Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Ferroll and Lisa A. Brawnowitz Jaily, we bring
Speaker 1: you insight from the best and economics, finance, investment, and
Speaker 1: international relations. Find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg
Speaker 1: dot Com, and of course on the Bloomberg terminal. Right
Speaker 1: now on a Friday. As we reset for November the
Speaker 1: end of this year, and as John has mentioned some
Speaker 1: of the window gazing into two thousand twenty two, it's
Speaker 1: time that you reset. Christian Mueller Glissman at Goldman Sachs
Speaker 1: is hugely qualified to talk about the linkage of the
Speaker 1: dynamics of the market into your portfolios, retail and institutional
Speaker 1: around the foundation back to nineteen of the sixty forty portfolio. Christian,
Speaker 1: thank you so much for joining and your work with
Speaker 1: the cf A Institute, of which I'm remember is well
Speaker 1: how dead is the dead sixty portfolio? Yeah, listen, it
Speaker 1: always is a bit aggressive to say that you have
Speaker 1: the debt or death of of kind of one of
Speaker 1: the most basic and and well known investment strategies. I
Speaker 1: think there's always going to be some benefit to be
Speaker 1: balanced now. But I think you have a particularly poor
Speaker 1: kind of starting point for these type of portfolios from
Speaker 1: two perspectives. No. I mean, first of all, everything is expensive.
Speaker 1: We know that, and equities and bonds are expensive at
Speaker 1: the same time. That was actually the same a few
Speaker 1: years ago, and still these portfolios continued performing really well.
Speaker 1: But what's new is how we are starting the cycle.
Speaker 1: And all the cycle is starting with more inflation and
Speaker 1: flatter yearth curves, and and that just means that what
Speaker 1: bonds can offer you in the portfolio is even more limited,
Speaker 1: both in terms of returns and and and with regards
Speaker 1: to to to risk reduction. One of the other determinants
Speaker 1: here is diversification, which over my span I've seen, for example,
Speaker 1: three hundred stocks down to fidelity fifty years. What Sequoia
Speaker 1: did years ago tell us about your view and the
Speaker 1: new diversification. If bonds are so unattractive, do I own Apple,
Speaker 1: Amazon and seven other stocks? Listen. It's exactly a good
Speaker 1: point you make there. I think you need to look
Speaker 1: for older sources of diversification than than just what equities
Speaker 1: and bonds can offer you. I actually think there's going
Speaker 1: to be much more potential for regional diversification. In the
Speaker 1: last twenty thirty years, all the academic evidence is showing
Speaker 1: that there's no benefit of having a global portfolio. If anything,
Speaker 1: the best thing was to have all your money just
Speaker 1: in the US equity market. But now that we introduce
Speaker 1: inflation risk, inflation volatility, policy uncertainty which we haven't had
Speaker 1: in the last twenty thirty years, and possibly much more
Speaker 1: macro volatility de synchronized cycles, what we could get is
Speaker 1: more diversification across the markets, and and also across styles,
Speaker 1: across sectors and and and and be the leadership is
Speaker 1: much much less narrow, So to some extent, you should
Speaker 1: not just be in the winners of the last cycle
Speaker 1: um and run a really concentrated portfolio. You need to
Speaker 1: branch out the bit you need need to diversity find. Obviously,
Speaker 1: the other key area, which we all know um and
Speaker 1: has already done really well, which will be more important
Speaker 1: than the portfolio's real assets, if it's commodities or other
Speaker 1: sources of of of of kind of real cash flaws.
Speaker 1: I think that that will also feature more heavily in
Speaker 1: the coming cycle. Is cash better than developed market bonds?
Speaker 1: Right now? Listen, this is the most interesting discussion, in
Speaker 1: my opinion, which is new. I think we all know
Speaker 1: that activities look better than bonds um in the long
Speaker 1: run on most models which you can come up with.
Speaker 1: But the more interesting discussion is really bonds versus cash.
