety one. The risks have risen, the risks 15 00:00:43,600 --> 00:00:46,519 Speaker 4: have not materialized. The feted chair Jaypouse, says, we're well 16 00:00:46,560 --> 00:00:47,720 Speaker 4: positioned to wait. 17 00:00:49,680 --> 00:00:51,160 Speaker 5: We don't think we need to be in a hurry. 18 00:00:51,200 --> 00:00:52,839 Speaker 5: We think we can be patient. We're in a good 19 00:00:52,840 --> 00:00:54,880 Speaker 5: position to wait and see is the thing. We don't 20 00:00:54,920 --> 00:00:57,200 Speaker 5: have to be in a hurry. The economy has been 21 00:00:57,240 --> 00:01:00,440 Speaker 5: resilient and is doing fairly well. Our policies wills the 22 00:01:00,480 --> 00:01:04,839 Speaker 5: costs of waiting to see further are fairly low. 23 00:01:05,120 --> 00:01:07,280 Speaker 4: So they aren't going to wait, wait to see the 24 00:01:07,319 --> 00:01:10,000 Speaker 4: outcome of trade talks between the United States and China, 25 00:01:10,080 --> 00:01:13,039 Speaker 4: wait to see if this economy breaks one way or 26 00:01:13,040 --> 00:01:13,319 Speaker 4: the other. 27 00:01:13,440 --> 00:01:15,080 Speaker 6: Why don't you just read moby Dick for an hour 28 00:01:15,080 --> 00:01:16,480 Speaker 6: and a half. I mean, honestly, if you want to 29 00:01:16,480 --> 00:01:18,319 Speaker 6: know if the how the Fed looks when they fil abuster, 30 00:01:18,520 --> 00:01:21,640 Speaker 6: this was it. Ultimately, I thought that line was interesting 31 00:01:21,880 --> 00:01:25,280 Speaker 6: that the cost of waiting didn't seem that great. Some 32 00:01:25,319 --> 00:01:28,679 Speaker 6: people Neil data might disagree with that, but this right 33 00:01:28,720 --> 00:01:30,639 Speaker 6: now is their stance. It is in a good place, 34 00:01:30,720 --> 00:01:33,080 Speaker 6: and they did not give any sense of exactly what 35 00:01:33,120 --> 00:01:35,840 Speaker 6: it would do to tip their hand away from that. 36 00:01:35,959 --> 00:01:38,720 Speaker 4: His speech at the Economic Club of Chicago, repeated in 37 00:01:38,760 --> 00:01:41,440 Speaker 4: the news conference this time around. If current trade policy 38 00:01:41,480 --> 00:01:44,160 Speaker 4: is sustained, it could mean high inflation. It could also 39 00:01:44,240 --> 00:01:47,720 Speaker 4: mean lower growth. Our job. We have an obligation Tom 40 00:01:47,760 --> 00:01:49,960 Speaker 4: to anchor inflation expectations. 41 00:01:50,080 --> 00:01:52,240 Speaker 7: The obligation is there, and of course the reach out 42 00:01:52,320 --> 00:01:54,040 Speaker 7: is to when will they do something. There's a lot 43 00:01:54,080 --> 00:01:55,760 Speaker 7: of heat to debate, and Neil Dudda sent me a 44 00:01:55,800 --> 00:02:00,000 Speaker 7: note here from Renaissance Macro. He's scathing is the only 45 00:02:00,160 --> 00:02:03,440 Speaker 7: word I could come up with scathing about their delay here, 46 00:02:03,600 --> 00:02:05,800 Speaker 7: as you mentioned Andrew Hollenhorst, with a view and then 47 00:02:05,800 --> 00:02:08,400 Speaker 7: you go all the way out. Dare I say in 48 00:02:08,520 --> 00:02:12,080 Speaker 7: the next year the dispersion here is right. I just 49 00:02:12,120 --> 00:02:13,680 Speaker 7: want to point out that if you had read the 50 00:02:13,680 --> 00:02:15,200 Speaker 7: cliff notes of Moby. 51 00:02:14,919 --> 00:02:17,160 Speaker 1: Dick, I did a knowledge. 52 00:02:16,919 --> 00:02:18,040 Speaker 2: They could have pulled it off. 53 00:02:19,120 --> 00:02:21,280 Speaker 4: How much in the transitory this time around? Short lived 54 00:02:21,440 --> 00:02:23,560 Speaker 4: or short lived? Yes, it's the new term for the 55 00:02:23,639 --> 00:02:24,639 Speaker 4: chairman of the feder Reserve. 56 00:02:24,720 --> 00:02:26,400 Speaker 6: Yeah, in the sense that they will get clarity as 57 00:02:26,480 --> 00:02:28,680 Speaker 6: time goes on, and right now they have none, but 58 00:02:28,800 --> 00:02:31,480 Speaker 6: it will be made apparent to them as things settle 59 00:02:31,600 --> 00:02:34,920 Speaker 6: into place. This idea, though, that right now the economy 60 00:02:35,000 --> 00:02:37,960 Speaker 6: is still relatively healthy, is one aspect that I think 61 00:02:38,320 --> 00:02:41,079 Speaker 6: maybe is going to become challenging in a month's time. 62 00:02:41,200 --> 00:02:43,320 Speaker 4: Let's get to the conversation joining us now they former 63 00:02:43,360 --> 00:02:46,040 Speaker 4: New York Fed President Bill Duntley, Bill, thank you for 64 00:02:46,160 --> 00:02:49,120 Speaker 4: joining us. They clearly face a range of risks, risks which, 65 00:02:49,120 --> 00:02:51,320 Speaker 4: as the chairman says, have not yet materialized. Can you 66 00:02:51,360 --> 00:02:53,959 Speaker 4: walk us through how you think they've responded to the 67 00:02:54,040 --> 00:02:55,680 Speaker 4: risk they face and what you make of that news 68 00:02:55,680 --> 00:02:58,639 Speaker 4: conference from Sham and Powell, I. 69 00:02:58,560 --> 00:03:01,440 Speaker 1: Don't think the news chre surprising at all. I mean, 70 00:03:01,760 --> 00:03:03,920 Speaker 1: the FED is not really sure where Terrists are going 71 00:03:03,960 --> 00:03:06,600 Speaker 1: to land, which is important, and when they land, they're 72 00:03:06,600 --> 00:03:08,600 Speaker 1: not really sure what the consequences are going to be 73 00:03:08,639 --> 00:03:11,920 Speaker 1: on growth versus inflation, on which side they're going to 74 00:03:11,919 --> 00:03:15,720 Speaker 1: miss their mandate by a greater degree. So I think 75 00:03:16,240 --> 00:03:18,600 Speaker 1: I was expecting him to say something pretty similar to this, 76 00:03:19,080 --> 00:03:20,639 Speaker 1: and if I was in issues, I would have done 77 00:03:20,720 --> 00:03:21,679 Speaker 1: exactly the same thing. 78 00:03:22,000 --> 00:03:22,520 Speaker 2: I thought the. 79 00:03:22,480 --> 00:03:25,240 Speaker 6: Most notable line was the cost of waiting to see 80 00:03:25,560 --> 00:03:28,000 Speaker 6: further data seem fairly low. 81 00:03:28,320 --> 00:03:29,280 Speaker 2: Do you agree with that? 82 00:03:29,440 --> 00:03:32,160 Speaker 6: Do you think that the cost is fairly low of 83 00:03:32,200 --> 00:03:34,560 Speaker 6: simply being parked on the sidelines at a time where 84 00:03:34,560 --> 00:03:37,320 Speaker 6: a lot of people think that there are signs of 85 00:03:37,360 --> 00:03:39,000 Speaker 6: a rapidly slowing economy. 86 00:03:40,200 --> 00:03:42,600 Speaker 1: Well, I think the costs are low relative to the 87 00:03:42,720 --> 00:03:44,880 Speaker 1: risk of making a mistake. You know, Let's imagine that 88 00:03:44,880 --> 00:03:47,119 Speaker 1: the FED cutting rates dramatically because they were worried about 89 00:03:47,160 --> 00:03:49,600 Speaker 1: the labor market, and then it turned out that inflation 90 00:03:49,760 --> 00:03:53,080 Speaker 1: expectations got unanchored and the labor market held up pretty well. 91 00:03:53,280 --> 00:03:55,880 Speaker 1: That'd be a big mistake. And so the FED really 92 00:03:55,880 --> 00:03:58,320 Speaker 1: wants to make sure that they don't go down that path. 93 00:03:58,360 --> 00:04:01,800 Speaker 1: This is not just about the central scenario. It's also 94 00:04:01,800 --> 00:04:04,800 Speaker 1: about risk management. Try not to do the wrong thing 95 00:04:05,480 --> 00:04:09,000 Speaker 1: so that you can respond effectively as things actually unfold. 