WEBVTT - Bloomberg Surveillance TV: April 17, 2025 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.400 with Lisa Bromwitz and am Marie Hordern. Join us each 0:00:18.480 --> 0:00:21.360 day for insight from the best in markets, economics, and 0:00:21.400 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.760 --> 0:00:27.400 are live on Bloomberg Television weekday mornings from six to 0:00:27.480 --> 0:00:31.000 nine am Eastern. Subscribe to the podcast on Apple, Spotify 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.479 --> 0:00:37.200 Bloomberg Terminal and the Bloomberg Business App. Mohammad al Owen 0:00:37.200 --> 0:00:39.800 of Queen's College, Cambridge, writing, the US has taken its 0:00:39.800 --> 0:00:42.720 economy and those of other countries on an uncomfortable journey 0:00:42.720 --> 0:00:45.880 to an uncertain destination. This will severely test the financial 0:00:45.920 --> 0:00:49.760 system and America's global standing. Muhammed joins us now for more. Mohammed, 0:00:49.760 --> 0:00:51.280 looking forward to spending the next two hours with you. 0:00:51.320 --> 0:00:53.840 Good morning, Good morning, Thank you John one. Your reaction 0:00:53.920 --> 0:00:55.920 to this headline here from the President in the last 0:00:56.000 --> 0:00:59.600 hour so add on Truth's social social media platform. The 0:00:59.640 --> 0:01:02.600 President following maybe some of the ECB commentary this morning, 0:01:02.720 --> 0:01:06.399 expectations that they'll reduce interest rates and complaining why isn't 0:01:06.400 --> 0:01:08.840 the Federal Reserve doing the same thing? And he ends 0:01:08.880 --> 0:01:12.920 this post with this line here, Mohammad Powell's termination cannot 0:01:12.920 --> 0:01:14.880 come fast enough. Now, the debate we've had around the 0:01:14.920 --> 0:01:17.200 table is how do you interpret that line. Is that 0:01:17.280 --> 0:01:19.400 someone waiting for the expiration of a term that takes 0:01:19.400 --> 0:01:22.200 place in May of next year, or someone who's thinking 0:01:22.240 --> 0:01:23.240 about doing things sooner. 0:01:24.000 --> 0:01:27.000 So only President Trump knows what that means. But it 0:01:27.000 --> 0:01:29.679 should come as no surprise. We know that President Trump 0:01:29.720 --> 0:01:35.399 has been frustrated at the absence of interest rate cuts. 0:01:36.480 --> 0:01:38.640 I suspect you got very angry when you heard Chair 0:01:38.680 --> 0:01:42.920 Powell yesterday. Chair Poal really put all the blame on tariffs, 0:01:43.360 --> 0:01:49.400 gave no possibility to the better outcome zero given zero possibility. 0:01:50.720 --> 0:01:53.200 And then there's one thing you have to remember. I 0:01:53.240 --> 0:01:57.360 know that the conventional wisdom is that this is an 0:01:57.360 --> 0:02:01.560 attack on the independence of the FED. There is another 0:02:02.920 --> 0:02:05.560 way of looking at this, which is this Fed has 0:02:05.600 --> 0:02:09.600 sacrificed people in the past. If you remember the president 0:02:09.720 --> 0:02:11.920 of the Dallas Fed, the president of the Boston FED. 0:02:12.040 --> 0:02:15.919 The vice chair was sacrificed ahead of Congress looking into 0:02:16.320 --> 0:02:20.680 allegations of insider trading if you remember, the potential side 0:02:20.800 --> 0:02:23.919 was sacrificed to protect the monetary policy side. And it 0:02:23.919 --> 0:02:26.359 wouldn't surprise me if President Trump is pushing on this, 0:02:26.840 --> 0:02:29.880 because there's a real question for Chair Pale should he 0:02:30.000 --> 0:02:34.079 step down to preserve the independence of the Fed, because 0:02:34.120 --> 0:02:37.160 otherwise the Federal will be the subject of a lot 0:02:37.160 --> 0:02:38.120 of attacks going. 