WEBVTT - Reframing Market Volatility and the Yen Carry Trade 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.960 --> 0:00:15.560 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:15.600 --> 0:00:18.960 with Paul Sweeney. Join us each day for insight from 0:00:18.960 --> 0:00:23.119 the best in economics, finance, investment, and international relations. You 0:00:23.160 --> 0:00:26.520 can also watch the show live on YouTube. Visit the 0:00:26.520 --> 0:00:31.280 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:31.280 --> 0:00:34.320 mornings from seven to ten am Eastern from our global 0:00:34.360 --> 0:00:39.000 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:39.360 --> 0:00:42.920 or anywhere else you listen and always I'm Bloomberg Radio, 0:00:43.080 --> 0:00:46.880 the Bloomberg Terminal, and the Bloomberg Business app. This could 0:00:46.880 --> 0:00:49.400 be a three hour conversation. We've got precious minutes this 0:00:49.479 --> 0:00:52.960 morning with Rebecca Pattison, a tour of duty with Bridgewater 0:00:54.040 --> 0:00:56.920 Sound Trust Advice at Bessemer Capital, and we're thrilled that 0:00:56.960 --> 0:00:57.720 she could join us. 0:00:57.880 --> 0:01:01.160 Bessemer Trust. They should say that she could join us. Paul, 0:01:01.200 --> 0:01:04.120 We're going to ignore the Patterson paragraph on bitcoin. 0:01:04.200 --> 0:01:06.119 Okay, We're just going to ignore it because there's too 0:01:06.120 --> 0:01:09.280 many other things going on right now. I want to 0:01:09.280 --> 0:01:12.520 go back to JP Morgan, where you understood dollar yen 0:01:13.120 --> 0:01:17.280 versus Korean Wan and the rest of it the carry trade, 0:01:17.360 --> 0:01:20.680 JP Morgan publishes this morning. You know what, it's mostly done. 0:01:20.920 --> 0:01:23.840 I've got my own theory. What's the Patterson theory on 0:01:23.920 --> 0:01:25.160 when this agony is over? 0:01:25.640 --> 0:01:27.600 I think you actually do need to listen a lot 0:01:27.640 --> 0:01:30.520 to the big investment banks that have large FX trading 0:01:30.640 --> 0:01:34.080 operations right now. JP Morgan's obviously one of them, because 0:01:34.080 --> 0:01:36.280 they're going to have the best real time data on 0:01:36.319 --> 0:01:39.120 where investors are versus where they were and what might 0:01:39.200 --> 0:01:42.679 seem comfortable in the new environment we're in. So you've 0:01:42.720 --> 0:01:45.280 seen JP Morgan say maybe we're almost done. A few 0:01:45.280 --> 0:01:47.480 other banks I've read in the last twenty four hours 0:01:47.520 --> 0:01:49.360 say we're not done, but we're. 0:01:49.200 --> 0:01:51.080 Close to the end. In the beginning, Okay, what. 0:01:51.120 --> 0:01:52.760 You do in this summer and in August at the 0:01:52.800 --> 0:01:55.560 Patterson household and the Keen household, when the brats are up, 0:01:55.560 --> 0:01:57.640 you slap them and say shut up and watch a 0:01:57.680 --> 0:02:00.560 real movie. You can't watch Glee five times so you're 0:02:00.600 --> 0:02:03.960 watching Butch Cassidy, who are these guys? Who are the 0:02:04.040 --> 0:02:07.080 people in? The carry trade? Is a dreaded hedge funds 0:02:07.240 --> 0:02:08.280 at huts and yards. 0:02:08.760 --> 0:02:11.640 So, just for the record, I've never slapped anyone. I 0:02:11.680 --> 0:02:14.240 know you're joking, feel like I need to get that 0:02:14.320 --> 0:02:17.880 out there. I think we don't know yet who exactly 0:02:17.919 --> 0:02:19.720 has been in the carry trade, but I would certainly 0:02:19.720 --> 0:02:22.200 assume that hedge funds have played a role. But one 0:02:22.320 --> 0:02:24.040 piece of the market that I think we need to 0:02:24.040 --> 0:02:26.720 play more attention to is the retail investor. If you 0:02:26.760 --> 0:02:30.400 look at data from the Federal Reserve, the total market, 0:02:30.480 --> 0:02:33.600 the percent that's retail today is the highest it's been 0:02:33.800 --> 0:02:37.160 since Get Ready for My Dates seven and ninety nine. 0:02:37.639 --> 0:02:39.079 Now that doesn't mean we're going to have the same 0:02:39.200 --> 0:02:42.720 ending to this movie, but it does mean that they're 0:02:42.760 --> 0:02:46.360 playing a significant role. And today they have more tools, 0:02:46.400 --> 0:02:50.560 including zero day options and Leverty ETFs. They have easier 0:02:50.600 --> 0:02:54.320 access with all these free to cheap platforms. So I 0:02:54.360 --> 0:02:58.560 wouldn't be shocked if there is a surprisingly large retail 0:02:58.600 --> 0:02:59.480 element to all of this. 0:03:00.400 --> 0:03:02.320 What do you make over the last four or five 0:03:02.400 --> 0:03:04.680 days of trading? We had that Job's number less Friday 0:03:04.680 --> 0:03:06.600 that really seemed to spook the market a little bit. 0:03:06.680 --> 0:03:09.000 We had some a lot of you know, selling and 0:03:09.080 --> 0:03:12.120 instability in the marketplace last several days. Maybe you know, 0:03:12.880 --> 0:03:14.960 what do you make of kind of where the economy 0:03:15.000 --> 0:03:16.679 is and maybe what the federal reservice. 0:03:16.360 --> 0:03:16.880 Thing came about. 0:03:17.000 --> 0:03:21.480 Sure, so you know, the poor manufacturing sentiment and the 0:03:21.480 --> 0:03:25.880 payrolls certainly came right together with the Bank of Japan 0:03:25.960 --> 0:03:28.760 decision not just to raise rates but give hawkish guidance. 0:03:28.800 --> 0:03:33.040 That plus positions, I think all came together to trigger 0:03:33.080 --> 0:03:35.280 this sell off. When I but when I take a 0:03:35.320 --> 0:03:38.000 step back and look at the economy, I think we're 0:03:38.040 --> 0:03:39.880 still kind of fifty to fifty. If we get a 0:03:39.880 --> 0:03:43.360 soft landing or something bumpier the service sector sentiment, and 0:03:43.360 --> 0:03:46.000 the service sector is a much bigger part of the economy. 0:03:46.400 --> 0:03:50.360 It's still holding up well, better than expected, still expanding. Yes, 0:03:50.400 --> 0:03:54.360 we're getting a lot of earnings suggesting consumer caution, but 0:03:54.600 --> 0:03:57.240 so far most of those seem more focused on the 0:03:57.280 --> 0:04:00.600 lower end consumer, which we know has been stretched for time. 0:04:01.040 --> 0:04:04.880 But I do think it makes the recovery more vulnerable. 0:04:05.320 --> 0:04:09.440 So if the expansion more vulnerable, if the wealthier consumer 0:04:09.520 --> 0:04:13.000 starts getting more cautious, or companies just say we need 0:04:13.040 --> 0:04:16.680 to start cutting some jobs or pairing back investment, this 0:04:16.720 --> 0:04:20.080 thing can get a negative kind of flywheel going pretty quickly. 0:04:20.680 --> 0:04:23.320 So what does our feeder reserve do here? Come September. 0:04:23.520 --> 0:04:26.160 Well, you know, we have almost fifty basis points priced 0:04:26.160 --> 0:04:29.040 in for September. I do think it's likely we get 0:04:29.040 --> 0:04:32.239 a cut. The question is is it twenty five or fifty. 0:04:32.320 --> 0:04:34.440 I think that will be a debate. We'll get guidance 0:04:34.480 --> 0:04:36.719 from Powell at Jackson Hole, as you mentioned earlier, and 0:04:36.760 --> 0:04:38.880 we have a lot of data, so it's going to 0:04:38.920 --> 0:04:40.760 be I hate to say this because it sounds like 0:04:40.800 --> 0:04:42.440 a cop out, but it is going to be data 0:04:42.480 --> 0:04:44.279 dependent in terms of the degree of the cut we 0:04:44.320 --> 0:04:45.000 get September. 0:04:45.080 --> 0:04:48.159 I agree in the data dependency. Bruce casmen out with 0:04:48.200 --> 0:04:50.560 a note this morning, falling up on a statement ten 0:04:50.640 --> 0:04:51.360 days ago. 0:04:51.720 --> 0:04:53.440 That he sees global disinflation. 