WEBVTT - Market and FX Moves 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.800 --> 0:00:17.880 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:21.960 on Apple CarPlay or Android Auto with the Bloomberg Business app. 0:00:22.320 --> 0:00:25.640 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.440 --> 0:00:29.440 Kim Dawson does this word duct for me? 0:00:29.480 --> 0:00:30.720 It's just for me, okay. 0:00:30.880 --> 0:00:34.640 In the fox size, it's like six it's like six point. 0:00:34.840 --> 0:00:38.479 It's like it's like, you know, fourteen years old in 0:00:38.520 --> 0:00:40.440 middle school when you could read the board from the 0:00:40.479 --> 0:00:41.160 back of the room. 0:00:41.479 --> 0:00:43.400 I can't read this note. Save me. 0:00:43.479 --> 0:00:46.960 Paul Sweeney, Cam Dawson joins us here CIO New Edge 0:00:47.159 --> 0:00:50.879 Wealth Here. Kim, what's the feel for earning so far 0:00:51.560 --> 0:00:53.280 this year? We've had, you know, more than, maybe not 0:00:53.440 --> 0:00:55.320 two thirds of the S and P five hundred reported. 0:00:55.720 --> 0:00:57.440 Seems pretty solid. Is it solid enough? 0:00:57.520 --> 0:00:57.640 Oh? 0:00:57.640 --> 0:01:00.400 Well, of course it's solid enough. We're trying looking at 0:01:00.440 --> 0:01:05.759 forty seven point struss real it's not real, right, So 0:01:05.920 --> 0:01:08.760 about twenty percentage points of that is coming from the 0:01:08.800 --> 0:01:11.960 paper gains from Amazon and Google. And that sets up 0:01:12.000 --> 0:01:14.639 for a very interesting dynamic as we get into twenty 0:01:14.640 --> 0:01:16.440 seven because it's unlikely. 0:01:16.160 --> 0:01:17.920 Those will will will repeat. 0:01:18.280 --> 0:01:20.600 But you still have the rest of the market growing 0:01:20.640 --> 0:01:23.680 at twenty eight point eight percent earnings growth, which is 0:01:23.880 --> 0:01:27.040 absolutely incredible, incredible given the fact that it's not as 0:01:27.080 --> 0:01:29.479 if we're coming out of an earnings recession the last 0:01:29.520 --> 0:01:30.720 couple of years. We're strong too. 0:01:31.480 --> 0:01:33.920 Yeah, So I mean, I mean, is this revenue driven? 0:01:34.000 --> 0:01:34.959 Is it margin driven? 0:01:35.000 --> 0:01:35.640 What's he's going on? 0:01:35.800 --> 0:01:40.800 This is stop stop stop stop Cefa Sweeney just nailed it, folks. 0:01:41.200 --> 0:01:43.920 Where on the income statement is this happening. 0:01:44.240 --> 0:01:47.600 So that's a it's a really important point because yes, 0:01:47.680 --> 0:01:50.080 there is a big revenue component and that should not 0:01:50.120 --> 0:01:52.400 be a surprise because nominal GDP. 0:01:52.400 --> 0:01:55.880 A you're just know you you know where I'm going continue. 0:01:56.000 --> 0:01:59.360 Well, it was eight percent. Remember, revenue is nominal. So 0:01:59.480 --> 0:02:02.600 they benefit from this world where prices are still going up. 0:02:03.120 --> 0:02:06.560 And the other dynamic that's happening is that, yes, margins 0:02:06.600 --> 0:02:09.519 are expanding. They're up about three hundred basis points on 0:02:09.560 --> 0:02:12.440 a net income margin overall for the S and P 0:02:12.520 --> 0:02:15.160 five hundred. Now, a good portion of that, about half 0:02:15.200 --> 0:02:17.639 of that is those paper gains again from Google and 0:02:17.720 --> 0:02:20.920 Amazon and the other The rest of that is actually 0:02:20.919 --> 0:02:24.720 coming from semiconductors, and not because of some kind of 0:02:24.760 --> 0:02:28.720 productivity boom, but we argue it's operating leverage. It's effectively 0:02:28.760 --> 0:02:31.320 you're growing revenue so much on a fixed cost business 0:02:31.360 --> 0:02:33.960 that margins are exploding for semiconductor. 