1
00:00:05,120 --> 00:00:09,200
Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

2
00:00:09,240 --> 00:00:13,080
Speaker 1: with Jonathan Ferroll and Lisa A. Brawnowitz Jaily, we bring

3
00:00:13,119 --> 00:00:17,159
Speaker 1: you insight from the best and economics, finance, investment, and

4
00:00:17,280 --> 00:00:23,280
Speaker 1: international relations. Find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg

5
00:00:23,360 --> 00:00:29,800
Speaker 1: dot Com, and of course on the Bloomberg terminal. Right

6
00:00:29,800 --> 00:00:32,239
Speaker 1: now on a Friday. As we reset for November the

7
00:00:32,320 --> 00:00:34,280
Speaker 1: end of this year, and as John has mentioned some

8
00:00:34,360 --> 00:00:37,720
Speaker 1: of the window gazing into two thousand twenty two, it's

9
00:00:37,760 --> 00:00:42,600
Speaker 1: time that you reset. Christian Mueller Glissman at Goldman Sachs

10
00:00:42,760 --> 00:00:46,760
Speaker 1: is hugely qualified to talk about the linkage of the

11
00:00:46,840 --> 00:00:52,240
Speaker 1: dynamics of the market into your portfolios, retail and institutional

12
00:00:53,040 --> 00:01:00,400
Speaker 1: around the foundation back to nineteen of the sixty forty portfolio. Christian,

13
00:01:00,440 --> 00:01:03,000
Speaker 1: thank you so much for joining and your work with

14
00:01:03,000 --> 00:01:05,559
Speaker 1: the cf A Institute, of which I'm remember is well

15
00:01:05,920 --> 00:01:11,440
Speaker 1: how dead is the dead sixty portfolio? Yeah, listen, it

16
00:01:11,880 --> 00:01:14,880
Speaker 1: always is a bit aggressive to say that you have

17
00:01:15,080 --> 00:01:17,399
Speaker 1: the debt or death of of kind of one of

18
00:01:17,400 --> 00:01:20,440
Speaker 1: the most basic and and well known investment strategies. I

19
00:01:20,480 --> 00:01:23,360
Speaker 1: think there's always going to be some benefit to be

20
00:01:23,480 --> 00:01:26,280
Speaker 1: balanced now. But I think you have a particularly poor

21
00:01:26,560 --> 00:01:29,160
Speaker 1: kind of starting point for these type of portfolios from

22
00:01:29,160 --> 00:01:32,600
Speaker 1: two perspectives. No. I mean, first of all, everything is expensive.

23
00:01:32,680 --> 00:01:35,440
Speaker 1: We know that, and equities and bonds are expensive at

24
00:01:35,440 --> 00:01:38,200
Speaker 1: the same time. That was actually the same a few

25
00:01:38,280 --> 00:01:41,839
Speaker 1: years ago, and still these portfolios continued performing really well.

26
00:01:42,080 --> 00:01:45,360
Speaker 1: But what's new is how we are starting the cycle.

27
00:01:45,440 --> 00:01:48,320
Speaker 1: And all the cycle is starting with more inflation and

28
00:01:48,400 --> 00:01:51,800
Speaker 1: flatter yearth curves, and and that just means that what

29
00:01:51,880 --> 00:01:55,680
Speaker 1: bonds can offer you in the portfolio is even more limited,

30
00:01:55,760 --> 00:01:58,720
Speaker 1: both in terms of returns and and and with regards

31
00:01:58,720 --> 00:02:01,280
Speaker 1: to to to risk reduction. One of the other determinants

32
00:02:01,280 --> 00:02:06,200
Speaker 1: here is diversification, which over my span I've seen, for example,

33
00:02:06,280 --> 00:02:09,520
Speaker 1: three hundred stocks down to fidelity fifty years. What Sequoia

34
00:02:09,600 --> 00:02:13,640
Speaker 1: did years ago tell us about your view and the

35
00:02:13,760 --> 00:02:19,359
Speaker 1: new diversification. If bonds are so unattractive, do I own Apple,

36
00:02:19,440 --> 00:02:23,839
Speaker 1: Amazon and seven other stocks? Listen. It's exactly a good

37
00:02:23,840 --> 00:02:25,520
Speaker 1: point you make there. I think you need to look

38
00:02:25,560 --> 00:02:29,600
Speaker 1: for older sources of diversification than than just what equities

39
00:02:29,600 --> 00:02:31,800
Speaker 1: and bonds can offer you. I actually think there's going

40
00:02:31,840 --> 00:02:35,239
Speaker 1: to be much more potential for regional diversification. In the

41
00:02:35,320 --> 00:02:38,840
Speaker 1: last twenty thirty years, all the academic evidence is showing

42
00:02:38,880 --> 00:02:42,960
Speaker 1: that there's no benefit of having a global portfolio. If anything,

43
00:02:43,000 --> 00:02:45,280
Speaker 1: the best thing was to have all your money just

44
00:02:45,400 --> 00:02:48,440
Speaker 1: in the US equity market. But now that we introduce

45
00:02:48,520 --> 00:02:53,600
Speaker 1: inflation risk, inflation volatility, policy uncertainty which we haven't had

46
00:02:53,600 --> 00:02:56,079
Speaker 1: in the last twenty thirty years, and possibly much more

47
00:02:56,120 --> 00:03:00,079
Speaker 1: macro volatility de synchronized cycles, what we could get is

48
00:03:00,360 --> 00:03:05,079
Speaker 1: more diversification across the markets, and and also across styles,

49
00:03:05,120 --> 00:03:08,720
Speaker 1: across sectors and and and and be the leadership is

50
00:03:08,800 --> 00:03:11,359
Speaker 1: much much less narrow, So to some extent, you should

51
00:03:11,360 --> 00:03:13,960
Speaker 1: not just be in the winners of the last cycle

52
00:03:14,240 --> 00:03:17,120
Speaker 1: um and run a really concentrated portfolio. You need to

53
00:03:17,160 --> 00:03:19,720
Speaker 1: branch out the bit you need need to diversity find. Obviously,

54
00:03:20,000 --> 00:03:22,480
Speaker 1: the other key area, which we all know um and

55
00:03:22,680 --> 00:03:25,080
Speaker 1: has already done really well, which will be more important

56
00:03:25,120 --> 00:03:28,560
Speaker 1: than the portfolio's real assets, if it's commodities or other

57
00:03:28,600 --> 00:03:31,600
Speaker 1: sources of of of of kind of real cash flaws.

58
00:03:31,639 --> 00:03:33,800
Speaker 1: I think that that will also feature more heavily in

59
00:03:33,840 --> 00:03:36,880
Speaker 1: the coming cycle. Is cash better than developed market bonds?

