WEBVTT - Steady as She [the Fed] Goes, Peters Says 0:00:00.080 --> 0:00:13.040 Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Leye. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:32.960 Bloomberg dot Com, and of course on the Bloomberg to 0:00:33.000 --> 0:00:35.239 talk about the regime, we can welcome in here in 0:00:35.240 --> 0:00:39.159 New York, YenS Norvik, Exante data founder and CEO, who 0:00:39.280 --> 0:00:41.880 joins us around a table right now. It's great to 0:00:41.920 --> 0:00:45.159 have you with us. Thank you. It's still goldilocks or 0:00:45.200 --> 0:00:48.800 a thing's changing. Well. People definitely got very worried about 0:00:48.880 --> 0:00:51.879 the spike and wage growth the previous months, so the 0:00:51.880 --> 0:00:55.160 fact that that's coming down is important. But obviously we 0:00:55.200 --> 0:00:57.120 have a lot of noise in this data. There's something 0:00:57.120 --> 0:00:59.800 about the hours work swinging up and down that is 0:00:59.800 --> 0:01:03.880 in in these numbers in both directions. So I personally 0:01:03.880 --> 0:01:05.840 think it's important to look ahead, like what is the 0:01:05.880 --> 0:01:10.640 trajectory of the economy. And what is really interesting is 0:01:10.720 --> 0:01:13.240 that they're not only have we got that the tax 0:01:13.319 --> 0:01:16.080 cut that is sort of working its way through its economy, 0:01:16.120 --> 0:01:19.560 but we have very very significant increases in physical spending 0:01:20.000 --> 0:01:22.120 in the second half of that year of this year, 0:01:22.200 --> 0:01:24.720 and actually first half from next year as well. That's 0:01:24.720 --> 0:01:26.400 going to add a lot to growth. Right, So we're 0:01:26.440 --> 0:01:28.520 looking at what the economy is are doing now, but 0:01:28.640 --> 0:01:30.759 we know it's going to shift up a gear pretty 0:01:30.840 --> 0:01:34.080 much over the next twelve months and it will be 0:01:34.200 --> 0:01:37.160 very very interesting to see how the Fed reacts that. 0:01:37.240 --> 0:01:40.720 Are they going to sort of be reacting slowly or 0:01:40.760 --> 0:01:42.240 they're going to say, okay, we need to be a 0:01:42.280 --> 0:01:44.360 bit more proactive. That that's the key. So I can't 0:01:44.400 --> 0:01:46.240 tell you how many research nights have read this morning 0:01:46.280 --> 0:01:48.440 with the word goldilocks in it. Kitchen Ciber at sock 0:01:48.520 --> 0:01:50.760 Jam with the with the title of his research this morning, 0:01:50.800 --> 0:01:53.960 who spiked goldilocks? Is Porridge and he's talking about the 0:01:53.960 --> 0:01:57.080 fiscal stimulus that come from Washington, d C. So help 0:01:57.120 --> 0:01:59.440 me understand what this means for the Federal Reserve. They've 0:01:59.440 --> 0:02:02.120 had a raised for the last few years of output rich, 0:02:02.520 --> 0:02:05.560 inflation poor, and then all of a sudden they've got 0:02:05.560 --> 0:02:08.680 to start thinking about capacity constraints and what happens when 0:02:09.080 --> 0:02:11.480 the fiscal stimulus really starts to buy What is the 0:02:11.480 --> 0:02:14.080 prudent monetary policy response to that. You've got years on 0:02:14.120 --> 0:02:17.440 your side of just output rich inflation poor, but the 0:02:17.440 --> 0:02:20.120 real prospect that things are starting to shift. Well, I 0:02:20.160 --> 0:02:23.639 think that the prudent monitory policy is to really keep 0:02:23.680 --> 0:02:26.840 your options open. So we were on TV like a 0:02:26.880 --> 0:02:28.960 couple of minutes ago, and we talked about, Okay, should 0:02:28.960 --> 0:02:33.040 the FED really make every single FED meeting live? I 0:02:33.080 --> 0:02:35.000 think that would be a good option here, Like they 0:02:35.080 --> 0:02:38.080 need to have the ability to step up the pace 0:02:38.120 --> 0:02:41.560 of tightening if they see it. And one way of 0:02:41.560 --> 0:02:45.360 of of sort of bring that optionality into play is 0:02:45.400 --> 0:02:48.600 to make every single meeting a line meeting with the 