96 00:04:09,280 --> 00:04:11,600 Speaker 1: So I think the fact that the ter policy is 97 00:04:11,640 --> 00:04:14,800 Speaker 1: not set is important, and the fact that we don't 98 00:04:14,840 --> 00:04:17,400 Speaker 1: have any experience with the tariffs shock of this magnitude 99 00:04:17,480 --> 00:04:20,320 Speaker 1: is also important. So in that environment, it's sort of like, 100 00:04:20,400 --> 00:04:22,560 Speaker 1: you know, the hippocrat, Oh, do no harm to your patient. 101 00:04:22,960 --> 00:04:25,480 Speaker 7: Bill Dudley, part of your charm is you had a 102 00:04:25,560 --> 00:04:28,520 Speaker 7: day job before the FED, job of actually trying to 103 00:04:28,680 --> 00:04:32,320 Speaker 7: forecast out the economy. How would you frame that? Now 104 00:04:32,360 --> 00:04:34,880 Speaker 7: you've got the luxury of not being at golden sacks. 105 00:04:35,400 --> 00:04:38,080 Speaker 7: Can you look out one month? Can you look out 106 00:04:38,080 --> 00:04:42,560 Speaker 7: two quarters? Can you model out a fancy McKelvey Dudley 107 00:04:43,320 --> 00:04:46,279 Speaker 7: jewel out a year right now? I don't think you can. 108 00:04:47,240 --> 00:04:47,920 Speaker 8: No, no way. 109 00:04:48,200 --> 00:04:49,520 Speaker 1: I mean, I think the only thing we can say 110 00:04:49,600 --> 00:04:52,239 Speaker 1: is that the economy, like Teerpaul said, is the economy 111 00:04:52,320 --> 00:04:54,200 Speaker 1: right now it seems to still be in good shape. 112 00:04:54,240 --> 00:04:56,680 Speaker 1: I think the most important thing I took away from 113 00:04:56,680 --> 00:04:58,800 Speaker 1: the press conference that people should take on board is 114 00:04:58,800 --> 00:05:02,160 Speaker 1: the fact that don't take the first quarter GDP at 115 00:05:02,160 --> 00:05:05,279 Speaker 1: face value. The minus point three reading is all because 116 00:05:05,320 --> 00:05:09,719 Speaker 1: of mismeasurements. It's basically, they counted imports a lot better 117 00:05:09,760 --> 00:05:12,800 Speaker 1: than they counted inventories, so there was a big drag 118 00:05:12,839 --> 00:05:15,560 Speaker 1: from imports that was not upset by a big accumulation 119 00:05:15,640 --> 00:05:19,040 Speaker 1: of inventories and domestic private final sales, which he brought 120 00:05:19,080 --> 00:05:21,520 Speaker 1: up repeatedly in the press conference, is really a much 121 00:05:21,560 --> 00:05:24,200 Speaker 1: more representative measure of how the economy is doing, and 122 00:05:24,200 --> 00:05:25,839 Speaker 1: it's doing just fine, rising. 123 00:05:25,600 --> 00:05:27,800 Speaker 8: Three percent, So I think he can put the weight 124 00:05:27,800 --> 00:05:28,560 Speaker 8: on the right things. 125 00:05:28,760 --> 00:05:30,839 Speaker 7: I'd point out you on Olssius with a two percent 126 00:05:30,880 --> 00:05:35,360 Speaker 7: statistic for this present quarter published I believe last weekend, 127 00:05:35,720 --> 00:05:39,800 Speaker 7: Bill Dudley. How does a FED communicate given this mess 128 00:05:40,040 --> 00:05:43,840 Speaker 7: that has been wrought? What do they do in speeches 129 00:05:43,880 --> 00:05:46,440 Speaker 7: coming up? John and I were talking here as we 130 00:05:46,480 --> 00:05:50,760 Speaker 7: are looking at psg Arsenal about Jackson Hole. How do 131 00:05:50,839 --> 00:05:54,240 Speaker 7: they get to Jackson Hole and communicate to the nation. 132 00:05:55,680 --> 00:05:57,680 Speaker 1: Well, you can only communicate to the extens that you 133 00:05:57,720 --> 00:06:00,960 Speaker 1: actually know what's actually going on. So I think it's 134 00:06:01,120 --> 00:06:04,760 Speaker 1: appropriate for the FED not to overpromise or imply that 135 00:06:04,800 --> 00:06:07,640 Speaker 1: they have some crystal magic ball that allows them to 136 00:06:07,640 --> 00:06:11,440 Speaker 1: see in the future when the future is actually ring cloudy. 137 00:06:11,760 --> 00:06:14,280 Speaker 1: What I'm expecting at Jackson Hole, frankly, is the FED 138 00:06:14,320 --> 00:06:17,640 Speaker 1: to talk about their Monitary Policy Framework review and wheel 139 00:06:17,720 --> 00:06:20,320 Speaker 1: that out. And I thought some of the questions at 140 00:06:20,320 --> 00:06:23,160 Speaker 1: the press combs and that were interesting were Paul admitted 141 00:06:23,200 --> 00:06:26,000 Speaker 1: that maybe Quey could have been wrapped up a bit sooner. 142 00:06:27,360 --> 00:06:30,240 Speaker 1: So I think they understand that there are some things 143 00:06:30,240 --> 00:06:32,280 Speaker 1: that they can improve in the monetary Policy framework, and 144 00:06:32,320 --> 00:06:33,920 Speaker 1: so I think that's going to be the most interesting 145 00:06:33,960 --> 00:06:35,240 Speaker 1: outcome of Jackson Hall. 146 00:06:35,440 --> 00:06:35,680 Speaker 2: Bill. 147 00:06:35,720 --> 00:06:37,559 Speaker 4: We've spent a lot of time speaking of FED watches 148 00:06:37,600 --> 00:06:39,320 Speaker 4: on Wall Street, and they've also had a similar thing 149 00:06:39,680 --> 00:06:42,320 Speaker 4: that this time, because of the constraints they might have 150 00:06:42,400 --> 00:06:44,840 Speaker 4: to wag late, they won't be able to act preemptively. 151 00:06:44,920 --> 00:06:47,200 Speaker 4: And I guess it's important to understand his definition of 152 00:06:47,240 --> 00:06:49,760 Speaker 4: being late, because there was this really interesting moment in 153 00:06:49,760 --> 00:06:51,480 Speaker 4: the news conference, and I'd love your thoughts on it. 154 00:06:51,880 --> 00:06:54,719 Speaker 4: He looked at the cutting that they did last year, 155 00:06:54,800 --> 00:06:57,839 Speaker 4: one hundred basis points of rate reductions and said the 156 00:06:57,880 --> 00:07:00,599 Speaker 4: FED was a little late to start cutting last year. 157 00:07:00,720 --> 00:07:03,080 Speaker 4: Just what is the definition of late on the FMC. 158 00:07:05,040 --> 00:07:08,120 Speaker 1: I think late is when you realize that the risk 159 00:07:08,240 --> 00:07:11,520 Speaker 1: on one side of the mandate have become you have 160 00:07:11,600 --> 00:07:15,200 Speaker 1: become very predominant. So if the fact is you're only 161 00:07:15,240 --> 00:07:18,720 Speaker 1: cutting at that moment means that you're probably late because 162 00:07:18,880 --> 00:07:21,520 Speaker 1: the risk have really accumulated on the employment side of 163 00:07:21,560 --> 00:07:23,280 Speaker 1: the ledger. And that's what happened last summer, and the 164 00:07:23,360 --> 00:07:26,560 Speaker 1: uneplayer went up pretty quickly, and the risk of the 165 00:07:26,600 --> 00:07:28,760 Speaker 1: layer markets are of unwinding. 