WEBVTT - Surveillance: Solving The Nuclear Problem With Adm. Stavridis 0:00:00.080 --> 0:00:13.040 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm term Keene 0:00:13.480 --> 0:00:17.560 jay Leye. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:32.680 Bloomberg dot Com, and of course, on the Bloomberg So 0:00:32.800 --> 0:00:35.960 what are you doing at ten am Eastern time? That 0:00:36.120 --> 0:00:39.680 is the big decision this morning? When the United States 0:00:39.800 --> 0:00:44.479 Ambassador Lightheiser testifies to a House panel, the fetes J 0:00:44.680 --> 0:00:47.600 Pal testifies to a House panel, and at the very 0:00:47.720 --> 0:00:51.880 same time, the president's former lawyer Michael Cohen testifies before 0:00:51.880 --> 0:00:54.920 a House panel. To help answer that question here in 0:00:54.960 --> 0:00:58.040 New York, Todd, Mariano, you raised a group US director 0:00:58.040 --> 0:01:01.480 and shiphap jellin news credit suite, head of FX, and 0:01:01.560 --> 0:01:04.360 a macro trading strategy. So what do you do at 0:01:04.360 --> 0:01:07.319 ten am? Todd? You've got those three screens? Which one 0:01:07.319 --> 0:01:10.160 are you watching? First of all, I try to watch 0:01:10.160 --> 0:01:13.800 all three at once, But failing that endeavor, I have 0:01:13.880 --> 0:01:16.840 to go with Lightheiser first and catching up with the 0:01:16.880 --> 0:01:19.520 other two in full later. What do you think should 0:01:19.520 --> 0:01:24.320 have I think from a pure entertainment perspective, I'd watch Coming, 0:01:24.400 --> 0:01:27.080 but I'd have to agree with Todd from a professional perspective, 0:01:27.160 --> 0:01:30.000 lighthiser comes. Yeah, it's funny that for the substance the focus, 0:01:30.040 --> 0:01:31.920 I think for many people, Tom Keane is going to 0:01:32.040 --> 0:01:36.640 be on Ambassador Lightheiser, But the distraction and the fireworks 0:01:36.840 --> 0:01:40.320 and the theater is coming from comedy. For those on radio, 0:01:40.400 --> 0:01:42.800 you just see the body language in Hannoy And as 0:01:42.800 --> 0:01:48.360 a beginning statement, it's totally different than Singapore. There at 0:01:48.400 --> 0:01:52.200 the Metropole Hotel Shob You've you've been there, John, Have 0:01:52.240 --> 0:01:55.520 you been to the metropolit Annoy? I've never been, But 0:01:55.600 --> 0:01:59.360 it's beautifully restored. It's elegant. You can buy fancy watches, 0:01:59.400 --> 0:02:02.960 you can have day what what was it, wago beef? 0:02:03.480 --> 0:02:05.680 They don't serve that on McDonald's. But the whole thing 0:02:06.240 --> 0:02:09.079 and the answer is that's a different president than what 0:02:09.120 --> 0:02:12.440 we saw in Singapore. Do you think today's events a 0:02:12.480 --> 0:02:14.720 whang on him? Somewhere? Absolutely saw it with the tweets 0:02:14.720 --> 0:02:16.639 this morning, I mean the tweets this morning, the eclectic 0:02:16.680 --> 0:02:19.919 sense of them. Todd was it was extraordinary where he 0:02:19.960 --> 0:02:23.360 is distracted by domestic issues, not that he's the first 0:02:23.360 --> 0:02:27.239 president to ever have that. He can't not be distracted 0:02:27.280 --> 0:02:31.200 by what's going on. It's it's too important to his presidency. Um, 0:02:31.240 --> 0:02:33.280 you know, certainly with with what's going on in the 0:02:33.560 --> 0:02:36.400 in the House, just in the oversight and reform let alone, 0:02:36.840 --> 0:02:39.960 you know, the various other investigations, the drip drip drip 0:02:40.000 --> 0:02:42.919 of of what comes out every day. Even his harshest 0:02:42.919 --> 0:02:46.640 critics give the President Shahab massive cred for trying to 0:02:46.760 --> 0:02:51.360 jump start a medieval kingdom towards some form of model 0:02:51.440 --> 0:02:55.720 of Asian capitalism. The President mentioned that in his comments, 0:02:55.800 --> 0:02:58.160 he's he's tremendous, I believe is the word he was. 0:02:58.200 --> 0:03:02.680 I'm paraphrasing their folks. Can he be optimistic about any 0:03:02.760 --> 0:03:07.120 sense of North Vietnam becoming like Laos Well, I think 0:03:07.200 --> 0:03:11.720 