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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

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Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business App.

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Speaker 1: Listen on demand wherever you get your podcasts, or watch

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Speaker 1: us live on YouTube.

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Speaker 2: Costs Hunter with us EIU right now, if you really

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Speaker 2: get started on the FED deicides, we'll do it at

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Speaker 2: one thirty. I'm gonna cut to the chase. There's actual growth,

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Speaker 2: real GDP. You'll overlay that with inflation, and that's the present.

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Speaker 2: The current nominal GDP. The British say money GDP, which

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Speaker 2: is even more confusing. I have two stories for Jerome Powell.

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Speaker 2: I have nominal GDP which is China like five point

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Speaker 2: four percent, six percent? Dare I say seven percent? And

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Speaker 2: I got a profession saying no, that's not true. Which

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Speaker 2: is it for Jerome Powell to save to do?

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Speaker 3: So?

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Speaker 4: Yeah, the Atlanta FED tracker certainly gave a boost to

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Speaker 4: what the GDP could come in at. And we think

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Speaker 4: that that the inherent problems with trackers is that they

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Speaker 4: don't adjust for what is coming. It's it's completely backward looking.

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Speaker 4: It's a great tool, but five percent seems a little rich. Now,

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Speaker 4: with that said, we had been looking for a softer

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Speaker 4: growth pace for the fourth quarter, something a little under

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Speaker 4: one percent, and we may need to end up revising

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Speaker 4: that so higher.

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Speaker 5: So revise higher. What do you think that FED should

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Speaker 5: do today? The market's saying it's going to hold.

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Speaker 6: What do you think they should do?

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Speaker 5: What do you think they should communicate to the market.

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Speaker 4: Yeah, so I think everybody sort of agrees that they

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Speaker 4: need to hold here, and I think what they need

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Speaker 4: to communicate to the market is that they need to

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Speaker 4: watch and wait and see how durable the price increase

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Speaker 4: is from tariffs are going to be. I think it

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Speaker 4: is widely acknowledged that those pricing increases have not been

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Speaker 4: put through. Firms held off passing those price increases through

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Speaker 4: for a myriad of reasons. Everybody is familiar with one.

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Speaker 4: We don't know if the tariffs are going to stay

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Speaker 4: in place. IEPA could be overturned. Two tariffs have become

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Speaker 4: increasingly unpopular, So if the IEPA tariffs are overturned, it

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Speaker 4: is unclear that the administration would even try to replace

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Speaker 4: them fully through other mechanisms. So those are good reasons

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Speaker 4: firms are holding back. However, we also know that households

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Speaker 4: are going to be getting big tax refunds in the

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Speaker 4: first quarter and in a bit in the second quarter.

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Speaker 4: If you were a firm that hadn't yet pressed on

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Speaker 4: prices and we're waiting to do so, this would be

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Speaker 4: a great time to do it when households have a

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Speaker 4: little more cash.

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Speaker 2: My theme today is a Sanata snooze fest. John and

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Speaker 2: I came up with it years ago and hilarious back

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Speaker 2: and forth with Frankfort and the ECB. To me, there's

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Speaker 2: almost a frenzy witness yesterday noon. As you mentioned, you

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Speaker 2: got tariff uncertainty. We've got a president who day to

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Speaker 2: day tweet to tweet. We're not sure how bad he's

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Speaker 2: going to go after Korea. I got gold doing what

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Speaker 2: it's doing. I got foreign exchange screaming at me on

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Speaker 2: week dollar as well. For Jerome Paul today, is that

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Speaker 2: backdrop of frenzy anything or does he just ignore it? Well,

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Speaker 2: how can he ignore it?

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Speaker 4: He can't. And I think your week dollar point is

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Speaker 4: exceptionally relevant, right because if we see the week dollar

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Speaker 4: continue through the rest of the year, we're going to

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Speaker 4: have passed through in terms of inflation. From a week

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Speaker 4: or dollar less than other countries because so much gets

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Speaker 4: transacted in dollars.

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Speaker 7: But that is a risk.

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Speaker 4: And then of course there's that concurrent risk that as

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Speaker 4: people spend more on tariffs, what they do is they

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Speaker 4: stop consuming other goods, right, And so it's a dead

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Speaker 4: weight loss, as economists like to say, and it could

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Speaker 4: end up slowing the economy. And that's why the EIU

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Speaker 4: and many other forecasters think that there will like B

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Speaker 4: two cuts in the second half of the year when

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Speaker 4: we've seen some of that pass through from tariffs come along.

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Speaker 2: Boy of the triangle here that it's Mundel way back

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Speaker 2: at Columbia. But the answer is, I'm looking at just

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Speaker 2: what Constance Hunter said, which is the GDP rate of

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Speaker 2: change into Q three and Q four, Right, huge uncertainty.

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Speaker 5: When's the price going to select the FED chair? And

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Speaker 5: do we really care that much? Where are we on

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Speaker 5: that process? Who do you think who do you think

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Speaker 5: he should pick and will pick and all that kind

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Speaker 5: of stuff.

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Speaker 4: Well, I mean in the reality show, right, they want

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Speaker 4: to keep us on the edge of our seats, so

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Speaker 4: they don't want us to be able to game that

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Speaker 4: otherwise we won't keep watching. So I can't say exactly

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Speaker 4: when I think he has to do it before the

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Speaker 4: end of March. And of course we have Senator Tillis

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Speaker 4: who's come out and said, I am not going to

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Speaker 4: put through any I'm not going to keep I'm not

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Speaker 4: going to put through any nominations until you have resolved

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Speaker 4: the issue with Lisa Cook. Right so, but look, everybody

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Speaker 4: is talking about Rick Reader and then I heard it

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Speaker 4: reported on Bloomberg News this morning that he has given

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Speaker 4: some donations to Democrats, to other Republicans Nikki Haley. I

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Speaker 4: don't know if that disqualifies him in the President's.

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Speaker 2: Canting we keep up conscience is more up to speak

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Speaker 2: than I am. Constance under with us, Stay with us,

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Speaker 2: concert with EIU. This morning, futures up fourteen nasty x

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Speaker 2: solid up eight tens of a percent, the vics for

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Speaker 2: actually sixteen point four to you today. We're watching gold Wow, Paul,

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Speaker 2: Wow Wow Wow. Fifty three hundred announced five three upstree

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Speaker 2: point seven percent on the currency complex. The Constance and

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Speaker 2: I are looking at here are the handles one fifty

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Speaker 2: three on yen yuro a one twenty rounded up one twenty.

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Speaker 2: They're sterling a one thirty eight constants under EIU as well.

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Speaker 2: So we got basically two stories here, and I don't

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Speaker 2: fault the FED for this. We've got a booming America

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Speaker 2: ASML over the Netherlands beyond boom, i got a consumer

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Speaker 2: flat on my back. Okay, why equill C plus I

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Speaker 2: plus G plus NX tell us about the consumer right now?

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Speaker 4: Well, if we look at the third quarter, the consumer

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Speaker 4: was exceptionally strong, right and as I mentioned, we are

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Speaker 4: going to be getting these tax refunds in the first

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Speaker 4: and second show.

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Speaker 2: So domestic private sales still say ample, solid decass.

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Speaker 4: I think we're I think we're well within potential GDP

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Speaker 4: range on consumption, certainly in the first half of the year.

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Speaker 4: I think the issue is what we saw album pointing to,

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Speaker 4: which is that the corollary to higher goal is higher

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Speaker 4: ten year prices ten year yields. And if the goal

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Speaker 4: of the FED, and we'll go back to Rick reader

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Speaker 4: who has talked a lot about housing affordability, the mortgage price.

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Speaker 4: How the tricky thing for anyone who becomes FED share

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Speaker 4: and for the FOMC overall, is how do you lower

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Speaker 4: short term range and ensure that you don't have a

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Speaker 4: rise in long term rates? Amid all of the noise

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Speaker 4: that is swirling around in the term premia that is elevated.

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Speaker 2: Paul for six and the thirty year by fourteen beeps away?

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Speaker 2: Are you and I on a five percent? I guess

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Speaker 2: we need to be given dollar dynamics.

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Speaker 5: So inflation still out there. If you talk to people

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Speaker 5: on the street, that's the game, that's the story. And

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Speaker 5: even President Trump is now, I guess, really leaning into

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Speaker 5: this affordability issue, which really became really came to the

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Speaker 5: four with some of the elections in New Jersey and

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Speaker 5: in Virginia. The candidates ran and won on the affordability issue.

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Speaker 6: What is the inflation story out there?

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Speaker 4: Well, look, we're seeing elevated goods prices where goods prices

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Speaker 4: have been zero to slightly negative for quite some time,

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Speaker 4: because of course we have increased productivity in that sector

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Speaker 4: of the economy. We obviously have China exporting distant or

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Speaker 4: deflation to the rest of the world by their extraordinary

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Speaker 4: supply that they provide, and the tariffs upended that. So

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Speaker 4: something that was not contributing to higher inflation was actually

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Speaker 4: contributing to lower inflation has gone away. And then of

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Speaker 4: course services are hit with the labor shortage, and so

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Speaker 4: we have increased prices for services. But also a lot

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Speaker 4: of services use goods in providing their services. Right, if

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Speaker 4: you are a restaurant, it's a service, but you are

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Speaker 4: using goods, some of which are imported to provide your service.

