WEBVTT - Surveillance: Central Banks Fight Inflation 0:00:00.120 --> 0:00:03.800 If you enjoy the Bloomberg Surveillance podcast, check out our 0:00:03.880 --> 0:00:08.959 new daily news program, the Bloomberg Daybreak Podcast. It gives 0:00:09.039 --> 0:00:12.840 you the day's top stories with context in just fifteen minutes. 0:00:13.240 --> 0:00:15.960 Look for it in your podcast feed by six a m. 0:00:16.160 --> 0:00:20.280 Eastern every morning. Subscribe on Apple, Spotify and anywhere else 0:00:20.400 --> 0:00:23.799 you get your podcasts, and stay tuned for a sample 0:00:23.880 --> 0:00:27.400 of today's edition of Bloomberg Daybreak at the very end 0:00:27.600 --> 0:00:36.360 of this podcast. This is the Bloomberg Surveillance Podcast. I'm 0:00:36.400 --> 0:00:40.480 Tom Keene, along with Jonathan Farrow and Lisa Abramowitz. Join 0:00:40.560 --> 0:00:44.720 us each day for insight from the best and economics, geopolitics, 0:00:44.720 --> 0:00:49.680 finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 0:00:49.920 --> 0:00:54.400 Spotify and anywhere you get your podcasts, and always on 0:00:54.520 --> 0:00:58.840 Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business App. 0:00:59.040 --> 0:01:03.160 We continue with Rochester g ten FX strategists at Namura. 0:01:03.840 --> 0:01:04.160 Jordan. 0:01:04.240 --> 0:01:06.800 Let me go and overlay the GDP question on your 0:01:06.840 --> 0:01:10.800 euro call. Germany is not getting it done right now? 0:01:11.040 --> 0:01:13.880 How does that change? A euro call from Nomura? 0:01:14.840 --> 0:01:17.160 Well, right now, Tom, we already knew growth would be weak. 0:01:17.200 --> 0:01:19.679 We've got that from the PMISER surveys. So I'm not 0:01:19.760 --> 0:01:22.240 really convinced that the GDP is the way to look 0:01:22.280 --> 0:01:24.080 at euro right here, right now in the short term. 0:01:24.319 --> 0:01:26.640 What's more important is what they did to those inflation 0:01:26.720 --> 0:01:28.840 forecast times. So there's been a bit of a revision 0:01:28.880 --> 0:01:31.960 down in the front tend for headline, but for core inflation. 0:01:32.080 --> 0:01:35.000 What's been surprising from this release is that we've got 0:01:35.080 --> 0:01:37.880 on average now five point one from the ECB for 0:01:37.920 --> 0:01:40.760 core inflation this year, up from four point six in 0:01:40.800 --> 0:01:43.600 their forecast previously. I said earlier that it was too low, 0:01:43.600 --> 0:01:45.000 it was going to be revised up, but I was 0:01:45.040 --> 0:01:47.840 discussing it with Andre and our economics team. We thought 0:01:48.000 --> 0:01:50.320 the east B might not pencil in a five handle 0:01:50.360 --> 0:01:52.800 for their core inflation just because that's a number that 0:01:52.800 --> 0:01:55.680 will make them very uncomfortable for the average of this year. 0:01:56.040 --> 0:01:56.600 Five percent. 0:01:56.640 --> 0:01:57.320 This is none of this. 0:01:57.720 --> 0:01:59.800 None of these forecasts for inflation have it going back 0:01:59.800 --> 0:02:02.640 towards two percent and actually going below two percent in 0:02:02.680 --> 0:02:06.400 the horizon. The twenty twenty five inflation forecast revised up 0:02:06.600 --> 0:02:09.640 just very slightly. But all of this says the ECB 0:02:10.160 --> 0:02:12.440 is being hawkish. We'll find out in the pressor how 0:02:12.960 --> 0:02:15.560 Madame Cguarde will express it. But we've seen the pricing 0:02:15.600 --> 0:02:18.200 Tom for the ECB for the next meeting jump already 0:02:18.360 --> 0:02:21.040 to twenty five basis points. The market was actually doubting 0:02:21.360 --> 0:02:24.200 a little bit if that would happen, and now we're 0:02:24.240 --> 0:02:27.000 actually now toying with the market thinking maybe this carries on, 0:02:27.360 --> 0:02:29.959 maybe this goes to September, and Tom the market is 0:02:30.040 --> 0:02:32.680 very happy pricing many twenty five basis point rate hikes 0:02:32.800 --> 0:02:35.079 for the Bank of England, and I suggest that maybe 0:02:35.360 --> 0:02:37.040 that's the case. We need to consider it for the 0:02:37.040 --> 0:02:38.240 ECB just quickly. 