1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,400 Speaker 2: with Lisa Bromwitz and a Marie Hordern. Join us each 4 00:00:18,480 --> 00:00:21,360 Speaker 2: day for insight from the best in markets, economics, and 5 00:00:21,400 --> 00:00:24,720 Speaker 2: geopolitics from our global headquarters in New York City. We 6 00:00:24,760 --> 00:00:27,400 Speaker 2: are live on Bloomberg Television weekday mornings from six to 7 00:00:27,480 --> 00:00:31,000 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 8 00:00:31,200 --> 00:00:33,479 Speaker 2: or anywhere else you listen, and as always on the 9 00:00:33,479 --> 00:00:37,040 Speaker 2: Bloomberg Terminal and the Bloomberg Business app. Sarah Hunt of 10 00:00:37,080 --> 00:00:40,680 Speaker 2: Alpi Saxon Words writing Investors scene positioned for positive earning 11 00:00:40,720 --> 00:00:44,400 Speaker 2: surprises into twenty six, but we expect higher volatility as 12 00:00:44,479 --> 00:00:47,320 Speaker 2: summer gives way to four. Sarah joins Usnaff for Marcom 13 00:00:47,360 --> 00:00:48,839 Speaker 2: One is Sarah, good morning, it's going to see you. 14 00:00:48,880 --> 00:00:50,760 Speaker 2: What's the source of that volatility going to be? 15 00:00:51,400 --> 00:00:54,440 Speaker 1: I think the uncertainty that's coming around the timing of 16 00:00:54,440 --> 00:00:57,480 Speaker 1: what's happening in tariffs, the timing. There was an announcement 17 00:00:57,520 --> 00:00:59,960 Speaker 1: today that aluminum and steel in different products was going 18 00:01:00,280 --> 00:01:03,280 Speaker 1: to be taxed at a different rate, and that did 19 00:01:03,280 --> 00:01:06,080 Speaker 1: not include it did include goods in transit. I think 20 00:01:06,120 --> 00:01:09,640 Speaker 1: all those kinds of things make for problems for potential earnings. 21 00:01:09,680 --> 00:01:12,440 Speaker 1: I think the uncertainty around what spending is going to happen, 22 00:01:12,640 --> 00:01:14,800 Speaker 1: something like what's going on with home depot not such 23 00:01:14,800 --> 00:01:16,560 Speaker 1: a huge thing, not a big surprise, a lot of 24 00:01:16,600 --> 00:01:19,840 Speaker 1: big ticket items, not so much people bought ahead of tariffs. 25 00:01:20,000 --> 00:01:22,200 Speaker 1: But I think that there is some concern about what 26 00:01:22,200 --> 00:01:23,480 Speaker 1: this is going to do to margins and what it's 27 00:01:23,520 --> 00:01:25,399 Speaker 1: going to do to earnings, and that's going to I think, 28 00:01:25,520 --> 00:01:25,840 Speaker 1: add to. 29 00:01:25,800 --> 00:01:27,320 Speaker 2: All, Well, let's slay on this, which way do you 30 00:01:27,319 --> 00:01:29,119 Speaker 2: think it breaks. Let's say we've got a company right 31 00:01:29,120 --> 00:01:31,800 Speaker 2: now in America that was importing a lot of goods, 32 00:01:32,040 --> 00:01:34,800 Speaker 2: a lot of pre tariff inventory of the goods they 33 00:01:34,880 --> 00:01:39,520 Speaker 2: imported that were tariffed, they were absorbing that on margin. 34 00:01:39,640 --> 00:01:42,080 Speaker 2: Do you believe that's going to lead to say, cost cutting, 35 00:01:42,440 --> 00:01:44,400 Speaker 2: a labor market hit, or do you believe it leads 36 00:01:44,440 --> 00:01:46,160 Speaker 2: to higher prices they're going to pass it on to 37 00:01:46,200 --> 00:01:46,720 Speaker 2: the consumer. 38 00:01:47,000 --> 00:01:48,440 Speaker 1: I think they're going to try to do both. I 39 00:01:48,440 --> 00:01:50,200 Speaker 1: think they're going to try to get their costs in 40 00:01:50,200 --> 00:01:51,720 Speaker 1: line as much as they can, and I think they're 41 00:01:51,720 --> 00:01:53,720 Speaker 1: going to try to push price to the extent that 42 00:01:53,760 --> 00:01:57,120 Speaker 1: they can. And the question really is, as these targets 43 00:01:57,120 --> 00:01:59,520 Speaker 1: have been moving all year, did we get such a 44 00:01:59,520 --> 00:02:01,480 Speaker 1: backup in demand that we pulled for a lot of 45 00:02:01,520 --> 00:02:04,640 Speaker 1: activity And are we therefore going to see some softness anyway, 46 00:02:04,960 --> 00:02:06,880 Speaker 1: or is this going to be so gradual that it's 47 00:02:07,040 --> 00:02:09,240 Speaker 1: that it doesn't have as big an impact as a 48 00:02:09,240 --> 00:02:12,160 Speaker 1: big one day slam dunk situation. And I think that's 49 00:02:12,200 --> 00:02:15,120 Speaker 1: the question and how this plays into PPI and CPI 50 00:02:15,400 --> 00:02:18,560 Speaker 1: because a tariff isn't really inflation itself. It's a tax, 51 00:02:18,760 --> 00:02:20,680 Speaker 1: but it doesn't matter because if the price levels are 52 00:02:20,720 --> 00:02:23,280 Speaker 1: moving higher, it doesn't matter to the consumer. It feels 53 00:02:23,280 --> 00:02:24,799 Speaker 1: like a problem because prices are higher. 54 00:02:24,840 --> 00:02:27,120 Speaker 3: I remember a long time ago at the end of 55 00:02:27,200 --> 00:02:30,440 Speaker 3: July when people said August tends to be volatile. Watch out, 56 00:02:30,480 --> 00:02:32,360 Speaker 3: it tends to be the witching month. Well, we're up, 57 00:02:32,480 --> 00:02:34,919 Speaker 3: you know, one point seven percent on the S and P. 58 00:02:35,080 --> 00:02:37,720 Speaker 3: We've reached new high after new high. Sure we've been 59 00:02:37,760 --> 00:02:39,280 Speaker 3: down for a couple of days, but down as sort 60 00:02:39,280 --> 00:02:42,000 Speaker 3: of a relative statement, given that we're going nowhere, at 61 00:02:42,000 --> 00:02:44,760 Speaker 3: what point are we just pushing off this volatility showing 62 00:02:44,760 --> 00:02:46,760 Speaker 3: that the pain trade still is higher. 