0:02:34.000 --> 0:02:35.639 As I just said to Robert Doll, let me say 0:02:35.639 --> 0:02:38.640 the same thing to you as well. If we assume 0:02:38.720 --> 0:02:43.600 it's someday our China like nominal GDP ms, what's the 0:02:43.760 --> 0:02:48.000 analog here of what the stock market does is nominal 0:02:48.080 --> 0:02:48.680 comes down? 0:02:48.919 --> 0:02:50.160 Yeah, do we have a history? 0:02:50.400 --> 0:02:54.359 Well, we do because we had a period of very 0:02:54.400 --> 0:02:57.359 strong nominal GDP growth and a year like twenty twenty 0:02:57.400 --> 0:03:00.959 one and it certainly decelerated a bit and twenty twenty two, 0:03:01.120 --> 0:03:04.680 and so we saw some dynamic of that reflect within 0:03:05.240 --> 0:03:06.760 the overall market performance. 0:03:06.800 --> 0:03:08.880 But it raises the question of. 0:03:09.080 --> 0:03:13.000 Is this as good as it gets? Second quarter earnings 0:03:13.040 --> 0:03:15.800 are so extraordinary, is that going to be the peak 0:03:15.880 --> 0:03:18.000 for this cycle? And then the question is does the 0:03:18.000 --> 0:03:20.720 market care? The market care is when you have a 0:03:20.800 --> 0:03:24.760 second derivative slowdown, So forty seven turns into thirty, turns 0:03:24.800 --> 0:03:28.040 into twenty, and then eventually you go to negative. So 0:03:28.120 --> 0:03:30.720 that would be the concern, is that if people see 0:03:30.720 --> 0:03:34.040 this as the peak and we descend from there. That 0:03:34.040 --> 0:03:36.200 could be a source of volatility for markets. 0:03:37.120 --> 0:03:39.160 We're going to get SpaceX after the close, and it's 0:03:39.240 --> 0:03:41.480 kind of been a certainly a seminal event for the 0:03:41.560 --> 0:03:45.240 equity market. It's the largest IK of all time. Monster 0:03:45.360 --> 0:03:48.600 valuation trades up, now it's trading down. 0:03:48.960 --> 0:03:50.080 Should the market. 0:03:50.080 --> 0:03:52.760 Pay attention to SpaceX and earnings here for the clothes today? 0:03:52.840 --> 0:03:52.960 Oh? 0:03:53.080 --> 0:03:56.080 I think we have to, just because it is the 0:03:56.120 --> 0:03:58.920 sign of a potentially all clear if you have a 0:03:58.920 --> 0:04:01.040 good reaction to the earn for some of these other 0:04:01.080 --> 0:04:03.880 big IPOs to come out. I mean, SpaceX has been 0:04:03.880 --> 0:04:07.280 a story about the perils of high valuation. Okay, right, 0:04:07.360 --> 0:04:11.960 So when they iPod at eighty five times current price 0:04:12.040 --> 0:04:15.800 to sales sixty times forward price to sales, even if 0:04:15.840 --> 0:04:19.120 those sales deliver, you are going to see you have 0:04:19.160 --> 0:04:20.880 to grow into that multiple. 0:04:21.120 --> 0:04:22.920 And that's effectly what has happened. 0:04:22.960 --> 0:04:25.640 You see that price to sales ratio now fall to 0:04:25.760 --> 0:04:29.680 about twenty five times price to sales, so effectively you've 0:04:29.720 --> 0:04:32.679 reset the valuation. The question is is it enough? Twenty 0:04:32.680 --> 0:04:34.960 five times would still be the third most expensive name 0:04:35.000 --> 0:04:37.359 in the s and P five hundred if SpaceX was 0:04:37.360 --> 0:04:38.880 in the S and P five hundred, which is not 0:04:38.960 --> 0:04:40.760 because it doesn't generate any profit. 0:04:40.920 --> 0:04:46.880 That's right, all right, allocation here? How are you thinking 0:04:46.880 --> 0:04:48.320 about equities versus fixing? 0:04:48.400 --> 0:04:48.800 Come here? 0:04:49.640 --> 0:04:52.480 Well, if you are concerned about growth or at all 0:04:52.600 --> 0:04:56.679 want to hedge your portfolio against a potential slowdown in growth, 0:04:56.680 --> 0:04:59.400 which I will note there is no sign of a 0:04:59.440 --> 0:05:02.159 slowdown on growth happening in any of the data. Look 0:05:02.160 --> 0:05:05.800 at Atlanta Fed GDP now over six percent for the 0:05:05.839 --> 0:05:06.440 third quarter. 