60
00:03:36,960 --> 00:03:41,160
Speaker 1: Right now? Listen, this is the most interesting discussion, in

61
00:03:41,200 --> 00:03:43,760
Speaker 1: my opinion, which is new. I think we all know

62
00:03:43,840 --> 00:03:46,440
Speaker 1: that activities look better than bonds um in the long

63
00:03:46,520 --> 00:03:48,760
Speaker 1: run on most models which you can come up with.

64
00:03:49,240 --> 00:03:52,160
Speaker 1: But the more interesting discussion is really bonds versus cash.

65
00:03:52,520 --> 00:03:55,760
Speaker 1: People are forgetting, but bonds have for very prolonged periods

66
00:03:55,760 --> 00:03:59,200
Speaker 1: of time lost your money versus cash. Actually, the hit

67
00:03:59,320 --> 00:04:03,560
Speaker 1: ratio of cash outperforming bonds over a ten year rolling

68
00:04:03,600 --> 00:04:08,120
Speaker 1: period is nearly so it's nearly fifty fifty that you

69
00:04:08,800 --> 00:04:11,360
Speaker 1: essentially do better with cash than with bonds. Based on

70
00:04:11,400 --> 00:04:13,840
Speaker 1: the last hundred years, we obviously have been in the

71
00:04:13,880 --> 00:04:16,240
Speaker 1: biggest bond bill market on records, so so we kind

72
00:04:16,279 --> 00:04:18,520
Speaker 1: of feel that's quite unusual. But if you look back

73
00:04:18,560 --> 00:04:20,760
Speaker 1: in history, there were plenty periods and one of the

74
00:04:20,800 --> 00:04:24,719
Speaker 1: most important indicators of how bonds might do versus cash

75
00:04:24,880 --> 00:04:27,400
Speaker 1: is the steepness of the youth curve, and and the

76
00:04:27,440 --> 00:04:29,800
Speaker 1: steepness of the youth curve is half of what we

77
00:04:29,920 --> 00:04:33,080
Speaker 1: normally get after a recession, exactly to some of the

78
00:04:33,120 --> 00:04:36,480
Speaker 1: comments we had earlier. Because there's so little optimism about

79
00:04:36,480 --> 00:04:40,240
Speaker 1: the duration and the longevity of the cycle and how

80
00:04:40,279 --> 00:04:43,000
Speaker 1: much central banks can hike. That means you have less buffer,

81
00:04:43,040 --> 00:04:45,599
Speaker 1: and you have less returned potential for bonds versus cash.

82
00:04:45,920 --> 00:04:49,039
Speaker 1: So I think definitely cash looks better versus bonds in

83
00:04:49,080 --> 00:04:52,160
Speaker 1: the coming cycle than than what we've experienced in recent years.

84
00:04:52,320 --> 00:04:54,480
Speaker 1: But inflation doesn't that sort of a road the idea,

85
00:04:54,520 --> 00:04:59,039
Speaker 1: because your buying power is steadily going away with no coupon. Yeah.

86
00:04:59,040 --> 00:05:01,000
Speaker 1: I mean it's always like you do you want to

87
00:05:01,040 --> 00:05:03,520
Speaker 1: lose money fast or slow? No? I think that that

88
00:05:03,600 --> 00:05:08,360
Speaker 1: the big problem is with cash you're losing money very slowly,

89
00:05:08,760 --> 00:05:11,840
Speaker 1: whereas with bonds you obviously have other drivers. And and

90
00:05:11,920 --> 00:05:15,360
Speaker 1: we all know that real yields have moved to incredibly

91
00:05:15,400 --> 00:05:18,919
Speaker 1: low levels, and there's really weird relationship you currently have

92
00:05:19,279 --> 00:05:22,880
Speaker 1: where inflation expectations go higher and higher and higher, but

93
00:05:22,960 --> 00:05:25,359
Speaker 1: the really yield stay will follow, and we know that

94
00:05:25,480 --> 00:05:27,640
Speaker 1: might change, and then you have some losses in bonds.

95
00:05:28,040 --> 00:05:30,840
Speaker 1: Christian one quick question. You can't have a Moller Glistman

96
00:05:31,080 --> 00:05:34,520
Speaker 1: article without Anibbitson chart. You try out the Roger Ibbitson

97
00:05:34,920 --> 00:05:38,200
Speaker 1: chart like Clark work here. The long term log performance

98
00:05:38,480 --> 00:05:42,760
Speaker 1: of the equity market and the Great Unspoken Fear is

99
00:05:42,880 --> 00:05:47,680
Speaker 1: another nineties seventies, the dismal seventies, the Carter malaise, the

100
00:05:47,680 --> 00:05:54,040
Speaker 1: flatness of equity return. What's the probability of that? Listen.

101
00:05:54,120 --> 00:05:58,080
Speaker 1: I think it's definitely higher post COVID and post the

102
00:05:58,160 --> 00:06:00,680
Speaker 1: crisis than before because we of the you have. Now

103
00:06:00,760 --> 00:06:04,280
Speaker 1: there's a new inflation uncertainty. And inflation is a very

104
00:06:04,360 --> 00:06:07,200
Speaker 1: I always say it's a very autocorelated animal. Once you

105
00:06:07,320 --> 00:06:10,640
Speaker 1: set it loose, I think it does create more uncertainty,

106
00:06:10,720 --> 00:06:13,760
Speaker 1: It has spillover effects and and and I think as

107
00:06:13,800 --> 00:06:15,880
Speaker 1: we sult of that, the probability has gone up. We

108
00:06:15,920 --> 00:06:19,240
Speaker 1: still would argue that like a seventy stack inflation. Don't

109
00:06:19,240 --> 00:06:22,839
Speaker 1: forget there was ten percent annualized inflation over a decade.

110
00:06:23,240 --> 00:06:26,159
Speaker 1: I mean that is quite aggressive. And you also have

111
00:06:26,200 --> 00:06:29,279
Speaker 1: to consider at the time, like the type of macro backdrop,

112
00:06:29,560 --> 00:06:33,840
Speaker 1: both with regards to demand supply disruptions which were related

113
00:06:33,880 --> 00:06:37,560
Speaker 1: to OPEC embargo, Iranian revolution. There were things going on

114
00:06:37,640 --> 00:06:40,160
Speaker 1: which seemed much more extreme than what we're dealing with.

115
00:06:40,240 --> 00:06:43,599
Speaker 1: I think stagflationary momentum is something we need to fear

116
00:06:43,680 --> 00:06:46,920
Speaker 1: next week, not down next week, next year, um um

117
00:06:46,920 --> 00:06:49,080
Speaker 1: where I think we know that growth will come down,

118
00:06:49,200 --> 00:06:52,000
Speaker 1: inflation might remain sticky, and we get a bit of

119
00:06:52,000 --> 00:06:56,000
Speaker 1: monetary policy normalization, and and and and potentially a bit

120
00:06:56,000 --> 00:06:58,080
Speaker 1: of a catch up for monetary policy, and that can

121
00:06:58,120 --> 00:07:00,840
Speaker 1: be a bit harmful for market. It's but I think

122
00:07:00,880 --> 00:07:04,560
Speaker 1: the seventies staculation to US is still a pretty extreme event,

123
00:07:04,640 --> 00:07:07,599
Speaker 1: which which I would still put more into the tail

124
00:07:07,720 --> 00:07:11,400
Speaker 1: risk bucket, not the base case. Christian, that was a clinic.

