WEBVTT - Surveillance: The Fed Is Probably Not Done Hiking, Dudley Says 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Lee. 0:00:13.960 --> 0:00:17.560 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 --> 0:00:33.680 Bloomberg dot Com, and of course on the Bloomberg. Very 0:00:33.680 --> 0:00:35.279 happy that we could talk about the day, and now 0:00:35.280 --> 0:00:36.960 we can. Head of it's a Michael McKee. He's in 0:00:37.000 --> 0:00:40.720 conversation with a form of Fete President William Dudley. Thank 0:00:40.760 --> 0:00:42.720 you very much, and welcome to all of our viewers 0:00:42.720 --> 0:00:46.080 and listeners on Bloomberg Television and radio worldwide. We're joined 0:00:46.080 --> 0:00:48.600 by William Dudley. He's the former president, of course of 0:00:48.640 --> 0:00:51.920 the New York Federal Reserve, now in semi retirement as 0:00:52.120 --> 0:00:55.760 senior scholar at Princeton University for the time being. Till you, uh, 0:00:56.320 --> 0:00:59.160 until you come up with something more interesting to do. 0:00:59.600 --> 0:01:03.279 There is press. It's plenty interesting. Well, you're keeping up, 0:01:03.280 --> 0:01:06.800 I know, with everything that has been going on. One 0:01:06.840 --> 0:01:09.400 of the questions that comes up here as people look 0:01:09.440 --> 0:01:12.160 forward to what monetary policy is going to be the 0:01:12.240 --> 0:01:15.160 rest of the years, where is neutral Because the Feds 0:01:15.160 --> 0:01:17.640 seemed to think it was another fifty basis points are 0:01:17.680 --> 0:01:20.199 so higher, but now we've got to pause, so maybe 0:01:20.240 --> 0:01:22.440 it's come down a little. Maybe we're right at neutrals. 0:01:22.800 --> 0:01:24.640 Where do you think we are like, I don't think 0:01:24.680 --> 0:01:27.000 that anybody knows was any certainty. I mean, this has 0:01:27.040 --> 0:01:29.520 been an unusual business cycle. Think about how long it's 0:01:29.560 --> 0:01:32.440 taken us to get back to full employment. I think 0:01:32.480 --> 0:01:35.080 generally what the FED is saying that in the language 0:01:35.120 --> 0:01:37.360 of being patient is that they're going to take a 0:01:37.400 --> 0:01:39.319 pause and wait for more data. I think there are 0:01:39.360 --> 0:01:41.760 a number of things that push them off moving to 0:01:41.959 --> 0:01:45.959 more tightening moves. Number one, you had a tightening of 0:01:45.959 --> 0:01:49.720 financial conditions. Stock prices went down, credit spreads widened, so 0:01:49.760 --> 0:01:54.160 that was one concern. Second, foreign growth looked a lot weaker, 0:01:54.280 --> 0:01:58.120 especially in China and Europe. Number three, there wasn't any inflation. 0:01:58.280 --> 0:02:00.200 You know, the inflation was the story of the dog 0:02:00.240 --> 0:02:02.720 that did embark. Even though the unemployee rate was low, 0:02:02.840 --> 0:02:04.960 you weren't seeing any acceleration much of much of an 0:02:04.960 --> 0:02:08.600 acceleration in wages, and that wasn't feeding into prices. My 0:02:08.600 --> 0:02:11.560 own personal view is that as long as inflation stays coiescent, 0:02:11.919 --> 0:02:14.600 FED will probably be on hold. If though the economy 0:02:14.680 --> 0:02:17.960 keeps growing at above trem pace, more pressure on resources, 0:02:18.000 --> 0:02:20.680 inflation probably will start to drift back up again. So 0:02:20.800 --> 0:02:24.079 my best judgment is the Fed's probably not done yet. 0:02:24.520 --> 0:02:27.600 Well how far did they go? Uh, at what point 0:02:27.600 --> 0:02:30.359 do you risk an accident? Well, that's why I think 0:02:30.400 --> 0:02:32.560 they're being patient right now. They don't want to call 0:02:32.720 --> 0:02:36.000 inadvertently cause a recession with inflation this law because people say, well, 0:02:36.000 --> 0:02:38.800 what you do that for? If inflation actually were to 0:02:38.840 --> 0:02:41.639 accelerate a bit, then they at least have a motivation 0:02:41.720 --> 0:02:45.240 for why they're moving to a tighter monetary policy stance. Well, 0:02:45.280 --> 0:02:48.320 once you did that for