0:05:06.720 --> 0:05:07.480 This is nuts. 0:05:07.800 --> 0:05:11.679 But if you were to want to hide yourself against growth, 0:05:11.800 --> 0:05:15.159 then that would certainly be in bonds a way to 0:05:15.240 --> 0:05:17.440 do it, given how high yields are, that you are 0:05:17.480 --> 0:05:20.719 getting well compensated, and the expectations you would see a 0:05:20.800 --> 0:05:22.880 rally in bonds if you were to see us. 0:05:23.560 --> 0:05:25.960 The difference here, folks, is if there's a forty two 0:05:26.000 --> 0:05:30.800 page report, unlike the duration of AI CAPEX, I'll read 0:05:30.800 --> 0:05:33.000 the first two pages and look for a chart to 0:05:33.000 --> 0:05:36.599 look at. Backdep Cam Dawson sits on the airplane and 0:05:36.680 --> 0:05:40.800 reads every single word of the report. How long does 0:05:40.839 --> 0:05:44.000 this keep going? I'm sorry, Cam? Here in August of 0:05:44.040 --> 0:05:48.000 this year, this is the arch question yeah, is if 0:05:48.000 --> 0:05:53.479 we assume this can't continue, can we adjust in this market, 0:05:53.600 --> 0:05:59.800 adjust in a measured manner before some correction or legitimate SPX. 0:06:00.800 --> 0:06:04.200 We truly are in an environment where it is Atlas 0:06:04.360 --> 0:06:07.640 holding up the world, and Atlas in this scenario is 0:06:07.680 --> 0:06:11.800 the hyperscaler's willingness to burn all of their free cash 0:06:11.880 --> 0:06:14.960 flow on this capex. We would not be seeing the 0:06:15.000 --> 0:06:17.400 nominal GDP growth that we are seeing. We would not 0:06:17.480 --> 0:06:19.720 be seeing the earnings growth we were seeing were it 0:06:19.839 --> 0:06:23.839 not for these companies' willingness to spend all of their 0:06:23.920 --> 0:06:26.599 cash and all of their free casual generation and be 0:06:26.640 --> 0:06:29.920 able to spend on this capex. If there is anything 0:06:29.960 --> 0:06:32.359 that causes them to pull back on that, and we 0:06:32.440 --> 0:06:35.760 are seeing no evidence of that that they're wanting to 0:06:35.760 --> 0:06:38.480 pull back on CAPEX, that would certainly be a big 0:06:38.520 --> 0:06:41.919 market negative. I would flag you look at Microsoft people 0:06:41.960 --> 0:06:46.400 celebrating their capex discipline because CAPEX slightly declined for twenty 0:06:46.440 --> 0:06:49.200 twenty six. It was just an accounting adjustment. They played 0:06:49.240 --> 0:06:52.480 some accounting games. They reclassified some of their cash flows 0:06:52.480 --> 0:06:56.000 from operating into financing cash flows, and that's CAPEX spell. 0:06:56.200 --> 0:06:58.880 It wasn't actually a real cut to capex. So this 0:06:59.000 --> 0:07:02.880 is still an environment where company's willingness to spend is 0:07:02.920 --> 0:07:06.560 certainly what is driving and boosting both that GDP and earnings. 0:07:07.120 --> 0:07:08.479 I like and your notes you say, this is a 0:07:08.480 --> 0:07:11.400 market that's wobbled, but it hasn't really fallen down yet, 0:07:11.440 --> 0:07:16.200 even if you've got semiconductors correcting, even if you've got 0:07:16.240 --> 0:07:18.000 just you know, some concerns out there in the marketplace 0:07:18.000 --> 0:07:21.600 about the MAG seven. It doesn't fall down, is it all? 0:07:22.080 --> 0:07:23.840 I guess it all just comes back to earnings. 0:07:23.560 --> 0:07:25.480 Right, Yeah, we did that for the seventies babies. 0:07:25.520 --> 0:07:26.080 Yeah, remember that. 0:07:26.120 --> 0:07:29.520 We Yeah, Weebel's wobble, but they don't fall down, and 0:07:29.560 --> 0:07:31.239 we're saying it's not a bowl or a bear market. 0:07:31.240 --> 0:07:32.320 It was a Weebel market. 