Speaker 1: People are forgetting, but bonds have for very prolonged periods
Speaker 1: of time lost your money versus cash. Actually, the hit
Speaker 1: ratio of cash outperforming bonds over a ten year rolling
Speaker 1: period is nearly so it's nearly fifty fifty that you
Speaker 1: essentially do better with cash than with bonds. Based on
Speaker 1: the last hundred years, we obviously have been in the
Speaker 1: biggest bond bill market on records, so so we kind
Speaker 1: of feel that's quite unusual. But if you look back
Speaker 1: in history, there were plenty periods and one of the
Speaker 1: most important indicators of how bonds might do versus cash
Speaker 1: is the steepness of the youth curve, and and the
Speaker 1: steepness of the youth curve is half of what we
Speaker 1: normally get after a recession, exactly to some of the
Speaker 1: comments we had earlier. Because there's so little optimism about
Speaker 1: the duration and the longevity of the cycle and how
Speaker 1: much central banks can hike. That means you have less buffer,
Speaker 1: and you have less returned potential for bonds versus cash.
Speaker 1: So I think definitely cash looks better versus bonds in
Speaker 1: the coming cycle than than what we've experienced in recent years.
Speaker 1: But inflation doesn't that sort of a road the idea,
Speaker 1: because your buying power is steadily going away with no coupon. Yeah.
Speaker 1: I mean it's always like you do you want to
Speaker 1: lose money fast or slow? No? I think that that
Speaker 1: the big problem is with cash you're losing money very slowly,
Speaker 1: whereas with bonds you obviously have other drivers. And and
Speaker 1: we all know that real yields have moved to incredibly
Speaker 1: low levels, and there's really weird relationship you currently have
Speaker 1: where inflation expectations go higher and higher and higher, but
Speaker 1: the really yield stay will follow, and we know that
Speaker 1: might change, and then you have some losses in bonds.
Speaker 1: Christian one quick question. You can't have a Moller Glistman
Speaker 1: article without Anibbitson chart. You try out the Roger Ibbitson
Speaker 1: chart like Clark work here. The long term log performance
Speaker 1: of the equity market and the Great Unspoken Fear is
Speaker 1: another nineties seventies, the dismal seventies, the Carter malaise, the
Speaker 1: flatness of equity return. What's the probability of that? Listen.
Speaker 1: I think it's definitely higher post COVID and post the
Speaker 1: crisis than before because we of the you have. Now
Speaker 1: there's a new inflation uncertainty. And inflation is a very
Speaker 1: I always say it's a very autocorelated animal. Once you
Speaker 1: set it loose, I think it does create more uncertainty,
Speaker 1: It has spillover effects and and and I think as
Speaker 1: we sult of that, the probability has gone up. We
Speaker 1: still would argue that like a seventy stack inflation. Don't
Speaker 1: forget there was ten percent annualized inflation over a decade.
Speaker 1: I mean that is quite aggressive. And you also have
Speaker 1: to consider at the time, like the type of macro backdrop,
Speaker 1: both with regards to demand supply disruptions which were related
Speaker 1: to OPEC embargo, Iranian revolution. There were things going on
Speaker 1: which seemed much more extreme than what we're dealing with.
Speaker 1: I think stagflationary momentum is something we need to fear
Speaker 1: next week, not down next week, next year, um um
Speaker 1: where I think we know that growth will come down,
Speaker 1: inflation might remain sticky, and we get a bit of
Speaker 1: monetary policy normalization, and and and and potentially a bit
Speaker 1: of a catch up for monetary policy, and that can
Speaker 1: be a bit harmful for market. It's but I think
Speaker 1: the seventies staculation to US is still a pretty extreme event,
Speaker 1: which which I would still put more into the tail
Speaker 1: risk bucket, not the base case. Christian, that was a clinic.
Speaker 1: It's going to catch up, says send out best to
Speaker 1: patter up in honor as well, Christie Milli Glisman there,
Speaker 1: I've got one sacks. Thank you, buddy. It's going to
Speaker 1: see it. One stock I want to look at in
Speaker 1: the pre market, Tom and now you want a brief
Speaker 1: comment on this to Jan J to split into two
Speaker 1: companies that coming from the company this morning the stock
Speaker 1: positive by about four percent, just short of one seventeen
Speaker 1: Now Tom at one sixty nine sixty two. It is
Speaker 1: not the J and J those older perceived. What's remarkable
Speaker 1: here in this data wonderful in the Bloomberg, I can't
Speaker 1: say enough about the d E S screen to get
Speaker 1: a snapshot of a company that we think we know
Speaker 1: that we don't know John Household, Baby Oil, the powder,
Speaker 1: all the rest of it. It's seventeen of the company.
