Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: We are thrilled to bring you Bob Michael Global had
Speaker 2: a fixed income JP Morgan Asset Management the real yield
Speaker 2: out of two point one one percent. I haven't done
Speaker 2: a standard deviation study. When does a higher real yield
Speaker 2: impinge on the American economy and on industry in America?
Speaker 1: Well, I would argue right now it's already starting to
Speaker 1: have an impact, because it was only a week ago
Speaker 1: that we came out of the FOMC meeting expecting a
Speaker 1: couple rate cuts, and you looked at the labor market
Speaker 1: that was their primary concern for good reason, it seemed
Speaker 1: a bit soft. Now you're paying a lot more to
Speaker 1: fill up your automobiles, and if you're a business, your
Speaker 1: input costs or energy's gone up. I would say it's
Speaker 1: having an impact right about now.
Speaker 3: If that is the case, certainly for a lot of
Speaker 3: full are starting to feel it. How does the FED
Speaker 3: react to that? There's really not a whole lot they
Speaker 3: can do, is there?
Speaker 1: I think the problem is at these levels there's no
Speaker 1: obvious solution because even ourselves with one hundred dollars oil,
Speaker 1: we don't see recession. We see growth. Slowing down a
Speaker 1: lot from where we had it, inflation going up a
Speaker 1: little bit. Then they just have to wait and see
Speaker 1: what cracks First. Does the labor market come under a
Speaker 1: lot of pressure and unemployment go up? Or do they
Speaker 1: see energy prices passed through to finish goods and services
Speaker 1: and consumers still buying and demanding wage price spirals.
Speaker 2: David Rosenberg in Toronto publishes moments Ago Rosenberg Research quote,
Speaker 2: still no market panic inequities even with a vis out
Speaker 2: of twenty nine point five three. How do you measure
Speaker 2: in Is there panic in the Bob Michael world? I
Speaker 2: mean price down, yield up? How does it you know?
Speaker 2: Equity panic? How does it work in the bond space?
Speaker 1: It's well, there are also volatility indicators in the bond market,
Speaker 1: and they've actually been muted. So it's been a surprisingly
Speaker 1: orderly sell off, a little bit at a time. A
Speaker 1: lot of confidence that you have an administration looking for
Speaker 1: an off rapp they'll find one. They watch the markets,
Speaker 1: they know the midterm elections are coming up soon. They
Speaker 1: have to figure out how to extricate themselves from the
Speaker 1: Middle East, and that's what the market's hanging it's hot on.
Speaker 3: So the FED has a little bit of leeway the
Speaker 3: US economy. We are a net exporter of oil. But boy,
Speaker 3: I guess we're all learning how exposed other parts of
Speaker 3: the world are to this pinch in Mid East oil.
Speaker 3: How do you expect other central banks around the world
Speaker 3: to react here?
Speaker 1: It's strange, right, because this all started with us being
Speaker 1: told that twenty percent of oil passes through the Strait
Speaker 1: of Hormuz. So you say, okay, sixty dollars a barrel,
Speaker 1: let's go to seventy two dollars a barrow, maybe a
Speaker 1: little premium in there. You're up at eighty. Not you're
Speaker 1: going right to one hundred and hanging out there and
Speaker 1: expectations I saw one could be two hundred dollars a hour.
Speaker 1: I think that's a bit extreme. I think by the
Speaker 1: time you get to one twenty to one point fifty,
Speaker 1: you'll create a tremendous amount of demand destruction. So it's
Speaker 1: a bit puzzling that you're there. Unlike the FED, which
Speaker 1: has a dual mandate, they have to watch the labor
Speaker 1: market as well as inflation, the ECB and the Bank
Speaker 1: of England have single mandates. They have to watch inflation
Speaker 1: and there's no differentiation between core and headline. All they
Speaker 1: know right now is headlines going up a lot. Hence
Speaker 1: they're talking hawkish. You would expect the ECB to hike
Speaker 1: rates once or twice in here or watch for the
Speaker 1: Bank of England.
Speaker 2: You have a sterling academics which goes back as far
Speaker 2: as Persian. You're work in Greek and Latin with all
Speaker 2: of your academics at pen and your work of course
Speaker 2: driving the bondship for mister Diamond. The cultural overlay here
Speaker 2: of Persian patients. What I keep reading in informed articles
Speaker 2: is these people are patient. Is that what you would
Speaker 2: would you agree with that Iran will be patient beyond anything?
Speaker 1: Well, if you look at their position, there's little else
Speaker 1: they can do. A lot of the infrastructure in their
Speaker 1: country has been destroyed, and yet somehow they're able to
Speaker 1: control the global supply of oil by controlling the Strait
Speaker 1: of Hormuz with a fleet of drones, despite all the
Speaker 1: military might of the West. And I think this is
Speaker 1: what the market's starting to get concerned about. The administration
Speaker 1: may want an off ramp, but the Iranians don't need
Speaker 1: to give him one.
Speaker 2: That's that simple. Bob Michael, think us so much,