1 00:00:00,120 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bramwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,920 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:36,960 Speaker 2: Terminal and the Bloomberg Business App. Joining us now to 10 00:00:36,960 --> 00:00:40,479 Speaker 2: discuss is Mohammad al Arian of Queen's College, Cambridge. Mohammed, 11 00:00:40,560 --> 00:00:43,000 Speaker 2: welcome to the program, Sir. I'm going to start yesterday. 12 00:00:43,200 --> 00:00:45,240 Speaker 2: I'm going to go back to yesterday morning, a thirty 13 00:00:45,280 --> 00:00:47,400 Speaker 2: easton time CPI drops. We were looking for you and 14 00:00:47,440 --> 00:00:49,879 Speaker 2: you weren't here. You're with us. Now, what's your response 15 00:00:49,920 --> 00:00:52,239 Speaker 2: to that day? To Muhammad? Because at the moment, the 16 00:00:52,280 --> 00:00:55,480 Speaker 2: market is slowly gravitating to paying more attention to levels. 17 00:00:55,760 --> 00:00:57,880 Speaker 2: The federal Reserve at the moment seems to be more 18 00:00:57,960 --> 00:00:59,760 Speaker 2: i would say, gripped by the current trend down in 19 00:00:59,800 --> 00:01:01,760 Speaker 2: curry by it. What are you focused on. 20 00:01:03,320 --> 00:01:05,640 Speaker 1: So, John, sorry, I wasn't with you yesterday. I was 21 00:01:05,680 --> 00:01:06,520 Speaker 1: on the road. 22 00:01:06,920 --> 00:01:10,400 Speaker 3: What I'm focused on is actually summarized really well by 23 00:01:10,560 --> 00:01:13,920 Speaker 3: John Authors of Bloomberg Opinion. I'm a big fan of 24 00:01:13,959 --> 00:01:17,839 Speaker 3: his daily Note, and today is a very thoughtful note, 25 00:01:17,880 --> 00:01:19,720 Speaker 3: and he basically leaves you with three messages. 26 00:01:20,520 --> 00:01:23,360 Speaker 1: One is the fall in inflation is stalling. 27 00:01:24,240 --> 00:01:28,360 Speaker 3: Two, if you look at the components, they suggest that 28 00:01:28,440 --> 00:01:30,200 Speaker 3: it will continue to stall. 29 00:01:30,880 --> 00:01:32,600 Speaker 1: And three is that if you. 30 00:01:32,560 --> 00:01:35,520 Speaker 3: Look at the work that's being done in the different 31 00:01:35,520 --> 00:01:38,959 Speaker 3: groups of economists within the FED, they also confirm that 32 00:01:39,000 --> 00:01:42,640 Speaker 3: we've got a three percent inflation weight. Now, as you know, 33 00:01:43,360 --> 00:01:45,880 Speaker 3: I think the equilibrium inflation weight for these countries between 34 00:01:45,920 --> 00:01:49,040 Speaker 3: two and a half and three. If you continue to 35 00:01:49,240 --> 00:01:52,200 Speaker 3: target two percent, then you're going to have some really 36 00:01:52,200 --> 00:01:54,520 Speaker 3: difficult choices, and I think that is what's facing the 37 00:01:54,520 --> 00:01:55,160 Speaker 3: FED right now. 38 00:01:55,240 --> 00:01:57,520 Speaker 2: Do you think they're also slightly realizing Muhammad without in 39 00:01:57,560 --> 00:01:59,880 Speaker 2: mind that they're not actually as restrictive as they think, 40 00:02:00,320 --> 00:02:02,560 Speaker 2: And are you seeing evidence of that start to creep 41 00:02:02,600 --> 00:02:05,720 Speaker 2: into some of the speeches you're hearing from FED officials. 42 00:02:06,560 --> 00:02:09,680 Speaker 3: Yeah, I think that backing away from the view that 43 00:02:09,720 --> 00:02:13,360 Speaker 3: they expressed in their last meeting, and I think that 44 00:02:14,160 --> 00:02:16,760 Speaker 3: what we're getting is, you know what, maybe I can 45 00:02:16,800 --> 00:02:21,960 Speaker 3: live with two percent plus for a while, because otherwise 46 00:02:22,320 --> 00:02:23,239 Speaker 3: they are. 47 00:02:23,000 --> 00:02:24,480 Speaker 1: In a really difficult situation. 48 00:02:24,880 --> 00:02:28,560 Speaker 3: Look, the market was relieved because the market didn't look 49 00:02:28,680 --> 00:02:31,320 Speaker 3: at the fact that core inflation is stuck at point 50 00:02:31,360 --> 00:02:35,000 Speaker 3: three monthly for the third straight months. The market was 51 00:02:35,040 --> 00:02:39,080 Speaker 3: worried that the numbers would be higher than the consensus forecasts, 52 00:02:39,080 --> 00:02:40,400 Speaker 3: and that didn't happen. 53 00:02:40,520 --> 00:02:43,800 Speaker 4: In the components though the BLS reported that over half 54 00:02:43,880 --> 00:02:47,640 Speaker 4: of the inflation we saw, Mohammad came from shelter prices 55 00:02:47,720 --> 00:02:51,200 Speaker 4: raising Claudia Sam said, we don't have an inflation problem. Now, 56 00:02:51,480 --> 00:02:54,000 Speaker 4: we have a housing problem. And that's been true for 57 00:02:54,120 --> 00:02:57,560 Speaker 4: over a year. We've seen the FED cut rates and 58 00:02:57,639 --> 00:03:00,560 Speaker 4: mortgages move higher. Muhammad, How do you solve an inflation 59 00:03:00,680 --> 00:03:03,720 Speaker 4: problem if it's underpinned by a fickle housing market. 60 00:03:04,639 --> 00:03:07,320 Speaker 3: So I don't think that's the only issue, Danny, but 61 00:03:07,360 --> 00:03:08,600 Speaker 3: it's an important issue. 62 00:03:08,840 --> 00:03:11,960 Speaker 1: And again I'll point you to john Author's note. 63 00:03:12,440 --> 00:03:14,560 Speaker 5: You can tell I really like it because you've got 64 00:03:14,639 --> 00:03:17,360 Speaker 5: such a good detailed work. We love Johnson where he 65 00:03:17,480 --> 00:03:19,880 Speaker 5: looks at trim the measures, where he looks at all that. 66 00:03:20,080 --> 00:03:24,359 Speaker 5: The problem is services, and within services is wages. 67 00:03:24,919 --> 00:03:29,440 Speaker 3: It's a good thing for the average American that real 68 00:03:29,480 --> 00:03:32,320 Speaker 3: wages are growing by more than one percent. Now, that's 69 00:03:32,360 --> 00:03:36,200 Speaker 3: a good thing. But it's feeding into services and that's 70 00:03:36,240 --> 00:03:40,360 Speaker 3: the big issue. And it's happening at the time when 71 00:03:41,000 --> 00:03:43,680 Speaker 3: grocery inflation has come down a lot, where there are 72 00:03:43,840 --> 00:03:48,160 Speaker 3: negative price increases for certain food items. And the concern 73 00:03:48,600 --> 00:03:51,600 Speaker 3: is that services aren't going to come down fast enough 74 00:03:51,640 --> 00:03:56,360 Speaker 3: inflation wise, before good services goods inflation starts. 75 00:03:56,000 --> 00:03:58,920 Speaker 4: Going up, Mohammed, If we're going to be an environment 76 00:03:59,240 --> 00:04:02,320 Speaker 4: where aid potentially is the priority of this White House, 77 00:04:02,360 --> 00:04:05,120 Speaker 4: tariffs are put on and American companies are broad or 78 00:04:05,120 --> 00:04:08,440 Speaker 4: forced to come back and they're forced to pay American workers, 79 00:04:08,800 --> 00:04:10,680 Speaker 4: is this problem not going to get a whole lot worse. 80 00:04:12,200 --> 00:04:15,760 Speaker 3: So I'm in the UK here, Danny, where everybody the 81 00:04:15,840 --> 00:04:18,279 Speaker 3: companies have found it totally normal to say the minute 82 00:04:18,320 --> 00:04:20,040 Speaker 3: might cost go up, I'm going to pass it on. 83 00:04:20,440 --> 00:04:23,560 Speaker 3: And you hear that over and over again from companies 84 00:04:23,640 --> 00:04:27,039 Speaker 3: in reaction to the budget. So there is this mentality 85 00:04:27,160 --> 00:04:31,440 Speaker 3: right now in the corporate world that forget about your profits, 86 00:04:31,480 --> 00:04:36,159 Speaker 3: forget about all the dividends and all the share buybacks 87 00:04:36,160 --> 00:04:39,119 Speaker 3: you do. If your costs go up, then you should 88 00:04:39,160 --> 00:04:40,640 Speaker 3: pass it on to the consumers. 