0:02:37.960 --> 0:02:40.079 Forward if he did step down, with that call into 0:02:40.280 --> 0:02:43.360 question even more the independs of the Federal Reserve, what's 0:02:43.400 --> 0:02:44.519 the ultimate outcome here? 0:02:44.639 --> 0:02:47.239 So this is a judgment that has to be made, 0:02:47.280 --> 0:02:50.800 and has to be made by Chairpalell. There are credible candidates. 0:02:50.880 --> 0:02:54.560 Kevin Walsh, for example, The markets would be very comfortable 0:02:54.600 --> 0:02:58.239 with Kevin Walsh as the FED chair. He has tremendous experience, 0:02:58.960 --> 0:03:02.720 He understands the market, understands the economics, he has expertise. 0:03:03.120 --> 0:03:05.680 So you know, I could see a scenario in which 0:03:06.160 --> 0:03:10.399 what Secretary Bassett said before the election plays out, where 0:03:10.440 --> 0:03:15.079 they pre announce Kevin as the next chair, and then 0:03:15.120 --> 0:03:17.920 that puts tremendous pressure and then Chair Powell has to 0:03:17.919 --> 0:03:19.280 make a very difficult decision. 0:03:19.440 --> 0:03:20.440 Let's say that happens. 0:03:20.760 --> 0:03:22.480 And I know that's not your base case right now, 0:03:22.520 --> 0:03:23.880 you can tell us if it is, but it hasn't 0:03:23.880 --> 0:03:26.000 been before. Let's say it happens, though, how do you 0:03:26.000 --> 0:03:27.200 think the market would respond to that? 0:03:27.960 --> 0:03:29.959 So I think the market would look at Kevin Walsh 0:03:30.160 --> 0:03:33.320 and think he's a very credible FET chair, And I 0:03:33.360 --> 0:03:37.080 think the market would rather have a credible FET chair 0:03:37.280 --> 0:03:41.160 that's not in continuous conflict with the White House than 0:03:41.200 --> 0:03:45.120 being continuous conflict with God. The Harvard example gives you 0:03:46.040 --> 0:03:48.200 is an illustration of what can happen. You can suddenly 0:03:48.240 --> 0:03:50.680 have all sorts of other things questioned about the FED 0:03:51.440 --> 0:03:53.520 if it's in direct conflict with the White House. 0:03:53.880 --> 0:03:57.560 Isn't this conversation alone putting in question the independence of 0:03:57.600 --> 0:04:01.880 the FED? We're talking about scenario where we could basically 0:04:01.920 --> 0:04:05.280 get around the White House to placate the president. 0:04:05.840 --> 0:04:09.360 But we've seen that scenarios where they've gone around the 0:04:09.440 --> 0:04:13.400 Congress to placate the Congress. We've seen a situation where 0:04:13.760 --> 0:04:16.320 in the beginning they sacrifice the pretential side. Michael bo 0:04:16.520 --> 0:04:20.479 was a vice chair and he stepped down. So I 0:04:20.520 --> 0:04:23.599 don't think this is a much structural break, but I 0:04:23.640 --> 0:04:26.320 do think there's a very delicate judgment, and Marie here 0:04:26.440 --> 0:04:28.400 very delicate and I'm glad I don't have to make it. 0:04:28.520 --> 0:04:30.760 Well, it almost sounds like you agree with the president 0:04:31.200 --> 0:04:34.640 in this sense. His termination cannot come fast enough, meaning 0:04:34.880 --> 0:04:37.120 when Powell's out of the job, it cannot. 0:04:36.839 --> 0:04:37.760 Be soon enough. 0:04:37.880 --> 0:04:39.160 It sounds like you agree with that. 0:04:39.240 --> 0:04:43.720 So the word termination is a very strong word, right, 0:04:45.040 --> 0:04:48.240 that word, I must say. I looked at it and thought, wow, 0:04:48.360 --> 0:04:53.440 that's a really strong word. But we do know that 0:04:54.080 --> 0:04:58.120 in a year's time, Chairpal will step down. We know that, 0:04:58.520 --> 0:05:00.880 we know that he's not going for us. We know 0:05:00.920 --> 0:05:03.800 he's not going to get a third term, so that 0:05:03.920 --> 0:05:06.000 issue is out there. We also know the President is 0:05:06.040 --> 0:05:11.320 really frustrated about interest rates not being cut. And I 0:05:11.400 --> 0:05:15.360 go back yesterday's comments by Chair Powell, which he went 0:05:15.520 --> 0:05:18.360 well beyond what he've said in the past, were like 0:05:18.400 --> 0:05:20.120 a red rag to the White House. 