Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: This is a breaking news update from Bloomberg.
Speaker 3: Instant reaction and analysis from our three thousand journalists and
Speaker 3: analysts around the world.
Speaker 4: The Chairman of the Federal Reserve wrapping up the main
Speaker 4: news conference, depressed, doing their best to make that interesting.
Speaker 4: The Chairman doing his best to make it boring, and
Speaker 4: I think he was fairly successful. Your equity market this
Speaker 4: afternoon looks like this equity is positive by just a
Speaker 4: tenth of one percent on the S and P five
Speaker 4: hundred in the bond market on a two year, ten year,
Speaker 4: thirty year we look like this on a ten year
Speaker 4: maturity yield to lower by a single basis point four
Speaker 4: twenty seven ninety one. The risks have risen, the risks
Speaker 4: have not materialized. The feted chair Jaypouse, says, we're well
Speaker 4: positioned to wait.
Speaker 5: We don't think we need to be in a hurry.
Speaker 5: We think we can be patient. We're in a good
Speaker 5: position to wait and see is the thing. We don't
Speaker 5: have to be in a hurry. The economy has been
Speaker 5: resilient and is doing fairly well. Our policies wills the
Speaker 5: costs of waiting to see further are fairly low.
Speaker 4: So they aren't going to wait, wait to see the
Speaker 4: outcome of trade talks between the United States and China,
Speaker 4: wait to see if this economy breaks one way or
Speaker 4: the other.
Speaker 6: Why don't you just read moby Dick for an hour
Speaker 6: and a half. I mean, honestly, if you want to
Speaker 6: know if the how the Fed looks when they fil abuster,
Speaker 6: this was it. Ultimately, I thought that line was interesting
Speaker 6: that the cost of waiting didn't seem that great. Some
Speaker 6: people Neil data might disagree with that, but this right
Speaker 6: now is their stance. It is in a good place,
Speaker 6: and they did not give any sense of exactly what
Speaker 6: it would do to tip their hand away from that.
Speaker 4: His speech at the Economic Club of Chicago, repeated in
Speaker 4: the news conference this time around. If current trade policy
Speaker 4: is sustained, it could mean high inflation. It could also
Speaker 4: mean lower growth. Our job. We have an obligation Tom
Speaker 4: to anchor inflation expectations.
Speaker 7: The obligation is there, and of course the reach out
Speaker 7: is to when will they do something. There's a lot
Speaker 7: of heat to debate, and Neil Dudda sent me a
Speaker 7: note here from Renaissance Macro. He's scathing is the only
Speaker 7: word I could come up with scathing about their delay here,
Speaker 7: as you mentioned Andrew Hollenhorst, with a view and then
Speaker 7: you go all the way out. Dare I say in
Speaker 7: the next year the dispersion here is right. I just
Speaker 7: want to point out that if you had read the
Speaker 7: cliff notes of Moby.
Speaker 1: Dick, I did a knowledge.
Speaker 2: They could have pulled it off.
Speaker 4: How much in the transitory this time around? Short lived
Speaker 4: or short lived? Yes, it's the new term for the
Speaker 4: chairman of the feder Reserve.
Speaker 6: Yeah, in the sense that they will get clarity as
Speaker 6: time goes on, and right now they have none, but
Speaker 6: it will be made apparent to them as things settle
Speaker 6: into place. This idea, though, that right now the economy
Speaker 6: is still relatively healthy, is one aspect that I think
Speaker 6: maybe is going to become challenging in a month's time.
Speaker 4: Let's get to the conversation joining us now they former
Speaker 4: New York Fed President Bill Duntley, Bill, thank you for
Speaker 4: joining us. They clearly face a range of risks, risks which,
Speaker 4: as the chairman says, have not yet materialized. Can you
Speaker 4: walk us through how you think they've responded to the
Speaker 4: risk they face and what you make of that news
Speaker 4: conference from Sham and Powell, I.
Speaker 1: Don't think the news chre surprising at all. I mean,
Speaker 1: the FED is not really sure where Terrists are going
Speaker 1: to land, which is important, and when they land, they're
Speaker 1: not really sure what the consequences are going to be
Speaker 1: on growth versus inflation, on which side they're going to
Speaker 1: miss their mandate by a greater degree. So I think
Speaker 1: I was expecting him to say something pretty similar to this,
Speaker 1: and if I was in issues, I would have done
Speaker 1: exactly the same thing.
Speaker 2: I thought the.
