WEBVTT - Surveillance: Fed Tapering With Peters 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along 0:00:09.240 --> 0:00:13.080 with Jonathan Ferrell and Lisa Brownwitz Jay Leye. We bring 0:00:13.119 --> 0:00:17.159 you insight from the best and economics, finance, investment, and 0:00:17.280 --> 0:00:23.280 international relations. Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg 0:00:23.360 --> 0:00:30.400 dot Com, and of course on the Bloomberg terminal. Lisa, 0:00:30.520 --> 0:00:33.720 as we go to a bond guy and I think 0:00:33.760 --> 0:00:35.600 you know this is true story, folks. I'm on the 0:00:35.600 --> 0:00:38.600 floor of bear Stearns a million years ago and John 0:00:38.600 --> 0:00:41.560 writing Lisa is ready to go on, and just before 0:00:41.600 --> 0:00:45.280 we cut to live, somebody screamed out at John John 0:00:45.720 --> 0:00:49.400 price up, yield down, and of course the whole place 0:00:49.560 --> 0:00:53.320 erupted in laughters. We went live. I mean, nobody's laughing, 0:00:53.360 --> 0:00:55.880 no are they know? Greg Peters that somebody who's gotten 0:00:55.880 --> 0:00:58.120 the bond market right again and again, as well as 0:00:58.160 --> 0:00:59.960 all of p Jim fixed Income. He's head of multi 0:01:00.000 --> 0:01:03.440 sector and strategy there. And you've been calling Greg for 0:01:03.640 --> 0:01:06.280 this decline in yields or at least a stasis where 0:01:06.319 --> 0:01:10.560 we are despite some of the UH inflated expectations earlier 0:01:10.560 --> 0:01:13.520 in the year for inflation, here we are at a 0:01:13.600 --> 0:01:16.759 precipice where bulls on Wall Street cannot get bullish enough 0:01:16.760 --> 0:01:19.959 about equities, where bond bond veterans are looking at the 0:01:19.959 --> 0:01:22.240 bond yields here and saying they're not going to move 0:01:22.319 --> 0:01:25.480 that much. Do you think that people could be surprised 0:01:25.640 --> 0:01:31.039 by bond yields going lower being a bear case for equities. Yeah, 0:01:31.080 --> 0:01:33.600 I think that's a distinct possibility. It's not my base 0:01:33.640 --> 0:01:36.000 case by any stretch. UM actually think we're in the 0:01:36.040 --> 0:01:41.759 symbiotic relationship where low yields really allow equities to outperform. Right, 0:01:41.800 --> 0:01:45.080 it's not only the discounting mechanism that's much lower, so 0:01:45.400 --> 0:01:48.320 you know, pushing up valuations, But it's just type a low, 0:01:48.400 --> 0:01:52.360 stable yield environment is just broadly supportive of growth, broad 0:01:52.760 --> 0:01:56.240 broadly supportive of earnings h and should be broadly supportive 0:01:56.280 --> 0:01:59.960 of risk asset. So I actually see the two actually 0:02:00.040 --> 0:02:03.480 pretty much aligned here. But I think your question ultimately 0:02:03.560 --> 0:02:06.160 is if the bond market really starts to sense and 0:02:06.360 --> 0:02:11.200 suss out a rolling over of economic activity, and then 0:02:11.240 --> 0:02:14.920 that's clearly not a great outlook for stocks. If J 0:02:15.040 --> 0:02:18.359 Powell this Friday, at his speech at the Virtual that 0:02:18.520 --> 0:02:22.360 Jackson Holl Symposium comes out and forecasts or four tells 0:02:22.600 --> 0:02:25.800 an earlier taper than the market is expecting, says November 0:02:25.880 --> 0:02:29.760 rather than December as most people seem to expect. What's 0:02:29.800 --> 0:02:34.639 the reaction markets, I don't know. I mean personally, I 0:02:34.680 --> 0:02:37.840 don't think a month matters. I mean, if the markets 0:02:37.840 --> 0:02:42.560 are that sensitive around November versus December, then I just 0:02:42.639 --> 0:02:45.240 think it's kind of looking for an excuse to uh 0:02:45.520 --> 0:02:48.080 take some chips off the table. So I'm not overly 0:02:48.120 --> 0:02:51.760 worried about it. That's my personal expectation that the Fed 0:02:51.840 --> 0:02:56.680 starts to taper in November, maybe December, but either way 0:02:56.720 --> 0:03:01.440 they're tapering, UH. And then equally, I'm not as jammed 0:03:01.520 --> 0:03:04.240 up over a taper as some other folks, just given 0:03:04.280 --> 0:03:07.400 the fact that you're seeing this massive shrinking UH in 0:03:07.480 --> 0:03:11.000 treasury supply at the same time, Gregor, part of the 0:03:11.040 --> 0:03:14.880 stresses that are out there now is historic liquidity. Every 0:03:15.040 --> 0:03:18.160 morning I look at overnight repo. We've now gone out 0:03:18.200 --> 0:03:21.240 over a trillion. We're grinding higher. I've got experts telling 0:03:21.240 --> 0:03:24.240 me it's no big deal. But how does the wall 0:03:24.320 --> 0:03:28.520 of money that's out there fold into the pijam yield? 