I think, having actually visited d M the DMZ some 0:03:11.840 --> 0:03:15.000 years ago and seeing that even then there were factories 0:03:15.040 --> 0:03:18.760 across the border that we're producing products for South Korea 0:03:18.800 --> 0:03:21.360 and others, the potential is clearly there, and even some 0:03:21.400 --> 0:03:25.600 of the infrastructure is already there. Uh. And with relations 0:03:25.639 --> 0:03:29.160 between South Korea and North Korea improving as well constantly, UM, 0:03:29.240 --> 0:03:31.720 we do have symplomas of hope here. But I think 0:03:31.800 --> 0:03:35.000 ultimately though It's not so much about what Trump thinks 0:03:35.000 --> 0:03:38.320 about all of this. It's the North Korea's domestic internal 0:03:38.320 --> 0:03:41.840 political structure that's very hard to read from from where 0:03:41.840 --> 0:03:44.880 I sit. For anyone waking up on Wall Street this morning, 0:03:45.320 --> 0:03:48.000 this isn't even on the radar? Is it todd? The 0:03:48.080 --> 0:03:51.440 situation in Hannoy? Is it? Is there something you're even 0:03:51.480 --> 0:03:56.320 paying attention to, Probably pay more attention tomorrow to uh, 0:03:56.360 --> 0:03:59.680 you know, actual outcomes the press conference last time and 0:03:59.720 --> 0:04:02.600 sing poor we had President Trump mentioned a couple of 0:04:02.600 --> 0:04:05.480 things during the press conference that weren't in the joint 0:04:05.560 --> 0:04:09.120 statement UM, but markets in general from a macro perspective, 0:04:09.280 --> 0:04:12.520 or as Schab was saying earlier, going to look at 0:04:12.560 --> 0:04:14.600 this from an as an up or down vote. You know, 0:04:14.720 --> 0:04:18.240 do we have a higher geopolitical risk premium um, you know, 0:04:18.440 --> 0:04:20.600 or a or a lower one or staying the same 0:04:20.680 --> 0:04:23.400 The nuance is harder at a price. And also, as 0:04:23.440 --> 0:04:25.279 you said at the top of this program, you're focus 0:04:25.360 --> 0:04:28.040 today will actually be on whatever Ambassador lighthiser has to 0:04:28.040 --> 0:04:30.120 say in front of the House panel. I just wanted 0:04:30.120 --> 0:04:32.680 to what degree the story playing out in Hannay actually 0:04:32.680 --> 0:04:35.479 folds into the trade story and China being the important 0:04:35.480 --> 0:04:38.800 piece in both. What are your thoughts on that side. Yeah, well, 0:04:38.880 --> 0:04:41.960 you know, the the chart that that Tom put up 0:04:41.960 --> 0:04:45.200 on TV earlier today is is interesting. It gets that 0:04:45.360 --> 0:04:49.760 it gets that okay more than more than okay. As 0:04:49.839 --> 0:04:53.159 as usual, Ferro didn't want me to use that chart. Explain, 0:04:54.240 --> 0:04:58.400 you don't because your focus on radios into the shot. 0:04:58.520 --> 0:05:01.680 Come on charts on radio here it is nominal GDP 0:05:02.040 --> 0:05:07.640 per capita the growth rate of the Asian nations back 0:05:09.279 --> 0:05:12.239 and Todd is is we just to quickly summarize China 0:05:12.279 --> 0:05:15.720 and Vietnam on fire, Cambodia a little less allows worse 0:05:15.760 --> 0:05:20.200 than that trailing. Yeah, this is uh, this is what 0:05:20.960 --> 0:05:23.800 I think the North Korean's what would ideally like to achieve. 0:05:24.200 --> 0:05:28.080 Of course, for for China, it's an economic opportunity as well. 0:05:28.120 --> 0:05:31.599 And what what we see across that whole region now 0:05:31.720 --> 0:05:35.240 is is competition. You know, not only over you know, 0:05:35.320 --> 0:05:38.920 just economic models and influence things like that, but you know, 0:05:38.960 --> 0:05:43.120 but certainly over technology too. So you know, China's approach 0:05:43.240 --> 0:05:46.440 here has been to um, you know, play this a 0:05:46.440 --> 0:05:50.120 little more quietly, stay behind the scenes, while uh, while 0:05:50.160 --> 0:05:52.400 the US is really out in front kind of you know, 0:05:52.520 --> 0:05:55.760 driving this semmetery with with Kim Jong Un. For them, 0:05:56.000 --> 0:05:58.320 it's a it's a longer term game. I think of 0:05:58.320 --> 0:06:00.720 economic