166 00:07:28,360 --> 00:07:30,720 Speaker 9: In a bad way increased, and the Federal Reserve was 167 00:07:30,760 --> 00:07:33,480 Speaker 9: pretty slow to get off the mark, and that's why 168 00:07:33,520 --> 00:07:37,120 Speaker 9: they ultimately cut rates more quickly than they delayed, and 169 00:07:37,120 --> 00:07:39,040 Speaker 9: then they cut more rates quickly than expected. 170 00:07:39,160 --> 00:07:41,360 Speaker 6: I think that that caught John has did attention, and 171 00:07:41,360 --> 00:07:43,800 Speaker 6: a caught mine as well, because some people disagreed and 172 00:07:43,800 --> 00:07:46,280 Speaker 6: said maybe it was proactive in a way that led 173 00:07:46,360 --> 00:07:49,520 Speaker 6: to the increase in longer term benchmark yields this idea 174 00:07:49,560 --> 00:07:52,800 Speaker 6: that maybe actually there was more strength and expected in 175 00:07:52,920 --> 00:07:55,720 Speaker 6: the underlying economy. I just wonder what that means going 176 00:07:55,760 --> 00:07:59,360 Speaker 6: forward about that two percent inflation target. If we're still 177 00:07:59,400 --> 00:08:03,160 Speaker 6: not back, if we did see something of affirming up 178 00:08:03,200 --> 00:08:05,360 Speaker 6: of the labor market, and yet that still is the 179 00:08:05,400 --> 00:08:06,720 Speaker 6: assessment from last year. 180 00:08:08,360 --> 00:08:10,560 Speaker 8: Well, I think there's two things there's are irrelevant going on. 181 00:08:10,680 --> 00:08:13,480 Speaker 1: Number One, the monitor policy may still not be as 182 00:08:13,520 --> 00:08:15,040 Speaker 1: restrictive as the FED thinks. That is, I mean, the 183 00:08:15,080 --> 00:08:18,600 Speaker 1: fact that the Commune's still doing okay with a resupposedly 184 00:08:18,800 --> 00:08:21,320 Speaker 1: restrictive monitary policy in place, I think sort of. 185 00:08:21,640 --> 00:08:22,840 Speaker 8: Is meaningful to at least to me. 186 00:08:24,560 --> 00:08:26,040 Speaker 1: And the second thing I think is going on it's 187 00:08:26,120 --> 00:08:28,160 Speaker 1: really important that people aren't putting up weight on is 188 00:08:28,640 --> 00:08:31,360 Speaker 1: the labor force is going to grow much slower in 189 00:08:31,440 --> 00:08:33,640 Speaker 1: twenty twenty five than it did in twenty twenty three 190 00:08:33,640 --> 00:08:36,280 Speaker 1: and twenty twenty four. So the kind of payroll gains 191 00:08:36,320 --> 00:08:38,800 Speaker 1: you need to keep the unemployed rates stable are much 192 00:08:38,880 --> 00:08:40,880 Speaker 1: dramatically lower this year than last year. 193 00:08:41,000 --> 00:08:42,920 Speaker 6: There is this question going forward of what kind of 194 00:08:42,920 --> 00:08:45,839 Speaker 6: pain tolerance would this FED be willing to accept before 195 00:08:45,960 --> 00:08:47,920 Speaker 6: they start to have the clarity that they need to 196 00:08:47,960 --> 00:08:50,760 Speaker 6: actually make a move. We were talking with Rich Clarita 197 00:08:51,080 --> 00:08:53,160 Speaker 6: just before the press conference, and he said, maybe a 198 00:08:53,200 --> 00:08:56,079 Speaker 6: half a percent increase in the unemployment rate, something material 199 00:08:56,720 --> 00:08:59,760 Speaker 6: that they could point to, what's your assessment that would 200 00:08:59,760 --> 00:09:02,760 Speaker 6: act actually provide clarity at a very unclear moment. 201 00:09:03,960 --> 00:09:06,560 Speaker 8: Well, I think I think Rich Clarida is broadly correct. 202 00:09:06,640 --> 00:09:09,000 Speaker 1: If the unemployer rate starts going up rapidly, like we 203 00:09:09,280 --> 00:09:11,160 Speaker 1: go from four to two to say four to six, 204 00:09:11,720 --> 00:09:13,600 Speaker 1: then the Federal Reserve is going to be thinking, boy, the. 205 00:09:13,640 --> 00:09:16,560 Speaker 8: Layer market really is weakening in a big way. 206 00:09:16,679 --> 00:09:20,720 Speaker 1: We are moving meaningfully away from full employment, and the 207 00:09:20,760 --> 00:09:23,240 Speaker 1: risk in that environment is that we're about to have 208 00:09:23,240 --> 00:09:26,000 Speaker 1: a full blown recession. The SAM role didn't work well 209 00:09:26,040 --> 00:09:28,120 Speaker 1: last year, right, the SAM role. We triggered the sum 210 00:09:28,200 --> 00:09:31,120 Speaker 1: roll and there was no recession. But that happened because 211 00:09:31,160 --> 00:09:33,600 Speaker 1: the labor force was growing very rapidly, and so the 212 00:09:33,720 --> 00:09:36,040 Speaker 1: rise in the uniployer rate was driven by rapid labor 213 00:09:36,040 --> 00:09:38,599 Speaker 1: force growth rather than by layoffs. This year, if the 214 00:09:38,679 --> 00:09:41,560 Speaker 1: unemployer rate rises rapidly, will be driven by laos. 215 00:09:41,840 --> 00:09:42,679 Speaker 8: Bill Doublon, let me. 216 00:09:42,640 --> 00:09:45,679 Speaker 7: Throw in an audible then on that, given a trade war, 217 00:09:45,840 --> 00:09:48,880 Speaker 7: given the ballet in Switzerland here in the coming days, 218 00:09:49,440 --> 00:09:53,520 Speaker 7: are we at risk of damaging the productivity that seems 219 00:09:53,520 --> 00:09:56,600 Speaker 7: so successful over the last twenty four months. 220 00:09:57,760 --> 00:10:01,560 Speaker 1: Absolutely, I mean this is putting investments, spending plans on hold. 221 00:10:01,880 --> 00:10:03,160 Speaker 8: We are almost certainly. 222 00:10:02,880 --> 00:10:04,959 Speaker 1: Going to have supply chain disruptions even if we were 223 00:10:05,000 --> 00:10:07,720 Speaker 1: to resolve this tomorrow, because a lot of ships from 224 00:10:07,760 --> 00:10:11,520 Speaker 1: China aren't landing here at coming to port here, and 225 00:10:11,559 --> 00:10:13,760 Speaker 1: then that means there's going to be a lot less 226 00:10:13,800 --> 00:10:18,800 Speaker 1: time to replenish stores for Christmas. So supply chain disruptions 227 00:10:18,840 --> 00:10:21,160 Speaker 1: to some degree are almost inevitable. And that's assuming that 228 00:10:21,200 --> 00:10:24,120 Speaker 1: you switch things back. You've turned the whole tariff thing 229 00:10:24,200 --> 00:10:25,640 Speaker 1: off almost immediately. 