Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern
Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business app.
Speaker 1: Listen on demand wherever you get your podcasts, or watch
Speaker 1: us live on YouTube.
Speaker 2: Right now, we want to turn our attention and we've
Speaker 2: decided we had to go to Japan. Shushrukiyamada drives the
Speaker 2: yen for Bank of America with wonderful academics out of
Speaker 2: the Massachusetts Institute of Technology and Stanford and joins us
Speaker 2: right now. She's Oki, are you surprised that we don't
Speaker 2: have a stronger yen moving from one sixty two stronger
Speaker 2: to one fifty eight and your key breakpoint of one
Speaker 2: fifty five?
Speaker 3: Well, thanks for inviting me here. Well, I think the
Speaker 3: authorities are determined to break one hundred fifty five this
Speaker 3: time around. I think right now they're probably waiting for
Speaker 3: events such as the Enerfy prints tomorrow. But this time around,
Speaker 3: I think the cost of failure is too high because
Speaker 3: they couldn't break hundred fifty five. If they can't break
Speaker 3: this time, I think the market will basically assume the
Speaker 3: authorities have run out of options to defend the end.
Speaker 2: The romance of this is George Soros and a guy
Speaker 2: named Druck and Miller a few years ago, where basically
Speaker 2: the market vigilanties tell the authorities what's going to happen.
Speaker 2: Is that an ancient idea or is the market telling
Speaker 2: the authorities in Japan and for that matter, the Secretary
Speaker 2: of Treasury what to do?
Speaker 3: Yeah, well, I think the Taka administration has potentially underestimated,
Speaker 3: you know, the market force, you know, up until now.
Speaker 3: But I do think, you know, the coordination with the
Speaker 3: US basically means Japan cannot, you know, indefinitely rely on
Speaker 3: intervention because you know, you ask someone to join your project,
Speaker 3: you have to have a goal and that goal cannot
Speaker 3: be just to buy time for yourself.
Speaker 1: Right.
Speaker 3: So I think this time around, this coordination appears to
Speaker 3: have been a well prepared in advance. I think that
Speaker 3: implies the Japanese government is this time prepared to respond
Speaker 3: with a comprehensive package, including faster bogy hikes.
Speaker 4: Sessh K. How important is it that the US worked
Speaker 4: in coordination with the Bank of Japan in this particular.
Speaker 3: Case, Well, I think it is quite important from two perspectives.
Speaker 3: One is that unilateral intervention obviously have a limit, which
Speaker 3: is the balance of FCS reserves Japan hold. But you know,
Speaker 3: as the US joins, ultimately the US can sell the
Speaker 3: U S dollar you know, it issues. So I think
Speaker 3: it removes a hard limit on the intervention. And secondly,
Speaker 3: I think, uh, you know, US coordination is key because
Speaker 3: without coordination on a broader community, I don't think that
Speaker 3: Japan has you know, Japan can determine to uh you know,
Speaker 3: uh respond with a comprehensive package because you know, Krent
Speaker 3: administration really you know, uh historically believes in easy monetary
Speaker 3: policy and uh uh you know, lose physical policy.
Speaker 4: So we understand that the US Fed sold euros to
Speaker 4: buy then as opposed to dollars, does that suggest maybe
Speaker 4: their commitment isn't as great as possibly could be.
Speaker 3: Yeah, I mean I think there are two aspects. I mean,
Speaker 3: first of all, they didn't sell US dollar the currency,
Speaker 3: so you know, obviously that could imply somewhat soft commitment
Speaker 3: at the moment. But I think there's an alternative aspect
Speaker 3: that is, because they sold europe there is a possibility
Speaker 3: that European policy makers may have been given an artist,
Speaker 3: So you know, this coordination could be you know, on
Speaker 3: a broader scale, let's say in the G seven community.
Speaker 3: We have to see, but I think the commitment could
Speaker 3: be that strong.
Speaker 2: I want to get this question because I think culturally
Speaker 2: it's just so so important our perception sisqu is the
Speaker 2: large multinationals drive the bus this time around, in this
Speaker 2: modern age, the domestic Japanese, the small business, the people
Speaker 2: politically and even financially. Do they have more power now
Speaker 2: where they're harmed by week yain, they're harmed by higher yields.
Speaker 2: Do they have more power than twenty or forty years ago.