89 00:04:40,800 --> 00:04:41,720 Speaker 1: So there is that risk. 90 00:04:41,720 --> 00:04:44,640 Speaker 3: But I want to stress that it's really hard to 91 00:04:44,760 --> 00:04:52,800 Speaker 3: model what the president elects economic promises. First you have 92 00:04:52,880 --> 00:04:55,520 Speaker 3: to decide how many are going to be implemented, and 93 00:04:55,560 --> 00:04:59,400 Speaker 3: then you have to decide the two counter forces. Yes, 94 00:05:00,000 --> 00:05:05,400 Speaker 3: arosty inflationary, Yes, higher budget deficit will tend to put pressure. 95 00:05:05,520 --> 00:05:08,480 Speaker 3: But on the other side you have a major deregulation 96 00:05:09,000 --> 00:05:11,160 Speaker 3: and on the other side you have a major promise 97 00:05:11,680 --> 00:05:15,520 Speaker 3: to act on the expenditure side of the budget. So 98 00:05:15,600 --> 00:05:18,760 Speaker 3: when you look at these two things, the first even 99 00:05:18,800 --> 00:05:20,559 Speaker 3: when you try to net it out, it is not clear. 100 00:05:20,600 --> 00:05:23,680 Speaker 3: And then the second round effects get really complicated. And 101 00:05:23,720 --> 00:05:27,599 Speaker 3: I tell people, regardless of what happens, we now have 102 00:05:27,680 --> 00:05:30,159 Speaker 3: an inflation that's not going to go to two percent. Now, 103 00:05:30,200 --> 00:05:32,760 Speaker 3: before you jump immediately to what's going to happen next, 104 00:05:33,920 --> 00:05:37,160 Speaker 3: understand that you got to wait because it's really complicated 105 00:05:37,240 --> 00:05:38,680 Speaker 3: economics sorting all this out. 106 00:05:39,120 --> 00:05:41,159 Speaker 6: Muhammad, you have a new piece out today and you say, 107 00:05:41,200 --> 00:05:43,800 Speaker 6: once again it was the economy stupid, im project syndicate, 108 00:05:43,839 --> 00:05:46,159 Speaker 6: And I think, and you can tell us here. Are 109 00:05:46,160 --> 00:05:48,480 Speaker 6: you trying to answer a question that our own colleague, 110 00:05:48,520 --> 00:05:53,479 Speaker 6: Craig Tours asked J. Powell in the press conference, which was, 111 00:05:53,520 --> 00:05:56,400 Speaker 6: did you learn anything about Americans think about the economy 112 00:05:56,640 --> 00:05:57,839 Speaker 6: from the election results? 113 00:05:59,360 --> 00:06:00,880 Speaker 1: Yeah? 114 00:05:59,720 --> 00:06:05,640 Speaker 3: And Marie, it's fascinating because there were two economic messages 115 00:06:05,720 --> 00:06:07,239 Speaker 3: sent and they're both correct. 116 00:06:07,960 --> 00:06:08,600 Speaker 1: There was the. 117 00:06:08,520 --> 00:06:12,479 Speaker 3: One that the Republicans pounced on, repeating the nineteen eighty 118 00:06:12,560 --> 00:06:15,520 Speaker 3: Reagan question are you better off? And they were talking 119 00:06:15,520 --> 00:06:20,080 Speaker 3: about the price level and people really still have sticker 120 00:06:20,160 --> 00:06:23,640 Speaker 3: shock when they go to the grocery store, so that 121 00:06:23,800 --> 00:06:26,240 Speaker 3: is what the average person focused on. 122 00:06:27,000 --> 00:06:28,960 Speaker 6: Well, you asked a question as well in your piece, 123 00:06:29,120 --> 00:06:32,640 Speaker 6: will the Democrats and establishment in quotes you put experts 124 00:06:32,680 --> 00:06:33,440 Speaker 6: get the message? 125 00:06:33,480 --> 00:06:33,880 Speaker 7: Will they? 126 00:06:34,960 --> 00:06:38,680 Speaker 3: Well, they haven't so far because they're focused on the 127 00:06:38,720 --> 00:06:42,280 Speaker 3: economic exceptionalism, which is also true, but in a ca 128 00:06:42,600 --> 00:06:46,520 Speaker 3: shaped economy that doesn't trickle down as much as you'd 129 00:06:46,560 --> 00:06:50,200 Speaker 3: like it to. So the Democrats stuck with the economic exceptionalism. 130 00:06:50,240 --> 00:06:53,560 Speaker 3: They didn't understand that that message wasn't getting through for 131 00:06:53,760 --> 00:06:57,520 Speaker 3: good reason, because people were concerned about the price level. 132 00:06:57,800 --> 00:06:59,680 Speaker 3: And you know, and Marie that the more you tell 133 00:06:59,800 --> 00:07:03,800 Speaker 3: some a message that doesn't speak to their reality. The 134 00:07:03,800 --> 00:07:06,680 Speaker 3: more they questioned you, the more they lose trust in you. 135 00:07:07,440 --> 00:07:11,440 Speaker 3: And the economists did a terrible job. The mainstream economists 136 00:07:11,440 --> 00:07:13,880 Speaker 3: did a terrible job of trying to reconcile the two views, 137 00:07:13,880 --> 00:07:19,360 Speaker 3: which are moreconcilable. But unfortunately the reality is that people 138 00:07:19,400 --> 00:07:21,640 Speaker 3: will continue to focus on the prist level because it 139 00:07:21,720 --> 00:07:23,680 Speaker 3: has been such a large shock. We're not used to 140 00:07:23,680 --> 00:07:26,120 Speaker 3: seeing inflation at nine percent, which is where it was 141 00:07:26,160 --> 00:07:28,840 Speaker 3: in June twenty twenty two, and that impact hasn't gone away. 142 00:07:28,920 --> 00:07:31,320 Speaker 2: Mohammed, What did your thoughts on the price action? Let's 143 00:07:31,320 --> 00:07:33,160 Speaker 2: talk about that. A little bit ahead of the election, 144 00:07:33,800 --> 00:07:35,720 Speaker 2: you were looking at what was happening in the bond market, 145 00:07:35,720 --> 00:07:37,400 Speaker 2: in the high yields, and this line came up in 146 00:07:37,400 --> 00:07:40,080 Speaker 2: your Bloomberg opinion column. Well, most analysts agree on the 147 00:07:40,080 --> 00:07:43,120 Speaker 2: list of potential contributors to this unusual development. FET's cutting 148 00:07:43,160 --> 00:07:46,160 Speaker 2: interest rates, yields a rising there is little consensus on 149 00:07:46,200 --> 00:07:48,600 Speaker 2: their relative importance. You went on to say that over 150 00:07:48,640 --> 00:07:50,720 Speaker 2: the next week we should get some clarity on that. 151 00:07:50,760 --> 00:07:53,600 Speaker 2: Do you have clarity now on what is driving long rates? 152 00:07:55,600 --> 00:07:59,320 Speaker 3: I have more clarity on what's driving long rates, and 153 00:07:59,520 --> 00:08:02,480 Speaker 3: it's exactly what you have been talking about the market 154 00:08:02,880 --> 00:08:06,600 Speaker 3: is front running economic announcements, including who's. 155 00:08:06,360 --> 00:08:08,360 Speaker 1: Going to be in Treasury and that's going to be 156 00:08:08,440 --> 00:08:11,400 Speaker 1: really important. And I agree with and earlier today saying 157 00:08:11,400 --> 00:08:12,560 Speaker 1: that that really matters. 158 00:08:13,000 --> 00:08:15,360 Speaker 3: You see that the economy has continued to surprise on 159 00:08:15,400 --> 00:08:19,120 Speaker 3: the upside and that has an impact. Meanwhile in Europe, 160 00:08:19,240 --> 00:08:21,560 Speaker 3: and I'm glad you've been focusing on the effects situation. 