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Speaker 4: So we are seeing sticky services prices as well. And

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Speaker 4: so I think for the FED, the trick is in

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Speaker 4: the sticky services prices. How sticky are they and how

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Speaker 4: long is that going to be back to price?

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Speaker 2: I mean your Holland Hoorst, you know he didn't get it.

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Speaker 2: Veronica Clerk wrote this, Yes, Gazelle Young is the one

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Speaker 2: who actually wrote this for Hollandhorst. Study group just publishes

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Speaker 2: and they may clear the unemployment factor is what we

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Speaker 2: should watch today within the medium, I have claims two

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Speaker 2: hundred thousand, two hundred and five thousand. I'm sorry, that's

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Speaker 2: a never cut rates ever again statistic. How do you

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Speaker 2: interpret that at EIU?

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Speaker 4: Yeah, I mean certainly the labor market is very tricky

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Speaker 4: right now, because it's agreed we are what is sustaining employment?

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Speaker 4: Is it twenty thousand a month? Some people are saying

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Speaker 4: it might be negative? Is it forty thousand a month?

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Speaker 4: And I don't think we're going to get clarity on

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Speaker 4: that right away. So you have to come up with

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Speaker 4: some sort of average there. Let's say between ten and

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Speaker 4: thirty thousand a month is going to be sustaining employee,

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Speaker 4: sustaining the unemployment rate, And then you have to look

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Speaker 4: at the mix of jobs. A lot has been made

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Speaker 4: of the fact that the sector that keeps adding jobs

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Speaker 4: is healthcare and social assistance. Now that makes sense because

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Speaker 4: we have an aging population. It also makes sense because

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Speaker 4: Americans purchase a lot of elective procedures, right And we

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Speaker 4: actually saw an increase in consumption of medical services in

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Speaker 4: the third quarter.

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Speaker 7: So I'm not sure.

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Speaker 4: That that is all bad, but it certainly tells you

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Speaker 4: you don't see growth in other areas of the economy.

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Speaker 5: So I guess just on the labor front here, is

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Speaker 5: it still just the base headline unemployment number that the

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Speaker 5: FED is Folks surrender. They try to really dig in

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Speaker 5: and see the components.

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Speaker 6: Do you think, Oh, I.

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Speaker 4: Think they dig in and see the components. I mean,

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Speaker 4: they have to look at unemployment. It's it's been a

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Speaker 4: good barometer because it's they're looking at employment in relation

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Speaker 4: to not just the growth rate. But how is that

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Speaker 4: going to impact inflation? Right? And so if people aren't

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Speaker 4: looking for work for whatever reason and they're not participating

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Speaker 4: in the labor force, that is something that the FED

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Speaker 4: needs to consider, which is why the unemployment rate is

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Speaker 4: such a critical factor and indicator for them to look

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Speaker 4: at it. It's really I would not want to be

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Speaker 4: in that job right now. It is very it's very

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Speaker 4: tricky to balance. You have extreme countervailing forces. I was

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Speaker 4: in Davos last week and my write up is juggling juxtaposition.

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Speaker 5: Right.

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Speaker 4: We have the juxtaposition of the extreme benefits and boom

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Speaker 4: boominess of AI and technology.

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Speaker 2: Did you write it at the Cloud Fair, piano, bar Did.

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Speaker 4: You write it on the I wrote it on the

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Speaker 4: plane home.

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Speaker 2: Yes, was Barry was singing Sweet Caroline, your Diamond and

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Speaker 2: you wrote it at the Cloud Fair?

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Speaker 4: You know, Thank you me, you caught me.

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Speaker 2: Thank you so much for the EU. Stay with us.

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Speaker 2: More from Bloomberg Surveillance coming up after this.

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Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live

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Speaker 1: weekday afternoons from seven to ten a m. Eastern Listen

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Speaker 1: on Applecarplay and Android Auto with the Bloomberg Business app

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Speaker 1: or watch us live on YouTube.

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Speaker 2: So I'm all cap m this morning, which is basically

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Speaker 2: there's a rate out there, but beta's like the stock

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Speaker 2: market movement, and there's a delta off expected returns. Stuart

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Speaker 2: Kais is going, Tom, I don't care, We're just bullish.

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Speaker 2: Is it just stimulus? Are people expecting out six months

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Speaker 2: at City Group and saying up, up and away in

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Speaker 2: our beautiful balloon? Yeah, I think one hundred percent time.

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Speaker 8: If I look back even to the fourth quarter of

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Speaker 8: last year, one of the reasons we expected cyclicals to

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Speaker 8: work to start twenty twenty six was the feedback we

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Speaker 8: were getting from clients about how much stimulus they expected

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Speaker 8: to kind of hit the economy in the front half

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Speaker 8: of this year, particularly via tax refunds, but just in general,

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Speaker 8: there's a very bullsh outlook for US economic growth front half.

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Speaker 2: Paul Sweden Julian Emmanuel with his note this morning, and

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Speaker 2: it's not fourteen percent? Are he's going right now? He's

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Speaker 2: modeling eight one to eight?

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Speaker 7: Yeah, eighteen?

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Speaker 2: I said, yeah, well, this is kidding some.

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Speaker 5: Margin improvement, that's for sure. Cyclicals. Is it a trade?

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Speaker 5: Is it a rotation that we should be really paying

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Speaker 5: attention to six twelve eighteen months out.

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Speaker 8: I think twelve to eighteen months out, you know, probably

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Speaker 8: probably a little too far. I think a lot of

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Speaker 8: folks are thinking about this as a first half trade

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Speaker 8: because you have the midterm elections and then potential inflationary

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Speaker 8: impact in the second half. That's not our house forew.

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Speaker 8: But that is a conversation folks are having. So I

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Speaker 8: think at least the front half of this year, which

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Speaker 8: probably means you want to sell in about April, right

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Speaker 8: if everybody else is prepared to sell it in June

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Speaker 8: or July. So, look, there is a sort of very

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Speaker 8: positive mole mentum in the US economy right now. I

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Speaker 8: know there's there's nits to pick on that, but if

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Speaker 8: you look at Atlanta GDP tracking, if you look at

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Speaker 8: what's going on with the unemployment rate, the economy looks

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Speaker 8: to be in good shape. And you throw on top

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Speaker 8: of that some some really strong tax refund data anticipated,

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Speaker 8: and that cyclical trade we think has some legs.

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Speaker 2: Here.

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Speaker 5: We're just this is the biggest busiest earnings week of

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Speaker 5: the quarter. Here, what are you and your analystis city

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Speaker 5: seeing and what do you expect to see?

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Speaker 2: Well?

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Speaker 8: I think what we're seeing in terms of price action

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Speaker 8: is that the tech stocks had kind of underperformed for

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Speaker 8: a bit of time to start the year, and you've

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Speaker 8: seen some early reports Gie Vernova for instance on the

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Speaker 8: AI side, are just reminding people about how powerful this

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Speaker 8: trend is. So I think what you've seen is if

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Speaker 8: you were a little bit underweight or a little skeptical

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Speaker 8: of these stocks to start the year, then you are

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Speaker 8: clearly don't want to go into these earnings reports, you know,

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Speaker 8: kind of positioned that way. So you know, people are bullish,

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Speaker 8: and I think they should be. The bar is obviously

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Speaker 8: very high for these earnings reports though, so you know,

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Speaker 8: if I remember correctly, I believe met it was off,

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Speaker 8: you know, over ten percent when they reported.

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Speaker 7: Back in October. So this is not without risk.

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Speaker 8: But I do think people were probably a little light

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Speaker 8: in the tech space coming into this week.

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Speaker 2: Well that's where I wanted to go. ASML in the

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Speaker 2: Netherlands a lithography read The Chip War The Chipward Chip

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Speaker 2: Miller Chris Miller. Chris Miller's Chip War is my book

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Speaker 2: of the year a couple of years ago. Absolutely fabulous.

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Speaker 2: ASML has a sixty two percent institutional ownership, like Apple

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Speaker 2: has and I looked at Kimberly Clark Boring with like

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Speaker 2: an eighty five ninety percent ownership as well. From where

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Speaker 2: you sit on the City Group desk, Stewart Kaiser, all

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Speaker 2: these fancy stocks were talking about are they basically under owned?

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Speaker 2: You know, it's a great question. It's it's be almost

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Speaker 2: impossible to own enough of them.

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Speaker 8: And just to give you a little feedback, like if

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Speaker 8: I'm up in Boston, for instance, a lot of these

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Speaker 8: benchmarks mutual fund investors are not used to having this

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Speaker 8: concentrated a portfolio, right because you're benchmark to the index

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Speaker 8: and now you're sitting with ten percent of your portfolio

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Speaker 8: so much does Will Danoff.

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Speaker 2: In fidelity have a different rule book than everybody else?

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Speaker 2: He just bought Meta, I believe held on to it.

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Speaker 8: Yeah, I mean, look, he's he obviously was comfortable with

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Speaker 8: that kind of concentration risk. But you know, I think

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Speaker 8: some portfolio managers and investors just don't like having all

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Speaker 8: of their kind of you know, portfolio tied up in

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Speaker 8: a very small number of stocks. So it has it

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Speaker 8: has been a challenge. You know, you didn't ask this question,

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Speaker 8: but in terms of retail, what we're seeing obviously they

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Speaker 8: love tech, but they've actually been quite evolved in the

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Speaker 8: industrial sector over the course of the early twenty twenty

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Speaker 8: six as they kind of warm up a little to

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Speaker 8: the power gen as well as aerospace and defense trade.