0:07:32.400 --> 0:07:35.400 And so effectively we had this wobble in markets. But 0:07:35.520 --> 0:07:39.560 because it was so rotational under the surface, weakness within 0:07:39.680 --> 0:07:42.840 MAG seven was offset by strength and semiconductors, and then 0:07:42.880 --> 0:07:46.120 weakness within semiconductors was offset by strength in MAG seven. 0:07:46.400 --> 0:07:49.880 Then you had continued strengthen things like financials, for example. 0:07:50.160 --> 0:07:52.280 And so it's left us with a market that has 0:07:52.320 --> 0:07:55.480 been able to be so resilient despite the fact that 0:07:55.680 --> 0:07:58.880 large weights had really weak periods. Think about the mag seven. 0:07:59.080 --> 0:08:01.240 A lot of these names rent Bear Markets just a 0:08:01.280 --> 0:08:05.040 couple of weeks ago, and so certainly the rotational nature 0:08:05.040 --> 0:08:06.840 of things has allowed us to have a much more 0:08:06.880 --> 0:08:07.840 resilient top line. 0:08:07.880 --> 0:08:12.640 Perfect what a perfect seguity, the rotational nature. Yes, Kim Dawson, 0:08:12.720 --> 0:08:13.600 thank you so much. 0:08:13.480 --> 0:08:15.640 For you wich well, stay with us. 0:08:15.880 --> 0:08:19.120 More from Bloomberg Surveillance coming up after this. 0:08:26.360 --> 0:08:29.960 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:08:30.000 --> 0:08:33.160 weekday afternoons from seven to ten am Eastern Listen on 0:08:33.240 --> 0:08:36.920 Applecarplay and Android Otto with the Bloomberg Business app, or 0:08:37.080 --> 0:08:38.560 watch us live on YouTube. 0:08:38.679 --> 0:08:40.880 This is a treat. We're trying to parachute and Damien 0:08:40.960 --> 0:08:43.960 sass are in a moment on em A tag team 0:08:44.000 --> 0:08:47.600 here Stephen Englander of the Standard Charter Bank, and we 0:08:47.679 --> 0:08:50.040 hope mister Sasa are with us trying to find him 0:08:50.080 --> 0:08:54.400 within the building. It's not Stephen, honored to have you here. 0:08:54.440 --> 0:08:56.640 You are definitive with your work at City Group over 0:08:56.720 --> 0:08:59.480 the years and now at the Standard Charter Bank. You 0:08:59.520 --> 0:09:02.280 and I we we gottic folks lift the dialogue here 0:09:02.679 --> 0:09:06.760 on this. Why should the average American care that there's 0:09:06.800 --> 0:09:10.559 a third or fourth Japanese intervention, and now the Secretary 0:09:10.600 --> 0:09:13.080 Treasury has to come to the rescue. What's the so 0:09:13.280 --> 0:09:15.760 what for Americans? 0:09:15.840 --> 0:09:18.400 I think the problem for the US is twofold. The 0:09:18.840 --> 0:09:24.520 major problem is that increasingly, when we see the Japanese 0:09:24.679 --> 0:09:28.760 end acutely weak, it's associated with higher Japanese yields. The 0:09:28.800 --> 0:09:33.240 market is afraid that the fiscal situation in Japan is deteriorating. 0:09:33.800 --> 0:09:38.440 So the weekend and higher Japanese yields occur together, but 0:09:38.559 --> 0:09:42.960 some of those higher Japanese yields spill over into US yields. Now, 0:09:43.000 --> 0:09:46.720 the Treasury Secretary, you know, his only job descriptions keeping 0:09:46.760 --> 0:09:50.400 borrowing costs down. And so when he sees this kind 0:09:50.400 --> 0:09:55.000 of risk, especially in a week like this, when they're 0:09:55.040 --> 0:09:58.680 talking about Bondihuans and you know, sort of giving the 0:09:58.679 --> 0:10:01.679 outlook for the future, he wants to be careful that 0:10:02.120 --> 0:10:04.480 he doesn't get blindsided by what's happening in Japan. 0:10:04.800 --> 0:10:08.480 To me, they're silence here. Jessper Cole is one of 0:10:08.520 --> 0:10:13.480 the great Japanese watchers for years. Jessper Cole says, there 0:10:13.760 --> 0:10:18.880 perhaps is tensions within the secondary bank system of Japan. 