WEBVTT - Chinese Innovation, Tech Earnings in Focus

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<v Speaker 1>This is Bloomberg day Break Asia for this Monday, April

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<v Speaker 1>twenty fourth in Hong Kong, Sunday April twenty third in

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<v Speaker 1>New York, and coming up.

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<v Speaker 2>Today, President Chichinping pledges support for China's innovative firms to

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<v Speaker 2>counter the US. The Bank of Japan is said to

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<v Speaker 2>be planning a review of its policies over the past

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<v Speaker 2>few decades at its next meeting. Bed Beth and Beyond

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<v Speaker 2>files for bankruptcy, and the retailers planning to shut its stores.

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<v Speaker 3>Nations pull diplomats from Sudan, US conducts daring Special Forces

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<v Speaker 3>rescue mission. Chinese diplomat lights furer when he says ex

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<v Speaker 3>Soviet bloc countries currently cannot claim sovereignty. McCarthy says he'll

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<v Speaker 3>get his debt bill passed this week. I'm at Baxter with.

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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 1>Good morning, I'm Brian Curtis.

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

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<v Speaker 1>Another busy week, and even for earnings. Let's get a

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<v Speaker 1>preview on that from Bloomberg's Charlie Pillett.

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<v Speaker 5>Technology. We'll be in focus when we hear from Microsoft,

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<v Speaker 5>Meta Platforms and Alphabet. Investors are continuing to sift through

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<v Speaker 5>corporate earnings looking for comments about pricing, power and the outlook.

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<v Speaker 5>Lisa shout Out is chief Investment Officer for Wealth Management

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<v Speaker 5>at Morgan Stanley.

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<v Speaker 6>So far, earnings have been mixed at best. I think

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<v Speaker 6>that you know, certainly we've had a sector mix issue

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<v Speaker 6>here that you know has prevented a material meltdown, but

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<v Speaker 6>we've had some big names missing and missing on fundamental

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<v Speaker 6>things like demand, like pricing, like margins.

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<v Speaker 5>This week, we hear from a wide range of companies

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<v Speaker 5>including General Motors, Caterpillar, x On Mobile, Ge, MasterCard, Visa, PepsiCo,

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<v Speaker 5>Ubs and Ups in New York. Charlie Pellett, Bloomberg, Daybreak, Asia,

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<v Speaker 5>Bed Bath and Beyond his file for Chapter eleven bankruptcy.

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<v Speaker 5>The retailer will close stores and liquidate after its turnaround

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<v Speaker 5>plans failed. The story from Bloomberg Susanna Palmer, the.

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<v Speaker 7>Retailer that sells all kinds of stuff for your home

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<v Speaker 7>will begin liquidating its three hundred and sixty bed Bath

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<v Speaker 7>and Beyond its stores and one hundred twenty Buy Buy

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<v Speaker 7>Baby shops. This while also searching for a buyer for

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<v Speaker 7>some or all of its assets. Bed Bath and beyonds

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<v Speaker 7>crisis got worse this year, starting in January, when it

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<v Speaker 7>floated the idea of restructuring its debts. A last minute

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<v Speaker 7>lifeline from the hedge fund Hudson Bay Capital Management and

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<v Speaker 7>an effort to sell more shares in the company didn't help.

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<v Speaker 7>A unit of six Street Partners is providing bed Bath

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<v Speaker 7>and Beyond with a two hundred and forty million dollar

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<v Speaker 7>loan to help it fund itself in bankruptcy. Suzannah Palmer

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<v Speaker 7>Bloomberg Daybreak Asia.

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<v Speaker 1>US Treasury Secretary Jennet Yellen has announced a proposal by

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<v Speaker 1>the Financial Stability Oversight Council that would revise the way

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<v Speaker 1>non bank firms are designated. These include changes to Trump

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<v Speaker 1>era guidance that had made it difficult to tag non

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<v Speaker 1>bank firms as systemically important institutions. Here's Yellen speaking on

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<v Speaker 1>Friday at an FSOC meeting in Washington, DC.

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<v Speaker 6>The existing guidance, issued in twenty nineteen created inappropriate hurdles

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<v Speaker 6>as part of the designation process.

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<v Speaker 8>These additional steps.

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<v Speaker 6>Are not legally required by the Dodd Frank Act, nor

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<v Speaker 6>are they useful or feasible.

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<v Speaker 1>Top Us regulators hope that their new proposal will address

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<v Speaker 1>threats to financial stability. The FSOC proposed a new framework

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<v Speaker 1>for financial stability risk identification as well as assessment and

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<v Speaker 1>then the response areas under the proposal could attract scrutiny.

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<v Speaker 1>Those include from insurers, from private equity players, hedge funds,

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<v Speaker 1>mutual fund firms, as well as some newer industries such

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<v Speaker 1>as crypto.

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<v Speaker 2>President Chi Jinping is encouraging Chinese companies to break technological

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<v Speaker 2>barriers to counter what he sees as containment by the West.

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<v Speaker 2>She stressed the role of enterprises in innovation and he

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<v Speaker 2>says that's key to realizing high level technological self reliance.

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<v Speaker 2>And it was on Friday she told a Communist Party meeting,

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<v Speaker 2>it's important to remove institutional barriers that impede competition. Beijing,

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<v Speaker 2>as we know, has been grappling with US efforts to

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<v Speaker 2>curb China's access to key technologies, particularly advanced semiconductors. The

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<v Speaker 2>Chinese president also stressed the importance of reforming state owned enterprises.

