WEBVTT - US Debt Ceiling Stalemate and Buffett’s Warning

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<v Speaker 1>This is Bloomberg Day Break Asia for this Monday, May

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<v Speaker 1>eighth in Hong Kong, Sunday May seventh in New York,

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<v Speaker 1>and coming up today.

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<v Speaker 2>Treasury Secretary Yellen warns there are no good options for

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<v Speaker 2>solving a debt limit stalemate in Washington.

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<v Speaker 1>With US adding more jobs than expected in April, traders

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<v Speaker 1>are now looking for upcoming inflation data for clues on

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<v Speaker 1>the Fed's rate hype path.

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<v Speaker 2>And Warren Buffett predicts the good times may be over

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<v Speaker 2>with earnings falling this year.

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<v Speaker 3>Rare South Korea Japan Summit works on rebuilding relationship and

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<v Speaker 3>semiconductor agreement. South Korea US Summit this week on cybersecurity.

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<v Speaker 3>US prepares for biggest potential migrant increase since World War Two.

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<v Speaker 3>I'm at Baxter with Global News.

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<v Speaker 4>That's all straight ahead on Bloomberg day Break Asia, the

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<v Speaker 4>business news you need to start your day in just

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<v Speaker 4>one fifteen minute podcast available on Apple, Spotify, the Bloomberg

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<v Speaker 4>Business App, and everywhere you get your podcasts.

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<v Speaker 5>Good morning, I'm Brian Curtiz.

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<v Speaker 2>And I'm Doug Chrisner. Here are the stories we're following today.

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<v Speaker 1>Treasury Secretary Jennet Yellen saying that there are simply no

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<v Speaker 1>good options for solving the debt limit stalemate in Washington.

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<v Speaker 1>This comes as GOP leaders are demanding promises of future

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<v Speaker 1>spending cuts before they approve a higher debt ceiling. Now,

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<v Speaker 1>President Biden has insisted on a clean increase, with budget

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<v Speaker 1>talks kept fully separate. The Treasury Department has warned that

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<v Speaker 1>it could run out of money to meet its obligations

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<v Speaker 1>as soon as June first. Yellen told ABC's This Week

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<v Speaker 1>that it's Congress's job to fix this problem.

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<v Speaker 6>If Congress doesn't act, more likely to see financial market consequences.

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<v Speaker 6>In twenty eleven, there is a steep decline in the

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<v Speaker 6>stock market and are borrowing costs back in twenty eleven,

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<v Speaker 6>the US was downgraded by the credit rating agencies. There

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<v Speaker 6>would be permanently higher borrowing costs for Americans for buying

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<v Speaker 6>a home, buying a car, and a failure that would

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<v Speaker 6>cause a steep economic downturn.

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<v Speaker 1>That's Jenny Yellen heard right here on Bloomberg. She also

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<v Speaker 1>cautioned that resorting to use of the fourteenth Amendment would

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<v Speaker 1>provoke a constitutional crisis. President Biden has scheduled to meet

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<v Speaker 1>with House Speaker Kevin McCarthy and some other congressional leaders

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<v Speaker 1>on Tuesday to discuss the debt ceialing issue.

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<v Speaker 2>Well, on Friday here in the US, we heard from

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<v Speaker 2>the head of the Saint Louis FED, Jim Bullard. He

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<v Speaker 2>was saying policymakers will probably have to push rates higher

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<v Speaker 2>to cool inflation. Even so, he thinks the FED can

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<v Speaker 2>still achieve a soft landing.

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<v Speaker 7>Yes, the conry couldn't go into recession, but that's not

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<v Speaker 7>the base case. I think the base case is slow growth,

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<v Speaker 7>probably somewhat softer labor market, and declining inflation.