Speaker 6: Most notable line was the cost of waiting to see
Speaker 6: further data seem fairly low.
Speaker 2: Do you agree with that?
Speaker 6: Do you think that the cost is fairly low of
Speaker 6: simply being parked on the sidelines at a time where
Speaker 6: a lot of people think that there are signs of
Speaker 6: a rapidly slowing economy.
Speaker 1: Well, I think the costs are low relative to the
Speaker 1: risk of making a mistake. You know, Let's imagine that
Speaker 1: the FED cutting rates dramatically because they were worried about
Speaker 1: the labor market, and then it turned out that inflation
Speaker 1: expectations got unanchored and the labor market held up pretty well.
Speaker 1: That'd be a big mistake. And so the FED really
Speaker 1: wants to make sure that they don't go down that path.
Speaker 1: This is not just about the central scenario. It's also
Speaker 1: about risk management. Try not to do the wrong thing
Speaker 1: so that you can respond effectively as things actually unfold.
Speaker 1: So I think the fact that the ter policy is
Speaker 1: not set is important, and the fact that we don't
Speaker 1: have any experience with the tariffs shock of this magnitude
Speaker 1: is also important. So in that environment, it's sort of like,
Speaker 1: you know, the hippocrat, Oh, do no harm to your patient.
Speaker 7: Bill Dudley, part of your charm is you had a
Speaker 7: day job before the FED, job of actually trying to
Speaker 7: forecast out the economy. How would you frame that? Now
Speaker 7: you've got the luxury of not being at golden sacks.
Speaker 7: Can you look out one month? Can you look out
Speaker 7: two quarters? Can you model out a fancy McKelvey Dudley
Speaker 7: jewel out a year right now? I don't think you can.
Speaker 8: No, no way.
Speaker 1: I mean, I think the only thing we can say
Speaker 1: is that the economy, like Teerpaul said, is the economy
Speaker 1: right now it seems to still be in good shape.
Speaker 1: I think the most important thing I took away from
Speaker 1: the press conference that people should take on board is
Speaker 1: the fact that don't take the first quarter GDP at
Speaker 1: face value. The minus point three reading is all because
Speaker 1: of mismeasurements. It's basically, they counted imports a lot better
Speaker 1: than they counted inventories, so there was a big drag
Speaker 1: from imports that was not upset by a big accumulation
Speaker 1: of inventories and domestic private final sales, which he brought
Speaker 1: up repeatedly in the press conference, is really a much
Speaker 1: more representative measure of how the economy is doing, and
Speaker 1: it's doing just fine, rising.
Speaker 8: Three percent, So I think he can put the weight
Speaker 8: on the right things.
Speaker 7: I'd point out you on Olssius with a two percent
Speaker 7: statistic for this present quarter published I believe last weekend,
Speaker 7: Bill Dudley. How does a FED communicate given this mess
Speaker 7: that has been wrought? What do they do in speeches
Speaker 7: coming up? John and I were talking here as we
Speaker 7: are looking at psg Arsenal about Jackson Hole. How do
Speaker 7: they get to Jackson Hole and communicate to the nation.
Speaker 1: Well, you can only communicate to the extens that you
Speaker 1: actually know what's actually going on. So I think it's
Speaker 1: appropriate for the FED not to overpromise or imply that
Speaker 1: they have some crystal magic ball that allows them to
Speaker 1: see in the future when the future is actually ring cloudy.
Speaker 1: What I'm expecting at Jackson Hole, frankly, is the FED
Speaker 1: to talk about their Monitary Policy Framework review and wheel
Speaker 1: that out. And I thought some of the questions at
Speaker 1: the press combs and that were interesting were Paul admitted
Speaker 1: that maybe Quey could have been wrapped up a bit sooner.
Speaker 1: So I think they understand that there are some things
Speaker 1: that they can improve in the monetary Policy framework, and
Speaker 1: so I think that's going to be the most interesting
Speaker 1: outcome of Jackson Hall.
Speaker 2: Bill.
Speaker 4: We've spent a lot of time speaking of FED watches
Speaker 4: on Wall Street, and they've also had a similar thing
Speaker 4: that this time, because of the constraints they might have
Speaker 4: to wag late, they won't be able to act preemptively.
Speaker 4: And I guess it's important to understand his definition of
Speaker 4: being late, because there was this really interesting moment in
Speaker 4: the news conference, and I'd love your thoughts on it.
