1 00:00:02,440 --> 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 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz 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 00:00:22,440 --> 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 --> 00:00:31,240 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 --> 00:00:35,880 Speaker 2: Terminal and the Bloomberg Business App. 10 00:00:36,400 --> 00:00:38,479 Speaker 1: We begin with our top story, the S and P 11 00:00:38,520 --> 00:00:40,960 Speaker 1: five hundred, looking to build on three weeks of gains 12 00:00:41,000 --> 00:00:43,920 Speaker 1: as investors prepare for a busy week of data. Peter 13 00:00:43,960 --> 00:00:47,000 Speaker 1: Sheer of Academy Securities writing this, I think we are 14 00:00:47,040 --> 00:00:50,120 Speaker 1: near the end of the lower yields fed put rally. 15 00:00:50,159 --> 00:00:53,920 Speaker 1: That is, health stocks creep higher on anemic volumes last week. 16 00:00:53,920 --> 00:00:57,040 Speaker 1: We argue that the market might quote gap from no 17 00:00:57,200 --> 00:01:00,760 Speaker 1: landing to some form of bumpy landing. I'm pleased to say, 18 00:01:00,920 --> 00:01:03,639 Speaker 1: joins us right now, it seems like we're some sort 19 00:01:03,680 --> 00:01:04,880 Speaker 1: of precipice. 20 00:01:04,360 --> 00:01:05,160 Speaker 3: Of narrative shift. 21 00:01:05,240 --> 00:01:06,039 Speaker 1: Is that kind of how you. 22 00:01:06,000 --> 00:01:08,720 Speaker 4: See it, yeah, And I feel we kind of clung 23 00:01:08,800 --> 00:01:12,720 Speaker 4: to this American exceptionalism too long. The data started turning 24 00:01:12,720 --> 00:01:14,320 Speaker 4: a couple months ago. You've seen it in the City 25 00:01:14,360 --> 00:01:17,440 Speaker 4: Economic Surprise Index, which you know encompasses a fair bit 26 00:01:17,480 --> 00:01:19,959 Speaker 4: of data, and yet all you heard was American exceptionalism 27 00:01:19,959 --> 00:01:24,200 Speaker 4: and American exceptionalism, American exceptionalism. I think that narrative has changed, 28 00:01:24,240 --> 00:01:26,280 Speaker 4: and we're going to wake up one day and realize, whoa, whoa, 29 00:01:26,319 --> 00:01:28,080 Speaker 4: things aren't as good as we thought they were. 30 00:01:28,319 --> 00:01:29,919 Speaker 3: And I think that's where we're at right now. 31 00:01:30,040 --> 00:01:32,559 Speaker 4: And Friday's consumer confidence was certainly a shock to anyone 32 00:01:32,600 --> 00:01:34,160 Speaker 4: who thought everything's still rosy. 33 00:01:35,480 --> 00:01:37,400 Speaker 1: Well, this is the reason why some people are looking 34 00:01:37,400 --> 00:01:41,040 Speaker 1: at this idea of maybe not goldilocks, but a landing 35 00:01:41,240 --> 00:01:43,720 Speaker 1: which will at least break the prospect of FED rate 36 00:01:43,800 --> 00:01:46,280 Speaker 1: cuts back on the table. Why do you see it 37 00:01:46,360 --> 00:01:49,880 Speaker 1: as something more pernicious than that, that this weakness is 38 00:01:49,920 --> 00:01:51,360 Speaker 1: maybe more entrenched. 39 00:01:52,800 --> 00:01:54,920 Speaker 4: One we've all been asking for the last year and 40 00:01:54,960 --> 00:01:56,720 Speaker 4: a half. When does the consumer slow down? When does 41 00:01:56,760 --> 00:01:59,480 Speaker 4: credit card debt all these things start, you know, intend, 42 00:02:00,200 --> 00:02:02,600 Speaker 4: you know, stopping their spending. I think we're seeing some 43 00:02:02,680 --> 00:02:05,680 Speaker 4: of that again. What I found really striking about consumer 44 00:02:05,720 --> 00:02:09,359 Speaker 4: confidence on Friday is University of Michigan publishes both by 45 00:02:09,680 --> 00:02:13,520 Speaker 4: Democrats and if those were affiliated with Republican Party, and 46 00:02:13,560 --> 00:02:16,560 Speaker 4: the Democrat party side went down precipitously as well. It's 47 00:02:16,600 --> 00:02:18,880 Speaker 4: down below ninety. So that struck me. It's, you know, 48 00:02:18,919 --> 00:02:21,280 Speaker 4: there's this party as we're heading to the election. People 49 00:02:21,320 --> 00:02:23,959 Speaker 4: seem very depressed. On both sides. They're worried. I think 50 00:02:24,000 --> 00:02:27,240 Speaker 4: that's kind of accelerates. We'll get a lot of information 51 00:02:27,280 --> 00:02:29,880 Speaker 4: about sales. And the big thing to me is equities 52 00:02:29,919 --> 00:02:31,960 Speaker 4: have already had this fed put rally, so I think 53 00:02:31,960 --> 00:02:34,639 Speaker 4: we've priced in a lot of bed put ye narrative. 54 00:02:34,840 --> 00:02:37,040 Speaker 3: We're not going to get that many cuts, even if 55 00:02:37,080 --> 00:02:37,520 Speaker 3: they cut. 56 00:02:38,639 --> 00:02:41,040 Speaker 1: We were speaking to Cameron Dawson of New Edge earlier 57 00:02:41,120 --> 00:02:43,520 Speaker 1: this morning and she said she's actually more interested in 58 00:02:43,560 --> 00:02:47,000 Speaker 1: retail sales than the CPI print, maybe because of what 59 00:02:47,040 --> 00:02:48,120 Speaker 1: you're just talking about. 60 00:02:48,280 --> 00:02:49,120 Speaker 5: Would you agree with that? 61 00:02:49,240 --> 00:02:50,600 Speaker 1: Is that sort of how you view things? 62 00:02:51,520 --> 00:02:53,560 Speaker 4: Yeah, I think there's a decent chance CPI will come 63 00:02:53,560 --> 00:02:54,640 Speaker 4: in lower than expected. 64 00:02:55,480 --> 00:02:57,320 Speaker 3: Just all the way the calculations are done. 65 00:02:57,400 --> 00:02:59,880 Speaker 4: We probably get a brief rally both on bonds and stocks, 66 00:03:00,480 --> 00:03:03,120 Speaker 4: But it really comes down to what's going on with 67 00:03:03,200 --> 00:03:06,160 Speaker 4: the retail, what's going on with consumption, what's going to happen. 68 00:03:06,160 --> 00:03:08,079 Speaker 4: I think with trade tariffs, right, if we're going to 69 00:03:08,160 --> 00:03:10,720 Speaker 4: put on more tariffs on China, how do they respond? 70 00:03:11,000 --> 00:03:13,079 Speaker 4: And I think we have just started this trade war 71 00:03:13,560 --> 00:03:15,639 Speaker 4: and it's accelerating, and what we're going to see as 72 00:03:15,720 --> 00:03:18,520 Speaker 4: more and more margin pressure as Chinese brands try and 73 00:03:18,520 --> 00:03:21,600 Speaker 4: compete both in China but also across the globe. Not 74 00:03:21,639 --> 00:03:23,679 Speaker 4: necessarily in the US, but I think that's where there's 75 00:03:23,680 --> 00:03:25,520 Speaker 4: going to be margin pressure. There's going to be competition 76 00:03:25,560 --> 00:03:28,120 Speaker 4: with these Chinese brands that's not yet priced in at all, 77 00:03:28,160 --> 00:03:30,760 Speaker 4: and I think tariffs, if we announced this week, will 78 00:03:30,800 --> 00:03:32,119 Speaker 4: make that more clear to people. 79 00:03:32,240 --> 00:03:34,040 Speaker 3: Hey, we've got to be aware of this, and it's. 80 00:03:33,960 --> 00:03:37,280 Speaker 4: Changing how the world global economy is behaving. 