161 00:08:22,160 --> 00:08:25,080 Speaker 3: Things have gone in the opposite direction, John. The yield 162 00:08:25,080 --> 00:08:31,120 Speaker 3: differential between tenure treasuries and tenure German government bonds, the 163 00:08:31,160 --> 00:08:35,160 Speaker 3: boons are back over two hundred basis points. That's been 164 00:08:35,200 --> 00:08:38,240 Speaker 3: a massive move, and it just the market has understood 165 00:08:38,840 --> 00:08:42,160 Speaker 3: that divergence is a major story going forward. 166 00:08:42,240 --> 00:08:45,240 Speaker 2: Now, Hammd, how much more divergent things possibly get? We've 167 00:08:45,280 --> 00:08:48,480 Speaker 2: already seen aggressive widening over the past week. I was 168 00:08:48,520 --> 00:08:50,760 Speaker 2: mentioning in a conversation earlier this morning at the front end, 169 00:08:50,800 --> 00:08:52,800 Speaker 2: if you compare the German two year to the US 170 00:08:52,840 --> 00:08:55,360 Speaker 2: two year only back in September that was treading around 171 00:08:55,360 --> 00:08:58,360 Speaker 2: one thirty now is something like two twenty, so almost 172 00:08:58,360 --> 00:09:01,080 Speaker 2: the one hundred basis point move on that spread. Mhammed, 173 00:09:01,120 --> 00:09:02,720 Speaker 2: how much wider can things get? 174 00:09:04,040 --> 00:09:06,559 Speaker 3: I think they can get wider, John, I think you know, 175 00:09:07,000 --> 00:09:08,400 Speaker 3: if you look at the good, the bad, and the 176 00:09:08,480 --> 00:09:11,800 Speaker 3: ugly of the global economy, Unfortunately Europe is in the ugly. 177 00:09:12,840 --> 00:09:17,040 Speaker 3: Cyclically that challenged, secularly that challenged. 178 00:09:18,280 --> 00:09:19,040 Speaker 1: There is no. 179 00:09:20,640 --> 00:09:24,600 Speaker 3: Definitive political leadership in the two countries where you need 180 00:09:24,640 --> 00:09:29,000 Speaker 3: it most, Germany and France. There's a roadmap the DRUGA report, 181 00:09:29,480 --> 00:09:34,080 Speaker 3: but they're nowhere near even talking about implementation, let alone implementation. 182 00:09:34,760 --> 00:09:38,480 Speaker 3: And these dynamics today mean that if you're lagging, you 183 00:09:38,520 --> 00:09:41,360 Speaker 3: are likely to lag even more so, John, it wouldn't 184 00:09:41,400 --> 00:09:43,640 Speaker 3: surprise me if you see that differential go higher. 185 00:09:43,640 --> 00:09:45,920 Speaker 1: It wouldn't surprise me if you see the year orgo weaker. 186 00:09:46,160 --> 00:09:48,680 Speaker 2: So that makes it easier, relatively speaking, to call the 187 00:09:48,679 --> 00:09:52,280 Speaker 2: ECP for twenty twenty five, they're going to cut interest rates, Muhammad. 188 00:09:52,280 --> 00:09:55,679 Speaker 2: There is overwhelming consensus the FED reduces rates again in December. 189 00:09:56,000 --> 00:09:58,360 Speaker 2: I would love your base case for twenty twenty five. 190 00:09:58,679 --> 00:10:00,200 Speaker 2: Before we get to the end of the year. You're 191 00:10:00,240 --> 00:10:02,160 Speaker 2: thinking about how much work this FED can actually do 192 00:10:02,679 --> 00:10:05,440 Speaker 2: and whether you think ultimately just in terms of how 193 00:10:05,520 --> 00:10:08,320 Speaker 2: the communication has evolved over the past few days, we're 194 00:10:08,320 --> 00:10:10,960 Speaker 2: setting ourselves out for a pause into twenty five. 195 00:10:12,240 --> 00:10:14,480 Speaker 3: So first I agree with you that we are likely 196 00:10:14,520 --> 00:10:18,120 Speaker 3: to see another twenty five basis points cut in December, 197 00:10:18,120 --> 00:10:21,640 Speaker 3: and we should see another basis point twenty five basis. 198 00:10:21,320 --> 00:10:23,840 Speaker 1: Point cut longer term. 199 00:10:24,200 --> 00:10:26,800 Speaker 3: You know the range if you look at the dots 200 00:10:26,840 --> 00:10:29,720 Speaker 3: of what where is the terminal weight where from about 201 00:10:29,720 --> 00:10:34,200 Speaker 3: three and a half to just over sorry, from two 202 00:10:34,200 --> 00:10:36,480 Speaker 3: and a quarter to just over three and three quarters, 203 00:10:36,600 --> 00:10:38,640 Speaker 3: And I've argued it's towards the upper end. 204 00:10:39,000 --> 00:10:41,680 Speaker 1: I suspect that that now is about four percent. That 205 00:10:41,800 --> 00:10:45,120 Speaker 1: is the terminal weight for where we're going. So we 206 00:10:45,200 --> 00:10:49,520 Speaker 1: will have a couple more cuts, and then it gets really. 207 00:10:49,160 --> 00:10:53,080 Speaker 3: Hard to cut more unless you're willing to have the 208 00:10:53,120 --> 00:10:55,600 Speaker 3: difficult discussions. And this is this is not a FED 209 00:10:55,679 --> 00:10:57,800 Speaker 3: that's willing to have a difficult discussion. This is a 210 00:10:57,800 --> 00:11:03,680 Speaker 3: FED that will continue to stand behind this notion of 211 00:11:03,760 --> 00:11:07,240 Speaker 3: data dependency. And this is a fact that may be 212 00:11:07,240 --> 00:11:10,040 Speaker 3: built out on inflation by what's happening away from it, 213 00:11:10,640 --> 00:11:13,400 Speaker 3: and build out in the wrong way, meaning that inflation 214 00:11:13,880 --> 00:11:16,360 Speaker 3: doesn't go to two percent, and they'll just say it's 215 00:11:16,360 --> 00:11:16,880 Speaker 3: not our fault. 216 00:11:17,360 --> 00:11:18,880 Speaker 2: Muhamma, and I had taught you all day, we all 217 00:11:18,920 --> 00:11:21,520 Speaker 2: could what do you mean by the difficult discussion. What 218 00:11:21,640 --> 00:11:23,600 Speaker 2: is the discussion that you'd like the Federal Reserved to 219 00:11:23,640 --> 00:11:25,480 Speaker 2: have as soon as today? What would you like to 220 00:11:25,480 --> 00:11:28,360 Speaker 2: hear from Chairman Pow at three pm Eastern time that 221 00:11:28,480 --> 00:11:29,559 Speaker 2: you're not expecting to hear. 222 00:11:30,960 --> 00:11:33,800 Speaker 3: So I'm definitely not expecting to hear the question. Is 223 00:11:33,840 --> 00:11:37,199 Speaker 3: two percent still the right inflation target? He's not going 224 00:11:37,240 --> 00:11:42,240 Speaker 3: to touch this? Hopefully behind closed door they are, because 225 00:11:42,440 --> 00:11:44,600 Speaker 3: even if you don't want to change your inflation target 226 00:11:44,720 --> 00:11:46,840 Speaker 3: and they won't change the inflation target. 227 00:11:47,000 --> 00:11:49,440 Speaker 1: The path to that really matters. 228 00:11:49,960 --> 00:11:53,000 Speaker 3: So I'm hoping that they're having a discussion what is 229 00:11:53,040 --> 00:11:57,120 Speaker 3: the white neutral weight in this economy right now? 230 00:11:57,120 --> 00:11:58,560 Speaker 1: What is the white inflation target? 231 00:11:59,000 --> 00:12:02,200 Speaker 3: That discussion, if you had it without the historical context 232 00:12:02,840 --> 00:12:06,079 Speaker 3: and without the legacy of having missed so badly on 233 00:12:06,520 --> 00:12:09,559 Speaker 3: your inflation target since twenty twenty one, would be it's 234 00:12:09,600 --> 00:12:11,800 Speaker 3: more between two and a half and three and that's 235 00:12:11,800 --> 00:12:15,200 Speaker 3: probably the range it should be. But that's not a 236 00:12:15,400 --> 00:12:17,559 Speaker 3: discussion that he will ever have publicly, not. 237 00:12:17,600 --> 00:12:19,800 Speaker 2: This fat Mohammed. It's good to hear from you, sir. 238 00:12:19,840 --> 00:12:23,040 Speaker 2: I appreciate your time. Mohammed al Erindav of Queen's College Cambridge. 