0:03:29.000 --> 0:03:32.400 How does it fold into the simple idea that we 0:03:32.440 --> 0:03:37.800 want to observe and guess where yield is going. Yeah, 0:03:37.880 --> 0:03:41.800 I think the technical dynamics are important here. Typically I 0:03:41.840 --> 0:03:45.360 don't think it um changes the direction, but I think 0:03:45.360 --> 0:03:48.440 it exacerbates the move. Uh. And so that's why I'm 0:03:48.440 --> 0:03:53.080 focused on treasury supply going forward, as I think the 0:03:53.120 --> 0:03:57.160 fact that you're going to see a decline in treasury 0:03:57.200 --> 0:04:00.400 supply next year and several years after, I think is 0:04:00.480 --> 0:04:03.840 highly supportive. At the same time, you know, the US 0:04:03.960 --> 0:04:06.440 is winning by not losing, right, So the fact that 0:04:06.480 --> 0:04:09.920 you're seeing so much foreign investment into the US into 0:04:09.960 --> 0:04:12.520 the bond market is also support So I think these 0:04:12.560 --> 0:04:17.239 are really supportive factors. But ultimately it does does point 0:04:17.320 --> 0:04:20.040 to the fundamental piece. And so I think fundamentals are 0:04:20.080 --> 0:04:23.960 the driver. I think the technical is just uh, just exacerbated. 0:04:24.000 --> 0:04:26.000 I don't want you to make a sales side bracketed 0:04:26.080 --> 0:04:28.360 tenure call, but I do you know, as a guy 0:04:28.680 --> 0:04:33.240 running institutional money with that belief on liquidity and on 0:04:33.920 --> 0:04:37.840 treasury supply bracket the ten year yield as you see 0:04:37.839 --> 0:04:42.240 it now a year out or two years out, Yes, 0:04:42.360 --> 0:04:45.479 so I think our level, uh you know, two years 0:04:45.520 --> 0:04:47.920 forward is about eight basis points on the ten year. 0:04:48.640 --> 0:04:50.880 Our call for the end of this year was a 0:04:50.920 --> 0:04:54.680 hundred and twenty basis points. Um so we're in striking distance. 0:04:55.000 --> 0:04:57.839 That felt like a terrible call in the first quarter, Tom, 0:04:57.880 --> 0:05:01.599 I have to be honest with you, quite painful. Uh, yeah, 0:05:01.680 --> 0:05:06.000 I did, um so. But I think longer term, Uh, 0:05:06.080 --> 0:05:10.520 you know, we see an environment where yield will remain low. Uh. 0:05:10.520 --> 0:05:13.760 And honestly, I struggle with the narrative that yields are 0:05:13.800 --> 0:05:21.159 going to jump post Fed taper, post economic activity that's 0:05:21.200 --> 0:05:25.160 off the charts, peak inflation, all those sorts of things 0:05:25.160 --> 0:05:27.760 are in the rear view, and to me, I just 0:05:27.760 --> 0:05:31.080 don't really see in an environment where yields after all 0:05:31.080 --> 0:05:34.159 that's been thrown at the market, that yields will will 0:05:34.320 --> 0:05:37.480 move higher after the fact. If it doesn't happen during 0:05:37.720 --> 0:05:40.279 then then I'd be shocked to see it happened after 0:05:40.360 --> 0:05:42.960 the fact. I know that in about four and a 0:05:42.960 --> 0:05:45.400 half hours time or so, Tom Keen is going to 0:05:45.400 --> 0:05:47.440 be awakening from his nap, eager really watching the to 0:05:47.520 --> 0:05:50.160 your Treasury auction we're getting at one pm Eastern time. 0:05:50.520 --> 0:05:53.039 He cannot wait, neither can Lisa. When it comes to 0:05:53.080 --> 0:05:55.680 these auctions in the supply and who is buying. How 0:05:55.720 --> 0:06:00.400 do you think about foreign buyers in the treasury market. Yeah, 0:06:00.440 --> 0:06:02.560 I think it's important. I mean, I mean we've been 0:06:02.560 --> 0:06:05.839 seeing it, uh, particularly as we get closer to taper. 