Speaker 1: It is amazing how they have deconsumered with their pharmaceutic
Speaker 1: called the medical devices growth over the last twenty years.
Speaker 1: And tell me this company is still an absolute based
Speaker 1: what are we looking at four hundred five d pillion
Speaker 1: dollarmarket gonna take eighteen to twenty four months to split
Speaker 1: it out. I know we've got an important conversation here, John,
Speaker 1: but I just can't say enough about how the margins
Speaker 1: fall in that income is hugely profitable. That important conversation
Speaker 1: Tom starts now with Jean Barvan, the head of the
Speaker 1: Investment Institute of Black Rock. John, your words, what ultimately
Speaker 1: matters is not the timing of liftoff on policy rights,
Speaker 1: but the cumulative response. John, can you build on that
Speaker 1: for us? Yeah, I mean we all focus on when
Speaker 1: exactly the lifto is gonna happen. And as you mentioned,
Speaker 1: like some are being brought pretty aggressively into twenty two.
Speaker 1: Now I would push back on you know, three hikes
Speaker 1: in twenty wee do seem like extremely aggressive to us, um,
Speaker 1: but we might see the beginning of the hiking cycle
Speaker 1: in twenty twenty two. But ultimately, what's gonna matter what
Speaker 1: this very unusually discycle is that the cumulative response to
Speaker 1: this kind of inflation that we haven't seen in thirty
Speaker 1: years will be much more muted than history lead. And
Speaker 1: that's gonna be meaning that the real rates in our view,
Speaker 1: are are remained very low for a sustained amount of time.
Speaker 1: And that's a that's a different way true to risk asset.
Speaker 1: I think that's a much more constructive backgroup that's sustained
Speaker 1: and and that's where there's a risk of confusion, we think,
Speaker 1: so hashtag confusion that for us is a is a
Speaker 1: starting point of manic conversation. What does the fiscal impulse
Speaker 1: of this natural disaster, this pandemic? What is it due
Speaker 1: to the geometry that any given central bank faces. It's
Speaker 1: not in the textbooks, is it. It's not in the textbox? Uh.
Speaker 1: And you know we call this whole kind of complex. Well,
Speaker 1: we've talked about a policy revolution over the last few years,
Speaker 1: this complex of both monstrey policy and fiscal policy moving
Speaker 1: very aggressively. But that leaves us at the place now
Speaker 1: where um, you know, we we kind of forget about this,
Speaker 1: but the dead levels are very high not long ago. Um,
Speaker 1: you know, the narrative in the US, was you the
Speaker 1: death servicing costs are solow like the trick or levels
Speaker 1: are low that we can afford to increase the debt
Speaker 1: very significantly, which we've done. The flip side of this,
Speaker 1: which will see soon, is that it won't take much
Speaker 1: in terms of rate increase to change the story completely
Speaker 1: on its head. Um, you know, we can add a
Speaker 1: ten year back at two point five and at that
Speaker 1: point that servicing costs in the US will be back
Speaker 1: to their to their historical level, throwing a completely out
Speaker 1: of the window. Uh, you know the argument that Summers
Speaker 1: and Lasha we're making just a couple of years ago.