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Speaker 8: So so to your point, you know, tom are probably

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Speaker 8: some of these stocks that are so large as a

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Speaker 8: part of the benchmark that people don't want to be

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Speaker 8: too overweight them because it just feels uncomfortable.

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Speaker 6: Yep.

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Speaker 5: Absolutely, ASML up five percent today, a forty percent year

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Speaker 5: to date. The stock has doubled over the last twelve months.

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Speaker 5: Just another story. So again we're gonna get a lot

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Speaker 5: of tech earnings here. I can't see a world where

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Speaker 5: tech doesn't lead though. I mean, it just feels like

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Speaker 5: if tech is not working, the market might have a

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Speaker 5: hard time or have we moved out of that there's

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Speaker 5: the worry.

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Speaker 8: Well, at the bottom line is if you take max

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Speaker 8: seven and you add in Broadcom your quote unquote in

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Speaker 8: lead eight, that's forty percent of SMP five hundred market cap.

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Speaker 6: Wow, it is.

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Speaker 7: Hard for a market to work. The market cap makes

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Speaker 7: it working.

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Speaker 8: So to your point, yes, it's like a you need

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Speaker 8: the theme to work because everybody's invested in the theme,

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Speaker 8: but be just. I know it's too cold for math,

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Speaker 8: but if far out of your ten dollars is in

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Speaker 8: these stocks, you really need them to at least participate

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Speaker 8: or be flat.

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Speaker 2: Right? Is there a bet now expressed by margin or

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Speaker 2: heavy use options or futures? Is there a leveraged exuberance

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Speaker 2: going on right now? I think there is a little time.

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Speaker 8: If you look at like FINRA margin account balances, which

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Speaker 8: is monthly data, you know, the ratio of borrowing to

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Speaker 8: credit in those accounts for retail investors is three x

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Speaker 8: and is by far the highest we've seen in the

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Speaker 8: last twenty five or thirty years. That said, it is

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Speaker 8: actually a relatively small percent of market cap for the

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Speaker 8: S and P. So you're seeing people with leverage in

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Speaker 8: their accounts, but those accounts have barely kept up with

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Speaker 8: a market basically.

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Speaker 2: Huge earnings day today, Carol and Tim leading with coverage

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Speaker 2: this afternoon as well Apple tomorrow. The foreign exchange I

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Speaker 2: was up basically all night on Europe. I mean, just

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Speaker 2: extraordinary dynamics in foreign exchange. We're so advantaged of Stuart

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Speaker 2: Kaiser with the City Group, the President of the United States,

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Speaker 2: with all that's going on talking to Sleya about neo

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Speaker 2: mercantilist theory and the rest of it. Paul yep may

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Speaker 2: I quote it is same mindset that gave pro football

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Speaker 2: the new and unwatchable quote sissy unquote kickoff rule that

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Speaker 2: made it possible for Bill Belichick to not be elected

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Speaker 2: into the Pro Football Hall of Fame. Both are ridiculous

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Speaker 2: and should be overturned. Exclamation point. I can state without

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Speaker 2: exception there's never been a presidential tweet. I'm more agree

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Speaker 2: to that. Good morning, mister President. We hope you're listening

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Speaker 2: to Blowberg and you hope you'll listen to the Feddicizes

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Speaker 2: this afternoon. I mean, Stuart, there it is a president

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Speaker 2: locked in on Bill Belichick.

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Speaker 8: And honestly the worst part of this kickoff rule is

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Speaker 8: you don't even have to fare catch it anymore.

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Speaker 9: I don't know, they just let it balance it. It

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Speaker 9: gets forced in to catch the ball. Signed the control

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Speaker 9: room and explained it to me once and that was fortunate.

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Speaker 9: After the third Mateen, I don't get it as well.

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Speaker 2: So it's a bull market. Do you have a I mean,

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Speaker 2: I get you're doing more of a training thing, folks.

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Speaker 2: Stuart Kaiser's like the TV show industry. It's like, you know,

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Speaker 2: he is like the guy in John Snow in Game

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Speaker 2: of Thrones. He is the John Snow trading city group.

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Speaker 2: With that said, Stewart, do you have any vision passed

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Speaker 2: the fourth of July? You know not at this point.

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Speaker 8: Frankly, I would say a lot of people, as I

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Speaker 8: mentioned earlier, saying, hey, own cycleicles into the front half,

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Speaker 8: and then in the second half, I run into this

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Speaker 8: election risk and it gets a little bit concerning if

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Speaker 8: you believe that, though, what is the single best way

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Speaker 8: for the Republicans to defend the House is to have

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Speaker 8: the economy humming, and is to have these tax refundations

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Speaker 8: go through. So I think a lot of folks are

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Speaker 8: of the view that they are going to throw the

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Speaker 8: kitchen sink at this US economy in the front half

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Speaker 8: and try to get it moving.

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Speaker 7: And if you believe that, then you're.

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Speaker 8: Trading the second half now basically, okay.

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Speaker 2: Come back to us with wats of sidewalks outside. Yeah,

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Speaker 2: when I came in, it was a little bit, you know,

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Speaker 2: a little bit sporting.

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Speaker 5: Seems like a years past we got rid of this

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Speaker 5: snow a little quicker.

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Speaker 6: I'm not sure.

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Speaker 2: Well, We've never seen since I've been in New York City,

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Speaker 2: We've never seen cold like this.

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Speaker 6: Yeah, this is exactly, exactly exactly.

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Speaker 2: The rea of the country of this storm from New

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Speaker 2: Mexico all the way over here is like one hundred

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Speaker 2: and twenty one years.

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Speaker 6: Yeah, it's or so significant.

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Speaker 2: Grandpa Kaiser was trading off the city book despect then

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Speaker 2: ster Kaiser with Citigroup, Thank you so much. He's out

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Speaker 2: of us equity trading static. Stay with us. More from

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Speaker 2: Bloomberg Surveillance coming up after this.

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Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live

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00:20:32,040 --> 00:20:35,159
Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on

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Speaker 1: Apple Karplay and Android Otto with the Bloomberg Business app,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: We're going to slow down now, folks. Have I had

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Speaker 2: Jersey phone up here? Is wonderful and this is you

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Speaker 2: just flat out get lucky. We booked doctor Thinn for

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Speaker 2: a conversation on the FED and now the American economy,

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Speaker 2: but we're gonna rip all that up. Thank you Constance

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Speaker 2: Hunter for giving us wonderful perspective there, and we're going

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Speaker 2: to talk to doctor Thinn about all of his academics,

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Speaker 2: the privilege of working with Robert Mundell with Columbia and

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Speaker 2: with Georgetown as well, on what currency is saying to

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Speaker 2: President Trump. I went back and I looked at log

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Speaker 2: trade weighted, and I looked at the Plaza accord in

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Speaker 2: the eighties. Now is a shadow of the Plaza accord dynamics.

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Speaker 2: It's not a time for another Plaza accord, is it?

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Speaker 5: No?

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Speaker 7: No, it's not. It's a very different world right now.

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Speaker 10: Tom. First of all, I want to say thank you

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Speaker 10: for the coin words. It's really my honor to be

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Speaker 10: here with this great crew, always that coming on and

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Speaker 10: having a great discussion.

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Speaker 7: So thank you.

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Speaker 2: I want to talk. Let's set this up because Paul's

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Speaker 2: got a bunch of FX questions as well, probably more

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Speaker 2: saying than mine. Mundel at Columbia dragged us into the

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Speaker 2: modern era. Then Jacob Frenkel at Chicago, Rudy Dornbush up

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Speaker 2: at MIT on the rogue off and the rest. Under

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Speaker 2: Mundell when he talks about a three part dynamic, explain

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Speaker 2: that in the modern age right now for President Trump.

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Speaker 7: Sure.

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Speaker 10: First of all, you know, Professor Mundell was brilliant economists,

439
00:22:13,280 --> 00:22:16,320
Speaker 10: and I think any international economist should read his works today,

440
00:22:16,359 --> 00:22:18,719
Speaker 10: it's still to me groundbreaking.

441
00:22:18,760 --> 00:22:21,959
Speaker 7: He introduced the whole idea of capital flows before capital flows. Actually,

442
00:22:22,200 --> 00:22:23,680
Speaker 7: is Donald Trump aware.

443
00:22:23,359 --> 00:22:25,600
Speaker 2: Of the capitol flow risk when he says week dollar?

444
00:22:26,800 --> 00:22:28,240
Speaker 10: Well, right now, they're having this sort of in this

445
00:22:28,280 --> 00:22:30,480
Speaker 10: litt sweet spot where they're getting you know, they're getting

446
00:22:30,480 --> 00:22:33,680
Speaker 10: weekly dollars without the spillover into other markets. But you know,

447
00:22:33,760 --> 00:22:35,840
Speaker 10: we've seen time and time again and both developed and

448
00:22:35,840 --> 00:22:38,320
Speaker 10: emerging markets, you know the times when these moves get

449
00:22:38,400 --> 00:22:39,840
Speaker 10: very dis orderly and it's hard to get that genie

450
00:22:39,880 --> 00:22:43,120
Speaker 10: back in the bottle. So I'm sure mister Besstant, of course,

451
00:22:43,119 --> 00:22:46,800
Speaker 10: who who was there when they broke the pound back

452
00:22:46,800 --> 00:22:49,240
Speaker 10: in the organized is well aware of how capital flows

453
00:22:49,240 --> 00:22:52,920
Speaker 10: can can really impact markets. So so mister Model back

454
00:22:52,920 --> 00:22:55,240
Speaker 10: in the fifties and early sixties talked about capital flows

455
00:22:55,240 --> 00:22:58,359
Speaker 10: when really cross border capitols were not really in vogue,

456
00:22:58,359 --> 00:23:01,679
Speaker 10: They weren't really there. It was very much a home bias.