125
00:07:11,520 --> 00:07:13,080
Speaker 1: It's going to catch up, says send out best to

126
00:07:13,080 --> 00:07:15,280
Speaker 1: patter up in honor as well, Christie Milli Glisman there,

127
00:07:15,320 --> 00:07:16,840
Speaker 1: I've got one sacks. Thank you, buddy. It's going to

128
00:07:16,840 --> 00:07:24,600
Speaker 1: see it. One stock I want to look at in

129
00:07:24,640 --> 00:07:26,240
Speaker 1: the pre market, Tom and now you want a brief

130
00:07:26,280 --> 00:07:28,960
Speaker 1: comment on this to Jan J to split into two

131
00:07:29,120 --> 00:07:31,440
Speaker 1: companies that coming from the company this morning the stock

132
00:07:31,480 --> 00:07:33,760
Speaker 1: positive by about four percent, just short of one seventeen

133
00:07:33,760 --> 00:07:36,520
Speaker 1: Now Tom at one sixty nine sixty two. It is

134
00:07:36,560 --> 00:07:40,240
Speaker 1: not the J and J those older perceived. What's remarkable

135
00:07:40,280 --> 00:07:42,480
Speaker 1: here in this data wonderful in the Bloomberg, I can't

136
00:07:42,480 --> 00:07:44,480
Speaker 1: say enough about the d E S screen to get

137
00:07:44,520 --> 00:07:47,080
Speaker 1: a snapshot of a company that we think we know

138
00:07:47,200 --> 00:07:52,040
Speaker 1: that we don't know John Household, Baby Oil, the powder,

139
00:07:52,480 --> 00:07:56,080
Speaker 1: all the rest of it. It's seventeen of the company.

140
00:07:56,160 --> 00:07:59,960
Speaker 1: It is amazing how they have deconsumered with their pharmaceutic

141
00:08:00,040 --> 00:08:03,040
Speaker 1: called the medical devices growth over the last twenty years.

142
00:08:03,040 --> 00:08:05,000
Speaker 1: And tell me this company is still an absolute based

143
00:08:05,040 --> 00:08:06,840
Speaker 1: what are we looking at four hundred five d pillion

144
00:08:06,880 --> 00:08:09,720
Speaker 1: dollarmarket gonna take eighteen to twenty four months to split

145
00:08:09,720 --> 00:08:12,080
Speaker 1: it out. I know we've got an important conversation here, John,

146
00:08:12,120 --> 00:08:15,200
Speaker 1: but I just can't say enough about how the margins

147
00:08:15,320 --> 00:08:18,760
Speaker 1: fall in that income is hugely profitable. That important conversation

148
00:08:18,840 --> 00:08:21,160
Speaker 1: Tom starts now with Jean Barvan, the head of the

149
00:08:21,200 --> 00:08:24,200
Speaker 1: Investment Institute of Black Rock. John, your words, what ultimately

150
00:08:24,320 --> 00:08:27,200
Speaker 1: matters is not the timing of liftoff on policy rights,

151
00:08:27,480 --> 00:08:30,040
Speaker 1: but the cumulative response. John, can you build on that

152
00:08:30,160 --> 00:08:34,079
Speaker 1: for us? Yeah, I mean we all focus on when

153
00:08:34,160 --> 00:08:36,480
Speaker 1: exactly the lifto is gonna happen. And as you mentioned,

154
00:08:36,520 --> 00:08:39,679
Speaker 1: like some are being brought pretty aggressively into twenty two.

155
00:08:39,760 --> 00:08:42,440
Speaker 1: Now I would push back on you know, three hikes

156
00:08:42,440 --> 00:08:45,120
Speaker 1: in twenty wee do seem like extremely aggressive to us, um,

157
00:08:45,559 --> 00:08:47,920
Speaker 1: but we might see the beginning of the hiking cycle

158
00:08:47,960 --> 00:08:51,640
Speaker 1: in twenty twenty two. But ultimately, what's gonna matter what

159
00:08:51,800 --> 00:08:54,679
Speaker 1: this very unusually discycle is that the cumulative response to

160
00:08:54,800 --> 00:08:57,640
Speaker 1: this kind of inflation that we haven't seen in thirty

161
00:08:57,760 --> 00:09:00,640
Speaker 1: years will be much more muted than history lead. And

162
00:09:00,760 --> 00:09:03,719
Speaker 1: that's gonna be meaning that the real rates in our view,

163
00:09:03,760 --> 00:09:07,480
Speaker 1: are are remained very low for a sustained amount of time.

164
00:09:07,520 --> 00:09:10,160
Speaker 1: And that's a that's a different way true to risk asset.

165
00:09:10,200 --> 00:09:12,760
Speaker 1: I think that's a much more constructive backgroup that's sustained

166
00:09:12,800 --> 00:09:16,200
Speaker 1: and and that's where there's a risk of confusion, we think,

167
00:09:16,320 --> 00:09:18,439
Speaker 1: so hashtag confusion that for us is a is a

168
00:09:18,480 --> 00:09:23,400
Speaker 1: starting point of manic conversation. What does the fiscal impulse

169
00:09:23,720 --> 00:09:27,760
Speaker 1: of this natural disaster, this pandemic? What is it due

170
00:09:27,800 --> 00:09:32,280
Speaker 1: to the geometry that any given central bank faces. It's

171
00:09:32,320 --> 00:09:37,280
Speaker 1: not in the textbooks, is it. It's not in the textbox? Uh.

172
00:09:37,440 --> 00:09:40,000
Speaker 1: And you know we call this whole kind of complex. Well,

173
00:09:40,480 --> 00:09:43,400
Speaker 1: we've talked about a policy revolution over the last few years,

174
00:09:43,480 --> 00:09:47,760
Speaker 1: this complex of both monstrey policy and fiscal policy moving

175
00:09:47,840 --> 00:09:50,520
Speaker 1: very aggressively. But that leaves us at the place now

176
00:09:50,600 --> 00:09:53,000
Speaker 1: where um, you know, we we kind of forget about this,

177
00:09:53,120 --> 00:09:57,320
Speaker 1: but the dead levels are very high not long ago. Um,

178
00:09:57,640 --> 00:10:00,640
Speaker 1: you know, the narrative in the US, was you the

179
00:10:00,760 --> 00:10:04,120
Speaker 1: death servicing costs are solow like the trick or levels

180
00:10:04,520 --> 00:10:07,000
Speaker 1: are low that we can afford to increase the debt

181
00:10:07,360 --> 00:10:10,439
Speaker 1: very significantly, which we've done. The flip side of this,

182
00:10:10,559 --> 00:10:13,280
Speaker 1: which will see soon, is that it won't take much

183
00:10:13,440 --> 00:10:16,640
Speaker 1: in terms of rate increase to change the story completely

184
00:10:16,679 --> 00:10:18,439
Speaker 1: on its head. Um, you know, we can add a

185
00:10:18,480 --> 00:10:21,319
Speaker 1: ten year back at two point five and at that

186
00:10:21,440 --> 00:10:23,959
Speaker 1: point that servicing costs in the US will be back

187
00:10:24,000 --> 00:10:28,120
Speaker 1: to their to their historical level, throwing a completely out

188
00:10:28,120 --> 00:10:30,560
Speaker 1: of the window. Uh, you know the argument that Summers

189
00:10:30,600 --> 00:10:33,400
Speaker 1: and Lasha we're making just a couple of years ago.