0:02:38.480 --> 0:02:41.840 Does this make a four percent ECB rate much more likely? 0:02:42.040 --> 0:02:45.400 And actually the base case in your view, it's. 0:02:45.280 --> 0:02:47.880 Not the base case, but look, it makes it possible. 0:02:48.080 --> 0:02:51.040 And the reason why is because we're seeing all this 0:02:51.120 --> 0:02:55.359 animal spirits inequities picked back up, boosting risk sentiment, boosting 0:02:55.400 --> 0:02:58.959 the sort of inflation pressures that we could see this summer, 0:02:59.120 --> 0:03:01.240 and as I mentioned earlier, natural gas going up. That 0:03:01.280 --> 0:03:05.120 should really worry the ECB. If it's like last year August. 0:03:05.200 --> 0:03:07.799 Last year we had energy prices at the highs. It's 0:03:07.919 --> 0:03:10.160 just June. Now, if we get two more months of 0:03:10.240 --> 0:03:13.560 gas storage demand pushing up inflation again of natural gas. 0:03:13.800 --> 0:03:16.560 It upsets the apple cart of the big disinflation. All 0:03:16.600 --> 0:03:19.200 my charts say the Euro Area inflation's going to really 0:03:19.240 --> 0:03:22.079 slow down, but that will change if natural gas keeps 0:03:22.120 --> 0:03:24.440 moving the way it is. So if it carries on, Lisa, 0:03:24.560 --> 0:03:25.680 it's potentially possible. 0:03:25.880 --> 0:03:28.160 Jordan Rochester, thank you for the effort today with no 0:03:28.320 --> 0:03:36.200 murder there. Ja Bryson rides heard over a terrific economic 0:03:36.280 --> 0:03:39.600 team at Wells Fargo. They have a fabulous heritage of 0:03:39.720 --> 0:03:43.680 measuring this nation from C to Shining Sea, and right 0:03:43.680 --> 0:03:45.200 now I'd like you to go over the other C. 0:03:45.480 --> 0:03:50.200 J Bryson too, Maybe summarize here what Wells Fargo sees 0:03:50.360 --> 0:03:54.600 in manufacturing in America versus a clear slow down in 0:03:54.680 --> 0:03:58.520 manufacturing in Germany. What is a state of the economy 0:03:58.600 --> 0:04:03.080 of manufacturing in America as we look at this data 0:04:03.160 --> 0:04:03.720 this morning? 0:04:05.160 --> 0:04:07.480 So Tom, I guess i'd roughly say that when I 0:04:07.520 --> 0:04:10.400 think about the manufacturing sector here in the States right now, 0:04:10.400 --> 0:04:14.960 I would say it's flat ish, you know, it's you know, 0:04:15.040 --> 0:04:17.320 if you look at the hard data of manufacturing production 0:04:17.640 --> 0:04:19.120 over the last year or so, it has been kind 0:04:19.120 --> 0:04:21.240 of flat, and you know, I think what's going on 0:04:21.360 --> 0:04:23.520 There is two things. There's a slowdown in the rest 0:04:23.520 --> 0:04:25.599 of the world, so we're not exporting as much. And 0:04:25.640 --> 0:04:28.039 then secondly, as there has been as you you know, 0:04:28.080 --> 0:04:30.680 well know, there's been this rotation over the last year 0:04:30.720 --> 0:04:34.640 away from spending on goods towards services. Goods obviously are manufactured, 0:04:34.960 --> 0:04:38.040 and so manufacturing is you know again it's not really contracting, 0:04:38.080 --> 0:04:40.520 but it's not growing. It's you know, as I said earlier, 0:04:40.520 --> 0:04:41.960 I think it's kind of flatish right now. 0:04:42.200 --> 0:04:44.039 Which is the best leading indicator of all of the 0:04:44.120 --> 0:04:47.359 data that we just got. Is it the retail sales 0:04:47.400 --> 0:04:50.799 coming in hotter than expected, or is it unemployment rising 0:04:50.960 --> 0:04:53.680 perhaps at a faster pace at least jobless claims than 0:04:53.680 --> 0:04:54.680 many people expected. 