230 00:10:25,960 --> 00:10:28,160 Speaker 4: Hey, Bill, I appreciate your thoughts. As always, built don't 231 00:10:28,160 --> 00:10:31,040 Speaker 4: be the former New York Fed President. The Federal Reserve 232 00:10:31,080 --> 00:10:33,760 Speaker 4: see it like this, the risks of risen to hire, unemployment, 233 00:10:33,880 --> 00:10:37,040 Speaker 4: to hire, inflation, to lower growth. But the risks haven't materialized, 234 00:10:37,440 --> 00:10:40,040 Speaker 4: and the risks are around trade talks as well. The 235 00:10:40,040 --> 00:10:41,920 Speaker 4: President of the United States. In the last two hours 236 00:10:41,960 --> 00:10:43,240 Speaker 4: or so, we've had a load of headlines from the 237 00:10:43,240 --> 00:10:45,319 Speaker 4: Federal Reserve, but maybe the most important headline came from 238 00:10:45,320 --> 00:10:47,640 Speaker 4: the President. The President said, where I'm willing to lower 239 00:10:47,640 --> 00:10:49,880 Speaker 4: tariffs to get China to the table. Now, the US 240 00:10:49,960 --> 00:10:52,160 Speaker 4: is in negotiation mode at the moment, going into talks 241 00:10:52,160 --> 00:10:54,559 Speaker 4: for the weekend, or already talks about talks between the 242 00:10:54,679 --> 00:10:57,400 Speaker 4: United States and China and they can dial up and 243 00:10:57,400 --> 00:11:00,600 Speaker 4: down the tariff by policy whenever they like. You can't 244 00:11:00,640 --> 00:11:03,240 Speaker 4: set policy in a moment like this because you don't 245 00:11:03,280 --> 00:11:05,199 Speaker 4: know what policy is going to be on the other 246 00:11:05,200 --> 00:11:05,959 Speaker 4: side of Washington. 247 00:11:06,120 --> 00:11:09,160 Speaker 6: You don't understand necessarily what the supply chain disruptions are 248 00:11:09,200 --> 00:11:12,079 Speaker 6: going to look like. Let's say they don't lower tariffs 249 00:11:12,160 --> 00:11:15,320 Speaker 6: in anticipation of these types of talks. China has said 250 00:11:15,360 --> 00:11:17,280 Speaker 6: that is the only way to start talks. So does 251 00:11:17,320 --> 00:11:20,160 Speaker 6: that remove the idea of talks from the table entirely, 252 00:11:20,200 --> 00:11:22,680 Speaker 6: even though they might be seeing each other in passing 253 00:11:22,760 --> 00:11:25,440 Speaker 6: in Switzerland. The key question here is how do they 254 00:11:25,440 --> 00:11:27,800 Speaker 6: start to game out whether this is really a pandemic 255 00:11:28,040 --> 00:11:31,400 Speaker 6: like supply side shock, or whether this is something entirely 256 00:11:31,440 --> 00:11:34,400 Speaker 6: different that can get remediated in the near term. That 257 00:11:34,520 --> 00:11:35,880 Speaker 6: is the difficulty that they are grappling. 258 00:11:35,920 --> 00:11:36,400 Speaker 2: It is different. 259 00:11:36,440 --> 00:11:38,720 Speaker 4: We've said it so many times on this program. I've 260 00:11:38,760 --> 00:11:41,240 Speaker 4: heard all these comparisons to COVID. The difference this time 261 00:11:41,320 --> 00:11:43,000 Speaker 4: around is you don't have to wait for the vaccine. 262 00:11:43,040 --> 00:11:45,720 Speaker 4: The president has the vaccine. He can take the tariffs off, 263 00:11:45,840 --> 00:11:48,800 Speaker 4: put the tariffs on whenever he likes. He's in control 264 00:11:48,840 --> 00:11:50,800 Speaker 4: of the virus. If that's a good word to use. 265 00:11:50,840 --> 00:11:53,160 Speaker 4: Probably not, but ultimately he is if you believe there 266 00:11:53,200 --> 00:11:57,280 Speaker 4: are comparisons to COVID. The President is running policy here 267 00:11:57,080 --> 00:11:59,480 Speaker 4: for some runaway virus that we don't have control over. 268 00:12:00,080 --> 00:12:01,640 Speaker 7: Chairman of the Fed right now, I. 269 00:12:01,559 --> 00:12:03,280 Speaker 4: Think he's in charge of what the feder Reserve's about 270 00:12:03,280 --> 00:12:04,600 Speaker 4: to do without it out and this is the problem 271 00:12:04,679 --> 00:12:06,800 Speaker 4: for the feeder reserve. Let's just say in a month, 272 00:12:06,840 --> 00:12:09,920 Speaker 4: these talks are fantastic and the Federal Reserve cut interest 273 00:12:10,000 --> 00:12:13,360 Speaker 4: rates by fifty basis points, seventy five basis points, one 274 00:12:13,440 --> 00:12:15,560 Speaker 4: hundred basis points because they thought these were the new 275 00:12:15,600 --> 00:12:18,199 Speaker 4: rules of the game. All of a sudden, policies offside 276 00:12:18,320 --> 00:12:20,280 Speaker 4: and guess what, we're about to deliver a big tax 277 00:12:20,320 --> 00:12:22,960 Speaker 4: package down in Washington, DC as well. That's why this 278 00:12:23,040 --> 00:12:23,560 Speaker 4: is so hard. 279 00:12:23,920 --> 00:12:24,640 Speaker 10: We vecho J. 280 00:12:24,760 --> 00:12:26,960 Speaker 6: Powell alluded to this, saying there are things that can 281 00:12:27,000 --> 00:12:28,800 Speaker 6: be done. Some things, you know, we haven't seen them 282 00:12:28,800 --> 00:12:30,280 Speaker 6: being done, but there are some things that could be 283 00:12:30,320 --> 00:12:32,680 Speaker 6: done that could actually cause outcomes to be very different. 284 00:12:32,760 --> 00:12:34,400 Speaker 6: Key question, and this is something that comes up in 285 00:12:34,440 --> 00:12:38,360 Speaker 6: a lot of our discussions with analysts and economists. There 286 00:12:38,400 --> 00:12:41,240 Speaker 6: is damage being done. It's not as if this genie 287 00:12:41,320 --> 00:12:43,640 Speaker 6: can go back into the bottle so easily, and there 288 00:12:43,640 --> 00:12:45,160 Speaker 6: are ships that are not going to get here, and 289 00:12:45,200 --> 00:12:48,440 Speaker 6: there are already supply chain disruptions. So at some point 290 00:12:48,600 --> 00:12:50,200 Speaker 6: that is the reason why people are saying the pain 291 00:12:50,280 --> 00:12:52,439 Speaker 6: is already being felt, the damage is being done, it's 292 00:12:52,480 --> 00:12:54,439 Speaker 6: not just a matter of magnitude. 293 00:12:54,679 --> 00:12:57,319 Speaker 7: A number of weeks ago, we had a yeah, but 294 00:12:57,800 --> 00:13:00,640 Speaker 7: where best, and maybe Lutnik had to go the president 295 00:13:00,679 --> 00:13:04,319 Speaker 7: and say you're off side, fix this right now? And 296 00:13:04,400 --> 00:13:06,920 Speaker 7: what in ten minutes they had it fixed. 297 00:13:06,640 --> 00:13:09,320 Speaker 4: And that initiatesd the night day pause we have and 298 00:13:09,360 --> 00:13:11,800 Speaker 4: the negotiations are starting. But if you're the chairman of 299 00:13:11,840 --> 00:13:14,400 Speaker 4: the Federal Reserve, look, it's an industry to go after 300 00:13:14,400 --> 00:13:15,080 Speaker 4: the Federal Reserve. 301 00:13:15,280 --> 00:13:16,040 Speaker 2: We all partake. 302 00:13:16,120 --> 00:13:18,920 Speaker 4: I understand that we've been very critical, but I have 303 00:13:18,960 --> 00:13:21,080 Speaker 4: some sympathy with the institution at the moment, I don't 304 00:13:21,120 --> 00:13:24,080 Speaker 4: understand how you set policy for the medium term in 305 00:13:24,160 --> 00:13:25,200 Speaker 4: a moment like this one. 306 00:13:25,559 --> 00:13:28,200 Speaker 6: I think that's the reason why the policy tool that 307 00:13:28,280 --> 00:13:32,280 Speaker 6: is communication is now filibustering, because ultimately there is no 308 00:13:32,360 --> 00:13:34,880 Speaker 6: communication that can be had at a time where there 309 00:13:34,920 --> 00:13:38,160 Speaker 6: is no information, solid information that can be had and 310 00:13:38,240 --> 00:13:40,839 Speaker 6: so maybe maybe we'll get more to the limits. 