Speaker 4: He looked at the cutting that they did last year,
Speaker 4: one hundred basis points of rate reductions and said the
Speaker 4: FED was a little late to start cutting last year.
Speaker 4: Just what is the definition of late on the FMC.
Speaker 1: I think late is when you realize that the risk
Speaker 1: on one side of the mandate have become you have
Speaker 1: become very predominant. So if the fact is you're only
Speaker 1: cutting at that moment means that you're probably late because
Speaker 1: the risk have really accumulated on the employment side of
Speaker 1: the ledger. And that's what happened last summer, and the
Speaker 1: uneplayer went up pretty quickly, and the risk of the
Speaker 1: layer markets are of unwinding.
Speaker 9: In a bad way increased, and the Federal Reserve was
Speaker 9: pretty slow to get off the mark, and that's why
Speaker 9: they ultimately cut rates more quickly than they delayed, and
Speaker 9: then they cut more rates quickly than expected.
Speaker 6: I think that that caught John has did attention, and
Speaker 6: a caught mine as well, because some people disagreed and
Speaker 6: said maybe it was proactive in a way that led
Speaker 6: to the increase in longer term benchmark yields this idea
Speaker 6: that maybe actually there was more strength and expected in
Speaker 6: the underlying economy. I just wonder what that means going
Speaker 6: forward about that two percent inflation target. If we're still
Speaker 6: not back, if we did see something of affirming up
Speaker 6: of the labor market, and yet that still is the
Speaker 6: assessment from last year.
Speaker 8: Well, I think there's two things there's are irrelevant going on.
Speaker 1: Number One, the monitor policy may still not be as
Speaker 1: restrictive as the FED thinks. That is, I mean, the
Speaker 1: fact that the Commune's still doing okay with a resupposedly
Speaker 1: restrictive monitary policy in place, I think sort of.
Speaker 8: Is meaningful to at least to me.
Speaker 1: And the second thing I think is going on it's
Speaker 1: really important that people aren't putting up weight on is
Speaker 1: the labor force is going to grow much slower in
Speaker 1: twenty twenty five than it did in twenty twenty three
Speaker 1: and twenty twenty four. So the kind of payroll gains
Speaker 1: you need to keep the unemployed rates stable are much
Speaker 1: dramatically lower this year than last year.
Speaker 6: There is this question going forward of what kind of
Speaker 6: pain tolerance would this FED be willing to accept before
Speaker 6: they start to have the clarity that they need to
Speaker 6: actually make a move. We were talking with Rich Clarita
Speaker 6: just before the press conference, and he said, maybe a
Speaker 6: half a percent increase in the unemployment rate, something material
Speaker 6: that they could point to, what's your assessment that would
Speaker 6: act actually provide clarity at a very unclear moment.
Speaker 8: Well, I think I think Rich Clarida is broadly correct.
Speaker 1: If the unemployer rate starts going up rapidly, like we
Speaker 1: go from four to two to say four to six,
Speaker 1: then the Federal Reserve is going to be thinking, boy, the.
Speaker 8: Layer market really is weakening in a big way.
Speaker 1: We are moving meaningfully away from full employment, and the
Speaker 1: risk in that environment is that we're about to have
Speaker 1: a full blown recession. The SAM role didn't work well
Speaker 1: last year, right, the SAM role. We triggered the sum
Speaker 1: roll and there was no recession. But that happened because
Speaker 1: the labor force was growing very rapidly, and so the
Speaker 1: rise in the uniployer rate was driven by rapid labor
Speaker 1: force growth rather than by layoffs. This year, if the
Speaker 1: unemployer rate rises rapidly, will be driven by laos.
Speaker 8: Bill Doublon, let me.
Speaker 7: Throw in an audible then on that, given a trade war,
Speaker 7: given the ballet in Switzerland here in the coming days,
Speaker 7: are we at risk of damaging the productivity that seems
Speaker 7: so successful over the last twenty four months.
Speaker 1: Absolutely, I mean this is putting investments, spending plans on hold.
Speaker 8: We are almost certainly.
Speaker 1: Going to have supply chain disruptions even if we were
Speaker 1: to resolve this tomorrow, because a lot of ships from
Speaker 1: China aren't landing here at coming to port here, and
Speaker 1: then that means there's going to be a lot less
Speaker 1: time to replenish stores for Christmas. So supply chain disruptions
Speaker 1: to some degree are almost inevitable. And that's assuming that
Speaker 1: you switch things back. You've turned the whole tariff thing
Speaker 1: off almost immediately.