0:04:53.640 --> 0:04:57.280 What I don't see in the zeitgeist right now, Rebecca, 0:04:57.640 --> 0:05:02.520 is the discussion of the damp effect of disinflation and 0:05:02.560 --> 0:05:07.040 deflation on the optionality that institutions have. 0:05:07.480 --> 0:05:09.280 They're going to run out of choices here. 0:05:09.680 --> 0:05:13.720 If we get Wayley's three percent China GDP growth, if 0:05:13.720 --> 0:05:18.080 we get Chasmin's global disinflation, how constrained are institution's going 0:05:18.120 --> 0:05:19.600 to be six months from now? 0:05:19.720 --> 0:05:23.360 Yeah, I mean we're already starting to see more companies 0:05:23.920 --> 0:05:26.800 feel the heat from not being able to raise prices 0:05:26.839 --> 0:05:27.280 as much. 0:05:27.560 --> 0:05:30.159 Yeah. Did you see Warner Brothers Discovery that was key esting? 0:05:30.440 --> 0:05:33.640 Yeah, that was a little heat or the McDonald's five 0:05:33.680 --> 0:05:37.480 dollars meals. You know, we're seeing companies realize consumers are 0:05:37.520 --> 0:05:40.200 saying no more, and so they're having to react to it. 0:05:40.240 --> 0:05:43.440 And if that continues, obviously we're going to see it 0:05:43.480 --> 0:05:45.160 feeding through into profit margins. 0:05:45.560 --> 0:05:48.039 What have you seen from earnings in this period? How 0:05:48.040 --> 0:05:49.000 would you characterize it? 0:05:49.120 --> 0:05:52.280 Yeah, I mean I wouldn't say it's bad by any stretch, 0:05:52.320 --> 0:05:54.640 but I think what the market is latching onto is 0:05:54.640 --> 0:05:57.880 the sense of caution with a consumer. What struck me though, 0:05:58.000 --> 0:06:00.960 is it it's coming from China and the US. So 0:06:00.960 --> 0:06:04.520 there's two stories here. There's the soft China story and 0:06:04.600 --> 0:06:07.400 the cautious US consumer story. And I wouldn't take my 0:06:07.480 --> 0:06:08.400 eyes off of China. 0:06:08.640 --> 0:06:08.880 Tom. 0:06:08.920 --> 0:06:12.080 You mentioned the Chinese rememby earlier, you know, when we 0:06:12.120 --> 0:06:15.560 talked about here carry on Wines and China. You know, 0:06:15.600 --> 0:06:18.000 their bond yields have fallen so far the government's now 0:06:18.000 --> 0:06:21.280 threatening to intervene to push up bond yields because they 0:06:21.279 --> 0:06:24.280 don't want a speculative bubble in bonds. The last thing 0:06:24.320 --> 0:06:27.000 they need is higher yields right now with their economy 0:06:27.080 --> 0:06:29.080 so soft, so they're kind of stuck, and I think 0:06:29.080 --> 0:06:31.200 we need to keep watching how that flows through, both 0:06:31.200 --> 0:06:32.520 to disinflation and growth. 0:06:32.640 --> 0:06:36.719 I want to overlay here your experience with talking to 0:06:36.760 --> 0:06:39.919 people where short term is three years? How do you 0:06:40.120 --> 0:06:46.760 prosecute an adult investment cycle or unknown future given the 0:06:46.800 --> 0:06:49.320 cacophity of short term idiocies. 0:06:50.080 --> 0:06:53.040 Wow, what a great sentence. This is why I love 0:06:53.120 --> 0:06:53.480 going on. 0:06:54.240 --> 0:06:54.960 I'm not awake. 0:06:55.080 --> 0:06:58.000 I stayed up and watched Siberia synchronized swimming, so I'm 0:06:58.040 --> 0:06:58.480 not awake. 0:06:58.680 --> 0:07:01.640 Well, just like Christine. Look I was a synchronized swimmer, 0:07:01.640 --> 0:07:04.200 so I'm all about that. Yes, that's another conversation. 0:07:05.360 --> 0:07:08.640 We'll stop the show, breaking news. Here were minutes left? 0:07:08.720 --> 0:07:10.320 No, no, no, no, no, God's name. 0:07:10.840 --> 0:07:12.840 Do you put your feet up in the air like that? 0:07:12.840 --> 0:07:15.680 I mean I talked to Leguard yesterday about this. How 0:07:15.720 --> 0:07:17.640 do you what are you doing. 