457
00:23:02,320 --> 00:23:05,080
Speaker 10: Americans invested in America, European's invest in Europe. But he

458
00:23:05,160 --> 00:23:09,560
Speaker 10: introduced this whole concept of the impossible trilema. I think

459
00:23:09,560 --> 00:23:11,560
Speaker 10: it is what you're referring to, where it's impossible to

460
00:23:11,560 --> 00:23:17,120
Speaker 10: have fixed exchange rates and maintain an independent monetary policy.

461
00:23:17,240 --> 00:23:17,880
Speaker 7: And you can't.

462
00:23:18,160 --> 00:23:20,240
Speaker 10: Something's got to give. We had Brankage, Pan had that

463
00:23:20,240 --> 00:23:22,919
Speaker 10: problem a couple of years ago. But again it's all

464
00:23:22,920 --> 00:23:26,800
Speaker 10: about the capitol flows. You know, daily turnovers at close

465
00:23:26,840 --> 00:23:29,840
Speaker 10: to ten trillion dollars, and that's all capital and not

466
00:23:30,359 --> 00:23:30,959
Speaker 10: trade flows.

467
00:23:31,080 --> 00:23:34,199
Speaker 2: Let's walk away from academics Paul Sweening with within within the.

468
00:23:34,200 --> 00:23:37,280
Speaker 5: Bank of NASA, what are some of the magna maybe

469
00:23:37,760 --> 00:23:41,920
Speaker 5: unsuspecting or unwanted ramifications of a week er dollar. Again,

470
00:23:41,920 --> 00:23:44,240
Speaker 5: we're seeing again ninety six handle on the d X

471
00:23:44,359 --> 00:23:45,040
Speaker 5: Y index.

472
00:23:45,119 --> 00:23:46,040
Speaker 6: We're at one hundred.

473
00:23:46,080 --> 00:23:49,640
Speaker 5: Just a cup of coffeego, as Tom would say, that's

474
00:23:49,640 --> 00:23:50,680
Speaker 5: what we look out for.

475
00:23:50,720 --> 00:23:51,000
Speaker 7: Sure.

476
00:23:51,320 --> 00:23:53,000
Speaker 10: You know when we talk about FX moves that we

477
00:23:53,080 --> 00:23:56,200
Speaker 10: I think the markets in their FicT always not only levels,

478
00:23:56,240 --> 00:23:58,280
Speaker 10: but also the pace. A lot of times the pace

479
00:23:58,400 --> 00:24:01,440
Speaker 10: is controlled and the level becomes not so important. But again,

480
00:24:01,520 --> 00:24:03,119
Speaker 10: as we've seen, the pace can all of a sudden,

481
00:24:03,240 --> 00:24:04,880
Speaker 10: you know, fall out of bed when when you least

482
00:24:04,880 --> 00:24:07,919
Speaker 10: expect it. So uh, you know, obviously, mister Trump is

483
00:24:07,920 --> 00:24:10,159
Speaker 10: talking about making experts competitive and that's been sort of

484
00:24:10,160 --> 00:24:14,359
Speaker 10: their mantra about getting manufacturing back on shore. But the

485
00:24:14,720 --> 00:24:17,639
Speaker 10: the the sort of the negative applications and repercussions. Obviously

486
00:24:17,720 --> 00:24:20,320
Speaker 10: imports become more expensive, so that becomes the inflation story

487
00:24:20,359 --> 00:24:23,200
Speaker 10: gets a little more messy. And again we talked about well,

488
00:24:23,480 --> 00:24:25,359
Speaker 10: if you're if you're a foreign hold of US treasuries

489
00:24:25,359 --> 00:24:27,520
Speaker 10: and you're getting say four percent on tenure, all of

490
00:24:27,560 --> 00:24:31,040
Speaker 10: a sudden the dolls depreciating one two three percent monthly,

491
00:24:31,080 --> 00:24:32,920
Speaker 10: all of a sudden that that yield is wiped out,

492
00:24:33,200 --> 00:24:35,880
Speaker 10: and so you can start demanding a foreign investors start

493
00:24:35,920 --> 00:24:38,960
Speaker 10: demanding a higher yield. So that's to me that the

494
00:24:39,000 --> 00:24:41,800
Speaker 10: biggest channel that mister bestt really again should be well

495
00:24:41,840 --> 00:24:43,960
Speaker 10: aware of and should be very very careful where they tread.

496
00:24:44,080 --> 00:24:46,800
Speaker 5: Is there a level that you think, okay, we're comfortable here,

497
00:24:47,200 --> 00:24:49,919
Speaker 5: but if we go below this area here, then we

498
00:24:50,000 --> 00:24:52,879
Speaker 5: start to get problematic, maybe in the treasury market, in

499
00:24:52,920 --> 00:24:54,159
Speaker 5: a refunding market, and any things like that.

500
00:24:54,240 --> 00:24:55,760
Speaker 7: Yeah, again, I say it's more of the pace.

501
00:24:56,400 --> 00:24:58,760
Speaker 10: It's been so far pretty containing exceft sort of the

502
00:24:58,800 --> 00:25:02,320
Speaker 10: tape Atangent back and in April Dogis Todd.

503
00:25:02,480 --> 00:25:04,200
Speaker 7: It's been pretty pretty contentile.

504
00:25:04,359 --> 00:25:06,199
Speaker 10: But I get the sense it's it's something you know,

505
00:25:06,240 --> 00:25:08,560
Speaker 10: it's something. The one that I'll just point out, the

506
00:25:08,560 --> 00:25:10,520
Speaker 10: FX market is generally like sort of the leading indicates

507
00:25:10,600 --> 00:25:13,440
Speaker 10: the asset that really sort of that markets look to

508
00:25:13,440 --> 00:25:14,800
Speaker 10: you to sort of get hey, you know, thumbs up,

509
00:25:14,800 --> 00:25:16,240
Speaker 10: thumbs down on what a country's doing.

510
00:25:16,280 --> 00:25:17,320
Speaker 7: So this is what's keeping an eye on.

511
00:25:17,359 --> 00:25:19,200
Speaker 2: Oh come on, we saw a jump conditioning. Yes today

512
00:25:19,200 --> 00:25:21,280
Speaker 2: win thin where the Swolks the Vancum down so thrilled

513
00:25:21,320 --> 00:25:23,960
Speaker 2: to heaven with this Irish Jersey scheduled to be as well.

514
00:25:24,000 --> 00:25:27,000
Speaker 2: That's a killer, killer half hour for Global Wall Street

515
00:25:27,000 --> 00:25:31,160
Speaker 2: Good Morning Worldwide on YouTube. Subscribe to Bloomberg Podcasts. That's

516
00:25:31,200 --> 00:25:35,959
Speaker 2: the way Alexis Christophers listens to us each and every morning,

517
00:25:36,240 --> 00:25:38,760
Speaker 2: Doctors tinn. I want to talk then about Paul's really

518
00:25:38,800 --> 00:25:43,000
Speaker 2: wonderful questions about level. I'm looking at Swiss Frank, which

519
00:25:43,040 --> 00:25:46,360
Speaker 2: is basically the new gold standard, and I'm sorry it's

520
00:25:46,359 --> 00:25:50,600
Speaker 2: on a log basis confexts. There's an accelerative tendency now

521
00:25:50,920 --> 00:25:53,720
Speaker 2: to the Swiss Frank where Donald Trump is telling the

522
00:25:53,760 --> 00:25:56,440
Speaker 2: Swiss you got to go to negative interest rates, you

523
00:25:56,520 --> 00:25:58,520
Speaker 2: got to change the way you're doing blowing. They're not

524
00:25:58,560 --> 00:26:00,480
Speaker 2: going to do it. They've been doing this since the

525
00:26:00,520 --> 00:26:05,919
Speaker 2: fifteen hundreds. How does Switzerland react to Donald Trump's neo mercantilism.

526
00:26:06,200 --> 00:26:09,240
Speaker 10: Well, it's well, first of all, I think they're they're

527
00:26:09,280 --> 00:26:10,800
Speaker 10: sort scratching has because I think they were hit with

528
00:26:10,840 --> 00:26:14,920
Speaker 10: something like forty percent tariffs early this year and a

529
00:26:15,000 --> 00:26:17,880
Speaker 10: top thist're getting the strong currency, so it's.

530
00:26:18,240 --> 00:26:19,840
Speaker 7: It's tough to be a small, open economy.

531
00:26:19,840 --> 00:26:21,879
Speaker 10: I think mister Karney hit the nail on the head

532
00:26:22,640 --> 00:26:24,760
Speaker 10: when he talked about at Davos. He talked about the

533
00:26:24,840 --> 00:26:26,680
Speaker 10: you know, the great powers are sort of imposing the

534
00:26:26,760 --> 00:26:28,640
Speaker 10: will and sort of the middle powers.

535
00:26:29,119 --> 00:26:31,280
Speaker 7: Okay, what do you banning together?