Speaker 4: Hey, Bill, I appreciate your thoughts. As always, built don't
Speaker 4: be the former New York Fed President. The Federal Reserve
Speaker 4: see it like this, the risks of risen to hire, unemployment,
Speaker 4: to hire, inflation, to lower growth. But the risks haven't materialized,
Speaker 4: and the risks are around trade talks as well. The
Speaker 4: President of the United States. In the last two hours
Speaker 4: or so, we've had a load of headlines from the
Speaker 4: Federal Reserve, but maybe the most important headline came from
Speaker 4: the President. The President said, where I'm willing to lower
Speaker 4: tariffs to get China to the table. Now, the US
Speaker 4: is in negotiation mode at the moment, going into talks
Speaker 4: for the weekend, or already talks about talks between the
Speaker 4: United States and China and they can dial up and
Speaker 4: down the tariff by policy whenever they like. You can't
Speaker 4: set policy in a moment like this because you don't
Speaker 4: know what policy is going to be on the other
Speaker 4: side of Washington.
Speaker 6: You don't understand necessarily what the supply chain disruptions are
Speaker 6: going to look like. Let's say they don't lower tariffs
Speaker 6: in anticipation of these types of talks. China has said
Speaker 6: that is the only way to start talks. So does
Speaker 6: that remove the idea of talks from the table entirely,
Speaker 6: even though they might be seeing each other in passing
Speaker 6: in Switzerland. The key question here is how do they
Speaker 6: start to game out whether this is really a pandemic
Speaker 6: like supply side shock, or whether this is something entirely
Speaker 6: different that can get remediated in the near term. That
Speaker 6: is the difficulty that they are grappling.
Speaker 2: It is different.
Speaker 4: We've said it so many times on this program. I've
Speaker 4: heard all these comparisons to COVID. The difference this time
Speaker 4: around is you don't have to wait for the vaccine.
Speaker 4: The president has the vaccine. He can take the tariffs off,
Speaker 4: put the tariffs on whenever he likes. He's in control
Speaker 4: of the virus. If that's a good word to use.
Speaker 4: Probably not, but ultimately he is if you believe there
Speaker 4: are comparisons to COVID. The President is running policy here
Speaker 4: for some runaway virus that we don't have control over.
Speaker 7: Chairman of the Fed right now, I.
Speaker 4: Think he's in charge of what the feder Reserve's about
Speaker 4: to do without it out and this is the problem
Speaker 4: for the feeder reserve. Let's just say in a month,
Speaker 4: these talks are fantastic and the Federal Reserve cut interest
Speaker 4: rates by fifty basis points, seventy five basis points, one
Speaker 4: hundred basis points because they thought these were the new
Speaker 4: rules of the game. All of a sudden, policies offside
Speaker 4: and guess what, we're about to deliver a big tax
Speaker 4: package down in Washington, DC as well. That's why this
Speaker 4: is so hard.
Speaker 10: We vecho J.
Speaker 6: Powell alluded to this, saying there are things that can
Speaker 6: be done. Some things, you know, we haven't seen them
Speaker 6: being done, but there are some things that could be
Speaker 6: done that could actually cause outcomes to be very different.
Speaker 6: Key question, and this is something that comes up in
Speaker 6: a lot of our discussions with analysts and economists. There
Speaker 6: is damage being done. It's not as if this genie
Speaker 6: can go back into the bottle so easily, and there
Speaker 6: are ships that are not going to get here, and
Speaker 6: there are already supply chain disruptions. So at some point
Speaker 6: that is the reason why people are saying the pain
Speaker 6: is already being felt, the damage is being done, it's
Speaker 6: not just a matter of magnitude.
Speaker 7: A number of weeks ago, we had a yeah, but
Speaker 7: where best, and maybe Lutnik had to go the president
Speaker 7: and say you're off side, fix this right now? And
Speaker 7: what in ten minutes they had it fixed.
Speaker 4: And that initiatesd the night day pause we have and
Speaker 4: the negotiations are starting. But if you're the chairman of
Speaker 4: the Federal Reserve, look, it's an industry to go after
Speaker 4: the Federal Reserve.
Speaker 2: We all partake.
Speaker 4: I understand that we've been very critical, but I have
Speaker 4: some sympathy with the institution at the moment, I don't
Speaker 4: understand how you set policy for the medium term in
Speaker 4: a moment like this one.