0:10:19.400 --> 0:10:22.440 Are there unknown unknowns we don't know about within the 0:10:22.440 --> 0:10:26.280 banking system with Japan, which makes the Secretary of Treasury 0:10:26.360 --> 0:10:27.400 want to parachute in. 0:10:28.600 --> 0:10:31.760 You know, that's very hard to say, especially from this distance, 0:10:31.840 --> 0:10:35.200 unless you're watching it very closely, you know. And certainly 0:10:35.240 --> 0:10:37.960 the Japanese would be better place to deal with their 0:10:38.040 --> 0:10:41.440 banking issues than the US Treasury. I mean, US is 0:10:41.440 --> 0:10:43.760 a big country, but it can't solve everybody's problems. 0:10:43.920 --> 0:10:45.880 Okay, I want to get this in. Paul's lined up 0:10:46.040 --> 0:10:50.040 with a question smarter than mine, as simple as I can. 0:10:50.520 --> 0:10:51.679 You and I read RUDIGERD. 0:10:51.720 --> 0:10:56.000 Dornbush, we read Rogue Off, we read Opsfeld, you lived 0:10:56.040 --> 0:10:57.520 it as a PhD. A. 0:10:58.000 --> 0:10:58.480 Yale? 0:10:58.679 --> 0:11:02.920 Is there any likely this can work for Japan? I 0:11:03.000 --> 0:11:07.240 don't see an analog to the past. 0:11:06.320 --> 0:11:08.680 You know. I think this is a bridge, you know, 0:11:09.120 --> 0:11:14.040 and they're hoping that something down the road happens that 0:11:14.160 --> 0:11:19.000 makes organically helps contribute to yen strength. So it could be, 0:11:19.559 --> 0:11:22.160 say there's a deal in the mid Mid East, so 0:11:22.280 --> 0:11:25.520 oil prices come down. It could be that the Bank 0:11:25.559 --> 0:11:29.079 of Japan sort of raises rates so that the pressures 0:11:29.120 --> 0:11:33.000 are off. It's not a solution on its own, and 0:11:33.040 --> 0:11:35.439 we wrote a piece today, and one of the issues 0:11:35.440 --> 0:11:39.720 with Japan is that, you know, retail is exporting capital, 0:11:39.960 --> 0:11:42.920 you know, the man on the street, and they're not 0:11:42.960 --> 0:11:45.880 going to care that the US is intervened. You know, 0:11:46.320 --> 0:11:49.959 the reasons for taking money out of Japan are very 0:11:50.000 --> 0:11:52.560 different and the reasons you know, say a speculator would 0:11:52.559 --> 0:11:53.280 go short dollar. 0:11:53.360 --> 0:11:56.800 Yet, how significant is it that the US did join 0:11:56.840 --> 0:11:59.439 the back of Japan in supporting the en Here. It 0:11:59.480 --> 0:12:01.480 doesn't happen very often, no. 0:12:01.520 --> 0:12:03.679 And it's the first time it's happened. It's first time 0:12:03.679 --> 0:12:06.679 it happened in this form with the US serve telegraphing 0:12:08.280 --> 0:12:10.200 what it was going to do in terms of intervention. 0:12:11.559 --> 0:12:14.920 You know, even intervening Friday afternoon when most people are 0:12:14.960 --> 0:12:18.240 heading to the beach is like, real, you loved it. 0:12:18.320 --> 0:12:20.800 You wrote off Friday night and Saturday. 0:12:20.400 --> 0:12:24.400 Right, actually not to be clear, and that he did 0:12:24.480 --> 0:12:28.360 rite on Sunday. So you know, I think there's a 0:12:28.360 --> 0:12:31.640 lot that's unusual here. And you know they intervened in 0:12:31.640 --> 0:12:35.480 twenty eleven after the earthquake that was a special circumstances. 0:12:35.520 --> 0:12:37.240 You have to go back to two thousand and one 0:12:37.280 --> 0:12:40.680 and the intervention on the euro to find us coming 0:12:40.720 --> 0:12:44.560 in to sort of directionally push another currency. 0:12:45.240 --> 0:12:48.760 The interventions work in the intermediate to long term. This 0:12:48.800 --> 0:12:51.800 one seems to be beholding. But I don't know tell 0:12:51.880 --> 0:12:53.120 us about that, well. 0:12:53.240 --> 0:12:57.040 I mean, I work on the trading floor. In the 0:12:57.120 --> 0:12:59.160 long term is longer than seventy two hours? 0:12:59.160 --> 0:12:59.640 Okay? 0:13:00.600 --> 0:13:03.600 You know. The answer is that if nothing changes, you know, 0:13:03.640 --> 0:13:06.720 it's really hard to keep spending the money that it takes. 