competition. I spend a couple of it's talking about 0:06:00.720 --> 0:06:02.240 what you want to focus on a little bit later 0:06:02.279 --> 0:06:05.880 this morning, which is the hearing with Lightheiser on trait specifically, 0:06:06.560 --> 0:06:08.480 what are the missing pieces that you want some color on. 0:06:09.960 --> 0:06:12.680 I would say, UM first and foremost U S M 0:06:12.720 --> 0:06:16.640 c A. It's it's something where lawmakers have been trying 0:06:16.680 --> 0:06:20.080 to get a little bit more color from Lightheiser. Where 0:06:20.080 --> 0:06:22.279 do we um, you know, where do we stand on 0:06:22.320 --> 0:06:27.240 some of the procedural steps. UM, very importantly, where is 0:06:27.320 --> 0:06:32.000 Mexico with their labor law? And UM. You know, certainly 0:06:32.200 --> 0:06:34.599 the stealing aluminum terroffs that are still in place on 0:06:34.680 --> 0:06:38.120 Canada and Mexico ought to be lifted, you know, especially 0:06:38.160 --> 0:06:41.240 for some Republican lawmakers, you know, to give their blessing 0:06:41.279 --> 0:06:46.280 to this agreement. So some additional you know, detail from 0:06:46.360 --> 0:06:49.160 Lightheiser would would really be interesting for me, Jahab what 0:06:49.200 --> 0:06:53.600 are you looking for? But I think one of the 0:06:53.680 --> 0:06:57.040 debates in the market has been about the extent to 0:06:57.080 --> 0:07:00.960 which this apparent divide between UH some of the hardliners 0:07:00.960 --> 0:07:03.800 on China on the trade issue and light highs and 0:07:03.880 --> 0:07:06.040 might be seen as one of them, and Trump himself 0:07:06.080 --> 0:07:09.159 who's looking for a deal. Some senses as to how 0:07:09.680 --> 0:07:12.840 protracted that conflict could be if there is one, um 0:07:12.920 --> 0:07:15.960 and is it bad enough to potentially derail the talks 0:07:16.160 --> 0:07:18.800 and stop the market getting to it where it wants 0:07:18.840 --> 0:07:22.960 to with respect to this issue. Um. I don't imagine 0:07:22.960 --> 0:07:24.800 that we'll see that today, but of course if if 0:07:24.800 --> 0:07:28.520 it comes out looking negative on that front, then there 0:07:28.560 --> 0:07:30.239 could be a bit of an upset for the market 0:07:30.240 --> 0:07:31.480 on that. And I think it's good John that you 0:07:31.560 --> 0:07:34.080 bring up the China trade talks because the fact is 0:07:34.240 --> 0:07:38.600 the vast majority of Americans are completely distracted by this 0:07:38.720 --> 0:07:41.440 other stuff, and yet these are going to be substantial 0:07:41.440 --> 0:07:45.480 discussions from the Primarily the distraction will be Michael coming today, 0:07:46.040 --> 0:07:48.120 I would say, given the last twelve hours for those 0:07:48.160 --> 0:07:50.720 waking up across America right now, just the last twelve 0:07:50.720 --> 0:07:53.560 hours of the the I guess the leak of is 0:07:53.600 --> 0:07:57.360 it it too uh? Leaked to The New York Times. 0:07:57.400 --> 0:07:59.800 Of course, on the language of Mr Cohen alone brings 0:07:59.800 --> 0:08:02.720 that a new level of acuity planning to tell the 0:08:02.760 --> 0:08:07.040 committee about alleged mistates by film of box. They're going 0:08:07.080 --> 0:08:09.280 to have how many hours of this liked it today? Well, 0:08:09.480 --> 0:08:11.560 three days or two days, whatever it is. But well, 0:08:11.640 --> 0:08:14.000 of course what we're seeing now across all of news 0:08:14.040 --> 0:08:18.080 is of course these images from Hanoi as well. I 0:08:18.080 --> 0:08:19.880 think we have to leave it there, gentlemen in the 0:08:19.920 --> 0:08:23.320 news logest extraordinary. I'm going to stick with us. It's 0:08:23.320 --> 0:08:25.840 a little bit later on this actually talk about markets 0:08:25.880 --> 0:08:27.720 and in the financial markets at the back of the 0:08:27.720 --> 0:08:30.200 events in Pakistan and India right in the last couple 0:08:30.200 --> 0:08:32.640 of days, especial thanks to Todd Marianna, thank you you 0:08:32.640 --> 0:08:50.560 write A group's US director John extraordinary to see just 0:08:50.600 --> 0:08:53.880 the immediacy in the