Speaker 6: I think that's the reason why the policy tool that
Speaker 6: is communication is now filibustering, because ultimately there is no
Speaker 6: communication that can be had at a time where there
Speaker 6: is no information, solid information that can be had and
Speaker 6: so maybe maybe we'll get more to the limits.
Speaker 2: Of course, you know.
Speaker 7: That is co dependent on the president. The president's driving
Speaker 7: the dialogue right now. It's standard psychiatric work. They're codependent
Speaker 7: at the White House.
Speaker 4: The White House is in the drive and seat couldn't
Speaker 4: be more TK. Mi McKay was in the room. He's
Speaker 4: out of the room now. Mi McKay, welcome back to
Speaker 4: the You said it multiple times, Mike can the lead
Speaker 4: up to this. I don't have anything to add on that.
Speaker 4: Chaman Powell and Mike on a number of issues. He
Speaker 4: didn't have much to add.
Speaker 10: No, he didn't. You've been talking about it. The FED
Speaker 10: doesn't know what's going to happen. Nobody knows what's going
Speaker 10: to happen, so you can't make policy. But one thing
Speaker 10: I would add is that you've been talking about this
Speaker 10: as a supply shock, which it very well could be,
Speaker 10: but the FED was also setting the message today that
Speaker 10: it could be a demand shock. And if there's a
Speaker 10: demand shock, it could be reflected in things beyond just
Speaker 10: the unemployment rate and the inflation rate. We could see
Speaker 10: people start to pull back on spending significantly because either
Speaker 10: the shelves are empty or because they think things are
Speaker 10: going to be bad. Maybe they listened to Jay Powell
Speaker 10: today talking about the elevated risks. So there's a lot
Speaker 10: going on, a lot of cross currents going on, and
Speaker 10: it really comes down to how does all this affect
Speaker 10: the consumer? And by that I also mean businesses, because
Speaker 10: as you reported, every day people are pulling guidance. They
Speaker 10: don't know what's going to happen. So at this point
Speaker 10: the economy could go either way. The Fed's stuck in
Speaker 10: the middle. And really there isn't much to say about
Speaker 10: the FED for right now except that they're watching like
Speaker 10: we are.
Speaker 1: Mike.
Speaker 6: You're a student of FED history, and I wonder how
Speaker 6: much this has a parallel in recent history at a
Speaker 6: time when the FED is just going to say uncertainty
Speaker 6: in fifteen different ways and then sometimes the same way
Speaker 6: over and over again.
Speaker 10: Well, I think there isn't an exact comparison, but what
Speaker 10: you might look at is obviously the pandemic, where nobody
Speaker 10: knew what was going to happen, because we hadn't had
Speaker 10: this happen before, and so the FED was stuck in
Speaker 10: a situation where it knew things were bad, it knew
Speaker 10: it had to do something but how long did that
Speaker 10: have to go on and how far did they need
Speaker 10: to go? That was the question that was never really
Speaker 10: decided and we kept talking about for months and months.
Speaker 10: But the idea of we've got stagflation out there, but
Speaker 10: we don't know if it's going to happen, and if
Speaker 10: it does happen, we don't know how bad it's going
Speaker 10: to be or when it's going to happen. That I
Speaker 10: don't see any precedent for Michael.
Speaker 7: McKee for International Audience briefest right now and you and
Speaker 7: I know the shadow FOMC iconic at Carnegie Mellon and
Speaker 7: the rest tell us about the Trumpian shadow FOMC right now?
Speaker 7: Is there coalescing a beast that's going to send signals,
Speaker 7: send messages? Critique Jerown Powell.
Speaker 10: Well, there are a couple of different groups going on.
Speaker 10: You could say the Shadow Open Market Committee doesn't really
Speaker 10: have a lot of critiques at this point other than
Speaker 10: what we were talking about earlier, the Fed's mission creep.
Speaker 10: The question I asked him, there are people who are
Speaker 10: contenders for the FED chairmanship when the President finally makes
Speaker 10: a decision, who could be having things to say. Kevin
Speaker 10: Warsh talked last week a week before about that. But
Speaker 10: really the opposition or the people who are going to
Speaker 10: the questions are in the administration right now. Because the
Speaker 10: President wants to influence the FED. He can't really do it,
Speaker 10: but he wants to. So there are going to be
Speaker 10: other people who are going to pick up on this
Speaker 10: stuff and talk about it. Scott Besson's been asked about it.