190
00:10:33,480 --> 00:10:36,319
Speaker 1: So point being to your point, Tom, it's um, it's

191
00:10:36,360 --> 00:10:38,360
Speaker 1: not textbook, and it's going to be a constraint on

192
00:10:38,600 --> 00:10:41,360
Speaker 1: how quickly rates that can go up. Jean, I find

193
00:10:41,400 --> 00:10:44,760
Speaker 1: this fascinating the idea here the central bankers and praying frankly,

194
00:10:44,840 --> 00:10:47,720
Speaker 1: policymakers in general don't want to see rates go up

195
00:10:47,760 --> 00:10:50,240
Speaker 1: too high because the economy is no longer able to

196
00:10:50,320 --> 00:10:52,800
Speaker 1: withstand it because of what you're just talking about. Does

197
00:10:52,880 --> 00:10:56,400
Speaker 1: that mean that the more volatile asset class is perhaps

198
00:10:56,559 --> 00:10:58,880
Speaker 1: short term yields that a very little room to maneuver,

199
00:10:59,000 --> 00:11:02,880
Speaker 1: but could potentially be offset dramatically by what my people

200
00:11:02,960 --> 00:11:05,959
Speaker 1: might speculate about policy changes, whereas stocks continue to be

201
00:11:06,040 --> 00:11:09,000
Speaker 1: supported no matter what by the negative real yields that

202
00:11:09,040 --> 00:11:13,200
Speaker 1: you see persisting. Yeah, so certainly consistent with what we've

203
00:11:13,200 --> 00:11:15,920
Speaker 1: seen over the last month or two, right, I mean,

204
00:11:16,520 --> 00:11:19,800
Speaker 1: lots of swings around the repricing of North Newton policy,

205
00:11:20,240 --> 00:11:23,719
Speaker 1: and yet the backdrop has been you know, continues to

206
00:11:23,760 --> 00:11:26,160
Speaker 1: be constructive more broadly for his causes. So I think

207
00:11:26,200 --> 00:11:29,760
Speaker 1: that would be consistent with uh, you know, UH, rates

208
00:11:29,840 --> 00:11:31,559
Speaker 1: might be lifting up at different point in time, but

209
00:11:31,640 --> 00:11:34,160
Speaker 1: there's a conviction that overall, uh, this is going to

210
00:11:34,240 --> 00:11:37,040
Speaker 1: be a muted the hiking cycle. And if it were not,

211
00:11:37,440 --> 00:11:39,360
Speaker 1: I think we've seen some example of that, then markets

212
00:11:39,400 --> 00:11:41,520
Speaker 1: are quick to surprive some kind of policy mistakes, of

213
00:11:41,600 --> 00:11:44,760
Speaker 1: quick reversal of policy, which speaks to this environment we're

214
00:11:44,760 --> 00:11:46,839
Speaker 1: talking about. It's gonna be difficult to raise rates or

215
00:11:47,160 --> 00:11:48,600
Speaker 1: I don't know, want to put it is like any

216
00:11:48,760 --> 00:11:53,000
Speaker 1: rate right, Um, we'll have a bigger impact, Jean. I'm

217
00:11:53,040 --> 00:11:55,440
Speaker 1: honored to do this with your work at Princeton. As

218
00:11:55,480 --> 00:11:58,719
Speaker 1: you know, the great Olivier Blanchard of France, of m

219
00:11:58,760 --> 00:12:02,920
Speaker 1: I T and of the International Monetary Fund. Professor Blanchard

220
00:12:03,040 --> 00:12:05,559
Speaker 1: is out with a blistering note this morning in the

221
00:12:05,640 --> 00:12:11,040
Speaker 1: Peterson Institute, saying, forget about team temporary, forget about team gloom.

222
00:12:11,280 --> 00:12:15,320
Speaker 1: John mentions Dr Ollarion. He says, we need to get

223
00:12:15,600 --> 00:12:19,040
Speaker 1: used to the consequences of higher inflation. What are the

224
00:12:19,160 --> 00:12:27,480
Speaker 1: consequences of a sustained higher inflation is Olivier. Blanchard mentions, well,

225
00:12:27,520 --> 00:12:30,480
Speaker 1: I mean it feeds to the entire economy, so you

226
00:12:30,559 --> 00:12:35,079
Speaker 1: know there will be adjustment through you know, obviously prices,

227
00:12:35,200 --> 00:12:38,640
Speaker 1: but that means also we'll see some wage dynamics, that

228
00:12:39,240 --> 00:12:43,760
Speaker 1: nominal wage dynamic that will be different than eventually you know, um,

229
00:12:44,480 --> 00:12:46,880
Speaker 1: workers will want to keep up with this. Inflation is

230
00:12:46,920 --> 00:12:49,880
Speaker 1: going to change the boggaining kind of situation, and I

231
00:12:49,960 --> 00:12:53,320
Speaker 1: think we'll see wages sketching up. We haven't seen, um,

232
00:12:53,440 --> 00:12:55,000
Speaker 1: I think I don't know. I haven't read yet the

233
00:12:55,040 --> 00:12:57,640
Speaker 1: Olivier's piece, but I would suspect, like one of the

234
00:12:57,720 --> 00:12:59,880
Speaker 1: key point is for the last twenty years, where you know,

235
00:13:00,120 --> 00:13:02,679
Speaker 1: inflation was missing in action. And even if we are

236
00:13:03,040 --> 00:13:06,160
Speaker 1: you know, two point five percent, well, going back, you know,

237
00:13:06,240 --> 00:13:09,920
Speaker 1: after some some spikes, it's gonna feel different for that reason.

238
00:13:10,160 --> 00:13:13,480
Speaker 1: And the other big point is, um, how will people

239
00:13:14,040 --> 00:13:16,160
Speaker 1: react in terms of the expectation of inflation? And I

240
00:13:16,200 --> 00:13:19,920
Speaker 1: don't think people we have collectively a good handle. There's

241
00:13:19,960 --> 00:13:23,240
Speaker 1: no good models of in flash expectations UM, and so

242
00:13:23,400 --> 00:13:25,839
Speaker 1: that's a big unknown. I guess that we'll need to

243
00:13:26,000 --> 00:13:28,720
Speaker 1: track and live with now. John, always quite get your

244
00:13:28,720 --> 00:13:36,720
Speaker 1: thoughts as always fantastic, John ban a blank rock right now.