311 00:13:40,880 --> 00:13:41,439 Speaker 2: Of course, you know. 312 00:13:42,920 --> 00:13:46,720 Speaker 7: That is co dependent on the president. The president's driving 313 00:13:46,760 --> 00:13:51,959 Speaker 7: the dialogue right now. It's standard psychiatric work. They're codependent 314 00:13:52,080 --> 00:13:53,000 Speaker 7: at the White House. 315 00:13:53,600 --> 00:13:55,760 Speaker 4: The White House is in the drive and seat couldn't 316 00:13:55,880 --> 00:13:58,040 Speaker 4: be more TK. Mi McKay was in the room. He's 317 00:13:58,040 --> 00:13:59,840 Speaker 4: out of the room now. Mi McKay, welcome back to 318 00:13:59,840 --> 00:14:02,559 Speaker 4: the You said it multiple times, Mike can the lead 319 00:14:02,600 --> 00:14:04,600 Speaker 4: up to this. I don't have anything to add on that. 320 00:14:05,120 --> 00:14:07,680 Speaker 4: Chaman Powell and Mike on a number of issues. He 321 00:14:07,720 --> 00:14:08,920 Speaker 4: didn't have much to add. 322 00:14:10,480 --> 00:14:13,080 Speaker 10: No, he didn't. You've been talking about it. The FED 323 00:14:13,120 --> 00:14:15,520 Speaker 10: doesn't know what's going to happen. Nobody knows what's going 324 00:14:15,520 --> 00:14:18,120 Speaker 10: to happen, so you can't make policy. But one thing 325 00:14:18,160 --> 00:14:20,960 Speaker 10: I would add is that you've been talking about this 326 00:14:21,120 --> 00:14:24,160 Speaker 10: as a supply shock, which it very well could be, 327 00:14:24,160 --> 00:14:26,640 Speaker 10: but the FED was also setting the message today that 328 00:14:26,760 --> 00:14:29,760 Speaker 10: it could be a demand shock. And if there's a 329 00:14:30,000 --> 00:14:34,240 Speaker 10: demand shock, it could be reflected in things beyond just 330 00:14:34,360 --> 00:14:38,680 Speaker 10: the unemployment rate and the inflation rate. We could see 331 00:14:38,680 --> 00:14:43,160 Speaker 10: people start to pull back on spending significantly because either 332 00:14:43,200 --> 00:14:46,160 Speaker 10: the shelves are empty or because they think things are 333 00:14:46,200 --> 00:14:48,880 Speaker 10: going to be bad. Maybe they listened to Jay Powell 334 00:14:48,880 --> 00:14:52,520 Speaker 10: today talking about the elevated risks. So there's a lot 335 00:14:52,600 --> 00:14:55,000 Speaker 10: going on, a lot of cross currents going on, and 336 00:14:55,080 --> 00:14:57,520 Speaker 10: it really comes down to how does all this affect 337 00:14:57,680 --> 00:15:00,840 Speaker 10: the consumer? And by that I also mean businesses, because 338 00:15:01,120 --> 00:15:04,480 Speaker 10: as you reported, every day people are pulling guidance. They 339 00:15:04,520 --> 00:15:06,920 Speaker 10: don't know what's going to happen. So at this point 340 00:15:07,280 --> 00:15:09,680 Speaker 10: the economy could go either way. The Fed's stuck in 341 00:15:09,720 --> 00:15:13,160 Speaker 10: the middle. And really there isn't much to say about 342 00:15:13,200 --> 00:15:16,040 Speaker 10: the FED for right now except that they're watching like 343 00:15:16,080 --> 00:15:16,480 Speaker 10: we are. 344 00:15:16,760 --> 00:15:16,920 Speaker 1: Mike. 345 00:15:16,960 --> 00:15:19,120 Speaker 6: You're a student of FED history, and I wonder how 346 00:15:19,200 --> 00:15:23,360 Speaker 6: much this has a parallel in recent history at a 347 00:15:23,400 --> 00:15:26,000 Speaker 6: time when the FED is just going to say uncertainty 348 00:15:26,040 --> 00:15:28,160 Speaker 6: in fifteen different ways and then sometimes the same way 349 00:15:28,200 --> 00:15:28,960 Speaker 6: over and over again. 350 00:15:30,400 --> 00:15:34,400 Speaker 10: Well, I think there isn't an exact comparison, but what 351 00:15:34,440 --> 00:15:37,200 Speaker 10: you might look at is obviously the pandemic, where nobody 352 00:15:37,240 --> 00:15:39,000 Speaker 10: knew what was going to happen, because we hadn't had 353 00:15:39,080 --> 00:15:41,760 Speaker 10: this happen before, and so the FED was stuck in 354 00:15:41,800 --> 00:15:44,400 Speaker 10: a situation where it knew things were bad, it knew 355 00:15:44,480 --> 00:15:47,120 Speaker 10: it had to do something but how long did that 356 00:15:47,200 --> 00:15:49,240 Speaker 10: have to go on and how far did they need 357 00:15:49,280 --> 00:15:52,160 Speaker 10: to go? That was the question that was never really 358 00:15:52,200 --> 00:15:55,080 Speaker 10: decided and we kept talking about for months and months. 359 00:15:55,320 --> 00:15:59,400 Speaker 10: But the idea of we've got stagflation out there, but 360 00:15:59,440 --> 00:16:01,080 Speaker 10: we don't know if it's going to happen, and if 361 00:16:01,120 --> 00:16:03,000 Speaker 10: it does happen, we don't know how bad it's going 362 00:16:03,040 --> 00:16:06,360 Speaker 10: to be or when it's going to happen. That I 363 00:16:06,400 --> 00:16:08,600 Speaker 10: don't see any precedent for Michael. 364 00:16:08,360 --> 00:16:12,640 Speaker 7: McKee for International Audience briefest right now and you and 365 00:16:12,680 --> 00:16:16,160 Speaker 7: I know the shadow FOMC iconic at Carnegie Mellon and 366 00:16:16,240 --> 00:16:21,600 Speaker 7: the rest tell us about the Trumpian shadow FOMC right now? 367 00:16:22,160 --> 00:16:25,960 Speaker 7: Is there coalescing a beast that's going to send signals, 368 00:16:26,040 --> 00:16:32,560 Speaker 7: send messages? Critique Jerown Powell. 369 00:16:30,640 --> 00:16:33,600 Speaker 10: Well, there are a couple of different groups going on. 370 00:16:33,760 --> 00:16:37,120 Speaker 10: You could say the Shadow Open Market Committee doesn't really 371 00:16:37,120 --> 00:16:39,200 Speaker 10: have a lot of critiques at this point other than 372 00:16:39,440 --> 00:16:41,880 Speaker 10: what we were talking about earlier, the Fed's mission creep. 373 00:16:43,000 --> 00:16:46,000 Speaker 10: The question I asked him, there are people who are 374 00:16:46,120 --> 00:16:50,440 Speaker 10: contenders for the FED chairmanship when the President finally makes 375 00:16:50,440 --> 00:16:52,840 Speaker 10: a decision, who could be having things to say. Kevin 376 00:16:52,880 --> 00:16:57,320 Speaker 10: Warsh talked last week a week before about that. But 377 00:16:57,560 --> 00:16:59,880 Speaker 10: really the opposition or the people who are going to 378 00:17:00,200 --> 00:17:03,200 Speaker 10: the questions are in the administration right now. Because the 379 00:17:03,240 --> 00:17:06,240 Speaker 10: President wants to influence the FED. He can't really do it, 380 00:17:06,280 --> 00:17:07,720 Speaker 10: but he wants to. So there are going to be 381 00:17:07,800 --> 00:17:09,479 Speaker 10: other people who are going to pick up on this 382 00:17:09,560 --> 00:17:13,240 Speaker 10: stuff and talk about it. Scott Besson's been asked about it. 383 00:17:13,320 --> 00:17:16,320 Speaker 10: He was asked about it today. They want the FED 384 00:17:16,359 --> 00:17:19,440 Speaker 10: to lower rates, but I think mister Bessett knows even 385 00:17:19,440 --> 00:17:22,360 Speaker 10: if