last sixty minutes of the headlines 0:08:53.920 --> 0:08:57.880 on Indian Pakistan, the econ Market Times of India says, 0:08:58.080 --> 0:09:01.839 let better sense prevail. We're willing to talk, says Mr 0:09:01.960 --> 0:09:05.600 Khan of Pakistan's that's sort of the legist nugget promise 0:09:05.640 --> 0:09:08.079 to Imran Khan is trying to make this settled down 0:09:08.120 --> 0:09:10.559 a little bit after the events of the last the 0:09:10.640 --> 0:09:13.240 last couple of days or so, the biggest escalation, I 0:09:13.240 --> 0:09:16.040 have to say in decades, India saying that an Air 0:09:16.040 --> 0:09:19.240 Force pilot was missing. After Pakistan said it has shot 0:09:19.280 --> 0:09:23.199 down to Indian fighter jets, relations between what many people 0:09:23.200 --> 0:09:27.480 consider to be arch rivals have just worsened amid the 0:09:27.480 --> 0:09:30.160 possibility potentially, of course, there is always the risk of 0:09:30.240 --> 0:09:32.400 full blown war. I want to bring in from New 0:09:32.440 --> 0:09:36.640 Delhi Ian Marlow Bloomberg, South Asia Government reporter, Ian, some 0:09:36.640 --> 0:09:39.240 fantastic reporting from the team and yourself over the last 0:09:39.240 --> 0:09:41.000 couple of days. Can you get us up to speed 0:09:41.000 --> 0:09:42.720 and where we are now, where we have been and 0:09:42.760 --> 0:09:45.959 where this is going. Yeah, at the moment, we're all 0:09:46.000 --> 0:09:49.200 still in a little bit of shock from the speed 0:09:49.240 --> 0:09:53.360 at which events have moved here. Earlier today two jets 0:09:53.440 --> 0:09:56.120 um Pakistan announced that they had shot down two jets, 0:09:56.120 --> 0:09:59.560 and then India came out and confirmed that a pilot, 0:10:00.360 --> 0:10:02.840 one of their Indian Air Force pilots was was in 0:10:03.120 --> 0:10:06.640 Pakistani custody um or at least that he was missing, 0:10:06.679 --> 0:10:09.280 missing an action. Um So, at the moment, we're all 0:10:09.320 --> 0:10:14.840 waiting to see how India responds to the developments of today. 0:10:15.200 --> 0:10:18.880 Um what pakistanalogies are two down Indian Air Force fighters 0:10:18.880 --> 0:10:21.400 And as a lot of other commentators have said, this 0:10:21.440 --> 0:10:24.760 is some of the most severe as military escalation we've 0:10:24.800 --> 0:10:28.480 seen in decades UM and UH some say dating back 0:10:28.520 --> 0:10:31.640 fifty years to the nineteen seventy one Indo Pakistani War. 0:10:31.880 --> 0:10:34.720 So Prime Minister Imran Khan Ian saying that he only 0:10:34.760 --> 0:10:38.520 took action after a ascertaining damage was done by Indian's 0:10:38.520 --> 0:10:41.840 attack on Tuesday, he called for dialogue. Essentially, he said 0:10:41.880 --> 0:10:45.360 better sense should prevail, we should sit down and talk. 0:10:46.000 --> 0:10:50.240 What is the Indian response. There hasn't been a solid 0:10:50.360 --> 0:10:55.600 Indian response to Prime Minister Khan's comments so far. UM. 0:10:56.120 --> 0:10:58.880 It would be useful to to note that over the 0:10:58.920 --> 0:11:04.520 past um year, Khan has made various gestures to India 0:11:04.840 --> 0:11:08.200 indicating that he would be happy to have some kind 0:11:08.200 --> 0:11:12.000 of peace talks with with India. But India always sort 0:11:12.000 --> 0:11:15.480 of goes back to their default position, which is that 0:11:15.559 --> 0:11:20.920 they say Pakistan sponsors terrorists UH and trains them and 0:11:20.960 --> 0:11:23.600 they strike inside India, and that they do that as 0:11:23.640 --> 0:11:26.200 a way to avoid a sort of direct military confrontation. 0:11:26.280 --> 0:11:29.000 So India says, we will not talk, and there's no 0:11:29.080 --> 0:11:32.920 point in talking unless you stop that and acknowledge that, 0:11:33.160 --> 0:11:35.320 and so at at the same time, con you know, 0:11:35.360 --> 0:11:38.480 can't come out and acknowledge that because of domestic politics 0:11:38.480 --> 0:11:40.520 and other things in India, that's what the U. S 0:11:40.559 --> 0:11:43.319 And other countries think is happening UH, and India is 0:11:43.360 --> 0:11:47.160 probably unlikely to to engage in any widespread or or 0:11:47.280 --> 0:11:50.440 sort of meaningful talks with with Pakistan at the moment. 