0:06:05.880 --> 0:06:08.920 Whether it's November or December or January. Who knows, the 0:06:09.320 --> 0:06:13.600 fact that you're seeing um uh foreign buyers increase their 0:06:13.640 --> 0:06:17.600 purchase power within the U S treasury market is important, right, 0:06:17.640 --> 0:06:19.919 So I do think that's a strong technical factor. So 0:06:19.960 --> 0:06:22.440 I expect that to continue. But I try not to 0:06:22.480 --> 0:06:27.280 get overly taxed by a single auction event. But I 0:06:27.320 --> 0:06:31.159 think you know, over time, though, you'll continue to see 0:06:31.760 --> 0:06:36.120 the auctions do quite well. Foreign to foreign UH participation 0:06:36.160 --> 0:06:39.360 to be quite high, uh, but and auctions that go 0:06:39.560 --> 0:06:42.240 quite well. And of course the US in many ways 0:06:42.279 --> 0:06:44.880 is attractive because it's still the highest yield you can 0:06:44.920 --> 0:06:48.000 get in basically sovereign bond markets globally. And if even 0:06:48.000 --> 0:06:49.880 if you expect yields to be staying lower when it 0:06:49.880 --> 0:06:55.320 comes to treasury yields, is that still going to remain true? Yeah? 0:06:55.400 --> 0:06:57.200 I think so it's a relative game. We play a 0:06:57.200 --> 0:07:00.320 relative game, So we're looking at where yields are. UH. 0:07:00.360 --> 0:07:03.159 In Europe, we look at where yields are in Japan, 0:07:03.800 --> 0:07:08.520 and the US by far has the most attractive field environment, 0:07:08.600 --> 0:07:11.400 so I don't see that changing anytime soon. I don't 0:07:11.440 --> 0:07:16.160 think anyone is forecasting European yields to move above zero 0:07:16.840 --> 0:07:21.440 uh anywhere over the near term or ever. So UM, 0:07:21.480 --> 0:07:25.280 I really think the support for U S treasuries US 0:07:25.320 --> 0:07:28.760 assets period will continue to be quite strong, which is 0:07:28.760 --> 0:07:30.920 why I think the dollar will continue to do quite 0:07:30.920 --> 0:07:35.920 well here, which is somewhat against consensus, or was against 0:07:36.000 --> 0:07:38.800 consensus right before we let you go. I want to 0:07:38.800 --> 0:07:41.720 ask a philosophical question as we talk about the FED, 0:07:41.920 --> 0:07:44.360 and they're ongoing a hundred and twenty billion dollars of 0:07:44.400 --> 0:07:48.760 asset purchases every month at a time of rising in equality, 0:07:48.840 --> 0:07:51.760 at a time of inflated asset prices, at a time 0:07:52.280 --> 0:07:54.800 when a lot of people are saying that corporate profits 0:07:54.800 --> 0:07:56.560 are as good as they're ever going to get, and 0:07:56.600 --> 0:07:59.600 we'll contin will continue to accelerate from here because of 0:07:59.640 --> 0:08:04.880 their eminence over specific sectors. Is this bond purchasing program 0:08:04.920 --> 0:08:09.080 more helpful than it is harmful at this point? That's 0:08:09.080 --> 0:08:14.880 a great question. Um. Clearly inequality is something that has worsened. 0:08:15.600 --> 0:08:19.320 Is worsened um during the pandemic post pandemic, right, you're 0:08:19.360 --> 0:08:23.040 creating the wealth effect. Central bank policy is a blunt instrument. 0:08:23.400 --> 0:08:28.160 This whole portfolio channel effect, whereby raising asset prices to 0:08:28.320 --> 0:08:31.920 increase kind of spending at all to trickle down hasn't 0:08:31.960 --> 0:08:35.240 really worked that well. So I think the FEDS focused 0:08:35.320 --> 0:08:38.920 will continue to be around getting real wages higher. So 0:08:39.040 --> 0:08:43.040 for me, the focus is less on asset prices, but 0:08:43.120 --> 0:08:45.680 getting real wages higher. And I think that's the most 0:08:45.720 --> 0:08:49.000 important piece of the puzzle here to solve, not only 0:08:49.000 --> 0:08:53.080 in the US but globally, as inequality has really worsen 0:08:53.200 --> 0:08:56.600 quite dramatically here over the past twelve eight months. Peters, 0:08:56.600 --> 0:08:58.400 thank you so much. With p Jim ahead of a 0:08:58.520 --> 0:09:09.720 multisector ategy, they're really interesting conversation. I guess this is 0:09:09.760 --> 0:09:15.040 the point where we begin a look back. It's September eleventh. 