0:02:48.639 --> 0:02:51.480 press conference. So that would be one thing. The other 0:02:51.520 --> 0:02:54.600 thing I think is to do with the signals that 0:02:54.639 --> 0:02:57.280 they send a little bit further ahead. I think increasing 0:02:57.320 --> 0:03:00.600 the pace of hikes beyond for a year right now 0:03:00.639 --> 0:03:02.880 will be dramatic step, but they can sick on okay 0:03:02.960 --> 0:03:05.920 next year, next year. We want to keep our options open. 0:03:05.960 --> 0:03:08.400 We don't know exactly where our star is. It's a 0:03:08.480 --> 0:03:11.240 very ecademic concept, so perhaps we need to go longer 0:03:11.520 --> 0:03:13.680 than people anticipating. I think that's the kind of forward 0:03:13.680 --> 0:03:16.200 guidance they can send now, and I think that would 0:03:16.360 --> 0:03:20.800 soon be appropriate. Within the forward guidance is a Fed 0:03:21.080 --> 0:03:24.000 that has to act. Everybody seems to agree on that. 0:03:24.560 --> 0:03:28.280 How far behind are they the real rate? The Fed 0:03:28.320 --> 0:03:33.200 funds real rate is still negative? Right yeah? Um. I 0:03:33.240 --> 0:03:36.800 think the problem is that we get so tied to 0:03:37.080 --> 0:03:42.240 this very academic way of analyzing what the equilibrium rate is. 0:03:42.880 --> 0:03:47.520 This our star concept is something that is incredibly difficult 0:03:47.560 --> 0:03:50.160 to calculate, and it's easy to say, Okay, here's a 0:03:50.160 --> 0:03:52.800 good academic paper. Now I'm going to believe there's number, 0:03:53.200 --> 0:03:56.760 but reality nobody knows. So I think this is probably 0:03:56.800 --> 0:03:58.560 one area where we can go back to the Green 0:03:58.600 --> 0:04:01.880 Splan days and really go into the minutia and say, okay, 0:04:01.960 --> 0:04:06.240 how is each sector really responding to these slightly higher rates. 0:04:06.240 --> 0:04:08.880 I've heard this from other people. What what's you're reading 0:04:08.960 --> 0:04:10.680 of that? I mean, you're not out there looking at 0:04:10.720 --> 0:04:14.960 every sector, but what you're reading of each in every sector? 0:04:15.120 --> 0:04:18.839 Right now? Because John and I get mail when we 0:04:18.920 --> 0:04:22.080 say that it's a fully employed America, our our audience 0:04:22.160 --> 0:04:25.279 thinks we're nuts. Well we can we can see the 0:04:26.640 --> 0:04:29.880 is definitely a big move in the participation right in 0:04:29.880 --> 0:04:32.480 the in the latest numbers. So that's very very interesting, 0:04:33.120 --> 0:04:38.159 and I guess Yellen was was very vocal a little 0:04:38.160 --> 0:04:41.039 while ago about saying, Okay, we need to push this 0:04:41.160 --> 0:04:44.280 economy harder to see okay, because there's some kind of 0:04:44.279 --> 0:04:47.000 reverses the races we can bring into play here. And 0:04:47.040 --> 0:04:50.960 perhaps she was right, but I think in terms of 0:04:51.000 --> 0:04:54.320 evaluating what's going on with the economy, it's aweso important 0:04:54.360 --> 0:04:57.159 to think about, Okay, the various sectors, can they actually 0:04:57.200 --> 0:05:00.840 cope with higher rates? And what It's very interesting if 0:05:00.839 --> 0:05:03.240 you look at the sort of debt levels, right, there's 0:05:03.279 --> 0:05:05.800 often a lot of focus on the fact that, Okay, 0:05:05.839 --> 0:05:08.479 we have a fishcal problem, we have a dead problem 0:05:08.600 --> 0:05:11.080 in in the government space. But if you look at 0:05:11.080 --> 0:05:14.039 the household sector, we actually have less debt relative to 0:05:14.080 --> 0:05:16.520 disposable income than we had the before the crisis. So 0:05:16.560 --> 0:05:18.800 that's a sector that I think can be quite resilient. 