0:07:17.440 --> 0:07:20.920 With your hands to get your feet that far up 0:07:20.960 --> 0:07:21.440 in the air. 0:07:21.600 --> 0:07:24.200 Well, the technical term is sculling, but you're just moving 0:07:24.200 --> 0:07:27.720 your arms back and forth, almost like a little propeller. 0:07:27.920 --> 0:07:30.920 But let's get back, let's get actually investors. 0:07:31.000 --> 0:07:33.480 Yes, no swimming in the sun. 0:07:34.320 --> 0:07:37.120 No, not a million years. Okay, get back, okay, all right, 0:07:37.200 --> 0:07:41.000 so let's okay, focus, focus. You know, I've had the 0:07:41.080 --> 0:07:44.120 luxury of dealing with very short and very long term investors, 0:07:44.160 --> 0:07:47.680 and I think for the longer term investor today, you know, 0:07:48.000 --> 0:07:50.520 this is an opportunity to say, is there anything I've 0:07:50.720 --> 0:07:53.640 liked that I can now get ten or twenty percent cheaper. 0:07:53.960 --> 0:07:57.360 I think some investors are looking at Japan saying, you know, 0:07:57.400 --> 0:08:00.640 we're getting a lot of reform, corporate reform, that's it's important. 0:08:00.800 --> 0:08:04.280 We are seeing some positive movement with actual earnings and 0:08:04.320 --> 0:08:07.720 buybacks from Japan. I'm a little more skeptical on Japan 0:08:07.880 --> 0:08:10.360 just because I think that their economy is still so 0:08:10.440 --> 0:08:12.320 dependent on the US, and if we have a bumpy 0:08:12.400 --> 0:08:14.160 landing in the US, it's going to be hard for 0:08:14.320 --> 0:08:17.800 the Japanese equity market to decouple. But overall, I think 0:08:17.840 --> 0:08:20.520 you want to stay. I know it's very obvious, but 0:08:20.640 --> 0:08:24.120 diversified and geography is not enough. We saw this Friday 0:08:24.120 --> 0:08:27.000 and Monday, when the stuff hits the fan, correlations go 0:08:27.040 --> 0:08:29.760 to one Europe Japan, they all sell off with the US. 0:08:29.800 --> 0:08:32.320 So that's not enough. You have to be thinking about 0:08:32.320 --> 0:08:35.720 your assets, subassets, the type of securities you own. I 0:08:35.760 --> 0:08:39.040 think that still includes treasuries in gold as part of 0:08:39.080 --> 0:08:42.720 those diversifiers even today. And one place I would look 0:08:42.760 --> 0:08:45.400 at overseas right now, which I think has gotten a 0:08:45.400 --> 0:08:50.240 little bit ignored is the UK very low beta equity market, 0:08:51.120 --> 0:08:54.920 very good, attractive valuations, and I think we'll see for 0:08:54.960 --> 0:08:56.640 the first time in a while we have a grown 0:08:56.679 --> 0:08:59.520 up government that might bring some stability, and stability would 0:08:59.520 --> 0:09:03.120 be a positive improvement, So that might be one to 0:09:03.120 --> 0:09:06.240 look at as far as a defensive equity position that 0:09:06.280 --> 0:09:07.400 you can get on sale. 0:09:07.480 --> 0:09:07.760 Right now. 0:09:07.880 --> 0:09:09.720 When you look at Europe and the UK, you don't 0:09:09.720 --> 0:09:12.240 have a big techt exposure there, so you're talking about 0:09:12.240 --> 0:09:14.640 stuff they actually make stuff in the export at the China, 0:09:14.880 --> 0:09:17.199 so that there's a China risk in those markets, right I. 0:09:17.120 --> 0:09:19.840 Think more so in Europe than in the UK. If 0:09:19.880 --> 0:09:22.120 we were talking about Germany, i'd say one hundred and 0:09:22.120 --> 0:09:26.120 ten percent. I think the UK, the sectors in the 0:09:26.200 --> 0:09:28.240 UK equity market are a little different and I would 0:09:28.280 --> 0:09:31.760 be focusing more frankly right now on the UK domestic 0:09:31.800 --> 0:09:34.080 equity market, so that index specifically. 