0:04:55.880 --> 0:04:57.839 Well, I guess I would say they're both kind of 0:04:57.920 --> 0:05:00.280 coincidence sort of indicator. Certainly, that's what we think about 0:05:00.279 --> 0:05:02.400 the labor market as being very very coincident. It gives 0:05:02.440 --> 0:05:04.680 us an idea where we are right now, you know, 0:05:04.720 --> 0:05:07.080 in terms of the retail sales sorts of numbers, you know, 0:05:07.080 --> 0:05:09.200 there's a little choppy in there right now. But I 0:05:09.200 --> 0:05:11.320 would say what I would say is what it's showing 0:05:11.400 --> 0:05:15.479 us is the consumer continues to spend at a modest pace. 0:05:15.520 --> 0:05:18.600 As long as that continues to happen, then the consumer 0:05:18.640 --> 0:05:21.800 sector isn't going to completely fall apart either. And so 0:05:22.200 --> 0:05:23.880 I think where we are right now in terms of 0:05:23.920 --> 0:05:26.320 the economy is if you look at the first quarter, 0:05:26.360 --> 0:05:29.040 we grew roughly one percent at an annualized rate. I 0:05:29.040 --> 0:05:31.000 think that's kind of where we are right now in 0:05:31.040 --> 0:05:33.760 the second quarter as well, somewhere, you know, plus or 0:05:33.800 --> 0:05:37.560 minus five tens a percentage point off of one percent right. 0:05:37.560 --> 0:05:40.560 Now if nothing really changes, no sort of big shocks 0:05:40.560 --> 0:05:42.760 to the system, and we get data like this for 0:05:42.839 --> 0:05:45.599 the next I guess four weeks, do you expect to 0:05:45.600 --> 0:05:48.480 fed we'll have to raise by another twenty five basis points. 0:05:48.760 --> 0:05:51.200 That yesterday's meeting was not the end of the rate 0:05:51.279 --> 0:05:52.320 hiking cycle. 0:05:52.920 --> 0:05:54.800 You know, I think that's that's right, Lisa, and I 0:05:54.920 --> 0:05:56.640 kind of think of it as yesterday was a little 0:05:56.680 --> 0:06:00.000 bit of a compromise between the you know, the doves 0:06:00.080 --> 0:06:02.200 on the committee who kind of want to pause right here, 0:06:02.240 --> 0:06:04.159 and the hawks who kind of want to keep on 0:06:04.279 --> 0:06:07.200 pressing ahead. And I think it was easy for them, 0:06:07.520 --> 0:06:10.960 the consensus, I think was easy for yesterday to call 0:06:11.120 --> 0:06:14.000 us around Okay, we'll keep rates on hold, but we'll 0:06:14.040 --> 0:06:17.040 send a signal of a hawkish pause if you will. 0:06:17.400 --> 0:06:20.120 A month from now. If we don't see any major 0:06:20.240 --> 0:06:22.520 changes to the economy, then I think it's easier to 0:06:22.520 --> 0:06:24.880 call us around. Okay, let's pump a up another twenty 0:06:24.880 --> 0:06:27.279 five basis points. But obviously we've got a lot of 0:06:27.320 --> 0:06:30.120 data between now and then, particularly the labor market report. 0:06:30.160 --> 0:06:32.400 We get another CPI, you know, sort of a report, 0:06:32.480 --> 0:06:35.040 so you know, if we come in a status quo 0:06:35.120 --> 0:06:37.520 where we are right now, then I think they go 0:06:37.560 --> 0:06:38.599 twenty five. I'm going to. 0:06:38.640 --> 0:06:43.000 Suggest doctor Bryson that none of this is in Chapel economics, 0:06:43.040 --> 0:06:47.679 Chepel Hill economic textbooks. I mean, it's absolutely original. Where 0:06:47.720 --> 0:06:51.799 we are. How much are we beholden to American exceptionalism 0:06:51.880 --> 0:06:54.839 right now? Europe has so many struggles, is seen with 0:06:54.880 --> 0:06:59.839 a subpar one percent GDP view forward, and we're different, 0:07:00.040 --> 0:07:03.440 We're doing better. Does Wells Fargo suggest there is an 0:07:03.480 --> 0:07:06.320 American difference, an American exceptionalism? 0:07:07.600 --> 0:07:09.479 Well, you know, Tom, I don't know if I would. 0:07:09.680 --> 0:07:11.440 So if you step back and you look at the 0:07:11.600 --> 0:07:13.640 broad sort of stuff, I mean, what we are with 0:07:13.720 --> 0:07:16.680 the United States is continues to be the technological leader 0:07:16.920 --> 0:07:19.280 in the world. Right this is where AI is being developed, 0:07:19.280 --> 0:07:21.920 et cetera, et cetera. I think that will probably continue. 