mister Trump doesn't, the FED can't move right now 386 00:17:22,359 --> 00:17:24,080 Speaker 10: because they don't know what mister Trump's going to do. 387 00:17:24,400 --> 00:17:26,920 Speaker 4: My McKay appreciate the reaction we're here from Mike throughout 388 00:17:26,920 --> 00:17:29,760 Speaker 4: today on Blombag TV and on Bloomberg Radio. So we've 389 00:17:29,760 --> 00:17:32,080 Speaker 4: had plenty of sympathy for the institution. It ends right now. 390 00:17:32,320 --> 00:17:35,359 Speaker 4: Here's the criticism. It goes like this. I've heard it 391 00:17:35,400 --> 00:17:39,000 Speaker 4: now from the previous Minneapolis FED president, Saint Louis FED 392 00:17:39,000 --> 00:17:42,040 Speaker 4: President rather Jim Ballad. I've heard it directly from muhammadan 393 00:17:42,080 --> 00:17:44,760 Speaker 4: Aeron as well, that this FEDER reserve is only really 394 00:17:44,880 --> 00:17:47,440 Speaker 4: entertaining one scenario. They hear a lot of people talking 395 00:17:47,480 --> 00:17:49,760 Speaker 4: about a wide range of outcomes, but emphasis matters at 396 00:17:49,760 --> 00:17:52,080 Speaker 4: a news conference, and the emphasis which Sham and Powell 397 00:17:52,119 --> 00:17:55,880 Speaker 4: keeps landing on stackflation without saying stackflation, and Jibilla said 398 00:17:55,920 --> 00:17:58,720 Speaker 4: this Muhamma set it as well. What they don't entertain 399 00:17:59,040 --> 00:18:01,520 Speaker 4: is the prospect of a good outcome, the prospect that 400 00:18:01,560 --> 00:18:03,840 Speaker 4: the Chinese turn around over the next few weeks and say, 401 00:18:03,880 --> 00:18:05,639 Speaker 4: you know what will give you what you want. The 402 00:18:05,720 --> 00:18:08,000 Speaker 4: Europeans do the same thing, and you end up in 403 00:18:08,000 --> 00:18:10,399 Speaker 4: a situation where you have lower teriffs, and maybe you 404 00:18:10,480 --> 00:18:12,200 Speaker 4: end up in a situation where you have a reduced 405 00:18:12,240 --> 00:18:14,280 Speaker 4: tax rate as well, and perhaps by the end of 406 00:18:14,280 --> 00:18:15,840 Speaker 4: this year you're in a better position for both the 407 00:18:15,880 --> 00:18:18,680 Speaker 4: risk assets and growth too. And you don't hear any 408 00:18:18,720 --> 00:18:20,720 Speaker 4: of that when you listen to Chairman powt and I 409 00:18:20,720 --> 00:18:22,480 Speaker 4: didn't hear much of that at all in the last 410 00:18:22,560 --> 00:18:23,119 Speaker 4: ninety minutes. 411 00:18:23,280 --> 00:18:25,720 Speaker 6: There is a key question here. Is there a scenario 412 00:18:25,720 --> 00:18:27,520 Speaker 6: in which they would have to high rates. Is there 413 00:18:27,560 --> 00:18:29,679 Speaker 6: a scenario in which they don't have to move at all, 414 00:18:29,720 --> 00:18:32,560 Speaker 6: because this is a soft landing in the same kind 415 00:18:32,560 --> 00:18:34,960 Speaker 6: of way that they used to with no tariffs. There 416 00:18:35,040 --> 00:18:38,880 Speaker 6: is a positive economic outcome that he kind of alluded 417 00:18:38,880 --> 00:18:41,399 Speaker 6: to in passing, but it wasn't necessarily the main story. 418 00:18:41,480 --> 00:18:44,679 Speaker 4: Yeah, kinda but not really very Joining us now to 419 00:18:44,680 --> 00:18:47,879 Speaker 4: discuss Jeff Rosenberg of Black Croc geff I make it simple, 420 00:18:48,000 --> 00:18:50,399 Speaker 4: is this a moment to own bonds and if so, 421 00:18:50,520 --> 00:18:51,240 Speaker 4: wear on the curve. 422 00:18:53,160 --> 00:18:56,520 Speaker 3: It's certainly a moment to be adding diversification to your 423 00:18:56,560 --> 00:19:00,119 Speaker 3: portfolio because the whole theme everybody's been talking about, and 424 00:19:00,160 --> 00:19:03,199 Speaker 3: Powell answered in multiple ways, is we don't know and 425 00:19:03,240 --> 00:19:06,200 Speaker 3: he doesn't know, and it's heightened uncertainty. So you need 426 00:19:06,240 --> 00:19:08,840 Speaker 3: more balance in your portfolio. And now the subsequent question 427 00:19:08,960 --> 00:19:11,200 Speaker 3: is the bonds give it to you? And there I'd 428 00:19:11,240 --> 00:19:14,560 Speaker 3: say you got to be more anchored to the front 429 00:19:14,640 --> 00:19:16,960 Speaker 3: end of the curve. The back end has a lot 430 00:19:16,960 --> 00:19:20,119 Speaker 3: of uncertainty. You got to look for alternative ways of 431 00:19:20,200 --> 00:19:25,400 Speaker 3: finding diversification in your portfolio. And beta exposures are just directional. 432 00:19:25,960 --> 00:19:27,760 Speaker 3: Is the market going up? Is it going down? Is 433 00:19:27,760 --> 00:19:29,600 Speaker 3: it a good outcome? Is it a bad outcome? Is 434 00:19:30,000 --> 00:19:33,480 Speaker 3: as LISTA was just outlining, you know, it's incredibly uncertain 435 00:19:33,600 --> 00:19:36,600 Speaker 3: and so it's a time for diversification. 436 00:19:36,920 --> 00:19:40,240 Speaker 6: Jeff, This feels like in high school when someone really 437 00:19:40,280 --> 00:19:42,760 Speaker 6: likes someone else, and they keep talking about them at nauseum, 438 00:19:42,800 --> 00:19:44,520 Speaker 6: and you feel like there's nothing else to talk about, 439 00:19:44,760 --> 00:19:46,760 Speaker 6: and you're kind of sick of the conversation, but you 440 00:19:46,760 --> 00:19:48,920 Speaker 6: feel like you have to keep entertaining it. It feels 441 00:19:48,920 --> 00:19:50,720 Speaker 6: like everyone's trying to get into the head of one 442 00:19:50,800 --> 00:19:52,840 Speaker 6: person again and again and again and is sort of 443 00:19:52,880 --> 00:19:54,160 Speaker 6: exhausted by the end of the day. 444 00:19:54,400 --> 00:19:55,600 Speaker 2: How do you rise above. 445 00:19:55,359 --> 00:19:58,600 Speaker 6: That and understand what's actually happening in the economy in 446 00:19:58,640 --> 00:20:01,040 Speaker 6: some kind of way, to understand what way things are turning. 447 00:20:02,920 --> 00:20:05,000 Speaker 3: Yeah, it's a good it's a it's a good metaphor, 448 00:20:05,040 --> 00:20:08,119 Speaker 3: it's fun metaphor, and uh, and it's and a tough question. 449 00:20:08,200 --> 00:20:10,920 Speaker 3: And I think one one way is to really think 450 00:20:10,920 --> 00:20:14,360 Speaker 3: about it from a portfolio construction point of view of 451 00:20:14,600 --> 00:20:16,159 Speaker 3: what am I exposed. 452 00:20:15,680 --> 00:20:16,800 Speaker 2: To in my portfolio? 453 00:20:16,960 --> 00:20:20,520 Speaker 3: Right, So, if it's about one person and one outcome, 454 00:20:20,880 --> 00:20:24,440 Speaker 3: that's kind of the antithesis to what we've all learned 455 00:20:24,560 --> 00:20:26,440 Speaker 3: over the years of how to build a good portfolio. 