239 00:12:23,080 --> 00:12:35,440 Speaker 2: Thank you, sir, President ELK. Donald Trump's priorities coming into 240 00:12:35,440 --> 00:12:38,560 Speaker 2: sharper focus. Rob Casey of Signum Global Advisors saying, we 241 00:12:38,640 --> 00:12:42,640 Speaker 2: believe President elect Trump and trade advisor Robert Leiheiser are 242 00:12:42,679 --> 00:12:46,440 Speaker 2: committed to implementing an aggressive terariff agenda, likely beginning with 243 00:12:46,480 --> 00:12:49,640 Speaker 2: Europe and ending with China. Rob joins us Now for 244 00:12:49,679 --> 00:12:50,840 Speaker 2: more Rob, Good morning John. 245 00:12:50,920 --> 00:12:51,559 Speaker 1: The sequence. 246 00:12:51,760 --> 00:12:55,120 Speaker 2: It's a big focus for financial market participants worldwide. You 247 00:12:55,240 --> 00:12:57,679 Speaker 2: think that it's going to start with trade and it 248 00:12:57,720 --> 00:12:59,040 Speaker 2: will start with Europe. 249 00:12:59,240 --> 00:13:02,480 Speaker 8: Why, yeah, Well, first and foremost, it's not to say 250 00:13:02,480 --> 00:13:04,600 Speaker 8: that we don't think that they're not going to wait 251 00:13:04,640 --> 00:13:06,839 Speaker 8: on China for very long, but we do think that 252 00:13:06,880 --> 00:13:10,079 Speaker 8: Europe is the day one priority mostly, you know, speaking 253 00:13:10,200 --> 00:13:12,200 Speaker 8: very bluntly because we don't think Trump likes you up 254 00:13:12,280 --> 00:13:15,760 Speaker 8: a whole lot. And you know, essentially we're dealing with 255 00:13:15,800 --> 00:13:18,280 Speaker 8: a what is not a net neutral landscape but a 256 00:13:18,280 --> 00:13:22,280 Speaker 8: net negative landscape. Seabam, deforestation, steel, airbus. They are all 257 00:13:22,280 --> 00:13:25,040 Speaker 8: of these trip wires that you know, the pro EU 258 00:13:25,120 --> 00:13:27,320 Speaker 8: presidency of Joe Biden was not able to deal with, 259 00:13:27,440 --> 00:13:30,079 Speaker 8: was not able to handle. We think Trump comes into 260 00:13:30,120 --> 00:13:33,760 Speaker 8: office essentially with all those tripwires laid out, not really 261 00:13:33,760 --> 00:13:34,600 Speaker 8: looking to avoid them. 262 00:13:34,760 --> 00:13:37,199 Speaker 6: Ron Desandis the governor of Florida is in Italy right 263 00:13:37,240 --> 00:13:39,480 Speaker 6: now on a trade mission. Who do you think Trump 264 00:13:39,600 --> 00:13:42,960 Speaker 6: views as someone he could work with in Europe? 265 00:13:43,080 --> 00:13:44,959 Speaker 8: Well, I think it's it's Orbon first, and then when 266 00:13:44,960 --> 00:13:46,760 Speaker 8: Trump realized that Auburn actually doesn't have a whole lot 267 00:13:46,760 --> 00:13:48,760 Speaker 8: of power in the EU, it will be Maloney second. 268 00:13:49,000 --> 00:13:50,880 Speaker 6: So when it comes to the tariffs, and if you 269 00:13:50,920 --> 00:13:53,760 Speaker 6: think they're going to be enacted, first, personnel's policy, as 270 00:13:53,800 --> 00:13:56,240 Speaker 6: you know in Washington, d C. Where does he put Lightheiser? 271 00:13:57,080 --> 00:13:59,080 Speaker 8: We think Lightheyser could be at USTR. 272 00:13:59,120 --> 00:14:00,080 Speaker 7: He could go back to us. 273 00:14:00,080 --> 00:14:02,480 Speaker 8: You are, but you know, if I'm Robert Leitheiser, honestly, 274 00:14:02,480 --> 00:14:05,880 Speaker 8: I'm looking for a slightly larger portfolio, a little bit 275 00:14:05,880 --> 00:14:08,080 Speaker 8: of a you know, a bigger role, and that could be. 276 00:14:08,080 --> 00:14:11,000 Speaker 2: A commerce that's terriffs, let's tell it taxes. Let's talk 277 00:14:11,000 --> 00:14:13,800 Speaker 2: about what can actually get through Congress, and you'll view 278 00:14:13,840 --> 00:14:15,920 Speaker 2: and what took place in the Senate in the last 279 00:14:15,960 --> 00:14:19,120 Speaker 2: twenty four hours. How constrained will this presidency be by 280 00:14:19,120 --> 00:14:22,240 Speaker 2: a Senate that for some people stand down the President 281 00:14:22,320 --> 00:14:24,760 Speaker 2: elect and made its own decision a backg a different way. 282 00:14:25,200 --> 00:14:26,720 Speaker 8: Yeah, well, I think we can all be sort of 283 00:14:26,760 --> 00:14:28,320 Speaker 8: relieved and happy that it's going to be John Thune, 284 00:14:28,320 --> 00:14:31,160 Speaker 8: who is to his core an institutionalist, so to the 285 00:14:31,200 --> 00:14:33,360 Speaker 8: extent that it's not Rick Scott. John Thune presents a 286 00:14:33,400 --> 00:14:35,680 Speaker 8: little bit more of a constraint, but I mean he's 287 00:14:35,680 --> 00:14:37,480 Speaker 8: got fifty three votes in the Senate, so I don't 288 00:14:37,520 --> 00:14:40,240 Speaker 8: think it's going to be a huge constraint moving forward. 289 00:14:40,280 --> 00:14:42,280 Speaker 6: But tendor Thoon has said he will not get rid 290 00:14:42,280 --> 00:14:44,920 Speaker 6: of the filibuster. So basically the only thing that can 291 00:14:45,040 --> 00:14:47,160 Speaker 6: the Senate can do with that kind of majority at 292 00:14:47,160 --> 00:14:51,880 Speaker 6: fifty three is tax and budget correct, Yeah, totally. 293 00:14:52,000 --> 00:14:55,160 Speaker 8: We think it'll be a very big budget reconciliation package. 294 00:14:55,440 --> 00:14:57,400 Speaker 8: You know, they're talking about getting it done in the 295 00:14:57,440 --> 00:14:59,600 Speaker 8: first one hundred days of the term. I think that 296 00:14:59,680 --> 00:15:02,440 Speaker 8: will be exceedingly difficult. We also have to realize, frankly, 297 00:15:02,440 --> 00:15:05,480 Speaker 8: that we're running up to a budget cliff in December 298 00:15:05,520 --> 00:15:07,040 Speaker 8: as well, so they're going to have to pass a 299 00:15:07,080 --> 00:15:07,920 Speaker 8: cr in the short. 300 00:15:07,800 --> 00:15:09,520 Speaker 7: Term with the current Congress. 301 00:15:09,680 --> 00:15:11,520 Speaker 8: If they pass it out to January February, they're going 302 00:15:11,560 --> 00:15:13,880 Speaker 8: to have to deal with that first. A larger reconciliation 303 00:15:13,960 --> 00:15:17,520 Speaker 8: package after that. But there's now talk about extending the 304 00:15:17,520 --> 00:15:20,560 Speaker 8: CR to September October November to give them kind of 305 00:15:20,560 --> 00:15:23,000 Speaker 8: that first one hundred days latitude to get the budget 306 00:15:23,040 --> 00:15:24,040 Speaker 8: or conciliation deal done. 307 00:15:24,120 --> 00:15:25,760 Speaker 6: So with soon at the helm, What do you make 308 00:15:25,800 --> 00:15:27,760 Speaker 6: of how the confirmation hearings are going to go. 309 00:15:28,560 --> 00:15:30,720 Speaker 8: I think we can safely say, or at least I 310 00:15:30,760 --> 00:15:32,640 Speaker 8: will predict that mat Gates does not get confirmed as 311 00:15:32,640 --> 00:15:35,280 Speaker 8: Attorney General, so he may wind up being sort of 312 00:15:35,320 --> 00:15:39,800 Speaker 8: the sacrificial lamb of the cabinet picks. I think everybody 313 00:15:39,840 --> 00:15:42,800 Speaker 8: else probably gets through. Again, Trump can lose one or 314 00:15:42,800 --> 00:15:46,640 Speaker 8: two Republicans in any confirmation vote and still still passes nominees. 