0:07:22.240 --> 0:07:24.720 But I also think that you know, right now where 0:07:24.720 --> 0:07:27.040 we are in terms of the cycle. You know, Europe 0:07:27.040 --> 0:07:28.920 has been hit with a number of shocks that the 0:07:29.000 --> 0:07:31.840 United States hasn't, you know, particularly the war in Ukraine 0:07:31.880 --> 0:07:34.280 and the and the spike it the spike in natural 0:07:34.320 --> 0:07:37.640 gas prices that everybody was talking about just before we 0:07:37.680 --> 0:07:40.720 came on air here. And so there's there's been a 0:07:40.720 --> 0:07:43.560 lot more shocks hitting Europe than there has been the 0:07:43.640 --> 0:07:46.960 United States. So is the United States exceptional from a 0:07:47.040 --> 0:07:50.240 very very long earned standpoint, yes, But from a cyclical standpoint, 0:07:50.800 --> 0:07:53.840 I can come up with reasons why, you know, Europe 0:07:53.920 --> 0:07:55.880 is different. Right now, What did you. 0:07:56.000 --> 0:08:00.360 Think yesterday when we had esteemed people like you on 0:08:01.280 --> 0:08:04.320 who said they just should have raised race and stopped 0:08:04.320 --> 0:08:08.800 with all this mumbo jumbo, skip pause, all this other stuff. 0:08:09.240 --> 0:08:11.920 Jay Bryson, would green Span or burns of raised rates? 0:08:13.240 --> 0:08:16.160 You know, I don't think so. I mean green Span 0:08:16.600 --> 0:08:18.200 was you know, at the end of the day, he 0:08:18.280 --> 0:08:21.160 was very very cautious as well. You know, you look 0:08:21.160 --> 0:08:24.200 at his last tightening cycle starting in twenty twenty, two 0:08:24.240 --> 0:08:26.920 thousand and four. It's twenty five basis points, you know, 0:08:27.800 --> 0:08:31.680 constant sort of thing. You know, So did they do 0:08:31.760 --> 0:08:34.800 the right thing yesterday? Obviously? You know people can can 0:08:34.880 --> 0:08:38.440 disagree on that, but we all know that monetary policy 0:08:38.440 --> 0:08:40.680 works with long lags. You are seeing signs that the 0:08:40.720 --> 0:08:44.440 economy is growing at a sub trend pace right now. 0:08:44.600 --> 0:08:47.800 I mentioned one percent before. Most people believe that's going 0:08:47.880 --> 0:08:51.319 to be subtrend, and if it continues to grow at subtrend, 0:08:51.320 --> 0:08:53.560 that will probably that will bring the inflation rate down 0:08:53.600 --> 0:08:55.559 over time. You know, you really don't want to put 0:08:55.559 --> 0:08:58.559 the economy into recession right now, if you if you don't, 0:08:58.640 --> 0:09:02.760 so it's a little bit of hard communication strategy right 0:09:02.760 --> 0:09:05.360 now on their part. They're walking a very very fine line. 0:09:05.559 --> 0:09:07.319 But you know, I think at the end of the 0:09:07.360 --> 0:09:08.880 day a pause was probably the right thing to do. 0:09:09.000 --> 0:09:11.160 We're about three and a half minutes away from Christineleaguard 0:09:11.280 --> 0:09:14.920 taking the helmet explaining a pretty hawkish proclamation and rate 0:09:15.000 --> 0:09:16.959 hike that we just got from the ECB right now, 0:09:17.000 --> 0:09:19.960 the euro versus the Japanese yen. It was extending the 0:09:20.000 --> 0:09:23.360 gains up one point one percent to the highest level, 0:09:23.360 --> 0:09:26.720 the strongest going back to going back to two thousand 0:09:26.720 --> 0:09:29.880 and eight, as you see that differential and rate policies 0:09:30.240 --> 0:09:33.199 really start to bleed into the currency, the agony back a. 0:09:33.200 --> 0:09:36.080 Zillion years and really not comparable. And I defer to 0:09:36.160 --> 0:09:38.600 Jordan Rochester, Steve England or others, but it's a one 0:09:38.760 --> 0:09:43.240 sixty maybe a one sixty three. We're distant from OMG, 0:09:43.400 --> 0:09:46.960 the worst ever. But I think scope and scale back 0:09:47.000 --> 0:09:51.360 to two thousand and eight really signals how removed Japan 0:09:51.520 --> 0:09:52.559 is from the other three. 