0:09:15.160 --> 0:09:18.240 There are those that have younger children explaining to their 0:09:18.280 --> 0:09:22.440 younger children exactly what was September eleven, And too many 0:09:22.520 --> 0:09:27.680 of us it is a collective memory. Everyone will pontificate 0:09:28.280 --> 0:09:34.000 only foreign affairs gives us wonderful expert opinion across a 0:09:34.040 --> 0:09:37.320 wonderful cross section. Who won the war on Tera. I 0:09:37.360 --> 0:09:40.600 really can't say enough about this. Daniel Kurtsfahlan joining us, 0:09:40.960 --> 0:09:45.319 driving on the legacy of all that have done foreign affairs. It's, folks, 0:09:45.360 --> 0:09:48.040 an annual subscription, I believe, is a price of an 0:09:48.040 --> 0:09:52.160 over priced martini at an overpriced restaurant. Throw it at 0:09:52.160 --> 0:09:56.120 your offspring and say shut up and read this, Daniel. Congratulations. 0:09:56.480 --> 0:10:00.280 Ben Rhodes is in there, maybe from conventional Washington's other 0:10:00.360 --> 0:10:03.240 people as well. And I'm thrilled to see the marine 0:10:03.360 --> 0:10:06.360 Elliott Ackerman in there was Travitas writing my book of 0:10:06.400 --> 0:10:10.400 the Summer, and Elliott Ackerman makes no bones about it. 0:10:10.480 --> 0:10:14.520 We are a nation preoccupied, We are a nation and fatigued. 0:10:14.960 --> 0:10:19.880 How tired is America? Well, it's it's appropriate in some 0:10:19.920 --> 0:10:23.520 ways that we're seeing this messy, chaotic, in many ways 0:10:23.559 --> 0:10:28.240 tragic withdrawal from Afghanistan, right as the twentieth anniversary of 0:10:28.400 --> 0:10:31.200 nine eleven is approaching. As all of us who remember 0:10:31.240 --> 0:10:34.600 it now, it was such a cataclysmic event for American politics, 0:10:34.600 --> 0:10:38.439 for American foreign policy, and it really shaped the way 0:10:38.520 --> 0:10:40.440 we used our power in the world, the way we 0:10:40.480 --> 0:10:42.720 thought about the rest of the world for so long, 0:10:42.760 --> 0:10:44.520 and in some ways that it seemed to really drop 0:10:44.559 --> 0:10:48.079 out of the foreign policy conversation in the last few 0:10:48.160 --> 0:10:51.280 years in Afghanistan, and what we're seeing now, the scenes 0:10:51.280 --> 0:10:54.920 from probably are really reminder of just how much it 0:10:54.960 --> 0:10:57.400 has changed the world, just how much has changed sense 0:10:57.400 --> 0:10:59.800 of American power in ourselves. There's so many ways to 0:11:00.000 --> 0:11:03.040 go here. Stravits's essay of a few days ago in 0:11:03.120 --> 0:11:07.480 Time magazine what Zacaria rode in the Washington Post into 0:11:07.520 --> 0:11:12.040 me the exhaustion is an exhaustion of theory or belief. 0:11:12.240 --> 0:11:16.000 In putting this addition together of foreign affairs, could you 0:11:16.120 --> 0:11:23.360 discover a modern American foreign policy theory? Does it exist? Well, 0:11:23.640 --> 0:11:26.400 if there's a theory or a tendency, it maybe one 0:11:27.000 --> 0:11:30.440 of overreach and and hubris and these kind of maximalist 0:11:30.480 --> 0:11:33.280 goals that are eventually walked back in time. If you 0:11:33.320 --> 0:11:36.360 remember back to the days after nine eleven and the 0:11:36.440 --> 0:11:39.480 declarations coming from President Bush at the time, but from 0:11:39.520 --> 0:11:42.400 lots of others about the agenda we had in the 0:11:42.440 --> 0:11:44.640 world and the way we were going to achieve this 0:11:44.760 --> 0:11:47.600 ultimate victory in the war in Terror and transform them 0:11:47.600 --> 0:11:51.520 into least and transform our own society. Um, all of 0:11:51.559 --> 0:11:56.000 those goals look so fanciful in retrospect and what we've 0:11:56.040 --> 0:11:58.760 come out of If we look back at this period, 0:11:58.800 --> 0:12:00.600 as you see in these essays, it's something that in 0:12:00.600 --> 0:12:02.719 some ways is would be surprising if you go back 0:12:02.720 --> 0:12:05.480 to days after nine eleven. We haven't seen the kind 0:12:05.520 --> 0:12:07.760 of you know, mass casualty