0:13:07.800 --> 0:13:11.360 You know, so far they've been dogged. Every intervention has 0:13:11.400 --> 0:13:14.959 tried to get yen stronger, so that anyone who went 0:13:15.080 --> 0:13:19.680 short yen after the previous intervention gets washed out. But 0:13:19.720 --> 0:13:21.480 there's a limit to how long you can do that, 0:13:21.600 --> 0:13:24.600 and if organically people want to take money out of 0:13:24.679 --> 0:13:28.079 Japan at some point that it goes the end way. 0:13:28.800 --> 0:13:31.800 Robin Brooks just publishes moments ago at Brookings for years 0:13:31.800 --> 0:13:35.520 with Gold and Sacks, he's been really definitive within this debate, folks, 0:13:35.559 --> 0:13:41.160 this is really complex inside baseball. He publishes on higher yields, 0:13:41.200 --> 0:13:45.920 stronger yen. He assumes a normal place for the Japanese 0:13:46.200 --> 0:13:51.480 bond market now is priced down yield up dramatically. Is 0:13:51.520 --> 0:13:54.520 that the end outcome here, whatever they want to do, 0:13:55.080 --> 0:13:57.640 is that there's going to be higher yields in Japan 0:13:57.920 --> 0:13:59.640 because he screwed this up so bad. 0:14:01.240 --> 0:14:05.040 They are facing pressures. You know, they tried very hard 0:14:05.080 --> 0:14:07.840 over the last ten years to stimulate the economy. You had, 0:14:08.080 --> 0:14:10.600 you know, the three arrows type of program, which had 0:14:10.679 --> 0:14:11.400 mixed success. 0:14:11.640 --> 0:14:11.880 Right. 0:14:12.760 --> 0:14:15.200 If you can't get the growth on your own, right, 0:14:15.360 --> 0:14:17.880 and you're trying to use fiscal policy to do it, 0:14:17.880 --> 0:14:20.240 there's a limit to what you can do. And if 0:14:20.240 --> 0:14:23.680 the fiscal policy isn't completely successful, right, people look at 0:14:23.680 --> 0:14:25.720 the other side of your balance sheet and say, you know, 0:14:25.760 --> 0:14:26.640 maybe not so good. 0:14:26.720 --> 0:14:30.440 Worldwide Bloomberg surveillance, where there's across America, Steven Anglander, where 0:14:30.440 --> 0:14:33.080 there's the standard Charter Bank Good Morning, ninety to nine 0:14:33.240 --> 0:14:36.120 FM Boston, ninety nine one in New York and Bloomerg 0:14:36.120 --> 0:14:38.360 eleven three to zero excuse me in New York in 0:14:38.440 --> 0:14:41.920 ninety nine one in Washington. What a joy is we 0:14:42.080 --> 0:14:44.960 brief in the morning at eight or nine am. Damien 0:14:45.120 --> 0:14:50.480 sasor of Bloomberg Intelligence on em with Steven Angler. Damien 0:14:50.640 --> 0:14:53.400 a question this morning for doctor Englander. 0:14:53.760 --> 0:14:55.720 So, doctor Englander, do you remember when we were on 0:14:55.720 --> 0:14:57.960 that panel with the Chinese at the Harvard Club a 0:14:57.960 --> 0:15:00.440 few years back, and we were you know, everything I'm 0:15:00.440 --> 0:15:02.600 seeing here with the en flags China yuon for me 0:15:02.720 --> 0:15:06.280 flags other low yielders, and the competition for funding currencies 0:15:06.320 --> 0:15:08.400 that's going on amidst the morass here. I mean, I 0:15:08.440 --> 0:15:11.880 think for me anyway, it was kind of implicit that 0:15:12.080 --> 0:15:15.080 the dollar and Japanese en were one currency block. Now 0:15:15.080 --> 0:15:18.640 that that's a little bit more explicit. What is yen strength? 0:15:18.800 --> 0:15:21.400 How does that weigh on other low yielding emerging market 0:15:21.560 --> 0:15:23.040 develop market currencies out there? 