245
00:13:36,800 --> 00:13:39,960
Speaker 1: An important essay by See Michure. She's senior global investment

246
00:13:40,040 --> 00:13:42,640
Speaker 1: strategist of Principal Group and Seema. I want to draw

247
00:13:42,800 --> 00:13:46,280
Speaker 1: right into what we see on emerging markets. You are

248
00:13:46,440 --> 00:13:49,240
Speaker 1: bold into the end of the year, you are bold

249
00:13:49,360 --> 00:13:51,760
Speaker 1: into the beginning of the year and say you may

250
00:13:51,840 --> 00:13:55,280
Speaker 1: not be on board with e M, but the belieguered

251
00:13:55,320 --> 00:13:58,560
Speaker 1: e M has your attention. Tell me about the when

252
00:13:59,480 --> 00:14:01,439
Speaker 1: of die thing in the e M. What do you

253
00:14:01,559 --> 00:14:07,199
Speaker 1: need to see to generate a belief in emerging markets? Hi, John, So,

254
00:14:07,320 --> 00:14:10,079
Speaker 1: I think the key thing is China. Right, we look

255
00:14:10,120 --> 00:14:12,360
Speaker 1: at the fundamentals of emerging markets. We feel that there's

256
00:14:12,360 --> 00:14:14,959
Speaker 1: a lot of promising movement with regards to vaccines to

257
00:14:15,040 --> 00:14:17,280
Speaker 1: kind of a shift away from zero COVID in a

258
00:14:17,400 --> 00:14:20,680
Speaker 1: number of countries um and and also you know, compared

259
00:14:20,720 --> 00:14:22,720
Speaker 1: to a lot of the other parts of emerging markets

260
00:14:22,800 --> 00:14:26,800
Speaker 1: lat term, Eastern Europe, Emerging Asia kind of you know,

261
00:14:26,920 --> 00:14:30,320
Speaker 1: not having as as significant rate hyps. But really the

262
00:14:30,440 --> 00:14:33,120
Speaker 1: catsule is China. You know, we need to see some

263
00:14:33,240 --> 00:14:36,360
Speaker 1: kind of movement there with regards to stimulus, potentially at

264
00:14:36,400 --> 00:14:38,400
Speaker 1: bottoming of growth, maybe a pull back in a bit

265
00:14:38,440 --> 00:14:40,680
Speaker 1: of regulation. And the problem here is is that we

266
00:14:40,840 --> 00:14:43,720
Speaker 1: don't know when that will happen. You know, we think

267
00:14:43,760 --> 00:14:46,280
Speaker 1: there is a pain threshold, but unfortunately are not able.

268
00:14:46,320 --> 00:14:48,320
Speaker 1: I think anyone is able to call that time in.

269
00:14:48,680 --> 00:14:50,600
Speaker 1: So the only thing that we can do here is

270
00:14:50,720 --> 00:14:53,480
Speaker 1: stay ready on the sidelines, waiting to to increase the

271
00:14:53,520 --> 00:14:56,520
Speaker 1: exposure because valuations have become more attractive. But we just

272
00:14:56,600 --> 00:14:58,760
Speaker 1: need China to play ball. Say what's your read at

273
00:14:58,760 --> 00:15:00,720
Speaker 1: the moment on how far down road we are in

274
00:15:00,800 --> 00:15:03,760
Speaker 1: these tightening cycles in places like Brazil, like Mexico. Are

275
00:15:03,800 --> 00:15:06,920
Speaker 1: we closely done yet? I think we're definitely getting there,

276
00:15:07,040 --> 00:15:09,560
Speaker 1: right so, you know, Russia will almost at the end. Brazil,

277
00:15:09,680 --> 00:15:12,560
Speaker 1: I think that we're they're going to move quickly. They're

278
00:15:12,600 --> 00:15:14,640
Speaker 1: going to move a lot, and then we should kind

279
00:15:14,680 --> 00:15:17,840
Speaker 1: of normalize by middle of next year, so I think,

280
00:15:18,720 --> 00:15:20,040
Speaker 1: And the fun thing is is, you know, they're going

281
00:15:20,080 --> 00:15:21,960
Speaker 1: to be finished with their rate hikes, are going to

282
00:15:22,000 --> 00:15:25,160
Speaker 1: have gone to pre pandemic levels before the FED even

283
00:15:25,240 --> 00:15:28,239
Speaker 1: gets going, So we have to take that into consideration.

284
00:15:28,280 --> 00:15:30,400
Speaker 1: So I do think that as we're get into two

285
00:15:30,840 --> 00:15:34,480
Speaker 1: developed markets start really moving faster towards their normalization process,

286
00:15:34,760 --> 00:15:36,600
Speaker 1: that actually emerging markets start to look a little bit

287
00:15:36,600 --> 00:15:39,840
Speaker 1: more attractive at that point. Okay, so they look more attractive. However,

288
00:15:39,960 --> 00:15:41,960
Speaker 1: there is the issue of the dollar. What happens if

289
00:15:41,960 --> 00:15:44,920
Speaker 1: the Federals serve does hike twice or even three times

290
00:15:45,120 --> 00:15:48,040
Speaker 1: in the next eighteen months, how much does that potentially

291
00:15:48,400 --> 00:15:51,600
Speaker 1: crimp the bet that you're making. Yeah, you know, we

292
00:15:51,760 --> 00:15:55,480
Speaker 1: think that for the US actually we're not expecting kind

293
00:15:55,520 --> 00:15:57,760
Speaker 1: of very very early hikes. We think it's going to

294
00:15:57,840 --> 00:16:00,120
Speaker 1: be right all the end of next year, that going

295
00:16:00,160 --> 00:16:02,480
Speaker 1: to look through a lot of that inflation tension um

296
00:16:02,560 --> 00:16:04,480
Speaker 1: and wait there and then from there on actually have

297
00:16:04,640 --> 00:16:07,080
Speaker 1: quite a shallow upper trajectory, we think. You know, we

298
00:16:07,120 --> 00:16:09,040
Speaker 1: look at the debt markets, we look at you know

299
00:16:09,120 --> 00:16:11,080
Speaker 1: the fact that the growth profile is on a slowdown,

300
00:16:11,160 --> 00:16:13,840
Speaker 1: and we don't see very significant moves. So I think

301
00:16:13,880 --> 00:16:15,800
Speaker 1: there is upper movement on the dollar, but I don't

302
00:16:15,800 --> 00:16:17,280
Speaker 1: think it's going to be to a point that it