0:09:34.200 --> 0:09:35.800 Rebecca Patterson, thank you so much for. 0:09:36.040 --> 0:09:36.880 Great to see you guys. 0:09:36.920 --> 0:09:37.679 I just wanted just a. 0:09:37.640 --> 0:09:38.760 Great brief there in this. 0:09:49.800 --> 0:09:55.160 Pream miser with this JP Morgan Asset Management, a portfolio manager, 0:09:55.880 --> 0:09:58.360 and I've just got to go to your arch call 0:09:58.520 --> 0:10:01.720 of lower yields over tow twenty four months. It's prea 0:10:01.840 --> 0:10:06.600 misra genius Ian lincoln'sat in that chair yesterday it bemo 0:10:06.760 --> 0:10:10.880 Capital Markets and said out there we will power through 0:10:11.240 --> 0:10:14.600 four percent well down into a three percent and he 0:10:14.679 --> 0:10:18.600 frames out two point ninety five percent somewhere out there, distant. 0:10:18.880 --> 0:10:22.880 Do you have the same overlay price up yield lower 0:10:23.000 --> 0:10:23.720 lower lower? 0:10:24.520 --> 0:10:26.800 I do? And here's why. 0:10:26.880 --> 0:10:29.560 I think the last week, if you didn't think that 0:10:29.679 --> 0:10:33.920 bonds and stocks were covered were essentially negatively correlated. 0:10:33.440 --> 0:10:35.040 Well the last week shows you that they are. 0:10:35.480 --> 0:10:38.360 So you know, if we stay in a soft landing, 0:10:38.640 --> 0:10:41.320 the interest rates are going to fall because the Fed's 0:10:41.320 --> 0:10:42.320 going to have to cut. 0:10:42.120 --> 0:10:44.000 To some normal level. 0:10:44.200 --> 0:10:45.840 We don't know what that normal is, but it's not 0:10:45.960 --> 0:10:48.240 five and a half percent, right. If it's three percent 0:10:48.280 --> 0:10:50.160 and the Fed's cutting all the way down to two 0:10:50.200 --> 0:10:52.240 and a half to three percent, that tenure is going 0:10:52.280 --> 0:10:55.319 to fall. If we actually slip into a recession. That's 0:10:55.360 --> 0:10:58.040 where risk assets are going to struggle, and that's when 0:10:58.080 --> 0:10:59.800 interest rates are going to fall much below that. 0:11:00.120 --> 0:11:02.320 Somebody said to me yesterday, they said, what's a single 0:11:02.320 --> 0:11:03.520 thing we're not talking about? 0:11:03.559 --> 0:11:05.440 And I talked. I quote it Bruce Kasman. 0:11:05.800 --> 0:11:09.400 He's an economist at a small bank down on Perk Avenue. 0:11:09.559 --> 0:11:13.120 Bruce Kasson wrote a piece on global disinflation, and to me, 0:11:13.200 --> 0:11:16.360 that's the heart of the matter. Fold in the China 0:11:16.440 --> 0:11:20.600 driven global disinflation into your portfolio management. 0:11:20.960 --> 0:11:24.400 Absolutely, So I think inflation is extremely global. We saw 0:11:24.440 --> 0:11:26.080 that on the way up. It's going to happen on 0:11:26.080 --> 0:11:29.120 the way down. I would argue markets extremely global, but 0:11:29.160 --> 0:11:31.320 we can sort of focus on I think one or 0:11:31.320 --> 0:11:33.520 two things at a time. So the last week has 0:11:33.559 --> 0:11:38.319 all been about the US payroll report or dollar en 0:11:38.400 --> 0:11:40.880 but look at globally, where is the engine of growth? 0:11:40.920 --> 0:11:43.560 I think the engine of growth was in the US, 0:11:43.679 --> 0:11:45.960 and now there's a question there are we slowing to 0:11:46.520 --> 0:11:49.720 normalizing trend levels? Are we slowing below that? I think 0:11:49.720 --> 0:11:53.040 that's still an open question. But look elsewhere and global 0:11:53.040 --> 0:11:56.560 growth is slowing and inflation is decelerating. So I think 0:11:56.559 --> 0:11:59.480 the market's focus, the Fed's focus has absolutely moved away 0:11:59.520 --> 0:12:02.520 from inflat. We have a CPR report, and I'm less 0:12:02.520 --> 0:12:06.080 worried about that next week than I am about you know, 0:12:06.160 --> 0:12:08.880 initial claims, which is showing up pretty soon. 0:12:08.800 --> 0:12:09.640 Coming up versus. 