81 00:03:38,560 --> 00:03:40,040 Speaker 1: Well, I want to get to that one second. This 82 00:03:40,080 --> 00:03:42,200 Speaker 1: has been your thesis for a long time that's been 83 00:03:42,480 --> 00:03:45,640 Speaker 1: really prescient, which is basically, this is a glut of 84 00:03:45,720 --> 00:03:48,000 Speaker 1: goods and the Chinese government is going to try to 85 00:03:48,040 --> 00:03:50,040 Speaker 1: flood the rest of the world with stuff that they're 86 00:03:50,080 --> 00:03:53,360 Speaker 1: overproducing because they structurally have to because their economy relies 87 00:03:53,400 --> 00:03:53,640 Speaker 1: on it. 88 00:03:53,640 --> 00:03:54,440 Speaker 3: It's sort of the new. 89 00:03:54,280 --> 00:03:58,320 Speaker 1: Housing market is a new industrial overproduction. Before we get there, though, 90 00:03:58,600 --> 00:04:00,560 Speaker 1: I want to just have you respond because you've see, 91 00:04:00,680 --> 00:04:04,120 Speaker 1: in direct opposition to what ahspc's Max Kettner is saying, 92 00:04:04,120 --> 00:04:05,960 Speaker 1: what he put out this morning, the dip in risk 93 00:04:06,000 --> 00:04:08,440 Speaker 1: assets is increasingly in the rear view year as many 94 00:04:08,480 --> 00:04:11,720 Speaker 1: major equity indices and reapproach their unit date highs. Talking 95 00:04:11,760 --> 00:04:14,960 Speaker 1: again about goldilocks that essentially some of these pressures that 96 00:04:15,000 --> 00:04:18,279 Speaker 1: you're talking about are going to keep the FED cutting 97 00:04:18,320 --> 00:04:20,919 Speaker 1: on some sort of trajectory that will allow things to 98 00:04:21,000 --> 00:04:24,440 Speaker 1: keep tugging along. Why do you think that is going 99 00:04:24,480 --> 00:04:26,240 Speaker 1: to end? At a time where earnings have come in 100 00:04:26,320 --> 00:04:29,640 Speaker 1: stronger than people expected, and companies are displaying a good 101 00:04:29,640 --> 00:04:32,360 Speaker 1: deal of pricing power and been able to shrug off 102 00:04:32,400 --> 00:04:33,839 Speaker 1: some of the geopolitical headwinds. 103 00:04:34,680 --> 00:04:37,080 Speaker 4: Now, I think one big thing that's been helping the 104 00:04:37,080 --> 00:04:39,400 Speaker 4: stock market is a huge record buyback. So we've seen 105 00:04:39,440 --> 00:04:42,200 Speaker 4: record buybacks. That's only supporting stocks when you look at 106 00:04:42,240 --> 00:04:44,520 Speaker 4: it right. In some of the past week, you saw 107 00:04:44,560 --> 00:04:46,400 Speaker 4: a little bit of weakness and then it was overcome 108 00:04:46,480 --> 00:04:48,760 Speaker 4: during the course of the day with what looked like 109 00:04:48,839 --> 00:04:51,240 Speaker 4: a lot like just you know, corporate buying, So I 110 00:04:51,240 --> 00:04:53,720 Speaker 4: think that's been supportive. I think the valuation questions are 111 00:04:53,720 --> 00:04:56,080 Speaker 4: still real. How much is AI driven US? Where we 112 00:04:56,120 --> 00:04:58,599 Speaker 4: headed on AI? You know, are we getting the benefit 113 00:04:59,000 --> 00:05:00,839 Speaker 4: all those things will start my out right, we get 114 00:05:00,839 --> 00:05:03,760 Speaker 4: in video earnings next week, so that'll be an important part. 115 00:05:03,839 --> 00:05:06,719 Speaker 4: So I think the valuations are creeping back high, setting 116 00:05:06,760 --> 00:05:09,160 Speaker 4: people up for another disappointment. And that's why I think 117 00:05:09,240 --> 00:05:11,560 Speaker 4: we dropped this five to ten percent. We got down 118 00:05:11,600 --> 00:05:13,920 Speaker 4: about six percent. We never got to that ten percent level. 119 00:05:14,080 --> 00:05:16,400 Speaker 4: I think we get there, you know, in the next 120 00:05:16,600 --> 00:05:19,360 Speaker 4: few weeks or months, as this realization sets in. There's 121 00:05:19,360 --> 00:05:20,760 Speaker 4: still too much hopium out there. 122 00:05:21,760 --> 00:05:24,320 Speaker 1: Well, this raises a prospect of what's the catalyst. Is 123 00:05:24,320 --> 00:05:26,440 Speaker 1: it going to be economic data pointing to a more 124 00:05:26,440 --> 00:05:30,000 Speaker 1: material slowdown in the consumer? Is the consumer maybe not 125 00:05:30,040 --> 00:05:32,680 Speaker 1: as significant as people previously thought, which is something that 126 00:05:32,720 --> 00:05:35,279 Speaker 1: we heard in an interview that Dandy Berger did earlier 127 00:05:35,279 --> 00:05:37,720 Speaker 1: this morning. Or is this really going to come from 128 00:05:37,760 --> 00:05:42,360 Speaker 1: the geopolitics at the moment of more tariffs, of widening pressures, 129 00:05:42,520 --> 00:05:45,599 Speaker 1: of this question of whether companies can sell in China 130 00:05:45,839 --> 00:05:47,240 Speaker 1: at a time where the gates are going up in 131 00:05:47,279 --> 00:05:48,040 Speaker 1: the US. 132 00:05:48,720 --> 00:05:51,479 Speaker 4: So my base case is that this economic weakness has 133 00:05:51,520 --> 00:05:54,240 Speaker 4: been helping yields lower, that's been helping stocks. We're going 134 00:05:54,279 --> 00:05:55,920 Speaker 4: to hit a point in the coming days or weeks 135 00:05:55,960 --> 00:05:58,760 Speaker 4: where we see more economic weakness and people realize, wow, 136 00:05:58,800 --> 00:06:01,039 Speaker 4: maybe this isn't so good for the future of the market, 137 00:06:01,200 --> 00:06:03,200 Speaker 4: and that's when you start rolling over in stocks. And 138 00:06:03,200 --> 00:06:05,479 Speaker 4: then you've got the geopolitical risk you've got made by 139 00:06:05,600 --> 00:06:08,160 Speaker 4: China theory, You've got the tariffs. All of those things 140 00:06:08,200 --> 00:06:10,480 Speaker 4: I think are almost quote unquote freebies if you're going 141 00:06:10,560 --> 00:06:13,159 Speaker 4: to be short or underweight this market. I think any 142 00:06:13,200 --> 00:06:15,360 Speaker 4: of those alone can knock this market down, and you 143 00:06:15,600 --> 00:06:18,599 Speaker 4: potentially get multiple of those things occurring. So I think 144 00:06:18,600 --> 00:06:20,719 Speaker 4: we're well set up if you want to be underweight 145 00:06:20,839 --> 00:06:21,680 Speaker 4: to benefit from that. 146 00:06:21,880 --> 00:06:22,880 Speaker 3: I still like yields. 147 00:06:23,080 --> 00:06:25,159 Speaker 4: I think yields do go lower, but stocks are going 148 00:06:25,200 --> 00:06:27,840 Speaker 4: to start giving up This whole narrative of lower yields 149 00:06:27,920 --> 00:06:30,040 Speaker 4: is good for stocks, And say, yields are going lower 150 00:06:30,080 --> 00:06:32,839 Speaker 4: because this economy is shaky and maybe even jobs aren't 151 00:06:32,839 --> 00:06:35,240 Speaker 4: anywhere close to as good as the published data has been. 152 00:06:36,680 --> 00:06:39,159 Speaker 1: How much do you see a potential rally and government 153 00:06:39,200 --> 00:06:42,560 Speaker 1: debt given some of the hangovers with inflation, given the 154 00:06:42,600 --> 00:06:45,120 Speaker 1: fact that we are seeing terriffs being put in place, 155 00:06:45,160 --> 00:06:47,119 Speaker 1: and given the fact that the deficit, which some people 156 00:06:47,120 --> 00:06:50,640 Speaker 1: worry about some people shrug off, is continuing to climb. 