0:05:19.839 --> 0:05:23.240 So I think it's very very hard to to say okay, 0:05:23.440 --> 0:05:27.119 or a star is real rate a little bit above zero, 0:05:27.839 --> 0:05:30.960 maybe we can get too substantially higher normal rates than 0:05:30.960 --> 0:05:33.200 people are anticipating. Now. Well, yes, I think there's two 0:05:33.240 --> 0:05:35.080 ways of looking at this. And Danny blanche Flower of 0:05:35.160 --> 0:05:37.800 Dartmouth was messaging me over the weekend. Of course he 0:05:37.880 --> 0:05:40.000 would be very dovish if he was on the Federal 0:05:40.040 --> 0:05:42.560 Reserve and the data backs him up. The participation rate 0:05:42.600 --> 0:05:46.040 is rising. This is an economy still printing three hundred 0:05:46.080 --> 0:05:49.440 thousand jobs apparently in a given month. We've been looking 0:05:49.440 --> 0:05:52.480 at two d K every other month seemingly, and yet 0:05:52.520 --> 0:05:55.000 wage growth isn't picking up. So there is a dovish 0:05:55.040 --> 0:05:56.720 picture you can paint of the labor market. At the 0:05:56.760 --> 0:05:59.120 same time, there's another way of just looking at this. Practically, 0:05:59.520 --> 0:06:02.120 should rights at the FETE big around one and a 0:06:02.120 --> 0:06:05.960 half percent near an emergency setting when we this late 0:06:06.000 --> 0:06:09.320 in the psycho and GDP is as high as it is. Yeah, Now, 0:06:09.360 --> 0:06:13.520 I think this is the big debate, Like we can 0:06:13.560 --> 0:06:17.000 discuss the manusha about okay, what is the wage growth 0:06:17.120 --> 0:06:19.240 number now? But the really big picture is when you 0:06:19.279 --> 0:06:22.599 set monitored policy, are you going to set it based 0:06:22.720 --> 0:06:26.120 on whether it's important that inflation is one point nine 0:06:26.200 --> 0:06:28.320 or two point zero or you're gonna take a bigger 0:06:28.320 --> 0:06:30.720 picture where you say, Okay, we have a strong economy 0:06:30.960 --> 0:06:32.760 and we want to have real rates. That's going to 0:06:32.880 --> 0:06:35.159 sort of create a degree of stability for the long 0:06:35.279 --> 0:06:38.480 term in the financial system. And I think we as 0:06:38.480 --> 0:06:41.120 you look around the world. You're seeing some extreme examples 0:06:41.160 --> 0:06:44.880 of central banks that get extremely mathematical about getting to 0:06:44.960 --> 0:06:49.160 two point zero, and they are actually totally not focusing 0:06:49.160 --> 0:06:51.680 on this bigger picture. Well, the bigger picture here you 0:06:51.800 --> 0:06:54.200 said this earlier, the idea that we're going to see 0:06:54.240 --> 0:06:58.119 substantial currency movement. Give us an example of a pair 0:06:58.920 --> 0:07:02.560 where we're gonna see figure movement that somebody can enjoy 0:07:02.839 --> 0:07:06.640 making or losing money on today. Well, so we've seen 0:07:06.760 --> 0:07:10.000 actually pretty big moves in two thousand eighteen. Right, We've 0:07:10.040 --> 0:07:13.280 had dolly in from one thirteen down to one of six. 0:07:13.560 --> 0:07:16.320 That's a pretty big move. And does it go further? 0:07:16.600 --> 0:07:19.480 It means it gonna go under a hundred, I think. 0:07:19.880 --> 0:07:23.520 So I'm obsessed with capital flows. I spent the last 0:07:23.560 --> 0:07:26.880 week just crunching all the Japanese capital flows because this 0:07:26.960 --> 0:07:29.320 is what our clients are very very focused on. Now, 0:07:30.680 --> 0:07:33.080 I think we're actually going to take a bit of 0:07:33.080 --> 0:07:34.960 a breather now. I think there's some of the forces 0:07:35.000 --> 0:07:36.720 that pushed it very fast. They're going to take a breather. 0:07:36.840 --> 0:07:39.880 But I think the next big pair to focus on 0:07:40.120 --> 0:07:43.440 is sort of this thing about NAFTA versus China. We've 0:07:43.440 --> 0:07:46.240 had all the tension around the NAFTA currency in Mexico 0:07:46.520 --> 0:07:49.880 and Canada. The next piece of tension is going to 0:07:49.920 --> 0:07:52.200 be China, so I think there can be some very 0:07:52.240 --> 0:07:55.720 interesting movement there where there's relaxation around the NAFTA currencies 0:07:55.800 --> 0:08:16.360 and more pressure on Asian currencies. With EXE data, John, 0:08:16.400 --> 0:08:19.720 why don't you bring in our next guest who just 0:08:19.800 --> 0:08:22.000 had he added