WEBVTT - Trump, Rates, Fitch, and Earnings (Podcast) 0:00:00.840 --> 0:00:04.000 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.080 --> 0:00:05.240 my co host Matt Miller. 0:00:05.640 --> 0:00:09.600 Every business day, we bring you interviews from CEOs, market pros, 0:00:09.720 --> 0:00:13.640 and Bloomberg experts, along with essential market moven news. 0:00:14.160 --> 0:00:17.279 Find the Bloomberg Markets Podcast on Apple Podcasts or wherever 0:00:17.400 --> 0:00:20.480 you listen to podcasts, and at Bloomberg dot com slash podcast. 0:00:21.320 --> 0:00:24.840 Nick Ackerman joins us. This is former Assistant Special Watergate 0:00:24.920 --> 0:00:29.040 prosecutor Nick As one of our Bloomberg opinion columnists wrote 0:00:29.120 --> 0:00:33.200 this morning, this is the big one for former President Trump. 0:00:33.760 --> 0:00:35.960 How do you think this will play out? 0:00:37.240 --> 0:00:41.000 Oh? I think it is absolutely a devastating indictment. You 0:00:41.120 --> 0:00:44.159 just read through the facts. It tells the entire story 0:00:44.240 --> 0:00:47.800 of what Donald Trump did after the election straight up 0:00:47.920 --> 0:00:52.160 until January sixth, to try and stay in power illegally. 0:00:53.080 --> 0:00:56.320 It is definitely a big one, but keep in mind 0:00:56.520 --> 0:01:00.440 the other indictments are serious also. If you do look 0:01:00.480 --> 0:01:05.560 at the District Attorney's indictment in Manhattan, even though it 0:01:05.680 --> 0:01:10.679 has to do with falsifying business records, the indictment alleges 0:01:10.720 --> 0:01:14.800 that he did so basically to defraud voters so that 0:01:14.880 --> 0:01:17.679 they wouldn't know about his payments of hush money to 0:01:17.760 --> 0:01:23.679 Stormy Daniels prior to the twenty sixteen election. This particular 0:01:23.720 --> 0:01:29.200 indictment relates to his efforts to lie to voters in 0:01:29.360 --> 0:01:33.240 order to keep himself in power after the twenty twenty elections. 0:01:33.240 --> 0:01:38.440 So both of these indictments really make neat bookends. And 0:01:38.480 --> 0:01:43.200 of course the whole indictment relating to classified documents is 0:01:43.319 --> 0:01:47.680 really separate and apart from the voters and the elections. 0:01:48.240 --> 0:01:50.400 Nick tell us about the timing of this and how 0:01:50.440 --> 0:01:53.880 it relates to the twenty twenty four election and if 0:01:54.560 --> 0:01:57.920 you know, winning the presidency again, if that's really Trump's 0:01:57.920 --> 0:02:00.320 best possible defense here, it kind of seems like that 0:02:00.400 --> 0:02:01.600 get out of jail free card. 0:02:02.440 --> 0:02:04.640 Well, no question is to get out of jail card 0:02:04.880 --> 0:02:08.440 free here, But you're going to look at a couple 0:02:08.560 --> 0:02:12.160 things on timing. The reason that Jack Smith brought this 0:02:12.360 --> 0:02:16.160 case just against Donald Trump is to keep the case 0:02:16.800 --> 0:02:20.360 lean and mean and simple so that he can get 0:02:20.360 --> 0:02:24.920 this case to trial somewhere around the seventy day period 0:02:25.000 --> 0:02:29.720 required by the Speedy Trial Act. I think realistically he 0:02:29.800 --> 0:02:33.600 could get this case to trial in January or February, 0:02:34.080 --> 0:02:38.720 prior to the DA investigation in the trial that's scheduled 0:02:38.880 --> 0:02:41.720 for March, So I think that is part of what 0:02:41.840 --> 0:02:44.920 he's looking to do to get a verdict, a guilty 0:02:45.000 --> 0:02:51.240 verdict prior to March. Secondly, in terms of the politics 0:02:51.320 --> 0:02:55.800 of this entire matter, one indictment coming down after another 0:02:55.880 --> 0:03:03.600 indictment sooner or later, Republican Senator House members, people who 0:03:03.680 --> 0:03:06.720 are running for governor and the Republican ticket have got 0:03:06.760 --> 0:03:10.120 to ask themselves do they really want to expose themselves 0:03:10.480 --> 0:03:13.799 to having the head of their ticket under indictment, which 0:03:13.840 --> 0:03:16.919 will ultimately in the next ten to fifteen days will 0:03:17.000 --> 0:03:20.080 be about four times And do they really want to 0:03:20.200 --> 0:03:24.079 answer questions that are going to be based on specific 0:03:24.240 --> 0:03:29.959 facts in all of these indictments that are absolutely devastating 0:03:30.120 --> 0:03:33.840 for Donald Trump and will be devastating for the Republican 0:03:33.919 --> 0:03:36.800 Party members to try to deal with over the course 0:03:36.840 --> 0:03:38.000 of the next election. 