Speaker 1: So point being to your point, Tom, it's um, it's
Speaker 1: not textbook, and it's going to be a constraint on
Speaker 1: how quickly rates that can go up. Jean, I find
Speaker 1: this fascinating the idea here the central bankers and praying frankly,
Speaker 1: policymakers in general don't want to see rates go up
Speaker 1: too high because the economy is no longer able to
Speaker 1: withstand it because of what you're just talking about. Does
Speaker 1: that mean that the more volatile asset class is perhaps
Speaker 1: short term yields that a very little room to maneuver,
Speaker 1: but could potentially be offset dramatically by what my people
Speaker 1: might speculate about policy changes, whereas stocks continue to be
Speaker 1: supported no matter what by the negative real yields that
Speaker 1: you see persisting. Yeah, so certainly consistent with what we've
Speaker 1: seen over the last month or two, right, I mean,
Speaker 1: lots of swings around the repricing of North Newton policy,
Speaker 1: and yet the backdrop has been you know, continues to
Speaker 1: be constructive more broadly for his causes. So I think
Speaker 1: that would be consistent with uh, you know, UH, rates
Speaker 1: might be lifting up at different point in time, but
Speaker 1: there's a conviction that overall, uh, this is going to
Speaker 1: be a muted the hiking cycle. And if it were not,
Speaker 1: I think we've seen some example of that, then markets
Speaker 1: are quick to surprive some kind of policy mistakes, of
Speaker 1: quick reversal of policy, which speaks to this environment we're
Speaker 1: talking about. It's gonna be difficult to raise rates or
Speaker 1: I don't know, want to put it is like any
Speaker 1: rate right, Um, we'll have a bigger impact, Jean. I'm
Speaker 1: honored to do this with your work at Princeton. As
Speaker 1: you know, the great Olivier Blanchard of France, of m
Speaker 1: I T and of the International Monetary Fund. Professor Blanchard
Speaker 1: is out with a blistering note this morning in the
Speaker 1: Peterson Institute, saying, forget about team temporary, forget about team gloom.
Speaker 1: John mentions Dr Ollarion. He says, we need to get
Speaker 1: used to the consequences of higher inflation. What are the
Speaker 1: consequences of a sustained higher inflation is Olivier. Blanchard mentions, well,
Speaker 1: I mean it feeds to the entire economy, so you
Speaker 1: know there will be adjustment through you know, obviously prices,
Speaker 1: but that means also we'll see some wage dynamics, that
Speaker 1: nominal wage dynamic that will be different than eventually you know, um,
Speaker 1: workers will want to keep up with this. Inflation is
Speaker 1: going to change the boggaining kind of situation, and I
Speaker 1: think we'll see wages sketching up. We haven't seen, um,
Speaker 1: I think I don't know. I haven't read yet the
Speaker 1: Olivier's piece, but I would suspect, like one of the
Speaker 1: key point is for the last twenty years, where you know,
Speaker 1: inflation was missing in action. And even if we are
Speaker 1: you know, two point five percent, well, going back, you know,
Speaker 1: after some some spikes, it's gonna feel different for that reason.
Speaker 1: And the other big point is, um, how will people
Speaker 1: react in terms of the expectation of inflation? And I
Speaker 1: don't think people we have collectively a good handle. There's
Speaker 1: no good models of in flash expectations UM, and so
Speaker 1: that's a big unknown. I guess that we'll need to
Speaker 1: track and live with now. John, always quite get your
Speaker 1: thoughts as always fantastic, John ban a blank rock right now.
Speaker 1: An important essay by See Michure. She's senior global investment
Speaker 1: strategist of Principal Group and Seema. I want to draw
Speaker 1: right into what we see on emerging markets. You are
Speaker 1: bold into the end of the year, you are bold
Speaker 1: into the beginning of the year and say you may
Speaker 1: not be on board with e M, but the belieguered
Speaker 1: e M has your attention. Tell me about the when
Speaker 1: of die thing in the e M. What do you
Speaker 1: need to see to generate a belief in emerging markets? Hi, John, So,
Speaker 1: I think the key thing is China. Right, we look
Speaker 1: at the fundamentals of emerging markets. We feel that there's
Speaker 1: a lot of promising movement with regards to vaccines to
Speaker 1: kind of a shift away from zero COVID in a
Speaker 1: number of countries um and and also you know, compared
Speaker 1: to a lot of the other parts of emerging markets
Speaker 1: lat term, Eastern Europe, Emerging Asia kind of you know,
Speaker 1: not having as as significant rate hyps. But really the
Speaker 1: catsule is China. You know, we need to see some
Speaker 1: kind of movement there with regards to stimulus, potentially at
Speaker 1: bottoming of growth, maybe a pull back in a bit
Speaker 1: of regulation. And the problem here is is that we
Speaker 1: don't know when that will happen. You know, we think
Speaker 1: there is a pain threshold, but unfortunately are not able.
Speaker 1: I think anyone is able to call that time in.