0:11:50.640 --> 0:11:52.320 The one thing we're sort of looking at is whether 0:11:52.320 --> 0:11:55.040 there could be any sort of restricted talks in terms 0:11:55.040 --> 0:11:58.319 of getting this UH pilot back UM. And that's something 0:11:58.320 --> 0:12:00.720 that at the moment isn't quite clear because India hasn't 0:12:00.720 --> 0:12:03.640 made their made their stance known. I And as you say, 0:12:03.679 --> 0:12:06.880 it's been surprising because it's happened so quickly, the events 0:12:06.880 --> 0:12:10.400 of the last day or so. They feel somewhat clumsy 0:12:10.600 --> 0:12:12.120 the way all of this is played out in the 0:12:12.200 --> 0:12:15.720 last several hours. Your thoughts on that, Yeah, absolutely, it's 0:12:15.720 --> 0:12:19.600 been It's been pretty remarkable to UM. Each day there's 0:12:19.640 --> 0:12:24.000 something dramatically different, UM and each each side UM is 0:12:24.080 --> 0:12:30.240 claiming remarkably different set of facts here. On Monday, India 0:12:30.280 --> 0:12:33.520 said they bombed a terrorist camp and killed three people. 0:12:34.240 --> 0:12:36.920 Pack stance that nothing was hit at all, There was 0:12:37.160 --> 0:12:40.000 just some damage on a sort of hillside somewhere in 0:12:40.040 --> 0:12:42.960 the in the mountains. UM, and today we have you know, 0:12:43.040 --> 0:12:47.000 two jets, one jet, two pilots captured, one pilot captured. 0:12:47.000 --> 0:12:49.440 No one is quite sure who to believe at the 0:12:49.480 --> 0:12:52.680 moment um, it's quite clear that these are you know, 0:12:52.840 --> 0:12:56.640 very kind of diametrically opposed positions, and it's very very 0:12:56.679 --> 0:12:59.560 sort of weighted in terms of what people are allowed 0:12:59.600 --> 0:13:02.320 to say in the record. UM. You know, for example, 0:13:02.360 --> 0:13:06.800 straight whether yeah, there's twenty two major languages in India 0:13:06.840 --> 0:13:09.240 by one count all that you decide is the expert 0:13:09.679 --> 0:13:13.520 here and within those languages is an election for Mr Modi. 0:13:13.760 --> 0:13:17.280 And within the linkage of language to culture is religion. 0:13:18.160 --> 0:13:23.080 Give our viewers worldwide, our listeners rather worldwide a sense 0:13:23.440 --> 0:13:30.520 of the religion debate in India. Now after these hostilities, yeah, 0:13:30.559 --> 0:13:34.840 I mean so Kashmir is obviously a Muslim majority state, 0:13:35.080 --> 0:13:39.600 and so after the terrorist attack of earlier this month 0:13:39.600 --> 0:13:43.880 on February fourteenth, that killed forty Indian paramilitary troops, there 0:13:43.960 --> 0:13:49.360 was a strong reaction um inside UH India towards UM 0:13:49.520 --> 0:13:54.800 Kashmiris and Kashmiri businesses. You had some hotels in parts 0:13:54.800 --> 0:13:59.280 of the sort of the sort of Hindu majority states, 0:13:59.679 --> 0:14:03.040 UM saying we don't want Kashmiri's coming to our hotels. 0:14:03.320 --> 0:14:06.960 You had a a state governor who was appointed by 0:14:06.960 --> 0:14:11.000 the ruling party urging a boycott of Kashmir so saying 0:14:11.000 --> 0:14:16.040 Indians shouldn't go there for tourism, you shouldn't frequent Kashmiri businesses. 0:14:16.400 --> 0:14:19.400 And I mean obviously most most Kashmiris are Muslim And 0:14:19.400 --> 0:14:23.400 this is very waited kind of fraud language coming ahead 0:14:23.400 --> 0:14:25.600 of an election. And and the U S government you know, 0:14:25.640 --> 0:14:29.560 has warned in the past that as elections approach in India, UM, 0:14:29.600 --> 0:14:32.040 there could be religious clashes and that's something that a 0:14:32.040 --> 0:14:34.960 lot of analysts are are waiting to see. Um. No 0:14:35.000 --> 0:14:37.960 one you know has expected, um a sort of India 0:14:38.000 --> 0:14:42.240 Pakistan confrontation has the election and obviously, um, you know, 0:14:42.280 --> 0:14:45.280 Pakistan does play up every once in a while. The 0:14:45.320 --> 0:14:49.200 