456 00:20:26,440 --> 00:20:29,359 Speaker 3: Don't put all your eggs in one basket. In this context, 457 00:20:29,359 --> 00:20:32,720 Speaker 3: it is, don't have all of your outcomes determined by 458 00:20:33,000 --> 00:20:38,040 Speaker 3: that uncertain and unforecastable outcome. Uh, and so that's really 459 00:20:38,080 --> 00:20:40,760 Speaker 3: about diversifying my sources of return. I've talked about it 460 00:20:40,840 --> 00:20:43,800 Speaker 3: on this program before. Often all we talk about is 461 00:20:43,840 --> 00:20:47,280 Speaker 3: the beta outcome, the directional outcome. And there's another good 462 00:20:47,320 --> 00:20:50,639 Speaker 3: news story here for investors, which is all this uncertainty 463 00:20:51,400 --> 00:20:56,840 Speaker 3: actually increases opportunities. But if you're investing not in directional space, 464 00:20:56,920 --> 00:20:59,639 Speaker 3: but in the cross section, and so you're creating bigger 465 00:20:59,680 --> 00:21:04,199 Speaker 3: winners and losers in the micro space, there's greater divergences 466 00:21:04,280 --> 00:21:06,119 Speaker 3: and dispersion in the macro space. 467 00:21:06,400 --> 00:21:07,840 Speaker 2: And so if you have strategies that. 468 00:21:07,880 --> 00:21:13,000 Speaker 3: Are more about betting on the differences and not the direction, 469 00:21:13,880 --> 00:21:17,240 Speaker 3: you can balance out your exposure to not just one 470 00:21:17,320 --> 00:21:20,560 Speaker 3: person that's a really tough outcome, but to hundreds of 471 00:21:20,600 --> 00:21:23,639 Speaker 3: different outcomes that's a better chance for success. And that's 472 00:21:23,680 --> 00:21:27,320 Speaker 3: a way to pivot away from this kind of unipolar focus. 473 00:21:27,000 --> 00:21:29,919 Speaker 2: On that you know, popular person in high school. 474 00:21:32,640 --> 00:21:41,040 Speaker 8: Is there anything else you'd like to a pod? 475 00:21:43,359 --> 00:21:45,560 Speaker 6: Good idea, just sort of it's just sort of exhausting. 476 00:21:45,560 --> 00:21:48,080 Speaker 2: There's something more to say or talk about. Everyone's exhausting. 477 00:21:48,160 --> 00:21:50,320 Speaker 8: I'll take that from you. There's no question about that. 478 00:21:50,680 --> 00:21:51,200 Speaker 2: Jeff Off. 479 00:21:51,240 --> 00:21:54,240 Speaker 7: Your remit what I'm seeing is a multi standard deviation 480 00:21:54,520 --> 00:22:02,640 Speaker 7: move in selected currencies. Where's your unexpected out there across equities, bonds, commodities, 481 00:22:02,680 --> 00:22:05,800 Speaker 7: and particularly the depth of the currency markets. 482 00:22:07,160 --> 00:22:10,680 Speaker 3: Yeah, I mean the FX move is really important here, right, 483 00:22:10,760 --> 00:22:13,320 Speaker 3: and so like let's just kind of look at what's 484 00:22:13,359 --> 00:22:15,800 Speaker 3: happened in markets since April second. 485 00:22:15,880 --> 00:22:18,680 Speaker 2: Is you've had this remarkable rebound in. 486 00:22:18,680 --> 00:22:25,560 Speaker 3: Risky assets, equities, subequity indices, factor exposures, and we've kind 487 00:22:25,560 --> 00:22:28,320 Speaker 3: of are above in many of those measures. The April 488 00:22:28,359 --> 00:22:32,600 Speaker 3: second tariff Day Liberation Day announcement. The one exception, you know, 489 00:22:32,720 --> 00:22:34,520 Speaker 3: all a lot of these boxes are the same. Which 490 00:22:34,520 --> 00:22:37,639 Speaker 3: one's different is the dollar and the FX piece of that, 491 00:22:37,760 --> 00:22:40,960 Speaker 3: and that's really talking about kind of the global impact 492 00:22:41,119 --> 00:22:44,320 Speaker 3: here and that that hasn't been resolved because you know, 493 00:22:44,440 --> 00:22:48,320 Speaker 3: are we going to be talking about deficit equalization or 494 00:22:48,440 --> 00:22:52,119 Speaker 3: tariff equalization. The latter is a pretty good outcome to 495 00:22:52,160 --> 00:22:55,360 Speaker 3: the earlier conversation. You could get lower tariffs, This could 496 00:22:55,400 --> 00:22:58,199 Speaker 3: be really positive. But the former, which is what was 497 00:22:58,240 --> 00:23:03,680 Speaker 3: the initial thrust of the policy announcement, is deficit equalization. 498 00:23:03,880 --> 00:23:06,840 Speaker 3: That's very problematic and it's problematic to the flip side 499 00:23:06,840 --> 00:23:10,360 Speaker 3: of deficit equalization is a big collapse in the US 500 00:23:10,359 --> 00:23:12,600 Speaker 3: capital account surplus, and that's what you see on the 501 00:23:12,640 --> 00:23:13,320 Speaker 3: currency piece. 502 00:23:13,560 --> 00:23:14,920 Speaker 2: That's the big surprise move. 503 00:23:15,080 --> 00:23:18,639 Speaker 3: We got to keep an eye on that, and I 504 00:23:18,640 --> 00:23:22,119 Speaker 3: think that's a really key development. You know, especially as 505 00:23:22,160 --> 00:23:26,080 Speaker 3: we go through each one of these announcements on bilateral 506 00:23:26,119 --> 00:23:30,399 Speaker 3: trade negotiations, you're going to look at the voting evaluation 507 00:23:30,680 --> 00:23:33,080 Speaker 3: of those pronouncements in the currency markets. 508 00:23:33,119 --> 00:23:34,000 Speaker 2: I think you'll get a good read. 509 00:23:34,240 --> 00:23:36,440 Speaker 6: This goes to the heart of your whole discussion around 510 00:23:36,440 --> 00:23:40,560 Speaker 6: diversification and balance. How much is that diversification and balance 511 00:23:40,640 --> 00:23:44,359 Speaker 6: increasingly international as a result of that uncertainty around the 512 00:23:44,400 --> 00:23:45,959 Speaker 6: dollar and the space going forward. 513 00:23:47,160 --> 00:23:49,600 Speaker 3: Yeah, I mean that's a huge theme. You see it 514 00:23:49,640 --> 00:23:50,920 Speaker 3: in the flows, you see it in the. 515 00:23:50,880 --> 00:23:53,000 Speaker 2: Relative equity returns. 516 00:23:53,280 --> 00:23:58,240 Speaker 3: It's partly what's reflective in the currency that you are 517 00:23:58,400 --> 00:24:01,879 Speaker 3: seeing from a global investor perspective, kind of a questioning 518 00:24:02,119 --> 00:24:07,080 Speaker 3: of the overweighting that has existed in say equity portfolios 519 00:24:07,160 --> 00:24:09,639 Speaker 3: because of the dominance of US capital markets. 520 00:24:09,720 --> 00:24:09,800 Speaker 7: Right. 521 00:24:09,840 --> 00:24:13,560 Speaker 3: You look at GDP VERSUS market cap differentials and you 522 00:24:13,600 --> 00:24:16,119 Speaker 3: have a very big gap. The largest gap is in 523 00:24:16,160 --> 00:24:19,040 Speaker 3: the US, and so that's one way of sort of 524 00:24:19,080 --> 00:24:22,880 Speaker 3: thinking about where would the rebalancing occur, and the trigger 525 00:24:22,960 --> 00:24:25,639 Speaker 3: for that is again this assessment. Are we going to 526 00:24:25,680 --> 00:24:29,400 Speaker 3: push further on this policy towards deficit equalization? 527 00:24:29,960 --> 00:24:32,120 Speaker 2: Then I think you're going to be looking. 528 00:24:31,880 --> 00:24:37,600 Speaker 3: More at equalization between market cap and say GDP contributions 529 00:24:37,840 --> 00:24:39,200 Speaker 3: in the global cross section. 