0:03:39.040 --> 0:03:40.960 Not that he doesn't have enough on his plate already 0:03:40.960 --> 0:03:43.400 from a legal perspective, but what do we know about 0:03:43.480 --> 0:03:47.160 what may happen from the Georgia Court in terms of timing, 0:03:47.160 --> 0:03:51.680 because that's also another big election issue for him. 0:03:52.040 --> 0:03:55.240 Well exactly, and that one, unlike the one that was 0:03:55.320 --> 0:03:58.960 just just came down yesterday, is likely to include a 0:03:59.000 --> 0:04:04.400 whole number of defendants. Fannie Willis, who is a expert 0:04:04.480 --> 0:04:08.880 in the Georgia Rico Statute, which simply allows her to 0:04:08.960 --> 0:04:12.680 bring in many crimes as one crime and be able 0:04:12.720 --> 0:04:16.560 to tell the entire story of Trump's efforts to undermine 0:04:16.600 --> 0:04:19.400 the vote in Georgia. I think is going to be 0:04:19.440 --> 0:04:22.640 a real blockbuster in the sense that a lot of 0:04:22.680 --> 0:04:26.320 the people that were named as unindicted co conspirators in 0:04:26.400 --> 0:04:29.800 this most recent indictment are going to be named as 0:04:29.839 --> 0:04:35.719 defendants in the Fulton County indictment. It's kind of interesting 0:04:35.800 --> 0:04:38.920 because I know that I think that Fannie Willis has 0:04:38.920 --> 0:04:43.040 said that she has not communicated with doj or Jack 0:04:43.080 --> 0:04:47.080 Smith on this indictment. But this is not a typical 0:04:47.160 --> 0:04:51.800 of what happens sometimes where certain defendants in certain matters 0:04:51.839 --> 0:04:54.160 are divided up. And I think what you're going to 0:04:54.240 --> 0:04:57.440 have here is this federal indictment that goes after Donald 0:04:57.480 --> 0:05:01.400 Trump himself. Maybe there'll be other federal indictment, but certainly 0:05:01.760 --> 0:05:04.680 the Georgia indictment is going to include a lot of 0:05:04.720 --> 0:05:09.800 these same unindicted co conspirators and more and cover more 0:05:09.880 --> 0:05:12.960 Georgia centric types of activities. 0:05:13.640 --> 0:05:15.800 Hey, Nick, you know, when I look at the legal 0:05:16.279 --> 0:05:18.800 representation for former President Trump, I don't see a lot 0:05:18.800 --> 0:05:21.960 of white shoe law firms that names that I recognize. 0:05:22.800 --> 0:05:26.800 Who are his attorneys? Are they any good? What do 0:05:26.839 --> 0:05:29.120 we know about them? Can he mount in all of 0:05:29.160 --> 0:05:32.479 these various cases? Can he mount the reasonable defense? 0:05:33.240 --> 0:05:35.240 Well? I mean that's a real problem for him. I mean, 0:05:35.279 --> 0:05:39.520 his big problem is that attorneys don't like to sign 0:05:39.560 --> 0:05:42.120 on with Donald Trump, especially big law firms, don't want 0:05:42.160 --> 0:05:46.520 their names besmirched. Every attorney that's been connected with Donald 0:05:46.520 --> 0:05:49.680 Trump in some way has fallen into the mud with 0:05:49.720 --> 0:05:55.000 Donald Trump. Secondly, he doesn't pay his billsop, And that 0:05:55.160 --> 0:05:57.360 is a huge problem. If you're a lawyer and you've 0:05:57.360 --> 0:06:00.080 got to devote the amount of time you need to 0:06:00.160 --> 0:06:02.360 vote to a case like this, you don't want to 0:06:02.400 --> 0:06:03.599 do it as a charity case. 0:06:04.720 --> 0:06:06.800 You know, you had mentioned, Nick about the idea of 0:06:06.880 --> 0:06:09.640 keeping this lean and mean and just focused on Trump. 