was to prevent downturn in 0:02:48.360 --> 0:02:52.079 the economy, which this group here, according to a survey 0:02:52.120 --> 0:02:55.120 of NAB members, suggests may come in two thousand twenty 0:02:55.160 --> 0:02:58.000 or two thousand twenty one. But the FED doesn't have 0:02:58.000 --> 0:03:00.840 a lot of ammunition if there's point to fight it. Well, 0:03:00.960 --> 0:03:03.359 that's one concern that the FED is wrestling with is 0:03:04.040 --> 0:03:06.200 if the peak federal funds rate in the cycle is 0:03:06.360 --> 0:03:08.040 you know, two and a half three, three and a 0:03:08.080 --> 0:03:11.240 half percent, there's not that much room between that and zero, 0:03:11.280 --> 0:03:14.200 and so there's been a lot of discussion among FED 0:03:14.240 --> 0:03:17.840 officials and other market observers on does the FED have 0:03:17.960 --> 0:03:21.120 enough firepower to get us out of the next economic downturn. 0:03:21.360 --> 0:03:23.360 My own view is I think there's more firepower than 0:03:23.440 --> 0:03:26.440 people realize, because they FED has invented a whole bunch 0:03:26.440 --> 0:03:28.959 of new tools to use if they're ever at the 0:03:29.040 --> 0:03:33.639 zero or body again for guidance asset purchases, open ended 0:03:33.639 --> 0:03:36.200 asset purchases, We'll just keep buying assets until we actually 0:03:36.200 --> 0:03:40.000 achieve our objection objectives of an actual recovery. But one 0:03:40.000 --> 0:03:42.560 of the arguments there is that a lot of that 0:03:42.920 --> 0:03:45.600 success that the FED had with those tools came from 0:03:45.600 --> 0:03:49.320 the announcement value. Now people know the tools are there, 0:03:49.360 --> 0:03:51.000 so they may not have as much of effect. Well, 0:03:51.040 --> 0:03:53.040 I think that if you let's imagine that we were 0:03:53.040 --> 0:03:55.800 in an economic downturn and the FED had reduced interest 0:03:55.840 --> 0:03:58.240 rates to zero, if the FED announced that we're going 0:03:58.320 --> 0:04:02.160 to do by treasuries an agency mortgage backed securities until 0:04:02.240 --> 0:04:05.640 we achieve us a given unemployment rate objective, that would 0:04:05.680 --> 0:04:08.320 be also a good commitment strategy. Would make people realize 0:04:08.320 --> 0:04:09.760 that rates are going to stay low for a long 0:04:09.800 --> 0:04:12.640 time until the FED actually has success. That's actually quite 0:04:12.640 --> 0:04:15.680 powerful in terms of supporting economic activity. Has the fact 0:04:15.680 --> 0:04:18.359 gotten too intertwined with the markets. Now, one of the 0:04:18.400 --> 0:04:20.800 reasons that the Fed, as you just said, when on 0:04:20.880 --> 0:04:24.320 hold is the market problems and dislocations we saw in December. 0:04:24.320 --> 0:04:27.200 And now everybody's back to the Powell put, Well, can 0:04:27.240 --> 0:04:29.920 you disentangle yourse? Well, it's tricky, right, because the Fed 0:04:29.960 --> 0:04:33.240 doesn't care about the stock market for the stock market's sake, 0:04:33.600 --> 0:04:35.640 cares about the stock market because of the stock market 0:04:35.640 --> 0:04:37.400 wad to go to down a lot and stay down, 0:04:37.440 --> 0:04:40.000 it would have consequences for the economy. So there isn't 0:04:40.000 --> 0:04:41.960 a put in the sense that the Fed is trying 0:04:41.960 --> 0:04:44.560 to support the stock market at given level, But there 0:04:44.640 --> 0:04:46.239 is a point in the sense that the stock market 0:04:46.320 --> 0:04:49.159 gets very weak that has consequences for the outlook and 0:04:49.160 --> 0:04:53.080 therefore for monetary policy. Well, they also were worried about 0:04:53.080 --> 0:04:55.440 the balance sheet. The balance sheet was supposed to be 0:04:55.680 --> 0:04:59.000 watching paint dry. Did Wall Street get that wrong? Well, 0:04:59.040 --> 0:05:01.240 I think all that happened there with the FED decided 0:05:01.279 --> 0:05:04.440 that the banks have a greater demand for reserves, and 0:05:04.520 --> 0:05:06.599 the FED had thought so. That just means that the 0:05:06.680 --> 0:05:09.280 stopping point for when you stop shrinking the ballantree is 0:05:09.320 --> 0:05:12.400 a little bit earlier in time than what they anticipated. 