63 00:02:47,240 --> 00:02:50,359 Speaker 1: So I think that right now we've got Jackson Hole 64 00:02:50,400 --> 00:02:52,760 Speaker 1: coming up this week. If you recalled last year, it 65 00:02:52,760 --> 00:02:55,040 Speaker 1: was the labor numbers in August that came in that 66 00:02:55,360 --> 00:02:57,880 Speaker 1: really threw things off for the FED and people started 67 00:02:57,880 --> 00:03:02,200 Speaker 1: to worry about the labor market day. It is uncertain 68 00:03:02,360 --> 00:03:05,160 Speaker 1: enough that right now it's like it needs a push 69 00:03:05,280 --> 00:03:06,800 Speaker 1: one way or the other. The fact that there is 70 00:03:06,960 --> 00:03:09,320 Speaker 1: talks with Russia and Ukraine, whether they get to piece 71 00:03:09,400 --> 00:03:11,919 Speaker 1: or not, that's probably a netpet benefit to most things, 72 00:03:11,960 --> 00:03:14,720 Speaker 1: except potentially energy, which is not the worst thing in 73 00:03:14,720 --> 00:03:16,800 Speaker 1: the world either, because that helps everybody else with lower 74 00:03:16,880 --> 00:03:19,440 Speaker 1: energy prices. I think the question's really going to be 75 00:03:19,800 --> 00:03:22,600 Speaker 1: where do we end up in terms of the consumer, 76 00:03:22,639 --> 00:03:24,880 Speaker 1: and where do we end up in terms of inflation, 77 00:03:25,040 --> 00:03:27,560 Speaker 1: and what happens to companies and are they laying people off? 78 00:03:27,680 --> 00:03:30,680 Speaker 1: Does that affect the labor market? All those interplays are 79 00:03:30,800 --> 00:03:33,160 Speaker 1: uncertain now, and I don't know how much clarity we 80 00:03:33,160 --> 00:03:35,119 Speaker 1: get in three or four weeks, but you could see 81 00:03:35,120 --> 00:03:36,440 Speaker 1: some money even data right now. 82 00:03:36,480 --> 00:03:38,760 Speaker 3: A number of people are talking about trying to just 83 00:03:38,760 --> 00:03:40,440 Speaker 3: get a little bit more defensive. We see that in 84 00:03:40,440 --> 00:03:42,840 Speaker 3: the investment grades market, with US spreads getting to the 85 00:03:42,840 --> 00:03:45,680 Speaker 3: lowest levels going back to nineteen ninety eight. And the 86 00:03:45,680 --> 00:03:48,480 Speaker 3: theory here is there's going to be some weakness and 87 00:03:48,520 --> 00:03:51,360 Speaker 3: potentially you could see it in a stiflationary type of feel. 88 00:03:51,640 --> 00:03:53,560 Speaker 3: Are we getting to a place where the high flyers, 89 00:03:53,560 --> 00:03:56,600 Speaker 3: the tech exposed stocks will continue to perform even as 90 00:03:56,680 --> 00:03:58,760 Speaker 3: the rest of the market continues to just kind of 91 00:03:58,800 --> 00:04:02,880 Speaker 3: grind nowhere because of that type of dynamic of sacflation. 92 00:04:03,160 --> 00:04:05,400 Speaker 1: And because of the dynamic that there's still a lot 93 00:04:05,440 --> 00:04:07,440 Speaker 1: of growth in that sector. There's still a lot of 94 00:04:07,440 --> 00:04:10,200 Speaker 1: cash flow, and they're not being impacted as negatively as 95 00:04:10,200 --> 00:04:12,960 Speaker 1: some of the companies that don't have the technology aspect. 96 00:04:13,160 --> 00:04:16,359 Speaker 1: So as that technology throws through flows through, maybe you 97 00:04:16,400 --> 00:04:18,520 Speaker 1: do get some margin expansion from that, right because that's 98 00:04:18,560 --> 00:04:20,240 Speaker 1: the big argument about AI is that it's going to 99 00:04:20,240 --> 00:04:22,159 Speaker 1: help us and it's going to help productivity, and that's 100 00:04:22,160 --> 00:04:23,880 Speaker 1: going to help margin. So there's a little bit of 101 00:04:23,920 --> 00:04:26,679 Speaker 1: an offset whether or not we get that. The big 102 00:04:26,680 --> 00:04:29,240 Speaker 1: spend right now is still in technology. So those stocks 103 00:04:29,240 --> 00:04:31,520 Speaker 1: are at a premium valuation for a reason because people 104 00:04:31,520 --> 00:04:32,720 Speaker 1: can see through and see forward. 105 00:04:32,760 --> 00:04:34,839 Speaker 2: At least I mentioned the investment great credit spreads. Let's 106 00:04:34,880 --> 00:04:37,400 Speaker 2: find a compliment it's on that this is important, super 107 00:04:37,440 --> 00:04:39,880 Speaker 2: tight tightiest level since when was it ninety eight d 108 00:04:39,880 --> 00:04:42,760 Speaker 2: eight this side of this century, which is absolutely bone 109 00:04:42,800 --> 00:04:45,560 Speaker 2: cause do you think that tells you more about confidence 110 00:04:45,600 --> 00:04:49,680 Speaker 2: in corporate America or a lack of confidence in the treasury, 111 00:04:50,200 --> 00:04:54,680 Speaker 2: in the US government and in fact for selvereigns worldwide. 112 00:04:54,920 --> 00:04:56,919 Speaker 1: I think it probably has to do more with the 113 00:04:56,960 --> 00:04:59,720 Speaker 1: confidence in the companies themselves and the balancees of the 114 00:04:59,720 --> 00:05:01,719 Speaker 1: company themselves. I think there's a little bit of that 115 00:05:01,760 --> 00:05:04,520 Speaker 1: on the sovereign side, because as debt levels rise globally, 116 00:05:04,800 --> 00:05:07,000 Speaker 1: there is concern on the sovereign side that we hadn't 117 00:05:07,000 --> 00:05:09,800 Speaker 1: seen prior to those massive increases in debt posts to 118 00:05:09,839 --> 00:05:10,839 Speaker 1: financial crisis. 119 00:05:11,040 --> 00:05:12,239 Speaker 2: But if you look at the way. 120 00:05:12,080 --> 00:05:15,880 Speaker 1: That public companies at least have been managing their cash 121 00:05:15,920 --> 00:05:18,359 Speaker 1: flows and balance sheets, there's a reason those spreads are 122 00:05:18,400 --> 00:05:20,599 Speaker 1: so tight when it was a yield chasing operation. And 123 00:05:20,600 --> 00:05:22,960 Speaker 1: the other one is they're in pretty good financial shape. 124 00:05:23,000 --> 00:05:25,640 Speaker 1: There isn't a lot of credit weakness on a lot 125 00:05:25,640 --> 00:05:28,680 Speaker 1: of the publicly traded stuff, so the IG and those 126 00:05:28,720 --> 00:05:31,120 Speaker 1: spreads are very very narrow because there isn't a lot 127 00:05:31,120 --> 00:05:32,159 Speaker 1: of daylight between that. 128 00:05:32,320 --> 00:05:35,240 Speaker 3: Right now, there's another way of asking what John asked, 129 00:05:35,279 --> 00:05:37,760 Speaker 3: which is, even with spreads at the narrowest since nineteen 130 00:05:37,839 --> 00:05:40,680 Speaker 3: ninety eight, is there still value because there is any 131 00:05:40,720 --> 00:05:45,560 Speaker 3: spread above benchmark government rates, given that their credit worthiness 132 00:05:45,680 --> 00:05:49,080 Speaker 3: on some level might be better in some respects than 133 00:05:49,120 --> 00:05:50,000 Speaker 3: the US government. 