157 00:06:51,520 --> 00:06:53,360 Speaker 4: Yeah, I think at the front end we should get 158 00:06:53,360 --> 00:06:55,560 Speaker 4: to two cuts this year. Maybe you see price in 159 00:06:55,600 --> 00:06:57,200 Speaker 4: three cuts. I don't think we can get any better 160 00:06:57,240 --> 00:06:59,120 Speaker 4: than that. And on tens, I think we can go 161 00:06:59,160 --> 00:07:01,200 Speaker 4: down to maybe four thirty. So I kind of have 162 00:07:01,279 --> 00:07:03,360 Speaker 4: this four thirty to four to fifty range. But as 163 00:07:03,400 --> 00:07:05,160 Speaker 4: you say, you've got all these other issues, and I've 164 00:07:05,160 --> 00:07:06,880 Speaker 4: got to admit, over the past couple of weeks, I'm 165 00:07:06,880 --> 00:07:10,280 Speaker 4: increasing looking at the commodity market and getting more and 166 00:07:10,320 --> 00:07:12,720 Speaker 4: more nervous that inflation is actually going to creep up 167 00:07:12,760 --> 00:07:13,880 Speaker 4: through the commodity market. 168 00:07:13,960 --> 00:07:14,760 Speaker 3: And that was off my. 169 00:07:14,800 --> 00:07:17,360 Speaker 4: Radar, I would say, two three weeks ago. And as 170 00:07:17,360 --> 00:07:19,400 Speaker 4: you look through the data you go back through look 171 00:07:19,520 --> 00:07:21,200 Speaker 4: a lot of the ISM, a lot of the PMI, 172 00:07:21,680 --> 00:07:24,280 Speaker 4: all prices paid were much higher. Well, the rest of 173 00:07:24,280 --> 00:07:26,480 Speaker 4: the data was weaker. So you know, I don't want 174 00:07:26,520 --> 00:07:29,760 Speaker 4: to say stat inflation. I don't think that's a realistic situation, 175 00:07:30,360 --> 00:07:32,720 Speaker 4: but I can't dismiss it as easily now as I 176 00:07:32,760 --> 00:07:33,720 Speaker 4: put a month ago. 177 00:07:34,600 --> 00:07:37,320 Speaker 1: Just real quick, which commodity, because oil prices haven't been 178 00:07:37,400 --> 00:07:38,320 Speaker 1: really shooting higher. 179 00:07:38,360 --> 00:07:38,960 Speaker 3: What are you watching? 180 00:07:39,040 --> 00:07:42,680 Speaker 4: So Copper's up quite significantly. You've seen Goal, you know, 181 00:07:42,720 --> 00:07:45,640 Speaker 4: the precious metals up, nickels up, a lot of the 182 00:07:45,680 --> 00:07:49,120 Speaker 4: industrial metals are actually up. Oil has been fairly stable. 183 00:07:49,120 --> 00:07:50,920 Speaker 4: Oil had a lot of priced in and it's kind 184 00:07:50,920 --> 00:07:53,880 Speaker 4: of been calm again. It hasn't really retreated even as 185 00:07:53,880 --> 00:07:55,600 Speaker 4: you've seen kind of the status co emerge in the 186 00:07:55,600 --> 00:07:56,080 Speaker 4: Middle East. 187 00:07:56,120 --> 00:07:58,480 Speaker 3: So I think that's still susceptible for a shock. 188 00:07:59,480 --> 00:08:01,480 Speaker 4: But really, Copper's been one of the big keys that 189 00:08:01,480 --> 00:08:02,240 Speaker 4: I've been looking at. 190 00:08:03,320 --> 00:08:06,280 Speaker 1: And with a five to ten percent decline in equities. 191 00:08:05,800 --> 00:08:07,080 Speaker 5: Peter, are you a buyer? 192 00:08:07,240 --> 00:08:10,000 Speaker 3: Is this a by the JIT moment? Yeah? I think so. 193 00:08:10,040 --> 00:08:12,160 Speaker 3: I think it'll be a good opportunity again right now. 194 00:08:12,200 --> 00:08:14,080 Speaker 4: I like Warren stocks better than U S Stox, so 195 00:08:14,080 --> 00:08:16,280 Speaker 4: I'm not completely burish on the global economy. I like 196 00:08:16,360 --> 00:08:19,000 Speaker 4: Chinese stocks, Indian stocks much better than I like, you know, 197 00:08:19,000 --> 00:08:21,760 Speaker 4: the NASZAC one hundred, and I am wanting to buy 198 00:08:21,920 --> 00:08:24,120 Speaker 4: banks and some of the things that have lagged behind. 199 00:08:24,320 --> 00:08:26,920 Speaker 4: So some of these low valuation, high debt companies I 200 00:08:26,920 --> 00:08:28,760 Speaker 4: think they can rebound as you start getting through this. 201 00:08:29,040 --> 00:08:30,680 Speaker 4: And we even started seeing in the past week or 202 00:08:30,680 --> 00:08:32,800 Speaker 4: two right where some of the you know, the rust 203 00:08:32,800 --> 00:08:34,400 Speaker 4: of two thousands been doing a little bit better. So 204 00:08:34,440 --> 00:08:36,199 Speaker 4: I think if we get that pullback, that's where I 205 00:08:36,200 --> 00:08:38,480 Speaker 4: want to invest. I like the equal weighted indices better, 206 00:08:38,600 --> 00:08:40,720 Speaker 4: but I am waiting for a pullback to get really committed. 207 00:08:41,800 --> 00:08:45,360 Speaker 1: Peter's share of Academy Securities, thank you as always really 208 00:08:45,520 --> 00:08:58,480 Speaker 1: wonderful insights. Meanwhile, the Financial Times reporting the New York 209 00:08:58,520 --> 00:09:02,439 Speaker 1: Stock Exchange surveying mark participants on round the clock trading. 210 00:09:02,600 --> 00:09:05,280 Speaker 1: The survey, coming as a startup backed by Stephen Cohen's 211 00:09:05,280 --> 00:09:08,640 Speaker 1: Point seventy two Ventures Fund, is seeking SEC approval to 212 00:09:08,720 --> 00:09:11,800 Speaker 1: launch the first round the clock exchange. Let's head to 213 00:09:11,800 --> 00:09:14,200 Speaker 1: New York where Danny Berger is joined by the New 214 00:09:14,280 --> 00:09:17,360 Speaker 1: York Sack Exchange President Lynn Martin to talk about why 215 00:09:17,400 --> 00:09:19,840 Speaker 1: we all need twenty four to seven trading in our lives. 216 00:09:19,920 --> 00:09:22,880 Speaker 5: Danny, Hi, Lisa, that's right, because you know, we want 217 00:09:22,880 --> 00:09:24,680 Speaker 5: to be wrangling the kids and have the ability to 218 00:09:24,720 --> 00:09:27,240 Speaker 5: trade while we do. Say Hyland, thank you so much 219 00:09:27,240 --> 00:09:29,640 Speaker 5: for joining us, Thanks for having me. So some others 220 00:09:29,720 --> 00:09:32,280 Speaker 5: might have opinions about this. But overall the survey that 221 00:09:32,280 --> 00:09:34,040 Speaker 5: you've gotten so far from what you've heard, I know 222 00:09:34,120 --> 00:09:35,160 Speaker 5: you're still in the middle of it. 223 00:09:35,400 --> 00:09:37,040 Speaker 3: What have you heard so far? 224 00:09:37,280 --> 00:09:39,880 Speaker 6: What we've heard is there are a lot of things 225 00:09:40,080 --> 00:09:43,160 Speaker 6: to consider, mainly on the infrastructure side, which is not 226 00:09:43,360 --> 00:09:47,040 Speaker 6: really a surprise. It's why we sought out to get 227 00:09:47,080 --> 00:09:52,280 Speaker 6: feedback before something like this was introduced by the SRO community. 