0:05:12.560 --> 0:05:15.080 It's not a big policy adjustment. They never knew how 0:05:15.080 --> 0:05:17.320 many banks, how many reserves banks we're going to demand, 0:05:17.560 --> 0:05:19.320 and now they're finding out the banks look like they 0:05:19.560 --> 0:05:21.000 are going to be in a little bit more reserves 0:05:21.000 --> 0:05:23.200 than they thought. That just means the stopping point is 0:05:23.240 --> 0:05:24.920 gonna be a little bit sooner, But it doesn't have 0:05:24.920 --> 0:05:27.599 a huge consequences for does QT though, have the same 0:05:27.760 --> 0:05:30.679 effect on the downside that it had. It doesn't seem 0:05:30.720 --> 0:05:33.839 to be having the same effect at this point. Part 0:05:33.839 --> 0:05:35.480 of the reason, I think is that people still are 0:05:35.480 --> 0:05:38.120 worried about inflation being too low rather than inflation being 0:05:38.120 --> 0:05:40.880 too high. So if you look at what what what 0:05:41.279 --> 0:05:44.000 the market participants called bond term pre and the spread 0:05:44.040 --> 0:05:46.520 between bonds and the spected path of short term rates, 0:05:46.760 --> 0:05:50.240 that's very very tiny. That's quite different than in past 0:05:50.279 --> 0:05:52.800 economic cycles. And let me ask you about a point 0:05:52.800 --> 0:05:56.320 that both the Chairman Powell and Vice Chairman Clarative made 0:05:56.360 --> 0:05:57.680 in the last couple of days, and that is that 0:05:57.800 --> 0:06:00.560 the federal deficit is just way too high and it's 0:06:00.560 --> 0:06:02.960 going to have an impact on the country. And yet 0:06:03.279 --> 0:06:06.120 we've talked about that for decades and bond rates are 0:06:06.120 --> 0:06:08.520 not going up. Well, I think it's partly because you 0:06:08.560 --> 0:06:10.520 have to look at the US bond rates in the 0:06:10.560 --> 0:06:13.159 context of rates elsewhere in the world, and we have 0:06:13.360 --> 0:06:16.200 very very low rates in Europe and Japan, so that's 0:06:16.240 --> 0:06:19.200 obviously a factor. And two people, Yeah, I think you're 0:06:19.200 --> 0:06:22.320 absolutely right. People anxiety about budget devis has going down 0:06:22.320 --> 0:06:24.960 a lot, but I'm sorry where they are. The budget 0:06:24.960 --> 0:06:27.800 devs is not only going to keep increasing, the debt 0:06:27.839 --> 0:06:30.200 service costs is going to start to climb very very rapidly, 0:06:30.279 --> 0:06:32.800 because not only is debt growing, interest rates are higher 0:06:32.839 --> 0:06:34.760 than they've been over the last ten years. So I 0:06:34.760 --> 0:06:36.599 think that that it is going to be a problem. 0:06:36.680 --> 0:06:38.440 It's not a problem right now. Well, what do you 0:06:38.440 --> 0:06:41.560 think of the modern monetary theory mm T argument that 0:06:41.720 --> 0:06:44.240 is getting so much attraction these days, particularly up on 0:06:44.320 --> 0:06:47.320 Capel Hill lately, that if you print money in your 0:06:47.320 --> 0:06:51.040 own currency you don't have to worry about deficits for 0:06:51.080 --> 0:06:53.600 a while. At least, I know it's the squishy definition. 0:06:53.720 --> 0:06:55.680 I think they're overstanding that it's true that if you 0:06:55.920 --> 0:06:59.200 print currency, print issue debt in your own currency, you 0:07:00.000 --> 0:07:02.599 don't have to default, so there's no default risk, but 0:07:02.640 --> 0:07:04.760 they're definitely an inflation risk. If you have too much 0:07:04.800 --> 0:07:07.080 money through chasing too few goods and services, you're gonna 0:07:07.120 --> 0:07:09.600 get inflation and that would be the consequence. So there, 0:07:09.680 --> 0:07:11.720 you know, as in economics, there is no free lunch, 0:07:12.000 --> 0:07:15.760 So this modern monetary theory I'm not buying a lot 0:07:15.800 --> 0:07:18.280 of Last question on the inflation and that is where 0:07:18.280 --> 0:07:20.960 do you think it goes from here? It disappeared in 0:07:21.040 --> 0:07:23.400 the fourth quarter. Does it start to come back? Well, 0:07:23.400 --> 0:07:25.040 I think it'll probably come back a little bit because 0:07:25.040 --> 0:07:27.720 obviously oil prices have recovered, so that's something that you know, 0:07:28.160 --> 0:07:30.840 moves in and out pretty quickly into the inflation numbers. 