WEBVTT - Ukraine Developments and Previewing Jackson Hole 0:00:02.560 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.880 --> 0:00:17.960 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.280 --> 0:00:22.040 on Apple CarPlay or Android Auto with the Bloomberg Business app, 0:00:22.400 --> 0:00:25.759 Listen on demand wherever you get your podcasts, or watch 0:00:25.800 --> 0:00:27.160 us live on YouTube. 0:00:27.320 --> 0:00:30.360 One of the great moments for Bloomberg's Surveillance is when 0:00:30.400 --> 0:00:34.360 research notes are accompanied by the bow tie. Yes, I'm 0:00:34.400 --> 0:00:37.599 in the background, hidden in the blurry view, but far 0:00:37.720 --> 0:00:41.199 more important is Klaus the beast has a bow tie 0:00:41.280 --> 0:00:45.040 on celebrate you the ninth birthday of Michael dartis dog Klaus. 0:00:45.560 --> 0:00:48.680 I'm a vineyard, Michael Darta joints this morning. Is Klaus 0:00:48.720 --> 0:00:50.680 Wisconsin a bow tie today? Michael? 0:00:51.960 --> 0:00:55.120 Well, actually, Tom, Klaus is under the covers. It's a 0:00:55.120 --> 0:00:58.240 little chilly this morning, so he has not arisen just 0:00:58.360 --> 0:00:59.160 yet a little. 0:00:59.320 --> 0:01:03.720 It's a little chick Washington. How does the international relations 0:01:04.200 --> 0:01:07.559 moment fold into the markets or is it a distraction? 0:01:09.040 --> 0:01:12.440 You know, that's a good one, Tom. You know, I 0:01:13.080 --> 0:01:16.880 hate to be kurt here, but I think unless you're 0:01:17.640 --> 0:01:21.680 really looking at a big disruption of commerce, these geopolitical 0:01:21.720 --> 0:01:25.319 events don't have to don't tend to have large lasting 0:01:25.480 --> 0:01:28.559 effects on market. So at least if we're talking about 0:01:28.600 --> 0:01:31.840 the US equity market, I don't think you're going to 0:01:31.880 --> 0:01:35.520 see much more than a fleeting impact here, unless there's 0:01:35.560 --> 0:01:38.759 some kind of big, unexpected breakthrough, and then maybe you'll 0:01:39.000 --> 0:01:41.280 get a little bit more than that, But you know, 0:01:41.360 --> 0:01:44.480 my guess is that it won't be material and long lasting. 0:01:45.319 --> 0:01:49.760 Michaels about a year ago that the FED began cutting rates. 0:01:49.840 --> 0:01:51.960 Some folks are saying, all right, let's do a reducs 0:01:51.960 --> 0:01:55.280 here this year. How do you expect their federal reaction 0:01:55.280 --> 0:01:57.320 in September maybe guide for the remainder of the year. 0:01:58.760 --> 0:02:01.680 Well, the markets are fully now for a twenty five 0:02:01.720 --> 0:02:06.240 basis point rate reduction in September, and over the course 0:02:06.240 --> 0:02:09.800 of the next year, markets are expecting the FED policy 0:02:09.880 --> 0:02:12.840 rate to drop a little more than one hundred basis points. 0:02:12.880 --> 0:02:16.600 But my view here is that a go slow approach 0:02:16.800 --> 0:02:19.920 is appropriate. When I look at tracking estimates for the 0:02:19.960 --> 0:02:23.360 third quarter, it looks like we're running pretty close to 0:02:23.520 --> 0:02:28.000 five percent nominal. So Tom Keane figure there a five 0:02:28.040 --> 0:02:33.520 percent nominal growth handle, frankly, is not indicative an economy 0:02:33.520 --> 0:02:35.240 that needs emergency rate cuts. 0:02:35.440 --> 0:02:36.560 And if you think about. 