228 00:09:52,320 --> 00:09:54,360 Speaker 6: We wanted to understand all of the pieces of the 229 00:09:54,480 --> 00:09:57,000 Speaker 6: ecosystem that would need to fit together if we're going 230 00:09:57,040 --> 00:10:01,240 Speaker 6: to introduce this responsibly. So the feedbacks so far hasn't 231 00:10:01,280 --> 00:10:04,000 Speaker 6: really surprised us. There's a lot of parts of the 232 00:10:04,120 --> 00:10:05,360 Speaker 6: value chain to consider. 233 00:10:05,480 --> 00:10:08,040 Speaker 5: So realistically, if you did want to do something like this, 234 00:10:08,160 --> 00:10:10,040 Speaker 5: how long would it take to actually set up that 235 00:10:10,040 --> 00:10:10,960 Speaker 5: type of infrastructure. 236 00:10:11,040 --> 00:10:13,400 Speaker 6: There's a variety of things that would need to be considered. 237 00:10:13,400 --> 00:10:15,960 Speaker 6: Most importantly, we would need to talk to our regulators 238 00:10:16,480 --> 00:10:19,840 Speaker 6: about it. Not just us, our clearinghouse DTC would also 239 00:10:19,920 --> 00:10:22,800 Speaker 6: need to consider that with the regulators to the extent 240 00:10:22,840 --> 00:10:25,840 Speaker 6: that they would remain open for that twenty four hour trading. 241 00:10:26,040 --> 00:10:28,199 Speaker 5: It's interesting because if there does appear to be demand here. 242 00:10:28,240 --> 00:10:31,080 Speaker 5: Lisa mentioned Steve Cohen's venture wants to do something like this. 243 00:10:31,120 --> 00:10:33,080 Speaker 5: Do you have any sense of idea of where that 244 00:10:33,160 --> 00:10:35,680 Speaker 5: demand is coming from the type of person that wants 245 00:10:35,679 --> 00:10:37,160 Speaker 5: to be trading twenty four seven. 246 00:10:37,040 --> 00:10:40,199 Speaker 6: So I don't know that it's really twenty four hours 247 00:10:40,240 --> 00:10:43,680 Speaker 6: a day. I think what has started most of demand, 248 00:10:43,760 --> 00:10:45,920 Speaker 6: what's really triggered most of the demand has been the 249 00:10:46,000 --> 00:10:48,840 Speaker 6: rise of the ETFs. And if you look at the 250 00:10:48,920 --> 00:10:53,600 Speaker 6: basket in some of the ETFs, particularly the international ETFs, 251 00:10:53,800 --> 00:10:57,439 Speaker 6: they're not just securities that are listed on domestic exchange. 252 00:10:57,640 --> 00:11:01,000 Speaker 6: So from a risk management standpoint, it would make sense 253 00:11:01,080 --> 00:11:04,000 Speaker 6: that you would want to manage your risk in the 254 00:11:04,120 --> 00:11:07,839 Speaker 6: underlying baskets when those domestic markets are open. 255 00:11:08,080 --> 00:11:10,720 Speaker 5: Fair enough now, No, when it comes to IPOs, we 256 00:11:10,760 --> 00:11:13,280 Speaker 5: started this year. You and many folks were excited for 257 00:11:13,440 --> 00:11:15,280 Speaker 5: twenty twenty four that it would be a big year. 258 00:11:15,880 --> 00:11:18,160 Speaker 5: So many people's hopes have been dashed. I think the 259 00:11:18,240 --> 00:11:21,680 Speaker 5: volume is somewhere still near a decade's low when it 260 00:11:21,720 --> 00:11:24,240 Speaker 5: comes to IPO volume, are you still hopeful for this year? 261 00:11:24,360 --> 00:11:28,640 Speaker 6: I absolutely am, and actually I'm incredibly optimistic given the 262 00:11:28,640 --> 00:11:31,720 Speaker 6: amount of proceeds that have been raised so far in 263 00:11:31,760 --> 00:11:35,000 Speaker 6: the markets fourteen billion so far has been raised in 264 00:11:35,040 --> 00:11:39,640 Speaker 6: the US markets. Through last Friday, we've had about twenty 265 00:11:39,640 --> 00:11:43,599 Speaker 6: five operating company IPOs on the New York Stock Exchange. 266 00:11:43,760 --> 00:11:48,280 Speaker 6: That's two times the amount of proceeds raised year to 267 00:11:48,360 --> 00:11:52,600 Speaker 6: date versus last year, and three times versus twenty twenty two. 268 00:11:52,880 --> 00:11:56,120 Speaker 6: So the markets are definitely opening up. And what I'm 269 00:11:56,160 --> 00:12:00,320 Speaker 6: personally excited about is those companies we've welcome have not 270 00:12:00,800 --> 00:12:05,000 Speaker 6: just gotten large deals done, many times, they have upsized 271 00:12:05,040 --> 00:12:08,240 Speaker 6: their deals. They've priced either at the high end or 272 00:12:08,480 --> 00:12:12,200 Speaker 6: above the range, and then they're seeing that pop, the 273 00:12:12,240 --> 00:12:15,800 Speaker 6: twenty percent pop when their stock opens. So it's been 274 00:12:15,840 --> 00:12:21,320 Speaker 6: a really exciting particularly Q two, really exciting time where 275 00:12:21,320 --> 00:12:24,800 Speaker 6: we're seeing about two IPOs a week at NYSA. 276 00:12:25,040 --> 00:12:27,679 Speaker 5: Well, Reddit is a great example of a company about IPO, 277 00:12:28,000 --> 00:12:30,360 Speaker 5: a lot of fanfare around it, but a company like Reddit, 278 00:12:30,679 --> 00:12:34,000 Speaker 5: it's a mature company, it's a quality company investors. 279 00:12:33,559 --> 00:12:34,160 Speaker 3: Feel safe with. 280 00:12:34,240 --> 00:12:36,480 Speaker 5: It is the room for anything outside of that. 281 00:12:36,920 --> 00:12:40,880 Speaker 6: So you have seen some more growth oriented companies go. 282 00:12:41,520 --> 00:12:47,240 Speaker 6: But importantly, as you mentioned, they've had a path to profitability. 283 00:12:47,559 --> 00:12:50,240 Speaker 6: So I think that's really what is getting valued. It's 284 00:12:50,360 --> 00:12:54,760 Speaker 6: why those companies that either are profitable or have a 285 00:12:54,800 --> 00:12:58,320 Speaker 6: path to profitability are getting rewarded. You look at a 286 00:12:58,320 --> 00:13:01,280 Speaker 6: company like Viking, which is a lot just IPO of 287 00:13:01,320 --> 00:13:03,800 Speaker 6: the year, it's a household name. I had so many 288 00:13:03,800 --> 00:13:06,240 Speaker 6: people say to me, I can't believe this company is 289 00:13:06,280 --> 00:13:10,240 Speaker 6: in public already, given that many of us have enjoyed 290 00:13:10,240 --> 00:13:13,439 Speaker 6: their cruises, whatever the case may be. But then you've 291 00:13:13,480 --> 00:13:18,920 Speaker 6: also got great companies emerging companies around cyber like Rubric 292 00:13:19,080 --> 00:13:20,440 Speaker 6: who just iPod on us. 293 00:13:20,440 --> 00:13:23,400 Speaker 5: A couple of weeks ago, even with the uptick and demand, 294 00:13:23,520 --> 00:13:26,040 Speaker 5: prequeent data came out that there's still three point trillion 295 00:13:26,120 --> 00:13:29,120 Speaker 5: dollars of companies of money tied up in aging companies 296 00:13:29,120 --> 00:13:32,000 Speaker 5: that haven't gone public. There still is this impetus to 297 00:13:32,040 --> 00:13:35,320 Speaker 5: stay private for longer. Are you concerned with as companies 298 00:13:35,360 --> 00:13:38,440 Speaker 5: stay private for longer that they found alternative paths to 299 00:13:38,480 --> 00:13:40,959 Speaker 5: going public and just that norm that we