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<v Speaker 2>Billard went on to say he wants to use a

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<v Speaker 2>data dependent approach before decide on what moved to support

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<v Speaker 2>of the Fed's June meeting. To be fair, he is

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<v Speaker 2>a non voter on that rate setting committee this year. Separately,

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<v Speaker 2>Bullard said the April job stated was stronger than forecast,

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<v Speaker 2>but he didn't know. Job openings are still much higher

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<v Speaker 2>than they were before the pandemic. Now this Wednesday, we'll

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<v Speaker 2>get US retail inflation data and clues on whether the

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<v Speaker 2>Fed has the flexibility to pause in its rate hiking cycle.

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<v Speaker 1>Well, the White House is downplaying the need to curb

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<v Speaker 1>short selling of banks. That's even as President Biden has

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<v Speaker 1>not ruled out any options to ensure the stability of

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<v Speaker 1>the banking system. Shares of regional banks have been under

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<v Speaker 1>pressure following failures at First Republic SVB and Signature Bank,

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<v Speaker 1>as well as Silvergate. We heard from Heather Bouchet, a

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<v Speaker 1>member of Biden's Council of Economic Advisors, the.

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<v Speaker 8>Information that we have at this point is the situation

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<v Speaker 8>remains under control. Certainly, the FDIC and Treasury are watching

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<v Speaker 8>these things very closely.

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<v Speaker 1>We've been able to.

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<v Speaker 8>See stability back into that system, and we've seen deposit

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<v Speaker 8>flows again stabilized, So I think they are indications that

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<v Speaker 8>we are in a better place certainly, and we continue

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<v Speaker 8>to watch the situation as it unfolds.

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<v Speaker 1>The KBW Regional Banking Index has dropped about thirty percent

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<v Speaker 1>this year. However, as we heard from Doug a few

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<v Speaker 1>moments ago, rebound across regional banking stocks on Friday into

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<v Speaker 1>that selling pressures had gone a little too far, Pack

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<v Speaker 1>West leading the way, soaring more than eighty percent. Following

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<v Speaker 1>the route that saw it shares tumbling to a record low.

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<v Speaker 2>We go next to the Oracle of Omaha, Warren Buffett,

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<v Speaker 2>who is warning of an economic slowdown, and he's also

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<v Speaker 2>calling for some bank executives to be punished. More from

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<v Speaker 2>Bloomberg's th Nase Pellegrini.

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<v Speaker 9>Berkshire Hathaway is reporting a jump in quarterly operating income,

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<v Speaker 9>but the billionaire chairman and CEO also warned earnings could

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<v Speaker 9>decline across Berkshire's units going forward, and at the annual

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<v Speaker 9>shareholder meeting in Omaha, Buffett also said execs failed banks

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<v Speaker 9>should be held accountable from mistakes hiding in plain sight,

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<v Speaker 9>including lex mortgage lending. He says at First Republic. Buffet

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<v Speaker 9>also says Berkshire isn't planning and buying the rest of

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<v Speaker 9>Occidental Petroleum it doesn't already own, and he reaffirmed his

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<v Speaker 9>choice of greg Abel as heir apparent at the conglomerate

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<v Speaker 9>Denise Pelgriny Bloomberg day Break Asia.

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<v Speaker 1>Australian Treasurer Jim Chalmers said that China is the economic

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<v Speaker 1>rebound cannot offset the impact of the Australian budget from

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<v Speaker 1>the global economic downturn. That's despite China being Australia's largest

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<v Speaker 1>trading partner. Here is Chalmer speaking in an interview with Bloomberg.

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<v Speaker 10>The Global economy more broadly has been a bit a

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<v Speaker 10>bit softer than what people were anticipating. China maybe a

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<v Speaker 10>little bit stronger, but you know, overall, we want to

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<v Speaker 10>make sure that we're making the most of these trading relationships.

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<v Speaker 10>That's been a big priority for US. China is important

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<v Speaker 10>to our economy and to our budget. Not the whole story,

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<v Speaker 10>but important part of it.

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<v Speaker 1>Chalmers is also expected to announce Australia. Ellia's economy has

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<v Speaker 1>returned to surplus for the first time in fifteen years.