0:05:20.279 --> 0:05:22.320 You've been critical of the Fellow Reserve before. You've referenced 0:05:22.320 --> 0:05:24.680 this address a couple of times. Now what stood out 0:05:24.760 --> 0:05:27.640 for you yesterday? Where do you think the Chairman went wrong? 0:05:28.760 --> 0:05:28.839 So? 0:05:28.960 --> 0:05:32.240 Actually, I think the Chairman yesterday was less political than 0:05:32.240 --> 0:05:36.400 he normally is. I do think that we all have 0:05:36.640 --> 0:05:42.720 to give the possibility of the good scenario. The market certainly. 0:05:42.760 --> 0:05:46.040 Does you heard me say the market is fifty to fifty. 0:05:46.160 --> 0:05:48.720 As to which of the two outcomes in the destination 0:05:48.920 --> 0:05:51.080 is going to play out. Is this going to be 0:05:51.279 --> 0:05:54.840 a Jimmy Carter moment with prolonged taxlation or is this 0:05:54.920 --> 0:05:57.280 going to be a Margaret Thatcher run a Wagan moment 0:05:57.320 --> 0:06:00.240 where you rewire not just the domestic economies, but to 0:06:00.320 --> 0:06:01.640 rewire a global economy. 0:06:02.000 --> 0:06:02.520 Isn't the fact? 0:06:02.560 --> 0:06:05.039 Yeah, basically acknowledging that by saying, we've got a way 0:06:05.080 --> 0:06:07.000 for more clarity before we can decide what we need 0:06:07.040 --> 0:06:07.280 to do. 0:06:07.640 --> 0:06:09.560 Yes, but he went much further. I mean, I have 0:06:09.600 --> 0:06:11.640 all that. He generally said, we have to wait for 0:06:11.839 --> 0:06:14.800 greater clarity, but he kept on pushing on the challenges 0:06:14.800 --> 0:06:18.320 to do a mandate. He kept on pushing that inflation 0:06:18.880 --> 0:06:22.120 may be persistent. He hasn't said that in the past. 0:06:22.440 --> 0:06:26.880 Two meetings ago, he reintroduced transitory. Two meetings ago he 0:06:26.960 --> 0:06:29.400 we introduced transitory when we talk about tariffs, and then 0:06:29.480 --> 0:06:32.760 last meeting he walked it back. And now he's gone 0:06:32.760 --> 0:06:35.400 one step further and made a very strong statement. 0:06:35.440 --> 0:06:37.400 So let's talk about the optimal outcome. What does it 0:06:37.440 --> 0:06:38.640 look like in the months to come. 0:06:39.560 --> 0:06:42.039 I think I am in the same vote that everybody 0:06:42.040 --> 0:06:44.400 else is saying. This is a really highly uncertain time. 0:06:44.839 --> 0:06:47.479 You know, I think this is an uncertain journey to 0:06:47.520 --> 0:06:51.279 an uncertain destination, and the market has been swinging one 0:06:51.279 --> 0:06:54.040 way and the other. You said it this morning, depending 0:06:54.080 --> 0:06:57.640 on the tariff news, it's either excitement or fear. 0:06:59.040 --> 0:07:01.760 Yesterday we did also here J. Powell talk out the 0:07:01.800 --> 0:07:05.360 Smoot Holly levies of the nineteen thirties, ninety five years ago, 0:07:05.480 --> 0:07:07.640 and he said there isn't a modern experience for how 0:07:07.640 --> 0:07:08.440 to think about this. 0:07:08.960 --> 0:07:09.800 Do you agree with him? 0:07:10.040 --> 0:07:13.080 Or can you draw some modern experiences to deal with 0:07:13.120 --> 0:07:13.880 this time right now? 0:07:14.480 --> 0:07:16.360 No, it's hard. I mean, by the way, that was 0:07:16.360 --> 0:07:18.760 a strong statement as well, something that he hasn't gone 0:07:18.800 --> 0:07:20.160 anywhere near before, and. 0:07:20.120 --> 0:07:22.800 That was the Faires Bueller scene I was alluding to earlier. 0:07:23.000 --> 0:07:25.280 Correct, and I remember that scene that he should have 0:07:25.320 --> 0:07:29.280 referred to in the movie. No, we haven't had this before. 0:07:29.680 --> 0:07:33.640 This is an attempt to rewire the global economy, and 0:07:33.680 --> 0:07:38.120 we haven't had this in an integrated globalized economy. 0:07:38.560 --> 0:07:41.600 Are you surprised by how different Powell sounds from Waller? 