used to sell, 300 00:13:41,200 --> 00:13:42,760 Speaker 5: see it's not going to get back to that. 301 00:13:43,120 --> 00:13:45,880 Speaker 6: I'm not really concerned because there is no match for 302 00:13:45,920 --> 00:13:49,480 Speaker 6: the US capital markets in terms of an efficient form 303 00:13:49,800 --> 00:13:54,360 Speaker 6: of capital and attaining that capital that you really need 304 00:13:54,400 --> 00:13:58,000 Speaker 6: to scale your business. Not just from that perspective, but 305 00:13:58,160 --> 00:14:03,559 Speaker 6: also rewarding employees democratizing investment and a M and A 306 00:14:03,720 --> 00:14:05,600 Speaker 6: is a big reason that I hear some of these 307 00:14:05,640 --> 00:14:08,719 Speaker 6: companies go and they believe that there's a different M 308 00:14:08,800 --> 00:14:12,319 Speaker 6: and A currency that you get with becoming a public 309 00:14:12,360 --> 00:14:18,400 Speaker 6: company versus staying private. So I continue to be incredibly optimistic. However, 310 00:14:19,000 --> 00:14:22,080 Speaker 6: if people are going to be more thoughtful about when 311 00:14:22,320 --> 00:14:25,000 Speaker 6: they go public, I don't think you're going to see 312 00:14:25,040 --> 00:14:27,760 Speaker 6: a rush to the public markets like you saw in 313 00:14:27,800 --> 00:14:32,600 Speaker 6: twenty twenty one for quite some time. But importantly, I 314 00:14:32,640 --> 00:14:35,320 Speaker 6: think we're out of the twenty twenty two twenty twenty 315 00:14:35,360 --> 00:14:37,680 Speaker 6: three closed IPO markets. 316 00:14:38,040 --> 00:14:39,760 Speaker 5: Is there a chance we get back to that rush 317 00:14:40,080 --> 00:14:42,400 Speaker 5: and what needs to be in place for that to happen. 318 00:14:42,280 --> 00:14:44,680 Speaker 6: Well, it feels like, you know, we have the capacity 319 00:14:44,720 --> 00:14:47,360 Speaker 6: to have a pretty normal year. If we've raised fourteen 320 00:14:47,840 --> 00:14:50,520 Speaker 6: just over fourteen billion to date, in an average year 321 00:14:50,560 --> 00:14:54,000 Speaker 6: you raise about forty five billion in the public markets, 322 00:14:54,120 --> 00:14:56,920 Speaker 6: we're not too far off, and based on what we're 323 00:14:56,920 --> 00:15:00,400 Speaker 6: seeing in our pipeline, I think this this could be 324 00:15:00,440 --> 00:15:02,040 Speaker 6: a pretty close to normal year. 325 00:15:02,360 --> 00:15:04,520 Speaker 5: How much of that depends on the FED cutting is 326 00:15:04,520 --> 00:15:05,160 Speaker 5: not necessary. 327 00:15:05,240 --> 00:15:09,040 Speaker 6: I don't think it's necessarily dependent on the FED cutting. 328 00:15:09,160 --> 00:15:12,280 Speaker 6: I think people are getting used to this concept of 329 00:15:13,120 --> 00:15:15,960 Speaker 6: there's a little bit of uncertainty in the markets. The 330 00:15:16,000 --> 00:15:18,360 Speaker 6: big concern you had over the last two years was 331 00:15:18,400 --> 00:15:22,520 Speaker 6: the hard landing versus soft landing. And I think people 332 00:15:22,520 --> 00:15:26,920 Speaker 6: feel pretty good about our economy, so I don't know 333 00:15:27,000 --> 00:15:31,320 Speaker 6: that it matters if the FED cuts once, not at all, 334 00:15:31,600 --> 00:15:34,480 Speaker 6: whatever the case may be. But I do think you'll 335 00:15:34,480 --> 00:15:37,440 Speaker 6: probably see a little bit of a closure of the 336 00:15:37,480 --> 00:15:40,040 Speaker 6: IPO markets around election time like you have any other 337 00:15:40,080 --> 00:15:40,760 Speaker 6: election year. 338 00:15:40,880 --> 00:15:43,120 Speaker 5: Fair enough, And going back to some things you mentioned 339 00:15:43,320 --> 00:15:46,920 Speaker 5: of why the American IPO market remains strong despite some 340 00:15:46,960 --> 00:15:49,520 Speaker 5: of the wobbles, things like the liquidity, the investor base. 341 00:15:49,880 --> 00:15:51,960 Speaker 5: It's made it a global destination. But there was this 342 00:15:52,000 --> 00:15:55,200 Speaker 5: report that she in the Chinese fast fashion company wants 343 00:15:55,200 --> 00:15:58,320 Speaker 5: to list in London instead of the US because of 344 00:15:58,360 --> 00:16:02,400 Speaker 5: the regulatory environment. Is that global beacon that the US 345 00:16:02,520 --> 00:16:05,240 Speaker 5: going to change with the US regulators that are more 346 00:16:05,240 --> 00:16:06,840 Speaker 5: intent on cracking down in China. 347 00:16:07,400 --> 00:16:09,320 Speaker 6: I don't know about that. I mean, I can't really 348 00:16:09,360 --> 00:16:13,240 Speaker 6: speak to the conversations that a prospect like Asians has 349 00:16:13,280 --> 00:16:16,560 Speaker 6: had with our regulators. I do hope that they're able 350 00:16:16,600 --> 00:16:19,320 Speaker 6: to enter the US markets, but it will be up 351 00:16:19,360 --> 00:16:22,280 Speaker 6: to our regulators to determine how Okay. 352 00:16:22,080 --> 00:16:23,760 Speaker 5: Lynn, we're going to have to leave it there. Thank 353 00:16:23,800 --> 00:16:25,760 Speaker 5: you so much for joining. Really great to see you. 354 00:16:26,080 --> 00:16:28,960 Speaker 5: That is Lynn Martin of the Nice Sye Lisa. With that, 355 00:16:29,000 --> 00:16:29,920 Speaker 5: I'll send it back to you. 356 00:16:39,240 --> 00:16:41,920 Speaker 1: Right now. With us here in DC, we have tourist 357 00:16:41,960 --> 00:16:44,760 Speaker 1: and Slock, chief economist for Apollo, who's here for the 358 00:16:44,800 --> 00:16:46,840 Speaker 1: same event that I'm here for, so I'm very glad 359 00:16:46,920 --> 00:16:48,600 Speaker 1: to see you. I want to start with a question 360 00:16:48,640 --> 00:16:50,400 Speaker 1: we've been asking all morning, which is which is more 361 00:16:50,440 --> 00:16:53,480 Speaker 1: important the inflation data or the retail sales data. 362 00:16:53,480 --> 00:16:55,800 Speaker 7: Well, if if you're from the FEDS dual mandate, which 363 00:16:55,880 --> 00:16:59,320 Speaker 7: is inflation at two percent and full employment, inflation is 364 00:16:59,320 --> 00:17:02,480 Speaker 7: probably a little more important. And particularly it's important because 365 00:17:02,520 --> 00:17:05,800 Speaker 7: for the last three months, we've seen the annualized change 366 00:17:05,840 --> 00:17:09,520 Speaker 7: in supercoco up by eight percent. We've seen the annualized 367 00:17:09,600 --> 00:17:12,560 Speaker 7: change and coin inflation go up by four percent. So 368 00:17:12,600 --> 00:17:14,800 Speaker 7: the momentum in inflation in the last three four months 369 00:17:14,840 --> 00:17:15,720 Speaker 7: has just been moving. 370 00:17:15,480 --> 00:17:16,320 Speaker 3: In the wrong direction. 371 00:17:16,640 --> 00:17:19,280 Speaker 7: So what's really important about Wednesday's number is whether that 372 00:17:19,480 --> 00:17:22,800 Speaker 7: momentum continues or whether we're going to see Indeed, as 373 00:17:22,960 --> 00:17:25,879 Speaker 7: Mike and Daniel was just talking about move low and inflation. 