536
00:26:31,400 --> 00:26:34,600
Speaker 2: Then to go to Mark Kearney, Good morning to Canada

537
00:26:34,720 --> 00:26:38,560
Speaker 2: and he spoke about a variable geometry. What's the new

538
00:26:38,640 --> 00:26:42,400
Speaker 2: geometry for you? Of what all this fancy foreign exchange

539
00:26:42,440 --> 00:26:46,400
Speaker 2: talk means to our listeners interviewers.

540
00:26:45,800 --> 00:26:50,000
Speaker 7: Well, I think you'll see more alliances being built.

541
00:26:50,000 --> 00:26:51,879
Speaker 10: I think this is what mister Carney got sort of

542
00:26:51,920 --> 00:26:54,440
Speaker 10: came to the point alliance were built on certain interests.

543
00:26:54,440 --> 00:26:58,119
Speaker 10: You might have an allignes with one country on certain topic,

544
00:26:58,160 --> 00:26:59,840
Speaker 10: but with another on the other it's and it's sort

545
00:26:59,880 --> 00:27:02,560
Speaker 10: of the middle countries, the Middle powers realize that they

546
00:27:02,600 --> 00:27:04,760
Speaker 10: are sort of caught in this big wave of this

547
00:27:04,920 --> 00:27:06,640
Speaker 10: conflict between the superpowers.

548
00:27:06,640 --> 00:27:08,240
Speaker 7: But the belief is.

549
00:27:08,160 --> 00:27:10,280
Speaker 10: That by banging together they can kind of carve their

550
00:27:10,320 --> 00:27:14,000
Speaker 10: own way and maximize their welfare. And realizing that the

551
00:27:14,040 --> 00:27:16,840
Speaker 10: old orders is gone. I think it's Carnie said, you know,

552
00:27:16,920 --> 00:27:19,680
Speaker 10: nostalogia is not a strategy. These old the old ways

553
00:27:19,760 --> 00:27:21,920
Speaker 10: not coming back. We're in a new world order, new

554
00:27:21,960 --> 00:27:22,480
Speaker 10: world order.

555
00:27:22,480 --> 00:27:26,000
Speaker 5: But it just feels like we've spent sixty seventy eighty

556
00:27:26,080 --> 00:27:30,320
Speaker 5: years building up this global economy.

557
00:27:30,640 --> 00:27:32,080
Speaker 6: How do you turn that back? How do you turned

558
00:27:32,080 --> 00:27:32,680
Speaker 6: the dial back?

559
00:27:32,800 --> 00:27:35,399
Speaker 10: Yeah, so you know, a lot of these things they

560
00:27:35,560 --> 00:27:37,520
Speaker 10: changed over time, right, we talked, we know, we talk

561
00:27:37,600 --> 00:27:39,879
Speaker 10: for hours about the dollar's role as a reserve currens

562
00:27:39,920 --> 00:27:42,200
Speaker 10: that erodes over time. It's not gonna happen overnight people

563
00:27:42,200 --> 00:27:43,760
Speaker 10: are going to go out and dump treasuries and comp

564
00:27:43,800 --> 00:27:46,080
Speaker 10: the dollar. But you can kind of see things happen.

565
00:27:47,560 --> 00:27:50,040
Speaker 10: I think they've been building in the last maybe ten

566
00:27:50,080 --> 00:27:51,720
Speaker 10: to fifteen years. They have an inklings of of the

567
00:27:51,760 --> 00:27:53,680
Speaker 10: shift in the world order. We had China sort of

568
00:27:53,720 --> 00:27:56,480
Speaker 10: research itself on the global stage, rushes over there in Europe,

569
00:27:56,760 --> 00:27:59,679
Speaker 10: so We've seen some cracks, but you know, it's it

570
00:27:59,720 --> 00:28:02,000
Speaker 10: feels like more of eruption. I was again, I'm stealing

571
00:28:02,040 --> 00:28:05,000
Speaker 10: mister Corney's words, but he said it very succinctly and eloquently.

572
00:28:05,280 --> 00:28:09,040
Speaker 2: James Baker in everyone, do you put a bike in

573
00:28:09,080 --> 00:28:12,480
Speaker 2: front of him? We believe in a strong dollar policy.

574
00:28:13,040 --> 00:28:17,199
Speaker 2: Do you look at President Trump's neo mercantilism is a

575
00:28:17,280 --> 00:28:21,040
Speaker 2: one off? Or is there permanence here to a new

576
00:28:21,080 --> 00:28:25,360
Speaker 2: mercantil America that gets us to one thirty euro one

577
00:28:26,040 --> 00:28:30,000
Speaker 2: yen buries the Southern Asia that you are expert on

578
00:28:30,800 --> 00:28:32,920
Speaker 2: with thin What does it do to m who knows?

579
00:28:32,960 --> 00:28:36,639
Speaker 2: I'll ask Damien, But is this a one off moment?

580
00:28:36,960 --> 00:28:40,560
Speaker 2: Or is there permanence to our neo americantilism?

581
00:28:41,520 --> 00:28:41,800
Speaker 6: Tom.

582
00:28:42,040 --> 00:28:44,440
Speaker 10: It's it's sorely to say, obviously, but my gut feelings

583
00:28:44,640 --> 00:28:46,520
Speaker 10: this is from for now one off.

584
00:28:46,800 --> 00:28:47,200
Speaker 7: I'm coming.

585
00:28:47,240 --> 00:28:51,320
Speaker 10: I've been working in FXIT over thirty years, and if

586
00:28:51,320 --> 00:28:53,680
Speaker 10: you remember back in the early nineties, Trashy Secretary Lloyd

587
00:28:53,680 --> 00:28:56,000
Speaker 10: Benson used FX as a cudgel. That was when they're

588
00:28:56,000 --> 00:28:59,239
Speaker 10: trying to get Japan or to auto Mary. Did they

589
00:28:59,240 --> 00:29:01,920
Speaker 10: did get the Japanese to on shore, some of them.

590
00:29:01,960 --> 00:29:05,920
Speaker 10: The car production here, there's definitely some pros and constant anyway,

591
00:29:06,280 --> 00:29:09,880
Speaker 10: ever since Lloyd Benson was replaced by mister Bob Rubin,

592
00:29:09,920 --> 00:29:12,080
Speaker 10: it's been the mantras, A strong dollar is in the

593
00:29:12,120 --> 00:29:14,040
Speaker 10: best interest of the US and every.

594
00:29:13,880 --> 00:29:15,560
Speaker 2: Are we going to hear that from best? I gotta

595
00:29:15,560 --> 00:29:17,040
Speaker 2: go here, but watch this.

596
00:29:17,200 --> 00:29:17,800
Speaker 7: We have not heard that.

597
00:29:17,840 --> 00:29:19,640
Speaker 2: Are we going to hear this from Chairman Besson?

598
00:29:20,520 --> 00:29:21,320
Speaker 6: I don't think.

599
00:29:22,880 --> 00:29:26,120
Speaker 10: Every other every Church of secretary until now has been very,

600
00:29:26,800 --> 00:29:29,280
Speaker 10: very strong. So that's why I think, I don't you know,

601
00:29:29,320 --> 00:29:33,320
Speaker 10: this is so to me perhaps a bump and the hiccup.

602
00:29:33,400 --> 00:29:36,000
Speaker 7: Maybe I think it's it's I think.

603
00:29:35,840 --> 00:29:38,400
Speaker 10: That to me that what's confusing for our trade partners

604
00:29:38,400 --> 00:29:40,800
Speaker 10: is that we had such a change in policies so quickly.

605
00:29:40,880 --> 00:29:43,480
Speaker 2: Ira Jersey's handlers just said, you got to get iron here.

606
00:29:43,520 --> 00:29:47,480
Speaker 2: One quick question. Are Posen and or Ze correct that

607
00:29:47,560 --> 00:29:50,320
Speaker 2: we need to be aware of a resilient or even

608
00:29:50,400 --> 00:29:51,520
Speaker 2: lifting inflation?

609
00:29:52,840 --> 00:29:54,640
Speaker 7: That is the million dollar question. And I know that

610
00:29:54,680 --> 00:29:55,640
Speaker 7: the Fate is sitting out the.

611
00:29:55,640 --> 00:29:57,600
Speaker 10: Table right now debating that, and we know there's a

612
00:29:57,640 --> 00:30:02,160
Speaker 10: whole spectrum of views. Again, the tariffs are complicated thing.

613
00:30:02,200 --> 00:30:04,040
Speaker 10: Now the week dollars going to add to the mix.

614
00:30:04,600 --> 00:30:07,160
Speaker 10: There's so many to meet with drivers and cross coins.

615
00:30:07,520 --> 00:30:10,600
Speaker 10: My gut feelings and you're sticky. What's coming down?

616
00:30:10,680 --> 00:30:12,840
Speaker 2: Are we? If we're on for the Bank of NASA

617
00:30:13,560 --> 00:30:16,400
Speaker 2: the third week of March? Is it the first week

618
00:30:16,400 --> 00:30:18,840
Speaker 2: in March? It's up to Paul's schedule. Can we bring

619
00:30:18,880 --> 00:30:19,840
Speaker 2: Ira Jersey with us?

620
00:30:19,920 --> 00:30:20,480
Speaker 6: Absolutely?

621
00:30:20,520 --> 00:30:23,800
Speaker 10: Thank you, thanks greatly appreciate that hesitation Banking Nasaw.