Speaker 3: Well that's a tough question, but I have to say
Speaker 3: that this time it's not all bad, you know, when
Speaker 3: it comes to what's happening in Japan. I mean, here's
Speaker 3: the fact about Japan. Right since last spring, so that's
Speaker 3: when you know, the yen started to weaken again, Japanese
Speaker 3: equity has been the best performer in the market, right,
Speaker 3: and we've seen the biggest balance of payment surplus in
Speaker 3: Japan among the developed nations. Right, So I think economically
Speaker 3: or in the equity market, things are great. Japanese bank
Speaker 3: stocks have performed US bank stocks, so I think, you know,
Speaker 3: we're not in a recession, we're not in a dead crisis.
Speaker 3: The weekend hurts, but I think so. I think from
Speaker 3: the public, maybe the pressure is not as strong as
Speaker 3: you know people think outside of Japan. And obviously, you know,
Speaker 3: the question is why the end has been so weak
Speaker 3: despite you know, good things like you know, strong equity
Speaker 3: and you know policy risk is one. But you know,
Speaker 3: I think there is an alternative hypothesis, which is that
Speaker 3: the equity has been too strong, meaning you know, outperformance
Speaker 3: of Japanese equities has basically led to access end selling
Speaker 3: from foreign investors.
Speaker 2: Shizuki, Thank you so much, Shazuki Yamada with the Bank
Speaker 2: of America ahead of Japan FX rates. Stay with us
Speaker 2: more from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch US live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on aval,
Speaker 1: Karpe and Android Auto with the Bloomberg Business app, or
Speaker 1: watch US live on YouTube.
Speaker 2: Joining us now, an energy fellow at the University of
Speaker 2: Houston barely describes editor's just definitive global ability, folks. They
Speaker 2: have Paul sank with us, and that edit hers is
Speaker 2: what it's about. Down at the bottom of your note.
Speaker 2: I've been emphasizing this. The refinery world is turned upside down.
Speaker 2: Explain to mere mortals why the refinery world is in
Speaker 2: real issue, like diesel at one hundred and sixty dollars
Speaker 2: a barrel equivalent, and how we're going to extricate ourselves
Speaker 2: from that mess.
Speaker 5: I think I saw one hundred and seventy five. So
Speaker 5: the reason is there's a shortage of refined products across
Speaker 5: the globe, and here in the US we've been exporting
Speaker 5: refined products now for about ten years. We bring in more,
Speaker 5: we export what we don't use, and the US we've
Speaker 5: been doing wonderfully well to reduce our reliance upon refined products.
Speaker 5: We're seeing growth, not necessarily altogether in evs, but the hybrids,
Speaker 5: which get double the mileage of a normal automobile, and
Speaker 5: so the refineries have the ability the capacity to send
Speaker 5: product overseas. You know, as the war kicked offf Xon
Speaker 5: Mobile chartered a couple of tankers to start sending gasoline
Speaker 5: and diesel to the Asian markets. It is a great
Speaker 5: time to be a refiner, you know, once every twenty
Speaker 5: five years. It's a good time to be a refiner.
Speaker 4: I'm actually surprised, or maybe I put it this way.
Speaker 4: Should I be surprised that oil prices BNT are not
Speaker 4: higher than the army? We've got this war in the
Speaker 4: Middle East, we've got rush of sanctions, plus they're in
Speaker 4: a war. Why isn't oil rent like one hundred and
Speaker 4: fifty bucks?
Speaker 5: I don't understand, you know, I look at WTI because
Speaker 5: of course that's what we have to buy, and Brent
Speaker 5: should be whatever the transport cost is from from the
Speaker 5: Gulf of Mexico up to Brent.
Speaker 2: Brent.
Speaker 5: The amount of Brent crew that's produced today is less
Speaker 5: than a thousand barrels a day. And so the Brent
Speaker 5: benchmark is a fiction. It's a fiction. It's a fiction.
Speaker 5: It's in fact Brent includes a portion WTI includes a
Speaker 5: portion of riata, whatever the price is. Why aren't we
Speaker 5: there at one hundred and six million dollar one hundred
Speaker 5: and six million barrels a day pre war, with ten
Speaker 5: millions supposedly off the market, we should have seen a
Speaker 5: price of oil hit about two hundred dollars a barrel.