0:07:31.000 --> 0:07:34.000 I think underneath the service you're seeing a very gradual 0:07:34.480 --> 0:07:37.400 firming of inflation, driven really by the tightness of the 0:07:37.480 --> 0:07:40.000 labor market and the firmness that was finally seeing in 0:07:40.240 --> 0:07:42.760 wages enough for the FED to have to react. Well, 0:07:42.800 --> 0:07:44.720 we'll see it's gonna you know, all this stuff is 0:07:44.720 --> 0:07:46.840 slow moving, so we'll see. I don't think the Fed 0:07:46.880 --> 0:07:48.920 is gonna do anything in the near term. Second half 0:07:48.920 --> 0:07:52.640 of the year, maybe FED starts hiking rates again. Bill Dudley, 0:07:52.640 --> 0:07:54.520 thank you very much for joining us this morning. Bloomberg 0:07:54.560 --> 0:07:57.720 Television and Radio worldwide. We'll send it back to you. Oh, 0:07:57.800 --> 0:08:00.000 Michael McKee, thank you so much. For the former president 0:08:00.240 --> 0:08:02.760 of the New York Fellow Reserved ACAS, Bill Dudley at 0:08:02.760 --> 0:08:05.240 Goldman Saxon. I should say he wrote with Ed mcclvie 0:08:05.320 --> 0:08:09.160 a wonderful chapter in my book. This was Mike John Farrell. 0:08:09.240 --> 0:08:12.440 This was forty five years ago. This was after, you know, 0:08:12.560 --> 0:08:15.600 just sort of early Thatcher when that book came out. 0:08:30.160 --> 0:08:33.000 One of the stories off the mark today Brexit. There's 0:08:33.040 --> 0:08:36.559 really not much there. You're a sterling. Rather one thirty 0:08:36.600 --> 0:08:40.719 three is weaker one? Two thirty nine right now? And 0:08:41.160 --> 0:08:44.240 yeah wow, would a move on five? John? I missed 0:08:44.240 --> 0:08:48.719 that Japanese Yeah, weaker one. I just flat out and 0:08:48.720 --> 0:08:52.880 missed that. It was yields right, US. Yields are right 0:08:52.960 --> 0:08:54.959 up against resistance. Had a bit of a drift free 0:08:55.040 --> 0:08:56.840 this week, a bit of a drift. Why don't you 0:08:56.880 --> 0:09:00.800 bring our wonderful guests in on the yields. I'm very 0:09:00.800 --> 0:09:03.080 happy to catch up with pre Misery till Security's head 0:09:03.080 --> 0:09:06.640 of Global interest rates Strategy. One of my guiding lights 0:09:06.679 --> 0:09:09.400 for the bond market, the real yields. Look for it 0:09:09.480 --> 0:09:12.920 this afternoon. Great summer there on Bloomberg. Thank you Tom, 0:09:12.920 --> 0:09:15.000 and thank you Prere. Let's start Prere with the range 0:09:15.000 --> 0:09:17.240 that we've been in for treasuries, a very tight range. 0:09:17.240 --> 0:09:19.760 We're actually still in it, but this week we've started 0:09:19.800 --> 0:09:24.199 to drift higher. Your thoughts, Hi, Johan uh and I Toma, 0:09:24.360 --> 0:09:26.920 thanks for having me on. So yes, I think we 0:09:27.000 --> 0:09:29.440 have drifted a little bit higher. Um. I think what's 0:09:29.440 --> 0:09:31.800 been interesting is over the last couple of months we've 0:09:31.800 --> 0:09:35.600 had a significant risk on move and yet interest rates 0:09:35.720 --> 0:09:38.560 have stayed in this extremely narrow range like two sixty 0:09:38.640 --> 0:09:41.880 to seventy. We've been, you know, very tightly bound there, 0:09:42.160 --> 0:09:44.560 and I think it's it's a function of the macro 0:09:44.679 --> 0:09:47.360 market sort of move from a policy mistake or a 0:09:47.360 --> 0:09:50.200 FED policy mistake perception in the fourth quarter to now 0:09:50.400 --> 0:09:53.360 de wish fed um and and which is why even 0:09:53.360 --> 0:09:56.640 though equities were able to rally, uh, you know, credit 0:09:56.679 --> 0:09:59.880 spreads compressed interestrates were unable to sell off because essentially 0:09:59.880 --> 0:10:02.440 the market raced in the stubbish FED. I think now 0:10:02.480 --> 0:10:05.360 going forward it has to come back to fundamentals, and 0:10:05.440 --> 0:10:07.560 that's where we might have more of a moving interest 0:10:07.640 --> 0:10:10.520 rates rather than uh than risk asset. So if we 0:10:10.559 --> 0:10:14.320 start seeing the first look of February data in the 0:10:14.440 --> 0:10:17.640 US and we start seeing that actually growth is not decelerating, 0:10:17.880 --> 0:10:21.280 we're still growing above potential, I think we should be, uh, 0:10:21.320 --> 0:10:23.600 you know, back to talking about FED hikes and then 0:10:23.600 --> 0:10:25.800 on the global growth front um, you know, if we 0:10:25.840 --> 0:10:28.880 do get a China trade deal, if we do see 0:10:28.960 --> 0:10:31.800 China stimulus, I think we're then talking about a little 0:10:31.800 --> 0:10:34.400 bit of an upside moving rates. So we are we 0:10:34.800 --> 0:10:37.720 are actually short duration here, looking for a small increase 0:10:37.960 --> 0:10:41.840 in rates, you know, closest level at the moment. I 0:10:41.840 --> 0:10:44.200 think most people would conclude it's far too premature to 0:10:44.240 --> 0:10:46.800 call the turn in the global economy with any real conviction. 0:10:46.840 --> 0:10:49.319 But how encouraged are you by some of the data 0:10:49.360 --> 0:10:53.120 points this week when the headline data has been terrifically underwhelming. 0:10:53.160 --> 0:10:56.320 But we're just clinging to these little elements, these little 0:10:56.360 --> 0:10:58.160 components of p M I that show a bit of 0:10:58.240 --> 0:11:02.400 encouragement right now, that's fair. I think it's it is 0:11:02.400 --> 0:11:04.440 too early to say whether it's we're actually turning. I 0:11:04.440 --> 0:11:08.000 think we're looking for momentum, though, is the momentum decelerating? 0:11:08.240 --> 0:11:10.160 And I think the early read is that maybe the 0:11:10.240 --> 0:11:14.559 momentum is stabilizing, and we're also looking at policymakers globally 0:11:15.000 --> 0:11:18.680 that seem to have changed their stands for normalization, tightening 0:11:18.720 --> 0:11:22.360 to now, you know, being accommodative. What are people doing 0:11:22.640 --> 0:11:28.320 with their money? It's tough. I mean I think, um, 0:11:28.360 --> 0:11:31.040 you know, they're staying in cash. Cash is king in 0:11:31.200 --> 0:11:35.000 the US front end. Cash is giving you positive real rates. 0:11:35.040 --> 0:11:37.800 So I think you keep risk light. Um, you know, 0:11:37.840 --> 0:11:41.880 you certainly have some cash for liquidity reasons, and then 0:11:41.960 --> 0:11:44.840 you start dipping back into risks. And this is where 0:11:44.880 --> 0:11:46.560 I think it's hard to say that you should just 0:11:46.600 --> 0:11:49.760 be buying all risk asses. You start doing more credit work, 0:11:49.800 --> 0:11:53.600 and you you pick you know, sectors or issues that 0:11:54.760 --> 0:11:58.240 or other issuers that that still may look fundamentally strong. 0:11:58.559 --> 0:12:01.040 But it's a tough market. I'm hearing this from every 0:12:01.080 --> 0:12:03.680 investor I meet. The tight range in the fact that 0:12:03.800 --> 0:12:07.440 risk is valid, I think, you know, means that it's 0:12:07.440 --> 0:12:10.079 it's hard to work now putting money to work. This 0:12:10.120 --> 0:12:12.240 is fascinating. And someone that would agree with pre a 0:12:12.320 --> 0:12:16.360 miserable TV securities is Daniel Fuss, who was just on 0:12:16.360 --> 0:12:22.200 Bloomberg Television, the acclaimed really the giant of total return investing. 0:12:22.200 --> 0:12:25.080 Bill Gross has always said that Mr Fuss at Lomas 0:12:25.120 --> 0:12:28.920 Sales was out front on this. Can you exist now 0:12:29.040 --> 0:12:33.360 after the last ten years we've experienced investing like Mr 0:12:33.440 --> 0:12:37.199 Fuss or you grabbed the coupon and wait for credit 0:12:37.280 --> 0:12:42.240 recovery and price appreciation of a note or bond. Is 0:12:42.240 --> 0:12:45.440 that game still out there? Or all the young turks 0:12:45.480 --> 0:12:48.880 like you become so sophisticated you can't do what Damn 0:12:48.960 --> 0:12:54.040 Fuss did. Um. I appreciate you calling me young, so 0:12:54.160 --> 0:12:56.400 we but we won't talk about that. UM. But I 0:12:57.120 --> 0:12:59.760 do think there's you know, that trade still exists. The 0:13:00.040 --> 0:13:02.560 very trade is there. You look at demographics in the 0:13:02.640 --> 0:13:05.160 U S so globally, I think demand for fixed income 0:13:05.520 --> 0:13:08.319 should be there. Now you have to diversify your portfolio. 