0:06:10.400 --> 0:06:13.320 I was poking around on I guess we'll call it 0:06:13.560 --> 0:06:17.680 X now not Twitter, and saw that Ginny Thomas was 0:06:17.760 --> 0:06:22.320 trending this morning as possibly one of the unnamed co conspirators. 0:06:22.360 --> 0:06:25.920 Wonder if you would venture to, you know, think out 0:06:25.960 --> 0:06:28.120 loud here of who the others might be, or if 0:06:28.160 --> 0:06:30.159 she could, if there's a case that she could be 0:06:30.160 --> 0:06:30.599 one of them. 0:06:31.400 --> 0:06:33.760 I don't think so. I mean I went through the 0:06:33.880 --> 0:06:36.839 list in pretty much. I mean, Rudy Giuliani is clearly 0:06:36.920 --> 0:06:44.080 co conspirator one, the Sydney Powell is I think co 0:06:44.080 --> 0:06:48.920 conspirator three. You've got John Eastman, who I think is 0:06:49.000 --> 0:06:53.839 co conspirator number two. I don't see Ginny Thomas being 0:06:54.000 --> 0:06:57.280 in the list there of people that are part of this. 0:06:58.440 --> 0:07:00.560 I mean, she was on the pariah free of this. 0:07:00.720 --> 0:07:03.800 I don't think she was a major player. She had 0:07:04.080 --> 0:07:08.760 put in her two cents with Mike Mark Meadows, Donald 0:07:08.760 --> 0:07:12.920 Trump's chief of staff, but no, I would be surprised 0:07:12.960 --> 0:07:15.400 if she turns out to be a big player in 0:07:15.440 --> 0:07:16.120 this indictment. 0:07:16.400 --> 0:07:18.000 Anything about Clarence. 0:07:19.440 --> 0:07:21.560 I don't think so. I mean, there is a reference 0:07:21.640 --> 0:07:25.280 there where they tried to get One of their plans 0:07:25.360 --> 0:07:27.640 was to try and get an order from the Supreme 0:07:27.760 --> 0:07:31.760 Court at some point, and we know that what they 0:07:31.760 --> 0:07:34.080 were trying to do was set this up so Clarence 0:07:34.160 --> 0:07:37.400 Thomas I would issue an order that would give them 0:07:37.440 --> 0:07:40.320 some kind of credibility in terms of what they were doing. 0:07:40.880 --> 0:07:43.160 So I think that's going to come into play here. 0:07:43.200 --> 0:07:46.800 But again I don't think Clarence Thomas is going to 0:07:46.800 --> 0:07:49.440 be a big player and somebody to be watching it 0:07:49.520 --> 0:07:50.200 in this case. 0:07:50.680 --> 0:07:52.960 Now people to watch are really. 0:07:53.240 --> 0:07:57.840 Mark Meadows and others, the lawyers who were the in 0:07:57.920 --> 0:08:02.080 house counsel, Mike Penn. I mean, keep in mind, the 0:08:02.160 --> 0:08:05.080 witnesses in this case are all going to be Donald 0:08:05.160 --> 0:08:10.360 Trump employees and people that work for Donald Trump. These 0:08:10.400 --> 0:08:15.440 are not left wing crazy ATIFA people. This is Donald 0:08:15.520 --> 0:08:19.400 Trump's own courtrey of people. I mean, these are his 0:08:19.640 --> 0:08:21.800 pals that are testifying against him. 0:08:22.520 --> 0:08:24.880 Nick, great stuff. As always, I'm not sure there's a 0:08:24.920 --> 0:08:30.000 better voice on this than Nick Ackerman, former assistant Special 0:08:30.040 --> 0:08:32.960 Watergate prosecutor. Nick Ackerman, Thank you so much for your 0:08:33.040 --> 0:08:35.560 time for this unfolding issue, and it just seems like 0:08:35.600 --> 0:08:37.920 it's a never ending There are so many layers it's 0:08:37.920 --> 0:08:40.400 hard to keep track of. I find some of the 0:08:40.840 --> 0:08:43.080 helpful reporting, at least for me, when I kind of 0:08:43.280 --> 0:08:45.960 spend my time looking at this stuff, it's just reminding 0:08:46.120 --> 0:08:48.440 kind of what's out there, where are we what stage 0:08:48.440 --> 0:08:49.760 are we at in these various things? 0:08:49.840 --> 0:08:51.720 It's so hard to keep track of and to think 0:08:51.760 --> 0:08:54.920 that this is somebody who might be elected president in 0:08:54.960 --> 0:08:57.480 a little over a year from now, and try to 0:08:57.520 --> 0:09:00.360 keep track of all the charges against him. I'm just 0:09:00.400 --> 0:09:01.240 as lost as you are. 0:09:01.360 --> 0:09:03.640 I will keep up with it. This is Bloomberg. 