134 00:05:50,320 --> 00:05:51,719 Speaker 1: I think that's one of the reasons that you saw 135 00:05:51,760 --> 00:05:54,040 Speaker 1: some of those corporates be able to borrow at ridiculously 136 00:05:54,040 --> 00:05:55,920 Speaker 1: low rates right because people looked at them and said, 137 00:05:55,920 --> 00:05:58,159 Speaker 1: those stabilities of cash flow are way better than some 138 00:05:58,200 --> 00:06:00,760 Speaker 1: governments that I've seen. I think in the end, there's 139 00:06:00,839 --> 00:06:03,880 Speaker 1: always a place for fixed income when it has finally 140 00:06:03,920 --> 00:06:06,440 Speaker 1: a yield, which it does if you're matching portfolios, if 141 00:06:06,480 --> 00:06:08,800 Speaker 1: you're matching exposure, or if you're just looking for safety 142 00:06:08,800 --> 00:06:11,440 Speaker 1: and preservation of capital. There's always a space for that. 143 00:06:11,760 --> 00:06:14,640 Speaker 1: And I think that right now it's not a bad 144 00:06:14,680 --> 00:06:16,400 Speaker 1: place to be if you know that you need that 145 00:06:16,440 --> 00:06:18,719 Speaker 1: money in a short period of time. Longer term, do 146 00:06:18,760 --> 00:06:20,600 Speaker 1: we think that rates maybe go higher on the long end, 147 00:06:20,800 --> 00:06:23,400 Speaker 1: they could, it's unusual to stay this low for this long. 148 00:06:23,480 --> 00:06:26,440 Speaker 3: A Corporate bonds a better hedge right now, a better 149 00:06:26,520 --> 00:06:29,720 Speaker 3: safety play than government bonds, given the facts that they 150 00:06:29,720 --> 00:06:32,160 Speaker 3: also have these strong balance sheets behind them. 151 00:06:32,800 --> 00:06:35,719 Speaker 1: I think that the volatility in governments is much more 152 00:06:35,720 --> 00:06:38,160 Speaker 1: policy driven than it would be for corporate so to 153 00:06:38,200 --> 00:06:40,120 Speaker 1: the extent that you might see more volatility in the 154 00:06:40,120 --> 00:06:42,479 Speaker 1: government market, and we have over the last year, which 155 00:06:42,520 --> 00:06:44,960 Speaker 1: is more the last couple of years, it's more surprising 156 00:06:45,000 --> 00:06:47,760 Speaker 1: to see that much volatility in government spreads, so to 157 00:06:47,800 --> 00:06:50,400 Speaker 1: the extent that there's less vow in the IG market, 158 00:06:50,400 --> 00:06:52,240 Speaker 1: I think that's not a wrong thought. 159 00:06:52,360 --> 00:06:54,799 Speaker 2: Sarah, good to see you. Thanks for dropping by, Folful staff. 160 00:06:54,800 --> 00:07:07,480 Speaker 2: Sarah Hanna of VAMPI Saxson Wood joining us not to 161 00:07:07,480 --> 00:07:10,720 Speaker 2: build on the conversation. Retired Lieutenant General Robert Welsh of 162 00:07:10,760 --> 00:07:13,520 Speaker 2: Academy Securities. Lieutenant General, Welcome back to the program, sir. 163 00:07:13,600 --> 00:07:16,480 Speaker 2: We've been tracking the diplomatic effort in the United States 164 00:07:16,520 --> 00:07:18,880 Speaker 2: in Alaska than down in Washington. Can you tell us 165 00:07:18,920 --> 00:07:22,000 Speaker 2: what the realities are of this conflict on the ground. 166 00:07:24,120 --> 00:07:27,160 Speaker 4: Yeah, thank you, John. You know, this is war's been 167 00:07:27,160 --> 00:07:29,680 Speaker 4: going on obviously for a long time, and when we 168 00:07:29,720 --> 00:07:33,520 Speaker 4: talk about a stalemate, Russia has been making slow progress 169 00:07:33,520 --> 00:07:35,760 Speaker 4: on the ground. There's no question about that. It's a 170 00:07:35,880 --> 00:07:39,680 Speaker 4: much larger country, it has a lot more military power, 171 00:07:40,520 --> 00:07:44,240 Speaker 4: but it's been very slow progress. And the real challenge 172 00:07:44,240 --> 00:07:49,080 Speaker 4: for Russia is that in today's modern warfare, the defense 173 00:07:49,280 --> 00:07:53,120 Speaker 4: is more to an advantage than the offense, and Russia 174 00:07:53,240 --> 00:07:57,720 Speaker 4: is running into that against the Ukraine belts of defense. 175 00:07:57,880 --> 00:08:01,360 Speaker 4: And what we see clearly here is they're getting closer 176 00:08:01,440 --> 00:08:05,800 Speaker 4: to the Ukrainian main defensive belts or their fortified belts. 177 00:08:06,240 --> 00:08:11,000 Speaker 4: Is that's the area of the Dunesk region that Russia 178 00:08:11,200 --> 00:08:13,560 Speaker 4: really would like to get their hands on for a 179 00:08:13,600 --> 00:08:18,000 Speaker 4: number of reasons. It's part of the industrialized area of Dunesque, 180 00:08:18,120 --> 00:08:21,000 Speaker 4: It's got a lot of key minerals that are in 181 00:08:21,040 --> 00:08:24,120 Speaker 4: that area. But from a military standpoint, and that's where 182 00:08:24,120 --> 00:08:27,320 Speaker 4: Putin is really focused. From a military standpoint, it has 183 00:08:27,360 --> 00:08:31,960 Speaker 4: the key defensive areas around four major cities, and urban conflict, 184 00:08:32,440 --> 00:08:36,199 Speaker 4: as military members know, is the toughest warfare to go through, 185 00:08:36,440 --> 00:08:39,920 Speaker 4: and that's where Russia or Ukraine has their forces entrenched 186 00:08:39,960 --> 00:08:41,080 Speaker 4: in this defensive belt. 187 00:08:41,200 --> 00:08:43,360 Speaker 3: Lieutenant General, how much of a win, then, is it 188 00:08:43,400 --> 00:08:46,280 Speaker 3: for Vladimir Putin to not have a ceasefire as some 189 00:08:46,360 --> 00:08:50,200 Speaker 3: of the details of this potential trilateral meeting take place. 