0:15:23.360 --> 0:15:26.200 Well, I think that that's just you know, secondary hope 0:15:26.240 --> 0:15:29.320 from the Treasury that, apart from sort of helping keep 0:15:29.440 --> 0:15:33.400 US yields down, that if the yen strengthens, it will 0:15:33.440 --> 0:15:36.200 spill over into other Asian currencies. You know, if you're 0:15:36.200 --> 0:15:39.360 a Korea or Taiwan or Thailand, it's hard for your 0:15:39.360 --> 0:15:41.560 currency to go up when the end is going down, 0:15:41.600 --> 0:15:43.960 that's right, And you know they're hoping that this will 0:15:44.480 --> 0:15:46.600 sort of lever everybody else down. 0:15:46.680 --> 0:15:49.200 Yeah, but the yuon is is at an all time 0:15:49.280 --> 0:15:51.000 not an all time It's had a cycle high here, 0:15:51.040 --> 0:15:53.480 so it's kind of that outlier. But then again, Chinese 0:15:53.520 --> 0:15:55.680 yields are lower than that of Japan right now. So 0:15:56.080 --> 0:15:58.280 you know, how do you think the PBOC, how will 0:15:58.320 --> 0:16:02.240 Beijing react to this sort of explicit sort of backing 0:16:02.720 --> 0:16:07.240 of the Japanese. 0:16:05.840 --> 0:16:08.320 We can't even tie your shoelaces. Just see how he 0:16:08.440 --> 0:16:11.960 does so on JP Y, c N Y, what do 0:16:12.000 --> 0:16:12.360 you do? 0:16:13.760 --> 0:16:17.920 You know, I think that they're very different. Structural situations 0:16:17.960 --> 0:16:22.520 like these want is strong, They have this enormous trade surplus, 0:16:23.600 --> 0:16:26.480 very insensitive to the strength of of CNY. 0:16:26.640 --> 0:16:29.560 Governments that are very willing to act and intervene. Both 0:16:29.600 --> 0:16:31.680 of them are similar in that respect, Steven. 0:16:31.840 --> 0:16:34.720 And you know, you know, you can think of the 0:16:34.720 --> 0:16:37.760 government of Japan and many other finance ministers is having 0:16:37.840 --> 0:16:39.640 this illusion that all you got to do is get 0:16:39.680 --> 0:16:42.960 your currency weaker and you're going to have an export boom. 0:16:43.000 --> 0:16:45.440 And it hasn't happened, right, And so I think that 0:16:45.480 --> 0:16:47.880 what you're seeing are different, very different. 0:16:48.080 --> 0:16:50.760 From a risk management and an investor standpoint, it's very 0:16:50.760 --> 0:16:53.040 difficult to bet one way or the other in those 0:16:53.080 --> 0:16:55.400 two currencies, even though they're low yielders, and you know, 0:16:55.520 --> 0:16:58.480 everybody wants to fund in them because of that threat 0:16:58.560 --> 0:17:01.800 that officials will inter mean and prop up or bring 0:17:01.840 --> 0:17:02.840 down the currency level. 0:17:02.920 --> 0:17:03.120 Right. 0:17:03.720 --> 0:17:05.520 You know, I think the Chinese have a lot more 0:17:05.520 --> 0:17:08.800 credibility because they're interesting. How some payments is so strong. 0:17:09.119 --> 0:17:11.840 Did Stephen your davy what you're getting there, folks? For 0:17:11.880 --> 0:17:16.240 those immortals out there that didn't nail differential equations, you're 0:17:16.280 --> 0:17:20.159 getting a window there into how the adults talk about this. 0:17:20.280 --> 0:17:23.960 We're trying to do that on surveillance. Nothing cursory. This 0:17:24.040 --> 0:17:26.479 is a huge deal on the other side of the world. 0:17:26.760 --> 0:17:30.000 Stephen Angler under the chance Standard Charter Bank, and Damien 0:17:30.119 --> 0:17:33.120 Sassar of Bloomberg Intelligence with Paul Sweeney. 0:17:33.480 --> 0:17:36.879 So, Steve, I mean, boy, before this intervention, we were 0:17:36.920 --> 0:17:38.800 once sixty four. We were all on a one sixty 0:17:38.880 --> 0:17:41.760 five watch. Why don't we head back there? I mean 0:17:42.720 --> 0:17:44.200 it kind of goes back to my first question. I mean, 0:17:44.560 --> 0:17:46.800 it seems like this intervention is short term at best. 0:17:47.600 --> 0:17:51.199 That's true, but if you've ever had the experience of 0:17:51.280 --> 0:17:54.280 losing money short term, it's not a very pleasant one. 0:17:54.480 --> 0:17:57.720 So you know, like you know people who you know, professional. 