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<v Speaker 1>Bloomberg economists predict that tomorrow's fiscal blueprint will show a

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<v Speaker 1>three point six billion dollars shortfall, or about a quarter

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<v Speaker 1>of a percent of GDP. Australia is expected to benefit

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<v Speaker 1>from surging revenues from commodities, exports and a persistently strong

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<v Speaker 1>labor market. We'll get the full Australian budget on Tuesday,

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<v Speaker 1>seven pm, Sydney time. All Right, I'm Brian Curtis, along

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<v Speaker 1>with Doug christ and Rashad Salama will join us in

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<v Speaker 1>a few moments, so Doug more talk of a short

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<v Speaker 1>selling ban on regional banks. That's one interesting bit of

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<v Speaker 1>the news flow, and I think also Warren Buffett saying

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<v Speaker 1>the good times may be over. However, a few moments

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<v Speaker 1>ago I mentioned good news. It's nice when good news

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<v Speaker 1>is good news, but then you know good news is

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<v Speaker 1>actually bad news to some and the reverse, so we

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<v Speaker 1>have to kind of explain ourselves. I would see the

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<v Speaker 1>jobs report as on balance good news, and it's interesting

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<v Speaker 1>because it seems that the market may have to come

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<v Speaker 1>around more to the Fed's position than the reverse, and

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<v Speaker 1>I think that's something that we'll get at all throughout

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<v Speaker 1>the morning.

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<v Speaker 2>I think that's a very interesting point, particularly in light

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<v Speaker 2>of the fact that we still don't have the data

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<v Speaker 2>on the current data on inflation. Will get that this

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<v Speaker 2>week CPI Wednesday, PPI on Thursday. If those numbers come

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<v Speaker 2>in on the soft side, maybe maybe the Fed has

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<v Speaker 2>a little bit of room to pause. But I hear

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<v Speaker 2>what you're saying, Brian. When it comes to those jobs

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<v Speaker 2>numbers coming in above forecast, Okay, perhaps we can avoid recession,

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<v Speaker 2>but the implication here is that inflationary pressures will remain.

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<v Speaker 1>Well, that's my point, and that's what Jay Powell has

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<v Speaker 1>been saying. He's saying we're not likely to cut, and

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<v Speaker 1>the market says we're going to cut this year and

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<v Speaker 1>he's saying no because he doesn't see recession and also

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<v Speaker 1>because he doesn't see inflation coming down quickly. So it

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<v Speaker 1>seems like at least at the moment. And you know,

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<v Speaker 1>this is funny because the market, the market is like

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<v Speaker 1>millions of people. But at least at the moment, the

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<v Speaker 1>Fed policy makers have a better grasp of this than

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<v Speaker 1>what the market is suggesting, because the market only is

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<v Speaker 1>saying one of two things is going to happen. Either

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<v Speaker 1>inflation is going to come down, it doesn't look like

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<v Speaker 1>that's going to happen, or that there's a serious downturn

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<v Speaker 1>in the economy which will force the FED to bring

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<v Speaker 1>interest rates down, and the Fed's saying not, we don't

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<v Speaker 1>see it.

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<v Speaker 2>Well, I think that's what the bond market is hoping for.

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<v Speaker 2>We know that employment is a lagging indicators, so maybe

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<v Speaker 2>an abrupt decline in the number of nonfarm jobs created

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<v Speaker 2>and perhaps some contraction of the labor market, and that

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<v Speaker 2>then maybe would justify the two twenty five bases point

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<v Speaker 2>rate cuts that the market is pricing in before the

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<v Speaker 2>end of the year.

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<v Speaker 1>Yeah, we did get a little bit of a rationalization

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<v Speaker 1>on the work from what it was before. So is

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<v Speaker 1>it two now then it was three before, I think,

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<v Speaker 1>so that's right. Yeah, it's a real moving target.

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<v Speaker 5>All right. Now it's time for Global News.