190 00:08:52,160 --> 00:08:55,920 Speaker 4: That's a great question, Lisa. I think both the US 191 00:08:55,960 --> 00:08:59,000 Speaker 4: and the Europeans did want to cease fire. In the 192 00:08:59,040 --> 00:09:03,160 Speaker 4: situation is the Europeans and Ukraine, certainly in the US 193 00:09:03,240 --> 00:09:06,360 Speaker 4: would like to end the war more than Vladimir Putin 194 00:09:06,360 --> 00:09:08,800 Speaker 4: would like to end the war. So a sea fire 195 00:09:09,120 --> 00:09:12,600 Speaker 4: helps end the war, stop the fighting right now, and 196 00:09:12,640 --> 00:09:15,360 Speaker 4: stop the killing. As Donald Trump has put out, in 197 00:09:15,400 --> 00:09:18,199 Speaker 4: the case of Putin, he would like to just continue. 198 00:09:18,240 --> 00:09:21,480 Speaker 4: So these talks he continues to kind of slowly drag 199 00:09:21,520 --> 00:09:25,120 Speaker 4: out because he wants these battlefield gains. The more gains 200 00:09:25,120 --> 00:09:28,160 Speaker 4: he gets on the battlefield, the more leverage he has, 201 00:09:28,640 --> 00:09:32,080 Speaker 4: and the possibility of a breakthrough that could happen, and 202 00:09:32,120 --> 00:09:35,000 Speaker 4: he could even gain more gains and threaten more of 203 00:09:35,040 --> 00:09:37,880 Speaker 4: the heart or the interior of Ukraine. 204 00:09:38,160 --> 00:09:40,640 Speaker 3: As we hear more about security guarantees, it's some sort 205 00:09:40,640 --> 00:09:44,880 Speaker 3: of agreement between the US and Europe to guarantee is 206 00:09:45,000 --> 00:09:47,840 Speaker 3: some sort of support to Ukraine. Do you feel more 207 00:09:47,960 --> 00:09:50,640 Speaker 3: encouraged or less encouraged? Do you still kind of feel 208 00:09:50,640 --> 00:09:51,720 Speaker 3: like the jury's out. 209 00:09:53,400 --> 00:09:56,079 Speaker 4: Now? I think very encouraged after what's happened over the 210 00:09:56,160 --> 00:09:59,040 Speaker 4: last few weeks. There's no question that the meeting yesterday 211 00:09:59,080 --> 00:10:01,760 Speaker 4: at the White House was historic. I don't think we've 212 00:10:01,800 --> 00:10:06,199 Speaker 4: ever seen that many national leaders along with the leader 213 00:10:06,200 --> 00:10:09,640 Speaker 4: from the EU and the NATO secretary, we haven't seen 214 00:10:09,679 --> 00:10:13,200 Speaker 4: anything like that the White House. That really shows is 215 00:10:13,320 --> 00:10:17,480 Speaker 4: the power, the unity, the strength that NATO is bringing 216 00:10:18,000 --> 00:10:21,480 Speaker 4: and the ability to kind of call less power for 217 00:10:21,600 --> 00:10:25,320 Speaker 4: collective security. And that's a key thing here that Vladimir Putin, 218 00:10:25,400 --> 00:10:29,040 Speaker 4: throughout this conflict has tried to break the NATO alliance, 219 00:10:29,120 --> 00:10:32,560 Speaker 4: tried to break the US from NATO. And if anything 220 00:10:32,679 --> 00:10:35,520 Speaker 4: with this showed around that table yesterday is those leaders, 221 00:10:35,559 --> 00:10:38,120 Speaker 4: as Ali had said, have really kind of come around 222 00:10:38,200 --> 00:10:41,080 Speaker 4: the table to show Putin that there is a lot 223 00:10:41,080 --> 00:10:44,959 Speaker 4: of strength here. And it's not only military strength that's here. 224 00:10:45,480 --> 00:10:48,440 Speaker 4: We know Russia has continued their wartime economy to build 225 00:10:48,440 --> 00:10:51,199 Speaker 4: their military, but the economic strength that you see from 226 00:10:51,200 --> 00:10:54,360 Speaker 4: the group that goes around the table it is much 227 00:10:54,480 --> 00:10:58,160 Speaker 4: larger than Russia is, and Putin knows that. 228 00:10:58,320 --> 00:11:01,360 Speaker 2: Lieutenant General. Just a final question, you mentioned NATO the 229 00:11:01,360 --> 00:11:04,720 Speaker 2: details of this security agreement. In your opinion, why does 230 00:11:04,760 --> 00:11:07,360 Speaker 2: it need to live outside of NATO, Why is that 231 00:11:07,440 --> 00:11:10,360 Speaker 2: so important and what does that tell you about really 232 00:11:10,400 --> 00:11:13,480 Speaker 2: the nature and strength of that overall agreement in the future. 233 00:11:15,000 --> 00:11:17,600 Speaker 4: Now, John's great question. I think the key thing is 234 00:11:17,600 --> 00:11:20,360 Speaker 4: is if you look at Putin's objective from the very beginning, 235 00:11:20,880 --> 00:11:25,040 Speaker 4: is to rebuild the former Soviet Union and break NATO. 236 00:11:25,559 --> 00:11:28,480 Speaker 4: That's his goal, that's an objective and a red line 237 00:11:28,480 --> 00:11:33,440 Speaker 4: for him from the very very beginning was Ukrainie and 238 00:11:33,480 --> 00:11:36,560 Speaker 4: not joining NATO. And from the beginning President Trump as 239 00:11:36,600 --> 00:11:39,920 Speaker 4: he came into office, laid that down that he knew 240 00:11:39,960 --> 00:11:42,080 Speaker 4: that would be a red line and took that off 241 00:11:42,120 --> 00:11:45,880 Speaker 4: the table, and the Europeans supported that. And so now 242 00:11:45,960 --> 00:11:48,800 Speaker 4: when you get to some type of security measures, it 243 00:11:48,880 --> 00:11:51,880 Speaker 4: is so important to have security measures that when the 244 00:11:51,920 --> 00:11:56,240 Speaker 4: fighting stops that there were security guarantees, and that is 245 00:11:56,280 --> 00:11:58,200 Speaker 4: going to be the devil in the details as we 246 00:11:58,280 --> 00:12:01,280 Speaker 4: go forward, and Putin will not want to have an 247 00:12:01,360 --> 00:12:06,760 Speaker 4: Article five type security arrangement. And what that means is 248 00:12:07,240 --> 00:12:12,240 Speaker 4: that we would be supporting Ukraine through the European countries, 249 00:12:12,640 --> 00:12:15,280 Speaker 4: those that are in NATO with the same type of 250 00:12:15,400 --> 00:12:18,559 Speaker 4: support that they would get as if Ukraine was in NATO. 251 00:12:18,880 --> 00:12:21,960 Speaker 4: It was a very interesting approach that Trump took and 252 00:12:22,040 --> 00:12:26,559 Speaker 4: pulled that out of his hat, and Vladimir Putin listened 253 00:12:26,640 --> 00:12:29,120 Speaker 4: to that and initially said he would take a hard 254 00:12:29,160 --> 00:12:30,600 Speaker 4: look at that. So I think that is going to 255 00:12:30,600 --> 00:12:32,840 Speaker 4: be the key thing. And Zelenski is going to push 256 00:12:32,920 --> 00:12:35,640 Speaker 4: you very very hard to get those type of disservances 257 00:12:35,679 --> 00:12:37,800 Speaker 4: from the large militaries. 