0:09:52.400 --> 0:09:55.520 Banks, Jay, As we set up for Christine Leguard to 0:09:55.520 --> 0:09:58.760 give some explanations, some meat behind the statement, what are 0:09:58.760 --> 0:10:00.839 you expecting to hear? What was the biggest shocker to 0:10:00.880 --> 0:10:04.360 you at a time when this ECP is forecasting out 0:10:04.760 --> 0:10:08.000 a three percent core inflation figure next year in a 0:10:08.040 --> 0:10:10.160 five point one percent inflation this year. 0:10:11.320 --> 0:10:13.120 You know, I think she's going to be very very 0:10:13.160 --> 0:10:16.400 hawkish as well. I think you know, she's speaking for 0:10:16.480 --> 0:10:18.920 the entire governing council. We all know that there's a 0:10:18.920 --> 0:10:21.520 lot of hawks on that on the Governing Council, and 0:10:21.520 --> 0:10:23.000 I think you know what they want to send as 0:10:23.040 --> 0:10:26.080 a signal of uh, we need to be hawkish here. 0:10:26.280 --> 0:10:29.160 You know, their mandate is two percent. We're far away 0:10:29.160 --> 0:10:31.839 from two percent inflation right now, so I would think 0:10:31.840 --> 0:10:34.880 she's going to reinforce a very very hawkish sort of view. 0:10:35.160 --> 0:10:38.679 And if bond yields back up even more on that, 0:10:38.760 --> 0:10:41.680 I don't think there that's not a bad thing for them. 0:10:41.760 --> 0:10:54.720 Is your press conference operating doctor Bryson within eurosclerosis. 0:10:50.880 --> 0:10:53.480 To find that term time, I'm not sure I get 0:10:53.520 --> 0:10:54.280 to just. 0:10:54.240 --> 0:10:58.120 The sluggish and as you mentioned, the technological superiority of 0:10:58.160 --> 0:11:01.960 America they're going after Google again was in the news today. 0:11:02.320 --> 0:11:05.240 Is there just that weight to the European model that 0:11:05.440 --> 0:11:07.080 was definitive twenty years ago? 0:11:09.000 --> 0:11:12.440 You know, they always lag us somewhat in terms of 0:11:12.480 --> 0:11:16.679 you know, productivity, growth and vibrancy of the of the economy, 0:11:16.720 --> 0:11:18.880 and I don't think that's going to I don't think 0:11:18.880 --> 0:11:21.199 that's going to to change anytime soon. Again, you know, 0:11:21.200 --> 0:11:23.440 when you look at all the AI breakthroughs that are 0:11:23.440 --> 0:11:26.400 happening here in the United States and they're not happening 0:11:26.480 --> 0:11:27.040 in Europe. 0:11:27.280 --> 0:11:29.160 Jay Breston, thank you so much for the brief Here 0:11:29.200 --> 0:11:31.840 is with Wells Fargo, They've been hugely helpful to us. 0:11:31.840 --> 0:11:45.960 Here on the economic facts and forth, Amy was Silverman 0:11:46.040 --> 0:11:48.880 joins us, Now, how to derout a strategy in RBC 0:11:49.120 --> 0:11:53.360 capital markets? Amy, It's real simple. You say, we've got 0:11:53.480 --> 0:11:57.200 upside here and we may not get the traditional equity 0:11:57.240 --> 0:12:01.360 market rotation. This is important to Global Wall Street. Why 0:12:01.400 --> 0:12:02.800 will we not rotate? 0:12:04.920 --> 0:12:07.600 Yeah, this is the question, you know, we've been asking 0:12:07.640 --> 0:12:11.440 the last few weeks. And I thought, yesterday's knee jerk reactions, Tom, 0:12:11.480 --> 0:12:14.880 we're just really telling So you know, look for the 0:12:15.000 --> 0:12:18.760 last few weeks, the options market's been chasing upside an IWM, 0:12:18.840 --> 0:12:20.520 and then you get a little bit of a hawkish 0:12:20.559 --> 0:12:22.680 tone from the Fed and from Palin. 0:12:22.800 --> 0:12:23.400 What happens? 0:12:23.400 --> 0:12:26.280 You have IWM sell off yesterday, you have Ques rally, 0:12:26.320 --> 0:12:29.600 you have nvideo rally, And I think that just tells you, 0:12:29.600 --> 0:12:33.000 you know, how the market is thinking about these different sectors. 