0:17:57.200 --> 0:18:01.399 Traders, people who do this, you know they're going to 0:18:01.440 --> 0:18:05.040 be wary. The one thing you do see is that 0:18:05.160 --> 0:18:09.760 the you know, in the options market, the premium for buying. 0:18:09.440 --> 0:18:14.480 The negative skill way up where that's gotten way down, 0:18:14.960 --> 0:18:18.760 So it could be that people will start selling yen. 0:18:18.720 --> 0:18:21.560 Upside or then by buying dollar yen upside. 0:18:21.760 --> 0:18:24.600 Typically the US, I mean, how committed are they to 0:18:25.200 --> 0:18:28.439 Japan and their efforts to try to strengthen her care? 0:18:28.480 --> 0:18:30.480 I mean, what do we know about the US role here? 0:18:31.840 --> 0:18:33.280 You know, you haven't think that was a grain of 0:18:33.320 --> 0:18:36.400 salt when the US a year ago was talking about 0:18:36.400 --> 0:18:41.000 slapping nineteen twenty nine fifty nine percent, you know, that 0:18:41.000 --> 0:18:44.080 didn't seem like a very friendly US view of Japan. 0:18:45.200 --> 0:18:48.720 You know, I think that the you know, they do 0:18:48.800 --> 0:18:49.639 have interests, and. 0:18:49.720 --> 0:18:52.680 That we were just foreign participation in US Treasury auctions. 0:18:52.680 --> 0:18:54.080 For me, that's what this comes down to. And I 0:18:54.119 --> 0:18:55.760 don't know, Stephen, if you have an opinion on that, 0:18:55.800 --> 0:18:57.480 But for me, the reason the White House I think 0:18:57.520 --> 0:19:00.880 became so explicit here is because they're looking at they're 0:19:00.920 --> 0:19:02.280 gonna have to place a lot of paper in the 0:19:02.280 --> 0:19:04.040 next few if I'm not mistaken, right, We've got some 0:19:04.080 --> 0:19:06.480 auctions coming up, and you know, the foreign bid for 0:19:06.560 --> 0:19:09.000 a lot of our paper has it's been like it 0:19:09.160 --> 0:19:09.879 that's critical and. 0:19:09.920 --> 0:19:13.320 Was standard Charter Bank Third World to Damien's point. Do 0:19:13.400 --> 0:19:17.320 you see the mom and pop Japan or even industrial 0:19:17.400 --> 0:19:19.760 Japan pulling away from full face. 0:19:20.520 --> 0:19:21.040 Where they are? 0:19:21.119 --> 0:19:23.840 Yeah, I don't think that they're gonna pull away from 0:19:23.880 --> 0:19:26.439 the States. I mean especially you know, we expect yields 0:19:26.440 --> 0:19:28.359 to continue to go up and it's going to be 0:19:28.400 --> 0:19:29.480 attractive to the rest of the world. 0:19:29.480 --> 0:19:30.399 Okay, well, let's discuss that. 0:19:30.480 --> 0:19:33.920 Because it's non leader Damien help us out here as well. Okay, 0:19:34.080 --> 0:19:36.240 I'm going to say, is a general statement where two 0:19:36.280 --> 0:19:40.760 point seven zero percent Japanese yield worse than umpteen decades 0:19:40.800 --> 0:19:43.040 going back to you know whatever, the Ming dynasty. I 0:19:43.080 --> 0:19:49.080 can't remember where nonlinearly does that relationship break price down 0:19:49.359 --> 0:19:53.680 Japan yield up. It's a smooth curve until it isn't. 0:19:53.960 --> 0:19:57.200 How close are we to some form of jump condition 0:19:57.680 --> 0:19:58.800 in Japanese yields. 0:20:00.040 --> 0:20:03.160 I'm the most critical of Japan, but I don't think 0:20:03.160 --> 0:20:05.640 we're that close. I mean, they, you know, the their 0:20:05.680 --> 0:20:08.920 death is very long term. They've been very careful in 0:20:09.400 --> 0:20:12.040 how they've placed it. I think that there may be 0:20:12.080 --> 0:20:14.240 gradual pressure. I don't think that there's going to be 0:20:14.400 --> 0:20:15.720 a cute immediate pressure. 0:20:16.080 --> 0:20:18.040 Yeah, I mean, I think the TIC data shows a 0:20:18.040 --> 0:20:20.760 little bit of stealth repatriation. Again, it's backward looking, right, 0:20:20.800 --> 0:20:22.359 I mean, we're for a few months in a years when. 0:20:22.240 --> 0:20:23.480