0:13:08.679 --> 0:13:11.240 I think the difference in what I was recommending, you know, 0:13:11.320 --> 0:13:13.960 ten years ago, was to be out the curve. I 0:13:13.960 --> 0:13:16.120 don't think you're getting paid up that much more to 0:13:16.360 --> 0:13:18.839 interociation risk, so I think the front end actually is 0:13:18.880 --> 0:13:22.319 more attractive. I would mention John that Mr First, the 0:13:22.440 --> 0:13:27.160 history of like buying all of Ontario's utility bands or 0:13:27.200 --> 0:13:31.400 buying all of New Zealand's paper huge bets fast and 0:13:31.480 --> 0:13:34.360 i'd continue with pretty much. So I pray something you 0:13:34.440 --> 0:13:36.680 touched on earlier that I think it's quite interesting. A 0:13:36.679 --> 0:13:39.120 lot of people have been quite bearish the global economy 0:13:39.160 --> 0:13:41.480 and encouraged to take on juration pick up at the 0:13:41.520 --> 0:13:44.120 long end of say the treasury curve. What I hear 0:13:44.160 --> 0:13:46.560 from you is not that creer. Why is your view 0:13:46.640 --> 0:13:50.480 so different? I think you know, if you look at 0:13:50.480 --> 0:13:54.120 a risk adjusted return, you're taking on a lot more 0:13:54.240 --> 0:13:56.480 risk and not really earning that much more. I mean, 0:13:56.520 --> 0:13:58.199 if I look at the two year at two fifty 0:13:58.400 --> 0:14:01.040 versus the ten year at two seven, if you have 0:14:01.160 --> 0:14:04.400 any interest rate increase, you're much more at risk the 0:14:04.440 --> 0:14:06.560 further out the curve you are. So I would say, 0:14:06.640 --> 0:14:08.720 you know, if you have some risk assets on on 0:14:08.840 --> 0:14:11.960 the front and own bills or twos, rather than you know, 0:14:12.040 --> 0:14:14.679 taking on all that duration risk for not earning that 0:14:14.760 --> 0:14:17.800 much more. Let me speak for our audience. That's all great, 0:14:17.920 --> 0:14:22.720 and it sounds brilliant, except I need yield. If I 0:14:22.760 --> 0:14:27.000 need yield, where do I get it? So I think credit, 0:14:27.080 --> 0:14:29.200 there are there are pockets of credit where I think, 0:14:29.240 --> 0:14:31.800 you know, you can dip your toes back in um 0:14:31.920 --> 0:14:34.160 and you know, take some credit, take on some front 0:14:34.240 --> 0:14:37.960 end duration, keep risk light because I think, um, you know, 0:14:38.040 --> 0:14:40.000 this is an environment where we're going to get these 0:14:40.000 --> 0:14:42.040 stale events. I mean just look at the fourth quarter, 0:14:42.800 --> 0:14:45.080 and you know that's when if you have some powder dry, 0:14:45.200 --> 0:14:47.600 you can go back and invest. The moment that some 0:14:48.160 --> 0:14:50.400 you know risk off, that's the time to you know, 0:14:50.440 --> 0:14:52.880 go back in. It's hard to say you should be 0:14:52.960 --> 0:14:56.000 hundred percent invested right now, just given that all risk 0:14:56.040 --> 0:14:58.960 premiums have compressed. So I think keep some keep some 0:14:59.000 --> 0:15:02.800 powder dry, and invest in some mix within the fixed 0:15:02.880 --> 0:15:05.720 in compole that I that I look at credit versus 0:15:05.760 --> 0:15:09.040 some front end bills, I think it's attractive. John Farrell, 0:15:09.120 --> 0:15:11.400 John Herman just publishes at m U f J. I'd 0:15:11.400 --> 0:15:14.440 love to have pre a comment on this. Mr Herman 0:15:14.560 --> 0:15:20.160 pre n notices a little bit of inflation stickiness within 0:15:20.240 --> 0:15:24.840 his micro analysis. Do you agree? Do you see inflations 0:15:24.840 --> 0:15:28.400 stickiness out there that