315 00:15:46,680 --> 00:15:50,600 Speaker 8: So you know, Hagseth probably going to be a longer, 316 00:15:50,920 --> 00:15:53,680 Speaker 8: more difficult process. Just give them that he's not really 317 00:15:53,680 --> 00:15:56,280 Speaker 8: on the books of regarding policy at all. I think 318 00:15:56,280 --> 00:15:58,000 Speaker 8: mac Gates is probably the one who's struck down, and 319 00:15:58,080 --> 00:15:59,200 Speaker 8: everybody else probably. 320 00:15:58,920 --> 00:15:59,840 Speaker 1: Gets through Seth. 321 00:16:00,080 --> 00:16:02,400 Speaker 4: Gates, though, showed us that Trump is willing to nominate 322 00:16:02,440 --> 00:16:04,720 Speaker 4: people who hadn't been on anyone's list. I don't think 323 00:16:04,720 --> 00:16:07,080 Speaker 4: anyone expected either of them to be put up for 324 00:16:07,120 --> 00:16:07,760 Speaker 4: these jobs. 325 00:16:08,200 --> 00:16:09,000 Speaker 1: Does that show us. 326 00:16:08,960 --> 00:16:10,920 Speaker 4: That maybe we're too sanguine that when it comes to 327 00:16:10,960 --> 00:16:13,320 Speaker 4: Treasury secretary will get kind of a classic pick, a 328 00:16:13,360 --> 00:16:14,320 Speaker 4: market friendly. 329 00:16:14,080 --> 00:16:16,920 Speaker 7: Pick on Treasury. 330 00:16:17,080 --> 00:16:19,440 Speaker 8: I mean, I think it's going to be Best in 331 00:16:19,440 --> 00:16:22,880 Speaker 8: Our or Lutnik. Frankly so to the extent that that 332 00:16:22,960 --> 00:16:24,680 Speaker 8: sort of hams us in. I think that's good news. 333 00:16:25,280 --> 00:16:27,360 Speaker 8: But we have to be honest and saying that Trump 334 00:16:27,360 --> 00:16:29,520 Speaker 8: received a whether or not it was landslide I think 335 00:16:29,600 --> 00:16:32,640 Speaker 8: is up for debate, but a national mandate, right, and 336 00:16:32,680 --> 00:16:34,920 Speaker 8: he's going to put people into these jobs that a 337 00:16:35,160 --> 00:16:37,120 Speaker 8: he likes and B we're very loyal to him, and 338 00:16:37,520 --> 00:16:39,160 Speaker 8: he's not really going to apologize for it. He doesn't 339 00:16:39,160 --> 00:16:41,360 Speaker 8: have to apologize for it. He won the national popular vote. 340 00:16:41,440 --> 00:16:43,960 Speaker 8: He's got to send up majority. And so do I 341 00:16:43,960 --> 00:16:45,720 Speaker 8: think we could get more surprises from here, or at 342 00:16:45,760 --> 00:16:48,560 Speaker 8: least really more trump accolytes from here. Whether or not 343 00:16:48,600 --> 00:16:50,800 Speaker 8: that's a surprise, yeah, I think we could. 344 00:16:50,920 --> 00:16:52,520 Speaker 2: But does soons. 345 00:16:52,160 --> 00:16:54,280 Speaker 4: Lifting up as leader or not show us that there 346 00:16:54,360 --> 00:16:57,760 Speaker 4: is some resistance to some of Trump's ideas and who 347 00:16:57,800 --> 00:16:58,240 Speaker 4: he wants. 348 00:16:58,480 --> 00:17:01,280 Speaker 8: There's some I would say there is some resistance, or 349 00:17:01,280 --> 00:17:03,000 Speaker 8: at least it's clear that the Senate isn't going to 350 00:17:03,000 --> 00:17:05,119 Speaker 8: just roll over for Trump every single time, right, And 351 00:17:05,359 --> 00:17:07,119 Speaker 8: I think John Thune will be He'll be a very 352 00:17:07,119 --> 00:17:09,320 Speaker 8: good majority leader. He'll be a strong majority leader. And 353 00:17:09,440 --> 00:17:11,200 Speaker 8: to the extent that he wants or has to stand 354 00:17:11,240 --> 00:17:12,639 Speaker 8: up to Trump, I think he will be able to. 355 00:17:13,640 --> 00:17:13,720 Speaker 1: That. 356 00:17:13,800 --> 00:17:17,560 Speaker 8: Being said, though, on policy right on tax policy, on tariffs, 357 00:17:17,560 --> 00:17:20,240 Speaker 8: et cetera, I think most of the Republican majorities in 358 00:17:20,240 --> 00:17:23,240 Speaker 8: Congress are in line with Trump. So Tune is not 359 00:17:23,240 --> 00:17:25,280 Speaker 8: going to stand up on policy. He may stand up 360 00:17:25,320 --> 00:17:26,560 Speaker 8: on some of these personnel decisions. 361 00:17:26,560 --> 00:17:28,720 Speaker 4: When Trump went to the House the other day, when 362 00:17:28,720 --> 00:17:31,240 Speaker 4: he also had the meeting with Biden, he brought Musk 363 00:17:31,640 --> 00:17:34,160 Speaker 4: alongside him. I just wonder what the presence of Musk, 364 00:17:34,160 --> 00:17:37,080 Speaker 4: who has become this huge donor for the Republican class, 365 00:17:37,359 --> 00:17:40,600 Speaker 4: does to affect sentiment in Capitol Hill. Is there almost 366 00:17:40,600 --> 00:17:42,560 Speaker 4: an element where they need to follow the money and 367 00:17:42,600 --> 00:17:45,080 Speaker 4: that Musk represents a greater threat to them and maybe 368 00:17:45,080 --> 00:17:47,879 Speaker 4: even funding challengers to those who don't support Trump. 369 00:17:48,200 --> 00:17:48,400 Speaker 1: Yeah. 370 00:17:48,400 --> 00:17:50,119 Speaker 8: Well, I think one of the biggest stories over the 371 00:17:50,119 --> 00:17:51,800 Speaker 8: next two years may wind up being Trump and Musk 372 00:17:51,800 --> 00:17:55,400 Speaker 8: falling out, just because two very talented political individuals, two 373 00:17:55,520 --> 00:17:57,600 Speaker 8: very big egos in the same room together. That that 374 00:17:57,680 --> 00:17:59,960 Speaker 8: only works for so long, right, So, I mean it's 375 00:18:00,040 --> 00:18:02,440 Speaker 8: jams as though Musk is attached to Donald Trump's hip 376 00:18:02,480 --> 00:18:05,479 Speaker 8: at this point, you know he's running this government if 377 00:18:05,520 --> 00:18:07,119 Speaker 8: he has this government efficiency mandate. 378 00:18:07,160 --> 00:18:08,240 Speaker 1: Now, we'll see how that goes. 379 00:18:09,119 --> 00:18:11,160 Speaker 8: Do Republicans want to keep him on side at least 380 00:18:11,200 --> 00:18:14,040 Speaker 8: until the midterms? Definitely? Will Trump be able to We'll 381 00:18:14,280 --> 00:18:16,600 Speaker 8: keep him on side and keep it friendly. I honestly 382 00:18:16,600 --> 00:18:18,080 Speaker 8: think it's easier said than them. 383 00:18:18,200 --> 00:18:20,440 Speaker 2: Do you think Democrats could have avoided this if they'd 384 00:18:20,480 --> 00:18:22,959 Speaker 2: shown as much love to Elon Musk as they had 385 00:18:23,000 --> 00:18:25,680 Speaker 2: shown to Mary Barrat of GM, Could this school have 386 00:18:25,760 --> 00:18:26,280 Speaker 2: been avoided? 387 00:18:27,800 --> 00:18:30,560 Speaker 8: I mean yes, But I also think that in terms 388 00:18:30,560 --> 00:18:35,600 Speaker 8: of Trump's not cabinet but kind of broader universe, it 389 00:18:35,680 --> 00:18:37,680 Speaker 8: was there for the taking from Musk, it was there 390 00:18:37,720 --> 00:18:40,919 Speaker 8: for the purchasing, and to the extent that Democrats were 391 00:18:41,000 --> 00:18:44,160 Speaker 8: nice or not to Trump to Musk, I think less 392 00:18:44,160 --> 00:18:46,439 Speaker 8: important because Trump was able to give Musk really what 393 00:18:46,480 --> 00:18:47,240 Speaker 8: he wanted it and that. 394 00:18:47,240 --> 00:18:48,240 Speaker 1: Is power Trump. 395 00:18:48,840 --> 00:18:51,600 Speaker 6: John brought up the Democrats yesterday. There was a report 396 00:18:51,680 --> 00:18:54,520 Speaker 6: that the reason why Kama Harris didn't said down with 397 00:18:54,600 --> 00:18:58,120 Speaker 6: Joe Rogan and tap his fifteen million subscribers is because 398 00:18:58,160 --> 00:19:00,919 Speaker 6: they were worried about the progressive pushback. How does the 399 00:19:00,920 --> 00:19:03,000 Speaker 6: Democratic Party pick up the pieces. 