to the g d P of the 0:08:22.000 --> 0:08:25.080 Greater New York Area that because he had to get 0:08:25.120 --> 0:08:29.160 a new mantle for his fireplace. His house is so big, 0:08:29.160 --> 0:08:31.760 he has like four fireplaces in it, and we bring 0:08:31.760 --> 0:08:34.080 it in the morning staff fixed in kind Manager of 0:08:34.080 --> 0:08:35.959 the Year. The trophy was so big he had to 0:08:36.000 --> 0:08:39.120 get you know, he had scaffolding up until they replaced 0:08:39.120 --> 0:08:44.320 it with a marble buttressed. Part of that PAGM team 0:08:44.480 --> 0:08:48.480 is Greg Paid, his managing director and senior investment officer. Greg. 0:08:48.480 --> 0:08:50.280 It's always great to get you on a program to 0:08:50.280 --> 0:08:53.439 to get your time. Really fascinating. The compare and contrast 0:08:53.559 --> 0:08:56.720 between the January jobs report and a February payrolls report. 0:08:56.760 --> 0:08:59.679 The fear that the January payrolls report put into this 0:08:59.720 --> 0:09:03.079 mark kid next to the camp that was ejected into 0:09:03.080 --> 0:09:06.080 this market for risk assets on Friday following the February 0:09:06.080 --> 0:09:08.160 pay rolls report, where's the truth one of the other 0:09:08.200 --> 0:09:11.760 somewhere in between. Greg, Yeah, the lesson is let's not 0:09:11.840 --> 0:09:15.960 get um too excited one way or the other month 0:09:16.000 --> 0:09:18.360 to month. I think we need to look at some 0:09:18.440 --> 0:09:21.240 of the longer trends. And you know, January was such 0:09:21.280 --> 0:09:25.400 an important set of data. It really kind of catalyzed 0:09:25.520 --> 0:09:28.840 a new regime in many different respects of higher yields, 0:09:28.920 --> 0:09:32.439 inflation getting out of controls on and so forth. UH, 0:09:32.480 --> 0:09:36.840 and the last UH and the last release on Friday 0:09:37.000 --> 0:09:39.120 really just threw cold water on it. So I think 0:09:39.120 --> 0:09:41.840 the message, at least at least for us a p gym, is, 0:09:42.200 --> 0:09:44.360 you know, let's not get overly excited one way or 0:09:44.400 --> 0:09:46.400 the other. Let's look at the broader set of data 0:09:46.440 --> 0:09:49.040 and the broader trends. And when you look at that, 0:09:49.200 --> 0:09:52.920 it's clear that you're seeing some firming on the inflation side. 0:09:53.440 --> 0:09:57.280 But as far as UH, you know, runaway wage or 0:09:57.480 --> 0:10:00.920 kind of broad based inflation, I think it's to premature 0:10:01.040 --> 0:10:03.440 to be called for that. So to that point, Greg, 0:10:03.480 --> 0:10:07.280 and we're seeing the shifting into a new regime or 0:10:07.320 --> 0:10:09.640 is it just the fear of a shift to a 0:10:09.640 --> 0:10:13.199 new regime that has gripped markets to some extent. I 0:10:13.240 --> 0:10:16.000 think it's more fear than reality at this point. Uh. 0:10:16.040 --> 0:10:19.000 You know, I do know that markets trade expectations. Uh, 0:10:19.080 --> 0:10:22.359 and so something that we watch very closely is inflation expectations. 0:10:22.360 --> 0:10:25.439 But at some point the expectations have to match kind 0:10:25.480 --> 0:10:30.360 of underlying hard data. Uh. And I think that became 0:10:30.400 --> 0:10:35.680 somewhat disconnected the past several months or so. Um. So 0:10:36.320 --> 0:10:39.240 you know, you know, to us, as steady as she goes? Uh, 0:10:39.400 --> 0:10:43.000 you think the Fed continues to move uh, you know, 0:10:43.080 --> 0:10:46.559 three times this year maybe for two thousand and nineteen 0:10:46.679 --> 0:10:49.680 is the bigger question. The markets are still pricing in 0:10:50.360 --> 0:10:52.880 just one in a quarter for two thousand and nineteen. 0:10:53.960 --> 0:10:56.520 But um, yeah, I think it's steady as you go. 0:10:56.559 --> 0:11:01.160 It's quite Frankly, Jonathan greg what was the distinction that 0:11:01.400 --> 0:11:05.920 made for your outstanding two thousand seventeen? What was the 0:11:06.040 --> 0:11:10.800 strategic decision you made within your fixed income portfolios to 0:11:10.960 --> 0:11:16.440 outpace the easy to find average. Yeah, so last year 0:11:16.960 --> 0:11:19.400 was uh, you know, gosh, you know, we're talking a 0:11:19.440 --> 0:11:21.560 lot about last year. This year is much much harder. 