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<v Speaker 1>In a rare summit, South Korea and Japan has struck

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<v Speaker 1>a court of unity in a rare summit over the weekend.

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<v Speaker 1>A backs to with Global News in the nine to

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<v Speaker 1>sixty newsroom in San Francisco.

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<v Speaker 3>Ed, yeah, right, Brian. It is rare. President yunsuk yu

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<v Speaker 3>Ol Prime Minister Fumio Kishita agreeing to cooperate fully with

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<v Speaker 3>each other and the US on security in the region

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<v Speaker 3>from North Korea also agree to implement a deal meant

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<v Speaker 3>to heat an historic rift between our heel, I should say,

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<v Speaker 3>an historic rift between the two going back to Japan's

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<v Speaker 3>colonial rule from ten to ten or nineteen ten to

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<v Speaker 3>nineteen forty five, and to work on an agreement on semiconductors.

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<v Speaker 3>Although they did not release any details. Kishita says he

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<v Speaker 3>sees talks going forward in dynamic manner, and Ewn says

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<v Speaker 3>he looks forward to shuttle diplomacy. Meanwhile, South Korea and

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<v Speaker 3>the US will meet this week to strengthen their cooperation

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<v Speaker 3>in responding to cybersecurity threats. Janhapp says part of the

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<v Speaker 3>Cyber Cooperation Working Group schedule for today and tomorrow. In

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<v Speaker 3>two days, US President Joe Biden will sit down with

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<v Speaker 3>Congression leaders to talk about how to stave off crisis

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<v Speaker 3>that could be caused by the government running out of

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<v Speaker 3>cash be the first time in history. Treasury Secretary Janet

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<v Speaker 3>Yellen today on ABC has heard on Bloomberg blaming Congress.

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<v Speaker 6>It simply is unacceptable for Congress to threaten economic calamity

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<v Speaker 6>for American assholds.

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<v Speaker 3>And the Senate Majority leader Chuck Schumer says social security crisis.

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<v Speaker 11>In fact, there could be a Social Security check shutdown

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<v Speaker 11>unless they can get their act together and we can

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<v Speaker 11>have a clean debt ceiling.

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<v Speaker 3>But Republican Senator James Lankford on ABC has heard here

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<v Speaker 3>on Bloomberg, says the GOP has said we'll.

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<v Speaker 5>Be tied to the deadlmit because we've got to have

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<v Speaker 5>this conversation again.

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<v Speaker 3>Yellen says the deadline is the first few days of June.

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<v Speaker 3>All maneuvering is exhausted at that point. She says. The

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<v Speaker 3>head of the Department of Homeland Security, Alejandro Maorkas, is

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<v Speaker 3>warning that this week we'll see a potential influx of

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<v Speaker 3>migrants bigger than anything the US has seen since World

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<v Speaker 3>War Two. My arcis on CBS as Homeland is working

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<v Speaker 3>on plants, but its hands basically are tied.

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<v Speaker 12>We need immigration reform. Everything that the Department of Homeland

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<v Speaker 12>Security is doing, everything that our partners across the federal

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<v Speaker 12>government are doing, is within a broken immigration system.

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<v Speaker 3>Fifteen hundred troops have been sent to the border to

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<v Speaker 3>help with processing, but not law enforcement. Alan Texas mourning

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<v Speaker 3>the loss of another US mass shooting. Eight people killed,

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<v Speaker 3>at least nine injured. Police Chief Brian Harvey says response

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<v Speaker 3>was very quick, but it could have been much worse.

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<v Speaker 13>One of our officers was on an unrelated call at

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<v Speaker 13>the Outlet mall. He heard gun shots, went to the gunshots,

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<v Speaker 13>engaged the suspect and neutralized the suspect.