treatment of of Muslims in India and always great to 0:14:49.200 --> 0:14:52.600 get your thoughts and inside from from the team fantastic 0:14:52.600 --> 0:15:09.160 Bloomberg South Asia Government reported Carol Rick Odonna, where us 0:15:09.160 --> 0:15:12.280 a Bloomberg Economics. He and tim O Haiti have published 0:15:12.640 --> 0:15:15.520 on all things Pole. But first let's go to Janna Smilek, 0:15:15.800 --> 0:15:20.640 who is in the trenches of looking question to question Jenna, 0:15:21.160 --> 0:15:26.160 is the chairman gonna have to face today political questions 0:15:26.760 --> 0:15:29.880 from a Democratic House? Is there going to be a 0:15:30.000 --> 0:15:33.840 much more political chit chat than what we witnessed yesterday? 0:15:35.440 --> 0:15:37.920 You know, it's an interesting question. We did see some 0:15:38.120 --> 0:15:42.080 political chit chat yesterday. You know, there were questions about 0:15:42.120 --> 0:15:45.440 the fact that, you know, Donald Trump. Actually Jenny Ellen's 0:15:45.440 --> 0:15:48.840 comments from earlier this week that Donald Trump really is 0:15:48.880 --> 0:15:51.760 doing got raised. I think you could definitely see more 0:15:51.800 --> 0:15:55.080 of that. You're also likely to see Powell kind of 0:15:55.240 --> 0:15:58.880 dem and choose not here. I know that, okay, but 0:15:58.960 --> 0:16:01.080 let's cut to the theater. Let's cut to the theater 0:16:01.160 --> 0:16:03.600 with the news law John Farrell says, what's a trade 0:16:03.600 --> 0:16:07.520 representative testimony? Not this song and dance? Okay? Sell me 0:16:07.640 --> 0:16:10.160 on why I need to watch Powell? Is he going 0:16:10.200 --> 0:16:14.840 to answer any questions from from democratic socialists? I mean, 0:16:15.080 --> 0:16:17.040 let's cut to the chase. Is he going to have 0:16:17.080 --> 0:16:21.560 to bounce off socialism today? It's an interesting question. He 0:16:21.680 --> 0:16:24.600 certainly pushed back heavily on this idea that death that 0:16:24.880 --> 0:16:28.400 don't matter in a country that is the reserve currency. 0:16:28.480 --> 0:16:31.560 Yes r and I thought that his pushback on that 0:16:31.680 --> 0:16:35.560 was really full throated, certainly more definitive than I would 0:16:35.560 --> 0:16:38.200 have expected from Chair Power. I think. Also it's going 0:16:38.240 --> 0:16:40.480 to be really interesting to watch to see if he 0:16:40.520 --> 0:16:43.640 gets asked more about the SIDS current rethink. You know, 0:16:43.720 --> 0:16:47.120 they are considering prentically going to some sort of average 0:16:47.120 --> 0:16:50.160 inflation targeting or price level targeting regime rather than the 0:16:50.200 --> 0:16:53.080 symmetric regime that they're right now. And he got asked 0:16:53.080 --> 0:16:55.880 about that yesterday. This is a big deal for the FED, 0:16:55.960 --> 0:17:03.400 this this whole year long process symmetric symmetric teacher. Yeahs interesting. 0:17:03.600 --> 0:17:05.720 Is he going to be asked about the collapse of Duke? 0:17:06.560 --> 0:17:09.480 I mean, what do you think? I mean, one can 0:17:09.520 --> 0:17:12.560 only hope. Okay, Gina smile like a chapel hill. Thank 0:17:12.600 --> 0:17:14.320 you so much for joining us. And there's a drinking 0:17:14.440 --> 0:17:16.960 game over the over the last twenty four hours and 0:17:16.960 --> 0:17:20.000 into today as well. Do you want to know what 0:17:20.000 --> 0:17:22.199 the buzzword is? Do it for the second day of 0:17:22.200 --> 0:17:25.680 the testimony is not due. It's not my lane. Oh, 0:17:25.680 --> 0:17:28.000 it's not my line. When Chamon Pal says it's not 0:17:28.080 --> 0:17:30.640 my lane, that's when you have a shot. And I 0:17:30.640 --> 0:17:33.359 imagine you'll be getting a lot more drunk today than 0:17:33.400 --> 0:17:35.600 you've got yes, I would think so as well. Carl 0:17:35.680 --> 0:17:38.240 rickodon Here, why don't you bring in Mr Rickodna, who 0:17:38.240 --> 0:17:41.240 knows the multiple lanes of the American economy. Boom Bag 0:17:41.240 --> 0:17:44.359 Economics chief US economist Carlie says that a lot doesn't he. 0:17:44.800 --> 0:17:48.040 