Speaker 5: Why we haven't, Well, China has cut its imports now
Speaker 5: by five million barrels a day. We've got increased production,
Speaker 5: or rather increased oil coming to market because the Venezuelan
Speaker 5: sanctions have been released. UAE has kicked up production significantly.
Speaker 5: We've been running down the spr at about two and
Speaker 5: a half million barrels a day. So the net effect
Speaker 5: that is about two million barrels a day off market.
Speaker 5: So that leads to a fifty percent price increase off
Speaker 5: the of the pre war price of fifty six dollars
Speaker 5: a barrel, which is what it was in January before
Speaker 5: the market priced in the war.
Speaker 4: As an energy person, do you just assume that the
Speaker 4: Middle East source of oil is going to be compromised
Speaker 4: for as long as we can see because the straight
Speaker 4: up Horn News arguably will never be open open.
Speaker 2: It's hard to say.
Speaker 5: I mean, you know, the Middle East has to sell
Speaker 5: that oil to somebody in order to make a living.
Speaker 5: In nineteen fifty six, with the Suez crisis, Eisenhower was
Speaker 5: approached by the UK, by France, by Israel to join
Speaker 5: in in retaking the Suez Canal because it was the
Speaker 5: bottleneck for oil going to Europe. And Eisenhower said, why
Speaker 5: you can just send it around. He didn't want to
Speaker 5: get involved with that. He knew that no matter who
Speaker 5: owned the oil in the Middle East, the only way
Speaker 5: it had value was for it to be sold. And
Speaker 5: eventually they'll all come to some sort of agreement or
Speaker 5: there will be demand destruction as they fight it out
Speaker 5: amongst themselves.
Speaker 2: And we got to run. But I gotta get this in.
Speaker 2: When a professor comes in of his acclaim editors a
Speaker 2: claim at u age and he writes a separate paragraph, Hey,
Speaker 2: Tom's stupid Blackstone enervis ask me so private equity Blackstone
Speaker 2: wants to take AI and bring it into the oil business,
Speaker 2: and your apoplectic about it.
Speaker 5: Discuss So Intervius is compiling data on every user or
Speaker 5: every royalty owner and actually every oil producer. They have
Speaker 5: data down to the graneur level on wells, on property holdings.
Speaker 5: This is information that for example, exonmobile eog Chevron. Ordinarily
Speaker 5: they fight hammertong, tooth and nail not to let that out.
Speaker 5: But now Blackstone is putting itself in a position of
Speaker 5: grabbing all of this data across private companies. And of course,
Speaker 5: if you're a royalty owner, they know your bank account,
Speaker 5: they know your social security number. They know what your
Speaker 5: interest is in this well over here, the one in
Speaker 5: West Texas, the one in Colorado, the one in West Virginia.
Speaker 2: They have a plectic on landman.
Speaker 5: Well just imagine, just imagine Bloomberg having all of the
Speaker 5: private data here and then now they've gone into a
Speaker 5: banking mode. They will make you a payday loan on
Speaker 5: your royalties for the next three or four months. And
Speaker 5: you know, in Houston some of the wealthiest oil guys
Speaker 5: are actually the estate attorneys who've been making a market
Speaker 5: in the little fragments so that they taking.
Speaker 2: Out of this. For people scared of a they shouldn't.
Speaker 5: Be terrified, because what this system is doing is it's
Speaker 5: overseeing all of the data. It's filling and plugging numbers.
Speaker 5: You wind up as a user getting money taken out
Speaker 5: of your account. Interest numbers change, there can be different
Speaker 5: owner numbers, and plus they use open servers across the globe,
Speaker 5: and so any bad actor can just go right into it.
Speaker 2: We got to go, but editors, you got to come
Speaker 2: back and continue this discussion because this touches folks on
Speaker 2: the fears that so many people here.
Speaker 5: They're acting like a bank and they're not regulated like
Speaker 5: a bank.
Speaker 2: That's the point. The regulation's not there, Professor Hurst, thank
Speaker 2: you so much. Always with the University of Houston. Stay
Speaker 2: with us. More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
Speaker 1: Apple Karplay and Android Otto with the Bloomberg Business app,
Speaker 1: or watch us Live on YouTube.
Speaker 2: And we made a commercial. Steve len Zone made a
Speaker 2: special commercial about the Standard Charter Bank. Yeah okay, and
Speaker 2: Steve Englander's brilliant foreign exchange. Suki Cooper has a privilege,
Speaker 2: is sitting with him global added commodities at a Standard
Speaker 2: Charter Bank with their whole Pacific room. How's a Pacific
Speaker 2: rim doing with the war in the Eastern Mediterranean is
Speaker 2: a general statement.