0:12:09.760 --> 0:12:12.839 So what should our federal Reserve be doing? I mean, 0:12:13.000 --> 0:12:17.560 Monday morning we had discussions of an emergency inter meeting 0:12:17.720 --> 0:12:18.559 rate cut. 0:12:18.320 --> 0:12:21.960 On Monday morning early. What do you think the Fed 0:12:22.120 --> 0:12:22.560 should do? 0:12:22.640 --> 0:12:26.199 In you know, I think they should start normalizing. We're 0:12:26.240 --> 0:12:29.800 at five and a half. Inflation is decelerating, you know, 0:12:29.840 --> 0:12:33.600 globally it's decelerating. In the US, service inflation, wage inflation's 0:12:33.600 --> 0:12:36.040 all coming down. I think they should absolutely be cutting. 0:12:36.600 --> 0:12:39.720 Where I've struggled with is this idea of gradual normalization. 0:12:39.840 --> 0:12:41.760 We know monetary policy works with a lag. 0:12:42.120 --> 0:12:44.600 So if the labor market, which I Pao said, is 0:12:44.600 --> 0:12:48.240 back to twenty nineteen levels, if inflation is decelerating close 0:12:48.280 --> 0:12:50.680 to that two percent, they should absolutely be cutting. I 0:12:50.679 --> 0:12:54.240 think they should be cutting fast to normal normalition levels. 0:12:54.360 --> 0:12:57.240 So fifty basis points make sense the inter meeting. I 0:12:57.280 --> 0:12:59.400 think the market went a little too far for an 0:12:59.440 --> 0:13:03.520 intermeeting rate cut. I think you need severe financial market stress, 0:13:03.559 --> 0:13:05.080 which is going to threaten the recovery. 0:13:05.200 --> 0:13:07.280 So at that point we're talking about either. 0:13:07.120 --> 0:13:10.200 An institutional failure or markets breaking down. 0:13:10.520 --> 0:13:10.720 You know. 0:13:10.760 --> 0:13:11.959 I think the speed of the move. 0:13:11.880 --> 0:13:15.400 Was interesting, but it is August, you know, there is 0:13:15.440 --> 0:13:18.760 summer liquidity. Everyone was in the soft landing trades. I 0:13:18.760 --> 0:13:21.120 don't think we should get carried away about intermeeting cuts, 0:13:21.160 --> 0:13:24.160 but I think the FED really here should be normalizing. 0:13:24.200 --> 0:13:26.600 Perhaps they should have started last week, but they can 0:13:26.640 --> 0:13:27.520 catch up quickly. 0:13:27.600 --> 0:13:29.520 They can catch up. So what happens when a FED 0:13:29.600 --> 0:13:32.080 begins to cut? How do they do it? 0:13:32.200 --> 0:13:35.040 They do it like every meeting, every other meeting, twenty 0:13:35.040 --> 0:13:37.160 five bass point fifty to fifty basis pots. I can't 0:13:37.160 --> 0:13:39.440 even remember the last time we were in a cutting cycle. 0:13:39.920 --> 0:13:42.480 So I think people look at the last cutting cycle, 0:13:42.520 --> 0:13:45.320 which is COVID, and that's where this intermeeting cut comes in, 0:13:45.440 --> 0:13:46.960 or they look at the one before that and the 0:13:47.000 --> 0:13:50.160 fed's cutting really fast. I think this could be a 0:13:50.280 --> 0:13:53.679 very different cutting cycle, and you know, fairly similar to 0:13:53.679 --> 0:13:57.080 the hiking cycle. Remember they started, they went aggressively seventy five, 0:13:57.240 --> 0:14:00.360 multiple seventy fives, and then they slowed down. I actually 0:14:00.400 --> 0:14:03.600 think this cutting cycle might look similar go fifties all 0:14:03.640 --> 0:14:06.160 the way to some level of neutral, maybe it's three percent, 0:14:06.360 --> 0:14:08.440 which is where the FED is at. Then they can 0:14:08.480 --> 0:14:10.960 slow down, and you know that gives them the opportunity 0:14:10.960 --> 0:14:14.000 to respond if things slow down. I think, you know 0:14:14.040 --> 0:14:16.040 the one fifty is not going to the market's going 0:14:16.080 --> 0:14:18.000 to focus on that dot plot. We're going to get 0:14:18.040 --> 0:14:22.280 revised dot a revised dot plot in September. Is the 0:14:22.280 --> 0:14:26.440 FED going to talk about aggressively getting to neutral or 0:14:26.600 --> 0:14:29.000 are they going to stay on this gradual path and 0:14:29.040 --> 0:14:30.840 that's when the market's going to get really nervous. 