Speaker 10: He was asked about it today. They want the FED
Speaker 10: to lower rates, but I think mister Bessett knows even
Speaker 10: if mister Trump doesn't, the FED can't move right now
Speaker 10: because they don't know what mister Trump's going to do.
Speaker 4: My McKay appreciate the reaction we're here from Mike throughout
Speaker 4: today on Blombag TV and on Bloomberg Radio. So we've
Speaker 4: had plenty of sympathy for the institution. It ends right now.
Speaker 4: Here's the criticism. It goes like this. I've heard it
Speaker 4: now from the previous Minneapolis FED president, Saint Louis FED
Speaker 4: President rather Jim Ballad. I've heard it directly from muhammadan
Speaker 4: Aeron as well, that this FEDER reserve is only really
Speaker 4: entertaining one scenario. They hear a lot of people talking
Speaker 4: about a wide range of outcomes, but emphasis matters at
Speaker 4: a news conference, and the emphasis which Sham and Powell
Speaker 4: keeps landing on stackflation without saying stackflation, and Jibilla said
Speaker 4: this Muhamma set it as well. What they don't entertain
Speaker 4: is the prospect of a good outcome, the prospect that
Speaker 4: the Chinese turn around over the next few weeks and say,
Speaker 4: you know what will give you what you want. The
Speaker 4: Europeans do the same thing, and you end up in
Speaker 4: a situation where you have lower teriffs, and maybe you
Speaker 4: end up in a situation where you have a reduced
Speaker 4: tax rate as well, and perhaps by the end of
Speaker 4: this year you're in a better position for both the
Speaker 4: risk assets and growth too. And you don't hear any
Speaker 4: of that when you listen to Chairman powt and I
Speaker 4: didn't hear much of that at all in the last
Speaker 4: ninety minutes.
Speaker 6: There is a key question here. Is there a scenario
Speaker 6: in which they would have to high rates. Is there
Speaker 6: a scenario in which they don't have to move at all,
Speaker 6: because this is a soft landing in the same kind
Speaker 6: of way that they used to with no tariffs. There
Speaker 6: is a positive economic outcome that he kind of alluded
Speaker 6: to in passing, but it wasn't necessarily the main story.
Speaker 4: Yeah, kinda but not really very Joining us now to
Speaker 4: discuss Jeff Rosenberg of Black Croc geff I make it simple,
Speaker 4: is this a moment to own bonds and if so,
Speaker 4: wear on the curve.
Speaker 3: It's certainly a moment to be adding diversification to your
Speaker 3: portfolio because the whole theme everybody's been talking about, and
Speaker 3: Powell answered in multiple ways, is we don't know and
Speaker 3: he doesn't know, and it's heightened uncertainty. So you need
Speaker 3: more balance in your portfolio. And now the subsequent question
Speaker 3: is the bonds give it to you? And there I'd
Speaker 3: say you got to be more anchored to the front
Speaker 3: end of the curve. The back end has a lot
Speaker 3: of uncertainty. You got to look for alternative ways of
Speaker 3: finding diversification in your portfolio. And beta exposures are just directional.
Speaker 3: Is the market going up? Is it going down? Is
Speaker 3: it a good outcome? Is it a bad outcome? Is
Speaker 3: as LISTA was just outlining, you know, it's incredibly uncertain
Speaker 3: and so it's a time for diversification.
Speaker 6: Jeff, This feels like in high school when someone really
Speaker 6: likes someone else, and they keep talking about them at nauseum,
Speaker 6: and you feel like there's nothing else to talk about,
Speaker 6: and you're kind of sick of the conversation, but you
Speaker 6: feel like you have to keep entertaining it. It feels
Speaker 6: like everyone's trying to get into the head of one
Speaker 6: person again and again and again and is sort of
Speaker 6: exhausted by the end of the day.
Speaker 2: How do you rise above.
Speaker 6: That and understand what's actually happening in the economy in
Speaker 6: some kind of way, to understand what way things are turning.
Speaker 3: Yeah, it's a good it's a it's a good metaphor,
Speaker 3: it's fun metaphor, and uh, and it's and a tough question.
Speaker 3: And I think one one way is to really think
Speaker 3: about it from a portfolio construction point of view of
Speaker 3: what am I exposed.
Speaker 2: To in my portfolio?
Speaker 3: Right, So, if it's about one person and one outcome,
Speaker 3: that's kind of the antithesis to what we've all learned
Speaker 3: over the years of how to build a good portfolio.