258 00:12:37,200 --> 00:12:39,200 Speaker 2: Of the bright. True, and we all wanted to say, 259 00:12:39,520 --> 00:12:52,560 Speaker 2: Lieutenant General, we appreciate its time. Kit jokes of self 260 00:12:52,600 --> 00:12:55,320 Speaker 2: gen writing. The more prices rise in the data, the 261 00:12:55,360 --> 00:12:57,520 Speaker 2: worse it will be for the economy, and the feed 262 00:12:57,600 --> 00:13:00,359 Speaker 2: should focus more on the labor market as a result. 263 00:13:00,559 --> 00:13:03,679 Speaker 2: If they do that, the dollar will be vulnerable. Kit 264 00:13:03,760 --> 00:13:05,640 Speaker 2: joined us now for more, Kit, welcome to the program. 265 00:13:05,679 --> 00:13:07,760 Speaker 2: So let's talk about this FX market driven in the 266 00:13:07,760 --> 00:13:10,400 Speaker 2: first half of this year by perceived capital flows. Do 267 00:13:10,440 --> 00:13:12,360 Speaker 2: you believe that in the second half of this year 268 00:13:12,760 --> 00:13:15,199 Speaker 2: it will be driven by rate differentials? And why. 269 00:13:18,040 --> 00:13:20,920 Speaker 5: Rate differentials up to appoint expectations about growth which are 270 00:13:21,200 --> 00:13:24,080 Speaker 5: which are often the same thing. But but yes, I think. 271 00:13:24,120 --> 00:13:27,560 Speaker 5: But people are genuinely uncertain and sense of at the 272 00:13:27,559 --> 00:13:29,840 Speaker 5: moment they're uncertain, but aware of the fact that the 273 00:13:29,840 --> 00:13:32,240 Speaker 5: world is very long dollars because we've all put so 274 00:13:32,280 --> 00:13:34,760 Speaker 5: much money into the US equity market, because money is 275 00:13:34,760 --> 00:13:36,520 Speaker 5: gone to the US treasury market, because the US has 276 00:13:36,559 --> 00:13:38,840 Speaker 5: been out performing for so long, and that if the 277 00:13:38,840 --> 00:13:43,440 Speaker 5: economy slows, rates need to come down significantly, then then 278 00:13:43,480 --> 00:13:45,520 Speaker 5: some of those some of the returns people have enjoyed 279 00:13:45,760 --> 00:13:48,840 Speaker 5: are pretty vulnerable. I think the market's confused about the 280 00:13:48,840 --> 00:13:51,880 Speaker 5: short term rate story, but confident that the bit the 281 00:13:51,960 --> 00:13:55,720 Speaker 5: answer is is the US economy slowing a little or 282 00:13:55,800 --> 00:13:59,120 Speaker 5: is it in more danger of a more significant significant slowdown? 283 00:13:59,200 --> 00:14:02,160 Speaker 5: And that means we're overreacting to every single piece of 284 00:14:02,200 --> 00:14:05,400 Speaker 5: macroeconomic data, with the exception perhaps of the really sort 285 00:14:05,400 --> 00:14:07,920 Speaker 5: of minded data we saw yesterday, but we're lining up 286 00:14:07,960 --> 00:14:10,400 Speaker 5: to overreact to each piece we get going into September. 287 00:14:10,520 --> 00:14:13,040 Speaker 3: Taking a step back kid Earlier this year, it seemed 288 00:14:13,040 --> 00:14:15,320 Speaker 3: like a one way freight train of cell dollars sell 289 00:14:15,320 --> 00:14:17,640 Speaker 3: the United States. That was the trade, and pretty much 290 00:14:17,720 --> 00:14:19,400 Speaker 3: everyone lined up behind it. 291 00:14:19,440 --> 00:14:19,960 Speaker 2: Is it over? 292 00:14:20,080 --> 00:14:22,280 Speaker 3: We've kind of plateaued and kind of shifted around this 293 00:14:22,400 --> 00:14:25,200 Speaker 3: level for a couple of months. Now, are we seeing 294 00:14:25,240 --> 00:14:27,520 Speaker 3: sort of the end of the cell the America trade 295 00:14:27,680 --> 00:14:30,440 Speaker 3: and going back to this sort of nuance to overreacting 296 00:14:30,440 --> 00:14:32,920 Speaker 3: to every data point, type of landscape. 297 00:14:33,440 --> 00:14:35,160 Speaker 5: I think the data will decide that. I think the 298 00:14:35,240 --> 00:14:37,800 Speaker 5: question then is whether the US economy is slowing significantly. 299 00:14:38,480 --> 00:14:41,000 Speaker 5: You know, a currency can't go down as fast as 300 00:14:41,040 --> 00:14:43,800 Speaker 5: the dollar did, or go up as fast as currencies 301 00:14:43,840 --> 00:14:46,960 Speaker 5: like the euro did for very long. An inflation targeting 302 00:14:47,000 --> 00:14:52,120 Speaker 5: central bank reacts to fast currency moves, and economy reacts 303 00:14:52,120 --> 00:14:55,120 Speaker 5: to fast currency moves. So the move we had in 304 00:14:55,160 --> 00:14:57,720 Speaker 5: euro dollar from one o two up to one eighteen 305 00:14:57,920 --> 00:15:00,720 Speaker 5: was too fast. We have to take time out. Whether 306 00:15:00,800 --> 00:15:02,880 Speaker 5: that takes us to one twenty five or we get 307 00:15:02,960 --> 00:15:07,040 Speaker 5: stuck here depends on how much or how little the 308 00:15:07,160 --> 00:15:09,520 Speaker 5: US economy slows in the next three months. I would 309 00:15:09,520 --> 00:15:12,360 Speaker 5: have said, and if we got a repeat of last 310 00:15:12,360 --> 00:15:15,480 Speaker 5: month's payroll numbers, if we've got something genuinely soft, then 311 00:15:15,480 --> 00:15:17,040 Speaker 5: I think we're going to head off into the middle 312 00:15:17,040 --> 00:15:18,800 Speaker 5: of the one twenties for eur dollar. We've got another 313 00:15:19,200 --> 00:15:21,320 Speaker 5: five to ten percent weakness in the dollar in this 314 00:15:21,360 --> 00:15:26,160 Speaker 5: cycle to come. But you know, I wouldn't want to 315 00:15:26,160 --> 00:15:28,560 