374 00:17:25,960 --> 00:17:27,920 Speaker 1: Why do you think from the Fed's reaction function, they 375 00:17:27,920 --> 00:17:30,280 Speaker 1: care more about that CPI print, which a lot of people, 376 00:17:30,320 --> 00:17:33,600 Speaker 1: including Austin Coolsby, have set as a lagging indicator versus 377 00:17:33,920 --> 00:17:36,560 Speaker 1: real weakening in the consumer in a sense that growth 378 00:17:36,640 --> 00:17:37,560 Speaker 1: is being challenged. 379 00:17:37,760 --> 00:17:39,359 Speaker 7: Well, I think the problem for them is that the 380 00:17:39,359 --> 00:17:41,679 Speaker 7: momentum in inflation has just not been going down for 381 00:17:41,720 --> 00:17:44,080 Speaker 7: the last several months, and if momentum has been building 382 00:17:44,080 --> 00:17:46,600 Speaker 7: to the upside, we really need from a FED perspective, 383 00:17:46,600 --> 00:17:48,879 Speaker 7: to see that momentum break and that's the risk with 384 00:17:48,920 --> 00:17:49,680 Speaker 7: the numbers this week. 385 00:17:49,760 --> 00:17:50,080 Speaker 3: Shelter. 386 00:17:50,480 --> 00:17:53,000 Speaker 7: There's an argument about, well, on the one hand, maybe 387 00:17:53,240 --> 00:17:55,920 Speaker 7: areas of occupancy rates are looking a bit better, which 388 00:17:55,920 --> 00:17:58,320 Speaker 7: would argue for Shelter inflation to come down. On the 389 00:17:58,320 --> 00:18:01,240 Speaker 7: other hand, case Shiller is now rising at six seven 390 00:18:01,280 --> 00:18:03,640 Speaker 7: percent and the annual rates, so that means that we're 391 00:18:03,680 --> 00:18:07,280 Speaker 7: seeing momentum actually building in home prices. So there's different 392 00:18:07,280 --> 00:18:09,080 Speaker 7: parts of the scale here that are weighing on. We 393 00:18:09,200 --> 00:18:11,560 Speaker 7: just don't quite know what the shel See inflation data 394 00:18:11,560 --> 00:18:13,000 Speaker 7: will do, and it has been coming down a lot 395 00:18:13,080 --> 00:18:16,320 Speaker 7: slower than what anyone expected and that might still combine 396 00:18:16,359 --> 00:18:19,040 Speaker 7: with auto insurance and combined with everything that's going on, 397 00:18:19,119 --> 00:18:22,080 Speaker 7: and the subcomponents still continue to put some upward pressure 398 00:18:22,119 --> 00:18:22,560 Speaker 7: on inflation. 399 00:18:22,680 --> 00:18:24,360 Speaker 1: So you still see no rate cuts this year. 400 00:18:24,440 --> 00:18:26,280 Speaker 7: We still see no rate cuts, and of course noway 401 00:18:26,280 --> 00:18:28,080 Speaker 7: from C members are also beginning to talk about no 402 00:18:28,200 --> 00:18:30,440 Speaker 7: rate coasts this year. So I do think that it's 403 00:18:30,440 --> 00:18:32,480 Speaker 7: just becoming more and more difficult. If you put it 404 00:18:32,520 --> 00:18:34,920 Speaker 7: together on a little spreadsheet, the growth rate that we've 405 00:18:34,920 --> 00:18:36,760 Speaker 7: seen for the last thirty years, for the rest of 406 00:18:36,800 --> 00:18:39,200 Speaker 7: this year, you will still have inflation at around three 407 00:18:39,240 --> 00:18:40,960 Speaker 7: percent by the end of the year. You need a 408 00:18:40,960 --> 00:18:44,520 Speaker 7: really dramatic slowdown in inflation erupon one for every single 409 00:18:44,520 --> 00:18:46,520 Speaker 7: month for the rest of the year to get core 410 00:18:46,600 --> 00:18:48,800 Speaker 7: PC inflation backed to two percent by the end of 411 00:18:48,840 --> 00:18:51,359 Speaker 7: the year. So the upward propressure on inflation is just 412 00:18:51,400 --> 00:18:53,200 Speaker 7: really strong over the next several months. 413 00:18:53,240 --> 00:18:55,000 Speaker 1: What we heard from firdjer J. Powell a couple of 414 00:18:55,000 --> 00:18:57,600 Speaker 1: weeks ago is real indication he wants to cut rates. 415 00:18:57,800 --> 00:19:00,240 Speaker 1: He is concerned about the strength of the economy. There 416 00:19:00,280 --> 00:19:02,919 Speaker 1: is clear deterioration there. It seems like the bias has 417 00:19:02,960 --> 00:19:07,520 Speaker 1: been more on strength than potentially that inflation. Read what 418 00:19:07,640 --> 00:19:10,760 Speaker 1: makes you think that's going to change given the fact 419 00:19:11,000 --> 00:19:13,560 Speaker 1: that we do see real pressure that's coming through with 420 00:19:13,600 --> 00:19:17,000 Speaker 1: initial jobless claims, with consumer confidence, with the fact that 421 00:19:17,040 --> 00:19:20,600 Speaker 1: people definitely are feeling something that's coming through in the numbers. 422 00:19:20,640 --> 00:19:22,720 Speaker 7: Oh absolutely, And that's why to resale sales it is 423 00:19:22,760 --> 00:19:25,200 Speaker 7: also important. It's not that inflation is the only important 424 00:19:25,200 --> 00:19:25,880 Speaker 7: indicator this week. 425 00:19:25,920 --> 00:19:27,440 Speaker 3: Retail sales too does play a role. 426 00:19:27,720 --> 00:19:29,399 Speaker 7: What's interesting is if you look at the Bank of 427 00:19:29,440 --> 00:19:32,359 Speaker 7: America cut data both a debit CUD and credit cards, 428 00:19:32,440 --> 00:19:35,320 Speaker 7: it actually showed, surprisingly where they show across the income 429 00:19:35,320 --> 00:19:38,520 Speaker 7: distribution that there was actually a fairly significant bump higher 430 00:19:38,880 --> 00:19:41,640 Speaker 7: in spending for both the low income billidon come andhig income. 431 00:19:41,440 --> 00:19:42,760 Speaker 3: Groups in the month of April. 432 00:19:43,000 --> 00:19:44,920 Speaker 7: So there's a number of different indicators that are pointing 433 00:19:44,920 --> 00:19:47,520 Speaker 7: in different directions. We do see to your point, dealinguage, 434 00:19:47,520 --> 00:19:49,600 Speaker 7: your rates go up in particular for low income house 435 00:19:49,640 --> 00:19:52,680 Speaker 7: and households that are younger on auto loans and credit 436 00:19:52,720 --> 00:19:55,080 Speaker 7: cards and student loans also have been seeing some pressure. 437 00:19:55,200 --> 00:19:57,200 Speaker 7: But the bottom line still is that let's see what 438 00:19:57,280 --> 00:19:59,920 Speaker 7: the data gives us, because overall, yes, the lad's not 439 00:20:00,040 --> 00:20:02,440 Speaker 7: van payrolls was a little bit weaker. There were two 440 00:20:02,480 --> 00:20:04,840 Speaker 7: reasons why there was slightly weaker, but the conclusive still 441 00:20:04,880 --> 00:20:07,920 Speaker 7: is this economy is not falling apart. It is still 442 00:20:08,119 --> 00:20:10,280 Speaker 7: a fairly solid growth rate that we see over the 443 00:20:10,280 --> 00:20:11,119 Speaker 7: next several quarters. 