0:07:42.760 --> 0:07:45.520 Yes? I do. I'm surprised how different Wallers sounds from 0:07:45.560 --> 0:07:47.560 Waller a year ago. 0:07:47.720 --> 0:07:49.000 I think he's running. 0:07:50.840 --> 0:07:53.160 It's been quite a transformation. Let's put it this way. 0:07:53.400 --> 0:07:55.040 Do you know how he did do a good job yesterday? 0:07:55.120 --> 0:07:55.800 Ragged Raj Jahan. 0:07:56.040 --> 0:07:59.520 He was a great He was absolutely fantastic, and he 0:07:59.560 --> 0:08:01.840 asked this question I'm place he asked. They talked about 0:08:02.080 --> 0:08:04.200 the difference of a challenge to the cycle and the 0:08:04.280 --> 0:08:06.800 challenge to the system. And you and I've reflected on 0:08:06.800 --> 0:08:09.360 this too, the challenge to the system here, how are 0:08:09.360 --> 0:08:11.640 you thinking about that challenge at the moment. 0:08:11.960 --> 0:08:13.520 So first of all, let me say Rugu was great 0:08:13.520 --> 0:08:16.120 because not only did he keep the flow going, but 0:08:16.200 --> 0:08:20.840 for those who are not very familiar with economics, he 0:08:20.880 --> 0:08:23.120 explained why he was asking the questions, and he did 0:08:23.200 --> 0:08:26.160 really well. You know, we've put it slightly differently. Is 0:08:26.200 --> 0:08:29.960 that normally advanced economy live in cyclical space and developing 0:08:30.000 --> 0:08:33.760 countries live in structural space. Now suddenly we have advanced 0:08:33.760 --> 0:08:37.040 economies living in structural space. So the boundaries to the 0:08:37.040 --> 0:08:40.480 cyclical fluctuations are no longer holding, or they are much 0:08:40.520 --> 0:08:42.680 wider than there were before. So we have a whole 0:08:42.760 --> 0:08:48.040 range of potential outcome. I love the United earnings call 0:08:48.120 --> 0:08:51.040 when they came out with two scenarios, it's a bimodal world. 0:08:51.360 --> 0:08:54.800 MX today came out with a huge qualifier saying it's 0:08:54.880 --> 0:09:00.200 subject to the global macroeconomy. So companies are not only 0:09:00.360 --> 0:09:04.080 thinking internally about arrange of outcomes, they're expressing it in 0:09:04.120 --> 0:09:04.920 their earnings course. 0:09:05.160 --> 0:09:08.000 As allocators need to do the same exercise. They need 0:09:08.000 --> 0:09:09.840 to work out what the future looks like. And Rujan 0:09:09.920 --> 0:09:12.280 talked about a change in US philosophy. So in the 0:09:12.280 --> 0:09:14.640 post war system, as you know better than most, US 0:09:14.720 --> 0:09:16.800 assets are at the very heart of it. And the 0:09:16.800 --> 0:09:20.079 interpretation of this administration appears to be that their responsibilities 0:09:20.080 --> 0:09:22.320 are a net burden and not a net benefit, and 0:09:22.320 --> 0:09:25.440 they're trying to rebalance that. They look at the FX 0:09:25.480 --> 0:09:28.640 so called distortions, that's what Steven Myron called them, and 0:09:28.679 --> 0:09:30.360 they don't look at the benefits that come from this 0:09:30.480 --> 0:09:33.720 structural bid for US as sets that deliver lower interest 0:09:33.800 --> 0:09:35.920 rates than maybe that otherwise get what are the dangers 0:09:35.960 --> 0:09:38.280 of trying to rebalance that over the period of say 0:09:38.480 --> 0:09:39.400 three and a half years. 0:09:40.000 --> 0:09:42.480 So, whether it is the US, whether it is the 0:09:42.600 --> 0:09:46.920 UK with the EU, this integration does two things to 0:09:46.960 --> 0:09:50.640 your balance sheet. It increases the gains and increases the 0:09:50.640 --> 0:09:53.440 potential losses, so you now operate at a higher level 0:09:53.440 --> 0:09:56.480 of both. And if you don't manage the potential losses, 0:09:56.800 --> 0:09:59.240 then people will focus on that and forget about the gains. 