Speaker 6: I think there's so much market focus there, but we
Speaker 6: have to remember that the geopolitics, while it's been set
Speaker 6: in the tempo for much of the commodities, some of
Speaker 6: the base that's been set up by some of the
Speaker 6: structural drivers. We've seen this morning in terms of copper
Speaker 6: surprise still being one of the potentially one of the
Speaker 6: most underappreciated risks there. But for the gold market, we
Speaker 6: still see that structural demand is still wanting to lean
Speaker 6: in and an allocate once there's a little bit more
Speaker 6: clarity on uncertainty there.
Speaker 4: So we saw gold at five thousand dollars an ounce.
Speaker 4: You know, experts are tell me, boy, that's that's really
Speaker 4: really toppy here. But then we pull back the four thousand,
Speaker 4: a big move down. What's the fundamental.
Speaker 2: Call on gold today?
Speaker 4: Is it feel attractive or not?
Speaker 6: I'd say if we're looking on a longer term basis,
Speaker 6: it might look relatively expensive, but if we're looking at
Speaker 6: the macro risks right now, then it still looks underappreciated.
Speaker 6: So the base, we think has formed quite well, especially
Speaker 6: as we're in the middle of a seasonal week period
Speaker 6: for consumption. And on top of that, we have a
Speaker 6: lot of macro headwinds that have been priced in, especially
Speaker 6: with the market swinging so sharply to expecting great hikes
Speaker 6: and in the US. So we think that prices have
Speaker 6: held up very well at these sort of levels. And
Speaker 6: now I think if we're starting to see an unwinding
Speaker 6: of some of that positioning that was very in that
Speaker 6: hawkish stance, we'll see gold starting to gain more traction.
Speaker 4: Silver I see down fourteen percent this year. I mean,
Speaker 4: I don't know anything about the commodity space, but I
Speaker 4: always feel like gold and silver kind of trade in
Speaker 4: tender but not really. Here's what's the feeling on gold here?
Speaker 4: I mean, I'm sorry, silvers par.
Speaker 6: If gold is our barometer for uncertainty, silver is our
Speaker 6: kicker on uncertainty plus the outlook for the industrial picture. Okay,
Speaker 6: and the silt, on the one hand, did incredibly well
Speaker 6: when we saw so much retail demands at the start
Speaker 6: of the year, but now we're starting to see some
Speaker 6: of these risks lurking in the background, rind substitution risk,
Speaker 6: especially for the solar industry. So on the one hand,
Speaker 6: you've got that AI demand boost that's growing, but the
Speaker 6: substitution risk on the solar side could be quite sharp.
Speaker 2: Okay, let's let's go let me. I happen to be
Speaker 2: in a small store on fifty seven Street, Tiffany the
Speaker 2: other day and the elevator randomly got me off with
Speaker 2: the silver floor. It was just packed packed. Is silver
Speaker 2: a big part of jewelry or is it really driven
Speaker 2: by solar panels?
Speaker 6: It's a significant part, but it's not the main part
Speaker 6: of jewelry consumption. It's at the moment we're seeing much more.
Speaker 6: Even though we're seeing the solar demand starting to shrink,
Speaker 6: it's still much larger. The industrial silver industrial usages are
Speaker 6: much larger. It's more than half of the consumption that is.
Speaker 2: There like a shortage of silver like mines versus gold.
Speaker 6: This is a really fascinating development because if we go
Speaker 6: back five years, I would have been satire saying silver's
Speaker 6: very well supply. There's plenty of above grind stock. But
Speaker 6: we've had five successive years of undersupplied market, so that
Speaker 6: readily available stock is no longer there, and that's one
Speaker 6: of the reasons we're seeing these shop moves.
Speaker 2: I'm ignorant on this. I feel like, right now I'm
Speaker 2: going to go read everything Sukie's written, plus three books
Speaker 2: on silver. You know, I just I'm just not up
Speaker 2: to speed. Why am I so dumb on silver? Why
Speaker 2: do we not look at silver like we look at
Speaker 2: gold or oil.