terrorist attacks in the United 0:12:07.800 --> 0:12:12.640 States that most people thought would come repeatedly after nine eleven, 0:12:13.160 --> 0:12:15.559 and that in some ways is an achievement, but look 0:12:15.600 --> 0:12:17.880 at all the costs that have come with it. You 0:12:17.920 --> 0:12:21.199 see in Elliott Ackerman's essay the one you mentioned, just 0:12:21.280 --> 0:12:23.800 how much it has affected American service members in the 0:12:23.800 --> 0:12:26.839 American military and American power. You see in Ben Rhodes 0:12:26.960 --> 0:12:30.079 essay just how much it has changed American foreign policy. 0:12:30.200 --> 0:12:32.960 So we can in some ways look at certain kinds 0:12:32.960 --> 0:12:35.800 of achievements and certain kinds of victories of American policy 0:12:35.800 --> 0:12:39.080 in that period, but if you look at the declarations 0:12:39.080 --> 0:12:41.360 and ambitions that we had in those days right after 0:12:41.480 --> 0:12:44.760 nine eleven, what we've had to pay for those those 0:12:44.800 --> 0:12:47.800 achievements is really staggering. And there's also the question of 0:12:47.800 --> 0:12:50.679 how the concept of the war on terror has changed 0:12:50.800 --> 0:12:54.840 amid a changing world. What do some of the expert 0:12:54.880 --> 0:12:58.680 writers way in on that front. Well, one of the 0:12:58.679 --> 0:13:02.040 one of the most striking things about the Afghanistan withdrawal, 0:13:02.160 --> 0:13:04.679 which I think is a theme that runs through a 0:13:04.720 --> 0:13:06.680 lot of these essays. We closed the issue, of course 0:13:06.720 --> 0:13:08.800 before we saw what was going to happen this week, 0:13:08.840 --> 0:13:11.560 but most of the writers really anticipated what this outcome 0:13:11.600 --> 0:13:13.959 was gonna look like. Is at this moment when the 0:13:14.000 --> 0:13:16.839 United States is trying to balance goals in the war 0:13:16.920 --> 0:13:20.280 on Terror and the kinds of considerations that drove us 0:13:20.320 --> 0:13:22.120 into Afghanistan in the first place, and that kept us 0:13:22.160 --> 0:13:25.200 there for for twenty years, against what are seeing is 0:13:25.240 --> 0:13:29.240 the kind of challenges of our day, China, technology, you know, 0:13:29.320 --> 0:13:32.040 great power competition. That's what people in the national security 0:13:32.040 --> 0:13:34.720 and foreign policy worlds were talking about now. But as 0:13:34.760 --> 0:13:36.679 you see in these essays, the response to the war 0:13:36.760 --> 0:13:39.320 in terror has shaped even the way we think about 0:13:39.360 --> 0:13:41.719 some of these great challenges today. So, even as it's 0:13:41.960 --> 0:13:45.200 it's passed out of the kind of core of American 0:13:45.240 --> 0:13:48.280 foreign policy concerns in many ways, at least before Afghanistan 0:13:49.120 --> 0:13:53.000 became the headline story of the day, uh, it really 0:13:53.080 --> 0:13:55.559 has shaped the way we think about the world and 0:13:55.640 --> 0:13:58.920 about our own power as we discussed this morning the 0:13:59.000 --> 0:14:01.880 idea of top level officials in the United States meeting 0:14:01.920 --> 0:14:06.720 with Taliban officials. The idea here of the legitimacy of 0:14:06.760 --> 0:14:11.079 groups previously designated as terrorist organizations. How much are we 0:14:11.200 --> 0:14:14.480 at risk in the Western world generally at risk from 0:14:14.600 --> 0:14:17.400 terror threats in Afghanistan where we have that much less 0:14:17.480 --> 0:14:21.440 visibility on the ground. That that is the big question 0:14:21.480 --> 0:14:23.640 of the day, and it's one we just don't know. 0:14:24.200 --> 0:14:27.440 Bill Burns, the CIA director who is you you alluded to, 0:14:27.560 --> 0:14:31.160 was meeting with the Taliban leadership in Cobble yesterday. Really 0:14:31.160 --> 0:14:35.600 extraordinary meeting given the history of these past years. Uh. 0:14:36.040 --> 0:14:39.360 He has said very very explicitly that we're gonna face 0:14:39.440 --> 0:14:42.080 some more uncertainty and some more risk, something that that 0:14:42.160 --> 0:14:44.000 I really liked one of