0:09:59.280 --> 0:10:03.760 We sort o the UK with Brexit. So I think 0:10:03.559 --> 0:10:06.480 the more integrated economies come, the more you have to 0:10:06.520 --> 0:10:09.080 manage the downside risks. I say this because AI is 0:10:09.080 --> 0:10:11.760 really critical in this. We've got to manage the downside 0:10:11.840 --> 0:10:16.240 risk to exploit the enormous benefits that come from that mom. 0:10:16.000 --> 0:10:17.920 And you said, when you look at developing economies, it's 0:10:17.960 --> 0:10:21.800 structural and like the United States, we're cyclical. Is everyone 0:10:21.840 --> 0:10:24.040 just viewing this moment wrong? Should we be thinking about 0:10:24.200 --> 0:10:26.760 developing economy when looking at what is going on right 0:10:26.800 --> 0:10:28.400 now in US in terms of policy. 0:10:28.640 --> 0:10:31.960 Well, some have tried to make that parallel when saying 0:10:32.120 --> 0:10:35.720 it's highly unusual to see the US having higher interest 0:10:35.800 --> 0:10:38.720 rates and a weekend dollar. That happens in the developing 0:10:38.760 --> 0:10:42.679 world that doesn't happen in advanced economies. I think that's 0:10:42.679 --> 0:10:46.120 a step too far. I think what we're seeing is 0:10:46.240 --> 0:10:50.079 a portfolio reallocation from an overweight to the US to 0:10:50.280 --> 0:10:53.560 more balanced globally. That is what we're seeing, and I thought, 0:10:53.600 --> 0:10:57.440 wik reader yesterday on the show, what's great with that? 0:11:07.600 --> 0:11:09.720 So here's the latest this morning starts at heading for 0:11:09.720 --> 0:11:12.320 a week of losses is Chan Chan Pound pause freezing 0:11:12.360 --> 0:11:15.240 cold water over the so called fed pert joining us 0:11:15.240 --> 0:11:17.840 now to discuss as Jean Pavan of Black Rock Jean 0:11:17.880 --> 0:11:20.400 get to see you, sir, some reaction by the President 0:11:20.400 --> 0:11:22.120 of the United States earlier on this morning, which I'm 0:11:22.160 --> 0:11:24.760 sure you saw, complaining that the chairman had not cut 0:11:24.800 --> 0:11:27.160 interest rates unlike the ECP, which is set to do 0:11:27.240 --> 0:11:29.360 in about thirty minutes time, and saying at the end 0:11:29.400 --> 0:11:31.880 of his social media post this morning, the pals termination 0:11:32.480 --> 0:11:35.640 cannot come fast enough. If clients asked you about that 0:11:35.679 --> 0:11:38.679 line this morning, what will you tell them? 0:11:39.160 --> 0:11:41.240 Well, I spent a week in Europe last week, and 0:11:41.240 --> 0:11:44.160 I'm going to tell you that the discussion about like 0:11:44.400 --> 0:11:47.840 us asset then we should think about this environment is 0:11:48.600 --> 0:11:52.040 totally different than everything I've seen. And I think that 0:11:52.200 --> 0:11:55.120 kind of development in the context. 0:11:54.679 --> 0:11:56.760 That is already one that investors are. 0:11:56.640 --> 0:12:00.600 Shaky, I think will require had a bit of work 0:12:00.640 --> 0:12:05.120 to reassure. I think you know what I would say 0:12:05.160 --> 0:12:07.240 would fall back to I think there are immutable laws 0:12:07.240 --> 0:12:08.120 that i'd play here. 0:12:08.320 --> 0:12:09.680 We're going to be bumping into them. 0:12:10.400 --> 0:12:12.439 We need to be ready for some kios along the way, 0:12:12.440 --> 0:12:15.160 but we're going to be bumping into some pretty immutable laws, 0:12:15.520 --> 0:12:16.800 and I think that's what we need to get a 0:12:16.800 --> 0:12:17.240 handle on. 0:12:17.600 --> 0:12:19.920 We've said repeatedly on this program this morning that we'd 0:12:19.960 --> 0:12:23.240 like clarity from the White House what termination actually means. 