Speaker 6: Silver is fascinating in that it's used in so many
Speaker 6: different facets, like from water purification to wood preservation, and
Speaker 6: we don't realize how many parts of our lives. It
Speaker 6: touches and any got the ev demand aspect too, But
Speaker 6: I think it tends to be looked at more so
Speaker 6: as a precious metal rather than its industrial components.
Speaker 4: I mean, all I know tom about commodities is GLCL, GLCO.
Speaker 4: Go on the Bloomberg Terminal Global Commodity prices, and I
Speaker 4: click on the metals and it gives me the base metals.
Speaker 4: They're all up double digit this year. Fairest metals down.
Speaker 4: I don't know, it's iron ore and all that stuff.
Speaker 4: But then I got to precious metals, and the precious
Speaker 4: medals are down kind of fifteen percent across the board
Speaker 4: here really platinum palladium talking about about those, because what's
Speaker 4: driving this story there.
Speaker 6: The picture for the PGMs of platinum pladium has become
Speaker 6: much more micro in comparison to macro. So last year
Speaker 6: maybe you could have said that platinum was riding on
Speaker 6: the coattails of gold. But this year we've seen some
Speaker 6: of the supply concerns maybe take a back seat and
Speaker 6: much more focus on the demand side and whether we
Speaker 6: might see auto demand being scaled back, or whether there
Speaker 6: might be some challenges around the recycling side. But we
Speaker 6: still see that the platinum market's undersupplied for this year
Speaker 6: medium tilting into a surplus. But having said that, the
Speaker 6: investment demand has turned a lot weaker, there's still that
Speaker 6: structural story that is supportive of platinum.
Speaker 2: Two things are gonna get this said. So to summarize
Speaker 2: your long.
Speaker 6: Gold here, we still see upside risk from here. We
Speaker 6: have fosand six hundred and fifty as our people are average.
Speaker 2: Okay, this is a listener emails and it's part of
Speaker 2: the ask ratio. That's how it works. This is missus
Speaker 2: keane somewhere a number of streets up. Can you ask Suki?
Speaker 2: Is the ratio of the twenty nine thousand dollars also
Speaker 2: Peretti small bone cuff in yellow gold twenty nine thousand
Speaker 2: dollars versus two thousand, one hundred dollars for the same
Speaker 2: silver cuff. Is that a proper ratio to look at
Speaker 2: gold to silver for a mere mortal out there.
Speaker 6: The gold seal. The ratio is one that people like
Speaker 6: to look at over the longer term, and it tells
Speaker 6: us whether one is overvalued or undervalued. But there isn't
Speaker 6: a fundamental basis that drives what that long term average
Speaker 6: should be. So we're starting to see that ratio normalizing
Speaker 6: at the current levels, Tiffany, at the retail level, there's
Speaker 6: many many other dynamics that out of play, the manufacturing,
Speaker 6: the cast.
Speaker 4: Really why, I mean to me, when you look at
Speaker 4: diamonds and now you get the Lapo diamonds, that puts
Speaker 4: that in totally.
Speaker 2: See Sukie's like she's got to Charter. Look on, she's
Speaker 2: not layering this morning. Now what you do as your
Speaker 2: layer and you mix your gold in your silver. I
Speaker 2: learned this and you do that. I mean, thank you
Speaker 2: so much. I folks, my ignorance of silver is just stunning.
Speaker 2: I mean, I just have to read up about it.
Speaker 2: Is there like a silver council like a gold council.
Speaker 6: There's a silver institute.
Speaker 2: Lots of institute there is, so I should go to
Speaker 2: their website.
Speaker 6: Get Yes, there's lots of great days.
Speaker 2: Just don't be a stranger. I'm smarter, Suki Cooper, Thank
Speaker 2: you so much. Global had of commodities in silver. It's
Speaker 2: the standard Charter Bank. Stay with us. More from Bloomberg
Speaker 2: Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on Apple,
Speaker 1: Karpla and Android Otto with the Bloomberg Business Up, or
Speaker 1: watch us live on YouTube.
Speaker 2: At New York Life. She's at sweet Greens three days
Speaker 2: a week. Julia and herman joins us, do you go
Speaker 2: to sweepeas?
Speaker 7: Do you have to agree with the prices?
Speaker 2: Did you throw that a New York Life fam Is
Speaker 2: that what we're doing?
Speaker 5: That's what we will.