the essays that we published 0:14:44.000 --> 0:14:46.120 by Dan Biman. You know, we talked for a long 0:14:46.160 --> 0:14:49.800 time about stamping out evil and standing out terrorism everywhere, 0:14:49.800 --> 0:14:52.400 and what what Dan Bieman points out in his essay 0:14:52.440 --> 0:14:54.320 is that we've come up with what he calls a 0:14:54.400 --> 0:14:57.040 good enough doctrine where we accept a degree of risk. 0:14:57.120 --> 0:14:59.240 We accept that the United States is not going to 0:14:59.320 --> 0:15:01.640 go out and destroy or every terrorist or every terrorist 0:15:01.640 --> 0:15:05.960 group everywhere, but that we can create enough protections that 0:15:06.000 --> 0:15:08.040 there should be defenses at least against the kind of 0:15:08.160 --> 0:15:10.720 large attacks that we worried about in the aftermath of 0:15:10.800 --> 0:15:14.360 nine eleven. So in the wake of years in which 0:15:14.400 --> 0:15:17.760 we talked about these grand victories and stamping out evil 0:15:17.800 --> 0:15:21.520 and all of that really grand, ambitious rhetoric, we're settling 0:15:21.520 --> 0:15:23.640 for something much murkier, and there will be a degree 0:15:23.640 --> 0:15:25.720 of risk and uncertainty as part of that. And Dan 0:15:25.800 --> 0:15:28.800 I saw Emma Ashford's essay on strategies of restraint. It 0:15:28.880 --> 0:15:30.880 is kind of an extension of that. I mean, twenty 0:15:30.960 --> 0:15:34.000 years post nine eleven, once we're out of both Afghanistan 0:15:34.040 --> 0:15:35.960 and of course been out of a rock, are we 0:15:36.040 --> 0:15:40.960 looking at a United States that is more restrained going forward? Absolutely. 0:15:41.000 --> 0:15:43.560 I think it's undeniable that all parts of the political 0:15:43.560 --> 0:15:47.280 spectrum have become much more attentive to limits on our 0:15:47.320 --> 0:15:50.880 power after a period in which there was broad agreement. 0:15:50.880 --> 0:15:53.720 If you remember those years after nine eleven about using 0:15:53.720 --> 0:15:57.600 American power, using the American military, and these fairly expansive 0:15:57.600 --> 0:16:00.440 ways all over the world, people all of a political 0:16:00.480 --> 0:16:03.520 spectrum are much more hesitant about using that kind of 0:16:03.520 --> 0:16:06.160 power now, and we may be at You know, there's 0:16:06.160 --> 0:16:08.960 always a sort of pendulum in American foreign policy between 0:16:08.960 --> 0:16:12.320 these relatively ambitious uses of power and these this sense 0:16:12.360 --> 0:16:16.040 of restraint, and maybe that we're at one far extreme 0:16:16.040 --> 0:16:18.000 of the pendulum and we're about to see it swing back, 0:16:18.080 --> 0:16:20.480 because this is what we've seen in Afghanistan. There's a 0:16:20.560 --> 0:16:23.000 reminder that their costs to restraint as well, just as 0:16:23.040 --> 0:16:26.320 there are are costs to ambition and overreach. And I 0:16:26.320 --> 0:16:28.520 wonder too if the United States is going to look 0:16:28.680 --> 0:16:31.160 internally next. There was also a great piece on from 0:16:31.240 --> 0:16:34.560 nine eleven to one six January six talking about the 0:16:34.640 --> 0:16:38.360 domestic terror threat and far right extremist white supremacists. Is 0:16:38.400 --> 0:16:41.000 that going to be the next error or area of 0:16:41.200 --> 0:16:45.560 terrorism focus. This is just an extraordinary sea by Cynthia 0:16:45.560 --> 0:16:48.720 Miller address who has been studying extremism of all kinds 0:16:49.440 --> 0:16:52.600 for for for years, and she traces the history of 0:16:53.080 --> 0:16:56.400 some of the domestic terrorist groups that we have seen 0:16:57.320 --> 0:17:00.440 a threat more recently, even even as the rep from 0:17:00.480 --> 0:17:04.040 Islamic terrorism started to receive a bit. She she traces 0:17:04.080 --> 0:17:07.399 their rise through these years and as we all know, 0:17:07.560 --> 0:17:10.440 after seeing some of the news events of the past, 0:17:10.520 --> 0:17:13.800 the past couple of years. This is sort of the 0:17:13.880 --> 0:17:17.680 unappreciated threat that crept up on us as we were 0:17:18.520 --> 0:17:22.080 focused on terrorism coming from far away. And what what 0:17:22.160 --> 0:17:24.359 something Milliar just points out in this piece is that 0:17:24.440 --> 0:17:27.040 we tend to apply some of the same frameworks. You know, 0:17:27.080 --> 0:17:28.680 this goes back to this question of how the War 0:17:28.720 --> 0:17:31.080 on Terror will continue to affect the way we approach things. 