0:02:36.320 --> 0:02:39.520 Where we were last fall when the FED kicked off 0:02:39.880 --> 0:02:43.440 the easing with a fifty basis point reduction. We were 0:02:43.480 --> 0:02:47.079 coming off peak policy rates one hundred basis points higher 0:02:47.080 --> 0:02:50.399 than they are today. In the unemployment rate had been 0:02:50.480 --> 0:02:56.560 moving up, triggering certain recession alarm bells. Inflation expectations were 0:02:56.639 --> 0:03:00.600 rolling over really hard. That's not happening today's. So I 0:03:00.639 --> 0:03:03.520 think against the current backdrop, the FED needs to be 0:03:03.600 --> 0:03:07.760 pretty gradual, definitely. You know, I think the Treasury Secretary 0:03:07.800 --> 0:03:10.000 out there saying, you know, the Fed's one hundred and 0:03:10.000 --> 0:03:12.959 fifty to one hundred and seventy five basis points too high. 0:03:13.680 --> 0:03:16.480 I don't know where that comes from. That looks completely 0:03:16.520 --> 0:03:17.280 pop based to me. 0:03:17.440 --> 0:03:20.160 You're thank Jonathan Ferrell for that interview that was talked 0:03:20.160 --> 0:03:22.919 about to say the least last week. We welcome all 0:03:22.960 --> 0:03:26.440 of you across the nation, and Serious XM channel will 0:03:26.480 --> 0:03:28.959 help me. Paul one twenty one, Sure the Brain goes 0:03:29.000 --> 0:03:32.480 on a Monday Channel one twenty one, Good Morning, Serious XM, 0:03:32.639 --> 0:03:36.440 Hot applecar Play and Android Auto, ninety nine to one FM, 0:03:37.160 --> 0:03:41.560 Karen Mosca Radio OH in Washington nineties and nine FM 0:03:41.680 --> 0:03:44.880 in Boston. Good Morning, Bloomberg eleven three OLO on YouTube 0:03:44.960 --> 0:03:49.040 on the vineyard on Nantucket. Subscribe to YouTube in your 0:03:49.080 --> 0:03:52.000 office or at the beach house with Klaus Paul. 0:03:52.640 --> 0:03:55.880 So, Michael, it looks like the consumer is kind of 0:03:55.920 --> 0:03:58.800 hanging in there here. I mean, how do you view 0:03:58.800 --> 0:04:00.440 the consumer with all these crosswinds out there? 0:04:01.880 --> 0:04:05.400 The consumer is hanging in there, Paul, that's good news. 0:04:05.600 --> 0:04:09.120 So right now it looks like real consumer spending is 0:04:09.160 --> 0:04:13.080 probably running just above two percent for the third quarter. Again, 0:04:13.160 --> 0:04:16.359 that's not a picture of an economy that necessarily needs 0:04:16.360 --> 0:04:20.200 emergency policy rate reductions. And I think the reason for 0:04:20.320 --> 0:04:23.479 that is we're coming through this uncertainty fog. Now. We 0:04:23.720 --> 0:04:28.280 obviously got hit with with a big uncertainty and confidence 0:04:28.360 --> 0:04:31.040 shock earlier in the year, but the labor market has 0:04:31.080 --> 0:04:35.320 remained fully employed despite the slowdown in job growth. The 0:04:35.400 --> 0:04:38.640 unemployment rate has been dead flat for the last year 0:04:38.760 --> 0:04:42.560 four point two percent. That's fully employed based on any 0:04:42.640 --> 0:04:47.120 reading of history. And you also have very high asset 0:04:47.200 --> 0:04:49.760 prices right household net worth has been moving up with 0:04:49.839 --> 0:04:53.760 the stock market, and as long as layoffs stay low here, 0:04:53.839 --> 0:04:56.320 I think that's really the key feature. Because the labor 0:04:56.320 --> 0:04:58.960 force growth has slowed with the shuttering of the border. 0:04:59.320 --> 0:05:02.480 If layoffs, starts shooting up, that's a different story. But 0:05:02.800 --> 0:05:06.080 those first time claims have been low hand stick. 0:05:06.640 --> 0:05:06.839 You know. 0:05:06.920 --> 0:05:07.120 Paul. 0:05:07.240 --> 0:05:09.120 Somebody emails in they go is it too early to 0:05:09.160 --> 0:05:09.640 go Nerd? 0:05:10.080 --> 0:05:12.120 I said, it's never too early to go Nerd. We 0:05:12.200 --> 0:05:13.560 go Nerd with Michael Darta. 0:05:13.760 --> 0:05:16.440 Michael, you know we've got a wonderful tailor rule function 0:05:16.880 --> 0:05:21.440 on the Bloomberg folks. It's got one, two, three, four, five, six, 0:05:21.920 --> 0:05:26.760 seven plugins and John W. Taylor's out of Stanford is classic, 0:05:26.800 --> 0:05:30.400 classic rule right now, the tailor rule, as you suggest, 0:05:30.480 --> 0:05:33.560 Michael suggests rates where they are as fine and Secretary 0:05:33.600 --> 0:05:38.039 Besson is wrong, wrong, wrong. Which attribute in the Taylor 0:05:38.160 --> 0:05:42.840 rule is the most data unknown? Is it nayru, It's 0:05:42.839 --> 0:05:46.000 not a jacket, folks. Is it the inflation? Guests? Which 0:05:46.040 --> 0:05:48.360 is the variable most up to debate? 