Speaker 3: Don't put all your eggs in one basket. In this context,
Speaker 3: it is, don't have all of your outcomes determined by
Speaker 3: that uncertain and unforecastable outcome. Uh, and so that's really
Speaker 3: about diversifying my sources of return. I've talked about it
Speaker 3: on this program before. Often all we talk about is
Speaker 3: the beta outcome, the directional outcome. And there's another good
Speaker 3: news story here for investors, which is all this uncertainty
Speaker 3: actually increases opportunities. But if you're investing not in directional space,
Speaker 3: but in the cross section, and so you're creating bigger
Speaker 3: winners and losers in the micro space, there's greater divergences
Speaker 3: and dispersion in the macro space.
Speaker 2: And so if you have strategies that.
Speaker 3: Are more about betting on the differences and not the direction,
Speaker 3: you can balance out your exposure to not just one
Speaker 3: person that's a really tough outcome, but to hundreds of
Speaker 3: different outcomes that's a better chance for success. And that's
Speaker 3: a way to pivot away from this kind of unipolar focus.
Speaker 2: On that you know, popular person in high school.
Speaker 8: Is there anything else you'd like to a pod?
Speaker 6: Good idea, just sort of it's just sort of exhausting.
Speaker 2: There's something more to say or talk about. Everyone's exhausting.
Speaker 8: I'll take that from you. There's no question about that.
Speaker 2: Jeff Off.
Speaker 7: Your remit what I'm seeing is a multi standard deviation
Speaker 7: move in selected currencies. Where's your unexpected out there across equities, bonds, commodities,
Speaker 7: and particularly the depth of the currency markets.
Speaker 3: Yeah, I mean the FX move is really important here, right,
Speaker 3: and so like let's just kind of look at what's
Speaker 3: happened in markets since April second.
Speaker 2: Is you've had this remarkable rebound in.
Speaker 3: Risky assets, equities, subequity indices, factor exposures, and we've kind
Speaker 3: of are above in many of those measures. The April
Speaker 3: second tariff Day Liberation Day announcement. The one exception, you know,
Speaker 3: all a lot of these boxes are the same. Which
Speaker 3: one's different is the dollar and the FX piece of that,
Speaker 3: and that's really talking about kind of the global impact
Speaker 3: here and that that hasn't been resolved because you know,
Speaker 3: are we going to be talking about deficit equalization or
Speaker 3: tariff equalization. The latter is a pretty good outcome to
Speaker 3: the earlier conversation. You could get lower tariffs, This could
Speaker 3: be really positive. But the former, which is what was
Speaker 3: the initial thrust of the policy announcement, is deficit equalization.
Speaker 3: That's very problematic and it's problematic to the flip side
Speaker 3: of deficit equalization is a big collapse in the US
Speaker 3: capital account surplus, and that's what you see on the
Speaker 3: currency piece.
Speaker 2: That's the big surprise move.
Speaker 3: We got to keep an eye on that, and I
Speaker 3: think that's a really key development. You know, especially as
Speaker 3: we go through each one of these announcements on bilateral
Speaker 3: trade negotiations, you're going to look at the voting evaluation
Speaker 3: of those pronouncements in the currency markets.
Speaker 2: I think you'll get a good read.
Speaker 6: This goes to the heart of your whole discussion around
Speaker 6: diversification and balance. How much is that diversification and balance
Speaker 6: increasingly international as a result of that uncertainty around the
Speaker 6: dollar and the space going forward.
Speaker 3: Yeah, I mean that's a huge theme. You see it
Speaker 3: in the flows, you see it in the.
Speaker 2: Relative equity returns.
Speaker 3: It's partly what's reflective in the currency that you are
Speaker 3: seeing from a global investor perspective, kind of a questioning
Speaker 3: of the overweighting that has existed in say equity portfolios
Speaker 3: because of the dominance of US capital markets.
Speaker 7: Right.
Speaker 3: You look at GDP VERSUS market cap differentials and you
Speaker 3: have a very big gap. The largest gap is in
Speaker 3: the US, and so that's one way of sort of
Speaker 3: thinking about where would the rebalancing occur, and the trigger
Speaker 3: for that is again this assessment. Are we going to
Speaker 3: push further on this policy towards deficit equalization?
Speaker 2: Then I think you're going to be looking.
Speaker 3: More at equalization between market cap and say GDP contributions
Speaker 3: in the global cross section.