622
00:30:23,800 --> 00:30:26,320
Speaker 2: This many folks that have such a privilege to have him,

623
00:30:26,320 --> 00:30:29,960
Speaker 2: with the academic heritage of American academics. I'm foreign age

624
00:30:30,400 --> 00:30:32,640
Speaker 2: ed to have doctor Finn of Columbia and Bank of

625
00:30:32,760 --> 00:30:35,440
Speaker 2: Nasaw where this is a real treat We go stronger now,

626
00:30:35,480 --> 00:30:38,840
Speaker 2: Ira Jersey joins us. We're looking into the FED meeting

627
00:30:38,880 --> 00:30:43,000
Speaker 2: this afternoon. Ira, what will your team publish into an

628
00:30:43,040 --> 00:30:46,719
Speaker 2: out of the FED meeting? What is the angle the

629
00:30:46,840 --> 00:30:47,960
Speaker 2: cast you're taking?

630
00:30:49,160 --> 00:30:51,800
Speaker 11: Yeah, it's this is not about this meeting, that's about

631
00:30:51,800 --> 00:30:54,200
Speaker 11: the next couple of meetings, and and you know it

632
00:30:54,320 --> 00:30:57,360
Speaker 11: winds up being a new cast of characters that that

633
00:30:57,400 --> 00:31:00,640
Speaker 11: are voting this time too. Remember Tom that in January

634
00:31:00,640 --> 00:31:04,320
Speaker 11: they always switch who the voters are and incrementally speaking,

635
00:31:04,480 --> 00:31:08,280
Speaker 11: we have slightly more hawkish members who are actually voters now,

636
00:31:08,680 --> 00:31:11,560
Speaker 11: so the chances of so the bars just a little

637
00:31:11,600 --> 00:31:14,440
Speaker 11: tiny bit higher for the federerserve to cut. That being said,

638
00:31:14,520 --> 00:31:17,440
Speaker 11: I think there is at least among the governors a

639
00:31:17,480 --> 00:31:21,280
Speaker 11: willingness to cut interest rates if the economy were to

640
00:31:21,720 --> 00:31:23,800
Speaker 11: worsen a little bit, particularly the labor market. Right, So,

641
00:31:24,360 --> 00:31:26,160
Speaker 11: all of the labor market data we get over the

642
00:31:26,200 --> 00:31:28,400
Speaker 11: next couple of months before the March meeting will be

643
00:31:28,480 --> 00:31:30,440
Speaker 11: key to what Actioned might take.

644
00:31:30,480 --> 00:31:35,200
Speaker 2: That are inflation adjusted rates in the many spreads, are

645
00:31:35,240 --> 00:31:38,040
Speaker 2: they indicating a new resilient inflation vet.

646
00:31:39,640 --> 00:31:42,520
Speaker 11: No, Actually, if you look at inflation break evens, you

647
00:31:42,560 --> 00:31:47,680
Speaker 11: look at either swaps based on CPI or just the

648
00:31:48,000 --> 00:31:51,440
Speaker 11: Treasury inflation protected securities market, all of those are saying that,

649
00:31:51,520 --> 00:31:53,840
Speaker 11: you know, they think over the medium and longer term,

650
00:31:54,320 --> 00:31:56,480
Speaker 11: inflation is going to just, you know, kind of hover

651
00:31:56,600 --> 00:31:58,440
Speaker 11: a little bit above two percent two and a half

652
00:31:58,480 --> 00:32:02,160
Speaker 11: percentage in term of CPI, And what that means is

653
00:32:02,200 --> 00:32:06,240
Speaker 11: generally speaking, the core PC deflator and even the headline

654
00:32:06,240 --> 00:32:10,800
Speaker 11: PC deflator, which is the Fed's preferred measure of inflation,

655
00:32:11,080 --> 00:32:13,480
Speaker 11: that tends to be twenty five to fifty basis points

656
00:32:13,520 --> 00:32:17,760
Speaker 11: lower than CPI. So if the market is correct, you

657
00:32:17,800 --> 00:32:21,120
Speaker 11: could actually see even more interest rate cuts this year.

658
00:32:21,280 --> 00:32:23,600
Speaker 11: And this is something we published a couple of weeks ago,

659
00:32:23,680 --> 00:32:28,560
Speaker 11: noting that the inflation the inflation market is currently saying, hey,

660
00:32:28,600 --> 00:32:31,880
Speaker 11: we could have sub two percent CPI prints year on

661
00:32:32,000 --> 00:32:34,720
Speaker 11: year in the year's time, and that suggests to us

662
00:32:34,760 --> 00:32:37,280
Speaker 11: that maybe the Federal Reserve would be more than happy

663
00:32:37,320 --> 00:32:39,560
Speaker 11: to cut another you know, seventy five two one hundred

664
00:32:39,560 --> 00:32:40,240
Speaker 11: basis points.

665
00:32:41,040 --> 00:32:43,200
Speaker 5: I remember were just talking with doctor Winton about the

666
00:32:43,800 --> 00:32:49,440
Speaker 5: weak US dollar. Historically, house it Fed dealt with changes

667
00:32:49,480 --> 00:32:52,120
Speaker 5: in the dollars as it thinks about its policy.

668
00:32:53,080 --> 00:32:55,720
Speaker 11: So the Fed chair will always tell you during its

669
00:32:55,720 --> 00:32:57,560
Speaker 11: semi annual you know, I used to call it Humphrey

670
00:32:57,600 --> 00:33:00,160
Speaker 11: Hawkins with the semi annual Monetary Policy testimony, that the

671
00:33:00,240 --> 00:33:02,920
Speaker 11: dollar is the purview of the Treasury Department. And and

672
00:33:02,960 --> 00:33:06,520
Speaker 11: while that's correct, the Federal Reserve, in its deliberations and

673
00:33:06,560 --> 00:33:09,960
Speaker 11: as it thinks about how the dollar might affect inflation,

674
00:33:10,960 --> 00:33:13,840
Speaker 11: you know, that will affect the path of monetary policy.

675
00:33:13,880 --> 00:33:16,840
Speaker 11: I mean, ironically, you know, a weeker dollar usually means

676
00:33:16,960 --> 00:33:20,880
Speaker 11: higher price in dollar terms of imported goods. But at

677
00:33:20,880 --> 00:33:24,560
Speaker 11: the same time we're there is some margin pressure I

678
00:33:24,560 --> 00:33:27,000
Speaker 11: think that will be brought on by this by this

679
00:33:27,040 --> 00:33:29,120
Speaker 11: week or dollar where people aren't going to want to

680
00:33:29,480 --> 00:33:33,440
Speaker 11: raise their prices as much as they they might want

681
00:33:33,480 --> 00:33:36,400
Speaker 11: to otherwise in this week or dollar environment, and it

682
00:33:36,440 --> 00:33:38,560
Speaker 11: will help the balance a trade. Right, So a weeker

683
00:33:38,640 --> 00:33:42,520
Speaker 11: dollar is going to likely help the trade balance generally

684
00:33:43,200 --> 00:33:45,600
Speaker 11: in terms of you know, what goods are being imported

685
00:33:45,640 --> 00:33:48,320
Speaker 11: and the prices of those goods. There will be substitution effects,

686
00:33:49,120 --> 00:33:52,360
Speaker 11: and all of these things will will go into the

687
00:33:52,400 --> 00:33:56,720
Speaker 11: consumer thinking about the dollar and therefore how inflationary that

688
00:33:56,720 --> 00:33:58,440
Speaker 11: that dollar move can be, which I think is not

689
00:33:58,520 --> 00:34:02,000
Speaker 11: going to be particularly particularly strong. You wind up with,

690
00:34:02,160 --> 00:34:05,120
Speaker 11: you know, incrementally and goods just a half a percent

691
00:34:05,240 --> 00:34:05,920
Speaker 11: or something like that.

692
00:34:06,160 --> 00:34:09,040
Speaker 2: This is this is like an Ira Jersey dominant constant

693
00:34:09,120 --> 00:34:16,880
Speaker 2: conversation credit sueeze like fifteen iras younger, Yeah, fifteen, I

694
00:34:16,880 --> 00:34:20,160
Speaker 2: mean iras synthesize this for just the basic thing of

695
00:34:20,200 --> 00:34:23,560
Speaker 2: Paul Sweeny's looking at the mortgage rate or someone's looking

696
00:34:23,600 --> 00:34:27,600
Speaker 2: at a five year CD. I mean, right now, the

697
00:34:27,920 --> 00:34:31,800
Speaker 2: news slowtels, we wait and look for an incrementally higher

698
00:34:31,880 --> 00:34:35,120
Speaker 2: yield on a CD or let's go because the mortgage

699
00:34:35,200 --> 00:34:38,120
Speaker 2: rates are going up, that's simplistic. How do you look

700
00:34:38,160 --> 00:34:38,400
Speaker 2: at that?