444 00:20:11,119 --> 00:20:13,640 Speaker 1: We've been talking about the flip flopping narrative. We had 445 00:20:13,920 --> 00:20:15,520 Speaker 1: no landing for a lot of this year. It's been 446 00:20:15,520 --> 00:20:18,000 Speaker 1: flipping and flopping depending on the day, sometimes in the 447 00:20:18,040 --> 00:20:21,320 Speaker 1: same day. Then we got to goldilocks, and that seemed 448 00:20:21,359 --> 00:20:23,000 Speaker 1: to be where everybody was at for about a couple 449 00:20:23,000 --> 00:20:25,879 Speaker 1: of weeks, and then now people are talking about the 450 00:20:25,880 --> 00:20:28,920 Speaker 1: potential for a hard landing due to economic weakness. It 451 00:20:29,000 --> 00:20:32,359 Speaker 1: sounds like you don't disagree. It's just later than people 452 00:20:32,440 --> 00:20:34,960 Speaker 1: expect and it's not soon enough to keep the FED 453 00:20:35,359 --> 00:20:36,760 Speaker 1: from holding rates where they are. 454 00:20:36,840 --> 00:20:38,440 Speaker 3: Is that correct? I think that is correct. 455 00:20:38,480 --> 00:20:40,679 Speaker 7: But I think at the tailwinds to the economy that 456 00:20:40,720 --> 00:20:41,600 Speaker 7: are still behind us. 457 00:20:41,600 --> 00:20:42,399 Speaker 3: Two things naming. 458 00:20:42,440 --> 00:20:44,840 Speaker 7: We still have behind us a very strong tailwind that 459 00:20:44,920 --> 00:20:46,560 Speaker 7: comes from easy financial conditions. 460 00:20:46,800 --> 00:20:47,760 Speaker 3: The stock market is. 461 00:20:47,800 --> 00:20:50,399 Speaker 7: Up nine trillion since November one AFMC meeting, when the 462 00:20:50,400 --> 00:20:53,080 Speaker 7: FIT begins to talk about rate cuts instead of rate hikes. 463 00:20:53,200 --> 00:20:54,800 Speaker 7: And on top of that, we also have a tailwind 464 00:20:54,840 --> 00:20:57,280 Speaker 7: from fiscal spending. We still have strong spending in the 465 00:20:57,320 --> 00:20:59,760 Speaker 7: pipeline from the Chipsack if lation reduction, in act. 466 00:20:59,600 --> 00:21:00,560 Speaker 3: The infrastr to act. 467 00:21:00,720 --> 00:21:04,680 Speaker 7: Those two things easy financial conditions and easy fiscal policy, 468 00:21:05,080 --> 00:21:06,880 Speaker 7: which by the way, is very different from what's going 469 00:21:06,880 --> 00:21:09,440 Speaker 7: on in Europe. But those things are likely to continue 470 00:21:09,440 --> 00:21:12,000 Speaker 7: to give us fairly robust data at least for the 471 00:21:12,000 --> 00:21:14,200 Speaker 7: next several months and most likely even all the way 472 00:21:14,240 --> 00:21:15,120 Speaker 7: through the end of the year. 473 00:21:15,200 --> 00:21:17,960 Speaker 1: Siphos has put out commentary that seem to agree with 474 00:21:18,000 --> 00:21:20,920 Speaker 1: what we heard from Peter's share of Academy Securities earlier. 475 00:21:20,920 --> 00:21:22,639 Speaker 1: This is the next five hundred points for the S 476 00:21:22,680 --> 00:21:25,120 Speaker 1: and p five hundred are going to be down, talking 477 00:21:25,119 --> 00:21:27,560 Speaker 1: about a ten percent correction, similar to what we heard 478 00:21:27,800 --> 00:21:31,200 Speaker 1: from Peter. Why do you disagree that there is enough 479 00:21:31,240 --> 00:21:33,439 Speaker 1: ammunition for things to kind of hang in there and 480 00:21:33,520 --> 00:21:37,000 Speaker 1: even creep higher even as people really do wake up 481 00:21:37,040 --> 00:21:39,920 Speaker 1: to real risks that we're seeing with respect to spending. 482 00:21:40,000 --> 00:21:41,639 Speaker 7: Well, I think this is a really important question. So 483 00:21:41,800 --> 00:21:44,480 Speaker 7: the risk from higher for longer is two things. Higher 484 00:21:44,480 --> 00:21:47,000 Speaker 7: for long on his own means higher debt servicing costs 485 00:21:47,000 --> 00:21:49,720 Speaker 7: for companies. That should argue for Starks going down and 486 00:21:49,760 --> 00:21:52,399 Speaker 7: credit spreads widening. The problem is that the reason for 487 00:21:52,480 --> 00:21:54,959 Speaker 7: higher valonga is that the economy is good, meaning earners 488 00:21:54,960 --> 00:21:57,280 Speaker 7: are good. GDP has been strong, so as a result 489 00:21:57,320 --> 00:21:59,040 Speaker 7: of that, we should expect starks to go up. We 490 00:21:59,040 --> 00:22:01,600 Speaker 7: should have express to So there's a tug of war 491 00:22:01,720 --> 00:22:04,880 Speaker 7: between rates. Higher for longer is hurting, so to speak, 492 00:22:04,880 --> 00:22:07,800 Speaker 7: in the cfo's office, when debt servicing costs are having 493 00:22:07,840 --> 00:22:10,400 Speaker 7: a negative impact. But if that's happening because the economy 494 00:22:10,440 --> 00:22:12,560 Speaker 7: is good, I would still expect the economies to do 495 00:22:12,680 --> 00:22:14,879 Speaker 7: just find for the next several quarters as a result 496 00:22:14,920 --> 00:22:17,639 Speaker 7: of the tailwind off the stock market going up, easy 497 00:22:17,760 --> 00:22:21,000 Speaker 7: financial conditions, tight credit spreads, and also fiscal policy is 498 00:22:21,080 --> 00:22:22,400 Speaker 7: still providing quite a tail wind. 499 00:22:22,400 --> 00:22:24,720 Speaker 1: Does that mean that there's going to be a bigger downside. 500 00:22:24,320 --> 00:22:25,000 Speaker 3: On the other side? 501 00:22:25,080 --> 00:22:27,400 Speaker 7: That does mean that when we look into twenty twenty five, 502 00:22:27,480 --> 00:22:29,520 Speaker 7: I do think that we'll settle ourselves up because think 503 00:22:29,560 --> 00:22:32,200 Speaker 7: about the following exactly as you're saying, Lisa. The fact 504 00:22:32,240 --> 00:22:34,320 Speaker 7: that we have the linguagy rates going up on credit 505 00:22:34,320 --> 00:22:37,240 Speaker 7: cards and order loans, even in an economy where everyone 506 00:22:37,280 --> 00:22:39,480 Speaker 7: has a job. The fact that you have highly leveled 507 00:22:39,480 --> 00:22:43,560 Speaker 7: companies in venture capital, in tech, in growth enterprise software 508 00:22:43,920 --> 00:22:46,680 Speaker 7: that are highly indebted and experiencing a lot of problems, 509 00:22:46,960 --> 00:22:49,840 Speaker 7: that these problems are still here even in a good economy. 510 00:22:49,960 --> 00:22:52,960 Speaker 7: That tells you once people do begin to lose their jobs, 511 00:22:53,040 --> 00:22:55,200 Speaker 7: once the economy does begin to slow down, you already 512 00:22:55,200 --> 00:22:57,800 Speaker 7: have a lot of distress, including a commercialy state. There's 513 00:22:57,800 --> 00:23:00,520 Speaker 7: a lot of office problems. Obviously, imagine what the problems 514 00:23:00,520 --> 00:23:02,639 Speaker 7: will look like if you finally get on fine rate 515 00:23:02,680 --> 00:23:05,679 Speaker 7: to move high. So therefore, the sensitivity next year is 516 00:23:05,720 --> 00:23:07,680 Speaker 7: that we might actually get a risk of a harder 517 00:23:07,720 --> 00:23:09,800 Speaker 7: landing coming back. But that's not the theme for the 518 00:23:09,800 --> 00:23:10,720 Speaker 7: next level quarters. 