0:05:50.000 --> 0:05:52.160 Well, Tom, you know, we really don't know where any 0:05:52.160 --> 0:05:55.640 of those variables are going with any super precision. But 0:05:55.800 --> 0:05:58.960 one question we can ask, and I think Larry Summers 0:05:59.040 --> 0:06:04.599 mentioned this on x Twitter last night. If the FED 0:06:05.040 --> 0:06:09.760 is dramatically above neutral for any period of time, we 0:06:09.800 --> 0:06:14.160 would know it because the economy would crater, asset prices 0:06:14.240 --> 0:06:18.040 would implode. So if you have a ten quarter average 0:06:18.080 --> 0:06:22.000 nominal growth rate of five percent, pretty strong real growth 0:06:22.600 --> 0:06:27.520 and soaring risk asset prices. That is highly unlikely to 0:06:27.560 --> 0:06:30.480 be a scenario in which the Federal Reserve has short 0:06:30.560 --> 0:06:33.000 term interest rates one hundred and fifty or one hundred 0:06:33.000 --> 0:06:36.160 and seventy five basis points above neutral. Now we can 0:06:36.200 --> 0:06:38.880 debate the forecast and where the economy is growing. But 0:06:38.920 --> 0:06:40.880 if you're arguing out on one side of the mouth 0:06:40.920 --> 0:06:43.159 that this is the best economy the world's ever seen, 0:06:43.680 --> 0:06:46.000 and out of the other that we need hundreds of 0:06:46.040 --> 0:06:49.160 basis points of rate cuts to support it, I'm sorry, 0:06:49.200 --> 0:06:50.640 but that just does not compute. 0:06:50.880 --> 0:06:55.719 Michael Darter, thanks so much, greatly, appreciate it. Stay with us. 0:06:55.720 --> 0:06:58.960 More from Bloomberg Surveillance coming up after this. 0:07:06.200 --> 0:07:09.800 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:07:09.880 --> 0:07:13.360 weekday afternoons from seven to ten am Eastern Listen on Apple, 0:07:13.440 --> 0:07:16.760 Karplay and Android Otto with the Bloomberg Business app, or 0:07:16.920 --> 0:07:19.080 watch us live on YouTube. 0:07:18.560 --> 0:07:21.800 With a question. Our interview of the Day. Angela Stent 0:07:22.000 --> 0:07:24.440 was with us a few days ago. Her book Putin's 0:07:24.440 --> 0:07:28.720 World is Definitive. This is a day of NATO and 0:07:28.800 --> 0:07:32.720 the President of the United States Angela. I don't want 0:07:32.720 --> 0:07:35.800 to turn it into a history lesson, but coming out 0:07:35.800 --> 0:07:40.360 of nineteen forty nine, we pieced together this thing NATO, 0:07:41.680 --> 0:07:45.640 and it's morphed over the years. And then we decided 0:07:45.720 --> 0:07:50.240 somewhere in the vicinity of seven eight that we wanted 0:07:50.360 --> 0:07:55.440 NATO to expand east. Did we make the right decision 0:07:55.600 --> 0:08:01.680 in America that NATO should reach out to Eastern Europe 0:08:02.120 --> 0:08:05.360 before mister Putin exploded? And part of that is the 0:08:05.480 --> 0:08:06.400 Ukraine War. 0:08:07.960 --> 0:08:11.240 I think we did. Good morning everyone. 0:08:11.640 --> 0:08:13.760 Yeah, I mean, if you think about it, after the 0:08:13.800 --> 0:08:16.880 Soviet Union collapsed, you had the countries of the former 0:08:16.920 --> 0:08:19.000 Warsaw packed eastern Europe and. 0:08:18.920 --> 0:08:20.200 They were kind of in limbo. 0:08:20.680 --> 0:08:23.640 Many of these countries have been invaded either by the 0:08:23.720 --> 0:08:25.840 Russian Empire or the Soviet Union. 0:08:26.880 --> 0:08:27.880 They didn't really. 