0:12:33.400 --> 0:12:36.440 The one question we've been asking ourselves is, you know, 0:12:36.480 --> 0:12:39.760 if the data continues to come in more economically strong, 0:12:39.960 --> 0:12:42.600 is it possible essentially to have a narrative where it's 0:12:42.640 --> 0:12:46.040 not really about value versus growth or small versus large gap. 0:12:46.080 --> 0:12:49.920 It's simply tech becomes your rallying point because of a 0:12:49.960 --> 0:12:53.160 secular story. Perhaps and then IWM becomes more of an 0:12:53.200 --> 0:12:56.760 IWM story on the more defensive and you know that side, 0:12:56.840 --> 0:12:58.679 but both can rally at the same time. 0:12:59.040 --> 0:13:02.200 Just it's a developed some of what you were talking about. 0:13:02.200 --> 0:13:05.839 This idea that big tech has become defensive has become 0:13:05.840 --> 0:13:09.560 the secular growth story, and really perhaps the fear of 0:13:09.600 --> 0:13:12.400 recession is playing out in the small caps in a 0:13:12.520 --> 0:13:15.280 new way and even in some of the non tech names, 0:13:15.720 --> 0:13:19.520 which really highlights a diversification that is very different than 0:13:19.520 --> 0:13:20.520 it was six months ago. 0:13:22.120 --> 0:13:25.520 Yeah, exactly. And one thing I'll say is what has 0:13:25.559 --> 0:13:30.040 been interesting, especially given yesterday, is we saw IWM sell 0:13:30.120 --> 0:13:33.040 off sort of in that reaction to the hawkage tone 0:13:33.080 --> 0:13:35.760 from Powell, but we didn't see any change in the 0:13:35.800 --> 0:13:40.000 option sentiment. So going into yesterday, Lisa, the option sentiment 0:13:40.040 --> 0:13:42.760 in IWM was quite full, as you saw almost a 0:13:42.840 --> 0:13:45.439 skew in version or that call demand is outweighing the 0:13:45.480 --> 0:13:47.760 poot demand. And that's been true for the last few 0:13:47.760 --> 0:13:50.360 weeks when people think, you know, that small cap is 0:13:50.360 --> 0:13:53.400 going to kind of burst out. But that didn't change yesterday, 0:13:53.520 --> 0:13:57.600 even though we did see continued optimism in the large 0:13:57.600 --> 0:13:59.760 caps as well. So that's why I've been saying, you know, 0:13:59.880 --> 0:14:03.480 is it possible the narrative no longer becomes this rotation 0:14:03.640 --> 0:14:07.280 from small to large or from growth to value, et cetera. 0:14:07.360 --> 0:14:10.160 It's just simply they can go along two different tracks 0:14:10.360 --> 0:14:11.480 and two different narratives. 0:14:11.559 --> 0:14:13.840 So basically, are you saying that people who are talking 0:14:13.880 --> 0:14:18.280 about bad breath getting into some sort of broadening out 0:14:18.720 --> 0:14:21.240 not happening, and it's not going to happen even if 0:14:21.280 --> 0:14:24.040 you continue to get a rally in the equity indexes. 0:14:25.360 --> 0:14:29.520 Yeah you said bad breath, not me this time, But yeah, 0:14:29.760 --> 0:14:33.440 I think that is possible. And the one major implication 0:14:33.560 --> 0:14:36.480 that has for volatility is one reason we've been counting 0:14:36.520 --> 0:14:39.080 on that breadth of widen is because it's going to 0:14:39.160 --> 0:14:42.840 change your correlation function, which obviously feeds into your index volatility. 0:14:42.960 --> 0:14:46.080 But if we don't get that happening, if you continue 0:14:46.120 --> 0:14:48.880 to have people who've missed out on megacap tech having 0:14:48.920 --> 0:14:51.800 to realloitate into it even as that small cap story 0:14:51.840 --> 0:14:53.960 is playing out, I don't think you get much of 0:14:54.000 --> 0:14:57.840 a change in correlation, which ultimately, you know, dampens volatility 0:14:57.880 --> 0:15:00.800 on an index level. So it's possible, you know, you 0:15:00.880 --> 0:15:03.240 have all these events ahead, but there's that suppression of 0:15:03.320 --> 0:15:07.360 voltility because that correlation component of volatility continues to not 0:15:07.520 --> 0:15:08.680 move because of the breadth. 