Speaker 1: So the only thing that we can do here is
Speaker 1: stay ready on the sidelines, waiting to to increase the
Speaker 1: exposure because valuations have become more attractive. But we just
Speaker 1: need China to play ball. Say what's your read at
Speaker 1: the moment on how far down road we are in
Speaker 1: these tightening cycles in places like Brazil, like Mexico. Are
Speaker 1: we closely done yet? I think we're definitely getting there,
Speaker 1: right so, you know, Russia will almost at the end. Brazil,
Speaker 1: I think that we're they're going to move quickly. They're
Speaker 1: going to move a lot, and then we should kind
Speaker 1: of normalize by middle of next year, so I think,
Speaker 1: And the fun thing is is, you know, they're going
Speaker 1: to be finished with their rate hikes, are going to
Speaker 1: have gone to pre pandemic levels before the FED even
Speaker 1: gets going, So we have to take that into consideration.
Speaker 1: So I do think that as we're get into two
Speaker 1: developed markets start really moving faster towards their normalization process,
Speaker 1: that actually emerging markets start to look a little bit
Speaker 1: more attractive at that point. Okay, so they look more attractive. However,
Speaker 1: there is the issue of the dollar. What happens if
Speaker 1: the Federals serve does hike twice or even three times
Speaker 1: in the next eighteen months, how much does that potentially
Speaker 1: crimp the bet that you're making. Yeah, you know, we
Speaker 1: think that for the US actually we're not expecting kind
Speaker 1: of very very early hikes. We think it's going to
Speaker 1: be right all the end of next year, that going
Speaker 1: to look through a lot of that inflation tension um
Speaker 1: and wait there and then from there on actually have
Speaker 1: quite a shallow upper trajectory, we think. You know, we
Speaker 1: look at the debt markets, we look at you know
Speaker 1: the fact that the growth profile is on a slowdown,
Speaker 1: and we don't see very significant moves. So I think
Speaker 1: there is upper movement on the dollar, but I don't
Speaker 1: think it's going to be to a point that it
Speaker 1: starts to strangle the measure markets. And actually, the other
Speaker 1: thing is is that you know, I know a lot
Speaker 1: of investors have been really concerned about how do emerging
Speaker 1: markets deal with fair tapering, and at the same time,
Speaker 1: the investors who are looking at a measure markets and thinking, right, well,
Speaker 1: there's a little a far more credible Montrey policy framework
Speaker 1: and incredible on the fiscal side across a number of countries,
Speaker 1: and I think that actually this is a slightly more
Speaker 1: stable emerging markets and what we've been used to do
Speaker 1: in previous years. So this is a really constructive outlook.
Speaker 1: Why then, are you seeing potential wibles in the US
Speaker 1: equity markets considering that there is this sort of reflation
Speaker 1: trade in a constructive narrative around the rest of the world. Well,
Speaker 1: so even for the United States that we're looking at
Speaker 1: growth slowdown, but we're still expecting growth to be a
Speaker 1: own trend of not above trend. So this isn't a
Speaker 1: very very negative outlook at all. There are going to
Speaker 1: be pressures on profits. We need to keep a very
Speaker 1: very close sign on that. But when we look at
Speaker 1: earnings of the earning season just gone, I think that
Speaker 1: equity markets have generally been really encouraged by signs that
Speaker 1: there is continued strong demand. So you know, we are
Speaker 1: expecting lower returns through two in a number of markets,
Speaker 1: including your including the US. But are we looking at
Speaker 1: negative returns? Absolutely not. What's the correlation here to week dollar?
Speaker 1: Basically e M investors are standing around waiting for a
Speaker 1: week dollar. Is that all this is about? No. I
Speaker 1: think emergine market investors are really watching to see what
Speaker 1: happens with China, and you know, it's it's too big
Speaker 1: to ignore. It has to be something that is working
Speaker 1: for them, um, you know. But having said that, there's
Speaker 1: pockets within emerging markets away from the e M Asia,
Speaker 1: such as in Latin America, where valuations are starting to
Speaker 1: look more attractive. I think it's just being ready for
Speaker 1: that opportunity. Don't get to underwaiting your portfolios. Be neutral
Speaker 1: and be ready to increase explosion when the right time comes.