0:11:21.559 --> 0:11:24.480 I will say, last year, what I think the market's 0:11:24.480 --> 0:11:29.240 got really excited over the new administration coming in, yields 0:11:29.280 --> 0:11:33.360 really spice higher, UH and we felt like, uh, a 0:11:33.440 --> 0:11:36.120 lot of that was not going to come to fruition, 0:11:36.200 --> 0:11:38.160 and in fact that played out. I think this year 0:11:38.240 --> 0:11:41.719 is very different though, as you are seeing tangible things happening. Right, 0:11:41.760 --> 0:11:45.400 you have seen a continued firming of the labor market 0:11:45.200 --> 0:11:47.640 at a trend that has been in place for you know, 0:11:47.679 --> 0:11:51.920 many years of course. But but but you have more 0:11:51.960 --> 0:11:55.400 pro growth policies and you have a tighter labor market, 0:11:55.480 --> 0:11:59.800 even though the jobs data report UH digit suggest and 0:11:59.840 --> 0:12:04.800 right fully so, that there's more um kind of sideline 0:12:04.800 --> 0:12:07.719 workers than many people envisioned. But I think last year 0:12:07.840 --> 0:12:12.840 was really easy. Obviously retrospect is, you know, much easier 0:12:12.880 --> 0:12:15.160 to call. But if you look at the fact that 0:12:15.200 --> 0:12:19.800 you had a really bullish environment for credit as an example, 0:12:20.040 --> 0:12:23.840 with no volatility. I mean you were seeing sharp ratios 0:12:23.880 --> 0:12:29.080 across many different portfolios of over ten times, they were 0:12:29.120 --> 0:12:32.880 equity like returns almost are you managing for the coupon 0:12:33.000 --> 0:12:36.440 this year? I think this year is much more difficult, 0:12:36.520 --> 0:12:38.760 and so we squeezed a lot of the juice out 0:12:38.800 --> 0:12:41.480 of the lemon last year, and I think this year 0:12:41.600 --> 0:12:45.640 is much more difficult, and so while we're not barish 0:12:45.679 --> 0:12:49.600 from a fundamental or economics standpoint, where we're more cautious, 0:12:49.640 --> 0:12:53.360 there's really just valuations. As valuations have really come far 0:12:53.760 --> 0:12:56.400 and it's hard to get too excited, and that's why 0:12:56.440 --> 0:13:00.120 we've taken down a risk somewhat um and you to 0:13:00.160 --> 0:13:02.959 your point, Tom, it's you know, seems like much more 0:13:03.000 --> 0:13:05.920 of a coupon, hopefully with a little kiss to it. 0:13:06.520 --> 0:13:08.640 But I think it's more of a coupon. You Well, Greg, 0:13:08.720 --> 0:13:10.959 let's work our way through it from rates three to 0:13:11.040 --> 0:13:13.280 corporates and begin with rates and talk to me about 0:13:13.280 --> 0:13:16.080 how you express this framework in the market for rates 0:13:16.240 --> 0:13:19.320 last year from speaking to you guys throughout the whole year. 0:13:19.600 --> 0:13:22.040 Stay short at the front end. The long end isn't 0:13:22.040 --> 0:13:23.959 going to drift higher in the way that people expect. 0:13:23.960 --> 0:13:26.560 That's going to remain anchored. So you're looking for the 0:13:26.600 --> 0:13:29.439 curve to flatten short the front end and then we're 0:13:29.440 --> 0:13:32.160 just gonna stay anchored around tens through to through to thirties. 0:13:32.160 --> 0:13:34.520 How has that changed for you, Greg and rates? That 0:13:34.679 --> 0:13:37.800 is still broadly the case. I we still think that 0:13:38.320 --> 0:13:41.400 a curve flatten er is the preferred path or the 0:13:41.440 --> 0:13:46.280 way that uh, we see the rate curve playing out, 0:13:46.679 --> 0:13:49.319 but the front end is increasingly more difficult to be short. 