0:12:23.520 --> 0:12:25.400 Does it mean the expiration of. 0:12:25.360 --> 0:12:28.600 The term may next year said to take place, or 0:12:28.640 --> 0:12:30.880 moving that forward and doing something more dramatic. But you've 0:12:30.880 --> 0:12:34.160 touched on something important, the erosion of trust in US 0:12:34.200 --> 0:12:37.160 assets that we've seen. Some people have made the case 0:12:37.200 --> 0:12:39.280 that over the last week all we saw was treasury 0:12:39.440 --> 0:12:42.800 markets responding to the unwinding a trade, some hedge funds 0:12:42.800 --> 0:12:45.640 blowing up, and maybe it was nothing bigger than that. 0:12:45.800 --> 0:12:46.800 What do you think it was. 0:12:47.520 --> 0:12:50.000 I think there's a broad story here, and if I 0:12:50.000 --> 0:12:52.240 had to say one word, I think it's debt. It's 0:12:52.280 --> 0:12:54.920 the large US debt that is a big part of 0:12:54.960 --> 0:12:57.440 the story here. But you know, I think we've seen 0:12:57.480 --> 0:12:59.520 and we were with a view with discuss that before 0:12:59.559 --> 0:13:00.040 that we were. 0:13:00.080 --> 0:13:02.040 An environment shape by supply. 0:13:03.040 --> 0:13:05.120 I think the tariff discussion we're having here is very 0:13:05.160 --> 0:13:08.240 much an example of another supply shock that is that 0:13:08.360 --> 0:13:11.679 is leading German power to be more awkish and people expected, 0:13:11.720 --> 0:13:14.240 I guess, but there is a really real story of 0:13:14.440 --> 0:13:16.679 supply shock that is putting pressure on rates to go up. 0:13:16.720 --> 0:13:20.079 So I think there was already uh, pressure for long 0:13:20.160 --> 0:13:22.400 term rates to go up, but you add on top 0:13:22.440 --> 0:13:27.720 of that, you know, questions about tariffs that are really 0:13:27.840 --> 0:13:30.920 like if you really are trying to decouple from the 0:13:30.920 --> 0:13:34.040 rest of the world quickly, Uh, that also means that 0:13:34.080 --> 0:13:37.160 you're cutting yourself out from a source of funding for 0:13:37.200 --> 0:13:39.880 your debt, and the that is large and I think 0:13:39.920 --> 0:13:42.080 this is this is the the key thing that is 0:13:42.160 --> 0:13:45.160 driving here is that you know, the financiers of that debt, 0:13:45.280 --> 0:13:48.960 people financing it, are looking at this differently now and 0:13:49.040 --> 0:13:51.520 I think that's adding another kind of risk premium, if 0:13:51.520 --> 0:13:54.840 you will, in terms of long term rates. And so 0:13:54.880 --> 0:13:56.960 that is the nimic at least, not about one player. 0:13:57.000 --> 0:14:00.520 It's not about like you know, one official government selling 0:14:00.600 --> 0:14:02.360 or not. I think this is a broader kind of 0:14:03.120 --> 0:14:04.000 sentiment story. 0:14:04.559 --> 0:14:06.320 So Jean, you set up, you told us about what 0:14:06.360 --> 0:14:09.440 you heard, You told us about the sentiment, how far 0:14:09.520 --> 0:14:13.000 are we in this rebalancing from the US to the 0:14:13.000 --> 0:14:13.640 rest of the world. 0:14:14.760 --> 0:14:15.920 I think we're pretty far. 0:14:16.200 --> 0:14:19.280 I mean, if if there's a if they are real 0:14:19.640 --> 0:14:25.520 intent of reducing current account deficit and surpluses and balancing 0:14:25.520 --> 0:14:28.200 these things, were very far from that objective and decoupling, 0:14:28.600 --> 0:14:30.760 and in fact, I don't think that can happen very quickly. 0:14:31.720 --> 0:14:33.560 So to me, this is more than there's a very. 0:14:33.440 --> 0:14:36.280 Near term, kind of immutable kind of constraint that we're 0:14:36.280 --> 0:14:38.640 going to be bumping against, as I said before, and 0:14:39.040 --> 0:14:41.560 it's going to be materializing by rates going up, which 0:14:41.560 --> 0:14:43.960 will make the debt look very different for the government 0:14:44.000 --> 0:14:46.520 I think themselves. I think their bigger channe The biggest 0:14:46.600 --> 0:14:49.920 challenge for them is rates at five percent ten year 0:14:50.040 --> 0:14:52.880 changes completely the budget are in medic going forward, and 0:14:52.920 --> 0:14:56.200 I think that will have to be confronted at some point. 