0:09:05.320 --> 0:09:09.199 You're listening to the Team Kenshar Live program Bloomberg Markets 0:09:09.200 --> 0:09:12.320 weekdays at ten am Eastern on Bloomberg dot Com, the 0:09:12.400 --> 0:09:15.520 iHeartRadio app, and the Bloomberg Business App, or listen on 0:09:15.600 --> 0:09:17.559 demand wherever you get your podcasts. 0:09:20.160 --> 0:09:22.559 When I saw the news that Fitch downgraded the US government, 0:09:22.760 --> 0:09:25.440 I was surprised. It just didn't seem very patriotic to me. 0:09:26.160 --> 0:09:28.480 But I'll tell you who was not surprised, and that's 0:09:28.520 --> 0:09:33.319 Ira Jersey and his team. IRA's the chief rate strategist 0:09:33.320 --> 0:09:36.720 at Bloomberg Intelligence. He wrote back on May twenty fifth 0:09:37.000 --> 0:09:41.320 that quote political partisanship causing a rolling debt ceiling crisis 0:09:41.360 --> 0:09:45.040 and continued deficits well over three percent of GDP doesn't 0:09:45.200 --> 0:09:48.880 suggest that a triple A rating is warranted. Iraight, you 0:09:48.920 --> 0:09:51.840 were so right here. I mean, what's fitched. I mean 0:09:51.840 --> 0:09:54.400 they're joining some other rating ahgs that have already done it. 0:09:54.440 --> 0:09:57.319 But that doesn't seem very patriotic. What's going on out there? 0:09:58.320 --> 0:10:01.920 Yeah, well, so it's been to years since SMP downgraded 0:10:01.920 --> 0:10:04.280 the US from Triple A to double A plus and 0:10:04.520 --> 0:10:07.200 almost of the week actually because that was Honor about 0:10:07.200 --> 0:10:10.800 August sixth that that SMP did it. So I think 0:10:10.840 --> 0:10:14.960 they just they saw the Treasury borrowing estimate from Monday 0:10:15.040 --> 0:10:17.360 night that came out at three o'clock, where the Treasury 0:10:17.360 --> 0:10:19.800 Department said, hey, we're going to borrow over a trillion 0:10:19.880 --> 0:10:23.920 dollars just this quarter, just this current quarter, and uh, 0:10:24.080 --> 0:10:25.800 and we expect to have to borrow a lot more 0:10:25.880 --> 0:10:30.280 later so and Fitch between that and between the you know, 0:10:30.320 --> 0:10:33.080 another debt sealing crisis that you know was averted again 0:10:33.120 --> 0:10:36.160 at the last minute back in June, you know, they 0:10:36.280 --> 0:10:38.480 just felt that the US is not yet is not 0:10:38.559 --> 0:10:41.680 triple A anymore. And quite frankly, I can't blame them 0:10:42.080 --> 0:10:44.400 because under you know, when you look at all of 0:10:44.440 --> 0:10:46.720 the triple A rated countries around the world, there's not 0:10:46.840 --> 0:10:49.800 that many, and you know, the US debt burden doesn't 0:10:49.800 --> 0:10:52.360 look anything like Germany's, for example, which is one of 0:10:52.400 --> 0:10:55.760 the one of the only triple A rated sovereigns left 0:10:55.800 --> 0:10:58.720 in the in the world. So you know, maybe if 0:10:58.760 --> 0:11:01.920 if we were willing to get rid of this debt 0:11:01.920 --> 0:11:04.160 ceiling problem that that we keep on having to do 0:11:04.200 --> 0:11:07.079 every two years, maybe Fitch would have had a different opinion. 0:11:07.160 --> 0:11:10.160 But you know, I can't say that it's a huge 0:11:10.200 --> 0:11:12.160 surprise that had happened. You know, maybe the timing a 0:11:12.160 --> 0:11:14.800 little bit we expected it to happen, maybe after this 0:11:14.880 --> 0:11:17.800 morning's announcement, but you know, it's still not a huge 0:11:18.320 --> 0:11:20.240 not a huge surprise. I don't think markets care very 0:11:20.320 --> 0:11:23.160 much about that. I think there the market, the treasury 0:11:23.200 --> 0:11:25.960 market is reacting a lot more to the higher supply 0:11:26.520 --> 0:11:28.319 that was announced just this morning. 0:11:28.720 --> 0:11:28.880 Right. 