400 00:19:03,119 --> 00:19:06,480 Speaker 8: Well, there's going to have to be a reckoning for sure. Obviously, 401 00:19:06,600 --> 00:19:10,480 Speaker 8: in this global landscape, it's hard for any incumbent administration 402 00:19:10,560 --> 00:19:11,200 Speaker 8: to get re elected. 403 00:19:11,240 --> 00:19:11,359 Speaker 1: Right. 404 00:19:11,400 --> 00:19:13,520 Speaker 8: We haven't seen that happen across the board this year, 405 00:19:13,600 --> 00:19:16,359 Speaker 8: So I certainly think Kamala Harris was running from behind 406 00:19:16,400 --> 00:19:19,439 Speaker 8: almost from the get go. That being said, Democrats have 407 00:19:19,520 --> 00:19:23,520 Speaker 8: sort of installed this message that is incredibly left on 408 00:19:23,640 --> 00:19:27,199 Speaker 8: social issues and actually pretty moderate on economic issues. And frankly, 409 00:19:27,200 --> 00:19:29,720 Speaker 8: I think most voters want the opposite right. They want 410 00:19:30,040 --> 00:19:32,800 Speaker 8: a populist economic policy, they want an economic policy that's 411 00:19:32,840 --> 00:19:35,560 Speaker 8: going to lift up manufacturing, lift up the working class, 412 00:19:36,240 --> 00:19:38,040 Speaker 8: and they want to hear less and less about some 413 00:19:38,080 --> 00:19:39,040 Speaker 8: of these social issues. 414 00:19:39,359 --> 00:19:40,000 Speaker 7: And so I think. 415 00:19:39,840 --> 00:19:42,440 Speaker 8: Democrats essentially have to have to inverse the messages. 416 00:19:42,960 --> 00:19:44,240 Speaker 2: The midterms are in two years. 417 00:19:44,400 --> 00:19:45,399 Speaker 6: How do they prepare for that? 418 00:19:46,720 --> 00:19:48,560 Speaker 8: In these two years? I think it's going to be 419 00:19:48,600 --> 00:19:50,280 Speaker 8: very hard to turn the party around one hundred and 420 00:19:50,280 --> 00:19:53,080 Speaker 8: eighty degrees right. It's hard to steer a really, really, 421 00:19:53,119 --> 00:19:55,920 Speaker 8: really big vote with a really, really really big bureaucracy. 422 00:19:56,480 --> 00:19:58,560 Speaker 8: That being said, I think for the next two years, 423 00:19:58,600 --> 00:20:01,760 Speaker 8: essentially they are going to to tit for tat against Trump. 424 00:20:01,920 --> 00:20:04,280 Speaker 8: They're going to be able to run against Trump in 425 00:20:04,320 --> 00:20:06,960 Speaker 8: the midterms. Most of the time, an incumbent party does 426 00:20:06,960 --> 00:20:08,159 Speaker 8: not do very well in the mid terms, as you 427 00:20:08,200 --> 00:20:11,560 Speaker 8: all know. I think for Democrats, the bigger issue, the 428 00:20:11,600 --> 00:20:14,760 Speaker 8: bigger challenge is just what is the proactive, sort of 429 00:20:14,800 --> 00:20:17,040 Speaker 8: positive message for their Democratic nominee. 430 00:20:17,080 --> 00:20:18,600 Speaker 7: And it's going to be a major fight. 431 00:20:18,640 --> 00:20:20,879 Speaker 8: We're going to see ten to twenty folks in that 432 00:20:20,960 --> 00:20:23,199 Speaker 8: nominee race, and so the question is what is the 433 00:20:23,240 --> 00:20:25,960 Speaker 8: message from the primary that emerges. 434 00:20:26,200 --> 00:20:27,720 Speaker 7: It's four years from now. We just started. 435 00:20:27,760 --> 00:20:29,760 Speaker 1: We just stopped talking about this this week. I's going 436 00:20:29,840 --> 00:20:30,119 Speaker 1: to watch you. 437 00:20:30,119 --> 00:20:31,560 Speaker 2: If you've got a name to watch, Have you got 438 00:20:31,600 --> 00:20:32,280 Speaker 2: a name in mind? 439 00:20:33,520 --> 00:20:36,960 Speaker 8: I think Pritzker from Illinois is sort of my dark 440 00:20:37,000 --> 00:20:40,280 Speaker 8: horse candidate. Not not a DC figure, but he can be, 441 00:20:40,440 --> 00:20:45,280 Speaker 8: you know, democrats billionaire in relation to Trump. He's tough talking, 442 00:20:45,520 --> 00:20:49,200 Speaker 8: he's come out post twenty twenty four, you know, strongly 443 00:20:49,240 --> 00:20:52,480 Speaker 8: in favor of many Democratic messages and strongly posted to Trump. 444 00:20:52,800 --> 00:20:54,440 Speaker 8: And I think it's a strong figure that's going to 445 00:20:54,480 --> 00:20:55,440 Speaker 8: have to be at the top of the ticket for 446 00:20:55,480 --> 00:20:57,440 Speaker 8: Democrats to compete in twenty twenty eight. 447 00:20:57,800 --> 00:20:58,399 Speaker 1: I appreciate it. 448 00:20:58,400 --> 00:21:00,679 Speaker 2: It's good to say six thank you. Roke their signal 449 00:21:10,920 --> 00:21:13,560 Speaker 2: Brian weistin' wealk and standing with us around a table. Brian, 450 00:21:13,640 --> 00:21:16,040 Speaker 2: welcome to the program. If we get a cut in December, 451 00:21:16,400 --> 00:21:17,240 Speaker 2: is that the last one? 452 00:21:18,119 --> 00:21:20,240 Speaker 7: It's the last one for a while. It could be 453 00:21:20,280 --> 00:21:20,920 Speaker 7: the last one. 454 00:21:21,119 --> 00:21:22,960 Speaker 9: I think they take the first quarter off at least, 455 00:21:23,160 --> 00:21:26,919 Speaker 9: you know, the first two meetings. There's a lot of 456 00:21:26,960 --> 00:21:28,320 Speaker 9: things that they have to sort through. I think this 457 00:21:28,320 --> 00:21:29,960 Speaker 9: one hundred we had god here was automatic. 458 00:21:30,320 --> 00:21:30,480 Speaker 1: Right. 459 00:21:30,520 --> 00:21:32,320 Speaker 9: We can all talk about the data and every data 460 00:21:32,320 --> 00:21:34,719 Speaker 9: point reacting to it, but we didn't react to it. 461 00:21:34,720 --> 00:21:36,480 Speaker 9: The data was stronger and we used one hundred basis 462 00:21:36,520 --> 00:21:39,160 Speaker 9: plot was the reaction was five point fifty was probably 463 00:21:39,200 --> 00:21:39,639 Speaker 9: too high. 464 00:21:39,760 --> 00:21:41,840 Speaker 7: Four point fifty sounds more normal? Is it? 465 00:21:42,040 --> 00:21:44,480 Speaker 9: We'll find out. So I think that's where we are. 466 00:21:44,560 --> 00:21:46,800 Speaker 9: But I think it's time to watch and let the 467 00:21:46,840 --> 00:21:48,520 Speaker 9: policy take effect and see what happened. 468 00:21:48,520 --> 00:21:51,080 Speaker 2: What concerns you is it the current level of things 469 00:21:51,040 --> 00:21:52,520 Speaker 2: that you look in less of the trend and more 470 00:21:52,560 --> 00:21:54,479 Speaker 2: about the levels and getting concern that maybe we get 471 00:21:54,520 --> 00:21:55,800 Speaker 2: stuck around these kind of levels. 472 00:21:56,080 --> 00:21:57,479 Speaker 7: I think we get stuck for a little bit. 473 00:21:57,520 --> 00:21:59,640 Speaker 9: And listen, our investors speaking with their wallets are buying 474 00:21:59,640 --> 00:22:02,120 Speaker 9: fixing right. We see it everywhere. The money's coming in, 475 00:22:02,520 --> 00:22:05,240 Speaker 9: you're getting a decent coupon. It should be a head 476 00:22:05,280 --> 00:22:08,080 Speaker 9: for equities. It hasn't been a great although now at 477 00:22:08,119 --> 00:22:10,040 Speaker 9: the back of the hives and yield the correlations breaking 478 00:22:10,080 --> 00:22:12,080 Speaker 9: down a bit right, Equities are doing okay. So my 479 00:22:12,160 --> 00:22:14,280 Speaker 9: instinct tells me the trade for next year is that 480 00:22:14,320 --> 00:22:16,160 Speaker 9: we're going to seek out the higher end of this range. 