0:08:27.680 --> 0:08:30.840 Have any place, and so was the right thing to 0:08:30.880 --> 0:08:33.920 do was to include them in NATO to make sure 0:08:34.000 --> 0:08:37.600 that I mean they were territories between a number of 0:08:37.600 --> 0:08:41.160 these countries, Romania and Hungary and others, to make sure 0:08:41.200 --> 0:08:44.240 that they were democratics. So this was not a mistake. 0:08:45.400 --> 0:08:48.360 And you know, in hindsight, we can say if U 0:08:48.400 --> 0:08:52.160 grained been a member of NATO, Russia wouldn't have invaded it. 0:08:52.760 --> 0:08:56.560 What do you want? I can't imagine the history today, 0:08:56.600 --> 0:08:59.200 Angelus stent back to when you and I were trying 0:08:59.200 --> 0:09:02.280 to figure out the high the Berlin Wall. What do 0:09:02.360 --> 0:09:04.880 we want to do here? So we don't have a 0:09:04.960 --> 0:09:09.600 domino theory in Europe. Mister Stubbs of Finland is really 0:09:09.640 --> 0:09:12.400 worried about that, isn't he? 0:09:12.400 --> 0:09:12.839 He is? 0:09:13.040 --> 0:09:16.520 And you noticed that all of these major European leaders 0:09:16.679 --> 0:09:20.360 are going to accompany President Zelenski today in the White 0:09:20.360 --> 0:09:23.640 House with President Trump to make sure that he doesn't 0:09:23.679 --> 0:09:27.280 just sell Ukraine short. And what they want to make 0:09:27.320 --> 0:09:31.640 sure is that Russia ends this war and doesn't have 0:09:31.880 --> 0:09:36.320 designs on other former Soviet states or even on rolling 0:09:36.400 --> 0:09:39.640 back the native enlargement. So I would say the states 0:09:39.679 --> 0:09:42.200 are pretty high today in the White House, and the 0:09:42.320 --> 0:09:45.760 European leaders do not want to repeat of what happened 0:09:45.800 --> 0:09:49.680 to poor President Zelenski, that dressing down a few months 0:09:49.679 --> 0:09:52.680 ago in the White in the Oval Office by President 0:09:52.720 --> 0:09:54.640 Trump and Vice President Vance. 0:09:55.440 --> 0:10:00.640 So Angela, in reality, what is he verifiable win mister 0:10:00.720 --> 0:10:03.120 le Zelenski and the European leaders. 0:10:03.320 --> 0:10:07.520 Well, a verifiable win would mean that President Trump is 0:10:07.559 --> 0:10:10.600 not going to try and persuade Ukraine that has to 0:10:10.640 --> 0:10:14.319 give up territory that Russia doesn't even control. I mean, 0:10:14.440 --> 0:10:18.400 just yesterday President Trump against it on truth social it's 0:10:18.480 --> 0:10:21.360 up to Zelensky to end the war. It isn't up 0:10:21.360 --> 0:10:24.959 to Zelensky. He didn't start the war. The Russian started 0:10:25.000 --> 0:10:28.880 the war. So it's to make sure that Zelensky doesn't 0:10:28.880 --> 0:10:31.640 have to give up territory he doesn't control, and to 0:10:31.840 --> 0:10:35.240 get President Trump to agree, which we have hims on 0:10:35.760 --> 0:10:38.360 that if there were a settlement, if the war were 0:10:38.400 --> 0:10:41.600 to end, that the US went back, the Europeans up 0:10:41.920 --> 0:10:46.760 in security guarantees for Ukraine to prevent Russia from waiting 0:10:46.800 --> 0:10:51.640 a few years and then attacking Ukraine again and the 0:10:51.800 --> 0:10:54.440 US agreeing to help the Europeans doing that. 0:10:55.200 --> 0:10:58.280 And it seems like the reality is mister Putin has 0:10:58.360 --> 0:11:01.720 no intention of stock the war. What's different management just 0:11:01.760 --> 0:11:03.240 dragging things on. 0:11:03.400 --> 0:11:04.880 Yeah, it's the heart of the matter. 0:11:04.840 --> 0:11:05.800 That's kind of it here. 0:11:05.880 --> 0:11:08.160 And he's got an American president that may allow that. 0:11:08.280 --> 0:11:10.760 Who knows, right, I mean, it's. 0:11:10.600 --> 0:11:11.640 Going to be very difficult. 