Speaker 7: John and John. The fiscal debate may get overwhelmed by
Speaker 7: the actual data of employment and interest rates, back to
Speaker 7: the FED and all that, But I would go back
Speaker 7: to what you and I first talked about decades ago,
Speaker 7: which is Euroswissy and the fact that you have strong
Speaker 7: Swiss right now, and as Jeff alluded to, anybody in
Speaker 7: equity who's including all our listeners and viewers in the
Speaker 7: stock market, don't forget a monitor foreign exchange each and
Speaker 7: every day. The Swiss Frank is talking right now.
Speaker 4: And these central banks will have a decision to make
Speaker 4: how to respond to some of these shocks, and I
Speaker 4: think it's clear the kind of decision they're making so far, Lisa,
Speaker 4: We've talked about it, the ECB reducing interest rates, the
Speaker 4: Chinese coming out reducing interest rates, the Federal Reserve doesn't
Speaker 4: really understand the nature of the shock yet. The rest
Speaker 4: of the world has decided it's disinflationary. Maybe they have
Speaker 4: the capacity to reduce interest rates in a way that
Speaker 4: the Federal Reserve does not. But we've talked about this
Speaker 4: a million times trade talks. Things can change from hour
Speaker 4: to hour, never mind day to day. It's only a
Speaker 4: few hours ago we read a headline from the President
Speaker 4: of the United States that said he wasn't willing to
Speaker 4: reduce terarists to engage in negotiations with the Chinese. And
Speaker 4: then we have reporting moments ago that says the President
Speaker 4: is ready to rescind global chip curbs. Now, this is
Speaker 4: sort of one versus the other. Every single headline moves
Speaker 4: this market one way versus the next. The Federal Reserve
Speaker 4: can't behave that way. It can't reduce rates twenty five
Speaker 4: minutes ago and then hikem the next That's the problem
Speaker 4: they've got at the moment.
Speaker 6: In fairness, a lot of people feel like they can't
Speaker 6: live like this right now. A lot of traders out
Speaker 6: there are saying, what's the point. I mean, you see
Speaker 6: that whip saw in the Nasdaq in particular, this is
Speaker 6: something that Nvidia has wanted. There is this tension between
Speaker 6: the fast moving headlines of a tweet or a truth
Speaker 6: or a statement with the real economy and companies that
Speaker 6: have to make longer term decisions. And as an investor,
Speaker 6: especially where speed was your friend, how do you deal
Speaker 6: with that in a very different.
Speaker 2: Backdrop, Jeffy, you toda this yet?
Speaker 4: How you fading?
Speaker 2: Look, we're feeling great.
Speaker 3: This is creating a lot of opportunities if you know
Speaker 3: where to look and rewait your sources of returns away
Speaker 3: from the stuff that's impossible to forecast, right and so
Speaker 3: like in this last conversation, this is sort of in
Speaker 3: our kind of systematic framing. It's like momentum signals versus reversal.
Speaker 3: Momentum is a really tough strategy right now. Reversal much better,
Speaker 3: exactly the description that you're just talking about. One day,
Speaker 3: it's one headline, even within a headline. Within a day,
Speaker 3: the headlines are reversing around. So that creates opportunities if
Speaker 3: you're way your sources returns to the right environment. And
Speaker 3: it's just kind of like recognizing, Look, the easy momentum
Speaker 3: macro trade of the post COVID environment is not the
Speaker 3: trade right now. It's much more in the cross section,
Speaker 3: much more reversal. That's where you can find some opportunities.
Speaker 3: And if you're trying to predict, you know what the
Speaker 3: next you know trade headline is going to be, that's
Speaker 3: going to be a very frustrating place.
Speaker 2: Yeah, good luck to you.
Speaker 4: Never mind within a day, within the hour, Jeff, Thank you, sir,
Speaker 4: Jeff Rosenberg of Flackrock. The latest reporting from the team
Speaker 4: here at Bloomberg the Trump administration planning to rescind Binden
Speaker 4: Era AI chip curbs. According to people familiar with the METSA.
Speaker 6: You look at in video shares, there are more than
Speaker 6: two percent on this news, and it makes sense given
Speaker 6: how vociferously against this they've been. This goes to the
Speaker 6: question of what is the ultimate goal of some of
Speaker 6: the tit for tat in the trade war that is
Speaker 6: between the China and the US. Is it just completely
Speaker 6: coupling when it comes to tech? Is this trying to
Speaker 6: tweak the rules confusing