Speaker 2: You have a brilliant note. What do you expect out
Speaker 2: of notre day? It's like wicked conventional and I really
Speaker 2: respect that. Right now, what do you learn from a
Speaker 2: treasury curve? The vanilla difference between twos and tens? Or
Speaker 2: dare I say in a worst kind of way three
Speaker 2: months and thirty years?
Speaker 7: Well, really, what we've learned from the curve in the
Speaker 7: last few weeks is that investors are struggling with not
Speaker 7: if the Fed's going to contain inflation, but what their
Speaker 7: glide path forward is from here. And we can learn
Speaker 7: that because we can dissect what's happening in the tenure.
Speaker 7: In the thirty year, we know that inflation.
Speaker 2: Conditions are still spread tens thirties.
Speaker 7: Well, we're looking at spreads across the entirety of the curve.
Speaker 7: But if we just take the individual tenors themselves, we
Speaker 7: can break this down into inflation expectations versus real yild.
Speaker 7: It's real yield that has driven the rate move in
Speaker 7: the last few weeks. And this is almost all attributable
Speaker 7: to term premium. And we know that fiscal questions have
Speaker 7: been the huge contributing driver to that term premium increased lately.
Speaker 7: But what happened, of course, last week is now we
Speaker 7: have these increased contributions of questions of how the Fed
Speaker 7: is planning to contain inflation.
Speaker 4: But the Fed's not really telling us too much these days.
Speaker 4: Here is that frustrating for you and for the market.
Speaker 4: It seems like some certain folks in the market are saying,
Speaker 4: I don't like this new regime, this new sheriff in town.
Speaker 7: Well, you know, it's not necessarily frustrating because candidly, a
Speaker 7: lot of the curve has done a good job of
Speaker 7: tightening financial conditions even without a ton of guidance or
Speaker 7: specifically a rate move of course.
Speaker 6: By the Fed.
Speaker 7: Now, given of course, that the geopolitical situation is so
Speaker 7: tenuous right now, so uncertain and We also know that
Speaker 7: the fed's tools are not well suited to cope with
Speaker 7: a supply side inflation shock like the one where dealing
Speaker 7: with candidly, you know, if the FED cuts in the
Speaker 7: near tur excuse me, hikes in the near term, or
Speaker 7: stays on hold is less important right now than if
Speaker 7: financial conditions are tightening naturally across the curve.
Speaker 2: We have no rate rise right, Sorry, you have on
Speaker 2: a FED call. You have no rate rise right.
Speaker 7: We have the fedal hold through year.
Speaker 2: Why? Why?
Speaker 7: Because the FED is two mandates and if you look
Speaker 7: at the labor side of the Fed's mandate. Obviously we'll
Speaker 7: get the jobs report tomorrow, but candidly, the jobs market
Speaker 7: is in something as close to an equilibrium as a
Speaker 7: team of economists could really hope for. Yeah, we have
Speaker 7: wage growth decelerating to a really nice, sustainable three and
Speaker 7: a half is percent. Yes, hiring has been relatively stable,
Speaker 7: but it hasn't been reaccelerating in a huge way. This
Speaker 7: is not, to us a labor market that can tolerate
Speaker 7: a sustained hiking cycle. Of course, we also know it's
Speaker 7: not a labor market that has needed a lot of
Speaker 7: cuts for support.
Speaker 4: It looks like the bond markets maybe doing the job
Speaker 4: for the FED. I mean, we've got rates that are
Speaker 4: higher here a ten year, you know, with a four
Speaker 4: to sixty four hand. I mean maybe that's maybe the
Speaker 4: market's already spoken.
Speaker 2: Yeah.
Speaker 7: I think it has in many ways, and it's contributed
Speaker 7: to volatility on the equity side of things because there
Speaker 7: is a mismatch between highly narrow, volatile cyclical market leadership.
Speaker 7: And by this I specifically mean the chip leadership within tech,
Speaker 7: and that's less compatible with a more tight rates environment.
Speaker 7: Not necessarily because these companies need a lot of interest
Speaker 7: rate support in order to continue their CAPEC cycle, but
Speaker 7: simply because the status of the economic cycle is a
Speaker 7: little bit more tenuous from here on out with a
Speaker 7: tighter rates environment.
Speaker 4: Global market strategist, that's your title. How do you think
Speaker 4: about the US versus rest of the world these days?