0:11:11.640 --> 0:11:11.800 You know. 0:11:11.880 --> 0:11:15.280 President Trump completely reversed himself. He went into the. 0:11:15.280 --> 0:11:19.000 Discussions in Alaska saying there had to be a ceasefire first, 0:11:19.040 --> 0:11:24.120 and then they discussed the conditions and now so, I mean, 0:11:24.160 --> 0:11:26.880 the thing that the Europeans and ukrain have to do 0:11:27.000 --> 0:11:30.120 today is to persuade President Trump that that's just not 0:11:30.280 --> 0:11:32.880 file right and that they have to push for a 0:11:32.960 --> 0:11:33.920 ceasefire first. 0:11:34.160 --> 0:11:36.920 Procrastination and around the world. Angela's stent with us this 0:11:36.960 --> 0:11:40.480 morning from Brookings Institution, Angela the ft I mean, they 0:11:40.480 --> 0:11:43.559 don't sugarcoat it. This is an editorial from the Financial 0:11:43.920 --> 0:11:47.840 Times of London. Donald Trump's Alaska summit with Vladimir Putin 0:11:47.960 --> 0:11:51.240 was an embarrassing failure. Worse, it was a terrible mistake. 0:11:51.720 --> 0:11:55.160 And what I find interesting, Angela, let me quote this exactly. 0:11:55.720 --> 0:12:01.160 For the Europeans, it means pushing back more assertive against 0:12:01.200 --> 0:12:07.040 Trump's alignment with Putin, while appealing to congressional Republicans and 0:12:07.200 --> 0:12:12.280 members of the administration who surely have grave misgivings about 0:12:12.320 --> 0:12:18.000 the Alaska fiasco. I mean, angel that's an incredible to 0:12:18.120 --> 0:12:22.920 do list for europe Who will lead that assertive pushback 0:12:23.320 --> 0:12:25.880 of NATO? Does it come out of Brussels or is 0:12:25.880 --> 0:12:27.559 it every nation for themselves? 0:12:28.600 --> 0:12:31.600 Well, I think the Secretary General of Natil Mark Rutzer, 0:12:31.679 --> 0:12:33.920 the former Netherland's Prime minister. 0:12:34.000 --> 0:12:35.520 He seems to be a leader in this. 0:12:35.880 --> 0:12:38.480 I mean, we have the other leaders there, the British 0:12:38.480 --> 0:12:43.360 Prime Minister, French President, German Chancellor, the Italian Prime minister. 0:12:43.600 --> 0:12:46.560 They'll all try and push, but I suspect that Mark 0:12:46.640 --> 0:12:49.720 Rutzer will be the leader here. But it's a huge 0:12:49.840 --> 0:12:53.520 tall order for them because they're very concerned that the 0:12:53.640 --> 0:12:57.600 US will just kind of abandon Ukraine, and that is 0:12:57.640 --> 0:13:00.600 not only Ukraine that's going to be threatened by Russia then, 0:13:00.840 --> 0:13:01.160 but the. 0:13:01.120 --> 0:13:01.920 Whole of Europe. 0:13:03.480 --> 0:13:03.840 Angela. 0:13:03.960 --> 0:13:07.360 Is there any role here, any voice here for the 0:13:07.400 --> 0:13:08.080 US Congress? 0:13:09.440 --> 0:13:11.800 Well there is, I mean, and we know that a 0:13:11.920 --> 0:13:16.040 number of the US Senators, including Republicans, were very concerned 0:13:16.040 --> 0:13:20.000 about what happened in Alaska and about President Trump really 0:13:20.720 --> 0:13:24.320 seeing Putin what Putin wanted. So there is the question 0:13:24.480 --> 0:13:28.760 is will the Congress stand up and you know, try 0:13:28.760 --> 0:13:32.920 and persuade the Trump administration, particularly the Republicans at Congress 0:13:33.480 --> 0:13:34.839 that they have to really. 0:13:34.920 --> 0:13:39.040 Refresh on and this and thank you so much doctor 0:13:39.080 --> 0:13:42.440 Stanners at Brookings Institution. Her book is definitive. It is 0:13:42.520 --> 0:13:49.439 Putin or look for her essays at Brookings. Stay with us. 0:13:49.480 --> 0:14:00.920 More from Bloomberg Surveillance coming up after this. 0:14:00.920 --> 0:14:04.840 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:14:04.880 --> 0:14:08.160 starting at seven am Eastern on Applecarplay and Android Auto 0:14:08.280 --> 0:14:11.240 with the Bloomberg Business app. You can also listen live 0:14:11.320 --> 0:14:14.920 on Amazon Alexa from our flagship New York station, Just 0:14:14.960 --> 0:14:17.480 say Alexa Play Bloomberg eleven thirty. 