I don't think it's fair when you are at the 0:17:48.040 --> 0:17:51.919 controls of the largest economy in the world and the 0:17:51.960 --> 0:17:54.520 FED chair is like it or not to say that's 0:17:54.520 --> 0:17:57.920 not in my lane. Everything pretty much falls under your 0:17:58.080 --> 0:17:59.920 But he still says it, right, Yeah, he can say 0:18:00.000 --> 0:18:02.960 that they can. The FED can deny they're responsible for 0:18:03.320 --> 0:18:08.040 participation trends and productivity growth and all those good things. Uh, 0:18:08.080 --> 0:18:10.240 they have to be held accountable lot. To some extent, 0:18:10.359 --> 0:18:13.440 the Chairman's had some difficulty with communication over the last 0:18:13.520 --> 0:18:17.280 year or so. Some sounded pretty good, pretty good day 0:18:17.520 --> 0:18:20.439 going into the second day. Is that why we watch 0:18:20.520 --> 0:18:23.879 this still? Just in case? Is it that? Just in case? 0:18:24.160 --> 0:18:28.080 It is interesting? Absolutely, and so ordinarily the prepared testimony 0:18:28.119 --> 0:18:30.640 that the speech he reads that the that the onset 0:18:30.760 --> 0:18:33.680 is identical on day two. It doesn't have to be identical. 0:18:33.720 --> 0:18:36.800 So if there is a misstatement or a big market 0:18:36.840 --> 0:18:39.719 move on day one, they can tweak the language. There 0:18:39.760 --> 0:18:41.879 wasn't a big market move yesterday, So I don't expect that. 0:18:41.960 --> 0:18:45.359 I want to framework to be your Bloomberg intelligence in 0:18:45.400 --> 0:18:49.360 Bloomberg economics work, which is you have certainly your job 0:18:49.480 --> 0:18:51.639 is not to predict what the Fed will do, but 0:18:51.800 --> 0:18:55.840 you have stated very coherently, here's why we're going to 0:18:55.920 --> 0:18:59.920 see a rate rise or even two of them. That's 0:19:00.080 --> 0:19:03.080 the backdrop of all this chit chat, isn't it is? 0:19:03.119 --> 0:19:05.439 He's never been as far away from the markets as 0:19:05.440 --> 0:19:07.760 he is right now. Absolutely, I think the Fed has 0:19:07.800 --> 0:19:10.679 been rattled. Uh, they've lost a little bit of their 0:19:10.720 --> 0:19:13.640 confidence after what happened in Q four and the less, 0:19:15.200 --> 0:19:18.080 you don't raise rates when equities are already down about 0:19:18.080 --> 0:19:20.520 twelve percent going into the meeting unless you really want 0:19:20.560 --> 0:19:22.840 to create a foul mood. And so they did that. 0:19:22.920 --> 0:19:25.480 They made that communications blunder, and they had to backtrack. 0:19:25.560 --> 0:19:28.479 As a result, they're now less confident that they have 0:19:28.720 --> 0:19:31.639 the tea leaves right in the economy. And so I 0:19:31.680 --> 0:19:35.119 think we're now looking at a more reactionary FED in 0:19:35.160 --> 0:19:40.439 twenty nineteen compared to eighteen. And that reactionary behavior means 0:19:40.560 --> 0:19:43.520 that as we get more inflation heading into mid year, 0:19:43.920 --> 0:19:50.199 they're gonna reverse course on a bad day. Where's the inflation? 0:19:51.040 --> 0:19:54.480 Just because the inflation inflation for the last eight years 0:19:54.480 --> 0:19:56.880 doesn't mean they'll be wrong in twenty nineteen. Here's where 0:19:56.920 --> 0:20:00.200 the inflation is. It's in goods, it's in services, it's 0:20:00.200 --> 0:20:04.119 in wages. Inflation is up forty BIPs over the course 0:20:04.119 --> 0:20:06.720 of the last year. That acceleration is going to extend 0:20:06.880 --> 0:20:10.280 into nineteen as the economy continues to operate above trend 0:20:10.600 --> 0:20:14.080 dangerous words and economics, this time is different. What is 0:20:14.160 --> 0:20:17.560 different in twenty nineteen. We've gone through full employment and 0:20:17.560 --> 0:20:22.800 we're starting to see changes the voice. The voice changes. 