0:15:08.840 --> 0:15:10.680 I mean, if we believe in a bull market and 0:15:10.680 --> 0:15:13.160 we've had a first leg from October, I've been calling 0:15:13.200 --> 0:15:16.360 it the income for ardentity bull market after two people 0:15:16.360 --> 0:15:20.160 that were way out front and identifying it. If that's 0:15:20.200 --> 0:15:23.680 the first leg, how do you use the cross moments? 0:15:23.960 --> 0:15:28.840 How do you use derivative mathematics to assist in identifying 0:15:28.880 --> 0:15:30.760 the second leg of a bull market? 0:15:32.440 --> 0:15:35.160 Yeah, so I'll give you one Bloomberg function that I 0:15:35.240 --> 0:15:37.600 like to look at a lot, which is BCA, which 0:15:37.640 --> 0:15:41.640 gives you the volatility landscape across you know, any constituents 0:15:41.680 --> 0:15:43.440 like the S and P five hundred and when you 0:15:43.680 --> 0:15:47.480 organize that tom By Skew level. So again that component 0:15:47.520 --> 0:15:50.600 of call demand versus put demand, you start to see 0:15:50.640 --> 0:15:53.280 where the really really bullish parts of the market are. 0:15:53.360 --> 0:15:55.800 So if you look at that right now, among your 0:15:55.840 --> 0:15:58.760 top ten names, you know, probably not shocking to you 0:15:58.920 --> 0:16:01.640 is going to be It's going to be in a video, 0:16:01.760 --> 0:16:04.280 It's going to be Tesla. And it really tells you 0:16:04.400 --> 0:16:06.840 not only where the market is out front the most on, 0:16:07.000 --> 0:16:10.120 but where it's beginning to start to see changes and sentiment, 0:16:10.160 --> 0:16:12.240 and you are starting to see some of the more 0:16:12.920 --> 0:16:16.760 IWM type names go in there into those sectors rather 0:16:16.840 --> 0:16:18.600 than it just being megacat tech. 0:16:18.920 --> 0:16:20.840 Are the big names out there, whether it's a big 0:16:20.880 --> 0:16:23.720 name Procter and Gamble, the big name Walmart, Intel is 0:16:23.760 --> 0:16:26.600 a dog of the moment or as you mentioned AMD, 0:16:27.440 --> 0:16:31.240 are they under owned by institutions in the traditional sense, 0:16:31.320 --> 0:16:34.119 not hedge funds, but along only byside. 0:16:34.160 --> 0:16:36.200 Are they under owned in what's. 0:16:36.000 --> 0:16:38.560 Worked they are? 0:16:38.680 --> 0:16:40.760 And that's part of the problem. There's sort of two 0:16:40.880 --> 0:16:44.440 interesting things. The first is that portion of the asset 0:16:44.440 --> 0:16:47.600 management community you've been talking about has been under allegated, 0:16:47.920 --> 0:16:52.440 and the issue is that begets this positive momentum situation 0:16:52.600 --> 0:16:55.080 where we've talked about in options, where you get that 0:16:55.160 --> 0:16:59.320 exacerbation of gamma. So essentially buying of calls can lead 0:16:59.360 --> 0:17:01.680 to more buying stock, which can lead to more buying 0:17:01.720 --> 0:17:04.000 of calls. This is what you saw during the meme prase. 0:17:04.400 --> 0:17:07.840 And the other thing is historically that segment of the 0:17:07.880 --> 0:17:10.119 market has that problem with owning things in such a 0:17:10.200 --> 0:17:13.520 narrow concentration. So if the breadth of the market starts 0:17:13.520 --> 0:17:17.000 to expand, that ultimately helps them in participating in the rally. 0:17:17.160 --> 0:17:19.880 Yeah, the headline there, folks, if you're keeping score at home, 0:17:20.000 --> 0:17:23.000 is Amy wu Silverman says, Apple is a meme stock. 0:17:23.160 --> 0:17:26.320 That's what we're going to do. We're going to go there. 0:17:26.960 --> 0:17:30.520 If I get gamma is an acceleration, you know within 0:17:30.560 --> 0:17:35.400 the derivative jargon, Are we gamma? Are we gammaing our 0:17:35.480 --> 0:17:37.320 way to melt up? 0:17:39.680 --> 0:17:41.600 So you know we already have. 0:17:41.960 --> 0:17:45.000 That's already been happening, and I think that can continue. 