701
00:34:39,480 --> 00:34:41,600
Speaker 11: Yeah, well, the mortgage rate is going to be based

702
00:34:41,880 --> 00:34:44,000
Speaker 11: a little bit more on the tenure than the five year,

703
00:34:44,000 --> 00:34:47,600
Speaker 11: and we still have a modestly steepening yield curve. So

704
00:34:47,920 --> 00:34:52,000
Speaker 11: the difference between longer term maturity rates are going higher

705
00:34:52,120 --> 00:34:54,719
Speaker 11: versus shorter maturity rates. So when you mentioned, you know,

706
00:34:54,760 --> 00:34:57,520
Speaker 11: the five year CD, that the five year recently has

707
00:34:57,600 --> 00:35:00,480
Speaker 11: kind of been the pivot point between you know, what

708
00:35:01,800 --> 00:35:04,879
Speaker 11: the Fed's doing and also what people are worried about

709
00:35:05,000 --> 00:35:08,399
Speaker 11: with either more supply and certainly demand for longer term

710
00:35:08,520 --> 00:35:11,360
Speaker 11: US assets because of some of the trade deals and

711
00:35:11,600 --> 00:35:16,600
Speaker 11: the tariffanks. So you know, ultimately, I think now's fine

712
00:35:16,760 --> 00:35:20,160
Speaker 11: if you want to, you know, think about, you know,

713
00:35:20,239 --> 00:35:22,480
Speaker 11: locking in those five year rates, because I do think

714
00:35:22,480 --> 00:35:25,399
Speaker 11: that ultimately the Fed Reserve is going to cut rates

715
00:35:25,400 --> 00:35:27,000
Speaker 11: a little bit more and certainly it's not going to

716
00:35:27,000 --> 00:35:29,680
Speaker 11: be hiking. Right, the chances of the Fed hiking over

717
00:35:29,680 --> 00:35:31,960
Speaker 11: the next you know, year to eighteen months is near zero,

718
00:35:32,960 --> 00:35:36,479
Speaker 11: and the market is still pricing another forty basis points

719
00:35:36,560 --> 00:35:38,120
Speaker 11: or so of interest rate cuts even though I think

720
00:35:38,160 --> 00:35:40,319
Speaker 11: it'll probably be a little bit more than that, so

721
00:35:40,400 --> 00:35:43,200
Speaker 11: you might as well lock in now. The issue with

722
00:35:43,320 --> 00:35:45,680
Speaker 11: the long end of the yield curve is you do

723
00:35:45,760 --> 00:35:49,280
Speaker 11: have different dynamics both in terms of supply and demand.

724
00:35:49,960 --> 00:35:51,719
Speaker 11: And you know, next week we'll probably talk about this,

725
00:35:52,080 --> 00:35:54,719
Speaker 11: but we have next week the quarterly refunding announcement. The

726
00:35:54,760 --> 00:35:58,520
Speaker 11: Trump administration could actually start issuing less ten year notes

727
00:35:58,520 --> 00:36:02,600
Speaker 11: and thirty year bonds starting in February, and that would

728
00:36:02,600 --> 00:36:04,879
Speaker 11: be this not being priced into the market right now.

729
00:36:04,960 --> 00:36:07,640
Speaker 11: But that is a known risk they have to look

730
00:36:07,640 --> 00:36:07,880
Speaker 11: out for.

731
00:36:08,280 --> 00:36:10,279
Speaker 2: Hira, thank you so much. I read Jersey with Us

732
00:36:10,320 --> 00:36:14,319
Speaker 2: was Bloomberg Intelligence and win Thin before that evening Stay

733
00:36:14,360 --> 00:36:18,239
Speaker 2: with Us more from Bloomberg Surveillance coming up after this.

734
00:36:25,480 --> 00:36:29,080
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live

735
00:36:29,120 --> 00:36:32,279
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on

736
00:36:32,400 --> 00:36:35,760
Speaker 1: Apple Karplay and Android Auto with the Bloomberg Business app,

737
00:36:35,960 --> 00:36:37,680
Speaker 1: or watch us live on YouTube.

738
00:36:37,840 --> 00:36:40,200
Speaker 2: Slay most enjoys us. Now we're thrilled to have around

739
00:36:40,280 --> 00:36:43,120
Speaker 2: way too early. She's like, you know, she's rocking nine am. Yeah,

740
00:36:43,880 --> 00:36:47,000
Speaker 2: she's an author, sliding her book paper sold just really

741
00:36:47,040 --> 00:36:51,520
Speaker 2: really outstanding on the Treasury. She is our wonderful fiscal

742
00:36:51,560 --> 00:36:54,960
Speaker 2: and Treasury reporter in Washington, say, I really want to

743
00:36:54,960 --> 00:36:58,320
Speaker 2: focus on Secretary Besson after the comments by the President

744
00:36:58,400 --> 00:37:03,560
Speaker 2: last night. The President clearly has a zero sum, neo

745
00:37:03,719 --> 00:37:08,200
Speaker 2: mrcantilist strategy out there. All of our listeners worldwide of

746
00:37:08,200 --> 00:37:10,600
Speaker 2: Global Wall Street want to know how the Secretary of

747
00:37:10,719 --> 00:37:16,239
Speaker 2: Treasury will advise the president on strong and weak dollar policy.

748
00:37:16,480 --> 00:37:18,560
Speaker 2: What do you listen for in the coming days.

749
00:37:19,640 --> 00:37:22,319
Speaker 3: Look, we currently have a treasure secretary who has a

750
00:37:22,360 --> 00:37:25,760
Speaker 3: lot of experience in currency markets and currency policy because

751
00:37:25,800 --> 00:37:29,000
Speaker 3: he worked for Sorrows when George Soros made the bet

752
00:37:29,080 --> 00:37:30,239
Speaker 3: in the ninety.

753
00:37:29,960 --> 00:37:33,120
Speaker 12: Early nineties that broke the pound famously.

754
00:37:33,719 --> 00:37:35,680
Speaker 3: So he was part of that team and has had

755
00:37:35,719 --> 00:37:37,439
Speaker 3: some moments with the Japanese yen as well.

756
00:37:37,480 --> 00:37:39,560
Speaker 12: So he's deeply knowledgeable about what's going on.

757
00:37:39,600 --> 00:37:41,480
Speaker 3: Of course, when you're a treasure secretary, you're looking at

758
00:37:41,480 --> 00:37:44,440
Speaker 3: it from a very different perspective, not a money making perspective,

759
00:37:44,760 --> 00:37:49,080
Speaker 3: but from economic policy and national and economic security perspective. Now,

760
00:37:49,200 --> 00:37:51,799
Speaker 3: the words that we heard from President Trump last night,

761
00:37:52,080 --> 00:37:54,400
Speaker 3: to me, it sounds like he's already been briefed by

762
00:37:54,440 --> 00:37:59,279
Speaker 3: the Treasure Secretary on the dollars decline. Sometimes policymakers, even

763
00:37:59,360 --> 00:38:03,399
Speaker 3: presidents historically have not always known just how powerful their

764
00:38:03,440 --> 00:38:05,160
Speaker 3: words can be on the dollar.

765
00:38:05,480 --> 00:38:07,840
Speaker 12: And so we saw that immediate slump. So I almost

766
00:38:07,880 --> 00:38:08,480
Speaker 12: wonder are.

767
00:38:08,320 --> 00:38:10,800
Speaker 3: We going to see maybe not a mop up or

768
00:38:10,800 --> 00:38:14,400
Speaker 3: a cleanup, but just a clarification with more nuanced statements

769
00:38:14,440 --> 00:38:14,960
Speaker 3: on the dollar.

770
00:38:15,600 --> 00:38:18,040
Speaker 2: So Slia, we have a surveillance tradition. Here, you're on

771
00:38:18,080 --> 00:38:21,879
Speaker 2: a YouTube worldwide right now. What's the name of the

772
00:38:22,000 --> 00:38:26,840
Speaker 2: cat that's behind you? Is that Janet yelling the cat?

773
00:38:27,239 --> 00:38:29,480
Speaker 2: What's the name of the cat behind you? Right now?

774
00:38:29,520 --> 00:38:32,279
Speaker 3: That's actually just a very small dog named Ludou who

775
00:38:32,280 --> 00:38:33,760
Speaker 3: wants to go live apparently.

776
00:38:34,000 --> 00:38:36,239
Speaker 7: Okay, that's good, go on live with the door.

777
00:38:36,360 --> 00:38:36,560
Speaker 2: Sele.

778
00:38:36,760 --> 00:38:39,279
Speaker 7: You know, I look at this and I got to

779
00:38:39,320 --> 00:38:39,920
Speaker 7: go back.

780
00:38:39,719 --> 00:38:42,839
Speaker 2: To Swiss Frank in the Gold complex here with all

781
00:38:42,880 --> 00:38:46,760
Speaker 2: your contacts in Washington. Is there any pause to understanding

782
00:38:47,080 --> 00:38:49,319
Speaker 2: in the chart I put out today, we're a two

783
00:38:49,360 --> 00:38:53,719
Speaker 2: standard deviations long term goal trend up three standard deviations

784
00:38:53,760 --> 00:38:56,680
Speaker 2: is seven four hunderd denounce And I'm looking at a

785
00:38:56,719 --> 00:39:00,479
Speaker 2: Swiss Frank chart. Back to my childhood Salaya, and we're

786
00:39:00,680 --> 00:39:05,520
Speaker 2: basically near record strengths with Frank. How does the Treasury

787
00:39:05,520 --> 00:39:08,080
Speaker 2: Apartment in a White House react to that or is

788
00:39:08,120 --> 00:39:09,480
Speaker 2: it invisible to them?

789
00:39:10,280 --> 00:39:11,200
Speaker 12: It's not invisible.

790
00:39:11,280 --> 00:39:14,360
Speaker 3: They monitor all of these same charts and data points

791
00:39:14,520 --> 00:39:16,759
Speaker 3: tom that you're looking at right now, especially on the

792
00:39:16,760 --> 00:39:19,600
Speaker 3: Bloomberg terminal. They're looking at everything. But you know, we

793
00:39:19,640 --> 00:39:22,000
Speaker 3: have a different administration, We're in a different era. We're

794
00:39:22,000 --> 00:39:25,160
Speaker 3: no longer pushing globalism and free trade. We are raising borders.