bears a close watch through March 0:15:28.480 --> 0:15:33.880 and particularly to the March twenty meeting. Um, you know, 0:15:33.960 --> 0:15:36.280 by stickiness you mean in the fundamental data or the 0:15:36.320 --> 0:15:41.280 market price, the fundamental data leading to a misjudgment by 0:15:41.360 --> 0:15:46.800 the disinflation crew. As John Farrell mentioned, early in the segment, right, 0:15:46.880 --> 0:15:49.760 So I think, yes, there's even the data suggests that 0:15:49.800 --> 0:15:53.560 there's significant inflation in Ussia. And we're in an environment 0:15:53.560 --> 0:15:55.520 where none of these models have done a great job 0:15:55.680 --> 0:15:58.960 predicting inflation, and so are we at some inflection point 0:15:59.000 --> 0:16:00.880 where there's going to be a big pick up an inflation. 0:16:01.320 --> 0:16:03.840 I think the market has sort of is in the 0:16:03.920 --> 0:16:06.680 show me mode, and so unless we start seeing that 0:16:06.760 --> 0:16:09.840 pick up an inflation, I don't know if the market 0:16:09.880 --> 0:16:12.480 is going to say or or that even the Fed 0:16:12.840 --> 0:16:14.720 seems to be losing a little bit of faith in 0:16:14.800 --> 0:16:17.360 this big pick up inflation. So I would have to agree, yes, 0:16:17.400 --> 0:16:20.800 there is just wonderful premise that we're going to thank 0:16:20.800 --> 0:16:37.160 you for their TV security is just wonderful perfect. I mean, 0:16:37.200 --> 0:16:40.080 you know, it's Friday, we're looking at the themes that 0:16:40.120 --> 0:16:44.440 matter from Seattleton, New York, which can only mean Amazon, 0:16:44.640 --> 0:16:46.880 and you know the quality of the guests we have, 0:16:47.520 --> 0:16:49.680 you know, John, in America, I don't know about in England, 0:16:49.960 --> 0:16:53.200 you have to take Western of one oh one when 0:16:53.200 --> 0:16:56.800 you go to school if you go to that common institution, 0:16:56.960 --> 0:17:01.280 have a for down in Pennsylvania that com wired requirement 0:17:01.640 --> 0:17:05.040 you need to take socialism one oh one, just to 0:17:05.119 --> 0:17:09.240 get in the door from Haverford. Sure overdate joins us. 0:17:09.320 --> 0:17:11.960 What is it like freshman year at Haverford. I do 0:17:12.040 --> 0:17:17.160 not remember any communist propaganda. Oh, freshman year of courses. 0:17:17.280 --> 0:17:19.639 If that's the question. It's a great school. It's a 0:17:19.640 --> 0:17:24.520 fabulous Quaker institution and wildly eclectic. But it's great preparation 0:17:24.640 --> 0:17:28.040 for the Battle of Queens, which is the class, cultural 0:17:28.440 --> 0:17:31.879 and political battle. Let's just frame it between the gentlewoman 0:17:31.960 --> 0:17:34.960 from the Bronx and the governor in Albany. Give us 0:17:35.000 --> 0:17:39.359 an update, I'm Bezos and Queens given the cultural battle 0:17:39.640 --> 0:17:42.040 of the New York Times this morning. Yeah, well, the 0:17:42.280 --> 0:17:45.440 New York Times is reporting that Andrew Cuomos, the governor 0:17:45.520 --> 0:17:48.879 of the state of New York, has basically made overtures 0:17:48.920 --> 0:17:53.480 to Amazon executives, including Jeff Bezos himself, to get Amazon 0:17:53.560 --> 0:17:58.240 to reconsider their decision to pull back from this HQ 0:17:58.400 --> 0:18:01.520 two or whatever HQ one and a half that Amazon 0:18:01.600 --> 0:18:06.600 was opiniata a second time. That's what's gonna happen. Yeah, 0:18:06.640 --> 0:18:08.960 I mean, it does seem, at least from the reporting, 0:18:08.960 --> 0:18:12.440 that the conversation is rather one sided. It's basically Quomo 0:18:12.560 --> 0:18:17.120 making assurances that if Amazon reconsiders that, Cuomo will sort 0:18:17.119 --> 0:18:21.439 of shepherd the political, the messy political process himself, and 0:18:21.520 --> 0:18:24.840 take some more responsibility over that. Sure, I make jokes 0:18:24.880 --> 0:18:27.160 about it. You are wired into this store like no 0:18:27.200 --> 0:18:31.160 one can that happen. Can the governor in Albany tell 0:18:31.240 --> 0:18:34.120 the state senator what to do and