Speaker 7: Well, I've been hearing more whispers and thoughts about this
Speaker 7: sell America trade and it's something that we really push
Speaker 7: back on. If you look at actual treasury flows, we
Speaker 7: have seen consistent inflows from private foreign investors, and the
Speaker 7: only place where we've seen foreign investor conviction start to
Speaker 7: rattle has been in specific treasury flows from official investors,
Speaker 7: so foreign governments and foreign central banks. But this is
Speaker 7: a trend that started in twenty thirteen and has not
Speaker 7: been accelerating. So rather than a sell America trade, we
Speaker 7: think that there's actually a lot more robustness in the
Speaker 7: teenage trade that there is no alternative to.
Speaker 2: Plus Julia Herman with this New York Life investment management.
Speaker 2: You know, I look at this, Julia. In the long
Speaker 2: term in the financial media is what do you think,
Speaker 2: Paul six months? Yeah, I'll piss the world series maybe, yep.
Speaker 2: You have just is one statistic, three hundred and forty
Speaker 2: seven billion something in New York Life matched up against
Speaker 2: insurance and annuity liabilities. What do you say to the
Speaker 2: managers of a huge, multi billion dollar portfolio New York
Speaker 2: Life where their short term is ten years?
Speaker 7: Well, you know, we think about this on the strategy
Speaker 7: perspective of the asset management side, which is where our
Speaker 7: team sits from the perspective of how do changes in
Speaker 7: the rate environment impact our holistic allocation considerations. So, for example,
Speaker 7: with the recent move in the long end of the curve,
Speaker 7: that for us really influences our duration view for the
Speaker 7: shorter term, which is that up until this point this year,
Speaker 7: we have been trying to stick toward the shorter side
Speaker 7: of neutral on duration coming out Yeah at four six,
Speaker 7: four seven on the tenure, that's a place where we
Speaker 7: would see more value.
Speaker 2: Okay, well, let explain. I think our audience doesn't know this.
Speaker 2: I mean, duration for New York Life or any other
Speaker 2: insurance company is a lot longer term, isn't it. Do
Speaker 2: you are you going to buy forty year Google paper today?
Speaker 7: Well, so I can only speak from the asset.
Speaker 2: Management side of the business, right, Okay.
Speaker 7: So from from the asset management side, we would see
Speaker 7: a little bit more value at the four seven. You
Speaker 7: know what we have historically seen a little bit more
Speaker 7: of though, is that you know, systemically there's an institutional
Speaker 7: bid around five for the tenure, and so you know,
Speaker 7: being able to creep into duration from here is not
Speaker 7: to say that we can't see a little bit more
Speaker 7: upward pressure on long rates again, that term premium. These
Speaker 7: questions are on both fiscal and FED related risks are significant,
Speaker 7: but around four to seven we would see those risks
Speaker 7: asymmetric For investors.
Speaker 2: Credit risk?
Speaker 4: Is it worth taking credit risk?
Speaker 2: Hereity?
Speaker 4: You just clip the coupon that the US government's given you.
Speaker 7: It's a really good opportunity right now for not just
Speaker 7: short duration, but short maturity credit right now in our view,
Speaker 7: and that allows investors to think about that buy and
Speaker 7: hold opportunity, which, yes, which as a total return perspective,
Speaker 7: is going to lean you more toward the yield perspective.
Speaker 7: Keeping everything short maturity specifically, in our view, is as
Speaker 7: solved for the two key sources of volatility right now,
Speaker 7: rates of all, of course, but also questions about the
Speaker 7: shorter term economic outlook, given that the impact of higher
Speaker 7: gasoline prices stemming from Iran has already contributed to consumers
Speaker 7: trading down, for example, that's data out of the Beige
Speaker 7: Book in the last few weeks. And we can bolster
Speaker 7: portfolios against some of that near term economic outlook volatility
Speaker 7: by keeping things shorter maturity.
Speaker 2: Julie, thank you so much. Julia Herman with his director
Speaker 2: Global Market Strategy for the It's like Ohio State, the
Speaker 2: New York Life Investment Management.
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apples, Spotify,
Speaker 1: and anywhere else you get your podcasts. Listen live each
Speaker 1: weekday seven to ten am Eastern on Bloomberg dot com,
Speaker 1: the iHeartRadio app tune In, and the Bloomberg Business app.
Speaker 1: You can also watch us live every weekday on YouTube
Speaker 1: and always on the Bloomberg terminal