303
00:16:17,320 --> 00:16:20,120
Speaker 1: starts to strangle the measure markets. And actually, the other

304
00:16:20,160 --> 00:16:21,480
Speaker 1: thing is is that you know, I know a lot

305
00:16:21,480 --> 00:16:24,280
Speaker 1: of investors have been really concerned about how do emerging

306
00:16:24,320 --> 00:16:27,040
Speaker 1: markets deal with fair tapering, and at the same time,

307
00:16:27,480 --> 00:16:30,160
Speaker 1: the investors who are looking at a measure markets and thinking, right, well,

308
00:16:30,200 --> 00:16:33,360
Speaker 1: there's a little a far more credible Montrey policy framework

309
00:16:33,400 --> 00:16:36,640
Speaker 1: and incredible on the fiscal side across a number of countries,

310
00:16:36,880 --> 00:16:38,760
Speaker 1: and I think that actually this is a slightly more

311
00:16:38,840 --> 00:16:41,000
Speaker 1: stable emerging markets and what we've been used to do

312
00:16:41,040 --> 00:16:43,640
Speaker 1: in previous years. So this is a really constructive outlook.

313
00:16:43,720 --> 00:16:46,080
Speaker 1: Why then, are you seeing potential wibles in the US

314
00:16:46,120 --> 00:16:49,480
Speaker 1: equity markets considering that there is this sort of reflation

315
00:16:49,600 --> 00:16:53,680
Speaker 1: trade in a constructive narrative around the rest of the world. Well,

316
00:16:53,800 --> 00:16:56,200
Speaker 1: so even for the United States that we're looking at

317
00:16:56,320 --> 00:16:59,760
Speaker 1: growth slowdown, but we're still expecting growth to be a

318
00:17:00,000 --> 00:17:02,760
Speaker 1: own trend of not above trend. So this isn't a

319
00:17:02,920 --> 00:17:06,280
Speaker 1: very very negative outlook at all. There are going to

320
00:17:06,320 --> 00:17:08,119
Speaker 1: be pressures on profits. We need to keep a very

321
00:17:08,200 --> 00:17:10,080
Speaker 1: very close sign on that. But when we look at

322
00:17:10,119 --> 00:17:13,040
Speaker 1: earnings of the earning season just gone, I think that

323
00:17:13,320 --> 00:17:15,879
Speaker 1: equity markets have generally been really encouraged by signs that

324
00:17:15,920 --> 00:17:18,480
Speaker 1: there is continued strong demand. So you know, we are

325
00:17:18,520 --> 00:17:22,719
Speaker 1: expecting lower returns through two in a number of markets,

326
00:17:22,760 --> 00:17:25,639
Speaker 1: including your including the US. But are we looking at

327
00:17:25,720 --> 00:17:30,879
Speaker 1: negative returns? Absolutely not. What's the correlation here to week dollar?

328
00:17:31,400 --> 00:17:35,359
Speaker 1: Basically e M investors are standing around waiting for a

329
00:17:35,440 --> 00:17:38,520
Speaker 1: week dollar. Is that all this is about? No. I

330
00:17:38,520 --> 00:17:40,639
Speaker 1: think emergine market investors are really watching to see what

331
00:17:40,680 --> 00:17:43,040
Speaker 1: happens with China, and you know, it's it's too big

332
00:17:43,119 --> 00:17:46,200
Speaker 1: to ignore. It has to be something that is working

333
00:17:46,280 --> 00:17:49,120
Speaker 1: for them, um, you know. But having said that, there's

334
00:17:49,160 --> 00:17:52,040
Speaker 1: pockets within emerging markets away from the e M Asia,

335
00:17:52,520 --> 00:17:54,840
Speaker 1: such as in Latin America, where valuations are starting to

336
00:17:54,880 --> 00:17:57,119
Speaker 1: look more attractive. I think it's just being ready for

337
00:17:57,200 --> 00:18:00,719
Speaker 1: that opportunity. Don't get to underwaiting your portfolios. Be neutral

338
00:18:00,880 --> 00:18:03,600
Speaker 1: and be ready to increase explosion when the right time comes.

339
00:18:03,880 --> 00:18:06,280
Speaker 1: When China does start to pull back at a bit

340
00:18:06,400 --> 00:18:10,120
Speaker 1: from from a lot of the veriest regulations, tightly constraints

341
00:18:10,160 --> 00:18:13,119
Speaker 1: that were started to introduce. Sama, thank you as always

342
00:18:13,240 --> 00:18:16,919
Speaker 1: great to catch you up principal level investors on emerging markets.

343
00:18:17,040 --> 00:18:24,960
Speaker 1: Right now, right now, let's go to George gun call Us.

344
00:18:25,040 --> 00:18:27,560
Speaker 1: This is really important, he said of the US macro

345
00:18:27,680 --> 00:18:30,239
Speaker 1: strategy at m u f G, and he writes one

346
00:18:30,240 --> 00:18:32,359
Speaker 1: of the most interesting in George, I love saying this

347
00:18:32,480 --> 00:18:36,080
Speaker 1: to you twisted notes on Wall Street and that it's

348
00:18:36,359 --> 00:18:41,840
Speaker 1: very thoughtful paragraph to paragraph about what the unseen is

349
00:18:42,040 --> 00:18:45,159
Speaker 1: out there. George, I love what you say about the

350
00:18:45,320 --> 00:18:48,560
Speaker 1: lack of depth in the three month market. The gloom

351
00:18:48,640 --> 00:18:53,080
Speaker 1: crew is worried about liquidity, they're worried about savings dynamics,

352
00:18:53,480 --> 00:18:56,720
Speaker 1: and you're focused on the lack of depth and treasuries.

353
00:18:57,040 --> 00:19:00,399
Speaker 1: What do you mean, Well, I mean look, and definitely

354
00:19:00,520 --> 00:19:02,880
Speaker 1: go down as a year that the bomb market could

355
00:19:02,880 --> 00:19:05,359
Speaker 1: not catch the breaks um And we start off, you know,

356
00:19:05,480 --> 00:19:08,000
Speaker 1: as John was pointing out, with the two stens curve steepening,

357
00:19:08,480 --> 00:19:11,080
Speaker 1: you know, really kind of encourage further steepeners. Those trades

358
00:19:11,119 --> 00:19:13,640
Speaker 1: got on the lound. Then during the month of October

359
00:19:13,880 --> 00:19:17,159
Speaker 1: around all the Central Bank kind of interventions which they

360
00:19:17,200 --> 00:19:19,840
Speaker 1: obviously didn't really deliver. Hawkish messages or hikes from the

361
00:19:19,840 --> 00:19:22,199
Speaker 1: b East point of view, really tripped up all these

362
00:19:22,240 --> 00:19:25,600
Speaker 1: short term rates markets. And then now as we head

363
00:19:25,600 --> 00:19:27,639
Speaker 1: into a year end, you know where liquidity is super