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<v Speaker 3>Police identify the man as being thirty three years old,

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<v Speaker 3>armed with a semi automatic weapon. They say he'd had

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<v Speaker 3>gun training to be a security guard. Global News powered

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<v Speaker 3>by more than twenty seven hundred journalists and analysts in

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<v Speaker 3>over one hundred and twenty countries. In San Francisco, I'm

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<v Speaker 3>at Baxter and this is Bloomberg.

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<v Speaker 1>IM Brian Curtis along with rushad' Salama. We are here

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<v Speaker 1>in Hong Kong.

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<v Speaker 5>George B.

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<v Speaker 1>Boris joins us now head of Research K two Asset Management.

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<v Speaker 5>George is in Melbourne.

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<v Speaker 1>So George, great to have you with us on a

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<v Speaker 1>Monday morning here in the Asia Pacific. Warren Buffett predicting

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<v Speaker 1>that the good times may be over. He's the Sage

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<v Speaker 1>of Omaha. What does the Sage of Melbourne tell us

0:12:23.240 --> 0:12:24.240
<v Speaker 1>on this Monday morning?

0:12:24.640 --> 0:12:25.480
<v Speaker 5>Opportunities?

0:12:27.000 --> 0:12:28.920
<v Speaker 14>Good morning, Yes, always opportunities.

0:12:29.160 --> 0:12:31.960
<v Speaker 15>That's why we have as allocation and we're always looking

0:12:31.960 --> 0:12:34.360
<v Speaker 15>for low correlations across the act classes, which is another

0:12:34.400 --> 0:12:37.880
<v Speaker 15>way of saying, always opportunities at different stages of the cycle.

0:12:38.559 --> 0:12:41.200
<v Speaker 15>The thing to reinforce is higher level of course, building

0:12:41.240 --> 0:12:44.000
<v Speaker 15>on from the great man Warren Buffett and many other

0:12:44.040 --> 0:12:47.120
<v Speaker 15>good ones. And I'm just a mere humble acid allocator

0:12:47.160 --> 0:12:52.400
<v Speaker 15>and front manager. Is is you looking through the scenario

0:12:52.520 --> 0:12:56.760
<v Speaker 15>of a shallow technical economic recession in North America with

0:12:56.800 --> 0:13:01.120
<v Speaker 15>the tight labor market and FED policy? What it should

0:13:01.200 --> 0:13:04.880
<v Speaker 15>be hawkish to deal with something that's quite stubborn and concerning.

0:13:04.440 --> 0:13:05.240
<v Speaker 14>With the core inflation.

0:13:05.960 --> 0:13:08.760
<v Speaker 15>But there's the reality is there's an unevenness in all

0:13:08.880 --> 0:13:13.600
<v Speaker 15>Western economies across the different sectors for equities, but also

0:13:13.679 --> 0:13:17.040
<v Speaker 15>across the economy, And you're saying it amplified obviously with

0:13:17.559 --> 0:13:20.920
<v Speaker 15>regional banks, small caps in North America versus the core

0:13:21.200 --> 0:13:24.880
<v Speaker 15>superbanks and then the big tech driving the aggregate earnings

0:13:24.880 --> 0:13:29.199
<v Speaker 15>through and beating expectations. But we come around in circle

0:13:29.240 --> 0:13:32.080
<v Speaker 15>again and have to deal with inflation. What are the

0:13:32.080 --> 0:13:35.360
<v Speaker 15>consequences of the policy that demand destruction? Things are breaking

0:13:35.360 --> 0:13:38.840
<v Speaker 15>at the margin, but it really isn't a traditional recession

0:13:38.880 --> 0:13:41.320
<v Speaker 15>that's going to be right across in aggregate.

0:13:41.360 --> 0:13:42.840
<v Speaker 14>Stan's hurting North America.

0:13:42.960 --> 0:13:44.680
<v Speaker 1>So does I mean you can Does that mean you

0:13:44.679 --> 0:13:46.839
<v Speaker 1>can just kind of ignore it and just play as

0:13:46.880 --> 0:13:49.960
<v Speaker 1>you would normally play because the recession isn't going to

0:13:49.960 --> 0:13:50.839
<v Speaker 1>be that deep.