0:11:28.960 --> 0:11:31.600 That seems like the timing is really the biggest question 0:11:31.640 --> 0:11:33.760 mark around all this on the in terms of the 0:11:33.800 --> 0:11:36.920 market reaction that we're seeing. And so you had flagged 0:11:36.920 --> 0:11:38.600 in your note I or that just came out that 0:11:39.360 --> 0:11:42.600 the treasury coupons being a bit of a factor in this. 0:11:43.320 --> 0:11:47.160 I was even wondering too, when when credit agencies issue 0:11:47.480 --> 0:11:51.120 of ratings watch those are typically resolved in what three 0:11:51.120 --> 0:11:53.280 to six months, So I guess we're kind of coming 0:11:53.400 --> 0:11:55.120 up on that period. So what do you think was 0:11:55.120 --> 0:11:57.360 really the principal driver in the timing here. 0:11:58.160 --> 0:12:01.280 Yeah, so sixty ish ninety. I think it was really 0:12:01.360 --> 0:12:04.520 the fiscal outlook that kind of drove Fitch over the edge. 0:12:05.120 --> 0:12:07.680 Obviously they were thinking about it for a while, and 0:12:07.760 --> 0:12:10.719 it's not unusual for the rating agencies to come out 0:12:10.760 --> 0:12:14.040 with their new sovereign ratings over the summer, you know. Again, 0:12:14.120 --> 0:12:17.040 like SMP downgraded the US right around the debt ceiling 0:12:17.120 --> 0:12:20.040 issue that we had in twenty eleven, but this is 0:12:20.080 --> 0:12:22.000 also the time when they were fresh their rating, so 0:12:22.040 --> 0:12:25.880 their annual review of sovereign debt ratings. So again, like, 0:12:25.960 --> 0:12:28.560 I don't think the precise timing was a little bit 0:12:28.600 --> 0:12:30.440 of a surprise, but I think the general timing not 0:12:30.559 --> 0:12:33.040 quite as much. Right, So sixty days ish after they 0:12:34.160 --> 0:12:38.520 initiated their watches, isn't that that surprising? The market reaction 0:12:38.600 --> 0:12:41.840 to your issue about talking about coupons, you know, the 0:12:42.000 --> 0:12:44.960 ten year started to sell off and a lot of 0:12:44.960 --> 0:12:47.480 the treasury started to sell off after the stronger than 0:12:47.520 --> 0:12:50.560 expected ADP report. But some of the details of the 0:12:50.600 --> 0:12:54.439 treasury refunding announcement were interesting in that the government decided 0:12:54.480 --> 0:12:56.640 that it was going to increase the amount of ten 0:12:56.720 --> 0:12:58.880 yere bombs ten year notes that it's going to issue 0:12:59.080 --> 0:13:03.680 by three billion dollars this month, just next week. That 0:13:03.840 --> 0:13:05.440 was a little bit more than I think most people 0:13:05.520 --> 0:13:08.360 were expecting. We were all expecting increases everywhere. We knew 0:13:08.360 --> 0:13:09.920 that the government was going to have to do that, 0:13:10.280 --> 0:13:13.440 but they chose specifically to increase the ten year more 0:13:13.480 --> 0:13:16.160 than they did the thirty year, for example. And I 0:13:16.160 --> 0:13:17.920 think that's one of the reasons why you're seeing ten 0:13:18.000 --> 0:13:21.360 year yields sell off a little bit more than other 0:13:21.400 --> 0:13:22.600 places along the yield curve. 0:13:23.000 --> 0:13:26.400 So Ira Liz McCormick a Bloomberg News is reporting this 0:13:26.440 --> 0:13:28.559 morning that the Treasury said it will sell one hundred 0:13:28.600 --> 0:13:30.960 and three billion dollars of longer term securities that it's 0:13:30.960 --> 0:13:33.960 so called quarterly refunding auctions next week. And I got 0:13:33.960 --> 0:13:35.600 to tell you, Ira, if I get a phone call 0:13:35.640 --> 0:13:37.640 from the Treasury asking me to pony up, I'm going 0:13:37.679 --> 0:13:39.959 to pass. I gotta tell you a little tapped out here. 0:13:40.000 --> 0:13:42.880 But my question to you is, given this downgrade, will 0:13:42.880 --> 0:13:44.960 that change who shows up next week to bid on 0:13:45.000 --> 0:13:46.520 these government bonds? 