364
00:19:27,720 --> 00:19:31,920
Speaker 1: precious and we're seeing some forms of cracks forming. I

365
00:19:31,960 --> 00:19:33,439
Speaker 1: mean it's too early to say, but if you look

366
00:19:33,480 --> 00:19:35,440
Speaker 1: at like, you know, the Government Liquidity Index on the

367
00:19:35,480 --> 00:19:38,000
Speaker 1: Bloomberg terminal, you compare against move. I think there's a

368
00:19:38,040 --> 00:19:40,040
Speaker 1: good article by someone on on the Bloomberg team to

369
00:19:40,080 --> 00:19:42,040
Speaker 1: put it out there, but there is you know, some

370
00:19:42,160 --> 00:19:44,080
Speaker 1: concerns I mean both in the bomb market. I think

371
00:19:44,119 --> 00:19:46,560
Speaker 1: that if this word persists, I think other markets would

372
00:19:46,600 --> 00:19:48,399
Speaker 1: care as well. I mean, the bond market is the

373
00:19:48,440 --> 00:19:50,600
Speaker 1: first to feel these things out. If you look at

374
00:19:50,640 --> 00:19:52,639
Speaker 1: the you know, the ball market has more than one

375
00:19:52,760 --> 00:19:54,560
Speaker 1: one curve going on right now, Well, let's go there.

376
00:19:54,600 --> 00:19:56,800
Speaker 1: I got three ways to go here, folks. And when

377
00:19:56,880 --> 00:20:00,159
Speaker 1: Mr gun Covas mentions there about the bond market, this

378
00:20:00,240 --> 00:20:03,080
Speaker 1: out front, I firmly believe in. I've seen it time

379
00:20:03,200 --> 00:20:06,280
Speaker 1: and time and time again. What does the bond market

380
00:20:06,320 --> 00:20:10,440
Speaker 1: telling the equity market in six months? Well, I mean

381
00:20:10,840 --> 00:20:13,200
Speaker 1: right now, because CP I I think, you know, finally

382
00:20:13,280 --> 00:20:14,639
Speaker 1: is a wake up call because the fact that it

383
00:20:14,680 --> 00:20:18,280
Speaker 1: continues to stay persistently high last this reading is the

384
00:20:18,480 --> 00:20:21,000
Speaker 1: strong the book. The camel's back on the long end

385
00:20:21,000 --> 00:20:22,800
Speaker 1: of the curve, and we saw that in the really

386
00:20:22,840 --> 00:20:26,160
Speaker 1: poor auctions of the thirty year um. But again, even then,

387
00:20:26,600 --> 00:20:27,879
Speaker 1: you know, it's good to kind of get around the

388
00:20:27,920 --> 00:20:29,960
Speaker 1: idea that we're gonna have to positive strong growth next

389
00:20:30,040 --> 00:20:33,240
Speaker 1: year in high inflation. But if inflation persists at this level,

390
00:20:33,359 --> 00:20:35,240
Speaker 1: I think other markets are gonna start to care because

391
00:20:35,640 --> 00:20:38,000
Speaker 1: it could you know, fast forward, you know, fed action

392
00:20:38,119 --> 00:20:40,280
Speaker 1: and like and even if it's just two heights in

393
00:20:40,320 --> 00:20:44,240
Speaker 1: a faster taper, markets broadly are not ready for that. George,

394
00:20:44,280 --> 00:20:46,959
Speaker 1: let's have therapy Friday. Why are bond traders so gloomy?

395
00:20:49,000 --> 00:20:52,480
Speaker 1: Because we're realistic? I think no. I asked this seriously

396
00:20:52,560 --> 00:20:56,080
Speaker 1: because whenever I read notes, and frankly I I gravitate

397
00:20:56,119 --> 00:20:58,840
Speaker 1: to the bond market, as many people would acknowledge. For

398
00:20:58,920 --> 00:21:03,119
Speaker 1: a reason, have been a lot of prognostications about cracks forming.

399
00:21:03,240 --> 00:21:05,520
Speaker 1: You really talked about the idea that as a tapering

400
00:21:05,600 --> 00:21:09,080
Speaker 1: starts to accelerate, it will reveal some of the significant

401
00:21:09,160 --> 00:21:12,719
Speaker 1: cracks in markets. What is the bond market so worried

402
00:21:12,720 --> 00:21:15,119
Speaker 1: about that will happen as the FEDS starts to more

403
00:21:15,200 --> 00:21:19,560
Speaker 1: meaningfully pull back. Who's gonna warehouse all this risk? I

404
00:21:19,600 --> 00:21:22,159
Speaker 1: mean it comes down to just that we've been we

405
00:21:22,240 --> 00:21:24,560
Speaker 1: saw massive q we to expect it to kind of

406
00:21:24,640 --> 00:21:27,960
Speaker 1: just go away quietly into the night. That to me

407
00:21:28,080 --> 00:21:30,000
Speaker 1: is whichful thinking. I think the bond market knows that,

408
00:21:30,119 --> 00:21:32,720
Speaker 1: and so you're seeing you know, multiple bond markets, you know,

409
00:21:33,119 --> 00:21:35,560
Speaker 1: forming around a central core of the treasury market. The

410
00:21:35,560 --> 00:21:38,199
Speaker 1: treasury market is made up of on the run benchmark

411
00:21:38,240 --> 00:21:40,760
Speaker 1: treasuries which everyone looks at every day, and then there's

412
00:21:40,800 --> 00:21:42,960
Speaker 1: the you know, the bonds that trade around that, these

413
00:21:43,000 --> 00:21:45,080
Speaker 1: off the run treasuries which start to get less liquid,

414
00:21:45,480 --> 00:21:47,520
Speaker 1: especially this time of the year, and with the fist

415
00:21:47,560 --> 00:21:50,600
Speaker 1: stepping back George in some ways are stocks and bonds

416
00:21:50,800 --> 00:21:53,399
Speaker 1: switching profiles where you start to see bonds becoming the

417
00:21:53,480 --> 00:21:57,160
Speaker 1: more volatile asset class and sort of equities following along

418
00:21:57,240 --> 00:22:00,440
Speaker 1: with this presumption that central bankers will step in and

419
00:22:00,520 --> 00:22:06,320
Speaker 1: stem declines create a backdrop where Tina civil exist. I mean,

420
00:22:06,359 --> 00:22:08,520
Speaker 1: that really comes down to which I think discussed another

421
00:22:08,680 --> 00:22:11,240
Speaker 1: episodes like it comes out to the credit market, which

422
00:22:11,280 --> 00:22:12,200
Speaker 1: is kind of in the middle of the two, and

423
00:22:12,280 --> 00:22:14,520
Speaker 1: he says, you look at just once rate ball starts

424
00:22:14,560 --> 00:22:17,240
Speaker 1: to infect credit utility, and then I think then equities

425
00:22:17,240 --> 00:22:20,320
Speaker 1: will matter. But until that happens, there's so much money