0:14:30.960 --> 0:14:32.600 I don't want to get you in trouble with Stacy 0:14:32.600 --> 0:14:35.560 Friedman and general counsel over at JP Morgan, but I 0:14:35.560 --> 0:14:37.480 got to ask because I think all of global Wall. 0:14:37.360 --> 0:14:38.160 Street wants to know. 0:14:38.920 --> 0:14:41.560 You killed it as a strategist and now you're a 0:14:41.640 --> 0:14:46.880 portfolio manager. What's been the biggest surprise about being quote 0:14:46.960 --> 0:14:49.120 unquote a portfolio manager? 0:14:50.040 --> 0:14:53.480 It's the correlations, which as a strategist, I could look 0:14:53.520 --> 0:14:56.480 at Excel and you know, have a lot of conviction 0:14:56.560 --> 0:14:59.960 on correlations, and then you live days where the core 0:15:00.040 --> 0:15:03.600 relation goes from negative to positive across asset classes. Because 0:15:03.720 --> 0:15:06.400 interst rates was hard enough trying to figure out interest 0:15:06.480 --> 0:15:10.520 rates and then how does that feed through across portfolios 0:15:10.680 --> 0:15:14.120 or you know, does it have differential impacts in different 0:15:14.120 --> 0:15:15.000 parts of credit. 0:15:15.080 --> 0:15:15.920 That's sort of what I speak. 0:15:16.000 --> 0:15:18.920 So where's the opportunity now in those differential impacts? That's 0:15:18.960 --> 0:15:19.600 the key question. 0:15:20.000 --> 0:15:21.800 So I think I ask it for Jamie. He just 0:15:21.840 --> 0:15:24.880 emailed me, So there is opportunity. I think high quality 0:15:24.920 --> 0:15:27.920 spread product. You're locking in yields of five and a 0:15:27.920 --> 0:15:31.760 half six percent. But here's where where you end of cycle, 0:15:31.840 --> 0:15:34.040 cost of capital is high. This is where that research 0:15:34.080 --> 0:15:36.960 background helps. You have to look at companies. You have 0:15:37.000 --> 0:15:39.680 to look at business models. What are companies doing with debt? 0:15:39.920 --> 0:15:42.800 I think dispersion is increasing within credit? So do the work, 0:15:43.120 --> 0:15:45.720 buy high quality spread product and buy some duration. 0:15:45.880 --> 0:15:49.880 Thirty seconds? Can you frame a sub three percent ten 0:15:49.960 --> 0:15:50.520 year yield? 0:15:50.800 --> 0:15:53.080 Not the drama back the negative rates, but can you 0:15:53.120 --> 0:15:55.480 see price up yield down that much? 0:15:55.640 --> 0:15:56.080 I can. 0:15:56.280 --> 0:15:58.920 I think we're normalizing if the Feds, you know, in 0:15:59.200 --> 0:16:01.560 terms of the economy as of the data right now, 0:16:01.840 --> 0:16:04.760 if the FED doesn't cut quickly enough, or the lags 0:16:04.800 --> 0:16:06.440 are long, they were long on the way up, they 0:16:06.480 --> 0:16:08.840 could be long on the way down. The economy slows 0:16:08.840 --> 0:16:12.480 into recession, the Fed's cutting to two percent or below. 0:16:12.520 --> 0:16:14.600 At that point, the tenure is going to be the 0:16:14.640 --> 0:16:17.200 only thing that investors are going to want. 0:16:17.200 --> 0:16:18.600 That's when you're going much low. 0:16:18.680 --> 0:16:21.440 In Neil Prea, thank you so much. Pria Misra is 0:16:21.440 --> 0:16:30.040 with JP Morgan. This is classic Belski, folks. He writes 0:16:30.040 --> 0:16:32.560 a mental note paragraph to pay if you hate him, 0:16:32.600 --> 0:16:34.920 because if it's a six page note, you got to 0:16:34.920 --> 0:16:40.080 read all six pages. He writes a blistering two paragraph, 0:16:40.120 --> 0:16:44.440 three paragraph note, which is what everybody calmed down. Figure 0:16:44.480 --> 0:16:46.360 out what you're going to buy when you have the 0:16:46.440 --> 0:16:50.960 courage to buy. Brian Belski, Bimo Capital joining us. Now, Brian, 0:16:51.040 --> 0:16:54.000 what will be the signal for you to take that 0:16:54.240 --> 0:16:57.280 list of equities you've got and pull the trigger and 0:16:57.320 --> 0:16:58.240 buy at the margin. 