0:20:22.880 --> 0:20:25.000 He knows what's coming. Is that you should see him. 0:20:25.040 --> 0:20:26.960 He can bring a bar to a complete halt. On 0:20:27.000 --> 0:20:31.720 Newtonian I've decided that I prefer timohitie, Why don't you 0:20:31.760 --> 0:20:34.520 step in here and look alone? Rick Odonna fired up 0:20:35.640 --> 0:20:38.720 inflation second half of the year. Okay, so the feed 0:20:38.840 --> 0:20:41.679 sits there, inflation starts creeping a little bit higher. Then 0:20:41.720 --> 0:20:44.359 all the duom crew come out and say, twenties coming, 0:20:44.560 --> 0:20:46.400 it's not going to be pretty. Why do they hike 0:20:46.440 --> 0:20:49.560 into that? Sure, they hike into that because they simply 0:20:49.640 --> 0:20:52.920 won't have the tolerance to sit on their hands as 0:20:52.920 --> 0:20:56.639 they reassess economic conditions at mid year and realize, Okay, 0:20:56.680 --> 0:20:58.280 we had a bit of a soft patch towards the 0:20:58.359 --> 0:21:00.440 end of eighteen and the first part of nine team, 0:21:00.480 --> 0:21:03.920 we had an earnings recession, possibly not an outright recession, 0:21:03.920 --> 0:21:07.840 and earnings recession that has subsequently passed, and we have 0:21:07.840 --> 0:21:12.000 an economy operating above trend. We have inflation above their target, 0:21:12.280 --> 0:21:14.600 and we have wage pressures at the highest at the 0:21:14.680 --> 0:21:17.359 fastest pace of the cycle, and we're seeing evidence that 0:21:17.440 --> 0:21:21.360 those wage pressures are indeed passing through into consumer prices. 0:21:21.760 --> 0:21:25.560 And they realize a setting of zero on real interest 0:21:25.640 --> 0:21:28.679 rates is not What about the argument the inflation is 0:21:28.680 --> 0:21:30.320 on the shelf for so long that we need to 0:21:30.400 --> 0:21:32.640 let an overshoot take place for a little while. Well, 0:21:32.640 --> 0:21:35.480 this site is happening very pumpluent, something Gina highlighted and 0:21:35.520 --> 0:21:39.800 something they're considering. Do you simply reset the clock every 0:21:39.880 --> 0:21:42.440 year on January one and say, let's aim for two 0:21:42.440 --> 0:21:45.240 percent this year, or do you say we need to 0:21:45.240 --> 0:21:47.639 make up for lost time? Really important, and this is 0:21:47.640 --> 0:21:50.159 the at the FED, and they're not clear on what 0:21:50.200 --> 0:21:52.560 the answer what is the history, What is the history 0:21:52.720 --> 0:21:56.560 of the quote overshoot unquote? Can they can they establish 0:21:56.680 --> 0:22:00.920 a policy to overshoot two percent? It's not in their DNA, 0:22:00.960 --> 0:22:04.080 it's not in their history. It's not in history. It's 0:22:04.119 --> 0:22:08.600 not in their DNA. If we're looking at me, absolutely 0:22:08.840 --> 0:22:12.200 asymmetric by definition, and you can see that in inflation expectations. 0:22:12.440 --> 0:22:16.120 Right as soon as we're overshooting their two percent target, 0:22:16.320 --> 0:22:19.640 they're gonna panic and start pushing more heavily on the intrket. 0:22:19.760 --> 0:22:23.240 How many basis points does a tenure pop um? Given 0:22:23.240 --> 0:22:26.760 the asymmetric nature, nature, the lack of history, we get 0:22:26.800 --> 0:22:29.000 the rick of Donna world. What's it gonna do to 0:22:29.040 --> 0:22:31.560 my portfolio on my yield market? Sure well, it's gonna 0:22:31.600 --> 0:22:34.840 push yield back up to the levels I think that's 0:22:34.840 --> 0:22:38.080 a fair assessment. Or even more, as we return to 0:22:38.320 --> 0:22:40.680 what yields looked like in the latter half of last year, 0:22:42.000 --> 0:22:44.480 those are still pretty low yields. The real yield will 0:22:44.520 --> 0:22:47.880 be the unreal yield because real yields will disappear. Can 0:22:47.880 --> 0:22:50.440 bring an important point. The FED is gonna let the 0:22:50.480 --> 0:22:52.720 market lead the way on this. If FED doesn't want 0:22:52.720 --> 0:22:54.960 to job own the market into rate hikes. If Fed's 0:22:55.000 --> 0:22:57.840 gonna sit back and say patient, patient, patient until the 0:22:57.880 --> 0:23:01.480 market is crying for rate hikes, and then jed to 0:23:01.520 --> 0:23:03.840 oblige you touched on something important. Car. Just to wrap 0:23:03.880 --> 0:23:08.199 this conversation up, real rates at the Federal Reserve, we 0:23:08.280 --> 0:23:12.680