0:14:17.720 --> 0:14:20.120 Let's get into a first Jackson Hole brief here we 0:14:20.120 --> 0:14:23.720 get to Wednesday, traveling out there. Lisa Bramwontz and myself 0:14:23.760 --> 0:14:26.920 will be with you Friday with Michael McKee leading all 0:14:26.960 --> 0:14:29.920 our coverage in Jackson Hole. A first brief with RBC 0:14:30.040 --> 0:14:34.440 Capital Markets US rate Strategies Blake Quinn as well. Will 0:14:34.480 --> 0:14:37.440 Powell move the bond market price up? Price down? 0:14:37.800 --> 0:14:38.480 Well, it's hard to tell. 0:14:38.520 --> 0:14:40.680 I mean the piece that I put out the preview, 0:14:40.760 --> 0:14:42.800 I called it not your twenty twenty four Jackson Hole. 0:14:42.800 --> 0:14:45.080 And I think looking back at last year, we had 0:14:45.080 --> 0:14:47.400 a very very clear message from Powell. I mean, he 0:14:47.640 --> 0:14:50.800 was could not have been more obvious that they were 0:14:50.800 --> 0:14:52.640 going to cut now the fifty. Obviously we didn't know 0:14:52.640 --> 0:14:54.680 they were going fifty yet, but made it very clear 0:14:54.680 --> 0:14:56.080 that they were going to act at that next meeting. 0:14:56.080 --> 0:14:57.520 But thanks were so much easier back then. 0:14:58.000 --> 0:15:01.720 You had unemployment rate on a long trend, remember triggering 0:15:01.720 --> 0:15:03.480 the Saw rule. Everybody was kind of freaked out about 0:15:03.480 --> 0:15:05.880 the labor market. The same time, inflation was coming down 0:15:06.040 --> 0:15:07.520 very steadily, very aggressively. 0:15:07.600 --> 0:15:10.280 So he was in a much better position last year 0:15:10.320 --> 0:15:12.400 to deliver a clear message. I don't think he has that. 0:15:12.080 --> 0:15:14.440 The data is really pulling them in two directions this time. 0:15:15.560 --> 0:15:19.560 So what should we look for, I mean, other than 0:15:19.600 --> 0:15:22.240 sitting at the million dollar cowboy bar, I mean we're 0:15:22.240 --> 0:15:24.080 going to be listening to Chairman Palin Friday. 0:15:24.280 --> 0:15:25.760 What should we be listening for? 0:15:25.920 --> 0:15:28.240 So I think one thing we might get is he 0:15:28.360 --> 0:15:30.760 might try to clip that tale of a fifty base 0:15:30.840 --> 0:15:31.280 point cut. 0:15:31.280 --> 0:15:33.120 So we've heard daily kind of saying, you know that 0:15:33.120 --> 0:15:34.720 that's not the right move. Now, we need to take 0:15:34.720 --> 0:15:35.880 it a little bit more gradually. 0:15:36.160 --> 0:15:37.600 So I think he may be willing to do that, 0:15:37.680 --> 0:15:40.400 But as far as very clearly signaling a zero or 0:15:40.440 --> 0:15:42.680 twenty five, it's just very hard for them to do, 0:15:42.800 --> 0:15:45.480 especially when you have this, you know, one more round 0:15:45.520 --> 0:15:47.520 of NFP, one more round of CPI kind of hanging 0:15:47.560 --> 0:15:49.240 out there because last thing they want to do is 0:15:49.720 --> 0:15:51.800 very clearly set up a cut, and then we get 0:15:51.800 --> 0:15:54.560 to the next data, labor bounces and inflation is hot. 0:15:54.640 --> 0:15:58.080 You guys have a vector of disinflation led by Ian Lingdon. 0:15:58.160 --> 0:16:01.800 You guys are world class EMO capital Markets at RBC 0:16:01.960 --> 0:16:06.080 Capital Markets, the whole thing. All the Canadian strategists just 0:16:06.160 --> 0:16:09.920 seem to be on a vector of disinflation. Is your 0:16:10.000 --> 0:16:13.920 call there at risk where we don't get lower yields? 0:16:15.080 --> 0:16:17.800 No, So I mean we actually have inflation continuing to 0:16:17.840 --> 0:16:18.240 go up. 0:16:18.840 --> 0:16:21.840 I think we probably subscribe to the same theme that 0:16:21.880 --> 0:16:23.800 the Fed does that this is going to be somewhat 0:16:23.880 --> 0:16:25.720 you know, transitory if you will. But I think what's 0:16:25.760 --> 0:16:28.360 becoming clear is it's not going to be transitory in 0:16:28.360 --> 0:16:30.960 a clear way. You know, it's going to leak into services. 