530 00:24:39,080 --> 00:24:41,520 Speaker 7: John and John. The fiscal debate may get overwhelmed by 531 00:24:41,560 --> 00:24:44,000 Speaker 7: the actual data of employment and interest rates, back to 532 00:24:44,080 --> 00:24:46,119 Speaker 7: the FED and all that, But I would go back 533 00:24:46,160 --> 00:24:48,080 Speaker 7: to what you and I first talked about decades ago, 534 00:24:48,119 --> 00:24:51,280 Speaker 7: which is Euroswissy and the fact that you have strong 535 00:24:51,400 --> 00:24:55,399 Speaker 7: Swiss right now, and as Jeff alluded to, anybody in 536 00:24:55,440 --> 00:24:57,800 Speaker 7: equity who's including all our listeners and viewers in the 537 00:24:57,840 --> 00:25:02,000 Speaker 7: stock market, don't forget a monitor foreign exchange each and 538 00:25:02,040 --> 00:25:05,000 Speaker 7: every day. The Swiss Frank is talking right now. 539 00:25:05,040 --> 00:25:06,960 Speaker 4: And these central banks will have a decision to make 540 00:25:07,000 --> 00:25:08,480 Speaker 4: how to respond to some of these shocks, and I 541 00:25:08,520 --> 00:25:11,639 Speaker 4: think it's clear the kind of decision they're making so far, Lisa, 542 00:25:11,680 --> 00:25:14,679 Speaker 4: We've talked about it, the ECB reducing interest rates, the 543 00:25:14,760 --> 00:25:18,000 Speaker 4: Chinese coming out reducing interest rates, the Federal Reserve doesn't 544 00:25:18,040 --> 00:25:20,280 Speaker 4: really understand the nature of the shock yet. The rest 545 00:25:20,280 --> 00:25:23,000 Speaker 4: of the world has decided it's disinflationary. Maybe they have 546 00:25:23,040 --> 00:25:25,040 Speaker 4: the capacity to reduce interest rates in a way that 547 00:25:25,040 --> 00:25:27,240 Speaker 4: the Federal Reserve does not. But we've talked about this 548 00:25:27,240 --> 00:25:31,040 Speaker 4: a million times trade talks. Things can change from hour 549 00:25:31,080 --> 00:25:33,399 Speaker 4: to hour, never mind day to day. It's only a 550 00:25:33,440 --> 00:25:35,399 Speaker 4: few hours ago we read a headline from the President 551 00:25:35,400 --> 00:25:37,639 Speaker 4: of the United States that said he wasn't willing to 552 00:25:37,640 --> 00:25:40,520 Speaker 4: reduce terarists to engage in negotiations with the Chinese. And 553 00:25:40,560 --> 00:25:43,040 Speaker 4: then we have reporting moments ago that says the President 554 00:25:43,080 --> 00:25:46,080 Speaker 4: is ready to rescind global chip curbs. Now, this is 555 00:25:46,080 --> 00:25:49,000 Speaker 4: sort of one versus the other. Every single headline moves 556 00:25:49,000 --> 00:25:51,639 Speaker 4: this market one way versus the next. The Federal Reserve 557 00:25:51,680 --> 00:25:54,560 Speaker 4: can't behave that way. It can't reduce rates twenty five 558 00:25:54,600 --> 00:25:57,680 Speaker 4: minutes ago and then hikem the next That's the problem 559 00:25:57,760 --> 00:25:58,560 Speaker 4: they've got at the moment. 560 00:25:58,600 --> 00:26:00,680 Speaker 6: In fairness, a lot of people feel like they can't 561 00:26:00,680 --> 00:26:02,560 Speaker 6: live like this right now. A lot of traders out 562 00:26:02,560 --> 00:26:04,160 Speaker 6: there are saying, what's the point. I mean, you see 563 00:26:04,160 --> 00:26:06,439 Speaker 6: that whip saw in the Nasdaq in particular, this is 564 00:26:06,440 --> 00:26:10,159 Speaker 6: something that Nvidia has wanted. There is this tension between 565 00:26:10,160 --> 00:26:12,600 Speaker 6: the fast moving headlines of a tweet or a truth 566 00:26:13,040 --> 00:26:16,359 Speaker 6: or a statement with the real economy and companies that 567 00:26:16,400 --> 00:26:19,680 Speaker 6: have to make longer term decisions. And as an investor, 568 00:26:19,840 --> 00:26:22,440 Speaker 6: especially where speed was your friend, how do you deal 569 00:26:22,480 --> 00:26:24,400 Speaker 6: with that in a very different. 570 00:26:24,080 --> 00:26:25,880 Speaker 2: Backdrop, Jeffy, you toda this yet? 571 00:26:26,040 --> 00:26:26,679 Speaker 4: How you fading? 572 00:26:28,359 --> 00:26:29,400 Speaker 2: Look, we're feeling great. 573 00:26:29,520 --> 00:26:32,480 Speaker 3: This is creating a lot of opportunities if you know 574 00:26:32,560 --> 00:26:36,119 Speaker 3: where to look and rewait your sources of returns away 575 00:26:36,119 --> 00:26:38,840 Speaker 3: from the stuff that's impossible to forecast, right and so 576 00:26:38,960 --> 00:26:41,720 Speaker 3: like in this last conversation, this is sort of in 577 00:26:41,800 --> 00:26:46,040 Speaker 3: our kind of systematic framing. It's like momentum signals versus reversal. 578 00:26:46,359 --> 00:26:50,240 Speaker 3: Momentum is a really tough strategy right now. Reversal much better, 579 00:26:50,640 --> 00:26:52,880 Speaker 3: exactly the description that you're just talking about. One day, 580 00:26:52,880 --> 00:26:56,080 Speaker 3: it's one headline, even within a headline. Within a day, 581 00:26:56,280 --> 00:26:59,600 Speaker 3: the headlines are reversing around. So that creates opportunities if 582 00:26:59,640 --> 00:27:02,879 Speaker 3: you're way your sources returns to the right environment. And 583 00:27:02,920 --> 00:27:06,280 Speaker 3: it's just kind of like recognizing, Look, the easy momentum 584 00:27:06,359 --> 00:27:10,959 Speaker 3: macro trade of the post COVID environment is not the 585 00:27:11,000 --> 00:27:13,160 Speaker 3: trade right now. It's much more in the cross section, 586 00:27:13,320 --> 00:27:17,480 Speaker 3: much more reversal. That's where you can find some opportunities. 587 00:27:17,480 --> 00:27:19,919 Speaker 3: And if you're trying to predict, you know what the 588 00:27:19,960 --> 00:27:22,359 Speaker 3: next you know trade headline is going to be, that's 589 00:27:22,400 --> 00:27:24,040 Speaker 3: going to be a very frustrating place. 590 00:27:24,119 --> 00:27:24,800 Speaker 2: Yeah, good luck to you. 591 00:27:24,880 --> 00:27:27,239 Speaker 4: Never mind within a day, within the hour, Jeff, Thank you, sir, 592 00:27:27,359 --> 00:27:29,840 Speaker 4: Jeff Rosenberg of Flackrock. The latest reporting from the team 593 00:27:29,840 --> 00:27:33,159 Speaker 4: here at Bloomberg the Trump administration planning to rescind Binden 594 00:27:33,280 --> 00:27:37,000 Speaker 4: Era AI chip curbs. According to people familiar with the METSA. 595 00:27:37,520 --> 00:27:39,280 Speaker 6: You look at in video shares, there are more than 596 00:27:39,320 --> 00:27:41,560 Speaker 6: two percent on this news, and it makes sense given 597 00:27:41,600 --> 00:27:44,399 Speaker 6: how vociferously against this they've been. This goes to the 598 00:27:44,480 --> 00:27:47,600 Speaker 6: question of what is the ultimate goal of some of 599 00:27:47,640 --> 00:27:49,879 Speaker 6: the tit for tat in the trade war that is 600 00:27:49,880 --> 00:27:53,160 Speaker 6: between the China and the US. Is it just completely 601 00:27:53,200 --> 00:27:56,119 Speaker 6: coupling when it comes to tech? Is this trying to 602 00:27:56,280 --> 00:27:58,720 Speaker 6: tweak the rules confusing