0:13:47.120 --> 0:13:51.040 Yeah, it probably won't, you know. I think that the 0:13:51.080 --> 0:13:53.439 single one of the biggest fallacies that I've been talking 0:13:53.480 --> 0:13:56.199 with customers about this morning is that there's this idea 0:13:56.280 --> 0:13:59.080 that there's a lot of mandates and people who own 0:13:59.160 --> 0:14:03.600 treasuries because their triple A. So most mandates say US 0:14:03.760 --> 0:14:08.120 government securities, securities of agency of US government agencies, so 0:14:08.200 --> 0:14:11.000 Fanny May, Freddie Mack, and the home loan banks, and 0:14:11.360 --> 0:14:14.880 investment grade corporate bonds. So even the triple A that 0:14:15.000 --> 0:14:18.040 can only own triple A or double A mandates, they 0:14:18.080 --> 0:14:22.680 still specify treasuries and agency mortgages as their own asset class. 0:14:22.960 --> 0:14:27.680 So the ratings are relevant for those for those particular instruments. Now, 0:14:27.800 --> 0:14:29.320 you know, if the US were to be rated to 0:14:29.560 --> 0:14:32.680 double B or something, maybe that would change the way 0:14:32.680 --> 0:14:35.080 that people change their outlook. But when you look at 0:14:35.120 --> 0:14:37.640 a country like Japan, for example, they have a much 0:14:37.720 --> 0:14:40.800 higher debt to GDP ratio than the US, they are 0:14:40.880 --> 0:14:43.920 slightly lower rated, and their yields on their bonds are 0:14:43.960 --> 0:14:46.480 significantly lower. Now big part of that is because the 0:14:46.520 --> 0:14:48.400 Bank of Japan has been buying a lot of bonds, 0:14:48.720 --> 0:14:51.440 but they still probably even without the Bank of Japan 0:14:51.480 --> 0:14:54.480 and the market probably wouldn't have yields at five percent 0:14:54.600 --> 0:14:57.160 or four and a half percent. And you know, similar 0:14:57.200 --> 0:14:58.800 to parts of the US curve. 0:14:59.040 --> 0:15:03.200 So Ara, I know that when credit agencies are what 0:15:03.240 --> 0:15:06.240 they're rating is the credit worthiness of the borrower. 0:15:06.360 --> 0:15:07.160 And it's just. 0:15:07.240 --> 0:15:10.400 Coming at an interesting time here, when the economy is 0:15:10.440 --> 0:15:13.080 doing really well and you're hearing all these more calls 0:15:13.120 --> 0:15:15.720 that more people are optimistic that we're going to avert 0:15:15.760 --> 0:15:18.360 a recession. The soft landing case has never looked better. 0:15:18.680 --> 0:15:21.160 You know, to someone who maybe is having a tough 0:15:21.160 --> 0:15:24.280 time squaring the two, what would you say to them. 0:15:24.000 --> 0:15:25.920 Well, I think there's two pieces to this. On the 0:15:25.920 --> 0:15:28.120 fiscal side of things. I think one is we've seen 0:15:28.240 --> 0:15:32.360 pretty massive wage gains by the household sector when you 0:15:32.400 --> 0:15:34.040 go back and you look at what happened in twenty 0:15:34.080 --> 0:15:36.040 twenty two and to so far in twenty twenty three, 0:15:36.400 --> 0:15:40.840 but that has not really translated into significantly higher tax revenues. 0:15:40.960 --> 0:15:45.840 And so, because you still have fiscal spending from the 0:15:46.400 --> 0:15:48.840 Inflation Reduction Act as well, still a little bit of 0:15:48.880 --> 0:15:52.160 the twenty twenty one stimulus still being pushed into the system, 0:15:52.560 --> 0:15:55.160 you have still deficits that are over one and a 0:15:55.200 --> 0:15:57.440 half trillion dollars a year and probably will be in 0:15:57.480 --> 0:16:01.400 fiscal twenty twenty four as well. So unless you wind 0:16:01.480 --> 0:16:05.640 up unless that good economy really winds up pushing up 0:16:05.680 --> 0:16:09.120 tax revenue significantly, you're going to continue to have a 0:16:09.160 --> 0:16:12.600 pretty not a good fiscal situation. On top of that, 0:16:12.640 --> 0:16:15.440 you have more and more baby boomers retiring. That's forcing 0:16:15.760 --> 0:16:17.960 more and more money out of the social security system. 