0:14:56.280 --> 0:14:58.920 So that's why I mean, no matter the intent, I 0:14:58.960 --> 0:15:01.920 think we're going to be stopp along the way. It's 0:15:02.000 --> 0:15:05.040 a many year's process as opposed to a mini month's. 0:15:04.800 --> 0:15:07.520 Process, and that goes against a key objective from this administration, 0:15:07.560 --> 0:15:10.200 which is to keep rates much lower. They want to 0:15:10.240 --> 0:15:13.200 see it going lower to four percent. When it comes 0:15:13.200 --> 0:15:15.680 to things like who is dumping these assets? The Treasury 0:15:15.680 --> 0:15:18.440 Secretary didn't seem to think it was foreign governments. Do 0:15:18.480 --> 0:15:19.440 you think it's sovereigns? 0:15:19.840 --> 0:15:23.080 As I said, I think this is a broader global 0:15:23.120 --> 0:15:27.680 reassessment and thinking. I think there's broad fundamental reasons for 0:15:27.800 --> 0:15:31.840 rates to go up, and then you get events like 0:15:32.040 --> 0:15:34.200 we got last week, and it adds to this narrative. 0:15:35.240 --> 0:15:36.680 So I think it's difficult. 0:15:36.360 --> 0:15:40.240 To pinpoint like a single source. I think this is broader. 0:15:40.480 --> 0:15:42.760 And then when these things happen, there's always other things 0:15:42.760 --> 0:15:44.280 that happen at the same time, so you get like 0:15:44.320 --> 0:15:48.040 the dynamic leveraging in the market that gets triggered by this. 0:15:48.120 --> 0:15:50.360 So I don't think we'll ever pinpoint one, but I 0:15:50.360 --> 0:15:53.840 think we should take note that there is a sentiment 0:15:53.880 --> 0:15:54.760 story that is playing on. 0:15:55.080 --> 0:15:57.880 So John, one of the things that is really debated 0:15:57.960 --> 0:16:01.320 right now among global macro ponomous is what is the 0:16:01.360 --> 0:16:03.120 beta of the rest of the world to US growth. 0:16:04.200 --> 0:16:07.080 So some people feel that it'ser point five, others feel 0:16:07.120 --> 0:16:09.800 it's more than one. Where would you put the beta 0:16:10.280 --> 0:16:12.280 the growth beta of the rest of the world, Well, 0:16:12.320 --> 0:16:14.720 it's the US for Europe and for developing countries. 0:16:16.320 --> 0:16:20.520 You know, I think there's a distinction between where this 0:16:20.560 --> 0:16:23.000 administration might want to go in many years from now 0:16:23.040 --> 0:16:24.480 and where we are right now. I don't think the 0:16:24.480 --> 0:16:28.000 world has changed materially yet. I mean, yes, the tone 0:16:28.000 --> 0:16:30.400 and everything has changed like drastically, and the uncertainty is 0:16:30.440 --> 0:16:32.880 as uncertainty as we've ever seen it, as you said before, 0:16:33.600 --> 0:16:37.000 But right now, the fundamentals where the US is still 0:16:37.080 --> 0:16:39.600 very much as link as it was. And I think 0:16:39.640 --> 0:16:41.760 we've seen it right, you know, when we've seen the 0:16:41.800 --> 0:16:45.320 baration day, we've seen the US market tank. It's not 0:16:45.440 --> 0:16:48.600 like Europe has outperformed during those days or other markets are. 0:16:48.680 --> 0:16:50.960 So the beta is still very much as strong as 0:16:51.000 --> 0:16:51.480 it was. 0:16:52.280 --> 0:16:54.360 Over time, more than one, more than one or less 0:16:54.360 --> 0:16:54.640 than one. 0:16:54.680 --> 0:16:56.240 I think we're looking at something that looks like one 0:16:56.360 --> 0:16:58.920 right now. So I don't think I wouldn't. 0:16:58.640 --> 0:17:01.240 Take a big on either side, but I think it 0:17:01.240 --> 0:17:03.120 looks like it's very much correlated with it. 0:17:03.120 --> 0:17:04.879 Does that mean you can't think is bigger bet for 0:17:04.960 --> 0:17:07.600 Europe against the United States and vice versa if they're 0:17:07.600 --> 0:17:08.320 on the same boat. 0:17:08.920 --> 0:17:11.640 Yeah, So I think I think it's it's it's it's something. 0:17:11.359 --> 0:17:14.800 To say US is risky, so let's let's go elsewhere. 