Speaker 5: overinterpret some of the data that we've had in the 316 00:15:28,560 --> 00:15:31,600 Speaker 5: summer and extrapolate it out blindly as saying that is 317 00:15:31,640 --> 00:15:35,200 Speaker 5: what's definitely going to happen again. If the inflation hit 318 00:15:35,240 --> 00:15:38,720 Speaker 5: from tariffs isn't too big, the economy is not going 319 00:15:38,760 --> 00:15:42,000 Speaker 5: to slow too much, and are very gentle easing in 320 00:15:42,120 --> 00:15:45,120 Speaker 5: US growth doesn't justify much dollar weakness at all. 321 00:15:45,160 --> 00:15:46,840 Speaker 3: So let's build on that. Right now, we're looking at 322 00:15:46,920 --> 00:15:49,640 Speaker 3: one sixteen eighty eight on the euro dollar cross. You're 323 00:15:49,680 --> 00:15:51,680 Speaker 3: saying it could go into the mid one twenties if 324 00:15:51,680 --> 00:15:53,600 Speaker 3: you do see some sort of significant weakening in the 325 00:15:53,680 --> 00:15:55,440 Speaker 3: US economy heading. 326 00:15:55,120 --> 00:15:55,960 Speaker 2: Into the fall. 327 00:15:56,200 --> 00:15:58,240 Speaker 3: What are the key data prints that you're looking at. 328 00:15:58,360 --> 00:16:01,360 Speaker 3: What would constitute that type of weekakness that would really 329 00:16:01,400 --> 00:16:03,720 Speaker 3: cause that type of depreciation in the dollar. 330 00:16:05,640 --> 00:16:07,560 Speaker 5: So we would set ourselves on that route if we 331 00:16:07,560 --> 00:16:10,680 Speaker 5: saw weakness that suggested not recession or anything, but that 332 00:16:10,680 --> 00:16:13,280 Speaker 5: the Fed's got significant rate cuts to make that we're 333 00:16:13,320 --> 00:16:15,480 Speaker 5: going to get yields down, that the things that have 334 00:16:15,640 --> 00:16:19,520 Speaker 5: made people pour them poor their money into US assets 335 00:16:20,120 --> 00:16:23,200 Speaker 5: need to be questioned, at least temporarily. So if we saw, 336 00:16:23,560 --> 00:16:25,360 Speaker 5: you know, if we saw a player le number in 337 00:16:25,400 --> 00:16:27,440 Speaker 5: the United States that was I don't know, say only 338 00:16:27,480 --> 00:16:29,840 Speaker 5: up one hundred thousand or weaker than that at the 339 00:16:29,840 --> 00:16:32,640 Speaker 5: beginning of September, I think that would concern people. If 340 00:16:32,680 --> 00:16:36,160 Speaker 5: you saw weakness in the housing market beyond a small correction, 341 00:16:36,280 --> 00:16:40,800 Speaker 5: if you saw softness in real personal spending as consumers 342 00:16:40,840 --> 00:16:43,480 Speaker 5: scale back in the face of higher prices, then I 343 00:16:43,480 --> 00:16:46,720 Speaker 5: think you'd be sort of forming that that kind of backdrop. 344 00:16:47,120 --> 00:16:50,400 Speaker 5: The advantage for the consumer who's critical in this is 345 00:16:50,440 --> 00:16:53,440 Speaker 5: if the inflation data continues to be held back by 346 00:16:54,040 --> 00:16:58,360 Speaker 5: lower energy prices. So if low energy prices offset tariff increases, 347 00:16:58,680 --> 00:17:01,720 Speaker 5: or if tariff increases aren't fed through to US consumers, 348 00:17:01,960 --> 00:17:05,520 Speaker 5: it all softens the economic blow and the downside of 349 00:17:05,560 --> 00:17:06,480 Speaker 5: the dollar is reduced. 350 00:17:06,840 --> 00:17:09,000 Speaker 2: We're all still wrestling with this, and I imagine many 351 00:17:09,000 --> 00:17:11,280 Speaker 2: on the committee that Federal Reserve are wrestling with the 352 00:17:11,400 --> 00:17:13,920 Speaker 2: very same thing, which begs the question going into Jackson Hole, 353 00:17:14,160 --> 00:17:16,920 Speaker 2: just how much can we expect NEIL data. Renmack, don't 354 00:17:16,960 --> 00:17:20,119 Speaker 2: expect a strong signal at Jackson Hole. Jonathan Pinglely ubs 355 00:17:20,160 --> 00:17:22,159 Speaker 2: if you're looking for ray cuts, he says, quote, I 356 00:17:22,200 --> 00:17:23,639 Speaker 2: don't think he's going to lock it in. 357 00:17:24,000 --> 00:17:24,160 Speaker 4: Kit. 358 00:17:24,240 --> 00:17:25,639 Speaker 2: Do you think he's going to lock it in in 359 00:17:25,680 --> 00:17:26,400 Speaker 2: a few days time. 360 00:17:26,640 --> 00:17:29,919 Speaker 5: I'd be surprised if he locks it in. But the topic, 361 00:17:30,080 --> 00:17:33,439 Speaker 5: the topic of the symposium is the labor market. The 362 00:17:33,520 --> 00:17:35,359 Speaker 5: labor market is going to be the thing that tells 363 00:17:35,440 --> 00:17:37,840 Speaker 5: us what's happened to the economy. So we should hear 364 00:17:37,880 --> 00:17:41,160 Speaker 5: a really interesting set of discussions about how they feel 365 00:17:41,200 --> 00:17:43,800 Speaker 5: about the labor market and how they feel about labor 366 00:17:43,840 --> 00:17:48,040 Speaker 5: market tightness relative to softness and employment gains. And if 367 00:17:48,119 --> 00:17:51,560 Speaker 5: I get any hints from that, will I will jump 368 00:17:51,600 --> 00:17:54,119 Speaker 5: on them to provide me with a clue to what 369 00:17:54,160 --> 00:17:59,040 Speaker 5: they'll do. But you know, I think that again, if 370 00:17:59,040 --> 00:18:00,960 Speaker 5: the job's numbers are week at the beginning of September 371 00:18:00,960 --> 00:18:03,720 Speaker 5: after what we saw last month, frankly, the game's up. 372 00:18:03,840 --> 00:18:06,200 Speaker 5: So that'll tell us what happens, But it'll be it'll 373 00:18:06,240 --> 00:18:08,720 Speaker 5: be a very interesting supposion on the labor market. 374 00:18:08,760 --> 00:18:10,879 Speaker 2: Okay, just before you go, what's more likely over the 375 00:18:10,960 --> 00:18:13,199 Speaker 2: next twelve months or so that we get three four 376 00:18:13,359 --> 00:18:15,520 Speaker 2: five rate cuts from the Federal serve or Arsenal win 377 00:18:15,560 --> 00:18:16,240 Speaker 2: the league. 