0:16:31.000 --> 0:16:32.760 It's going to be in categories that you don't expect. 0:16:32.800 --> 0:16:36.760 It's going to happen over said rate cut. We do, 0:16:36.800 --> 0:16:40.000 but not until December, and Marcus, right now, you know 0:16:40.000 --> 0:16:41.280 we're still pricing over two cuts. 0:16:41.280 --> 0:16:42.800 And that's actually come off a lot. Last week. 0:16:42.800 --> 0:16:44.400 There was a there was a period we were actually 0:16:44.400 --> 0:16:47.280 pricing in some probability of a fifty basis point cut 0:16:47.280 --> 0:16:47.920 in September. 0:16:48.040 --> 0:16:50.160 That's actually come back a bit. We have them pausing. 0:16:50.240 --> 0:16:53.880 But Jim Bianco last week, this is just absolutely fascinating. 0:16:53.920 --> 0:16:56.240 If I put myselves in, if I put myself in 0:16:56.280 --> 0:16:59.480 FED Chairman J. Pale's shoes, I would feel pressure to cut. 0:17:00.000 --> 0:17:02.760 You think he feels pressure to cut. Whether it's political pressure, 0:17:03.200 --> 0:17:04.919 market pressure, I don't know. 0:17:05.040 --> 0:17:07.600 I mean, that's honestly, the best case that I can 0:17:07.720 --> 0:17:10.800 draw for cutting in September mostly runs through these non 0:17:10.840 --> 0:17:13.080 fundamental factors, Like if I just sit down and look 0:17:13.119 --> 0:17:15.960 at the data. You know, a lot of the kind 0:17:16.000 --> 0:17:18.320 of freak out we've had over labor data since those 0:17:18.400 --> 0:17:20.560 NFP revisions I think is a little bit overdone. A 0:17:20.560 --> 0:17:23.800 lot of those don't really look cyclical, their education, their government. 0:17:24.200 --> 0:17:26.359 So I think the labor situation looks okay. 0:17:26.720 --> 0:17:27.800 Meanwhile, you've got some hon. 0:17:27.680 --> 0:17:31.639 Inflation prints that are a little bit worrying Muslem, you know, 0:17:31.640 --> 0:17:33.160 from the FED set at best. I think he said 0:17:33.160 --> 0:17:35.919 we're missing on inflation, now we're not missing on labor. 0:17:36.359 --> 0:17:38.160 So I think if I was just looking at the data, 0:17:38.160 --> 0:17:39.840 I wouldn't see a case to cut. All of the 0:17:39.880 --> 0:17:42.880 case to cut really comes to these tangential things. It's 0:17:42.880 --> 0:17:45.000 the political pressures, you know, the fact that the markets 0:17:45.040 --> 0:17:46.639 are already pricing in when we've seen the Fed not 0:17:46.680 --> 0:17:48.520 really want to surprise market, we. 0:17:48.520 --> 0:17:54.320 Get an RBC capital markets inflation. Do we risk a 0:17:54.440 --> 0:17:59.240 negative real wage I don't think that's in the zeitgeist yet. 0:17:59.400 --> 0:17:59.960 Yeah, I don't. 0:18:00.040 --> 0:18:00.320 I don't. 0:18:00.400 --> 0:18:02.440 I mean, i'd have to look at how that really 0:18:02.440 --> 0:18:04.919 interacts with the wages. I don't think it's really going 0:18:05.000 --> 0:18:07.159 to pass through as much to wage pressure. A lot 0:18:07.200 --> 0:18:08.639 of that's going to depend on what's happening on the 0:18:08.680 --> 0:18:09.280 labor side of it. 0:18:10.240 --> 0:18:10.440 Now. 0:18:10.720 --> 0:18:12.400 I will say on the labor. 0:18:12.119 --> 0:18:14.760 Side, I think one thing that's interesting with these NFPs 0:18:14.800 --> 0:18:17.080 with the payrolls. And this is part of the reason 0:18:17.119 --> 0:18:19.120 Palace saying you got to focus on the unemployment rate, 0:18:19.240 --> 0:18:20.520 not the payrolls. 0:18:20.760 --> 0:18:22.159 He said that at the last press conference. 