481 00:22:16,200 --> 00:22:18,399 Speaker 9: So you know, call it, you know, four percent to 482 00:22:18,520 --> 00:22:22,000 Speaker 9: five and a half maybe for next year. I don't 483 00:22:22,040 --> 00:22:24,000 Speaker 9: think we get there quickly. If we do, it's a problem, 484 00:22:24,000 --> 00:22:26,199 Speaker 9: it'll hurt risk. But if we get there kind of 485 00:22:26,240 --> 00:22:28,000 Speaker 9: hang out of four and a half start to move higher, 486 00:22:28,240 --> 00:22:30,119 Speaker 9: I think the market will be okay as long as 487 00:22:30,160 --> 00:22:32,840 Speaker 9: it's a growth story. We have all the dead stories 488 00:22:32,840 --> 00:22:34,359 Speaker 9: of inflation. But I think at the end of the day, 489 00:22:34,400 --> 00:22:36,800 Speaker 9: the growth story is actually the important one. 490 00:22:37,040 --> 00:22:39,920 Speaker 4: In the meantime, Blan, can you touch duration at all? 491 00:22:40,119 --> 00:22:43,120 Speaker 4: There are just so many unknowns for twenty twenty five 492 00:22:43,160 --> 00:22:44,359 Speaker 4: and it's playing out on the long. 493 00:22:44,280 --> 00:22:44,800 Speaker 7: End of the curve. 494 00:22:44,960 --> 00:22:46,720 Speaker 9: Yeah, listen, when I look at the yeld curve, I 495 00:22:46,720 --> 00:22:49,679 Speaker 9: say history is a great guide, right, two's tens In 496 00:22:49,680 --> 00:22:51,400 Speaker 9: a normal cycle, she get to one hundred and fifty 497 00:22:51,400 --> 00:22:54,160 Speaker 9: two hundred basis points tens bonds. Let's forget the deficit 498 00:22:54,160 --> 00:22:56,199 Speaker 9: for a second, just normal times, she get eighty to 499 00:22:56,240 --> 00:22:58,240 Speaker 9: one hundred basis points. I look at the ield curve 500 00:22:58,280 --> 00:22:59,880 Speaker 9: and go, wow, if twos are going to be stuck 501 00:22:59,880 --> 00:23:02,400 Speaker 9: in more and a half and you make a big gulp, right, 502 00:23:02,400 --> 00:23:05,440 Speaker 9: if you had two hundred, you get some big numbers there, right, 503 00:23:05,560 --> 00:23:08,879 Speaker 9: If that's where we're going. So yeah, I think duration 504 00:23:08,960 --> 00:23:11,600 Speaker 9: has a place no portfolio. It always does. And I 505 00:23:11,600 --> 00:23:13,639 Speaker 9: could be wrong and fields could follw hundred basis points. 506 00:23:13,760 --> 00:23:16,000 Speaker 9: So I don't hate it as yields go up, but again, 507 00:23:16,040 --> 00:23:17,919 Speaker 9: I don't see a reason to rush into it if 508 00:23:17,960 --> 00:23:19,800 Speaker 9: you believe we're going to go back to normal looking 509 00:23:19,840 --> 00:23:21,840 Speaker 9: yield curves, and you don't think fed fund is going 510 00:23:21,880 --> 00:23:23,439 Speaker 9: to go back to three, right, So there's a lot 511 00:23:23,480 --> 00:23:24,520 Speaker 9: of variables around it. 512 00:23:24,560 --> 00:23:25,679 Speaker 7: That's how I look at it. 513 00:23:25,640 --> 00:23:28,080 Speaker 4: But that's still not kind of the most comforting for 514 00:23:28,320 --> 00:23:30,880 Speaker 4: as you say, something that's usually behn usually something that's 515 00:23:30,920 --> 00:23:31,959 Speaker 4: uncorrelated with equities. 516 00:23:32,200 --> 00:23:32,920 Speaker 2: What becomes down. 517 00:23:32,840 --> 00:23:34,720 Speaker 9: The portable I think on the on the front end 518 00:23:34,720 --> 00:23:36,600 Speaker 9: of the eield curve, you still get you can get 519 00:23:36,600 --> 00:23:38,879 Speaker 9: good income without the duration. We've seen big flows into 520 00:23:38,920 --> 00:23:43,720 Speaker 9: floating rate alone, short duration municipals, income funds and fixed 521 00:23:43,720 --> 00:23:44,760 Speaker 9: income that have less. 522 00:23:44,640 --> 00:23:46,159 Speaker 7: Duration and more coupon. 523 00:23:46,359 --> 00:23:48,760 Speaker 9: So I think you can get coupon without taking max 524 00:23:48,840 --> 00:23:51,040 Speaker 9: duration risk is how I would look at it. And 525 00:23:51,080 --> 00:23:53,000 Speaker 9: again that's what investors have been buying. 526 00:23:53,080 --> 00:23:54,879 Speaker 2: I was saying, you were coming on the program about 527 00:23:54,880 --> 00:23:56,920 Speaker 2: an hour ago, and I teed up the credit conversation. 528 00:23:57,000 --> 00:23:59,439 Speaker 2: So let's do it. The spread right now for investment 529 00:23:59,480 --> 00:24:02,879 Speaker 2: great credit. It's like this big seventy six basis points. 530 00:24:03,280 --> 00:24:04,879 Speaker 2: It's as tight as it ever has been for the 531 00:24:04,880 --> 00:24:07,679 Speaker 2: whole of this century. I want to understand from you 532 00:24:07,760 --> 00:24:09,760 Speaker 2: why you think it can get a whole lot tighter 533 00:24:09,840 --> 00:24:10,359 Speaker 2: from here. 534 00:24:10,840 --> 00:24:12,359 Speaker 9: I think it gets tighter from here. I think there 535 00:24:12,359 --> 00:24:15,120 Speaker 9: are two major reasons. One is the buying dynamic, right, 536 00:24:15,160 --> 00:24:16,920 Speaker 9: so listen, if I'm right and you'lds drift higher. 537 00:24:18,000 --> 00:24:19,080 Speaker 7: There's a lot of government debt. 538 00:24:19,080 --> 00:24:22,200 Speaker 9: We've covered that, there's less corporate debt relative, so people 539 00:24:22,200 --> 00:24:24,639 Speaker 9: will continue to buy corporate debt if the growth story 540 00:24:24,680 --> 00:24:27,280 Speaker 9: is good, equities do fine, and so credit gets tighter. 541 00:24:27,480 --> 00:24:30,159 Speaker 9: The second piece I think people don't truly focus on, 542 00:24:30,400 --> 00:24:32,679 Speaker 9: which is the market structure has changed that in one 543 00:24:32,720 --> 00:24:33,439 Speaker 9: hundred years. 544 00:24:33,720 --> 00:24:35,280 Speaker 7: How hard was it to trade corporate. 545 00:24:35,040 --> 00:24:36,919 Speaker 9: Bonds when I started in this business in the early 546 00:24:36,960 --> 00:24:39,600 Speaker 9: two thousands. Now you have ETFs, right, you have baskets 547 00:24:39,600 --> 00:24:40,760 Speaker 9: of bonds trading. 548 00:24:41,280 --> 00:24:42,719 Speaker 7: Credit is much much more liquid. 549 00:24:42,920 --> 00:24:45,160 Speaker 9: So if there's less to fault risk currently too much 550 00:24:45,200 --> 00:24:47,880 Speaker 9: government debt and it's easy to buy, I would say again, 551 00:24:47,880 --> 00:24:50,080 Speaker 9: I would think there's a mathematical limit somewhere around fifty 552 00:24:50,119 --> 00:24:52,280 Speaker 9: basis points a little bit less. You know, maybe that's 553 00:24:52,280 --> 00:24:54,119 Speaker 9: a pretty aggressive call. So I don't want to be 554 00:24:54,240 --> 00:24:55,720 Speaker 9: I don't think we have to get there, but I 555 00:24:55,720 --> 00:24:57,760 Speaker 9: do think in an orderly sell off, credit will continue 556 00:24:57,760 --> 00:24:59,119 Speaker 9: to frustrate people and continue to tea. 557 00:24:59,240 --> 00:25:00,960 Speaker 2: Yeah, but you're cold. Is much more aggressive than that, 558 00:25:01,000 --> 00:25:03,880 Speaker 2: and you're burying the lead. There's the spread. You think 559 00:25:03,880 --> 00:25:07,040 Speaker 2: this can happen. The treasury yields could go above what 560 00:25:07,080 --> 00:25:09,200 Speaker 2: we could see in corporate America, maybe not across the 561 00:25:09,200 --> 00:25:12,080 Speaker 2: whole index, but perhaps possibly on a few credits. 