0:17:31.320 --> 0:17:33.760 We apply some of the same frameworks and tools to 0:17:33.800 --> 0:17:35.920 these groups, even though it's a very very different kind 0:17:35.920 --> 0:17:41.879 of threat. Tell me about our new isolationism. I find 0:17:42.320 --> 0:17:47.240 Dan absolutely fascinating and your wonderful book on George Marshall, 0:17:47.280 --> 0:17:50.960 it was a battle of n as well. What is 0:17:50.960 --> 0:17:57.520 the color of our our two thousand twenty five isolationism, Well, 0:17:57.760 --> 0:18:00.000 it's it's a it may be a little bit more 0:18:00.040 --> 0:18:03.560 subtle than that. It's not purely isolationist. It is a 0:18:03.600 --> 0:18:07.879 reaction to the perceived failures and the overreach of the 0:18:07.960 --> 0:18:10.320 years after nine eleven, when we thought we could use 0:18:10.320 --> 0:18:14.000 the American military to go it in and address threats completely, 0:18:14.040 --> 0:18:17.639 to stamp out threats completely, and to transform foreign societies. 0:18:18.000 --> 0:18:21.159 A lot of those uses, whether in Afghanistan or in 0:18:21.200 --> 0:18:25.719 Iraq or Libia, have proved to be much more difficult 0:18:25.840 --> 0:18:28.800 than people expected at the time and much bloodier and 0:18:28.880 --> 0:18:31.439 much more possible perspective time. At the same time, we 0:18:31.520 --> 0:18:35.080 are as as you know well, very very focused on 0:18:35.200 --> 0:18:38.080 this threat from China, and in some ways there are 0:18:38.119 --> 0:18:41.440 people in Washington and the nash security world who see 0:18:41.800 --> 0:18:43.359 the China threat as a thing that is going to 0:18:43.520 --> 0:18:47.159 keep us from receding into isolationism, precisely because it is 0:18:47.600 --> 0:18:50.240 a kind of what that is defining our our American 0:18:50.240 --> 0:18:52.800 form policy. That Pottngers piece in the issue is a 0:18:52.840 --> 0:18:55.359 great demonstration of that. Daniel Kurs, Phil and thank you 0:18:55.440 --> 0:18:58.920 so much. Just wonderful to begin our remembrance of September 0:18:58.920 --> 0:19:02.520 elevens with you on a Tuesday in August. Foreign Affairs 0:19:02.600 --> 0:19:05.560 who won the War on Terror can't say enough about 0:19:05.760 --> 0:19:09.639 some very controversial essays there to give up respective In 0:19:09.720 --> 0:19:13.160 his uh Dr kurtz Phalan said, particularly with all that's 0:19:13.200 --> 0:19:24.320 going on in Afghanistan, this is a joy because if 0:19:24.320 --> 0:19:26.920 you're at sixty feet, you've got to keep your eyes 0:19:26.920 --> 0:19:29.320 on the ground. Ellen Ruskin has made a career of that, 0:19:29.720 --> 0:19:32.920 and working with David focus Landau at Deutsche Bank, publishes 0:19:33.000 --> 0:19:37.479 the most interesting and twisted literature in this time of 0:19:37.520 --> 0:19:41.680 our paranoias, are worries, are angst about inflation and such? 0:19:42.240 --> 0:19:45.439 Good to catch up with the chief international strategist of 0:19:45.480 --> 0:19:49.560 Deutsche Bank, Alan focus Land on the team worry about 0:19:49.600 --> 0:19:54.000 German inflation. They talk about the tail risks. What is 0:19:54.280 --> 0:20:00.000 your tail risk in the Q four. I think inflation 0:20:00.359 --> 0:20:03.720 globally is very much the tail risk. I think the 0:20:03.760 --> 0:20:07.200 markets have taken a very sanguine view that, particularly in 0:20:07.240 --> 0:20:09.520 the US, the Federal Reserve is going to be correct, 0:20:09.640 --> 0:20:13.399 that a lot of the inflation forces on in fact transitory, 0:20:13.480 --> 0:20:19.400 that the possibility that they're wrong and the consequences if 0:20:19.440 --> 0:20:23.399 they're wrong are enormous. So I would say that, you know, 0:20:23.480 --> 0:20:26.280 in terms of macro risk, this is one of the 0:20:26.320 --> 0:20:31.840 most elevated risks out there, and and and is much 0:20:32.359 --> 0:20:36.800 more important as a concern than macro risks we've had 0:20:36.840 --> 0:20:39.480 for quite some time, Sertay. Since COVID's broken, the theme 0:20:39.560 --> 0:20:44.399 from last week's angst to this week's celebration can be 0:20:44.560 --> 0:20:49.320 institutions changing, arguably keens when the facts change, I change. 