795
00:39:25,160 --> 00:39:28,879
Speaker 3: Since twenty seventeen, including through the Biden administration and back

796
00:39:28,920 --> 00:39:32,440
Speaker 3: to Trump, we're seeing more isolation as policies, and so

797
00:39:32,680 --> 00:39:35,560
Speaker 3: if there is a benefit to a weaker dollar, then

798
00:39:35,840 --> 00:39:39,640
Speaker 3: this administration we'll try to gain and get as much

799
00:39:39,680 --> 00:39:42,879
Speaker 3: from that benefit. What we're watching for is any kind

800
00:39:42,880 --> 00:39:46,600
Speaker 3: of disorderly movement in the dollar. If that slide down

801
00:39:46,719 --> 00:39:51,359
Speaker 3: becomes disorderly, unexpected, unpredictable, don't know what's going on.

802
00:39:51,520 --> 00:39:53,680
Speaker 12: We'll see some different statements across.

803
00:39:53,360 --> 00:39:55,560
Speaker 2: The nation this morning. Salia Mosen with us. Look for

804
00:39:55,600 --> 00:39:58,319
Speaker 2: her book. I'll put it out on Twitter and LinkedIn here.

805
00:39:58,360 --> 00:40:02,160
Speaker 2: It's a fabulous summar tension at the Treasury pod. Are

806
00:40:02,200 --> 00:40:04,279
Speaker 2: we giving a blue ribbon today to the beast behind it.

807
00:40:04,880 --> 00:40:07,200
Speaker 7: Absolutely, I mean we're talking to this is like I

808
00:40:07,200 --> 00:40:10,120
Speaker 7: feel like I'm at the Westminster dog show. Soleya, Paul

809
00:40:10,160 --> 00:40:12,240
Speaker 7: Sweeney was Sola mos Soeleia.

810
00:40:12,719 --> 00:40:15,360
Speaker 5: This will be the last FED meeting for FED Chairman

811
00:40:15,440 --> 00:40:17,480
Speaker 5: Jaypath here. It give us a sense of what the

812
00:40:17,480 --> 00:40:19,239
Speaker 5: White House is thinking about as I think about a

813
00:40:19,280 --> 00:40:19,960
Speaker 5: new FED chair.

814
00:40:21,120 --> 00:40:22,960
Speaker 3: Yeah, the White House has a big decision to make.

815
00:40:23,000 --> 00:40:24,800
Speaker 3: President Trump has a big decision to make. We have

816
00:40:24,960 --> 00:40:28,560
Speaker 3: four candidates finalists so far. You never know what Trump

817
00:40:28,640 --> 00:40:29,800
Speaker 3: when he pulls a new game.

818
00:40:29,640 --> 00:40:33,719
Speaker 2: To that's the inside story. Stop you know everyone, what's

819
00:40:33,760 --> 00:40:35,960
Speaker 2: the inside Storry Soleaya.

820
00:40:36,160 --> 00:40:40,080
Speaker 3: Fortunately we have published everything I could possibly know about this.

821
00:40:40,239 --> 00:40:42,000
Speaker 12: I'm waiting to gather more information.

822
00:40:42,080 --> 00:40:45,200
Speaker 3: It looks like as of a week ago, Rick Reader

823
00:40:45,280 --> 00:40:47,080
Speaker 3: of Black Rock was gaining traction.

824
00:40:47,200 --> 00:40:48,720
Speaker 12: His interview went really, really well.

825
00:40:49,040 --> 00:40:53,720
Speaker 3: Trump liked his comments on reform at the Federal Reserve.

826
00:40:53,800 --> 00:40:57,000
Speaker 3: But you know there's a wild dynamic here where Powell

827
00:40:57,040 --> 00:40:59,000
Speaker 3: saying he's not going to leave and vacate a seat.

828
00:40:59,320 --> 00:41:02,440
Speaker 3: And we had this DOJ investigation that it seems like

829
00:41:02,520 --> 00:41:04,839
Speaker 3: no one at the White House really wanted. And then

830
00:41:04,920 --> 00:41:07,920
Speaker 3: Senator tillis a Republican who's saying I'm going to block

831
00:41:08,080 --> 00:41:12,040
Speaker 3: any FED Chair nominee until this investigation is resolved. So

832
00:41:12,080 --> 00:41:14,319
Speaker 3: I almost wonder if in an announcement might be a

833
00:41:14,320 --> 00:41:17,760
Speaker 3: little bit further out, because looking at the Senate calendar

834
00:41:17,840 --> 00:41:20,399
Speaker 3: for anyone who needs confirmation that name does not need

835
00:41:20,440 --> 00:41:22,200
Speaker 3: to be presented to the Senate for another.

836
00:41:22,040 --> 00:41:25,680
Speaker 5: Month, what's the sense of timing here? I mean here

837
00:41:25,920 --> 00:41:27,640
Speaker 5: for those of us on Global Wall Street, we're like,

838
00:41:27,760 --> 00:41:29,200
Speaker 5: what's the president waiting for?

839
00:41:29,320 --> 00:41:31,120
Speaker 6: Let's get going here on a selection.

840
00:41:32,360 --> 00:41:34,279
Speaker 3: You know, he doesn't, like I said, he doesn't really

841
00:41:34,320 --> 00:41:37,080
Speaker 3: need to pick anyone until end of February to make

842
00:41:37,120 --> 00:41:40,080
Speaker 3: sure that slot is filled by May, when Powell's term

843
00:41:40,120 --> 00:41:40,439
Speaker 3: is up.

844
00:41:40,640 --> 00:41:42,520
Speaker 12: It feels like it's been a long time for the

845
00:41:42,560 --> 00:41:43,280
Speaker 12: rest of us.

846
00:41:43,200 --> 00:41:46,080
Speaker 3: Because he's been doing this apprentice style talking about this

847
00:41:46,120 --> 00:41:49,479
Speaker 3: since June of last year who he's gonna pick, saying

848
00:41:49,520 --> 00:41:51,839
Speaker 3: I've picked someone and in a couple of days, I'm

849
00:41:51,840 --> 00:41:53,840
Speaker 3: going to announce it. And every time he says that,

850
00:41:54,000 --> 00:41:56,239
Speaker 3: I tell you, Tom and Paul, I start me. In

851
00:41:56,360 --> 00:41:59,120
Speaker 3: our colleagues, Anne, Marie Horder and and Joshuing Grove and

852
00:41:59,200 --> 00:42:02,120
Speaker 3: Nancy Cook and John we all just start calling sources

853
00:42:02,160 --> 00:42:04,520
Speaker 3: and sort of preparing for an announcement and it now

854
00:42:04,520 --> 00:42:06,239
Speaker 3: we're almost in February.

855
00:42:06,560 --> 00:42:10,080
Speaker 2: Your wonderful book, Paper Soldiers on the Weaponization of the

856
00:42:10,160 --> 00:42:13,759
Speaker 2: Dollar or the Sun the Treasury Chapter five, soleya the

857
00:42:13,880 --> 00:42:17,759
Speaker 2: Bad Dollar. Does President Trump look at the dollar is

858
00:42:17,800 --> 00:42:21,080
Speaker 2: a bad dollar and must drive it weaker to boost

859
00:42:21,440 --> 00:42:22,640
Speaker 2: Boeing exports?

860
00:42:23,880 --> 00:42:25,839
Speaker 3: You know, in the first term I covered him very

861
00:42:25,840 --> 00:42:29,000
Speaker 3: closely and there was closed door discussion which we reported

862
00:42:29,000 --> 00:42:32,160
Speaker 3: at Bloomberg about a dollar intervention in order to make

863
00:42:32,200 --> 00:42:35,200
Speaker 3: it weaker. This time you heard the President say that

864
00:42:35,239 --> 00:42:38,840
Speaker 3: the dollar is seeking its own level, and that shows

865
00:42:38,840 --> 00:42:42,279
Speaker 3: that his knowledge of currency markets and currency policy is

866
00:42:42,440 --> 00:42:46,160
Speaker 3: much more sophisticated. He does not actively want to push

867
00:42:46,200 --> 00:42:48,800
Speaker 3: the dollar down, but he definitely is enjoying the wins.

868
00:42:48,840 --> 00:42:51,280
Speaker 12: Now that is so far. You never know when things change.

869
00:42:51,360 --> 00:42:53,640
Speaker 2: Sale Moson, thank you so much driving all of our

870
00:42:53,680 --> 00:42:56,879
Speaker 2: treasury coverage at Bloomberg. Again. I'll get Paper Soldiers out

871
00:42:56,920 --> 00:43:00,279
Speaker 2: on LinkedIn and Twitter winning all sorts of awards than

872
00:43:00,400 --> 00:43:02,720
Speaker 2: Economics in the last twenty four.

873
00:43:03,800 --> 00:43:08,600
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify

874
00:43:08,719 --> 00:43:13,040
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,

875
00:43:13,160 --> 00:43:16,600
Speaker 1: seven to ten am Eastern on Bloomberg dot Com, the

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00:43:16,680 --> 00:43:20,719
Speaker 1: iHeartRadio app tune In, and the Bloomberg Business app. You

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00:43:20,760 --> 00:43:24,120
Speaker 1: can also watch us live every weekday on YouTube and

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Speaker 1: always on the Bloomberg terminal