562 00:25:12,080 --> 00:25:13,000 Speaker 7: Well, there's so few. 563 00:25:12,960 --> 00:25:15,439 Speaker 9: High rated credits right the other century changes that the 564 00:25:15,440 --> 00:25:17,280 Speaker 9: triple B part of the index is so much larger. 565 00:25:17,359 --> 00:25:18,960 Speaker 9: So I don't think you have triple b's trading through 566 00:25:18,960 --> 00:25:21,520 Speaker 9: government bonds. But for those few companies that can trade 567 00:25:21,520 --> 00:25:24,480 Speaker 9: with A A, I do think there'll be a select few. 568 00:25:24,720 --> 00:25:26,879 Speaker 9: Some of them are really close right now to go 569 00:25:26,960 --> 00:25:29,240 Speaker 9: through government bonds. Do I think it's logical? No, the 570 00:25:29,280 --> 00:25:31,800 Speaker 9: government can print currency, right, it's a better credit. But 571 00:25:31,840 --> 00:25:34,639 Speaker 9: I think it's a supplied demand dynamic. And listen, you 572 00:25:34,640 --> 00:25:38,720 Speaker 9: can make an argument that if you have fiscal irresponsibility 573 00:25:37,640 --> 00:25:40,520 Speaker 9: that maybe I'm wrong, maybe they should trade through So 574 00:25:40,520 --> 00:25:43,119 Speaker 9: I think they will in certain credits. And I do 575 00:25:43,160 --> 00:25:45,440 Speaker 9: think credit tights or not, we have not seen them yet. 576 00:25:45,480 --> 00:25:47,960 Speaker 4: Well, corporate credit is one of those markets that people 577 00:25:47,960 --> 00:25:49,680 Speaker 4: look to you to get a signal for overall health 578 00:25:49,680 --> 00:25:51,399 Speaker 4: that Okay, if spread starts to blow out, then I 579 00:25:51,440 --> 00:25:54,040 Speaker 4: need to get worried. You mentioned the ETFs, but I 580 00:25:54,040 --> 00:25:56,439 Speaker 4: also just wonder how much of this is just a 581 00:25:56,640 --> 00:25:59,639 Speaker 4: really distorted risk premium. Not even with ETFs, but all 582 00:25:59,640 --> 00:26:01,960 Speaker 4: the risks stuff is starting to go to private credit. Now, 583 00:26:02,000 --> 00:26:04,960 Speaker 4: can we really use corporate credit as a signal anymore 584 00:26:05,000 --> 00:26:06,879 Speaker 4: as in the way it once was. 585 00:26:07,720 --> 00:26:09,480 Speaker 9: A fair question. Listen, you're right a lot of the 586 00:26:09,600 --> 00:26:11,680 Speaker 9: risk has moved to private balance sheets, doesn't get marked 587 00:26:11,680 --> 00:26:14,639 Speaker 9: to market. Does that leave higher quality or lower quality 588 00:26:14,640 --> 00:26:17,200 Speaker 9: stuff for the public markets? We can debate. I think 589 00:26:17,200 --> 00:26:19,480 Speaker 9: the investment grade credit market is a little less affected 590 00:26:19,480 --> 00:26:22,920 Speaker 9: by it, So I do think it's a kind of 591 00:26:23,000 --> 00:26:23,720 Speaker 9: chicken and egg question. 592 00:26:23,800 --> 00:26:23,879 Speaker 1: Right. 593 00:26:23,880 --> 00:26:25,600 Speaker 9: If the equity market goes down to twenty percent, are 594 00:26:25,680 --> 00:26:27,600 Speaker 9: there's credit going to be wider? Of course, will be 595 00:26:27,640 --> 00:26:31,160 Speaker 9: caused by the credit market. I don't know this time around. Again, 596 00:26:30,880 --> 00:26:34,119 Speaker 9: I think investors are happy to buy the extra spread 597 00:26:34,119 --> 00:26:36,560 Speaker 9: and the yield you get from treasuries plus corporates, and 598 00:26:36,560 --> 00:26:38,080 Speaker 9: I think there's some logic to be said. I don't 599 00:26:38,119 --> 00:26:39,879 Speaker 9: need to own treasuries. There's not a lot of upside 600 00:26:39,880 --> 00:26:40,400 Speaker 9: to doing so. 601 00:26:40,800 --> 00:26:43,840 Speaker 7: Your duration question earlier, So again, we're tight. Credit fits 602 00:26:43,840 --> 00:26:45,080 Speaker 7: are tight. I think they'll get tighter. 603 00:26:45,520 --> 00:26:47,440 Speaker 9: Listen, if it gets disorderly, if ten year lues or five 604 00:26:47,400 --> 00:26:49,560 Speaker 9: and a half percent in six weeks, it will be 605 00:26:49,600 --> 00:26:52,000 Speaker 9: a different story. But if it moves in an orderly fashion, 606 00:26:52,240 --> 00:26:53,080 Speaker 9: I think that's where we're going. 607 00:26:53,119 --> 00:26:54,560 Speaker 6: Brian we're going to be from J Powell today, and 608 00:26:54,560 --> 00:26:57,680 Speaker 6: you started the conversating conversation saying that December might be 609 00:26:57,720 --> 00:27:00,480 Speaker 6: the last cut and maybe no cuts next year. 610 00:27:00,520 --> 00:27:03,640 Speaker 7: Could we see hikes next year? Listening, it's so fun 611 00:27:03,680 --> 00:27:04,920 Speaker 7: to talk about. 612 00:27:05,720 --> 00:27:07,560 Speaker 9: I don't have a great I don't think I could 613 00:27:07,560 --> 00:27:09,400 Speaker 9: sit here on layer for you exactly how we get there. 614 00:27:09,400 --> 00:27:11,480 Speaker 9: In other words, if you know, if inflations runs, you know, 615 00:27:11,520 --> 00:27:13,440 Speaker 9: point two to point three instead of you know, going 616 00:27:13,440 --> 00:27:14,920 Speaker 9: back to two, is if they're going to go right 617 00:27:14,920 --> 00:27:18,160 Speaker 9: back to hiking. I don't think so. So I think 618 00:27:18,200 --> 00:27:20,679 Speaker 9: it's possible. I think it's more likely that they just 619 00:27:20,800 --> 00:27:23,200 Speaker 9: want to sit here and let government do the work 620 00:27:23,359 --> 00:27:24,920 Speaker 9: that they can say this maybe we'll say four and 621 00:27:24,960 --> 00:27:27,280 Speaker 9: a half percent looks more like neutral than we thought, right, 622 00:27:27,320 --> 00:27:27,960 Speaker 9: Could it be four? 623 00:27:28,440 --> 00:27:29,840 Speaker 7: Sure? I still don't think it's five. 624 00:27:30,119 --> 00:27:33,199 Speaker 9: So hikes would require all these things to happen, you know, 625 00:27:33,400 --> 00:27:36,720 Speaker 9: tiff speed superinflationary but still pro growth, and aquity's making 626 00:27:36,760 --> 00:27:37,320 Speaker 9: new highs again. 627 00:27:37,320 --> 00:27:38,159 Speaker 7: It would be it would be. 628 00:27:38,480 --> 00:27:39,920 Speaker 9: I can tell you this story, but I don't sit 629 00:27:39,960 --> 00:27:42,040 Speaker 9: here thinking about, you know, rate. I don't want to 630 00:27:42,040 --> 00:27:44,040 Speaker 9: bet on a rate hike in September. 631 00:27:43,640 --> 00:27:44,760 Speaker 7: And as my base case. 632 00:27:44,880 --> 00:27:46,960 Speaker 2: You don't want that to be the headline, Bron, Don't worry. 633 00:27:46,960 --> 00:27:47,320 Speaker 1: It won't be. 634 00:27:47,359 --> 00:27:49,760 Speaker 2: It'll be something else. On credit from Wiston there of 635 00:27:49,840 --> 00:27:53,080 Speaker 2: focus standing Brown appreciate the updates set. This is the 636 00:27:53,119 --> 00:27:57,359 Speaker 2: Bloomberg Seventans podcast, bringing you the best in markets, economics, 637 00:27:57,359 --> 00:27:59,760 Speaker 2: angie of politics. You can watch the show live on 638 00:27:59,840 --> 00:28:03,520 Speaker 2: Bloomberg TV weekday mornings from six am to nine am Eastern. 639 00:28:03,800 --> 00:28:07,160 Speaker 2: Subscribe to the podcast on Apple, Spotify or anywhere else 640 00:28:07,200 --> 00:28:09,840 Speaker 2: you listen, and as always, on the Bloomberg Terminal and 641 00:28:09,920 --> 00:28:11,120 Speaker 2: the Bloomberg Business app.