378 00:18:18,720 --> 00:18:22,080 Speaker 5: Three four five. I think Arsenal I've got a decent 379 00:18:22,160 --> 00:18:25,560 Speaker 5: chance of winning the league. Probably, it's probably I'm slightly 380 00:18:25,640 --> 00:18:28,119 Speaker 5: more optimistic about that than about anything in the US economy, 381 00:18:28,119 --> 00:18:29,119 Speaker 5: which is all up for graps. 382 00:18:29,160 --> 00:18:32,000 Speaker 2: Okay, thank you, sir, kit Chu's there a sebchen Okay, 383 00:18:32,040 --> 00:18:34,359 Speaker 2: thank you very much. On the FX market and a 384 00:18:34,400 --> 00:18:46,800 Speaker 2: little bit of Premier League football, pre amisserer of JP 385 00:18:46,880 --> 00:18:49,880 Speaker 2: Morgan writing the dual mandate is intention but we think 386 00:18:49,880 --> 00:18:52,960 Speaker 2: a September twenty five basis point rate cut is likely 387 00:18:53,240 --> 00:18:55,560 Speaker 2: and a sign or for more cuts to come as 388 00:18:55,560 --> 00:18:58,480 Speaker 2: the feder removes the level of restriction in monetary policy. 389 00:18:58,560 --> 00:19:01,800 Speaker 2: For more pre adjoints round a table, pray, good morning, 390 00:19:01,880 --> 00:19:03,879 Speaker 2: it's going to see RBC has talked about this. A 391 00:19:03,960 --> 00:19:05,880 Speaker 2: lot of people are focused on. It is the long 392 00:19:06,040 --> 00:19:10,120 Speaker 2: end becoming unanchored from the front end, not just domestically 393 00:19:10,359 --> 00:19:12,240 Speaker 2: but worldwide when you look at the bond market at 394 00:19:12,240 --> 00:19:12,639 Speaker 2: the moment. 395 00:19:13,040 --> 00:19:14,920 Speaker 6: So I'm glad you bring up the global side because 396 00:19:14,960 --> 00:19:18,720 Speaker 6: I think that's absolutely important. Global term premiums are correlated 397 00:19:19,040 --> 00:19:22,840 Speaker 6: the fact that we have fiscal expansion globally, the fact 398 00:19:22,840 --> 00:19:25,040 Speaker 6: that there isn't that much demand for long duration is 399 00:19:25,080 --> 00:19:29,440 Speaker 6: the reason why UK, German, Japanese long end yields arising, 400 00:19:29,480 --> 00:19:33,040 Speaker 6: and that's raising US rates as well. But I mean, 401 00:19:33,080 --> 00:19:37,600 Speaker 6: talking about the long end getting unanchored Sell America or 402 00:19:37,640 --> 00:19:40,439 Speaker 6: the deficit, that's like very April. I mean, I know 403 00:19:40,440 --> 00:19:42,240 Speaker 6: it was only a few months ago, only a few 404 00:19:42,280 --> 00:19:45,119 Speaker 6: months ago, but you look at the tariff revenues they 405 00:19:45,119 --> 00:19:48,760 Speaker 6: are coming in, they're actually offsetting the trip will be 406 00:19:48,840 --> 00:19:50,879 Speaker 6: the one big beautiful bill. I think it's going to 407 00:19:50,920 --> 00:19:53,440 Speaker 6: largely offset it. You look at the Cell America trade, 408 00:19:53,480 --> 00:19:56,320 Speaker 6: we're not seeing evidence that foreign investors have stayed away. 409 00:19:56,440 --> 00:19:58,800 Speaker 6: Now there is a longer term question how much should 410 00:19:58,800 --> 00:20:01,280 Speaker 6: treasury And I love your question to Secretary Vesson, how 411 00:20:01,359 --> 00:20:03,480 Speaker 6: much should you issue in the long end? I think 412 00:20:03,720 --> 00:20:06,480 Speaker 6: all Treasury departments have to think about that and maybe 413 00:20:06,480 --> 00:20:08,439 Speaker 6: not issue as much in the long end. And that 414 00:20:08,520 --> 00:20:11,640 Speaker 6: might be happening issue where the demand is the demand, 415 00:20:11,800 --> 00:20:14,160 Speaker 6: and you see it in the credit market, the mortgage market, 416 00:20:14,200 --> 00:20:16,280 Speaker 6: the treasury market demands on the bellue of the curve 417 00:20:16,359 --> 00:20:19,040 Speaker 6: five to ten, and that's where they can issue. So yes, 418 00:20:19,080 --> 00:20:21,199 Speaker 6: it's a little unanchored. You can trade the curve on 419 00:20:21,280 --> 00:20:23,600 Speaker 6: that front. But I don't think we're looking at a 420 00:20:23,640 --> 00:20:26,480 Speaker 6: scenario that bears steepener. Which is a nightmare scenario for 421 00:20:27,080 --> 00:20:29,880 Speaker 6: risk assets as well, is when all rates rise led 422 00:20:29,920 --> 00:20:31,680 Speaker 6: by the long end. We're not seeing that. I think 423 00:20:31,720 --> 00:20:33,360 Speaker 6: the curve is steepening for different reasons. 424 00:20:33,359 --> 00:20:35,400 Speaker 3: Now, are we going to see the opposite? You said 425 00:20:35,440 --> 00:20:38,280 Speaker 3: that Cell America is so April, Okay, are we actually 426 00:20:38,359 --> 00:20:41,080 Speaker 3: outright into buy America again? As we see the dollar 427 00:20:41,160 --> 00:20:43,399 Speaker 3: firm up in a couple of different pockets, and the 428 00:20:43,440 --> 00:20:46,560 Speaker 3: long end, Yes, yields have been rising, but not necessarily 429 00:20:46,960 --> 00:20:48,600 Speaker 3: unmoored in the way a lot of people were worried 430 00:20:48,640 --> 00:20:49,600 Speaker 3: about exactly. 431 00:20:49,680 --> 00:20:52,600 Speaker 6: So, I do think that US exceptionalism, Remember we talked 432 00:20:52,600 --> 00:20:54,560 Speaker 6: about it just a few months ago. Is that over 433 00:20:55,080 --> 00:20:57,520 Speaker 6: look at the economic data. We're pricing it. Look at 434 00:20:57,520 --> 00:21:00,359 Speaker 6: financial markets, you know, I know the financial market is 435 00:21:00,400 --> 00:21:03,200 Speaker 6: not the economy, but it is pricing in. I think 436 00:21:03,240 --> 00:21:06,160 Speaker 6: markets across the board are pricing in a soft landing 437 00:21:06,600 --> 00:21:09,560 Speaker 6: and what government Waller called good news rate cuts that 438 00:21:09,640 --> 00:21:12,400 Speaker 6: maybe the Fed can reduce accommodation, those rates can fall 439 00:21:12,480 --> 00:21:15,240 Speaker 6: a little bit, allowing the broadening out of the recovery. 440 00:21:15,280 --> 00:21:19,080 Speaker 6: I mean, we have the structural AI tech capex in there, 441 00:21:19,119 --> 00:21:21,760 Speaker 6: but maybe this can broaden up. That's what the market's pricing. 