0:17:45.040 --> 0:17:47.840 So when you look kind of to the weak right 0:17:48.040 --> 0:17:51.160 post Navidia's earnings, that's what you saw. You saw those 0:17:51.200 --> 0:17:54.119 skew in versions, you know, on that VCA function, and 0:17:54.160 --> 0:17:56.560 then you continue to see that now that actually hasn't 0:17:56.640 --> 0:17:59.160 changed all that much. Even though you know some people 0:17:59.200 --> 0:18:02.280 are asking it that AI rally is tired, you don't 0:18:02.359 --> 0:18:04.680 yet see that. In the options, you continue to see 0:18:04.680 --> 0:18:07.960 that call and bounce pretty heavily, and then each day 0:18:08.000 --> 0:18:10.120 that goes by, we actually start to see it in 0:18:10.480 --> 0:18:13.240 different parts of the market, not just megacaptech. And that's 0:18:13.240 --> 0:18:15.400 why I think it's very telling in terms of the 0:18:15.440 --> 0:18:18.920 sentiment and options. Those wins have really changed over the 0:18:19.000 --> 0:18:19.840 last month. 0:18:19.880 --> 0:18:22.520 And it was silver in terrific opening Briefforce today with 0:18:22.720 --> 0:18:30.920 RBC Capital Market. Patrick Tumey is one of our more 0:18:31.000 --> 0:18:34.640 interesting senators. A former senator. He is of Pennsylvania. It's 0:18:34.680 --> 0:18:37.800 his fault the Phillies lost, and he excided after that 0:18:37.960 --> 0:18:39.560 and he joins us today. He's on the board of 0:18:39.600 --> 0:18:43.439 Apollo now, among other good duties here in his former career. 0:18:43.560 --> 0:18:47.920 What's the biggest difference of moving from the August Senate 0:18:48.480 --> 0:18:50.520 of Washington into the private space. 0:18:51.480 --> 0:18:53.840 Well, there are a lot. Having control of your own 0:18:53.840 --> 0:18:57.119 schedule is one of them. The Majority leader gets to 0:18:57.119 --> 0:18:59.520 decide when votes will occur, and you have to be 0:18:59.680 --> 0:19:02.360 on the floor in person to cast a vote. When 0:19:02.359 --> 0:19:03.960 you're out of the Senate, you have a lot more 0:19:04.000 --> 0:19:05.240 saying it just a human and. 0:19:05.240 --> 0:19:07.600 We're huge difference in the House right now where there's 0:19:07.720 --> 0:19:10.040 one or two people away and that changes it for 0:19:10.119 --> 0:19:11.280 Speaker McCarthy. 0:19:11.080 --> 0:19:12.119 And that can happen in the Senate. 0:19:12.119 --> 0:19:15.159 Also, Yeah, how much do you kind of feel like 0:19:15.200 --> 0:19:18.000 you wouldn't necessarily run if the dynamics were the same 0:19:18.359 --> 0:19:21.200 now as they were when you started in politics. 0:19:22.160 --> 0:19:25.359 Honestly, for me, I was in federal office for eighteen years, 0:19:26.240 --> 0:19:29.119 twelve consecutive years in the Senate, and prior to that 0:19:29.160 --> 0:19:30.760 a gap, and then six years in the House. 0:19:31.359 --> 0:19:32.359 For me, that was enough. 0:19:32.680 --> 0:19:33.760 I was ready to move on. 0:19:34.400 --> 0:19:37.159 I have no regrets, and I really enjoyed and appreciated 0:19:37.200 --> 0:19:39.800 the chance to pursue the policies that I believed in. 0:19:39.880 --> 0:19:42.960 But I don't like the idea of being there forever 0:19:43.800 --> 0:19:45.680 for anybody, myself included. 0:19:46.400 --> 0:19:48.440 You're cut from a different cloth. I mean, there's Morgan 0:19:48.480 --> 0:19:51.280 Grenfell and then you're in Rookies restaurant in you know, Lehigh. 0:19:51.000 --> 0:19:54.000 Valley and all that. But what you're really. 0:19:53.720 --> 0:19:56.840 Acclaimed for is standing up to the former president saying 0:19:56.880 --> 0:20:00.000 the behavior is not appropriate. We have seen an absolutely 0:20:00.200 --> 0:20:03.480 historic moment for the nation that will continue right coming weeks. 0:20:03.800 --> 0:20:04.600 In months. 0:20:04.880 --> 0:20:09.200 What is the best practice right now of centrist Republicans 0:20:09.400 --> 0:20:11.880 is they address this indictment in Miami. 0:20:12.200 --> 0:20:17.600 Well, so I'm a conservative Republican and my conservatism sort 0:20:17.600 --> 0:20:21.480 of requires me to call out the completely unacceptable and 0:20:21.560 --> 0:20:25.680