0:16:18.280 --> 0:16:21.200 The social security now has to be funded. So whereas 0:16:21.920 --> 0:16:24.160 you know, just a couple of years ago, your social 0:16:24.160 --> 0:16:26.840 Security taxes went to the people who were retired, that's 0:16:26.880 --> 0:16:29.080 not the case anymore. It just doesn't cover it. The 0:16:29.160 --> 0:16:32.080 soci security taxes that we're collecting today doesn't cover one 0:16:32.120 --> 0:16:34.800 hundred percent of the outflows of that program. So we 0:16:34.920 --> 0:16:37.920 have to figure out some way either to raise taxes 0:16:38.080 --> 0:16:40.320 or to raise government debt. Those are the only two 0:16:40.360 --> 0:16:42.800 ways to get those mandates fully funded. 0:16:43.000 --> 0:16:44.640 Ye I'm starting to pay a little bit more attention 0:16:44.720 --> 0:16:48.120 to that whole social security discussion than maybe I did 0:16:48.200 --> 0:16:50.200 a few years ago. I don't know, Maybe it's just 0:16:50.240 --> 0:16:56.240 me Ira. So when we have these auctions next week, 0:16:56.480 --> 0:16:58.640 the government's gonna have to pay up more. Well, I 0:16:58.680 --> 0:17:00.320 guess my question is will they have to pay more 0:17:00.320 --> 0:17:02.560 than they did, say yesterday before the downgrade. 0:17:03.760 --> 0:17:06.240 Well, assuming yield stay where they are right now, the 0:17:06.280 --> 0:17:07.879 answer is yes, and I think that that's one of 0:17:07.880 --> 0:17:10.080 the reasons you're seeing the sell off today is just 0:17:10.160 --> 0:17:12.239 this idea that you know, yeah, maybe a little bit 0:17:12.240 --> 0:17:14.760 on Fitch, but just the idea that we are going 0:17:14.840 --> 0:17:17.720 to have more supply, you know, next year. Next week 0:17:17.720 --> 0:17:20.200 we get the three year auction, ten year, and thirty year, 0:17:20.520 --> 0:17:22.560 and that's a lot of duration. So that's a lot 0:17:22.600 --> 0:17:27.160 of market risk that investors have to absorb. Now, we've 0:17:27.160 --> 0:17:30.600 seen reasonably decent auctions. They've been you know, somewhat mixed, 0:17:30.600 --> 0:17:33.240 but we saw a pretty good ten year auction last month. 0:17:33.280 --> 0:17:37.919 So the question is will that relate today this week. 0:17:38.160 --> 0:17:40.280 Keep in mind, too, is that you have old ten 0:17:40.320 --> 0:17:43.560 year notes maturing on the fifteenth of the month that 0:17:43.600 --> 0:17:47.400 were issued ten years ago, so those so people who 0:17:47.440 --> 0:17:50.000 own some of those and held them to maturity might 0:17:50.000 --> 0:17:52.360 think about reinvesting some of that into the current ten 0:17:52.400 --> 0:17:54.960 year notes. So refunding auctions tend to be a somewhat 0:17:54.960 --> 0:17:58.560 different animal than the auctions that you get in the 0:17:58.640 --> 0:18:02.320 subsequent couple of months. And obviously this three billion dollar 0:18:02.440 --> 0:18:05.040 larger size I think could have an effect. So I 0:18:05.800 --> 0:18:08.440 think your risk, Paul, is that you wind up we'll 0:18:08.480 --> 0:18:11.240 see some of higher yields at next week's auction because 0:18:11.240 --> 0:18:12.240 of the excess supply. 0:18:12.520 --> 0:18:15.639 All right, Ira, good stuff as always, Ira Jersey, chief 0:18:15.760 --> 0:18:19.960 US Interest rates strategist for Bloomberg Intelligence, chief soccer strategist 0:18:20.080 --> 0:18:25.560 for Bloomberg LP. Real Central, New Jersey is his club. 0:18:25.640 --> 0:18:27.919 As they say, you're listening to the tape. 0:18:28.040 --> 0:18:31.320 Catch our live program Bloomberg Markets weekdays at ten am 0:18:31.400 --> 0:18:35.200 Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, 0:18:35.240 --> 0:18:38.000 and the Bloomberg Business App. You can also listen live 0:18:38.080 --> 0:18:41.240 on Amazon Alexa from our flagship New York station. Just 0:18:41.320 --> 0:18:45.240 say Alexa, play Bloomberg eleven thirty, Mollie. 0:18:45.040 --> 0:18:47.520 Smith, Paul Sweeney here in our Bloomberg Interactive Brookers Studio 0:18:48.320 --> 0:18:51.119 also doing that YouTube thing, so just head over to YouTube. 