0:13:52.400 --> 0:13:55.800
<v Speaker 15>In part, you can never ignore it. We are data dependent,

0:13:55.880 --> 0:13:58.360
<v Speaker 15>like the Federal observes. We're always looking to data week

0:13:58.400 --> 0:14:01.560
<v Speaker 15>by week. But what what is happening and what we're

0:14:01.600 --> 0:14:05.440
<v Speaker 15>expecting going forward is unlike the past fifteen years. And

0:14:05.520 --> 0:14:07.640
<v Speaker 15>some of the many consequences of that is that we're

0:14:07.679 --> 0:14:10.840
<v Speaker 15>looking for again low correlations before the asset classes and

0:14:10.880 --> 0:14:14.040
<v Speaker 15>fixed income behaving as it should be when you have

0:14:14.120 --> 0:14:16.520
<v Speaker 15>that in your portfolio versus equities. And then when you're

0:14:16.559 --> 0:14:20.320
<v Speaker 15>in equities, obviously there's a big tilt to defensives and

0:14:20.400 --> 0:14:22.440
<v Speaker 15>the big texts and some of the big banks relative

0:14:22.440 --> 0:14:26.320
<v Speaker 15>to the smaller ones. Industrials obviously looking at an opportunity

0:14:26.360 --> 0:14:29.800
<v Speaker 15>in North America and parts of Europe. But the point

0:14:29.880 --> 0:14:33.960
<v Speaker 15>being is we're getting more traditional cycles and the risk

0:14:34.000 --> 0:14:38.760
<v Speaker 15>free rate being elevated for longer is something that was

0:14:38.880 --> 0:14:41.240
<v Speaker 15>experience over fifteen years ago, and that's where we're getting

0:14:41.240 --> 0:14:43.800
<v Speaker 15>into that sort of operating platform Georgia.

0:14:43.840 --> 0:14:47.400
<v Speaker 11>You know, then as an asset allocator, you look at

0:14:47.440 --> 0:14:49.960
<v Speaker 11>what's going on and did you stay away from US

0:14:50.040 --> 0:14:51.280
<v Speaker 11>assets for the tone being.

0:14:53.000 --> 0:14:56.000
<v Speaker 15>No, we like US assets because there's a little bit

0:14:56.040 --> 0:15:00.280
<v Speaker 15>more predictability to the source of those revenues from again

0:15:01.000 --> 0:15:02.720
<v Speaker 15>largerous corporates, the majors.

0:15:02.760 --> 0:15:08.080
<v Speaker 14>And you're saying it, you got very with the quarterly numbers.

0:15:08.200 --> 0:15:10.080
<v Speaker 15>Earnings are much louder whether we're a year ago, but

0:15:10.080 --> 0:15:13.640
<v Speaker 15>the much better versus expectations, and you're getting a good

0:15:13.760 --> 0:15:16.880
<v Speaker 15>high concentration being delivered again by big tag, big big

0:15:16.880 --> 0:15:20.040
<v Speaker 15>American industrials and some of the larger banks, and that's

0:15:20.120 --> 0:15:23.440
<v Speaker 15>replicated around the world in Australia. So in essence, the

0:15:23.440 --> 0:15:25.360
<v Speaker 15>predictability is a little bit better for the large cap

0:15:25.360 --> 0:15:27.880
<v Speaker 15>and the broadcap, but not so much for the med

0:15:27.920 --> 0:15:30.200
<v Speaker 15>and small cap, which is a typical story around the

0:15:30.360 --> 0:15:31.240
<v Speaker 15>developed markets.

0:15:31.680 --> 0:15:32.800
<v Speaker 5>Well difficult times.

0:15:32.840 --> 0:15:34.680
<v Speaker 1>So we've had a few guests on the program of

0:15:34.760 --> 0:15:38.640
<v Speaker 1>late saying, go with the you know, with the best performer.