426
00:22:20,440 --> 00:22:22,560
Speaker 1: chasing yield, and so as long as that dynamic is

427
00:22:22,560 --> 00:22:25,320
Speaker 1: still there, then credit should you know, hanging in there,

428
00:22:25,359 --> 00:22:27,359
Speaker 1: and the next we should as well. But I mean,

429
00:22:27,359 --> 00:22:29,200
Speaker 1: I think ultimately, if the bad market gets a little

430
00:22:29,240 --> 00:22:32,480
Speaker 1: bit uh illiquid, it's gonna hurt others. Is there so

431
00:22:32,680 --> 00:22:36,959
Speaker 1: much money chasing yield a two thousand and six equivalent,

432
00:22:38,760 --> 00:22:40,800
Speaker 1: that's actually a great point because if you look at like, um,

433
00:22:41,440 --> 00:22:43,760
Speaker 1: the way that like so overall of all and and

434
00:22:44,119 --> 00:22:47,320
Speaker 1: and how like the last year of that that period

435
00:22:47,359 --> 00:22:49,560
Speaker 1: of oh six, when you know we've got a lot

436
00:22:49,600 --> 00:22:51,480
Speaker 1: of complacency in the markets. Back then we're like, hey,

437
00:22:51,560 --> 00:22:54,199
Speaker 1: you know, things are gonna be super smooth forever. We're

438
00:22:54,240 --> 00:22:57,119
Speaker 1: gonna have this positive kind of reinforces mechanism on growth.

439
00:22:57,560 --> 00:22:59,639
Speaker 1: And it didn't last into two thousand seven. Sassanate, I

440
00:22:59,640 --> 00:23:01,480
Speaker 1: don't think have to have a repeat of that per se.

441
00:23:01,600 --> 00:23:04,520
Speaker 1: But yeah, we've we've been on the backup central banks,

442
00:23:04,680 --> 00:23:08,040
Speaker 1: largest and fiscal supply A cistal sinulus and now that's

443
00:23:08,040 --> 00:23:10,480
Speaker 1: going away, and so I think, yeah, I think that

444
00:23:10,840 --> 00:23:15,639
Speaker 1: probably thousand one is like the oh six period ofstalogy Georgia.

445
00:23:15,760 --> 00:23:20,000
Speaker 1: Delicate question. But with m u f j's Japanese heritage

446
00:23:20,240 --> 00:23:24,359
Speaker 1: in Japanese reality one are the lessons from Japan the

447
00:23:24,480 --> 00:23:27,439
Speaker 1: fixed income market in the West needs to understand right now?

448
00:23:29,280 --> 00:23:32,920
Speaker 1: Uh that you know, eventually, if you don't get the growthing,

449
00:23:33,119 --> 00:23:37,200
Speaker 1: the deflation always wins going forward. What are you looking

450
00:23:37,240 --> 00:23:39,840
Speaker 1: at in terms of the trigger point for the long end?

451
00:23:39,880 --> 00:23:41,280
Speaker 1: You said that this was a wake up call the

452
00:23:41,359 --> 00:23:44,399
Speaker 1: CPI print, Yeah, the wake up call seems relatively muted

453
00:23:44,440 --> 00:23:46,000
Speaker 1: when you take a look at the flattening gield curve

454
00:23:46,040 --> 00:23:48,119
Speaker 1: that John was talking about. What do you expect to

455
00:23:48,200 --> 00:23:50,560
Speaker 1: happen here as the wake up wake up call becomes

456
00:23:50,680 --> 00:23:54,199
Speaker 1: more widely accepted. So, I mean, look, in general, we'll

457
00:23:54,240 --> 00:23:58,680
Speaker 1: see uh more curve altility and relative to specific points

458
00:23:58,720 --> 00:24:00,600
Speaker 1: on the curve. So if the curve continue to kind

459
00:24:00,600 --> 00:24:02,800
Speaker 1: of move in the erratic behaviors, I mean, it's been

460
00:24:02,800 --> 00:24:04,879
Speaker 1: in the flattening trends, it's hard to kind of distinguish that.

461
00:24:04,920 --> 00:24:06,840
Speaker 1: But the realized ball has been pretty high in curves

462
00:24:07,400 --> 00:24:09,600
Speaker 1: and so just looking at curve altility is gonna be

463
00:24:09,640 --> 00:24:12,320
Speaker 1: a big deal. Um. I mean, I do think that,

464
00:24:12,480 --> 00:24:14,879
Speaker 1: you know, like look on the grand scheme of things,

465
00:24:14,920 --> 00:24:16,720
Speaker 1: we all know rates are low, but it means it's

466
00:24:16,800 --> 00:24:19,440
Speaker 1: it's really the starting points that matter. So if we

467
00:24:19,520 --> 00:24:21,680
Speaker 1: start to move well back above one sixty on a

468
00:24:21,760 --> 00:24:24,400
Speaker 1: ten year, back above two percent in a meaningful way

469
00:24:24,480 --> 00:24:27,200
Speaker 1: about on the third year, that's when I think, you know,

470
00:24:27,359 --> 00:24:30,080
Speaker 1: it will start to see some concerns about people that

471
00:24:30,160 --> 00:24:32,439
Speaker 1: got along basically at the lows and rates when they

472
00:24:32,480 --> 00:24:35,040
Speaker 1: knew growth was strong and inflation was super higher. And

473
00:24:35,119 --> 00:24:37,199
Speaker 1: if it keeps going and then that's what I think

474
00:24:37,240 --> 00:24:39,440
Speaker 1: you have less interest and further tails and things like

475
00:24:39,520 --> 00:24:41,919
Speaker 1: that that we that I think you guys cover well

476
00:24:41,960 --> 00:24:44,800
Speaker 1: on Bloomberg. We appreciate that. Thanks for the con Wood,

477
00:24:44,920 --> 00:24:47,560
Speaker 1: You're welcome back anytime. Jorge can compass that of m

478
00:24:47,680 --> 00:24:49,600
Speaker 1: u f G on the sball Knock Kid. This is

479
00:24:49,640 --> 00:24:53,600
Speaker 1: the Bloomberg Surveillance Podcast. Thanks for listening. Join us live

480
00:24:53,800 --> 00:24:57,520
Speaker 1: weekdays from seven to ten AMI Eastern. I'm Bloomberg Radio

481
00:24:57,800 --> 00:25:01,360
Speaker 1: and on Bloomberg Television each a from six to nine

482
00:25:01,440 --> 00:25:05,840
Speaker 1: am for insight from the best in economics. Finance, investment,

483
00:25:06,000 --> 00:25:11,000
Speaker 1: and international relations. And subscribe to the Surveillance podcast on

484
00:25:11,119 --> 00:25:14,920
Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course, on

485
00:25:15,040 --> 00:25:19,119
Speaker 1: the terminal. I'm Tom keene In. This is Bloomberg.