0:18:51.160 --> 0:18:54.600 And I've been in the search Bloomberg Global News in 0:18:54.600 --> 0:18:57.280 that old Bloomberg Global Markets or bloom Bloomberg Global News. 0:18:57.280 --> 0:18:59.480 I think gets it to you. That'll bring it to 0:18:59.520 --> 0:19:02.959 the feed there. So you know, I recently closed on 0:19:03.320 --> 0:19:06.840 the Jersey Shore estate the compound, if you will, and 0:19:06.920 --> 0:19:09.800 my mortgage had a six handle and I was not happy. 0:19:10.200 --> 0:19:12.840 Now I'm looking at the bank rate thirty year mortgage 0:19:12.920 --> 0:19:15.640 rate seven point three one percent. 0:19:15.800 --> 0:19:16.440 You got a deal. 0:19:16.520 --> 0:19:18.480 I got a deal, I gotta deal. You got closed 0:19:18.680 --> 0:19:22.600 a victory, Yes, exactly. Now, now what do we do? 0:19:22.680 --> 0:19:24.440 I mean, what's this market doing. Nobody wants to get 0:19:24.440 --> 0:19:26.920 out of their house here, some he chief economist of 0:19:26.960 --> 0:19:29.280 core Logic, joins us. Some give us a lay of 0:19:29.320 --> 0:19:32.000 the land, of the kind of the residential real estate 0:19:32.040 --> 0:19:35.199 market today in a world where a thirty year fixes 0:19:35.240 --> 0:19:36.280 seven point three percent. 0:19:37.800 --> 0:19:40.560 Yeah, like you said, nobody wants to move at the moment. 0:19:40.680 --> 0:19:44.240 And so residential housing market is really suffering, particularly the 0:19:44.280 --> 0:19:48.199 existing market, because on the new home side, builders and 0:19:48.240 --> 0:19:51.720 developers can they can step in and provide some mortgage 0:19:51.800 --> 0:19:55.359 rate buydown offers. So there's sort of a story of 0:19:55.400 --> 0:19:59.000 two markets still one where there is no inventory because 0:19:59.080 --> 0:20:02.320 existing inventory is locked up, and the other one where 0:20:02.400 --> 0:20:05.480 there is much more movement. And that's where where there's 0:20:06.000 --> 0:20:07.720 more new home construction. 0:20:08.560 --> 0:20:10.680 Yeah, so we had a story the other day. I 0:20:10.840 --> 0:20:15.400 was taking a survey from Zillow and looking at kind 0:20:15.400 --> 0:20:18.199 of pegging five percent as the mortgage rate. That's the 0:20:18.240 --> 0:20:22.639 tipping point of if you're below five percent, you're twice 0:20:22.680 --> 0:20:25.000 as likely to hold on to your home. But if 0:20:25.000 --> 0:20:28.200 you're above five percent, that's more when you're likely to sell. 0:20:28.240 --> 0:20:30.199 I mean, do you have you kind of drawn a 0:20:30.240 --> 0:20:32.720 line in the sand of where you see people as 0:20:32.760 --> 0:20:34.920 more likely to lean one way or the other? 0:20:36.200 --> 0:20:39.400 Yeah, I mean I've seen surveys, a couple of surveys 0:20:39.800 --> 0:20:42.640 to that extent showing that five and a half percent 0:20:42.760 --> 0:20:44.959 is the magic rate at which you know, there's there 0:20:44.960 --> 0:20:48.320 would be more people would be more willing to move. 0:20:48.520 --> 0:20:50.560 So you know, I mean think about it this way. 0:20:50.680 --> 0:20:55.440 You know, six ninety six percent of existing mortgages are 0:20:56.320 --> 0:20:59.960 below six percent, So that's you know, such a special mark. 0:21:00.960 --> 0:21:04.680 Excuse me, that makes me special being in that fort. 0:21:04.200 --> 0:21:08.680 Yeah right, Well, I myself locked in at six point 0:21:08.680 --> 0:21:11.000 three in March of this year, and I was very 0:21:11.080 --> 0:21:12.720 unhappy about it. 0:21:13.440 --> 0:21:17.439 So what does new construction need to do here? I mean, 0:21:17.480 --> 0:21:20.360 it is just simply a situation where this is an 0:21:20.359 --> 0:21:23.760 industry that requires more inventory. We need more housing. 0:21:25.320 --> 0:21:28.040 Well, yes, that's definitely the case. I mean, when you 0:21:28.080 --> 0:21:31.320 look at the you know, trend in terms of new 0:21:31.320 --> 0:21:35.280