Speaker 1: When China does start to pull back at a bit
Speaker 1: from from a lot of the veriest regulations, tightly constraints
Speaker 1: that were started to introduce. Sama, thank you as always
Speaker 1: great to catch you up principal level investors on emerging markets.
Speaker 1: Right now, right now, let's go to George gun call Us.
Speaker 1: This is really important, he said of the US macro
Speaker 1: strategy at m u f G, and he writes one
Speaker 1: of the most interesting in George, I love saying this
Speaker 1: to you twisted notes on Wall Street and that it's
Speaker 1: very thoughtful paragraph to paragraph about what the unseen is
Speaker 1: out there. George, I love what you say about the
Speaker 1: lack of depth in the three month market. The gloom
Speaker 1: crew is worried about liquidity, they're worried about savings dynamics,
Speaker 1: and you're focused on the lack of depth and treasuries.
Speaker 1: What do you mean, Well, I mean look, and definitely
Speaker 1: go down as a year that the bomb market could
Speaker 1: not catch the breaks um And we start off, you know,
Speaker 1: as John was pointing out, with the two stens curve steepening,
Speaker 1: you know, really kind of encourage further steepeners. Those trades
Speaker 1: got on the lound. Then during the month of October
Speaker 1: around all the Central Bank kind of interventions which they
Speaker 1: obviously didn't really deliver. Hawkish messages or hikes from the
Speaker 1: b East point of view, really tripped up all these
Speaker 1: short term rates markets. And then now as we head
Speaker 1: into a year end, you know where liquidity is super
Speaker 1: precious and we're seeing some forms of cracks forming. I
Speaker 1: mean it's too early to say, but if you look
Speaker 1: at like, you know, the Government Liquidity Index on the
Speaker 1: Bloomberg terminal, you compare against move. I think there's a
Speaker 1: good article by someone on on the Bloomberg team to
Speaker 1: put it out there, but there is you know, some
Speaker 1: concerns I mean both in the bomb market. I think
Speaker 1: that if this word persists, I think other markets would
Speaker 1: care as well. I mean, the bond market is the
Speaker 1: first to feel these things out. If you look at
Speaker 1: the you know, the ball market has more than one
Speaker 1: one curve going on right now, Well, let's go there.
Speaker 1: I got three ways to go here, folks. And when
Speaker 1: Mr gun Covas mentions there about the bond market, this
Speaker 1: out front, I firmly believe in. I've seen it time
Speaker 1: and time and time again. What does the bond market
Speaker 1: telling the equity market in six months? Well, I mean
Speaker 1: right now, because CP I I think, you know, finally
Speaker 1: is a wake up call because the fact that it
Speaker 1: continues to stay persistently high last this reading is the
Speaker 1: strong the book. The camel's back on the long end
Speaker 1: of the curve, and we saw that in the really
Speaker 1: poor auctions of the thirty year um. But again, even then,
Speaker 1: you know, it's good to kind of get around the
Speaker 1: idea that we're gonna have to positive strong growth next
Speaker 1: year in high inflation. But if inflation persists at this level,
Speaker 1: I think other markets are gonna start to care because
Speaker 1: it could you know, fast forward, you know, fed action
Speaker 1: and like and even if it's just two heights in
Speaker 1: a faster taper, markets broadly are not ready for that. George,
Speaker 1: let's have therapy Friday. Why are bond traders so gloomy?
Speaker 1: Because we're realistic? I think no. I asked this seriously
Speaker 1: because whenever I read notes, and frankly I I gravitate
Speaker 1: to the bond market, as many people would acknowledge. For
Speaker 1: a reason, have been a lot of prognostications about cracks forming.