and the others 0:18:34.160 --> 0:18:37.640 that have driven forward this exit of plans? I don't 0:18:37.640 --> 0:18:40.680 think so. So. The the issue here is that both 0:18:40.800 --> 0:18:45.320 Amazon and local political leaders, including Cuomo and mayor build 0:18:45.320 --> 0:18:49.919 the Blasio, they botched this right. It was this complicated, 0:18:50.160 --> 0:18:56.200 secretive process for for a year, highly public and secretive, 0:18:56.240 --> 0:18:59.159 kind of a toxic mix involving one of the world's 0:18:59.160 --> 0:19:01.920 most valuable come bunize, and I think it just left 0:19:01.920 --> 0:19:07.200 a bitter taste in everyone's mouth, including local politicians, local residents, 0:19:07.240 --> 0:19:09.800 Amazon executives. And it doesn't seem like there's a do over. 0:19:09.960 --> 0:19:12.280 And it's very public this morning once again with this 0:19:12.280 --> 0:19:15.200 big letter in the New York Times, dear Mr Bezos, 0:19:15.200 --> 0:19:18.720 please come back, essentially share My issue is this whole HQ, 0:19:18.840 --> 0:19:21.600 as you put at one point five, Why did they 0:19:21.640 --> 0:19:24.480 do this both so publicly and then so privately to 0:19:24.520 --> 0:19:26.520 get the states to fight with each other, as you say, 0:19:26.560 --> 0:19:29.359 it's toxic. Why didn't they just do what Google are 0:19:29.440 --> 0:19:33.920 doing in Manhattan, pick somewhere by it invest Yeah, I 0:19:33.920 --> 0:19:37.800 I I wonder I hope that Amazon learned their lesson 0:19:38.040 --> 0:19:41.280 from this process that they basically set up a reality 0:19:41.320 --> 0:19:46.080 television competition saying, please all US cities, all North American 0:19:46.080 --> 0:19:49.320 cities come and um, you know, lay flowers at our 0:19:49.320 --> 0:19:52.240 feet and tell us why your city should be graced 0:19:52.280 --> 0:19:54.920 with Amazon's presence. And that might have been a good 0:19:54.960 --> 0:19:59.439 idea in late when Amazon kicked off that process, but 0:19:59.520 --> 0:20:03.000 it just kind of got more and more distasteful as 0:20:03.040 --> 0:20:07.040 the process went on. And also, look Amazon, the story 0:20:07.080 --> 0:20:09.480 of Amazon also got a little bit more complicated in 0:20:09.480 --> 0:20:13.800 in that year that the process took Amazon became more valuable, 0:20:13.880 --> 0:20:17.560 more powerful, Bezos became the world's richest person. And then 0:20:17.560 --> 0:20:19.960 when they kind of decided, oh, we're not going to 0:20:20.080 --> 0:20:22.439 make an HQ two, We're going to make two or 0:20:22.600 --> 0:20:26.480 three HQ two's, I think it just it just seemed 0:20:26.480 --> 0:20:29.520 a little gross. So share going forward. I mean, so 0:20:29.600 --> 0:20:31.400 much work has been done here in New York City 0:20:31.400 --> 0:20:34.000 to attract tech firms, some tremendous work has been done 0:20:34.040 --> 0:20:37.320 and you can see the results. Does this episode spill 0:20:37.359 --> 0:20:40.160 over into anything more broadly or is it just an Amazon, 0:20:40.640 --> 0:20:45.120 uniquely Amazon episode. I think it's mostly a uniquely Amazon episode. 0:20:45.119 --> 0:20:48.600 The reason that the tech community, that the tech hiring 0:20:48.960 --> 0:20:54.080 has flourished in New York City is not necessarily about 0:20:54.119 --> 0:20:59.160 you know, tax breaks and showy political press conferences. It's 0:20:59.240 --> 0:21:03.080 because this city has a lot to offer the tech industry, 0:21:03.080 --> 0:21:08.000 including highly talented people in good infrastructure. At least in theory, 0:21:08.400 --> 0:21:10.080 this is a place that a lot of people still 0:21:10.160 --> 0:21:14.680 want to live and that isn't changing just because Amazon 0:21:14.840 --> 0:21:17.200 kind of got its fingers burned on the stove. Share 0:21:17.240 --> 0:21:20.640 I get to see you, You've got to come back happy. 0:21:20.760 --> 0:21:24.200 I was happy to be here overday Bloomberg opinion columnist 0:21:24.280 --> 0:21:27.280 and Tom Kine with quite an introduction that it's it's true. 0:21:27.359 --> 0:21:29.240