0:16:59.280 --> 0:17:00.200 Well, good morning. 0:17:00.400 --> 0:17:02.520 Uh, you know the market seems to be this fire 0:17:02.600 --> 0:17:07.000 aim ready again, which for us creates great opportunity because 0:17:07.040 --> 0:17:08.760 we have a process and a discipline. 0:17:08.920 --> 0:17:11.520 The names that you know we listened in our note 0:17:11.520 --> 0:17:13.479 this morning are all kind of core names. 0:17:13.560 --> 0:17:17.399 And because we don't do a lot of or invoke 0:17:17.440 --> 0:17:20.639 a lot of turnover in our portfolios that we manage 0:17:20.640 --> 0:17:23.000 for our great wealth management system in both the United 0:17:23.000 --> 0:17:23.840 States and Canada. 0:17:24.520 --> 0:17:27.119 Our clients are already invested in those names. 0:17:27.119 --> 0:17:29.320 And if you take a look at where where there's 0:17:29.359 --> 0:17:31.760 been blood in the streets, not like a Warner Brothers 0:17:31.800 --> 0:17:36.800 Discovery today, because obviously there's some operational issues there, but 0:17:37.040 --> 0:17:40.240 names like Morgan Stanley that were down, or the Apple 0:17:40.320 --> 0:17:43.320 pull back, or even Lulu Lemon when there's when there's 0:17:44.280 --> 0:17:46.960 there's strong fundamentals underneath that, Tom, we want to own 0:17:47.000 --> 0:17:49.560 those names longer term. We've had an opportunity this week 0:17:49.600 --> 0:17:51.000 to kind of rebalance portfolio. 0:17:51.200 --> 0:17:53.719 And what's important here, folks, is the adults look at 0:17:53.720 --> 0:17:58.560 the Bloomberg and they use fundamental technical and economic analysis. 0:17:58.720 --> 0:18:02.560 Paul the weekly ch, not the daily gyrations. Smooth it 0:18:02.560 --> 0:18:06.560 out a little, Paul the weekly chart. Take it log arrhythmics, 0:18:06.600 --> 0:18:09.880 standard and poors five hundred and Belski has his tattooed 0:18:09.920 --> 0:18:13.760 to his brain. We are perfectly back to the long 0:18:13.960 --> 0:18:19.160 term bull market moving average using the exponential moving averages 0:18:19.440 --> 0:18:23.119 I use. We haven't even broken long term support and 0:18:23.200 --> 0:18:24.440 we're all going to cash. 0:18:24.520 --> 0:18:26.000 We'll go crazy, Tom. 0:18:26.040 --> 0:18:28.200 You know, about a million years ago, Brian was a 0:18:28.240 --> 0:18:30.720 student at Saint Cloud State University. So I had to 0:18:30.760 --> 0:18:34.040 Google map this, dude. It is practically in Canada. Its 0:18:34.040 --> 0:18:37.119 way up there in Minnesota, and it's awesome. Exactly the 0:18:37.640 --> 0:18:42.040 Herbrooks National Hockey Centers, the Change River, I forgot, the 0:18:42.080 --> 0:18:43.000 Mississippi Rivers. 0:18:43.040 --> 0:18:46.080 I played with the animals from a Dyna Minnesota. Yeah, 0:18:46.160 --> 0:18:49.199 and they were like basically junior a player from Canada 0:18:49.359 --> 0:18:50.919 masquerading as Americans. 0:18:51.000 --> 0:18:51.879 Continue with Bran. 0:18:51.840 --> 0:18:56.640 All right, Brian, people were freaking out in Monday morning. Brian, 0:18:56.680 --> 0:18:59.200 there was a sense of panic in the market here. 0:19:00.000 --> 0:19:01.239 I mean, did you sense that? 0:19:01.320 --> 0:19:03.879 And what does that tell you about maybe how investors 0:19:03.920 --> 0:19:04.879 are thinking about this market? 0:19:06.320 --> 0:19:09.840 We did, Paul, and you know, it's still the old 0:19:09.840 --> 0:19:12.160 notion attention spans of nats and oh, by the way, 0:19:12.160 --> 0:19:16.040 it's gotten worse. We seem to forgotten that August is 0:19:16.160 --> 0:19:19.239 usually a very bad month, and we've had it in 0:19:19.240 --> 0:19:21.840