0:15:38.400 --> 0:15:39.520
<v Speaker 5>In these industries.

0:15:39.840 --> 0:15:42.120
<v Speaker 1>So you're looking at JP Morgan and the banks, maybe

0:15:42.160 --> 0:15:46.200
<v Speaker 1>looking at someone like United Healthcare in managed care in

0:15:46.240 --> 0:15:51.120
<v Speaker 1>the healthcare area. You know, obviously every industry has its superstars,

0:15:51.160 --> 0:15:54.080
<v Speaker 1>the best balance sheets, the best performers excellon in.

0:15:54.040 --> 0:15:54.880
<v Speaker 5>The energy patch.

0:15:55.320 --> 0:15:57.120
<v Speaker 1>Is that a way to play it or can you

0:15:57.160 --> 0:15:59.440
<v Speaker 1>be or do you need to be a lot more subtle?

0:16:01.000 --> 0:16:02.280
<v Speaker 14>Yeah, that's how we're playing it.

0:16:02.320 --> 0:16:09.440
<v Speaker 15>So predictability with energy, the transition, energy exporters, materials, metals, rare, earth, healthcare,

0:16:09.520 --> 0:16:12.840
<v Speaker 15>large cap, big super tech, they're the things that we

0:16:12.920 --> 0:16:15.800
<v Speaker 15>are long in. We don't talk about our shorts across

0:16:15.800 --> 0:16:18.760
<v Speaker 15>the world. But that's opportunistic and it comes from many

0:16:18.800 --> 0:16:22.760
<v Speaker 15>different reasons. But that's the reality is that in aggregate,

0:16:22.800 --> 0:16:25.920
<v Speaker 15>the earnings are very reasonable given the tightening there. But

0:16:26.280 --> 0:16:31.040
<v Speaker 15>once again it's an oversimplification risk free rate higher for

0:16:31.160 --> 0:16:33.520
<v Speaker 15>longer pressing and rate carts.

0:16:33.320 --> 0:16:36.320
<v Speaker 14>Is reasonable by the mud market, but unrealistic. They just

0:16:36.320 --> 0:16:38.280
<v Speaker 14>price them out again then pross them back in again.

0:16:39.160 --> 0:16:42.120
<v Speaker 15>But you get the sense that this is unlike policy

0:16:42.160 --> 0:16:43.200
<v Speaker 15>of the past fifteen years.

0:16:43.240 --> 0:16:46.520
<v Speaker 14>We need to erase that a little bit and go forward.

0:16:47.160 --> 0:16:50.880
<v Speaker 15>They're really doing something because of that stubborn services core inflation,

0:16:51.240 --> 0:16:54.080
<v Speaker 15>which is concerning on a year on your basis, because

0:16:54.080 --> 0:16:57.000
<v Speaker 15>it's not dissolved yet the other parts that are resolved.

0:16:57.360 --> 0:17:00.160
<v Speaker 11>George, I mean, they're just essentially normalizing, aren't they having

0:17:00.200 --> 0:17:03.080
<v Speaker 11>themselves more wiggle room and bullets to put in the

0:17:03.200 --> 0:17:05.760
<v Speaker 11>chamber should there be another big bundturn.

0:17:07.119 --> 0:17:07.560
<v Speaker 14>Spot on.

0:17:07.880 --> 0:17:11.800
<v Speaker 15>And that's good policy, and that's why the hawkish starts

0:17:11.840 --> 0:17:14.000
<v Speaker 15>would be there from a retric But again we.

0:17:14.000 --> 0:17:15.240
<v Speaker 14>Are wake by wake from the Fed.