0:13:49.440 --> 0:13:51.600 I I still think you need to be short at 0:13:51.640 --> 0:13:54.680 the front end. Uh. And so we do have the 0:13:54.720 --> 0:13:58.480 same flatten Er bias for sure, but but it's not 0:13:58.640 --> 0:14:01.880 as uh as easy as it once was, as there's 0:14:01.880 --> 0:14:04.040 a lot being pricing to the front end now. And 0:14:04.080 --> 0:14:07.280 so we mentioned there's three full hikes priced in for 0:14:07.280 --> 0:14:09.880 two thousan eighteen. Uh. You know, if you get the 0:14:09.880 --> 0:14:13.920 four hikes, that's basically price for perfection. So I don't 0:14:13.960 --> 0:14:16.479 think you want to invest in something price for perfection 0:14:17.080 --> 0:14:19.040 until we're getting close. But I still think it's the 0:14:19.120 --> 0:14:23.040 same trend. If you want to be long the belly uh, 0:14:23.040 --> 0:14:26.280 and the curve will flatten. What's the yield there? I mean, 0:14:26.360 --> 0:14:29.480 within the mix that you have at p Jim, can 0:14:29.520 --> 0:14:33.040 I get to a four percent all in coupon? Uh? 0:14:33.040 --> 0:14:36.600 It's it's hard, you know, I mean you know that's 0:14:36.640 --> 0:14:40.000 the point the underlying kind of yield construct not only 0:14:40.040 --> 0:14:43.200 here in the US, but more more so in Europe, 0:14:43.240 --> 0:14:46.240 and we are a global manager. Uh. It's uh, it's 0:14:46.680 --> 0:14:52.600 it's very challenging to get high yields if you would, um. Uh. 0:14:52.640 --> 0:14:54.760 And so you know, quite frankly, speaking of high yield, 0:14:54.800 --> 0:14:57.480 that's an area that uh, you know, we've really liked 0:14:57.480 --> 0:15:01.080 for quite some time. We have taken in our risk 0:15:01.240 --> 0:15:04.640 down in uh, in the high yield market broadly. But 0:15:04.760 --> 0:15:07.600 what we're doing is that we actually think there's more 0:15:07.720 --> 0:15:10.320 value out the risk curve, and so we see more 0:15:10.440 --> 0:15:13.160 value in triple cs than we do double bees, which 0:15:13.240 --> 0:15:15.560 less clear that's where the performance has been this year 0:15:15.560 --> 0:15:19.920 as well. Is that, uh, you know, because I think 0:15:20.400 --> 0:15:24.120 the double B market has been much more sensitive to 0:15:24.160 --> 0:15:26.120 the selling that you're seeing on the mutual fund and 0:15:26.200 --> 0:15:31.680 et F side, as that's more rate yield driven um. 0:15:32.120 --> 0:15:35.320 Whereas the triple C part of the market, which we 0:15:35.400 --> 0:15:38.400 think you're getting amply paid for, is about you know, 0:15:38.720 --> 0:15:42.240 over three point three times the amount of spread relative 0:15:42.320 --> 0:15:47.320 the double bees. It's more idiosyncratic. Uh, And you're not 0:15:47.480 --> 0:15:51.200 tied to kind of rates moving up and down. Great. 0:15:51.200 --> 0:15:53.120 Just to be clear, are you blaming the tourists for 0:15:53.160 --> 0:15:56.680 the action and double bass No? I I just think 0:15:56.720 --> 0:16:00.560 that's where the you know, the rate sensitive the market 0:16:00.680 --> 0:16:03.680 is right. But to be clear, you have seen a 0:16:03.840 --> 0:16:08.520 proliferation of these short duration high quality funds both in 0:16:08.520 --> 0:16:13.000 investment grade UH and HI yould bonds. And so that's 0:16:13.040 --> 0:16:17.200 the first thing to be sold pageon Managings Director and 0:16:17.360 --> 0:16:31.440 Senior Investment Officer. This is a formal thing before we 0:16:31.480 --> 0:16:34.320 get to a serious conversation with Chad Bound at the 0:16:34.320 --> 0:16:39.000 Peterson Institute. This is an annual thing that happens now, folks, 0:16:39.360 --> 0:16:43.200 we're handing the bracket to the head of my life 0:16:44.000 --> 0:16:46.320 to the bus to let her know that we are 0:16:47.160 --> 0:16:49.240 boiler up. Is this why I put you? Is in 0:16:51.120 --> 0:16:56.200 for our global audience? Yes, my whiz, I actually did 0:16:56.200 --> 0:16:59.200 pretty well last year. How are they ranked? They're like good, 0:16:59.240 --> 0:17:03.040 They're better? They're like what okay, there are two team 0:17:03.480 --> 0:17:08.840 say there it is provedn be nice to meets your 0:17:08.920 --> 0:17:10.920 hands to Pharaoh so he knows what not to do. 0:17:11.720 --> 0:17:15.280 There you go. You just do the opposite of what 0:17:16.040 --> 0:17:18.320 Chad Bound with us for the Peterson Institute. We have 0:17:18.359 --> 0:17:19.880 a lot of fun with the brackets and we say 0:17:19.920 --> 0:17:24.000 good morning to allow you across the nation on serious sexption. 