519 00:23:10,840 --> 00:23:13,680 Speaker 1: Meanwhile, you keep mentioning the fiscal overhang and how much 520 00:23:13,720 --> 00:23:15,600 Speaker 1: that's going to be funding things. It is the reason 521 00:23:15,640 --> 00:23:16,240 Speaker 1: why we're here. 522 00:23:16,359 --> 00:23:16,960 Speaker 3: We're going to be. 523 00:23:17,400 --> 00:23:20,800 Speaker 1: Speaking on a panel talking about the fiscal debt and 524 00:23:20,840 --> 00:23:22,800 Speaker 1: how much that's really going to be a problem at 525 00:23:22,800 --> 00:23:24,960 Speaker 1: a time where Seeweisman came on and said, the only 526 00:23:24,960 --> 00:23:26,480 Speaker 1: the death is of people. If it's worrying for the 527 00:23:26,480 --> 00:23:28,720 Speaker 1: past thirty years and they've been wrong and wrong and wrong, 528 00:23:28,960 --> 00:23:30,120 Speaker 1: why is it different this time. 529 00:23:30,280 --> 00:23:32,639 Speaker 7: Well, because all the literature and all the papers that 530 00:23:32,720 --> 00:23:35,399 Speaker 7: look at financial crisis and dead crisis. They do so 531 00:23:35,600 --> 00:23:38,040 Speaker 7: that if you eventually keep on growing your dead levels 532 00:23:38,560 --> 00:23:40,840 Speaker 7: up up, and they just keep rising, and the CBO, 533 00:23:40,960 --> 00:23:43,240 Speaker 7: the Congressional Budget Office forecast is that we basically go 534 00:23:43,280 --> 00:23:45,800 Speaker 7: from one hundred percent of GDP dead levels to two 535 00:23:45,880 --> 00:23:49,120 Speaker 7: hundred percent of GDP dead levels. Ultimately, it does try 536 00:23:49,160 --> 00:23:51,680 Speaker 7: to stress the system more in terms of three things. 537 00:23:51,920 --> 00:23:55,760 Speaker 7: What's happening in treasury auctions, what's happening to ratings meaning 538 00:23:55,800 --> 00:23:58,440 Speaker 7: sovereign ratings, and what's happening to the term premium. 539 00:23:58,520 --> 00:23:59,200 Speaker 3: So that's why in. 540 00:23:59,160 --> 00:24:02,000 Speaker 7: Financial markets we should be watching auctions, which we do 541 00:24:02,119 --> 00:24:02,679 Speaker 7: every week. 542 00:24:02,840 --> 00:24:03,400 Speaker 3: We should be. 543 00:24:03,320 --> 00:24:05,920 Speaker 7: Watching what's happening from the rating agencies where we get 544 00:24:05,920 --> 00:24:08,040 Speaker 7: another sovereign downgrade of the US from some of them. 545 00:24:08,280 --> 00:24:11,119 Speaker 7: Moody still has trivial a fits has been downgrading in August, 546 00:24:11,320 --> 00:24:13,680 Speaker 7: so that's really important. And the third thing is the 547 00:24:13,760 --> 00:24:16,080 Speaker 7: term premium, which you can find on your Bloomberg screen here, 548 00:24:16,240 --> 00:24:18,520 Speaker 7: has also been trending high in the last six nine months. 549 00:24:18,680 --> 00:24:21,920 Speaker 7: So the stresses are slowly beginning to emerge. So far, 550 00:24:22,400 --> 00:24:25,800 Speaker 7: most auctions are going fine, but investors should absolutely be 551 00:24:25,840 --> 00:24:27,639 Speaker 7: keeping an eye on this. This is something that's just 552 00:24:27,800 --> 00:24:28,760 Speaker 7: a big and bigger risk. 553 00:24:28,800 --> 00:24:31,240 Speaker 1: In the background, you have some in credible statistics in 554 00:24:31,359 --> 00:24:33,719 Speaker 1: terms of the amount of debt that's going to mature 555 00:24:33,760 --> 00:24:35,919 Speaker 1: by the government eight point nine trillion dollars of the 556 00:24:35,920 --> 00:24:40,119 Speaker 1: next year. You talk about an average twelve percent of 557 00:24:40,200 --> 00:24:45,280 Speaker 1: government spending is currently composed comprised of debt servicing payments. 558 00:24:45,359 --> 00:24:47,400 Speaker 1: And we're talking about a lot of people who are 559 00:24:47,400 --> 00:24:50,479 Speaker 1: still dismissing this in terms of a major risk. What 560 00:24:50,520 --> 00:24:52,960 Speaker 1: do you think could be the catalyst? At what point 561 00:24:53,000 --> 00:24:55,240 Speaker 1: do you say to people you know you can dismiss 562 00:24:55,240 --> 00:24:58,760 Speaker 1: it until you can't. Is the election something you're watching? 563 00:24:58,920 --> 00:25:00,600 Speaker 7: Well, I would say that if you think about this 564 00:25:00,600 --> 00:25:02,879 Speaker 7: from a corporate perspective, when dead levels go up for 565 00:25:02,920 --> 00:25:05,600 Speaker 7: a long time, it doesn't matter in most cases, and 566 00:25:05,600 --> 00:25:07,600 Speaker 7: certainly it doesn't matter. So the fear you can have 567 00:25:07,720 --> 00:25:10,600 Speaker 7: exactly as you're highlighting that the rollover of existing debt 568 00:25:10,680 --> 00:25:13,000 Speaker 7: is roughly around nine trillion. Then on top of that, 569 00:25:13,359 --> 00:25:15,600 Speaker 7: the budget deficit in very round numbers is about a 570 00:25:15,640 --> 00:25:17,479 Speaker 7: trillion for the next many years, So that brings us 571 00:25:17,480 --> 00:25:18,199 Speaker 7: to ten trillion. 572 00:25:18,480 --> 00:25:19,760 Speaker 3: And then, by the way, if it is. 573 00:25:19,720 --> 00:25:23,000 Speaker 7: Still doing QT, which adds a few more hundred billions 574 00:25:23,000 --> 00:25:24,880 Speaker 7: of dollars, so it brings you to more than ten 575 00:25:24,880 --> 00:25:27,280 Speaker 7: trillion dollars that needs to be refinance in the next 576 00:25:27,280 --> 00:25:30,199 Speaker 7: twelve months, So that's roughly a third of GDP. If 577 00:25:30,240 --> 00:25:32,159 Speaker 7: we do continue to see more spending, and if we 578 00:25:32,160 --> 00:25:34,720 Speaker 7: will continue to see budget deficits as far as the 579 00:25:34,840 --> 00:25:37,800 Speaker 7: CEO continues to forecast, then I do think that investors 580 00:25:37,840 --> 00:25:41,160 Speaker 7: need to watch very carefully what's going on again with auctions, 581 00:25:41,400 --> 00:25:44,480 Speaker 7: what's going on with rating agencies, are they downgrading the US? 582 00:25:44,720 --> 00:25:46,680 Speaker 7: And finally, what's going on with the term premium because 583 00:25:46,680 --> 00:25:49,880 Speaker 7: that's where these stresses in financial markets will first begin 584 00:25:49,920 --> 00:25:50,320 Speaker 7: to show up. 585 00:25:50,400 --> 00:25:52,240 Speaker 1: So put you down as or the deficit one of 586 00:25:52,240 --> 00:25:55,439 Speaker 1: those in that camp. Absolutely the Restan's block of Apollo. 587 00:25:55,560 --> 00:25:56,359 Speaker 1: Thank you so much. 588 00:25:57,040 --> 00:26:00,600 Speaker 2: This is the Bloomberg Sevenants podcast, bringing you the best 589 00:26:00,600 --> 00:26:03,920 Speaker 2: in markets, economics, a geopolitics. You can watch the show 590 00:26:04,000 --> 00:26:06,919 Speaker 2: live on Bloomberg TV weekday mornings from six am to 591 00:26:07,080 --> 00:26:10,840 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 592 00:26:10,960 --> 00:26:13,200 Speaker 2: or anywhere else you listen, and as always on the 593 00:26:13,200 --> 00:26:15,640 Speaker 2: Bloomberg Terminal and the Bloomberg Business app.