0:20:49.720 --> 0:20:53.440 China came to the rescue with a dialogue of accommodation 0:20:53.520 --> 0:20:57.080 by their central bank, do you assume other institutions will 0:20:57.119 --> 0:20:59.879 do the same thing. Under angst, they'll just solve the 0:21:00.040 --> 0:21:05.159 problem for US. No, I think I think the problems 0:21:05.359 --> 0:21:10.119 tend to be quite localized and need local solutions. The 0:21:10.160 --> 0:21:12.520 US economy is just too big to be able to 0:21:12.560 --> 0:21:17.160 rely on other central banks solving its problems. I think Tom, 0:21:17.200 --> 0:21:19.520 you're right to point out that there's there's been this 0:21:19.880 --> 0:21:26.800 dichotomy really between risks associated with China and optimism essentially 0:21:27.320 --> 0:21:29.520 related to the US. And I think you see this 0:21:29.600 --> 0:21:31.879 in terms of the schism we've we we've seen in 0:21:32.000 --> 0:21:35.439 terms of the Chinese stock market and the U s 0:21:35.440 --> 0:21:39.000 stock market, which is having you know, broad ramifications, and 0:21:39.160 --> 0:21:41.400 you know markets that I cover most closely, the currency 0:21:41.440 --> 0:21:44.520 market in particular, So you know, I think there's something 0:21:44.560 --> 0:21:46.400 you've got to watch for. But I think China can 0:21:46.440 --> 0:21:51.960 make things easier for global markets. Absolutely, it has enormous influence. 0:21:52.320 --> 0:21:56.679 But if it's US problems like inflation, for example, the 0:21:56.680 --> 0:21:59.119 Federal Reserve is gonna have to solve that one. Allen 0:21:59.760 --> 0:22:02.840 and curious going forward about how consistent it is for 0:22:02.880 --> 0:22:06.920 a higher inflationary regime and then to see bears become bulls, 0:22:07.040 --> 0:22:09.840 bulls become even bigger bulls when it comes to equities, 0:22:09.840 --> 0:22:15.160 particularly in the United States, is there an inconsistency here? Well, 0:22:15.200 --> 0:22:19.000 I think there are a lot of bond bears out there, 0:22:19.400 --> 0:22:23.160 and they've had a very hard time since pretty much 0:22:23.160 --> 0:22:25.639 the end of the first quarter. Most of them have 0:22:25.720 --> 0:22:28.119 capitulated at this point in time, I think there's an 0:22:28.160 --> 0:22:30.440 acceptance that it's a tenure. Heel is going to trade 0:22:30.480 --> 0:22:32.880 at something like one in a quarter pers end. It's 0:22:32.920 --> 0:22:35.720 going to be very hard to tell a story that's 0:22:35.800 --> 0:22:40.600 particularly negative as far as US equities are concerned. Unlike 0:22:40.600 --> 0:22:43.359 in the Trump era, when you're getting hit by trade 0:22:43.400 --> 0:22:46.639 related issues every now and then creating clean uts and 0:22:46.720 --> 0:22:50.480 by and by by the dip opportunities, you don't have 0:22:50.520 --> 0:22:53.320 that this time around. So you've got to have other 0:22:53.359 --> 0:22:56.480 features that create clean uts, and obviously the inflation stories 0:22:56.520 --> 0:22:58.879 being part of it. But even there, the market is 0:22:58.920 --> 0:23:02.600 taking a very benign look at the FED. You look 0:23:02.600 --> 0:23:05.920 at what's priced in through the end of it's less 0:23:05.920 --> 0:23:08.879 than a hundred basis points of tightening. That's nothing in 0:23:08.920 --> 0:23:12.199 the grand scheme of you know, FED tightening cycles. So 0:23:12.520 --> 0:23:15.480 the market has taken a very benign look at things. 0:23:15.680 --> 0:23:17.919 But obviously the back end of the bond market, I 0:23:17.960 --> 0:23:21.960 think is creating the backdrop for very solid equity market 0:23:22.000 --> 0:23:24.320