0:17:15.359 --> 0:17:17.359 But because of that beta, I think we're still in 0:17:17.400 --> 0:17:21.920 the world where you know, all boats will be moving together. 0:17:22.760 --> 0:17:24.480 But there is one thing happening though, is that in 0:17:24.520 --> 0:17:27.640 this environment that you know, clients have always been having 0:17:27.680 --> 0:17:30.480 a home bias, right, it's easier to invest shelter to home. 0:17:30.920 --> 0:17:33.680 I think that exacerbates that home bias we have. So 0:17:33.760 --> 0:17:35.320 it's in this environment. 0:17:34.960 --> 0:17:37.040 Your high conviction view is actually in the treasury market. 0:17:37.240 --> 0:17:39.879 So should we finish on that underway treasure raise? Is 0:17:39.920 --> 0:17:42.399 it for all the reasons we've discussed or something missing? 0:17:43.400 --> 0:17:45.919 It's for while we had on top of that the 0:17:45.960 --> 0:17:50.119 inflation story that is not resolved. It's actually being you know, 0:17:50.880 --> 0:17:53.600 fueled somewhat more with with those measures. 0:17:54.040 --> 0:17:56.600 So we have been on the way to us church. 0:17:56.720 --> 0:17:58.399 This is the highest conviction we've been having for the 0:17:58.440 --> 0:18:02.080 last many months, even I would say many years. We're 0:18:02.119 --> 0:18:05.080 setting through a high rate environment. Everything we see confirms 0:18:05.119 --> 0:18:08.120 out and the leader's development. I think after that as well, and. 0:18:08.040 --> 0:18:10.320 The latest communication from cham and Pan which reinforced it 0:18:10.359 --> 0:18:22.679 to Choman Van a black crop can I'm shure before 0:18:22.720 --> 0:18:24.639 my senior Trump trying to advice that joins us now 0:18:24.640 --> 0:18:25.359 for more Candian is. 0:18:25.359 --> 0:18:26.880 Good to see you. Good to see you as well. 0:18:26.920 --> 0:18:28.800 What are the prospects of making a deal in this 0:18:28.840 --> 0:18:31.120 smaller timeframe with this money countries? 0:18:31.800 --> 0:18:33.600 Well, I think the chances of making a deal with 0:18:33.720 --> 0:18:37.320 Japan seem pretty high. Right, Like you've heard bess and 0:18:37.400 --> 0:18:39.639 talk about the fact that there are about fifteen countries 0:18:39.680 --> 0:18:42.120 with whom they're close to making a deal. I don't 0:18:42.160 --> 0:18:45.040 foresee ninety countries in ninety days, but certainly with some 0:18:45.080 --> 0:18:47.000 of our major trading partners with whom we have some 0:18:47.040 --> 0:18:49.760 of these significant issues, I do think the administration is 0:18:49.880 --> 0:18:50.639 very optimistic. 0:18:50.720 --> 0:18:52.919 Let's talk about the one that's a little bit harder, China. 0:18:53.160 --> 0:18:54.879 They came out this week with a number of demands 0:18:54.920 --> 0:18:57.280 they'd like to see response. By the way, we should 0:18:57.320 --> 0:18:59.800 note this was a bloomberg scoop according to someone familiar 0:18:59.840 --> 0:19:02.679 with the CCP, thinking right now, do you think this 0:19:02.720 --> 0:19:06.320 administration is ready to appoint a point person for Beijing 0:19:06.359 --> 0:19:07.040 to deal with. 0:19:07.359 --> 0:19:09.800 Well, I think both sides are looking to see if 0:19:09.800 --> 0:19:11.760 there is an off ramp. Right Like last week, we 0:19:11.920 --> 0:19:15.479 backed ourselves into a trade embargo between the two world's 0:19:15.600 --> 0:19:18.639 largest economies, So there has to be a way to 0:19:18.720 --> 0:19:20.679 resolve this at some sort of political level, and I 0:19:20.680 --> 0:19:23.240 think appointing someone seems like a reasonable way forward. But 0:19:23.280 --> 0:19:25.760 that said, the President has said that he wants to 0:19:25.800 --> 0:19:29.320 negotiate directly with Shijing Pang, so there's going to be 0:19:29.359 --> 0:19:31.960 some negotiations behind the scenes to see if they want 0:19:31.960 --> 0:19:33.720