0:17:24.040 --> 0:17:27.760 On one nineteen, Mr Bown is to the Peterson Institute 0:17:28.320 --> 0:17:31.360 and we do need an update on terroriffs. Is that 0:17:31.359 --> 0:17:35.240 that nudges away in our vision and yet it should 0:17:35.280 --> 0:17:37.960 not Chad. What do we need to focus on now 0:17:38.520 --> 0:17:42.960 with this huge tariff debate, Well, the first thing we 0:17:42.960 --> 0:17:46.000 need to focus on is my buck now, Bison, my 0:17:46.000 --> 0:17:49.760 my school number fifteen, Michigan State. Get to the important 0:17:49.760 --> 0:17:55.160 stuff to watching them go there. But more seriously, uh 0:17:55.240 --> 0:17:57.280 so we're still waiting to see how all this plays out. 0:17:57.320 --> 0:18:01.800 So President Trump on Thursday tariffs on steel, ten percent 0:18:01.840 --> 0:18:04.840 tariffs on aluminum. But the first thing he said was well, 0:18:04.880 --> 0:18:06.520 for now, we're not going to impose these things on 0:18:06.600 --> 0:18:10.399 Canada and Mexico. We're gonna potentially exempt them that we 0:18:10.480 --> 0:18:11.960 may hang it over their head a little bit in 0:18:12.000 --> 0:18:14.600 the NAFTA talk. So we'll see what happens there. But 0:18:14.680 --> 0:18:17.320 everybody else is up for grabs. Now. He did open 0:18:17.359 --> 0:18:21.240 the possibility that are Security Alliance partners may be able 0:18:21.240 --> 0:18:24.520 to wiggle their way out of this somehow. So the 0:18:24.600 --> 0:18:28.439 U S Trade Representative, Robert Leidheiser was in Brussels on 0:18:28.520 --> 0:18:31.720 Saturday meeting with Cecilia Moms from the EU Trade Commissioner, 0:18:32.040 --> 0:18:35.720 the Japanese Trade Commissioner. Uh you know, potentially seeking them 0:18:35.760 --> 0:18:38.480 to get exempted. But nobody else has been exempted yet 0:18:38.520 --> 0:18:41.080 so as of now, only Canada and Mexico are not 0:18:41.119 --> 0:18:42.959 going to be hit by these new tariffs. So it's 0:18:42.960 --> 0:18:45.119 the President United States has just twaited for USAULT to 0:18:45.160 --> 0:18:47.639 say the Secretary of Commas, Wilbur Ross, will be speaking 0:18:47.680 --> 0:18:51.440 with representatives of the European Union about eliminating the large 0:18:51.440 --> 0:18:54.200 tariffs and barriers they use against the United States of America. 0:18:54.320 --> 0:18:57.280 The words of the President this morning chat, this is 0:18:57.320 --> 0:18:59.760 the time when ready the United States should be working 0:18:59.760 --> 0:19:04.600 with Europe, with Japan to address the issue that is China. Instead, 0:19:04.840 --> 0:19:08.320 there seems to be friction, tension between themselves at a 0:19:08.359 --> 0:19:11.480 time that China is sort of centralizing strength within President 0:19:11.560 --> 0:19:13.080 Shape talk to me about how difficult it will be 0:19:13.119 --> 0:19:15.240 to take on China alone if you don't have Europe, 0:19:15.600 --> 0:19:19.320 Europe and Japan with you. Yeah, that's exactly the issue here. 0:19:19.320 --> 0:19:21.800 So the source of the underlying concern when it comes 0:19:21.840 --> 0:19:26.360 to steal aluminum is global over capacity, most of which 0:19:26.440 --> 0:19:28.520 has come out of China. Uh. And you know, the 0:19:28.520 --> 0:19:31.119 Europeans are suffering in much the same way as U 0:19:31.200 --> 0:19:34.719 s deal and aluminum. The Japanese are as well. So 0:19:34.800 --> 0:19:37.439 you would think that if you're the US administration that 0:19:37.480 --> 0:19:40.480 you would want to get the EU Japan to cooperate 0:19:40.520 --> 0:19:44.640 with you in dealing with this, this underlying problem of China. 