442 00:21:21,800 --> 00:21:23,200 Speaker 6: And so to your question, is the rest of the 443 00:21:23,240 --> 00:21:26,480 Speaker 6: world buying US assets? They are, They're buying credit, they're 444 00:21:26,520 --> 00:21:29,960 Speaker 6: buying equities, they're buying treasuries, fixed income because they are 445 00:21:30,000 --> 00:21:32,520 Speaker 6: seeing that the US is still growing the best. 446 00:21:32,600 --> 00:21:34,480 Speaker 3: Are you going a long duration? Is this a time 447 00:21:34,520 --> 00:21:36,879 Speaker 3: to buy even at a time or potentially there is 448 00:21:36,880 --> 00:21:38,520 Speaker 3: inflationary pressure coming down the pike. 449 00:21:38,880 --> 00:21:41,520 Speaker 6: So we are long duration. We've looked for any opportunity. 450 00:21:41,560 --> 00:21:43,560 Speaker 6: If we've been in this three seventy five four and 451 00:21:43,600 --> 00:21:46,399 Speaker 6: a half fair value in our mind, that's the soft 452 00:21:46,480 --> 00:21:50,080 Speaker 6: landing fair value. There's an asymmetry though, if things slow down. 453 00:21:50,320 --> 00:21:52,800 Speaker 6: We have a lot of policy shocks that have hit 454 00:21:52,840 --> 00:21:56,280 Speaker 6: the economy. If things slow down, we can absolutely rally more. 455 00:21:56,680 --> 00:21:58,760 Speaker 6: But if we stay in the soft landing. By rally 456 00:21:58,800 --> 00:22:01,199 Speaker 6: more I mean lower rates. But if we see in 457 00:22:01,200 --> 00:22:03,960 Speaker 6: the soft landing four p thirty on tens is cheap, 458 00:22:04,040 --> 00:22:06,200 Speaker 6: you're near the upper end of the range. So absolutely 459 00:22:06,240 --> 00:22:08,480 Speaker 6: we've been buying some duration. Are we max long? 460 00:22:08,640 --> 00:22:08,680 Speaker 4: Know? 461 00:22:09,760 --> 00:22:12,520 Speaker 6: You know there's to your point the treasure amount. Interest 462 00:22:12,560 --> 00:22:16,040 Speaker 6: rates are driven by this fear of inflation, fear of growth. 463 00:22:16,040 --> 00:22:19,400 Speaker 6: There are shades of stagflation in the data right now. 464 00:22:19,640 --> 00:22:21,639 Speaker 6: I don't think Chepool is going to commit to a 465 00:22:21,720 --> 00:22:23,520 Speaker 6: rate cut. I think it's going to just signal the 466 00:22:23,560 --> 00:22:26,720 Speaker 6: easing bias. So we might hang around here. But what 467 00:22:26,840 --> 00:22:29,399 Speaker 6: happens if this I think the labor market's on edge, 468 00:22:29,640 --> 00:22:32,480 Speaker 6: and if things actually slow down, as companies say, we 469 00:22:32,520 --> 00:22:34,520 Speaker 6: can't absorb all of this in margins, We're going to 470 00:22:34,560 --> 00:22:36,720 Speaker 6: have to cut costs. That's a fear. That's what keeps 471 00:22:36,800 --> 00:22:39,040 Speaker 6: me up at night, and at that point, duration's your 472 00:22:39,040 --> 00:22:39,560 Speaker 6: only friend. 473 00:22:39,720 --> 00:22:41,960 Speaker 2: Do you think it's for disappointment on Friday? 474 00:22:42,760 --> 00:22:45,399 Speaker 6: I think we get a lot on Friday, so becaus 475 00:22:45,560 --> 00:22:48,359 Speaker 6: I always think of the economic outlook in the reaction function. 476 00:22:49,000 --> 00:22:52,440 Speaker 6: If you're looking for chap Owel to signal imminent rate 477 00:22:52,520 --> 00:22:55,280 Speaker 6: cuts or a dubbish reaction function, I don't think we're 478 00:22:55,280 --> 00:22:57,600 Speaker 6: going to get that. I think it's going to depend 479 00:22:57,640 --> 00:22:59,760 Speaker 6: on So where the disappointment might come in is we 480 00:23:00,080 --> 00:23:02,400 Speaker 6: didn't commit to September. We still left the door open 481 00:23:02,480 --> 00:23:06,560 Speaker 6: because we have another payroll report revisions. Now, I think 482 00:23:06,600 --> 00:23:09,879 Speaker 6: the market might make pay more attention to revisions along 483 00:23:09,880 --> 00:23:12,600 Speaker 6: with that number. Something that's frustrated me for years that 484 00:23:12,840 --> 00:23:15,119 Speaker 6: you get both sets of data and the market always 485 00:23:15,119 --> 00:23:17,480 Speaker 6: looks at the headline. Maybe we will look at both. 486 00:23:17,760 --> 00:23:20,840 Speaker 6: You have another CPI report, So I think where the 487 00:23:20,880 --> 00:23:23,600 Speaker 6: disappointment will come in is no commitment. But I'm going 488 00:23:23,680 --> 00:23:26,240 Speaker 6: to be watching that framework review. That's going to sound 489 00:23:26,280 --> 00:23:28,320 Speaker 6: maybe a little bit hawkish. They're going to talk about 490 00:23:28,520 --> 00:23:32,240 Speaker 6: symmetry to the unemployment rates, symmetry to inflation. That might 491 00:23:32,280 --> 00:23:35,560 Speaker 6: sound a little hawkish, but I'm watching the economic outlook. 492 00:23:35,640 --> 00:23:39,679 Speaker 6: How nervous is he that consumer spending has slown? That 493 00:23:40,119 --> 00:23:45,400 Speaker 6: PDFP the private domestic finance sales, That number is slowing 494 00:23:45,680 --> 00:23:48,360 Speaker 6: without the rise that much rise in inflation. So why 495 00:23:48,400 --> 00:23:51,080 Speaker 6: is the consumer pulling back if companies are not passing 496 00:23:51,080 --> 00:23:54,200 Speaker 6: on costs? This there's some under maybe some underlying sloaning. 497 00:23:53,920 --> 00:23:58,600 Speaker 2: Here, premiser of JP Morgan. This is the Bloomberg Seventans podcast, 498 00:23:58,720 --> 00:24:02,639 Speaker 2: bringing you the best in markets, economics, and geopolitics. You 499 00:24:02,640 --> 00:24:05,439 Speaker 2: can watch the show live on Bloomberg TV weekday mornings 500 00:24:05,440 --> 00:24:08,399 Speaker 2: from six am to nine am Eastern. Subscribe to the 501 00:24:08,400 --> 00:24:11,919 Speaker 2: podcast on Apple, Spotify or anywhere else you listen, and 502 00:24:11,960 --> 00:24:14,840 Speaker 2: as always on the Bloomberg Terminal and the Bloomberg Business 503 00:24:14,840 --> 00:24:15,040 Speaker 2: opp