Speaker 1: You really talked about the idea that as a tapering
Speaker 1: starts to accelerate, it will reveal some of the significant
Speaker 1: cracks in markets. What is the bond market so worried
Speaker 1: about that will happen as the FEDS starts to more
Speaker 1: meaningfully pull back. Who's gonna warehouse all this risk? I
Speaker 1: mean it comes down to just that we've been we
Speaker 1: saw massive q we to expect it to kind of
Speaker 1: just go away quietly into the night. That to me
Speaker 1: is whichful thinking. I think the bond market knows that,
Speaker 1: and so you're seeing you know, multiple bond markets, you know,
Speaker 1: forming around a central core of the treasury market. The
Speaker 1: treasury market is made up of on the run benchmark
Speaker 1: treasuries which everyone looks at every day, and then there's
Speaker 1: the you know, the bonds that trade around that, these
Speaker 1: off the run treasuries which start to get less liquid,
Speaker 1: especially this time of the year, and with the fist
Speaker 1: stepping back George in some ways are stocks and bonds
Speaker 1: switching profiles where you start to see bonds becoming the
Speaker 1: more volatile asset class and sort of equities following along
Speaker 1: with this presumption that central bankers will step in and
Speaker 1: stem declines create a backdrop where Tina civil exist. I mean,
Speaker 1: that really comes down to which I think discussed another
Speaker 1: episodes like it comes out to the credit market, which
Speaker 1: is kind of in the middle of the two, and
Speaker 1: he says, you look at just once rate ball starts
Speaker 1: to infect credit utility, and then I think then equities
Speaker 1: will matter. But until that happens, there's so much money
Speaker 1: chasing yield, and so as long as that dynamic is
Speaker 1: still there, then credit should you know, hanging in there,
Speaker 1: and the next we should as well. But I mean,
Speaker 1: I think ultimately, if the bad market gets a little
Speaker 1: bit uh illiquid, it's gonna hurt others. Is there so
Speaker 1: much money chasing yield a two thousand and six equivalent,
Speaker 1: that's actually a great point because if you look at like, um,
Speaker 1: the way that like so overall of all and and
Speaker 1: and how like the last year of that that period
Speaker 1: of oh six, when you know we've got a lot
Speaker 1: of complacency in the markets. Back then we're like, hey,
Speaker 1: you know, things are gonna be super smooth forever. We're
Speaker 1: gonna have this positive kind of reinforces mechanism on growth.
Speaker 1: And it didn't last into two thousand seven. Sassanate, I
Speaker 1: don't think have to have a repeat of that per se.
Speaker 1: But yeah, we've we've been on the backup central banks,
Speaker 1: largest and fiscal supply A cistal sinulus and now that's
Speaker 1: going away, and so I think, yeah, I think that
Speaker 1: probably thousand one is like the oh six period ofstalogy Georgia.
Speaker 1: Delicate question. But with m u f j's Japanese heritage
Speaker 1: in Japanese reality one are the lessons from Japan the
Speaker 1: fixed income market in the West needs to understand right now?
Speaker 1: Uh that you know, eventually, if you don't get the growthing,
Speaker 1: the deflation always wins going forward. What are you looking
Speaker 1: at in terms of the trigger point for the long end?
Speaker 1: You said that this was a wake up call the
Speaker 1: CPI print, Yeah, the wake up call seems relatively muted
Speaker 1: when you take a look at the flattening gield curve
Speaker 1: that John was talking about. What do you expect to
Speaker 1: happen here as the wake up wake up call becomes
Speaker 1: more widely accepted. So, I mean, look, in general, we'll
Speaker 1: see uh more curve altility and relative to specific points
Speaker 1: on the curve. So if the curve continue to kind
Speaker 1: of move in the erratic behaviors, I mean, it's been
Speaker 1: in the flattening trends, it's hard to kind of distinguish that.
Speaker 1: But the realized ball has been pretty high in curves
Speaker 1: and so just looking at curve altility is gonna be
Speaker 1: a big deal. Um. I mean, I do think that,
Speaker 1: you know, like look on the grand scheme of things,
Speaker 1: we all know rates are low, but it means it's
Speaker 1: it's really the starting points that matter. So if we
Speaker 1: start to move well back above one sixty on a
Speaker 1: ten year, back above two percent in a meaningful way
Speaker 1: about on the third year, that's when I think, you know,
Speaker 1: it will start to see some concerns about people that
Speaker 1: got along basically at the lows and rates when they
Speaker 1: knew growth was strong and inflation was super higher. And
Speaker 1: if it keeps going and then that's what I think
Speaker 1: you have less interest and further tails and things like
Speaker 1: that that we that I think you guys cover well
Speaker 1: on Bloomberg. We appreciate that. Thanks for the con Wood,
Speaker 1: You're welcome back anytime. Jorge can compass that of m
Speaker 1: u f G on the sball Knock Kid. This is
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