0:19:44.840 --> 0:19:46.680 But that doesn't seem to be their approach. They're gonna, 0:19:46.680 --> 0:19:48.760 you know, potentially slap tariffs on them. That EU has 0:19:48.800 --> 0:19:50.800 already come out with their list of products over which 0:19:50.800 --> 0:19:53.840 they're gonna have to threaten to retaliate against the United States. 0:19:54.080 --> 0:19:55.760 And so all of this is really a side show 0:19:55.840 --> 0:19:58.840 to the actual underlying problem. So let's get to the 0:19:58.880 --> 0:20:01.440 underlying problem. I'm still wanting for a great answer to 0:20:01.480 --> 0:20:03.720 this question, chat, what is the best approach for dealing 0:20:03.720 --> 0:20:07.520 with China? Well, I do think you need cooperation. Uh. 0:20:07.640 --> 0:20:09.720 You know, having the United States trying to go at 0:20:09.760 --> 0:20:13.520 it alone, uh and without its key allies is really 0:20:13.520 --> 0:20:15.800 not going to work. So you do need to get 0:20:15.800 --> 0:20:19.040 the other major players out there to actually stand up, 0:20:19.080 --> 0:20:22.040 stand up alongside you. Now, you know, we we can't 0:20:22.040 --> 0:20:24.360 take that off the table completely. Uh. You know, there 0:20:24.480 --> 0:20:28.920 was a renewed engagement by the three the US, EU 0:20:29.200 --> 0:20:31.639 and in Japan coming out of the weekend. You know, 0:20:31.680 --> 0:20:33.840 this was this meeting that they had on Saturday, was 0:20:33.920 --> 0:20:36.240 long scheduled. The timing ended up being a little bit 0:20:36.280 --> 0:20:39.520 awkward because it was right after President Trump's Triff announcement, 0:20:39.840 --> 0:20:41.680 But this thing had been in the planning for a while, 0:20:41.760 --> 0:20:45.480 trying to deal with China on uh steal an aluminium capacity, 0:20:45.720 --> 0:20:48.560 the bigger intellectual property issues that that they're worried about 0:20:48.640 --> 0:20:51.159 jointly as well. So it's going to take a cooperative 0:20:51.160 --> 0:20:53.600 approach for for these and and all the other economies 0:20:53.640 --> 0:20:56.320 of the world to really address this. I'll chat. I'm 0:20:56.359 --> 0:20:59.160 sure that we'll touch upon this with you in the future. 0:20:59.640 --> 0:21:04.280 None of this matters. After the Bucknell Bison crushed Colgate. 0:21:05.119 --> 0:21:08.280 To get to the joy of facing Michigan State, Chad Bound, 0:21:08.480 --> 0:21:12.520 how does the strategy change as you move from Colgate 0:21:12.920 --> 0:21:17.600 to Michigan State. Well, Michigan State is going to be tough, um, 0:21:17.680 --> 0:21:21.159 So I will say Bucknell does have a really good 0:21:21.160 --> 0:21:24.240 track record in the Big Dance. You know, it wasn't 0:21:24.280 --> 0:21:26.800 that long ago that I forget if they were at 0:21:27.840 --> 0:21:30.199 They actually took out Kansas in the first round, So 0:21:30.680 --> 0:21:33.760 you never know with my andh Why do I see 0:21:33.840 --> 0:21:36.200 buck now in your bracket? Tom King? It is not 0:21:36.400 --> 0:21:39.040 in my bracket. What I what I suggest, Chad Bound, 0:21:39.400 --> 0:21:42.120 is you head over to the chemistry department at Bucktell 0:21:42.520 --> 0:21:46.520 Bucknell Folks, which was world acclaimed and maybe they could 0:21:46.520 --> 0:21:49.119 come up with some flubber or something to put on 0:21:49.160 --> 0:21:52.240 the ball to uh get you within shouting distance of 0:21:52.320 --> 0:21:55.520 Michigan State Chad bound in the Peterson Institute and Bucknell. 0:21:55.560 --> 0:21:58.520 As we look at teriffs and uh, really the fund 0:21:58.560 --> 0:22:02.240 for our global audience is just playing fun to look 0:22:02.280 --> 0:22:19.600 at march Mandis because people know it's very simple. At 0:22:19.640 --> 0:22:23.400 two hundred West Street downtown is the Golden Sax Tower, 0:22:23.520 --> 0:22:27.400 forty four stories high. And of course all of Global 0:22:27.400 --> 0:22:32.359 Wall Street repealed for Fumta Bianca or Fumta and Era 0:22:32.440 --> 0:22:35.639 today and as Dac and Campbell knows, the ballots of 0:22:35.680 --> 0:22:39.640