0:17:15.320 --> 0:17:17.679
<v Speaker 15>We're week by way every other central bank in the

0:17:17.680 --> 0:17:20.679
<v Speaker 15>world looking at the data. More demand destruction has to happen,

0:17:21.240 --> 0:17:24.280
<v Speaker 15>More breakage will be a consequence of it. The market

0:17:24.280 --> 0:17:27.480
<v Speaker 15>will have a conniption and bolotilla is spiked for a

0:17:27.520 --> 0:17:30.439
<v Speaker 15>few days here and there, and unfortunately the unemployment rate

0:17:30.480 --> 0:17:32.480
<v Speaker 15>as a consequence needs to be one to two percentage

0:17:32.520 --> 0:17:36.080
<v Speaker 15>points higher, which is still a reasonable long run situation

0:17:36.160 --> 0:17:39.359
<v Speaker 15>to be in to get the outcome that they're looking for,

0:17:39.400 --> 0:17:42.520
<v Speaker 15>and that is stable price stability in economies. Because of

0:17:42.520 --> 0:17:45.359
<v Speaker 15>the consequence, it's much worse for investors and everyone in

0:17:45.359 --> 0:17:45.920
<v Speaker 15>the economy.

0:17:47.160 --> 0:17:48.760
<v Speaker 5>So the real rates at least positive.

0:17:48.800 --> 0:17:53.080
<v Speaker 1>Now, that's a good start, and you know, still room

0:17:53.160 --> 0:17:55.800
<v Speaker 1>to go, room to move. I know that you said

0:17:55.880 --> 0:17:58.639
<v Speaker 1>K two doesn't reveal it short, so you don't have

0:17:58.720 --> 0:18:01.680
<v Speaker 1>to be specific. Are there some areas that you think

0:18:02.240 --> 0:18:05.919
<v Speaker 1>might might warrant some attention there that are still you know,

0:18:06.000 --> 0:18:08.639
<v Speaker 1>sort of vulnerable to the downside that could be exploited

0:18:08.640 --> 0:18:09.479
<v Speaker 1>by a short position.

0:18:11.000 --> 0:18:12.399
<v Speaker 14>Yeah, shorts tend to happen.

0:18:13.320 --> 0:18:16.080
<v Speaker 15>The way to answer that one, and I'm not a politician,

0:18:16.080 --> 0:18:20.439
<v Speaker 15>but shorts tend to be overvaluation, like expensive or sectors

0:18:20.480 --> 0:18:25.520
<v Speaker 15>that you're trying to avoid and and generally no outright

0:18:25.560 --> 0:18:28.520
<v Speaker 15>sector we want to avoid. I mean, there's highly cyclical

0:18:28.560 --> 0:18:34.840
<v Speaker 15>sectors that we weary of. But in essence, there's some

0:18:34.960 --> 0:18:37.399
<v Speaker 15>financials have been short and active. Again, not to go

0:18:37.440 --> 0:18:40.800
<v Speaker 15>down in that pathway, but the way if I can

0:18:41.000 --> 0:18:44.040
<v Speaker 15>tilt at my way and be the answer is that

0:18:44.600 --> 0:18:48.639
<v Speaker 15>the divergence of mid small banks versus large banks and

0:18:48.680 --> 0:18:52.439
<v Speaker 15>the developed economy is a big signal of the concern

0:18:52.480 --> 0:18:55.320
<v Speaker 15>out there from people. And it's also amplified by the

0:18:55.400 --> 0:18:57.280
<v Speaker 15>term deposits being offered in the West and well by

0:18:57.359 --> 0:18:59.840
<v Speaker 15>MidCap small cat banks versus the majors and.

0:18:59.840 --> 0:19:03.479
<v Speaker 14>The and that's still called a britual relationship. So that

0:19:03.520 --> 0:19:06.359
<v Speaker 14>gap is quite wide. Yes, it is. It is a

0:19:06.560 --> 0:19:08.720
<v Speaker 14>crack in it. It's a crack in the system, and

0:19:08.840 --> 0:19:09.719
<v Speaker 14>just be wary of it.

0:19:09.760 --> 0:19:13.959
<v Speaker 15>And that's where shorts are actively playing and testing that proposition.

0:19:18.000 --> 0:19:20.800
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