0:18:22.240 --> 0:18:25.760 Yeah, you really can't tell what payrolls mean right now 0:18:25.960 --> 0:18:28.520 because the shifts we have an immigration because of retirements 0:18:28.560 --> 0:18:28.920 going on. 0:18:29.320 --> 0:18:31.560 You could actually, I mean this is an extreme. 0:18:31.240 --> 0:18:33.080 Scenario, and I don't know that this is the case, 0:18:33.119 --> 0:18:34.679 but you could actually have a scenario where we have 0:18:35.119 --> 0:18:38.200 zero or negative payrolls, but labor markets are actually getting 0:18:38.240 --> 0:18:40.919 tighter because we're losing people out of those jobs. 0:18:40.640 --> 0:18:42.120 And companies have to replace them. 0:18:42.440 --> 0:18:44.480 So you could end up in a scenario like that 0:18:44.760 --> 0:18:47.240 where labor markets are getting tighter because of these lost 0:18:47.320 --> 0:18:49.480 jobs and wage pressure is actually going up. 0:18:50.359 --> 0:18:52.880 Ten year government bond is sitting here at four point 0:18:52.960 --> 0:18:53.720 three zero percent. 0:18:53.720 --> 0:18:54.920 Where do you think we're going to end a year? 0:18:55.680 --> 0:18:57.840 You know what's funny, we're very close to our Yearend 0:18:57.840 --> 0:19:01.240 targets right here. Yeah, I think we're probably going to 0:19:01.320 --> 0:19:02.359 remain range bound. 0:19:03.040 --> 0:19:03.159 You know. 0:19:03.200 --> 0:19:05.720 I think even if we're right and we do see 0:19:05.720 --> 0:19:09.560 that December start to the cut, you know, I think 0:19:09.560 --> 0:19:12.119 people kind of near term probably price out. There's a 0:19:12.119 --> 0:19:13.399 little bit to price out of the front end, but 0:19:13.440 --> 0:19:16.000 I think the back end, you know, tens thirties, those 0:19:16.040 --> 0:19:18.840 remain relatively well pegged. I think most of the volatility 0:19:18.920 --> 0:19:20.800 is going to come in the five year year, five 0:19:20.880 --> 0:19:21.639 year sector. 0:19:21.720 --> 0:19:25.600 Paul Sweeney's world. Do you clip the coupon or do 0:19:25.640 --> 0:19:28.399 you have risked a total return in fixed income? 0:19:28.720 --> 0:19:30.879 I mean, I think the trade right now, because I 0:19:30.920 --> 0:19:33.680 do not have a strong directional view on rates. At 0:19:33.680 --> 0:19:35.760 these levels, things look pretty fair. I think the right 0:19:35.800 --> 0:19:38.000 way to think about things. Is something like a twoes 0:19:38.040 --> 0:19:41.440 tens flattener where you are picking up positive carry. It's 0:19:41.480 --> 0:19:43.359 less for it's less because I think two tens is 0:19:43.359 --> 0:19:46.120 going to flatten massively. But you are earning positive carry 0:19:46.119 --> 0:19:47.720 to be in that trade, and you have a risk 0:19:47.760 --> 0:19:49.200 that we price out some of those cuts at the front. 0:19:49.400 --> 0:19:51.840 That's too much jargon for Monday, Sorry about that. 0:19:52.280 --> 0:19:54.480 The same as a two cent flatner. 0:19:54.160 --> 0:19:57.359 Two tens so basically being long the ten year sector 0:19:57.520 --> 0:19:59.480 short to two year section. So you want the yields 0:19:59.480 --> 0:20:01.560 of the front end go higher, eels in the back 0:20:01.640 --> 0:20:04.760 end to go lower. But if that trade doesn't move, 0:20:04.840 --> 0:20:08.040 if if it doesn't actually suit, it's a bit opposite 0:20:08.040 --> 0:20:10.040 of the consensus. Most people want to be in the steepener, 0:20:10.080 --> 0:20:13.200 but that costs you money. You're bleeding away those cupons 0:20:13.240 --> 0:20:16.159 you mentioned about. You're bleeding away, Carrie to be in 0:20:16.240 --> 0:20:17.960 that trade. It costs you money to be in that trade. 0:20:19.920 --> 0:20:20.760 LISTA. Bromwitz. 0:20:20.920 --> 0:20:22.479 She's the only one to understand this stuff as far 0:20:22.480 --> 0:20:25.040 as I know. She tells me to look at the 0:20:25.040 --> 0:20:26.800 two tens, and it is, you know, we have a 0:20:26.800 --> 0:20:29.720