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<v Speaker 2>She said this would help insure national economic security.

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<v Speaker 1>The Bank of Japan is said to be planning a

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<v Speaker 1>review of policies taken over the past decades at its

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<v Speaker 1>upcoming meeting. We get that story from Bloomberg's Joan Wong.

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<v Speaker 9>The BOJ what examined whats worked well for Japan's economy

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<v Speaker 9>in the past. It will be done with hopes that

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<v Speaker 9>the central bank can come up with effective policies under

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<v Speaker 9>newly appointed Governor Kazuo. That's according to the sign Key newspaper.

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<v Speaker 9>The BOJ is expected to consider the past quarter century

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<v Speaker 9>of Japan's deflationary economy, and the report said the review

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<v Speaker 9>could go back as far as about thirty years, when

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<v Speaker 9>Japan's bubble economy burst. The BOJ has employed unconventional tool

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<v Speaker 9>since adopting a zero interest rate policy in nineteen ninety nine.

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<v Speaker 9>Earlier this month, Weda said in his inaugural speech as

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<v Speaker 9>governor that the bank's yield curve control and negative interest

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<v Speaker 9>rates were appropriate for now, but he added that he

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<v Speaker 9>was open to the idea of a longer term policy review.

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<v Speaker 9>The Bank of Japan's next policy meeting will be on

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<v Speaker 9>April twenty seventh and twenty eighth in Hong Kong, Joan One, Bloomberg,

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<v Speaker 9>Dave Braagaisia.

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<v Speaker 1>I'm Brian Curtis, along with Doug Krisner and Rashad Salama

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<v Speaker 1>will join us in a few moments, so Doug. I

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<v Speaker 1>know this runs a little counter to conventional wisdom, but

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<v Speaker 1>volatility has quietly dropped out of both the stock and

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<v Speaker 1>bond markets. Last week. We had yields on the two

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<v Speaker 1>year and the ten year finish up the week roundabout

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<v Speaker 1>world where they were on Monday. And as for the

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<v Speaker 1>stock market, the Vicks is under seventeen. It may not

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<v Speaker 1>stay that way, and perhaps it's a common head of

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<v Speaker 1>the storm, but it's a good question for guests is

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<v Speaker 1>what has brought that on.

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<v Speaker 2>That's a good point. At the same time, when we

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<v Speaker 2>consider the fact that we're still in the earning season

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<v Speaker 2>early innings, yes, but the results so far have been

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<v Speaker 2>coming in strong enough to lead some on Wall Street

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<v Speaker 2>to wonder maybe they were too pessimistic. Twenty percent, roughly speaking,

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<v Speaker 2>of the companies in the S and P have posted

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<v Speaker 2>their results so far, seventy seven percent have been better

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<v Speaker 2>than expected. And you highlighted earlier, Brian, it's going to

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<v Speaker 2>be a key week for big tech earnings. Oil producers

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<v Speaker 2>will also be key in the week ahead.

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<v Speaker 1>Yeah, I think it's smart that you highlight the earnings

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<v Speaker 1>because that's one of the reasons I suppose that the

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<v Speaker 1>macro scene has kind of quieted just a little bit.

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<v Speaker 1>And it's not like we haven't seen volatility in the

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<v Speaker 1>stock market. It's just that overall we are where we are,

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<v Speaker 1>but there's been a lot of individual stories where stocks

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<v Speaker 1>have either gained a lot or.

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<v Speaker 4>Dropped a lot.

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<v Speaker 1>I wanted to offer a quick comment about China and

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<v Speaker 1>the policy that you just mentioned in our a block there,

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<v Speaker 1>that it runs a little counter to what we saw

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<v Speaker 1>back in twenty twenty one and twenty two, because at

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<v Speaker 1>that time China was regulating and raining in the private sector,

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<v Speaker 1>and now shi Jinping wants to stimulate the private sector

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<v Speaker 1>and thinks that there are a lot of things that

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<v Speaker 1>they can do to remove some of these institutional barriers.

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<v Speaker 1>And some might call that a reversal of policy, but

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<v Speaker 1>it might end up being good for the private sector

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<v Speaker 1>and thus the stock market in China. Something we'll be watching.

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<v Speaker 2>And as long as we're talking about China, I want

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<v Speaker 2>to ask you to keep your eye on the Chinese traveler.

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<v Speaker 2>We're going into the Golden Week holiday next month, and

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<v Speaker 2>I saw data from JP Moore and Chase saying that

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<v Speaker 2>jet fuel demand so far is up about seventy five

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<v Speaker 2>percent of pre pandemic levels. That in the latest survey week,

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<v Speaker 2>which I think wrapped up up on the fifteenth, So

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<v Speaker 2>we know that Chinese travelers are returning to the sky.

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<v Speaker 2>If you're talking about the macro in China, maybe things

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<v Speaker 2>are on the up and up.

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<v Speaker 1>I think definitely in terms of small items travel and

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<v Speaker 1>restaurants and bars and that sort of thing, that's going

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<v Speaker 1>very well in the recovery. We're still waiting to see

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<v Speaker 1>whether the big ticket items cars and houses really start

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<v Speaker 1>to move. We've seen some encouraging activity in the housing market,

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<v Speaker 1>but it hasn't translated to big numbers just yet. All right,

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<v Speaker 1>it's time now for global news. Many nations are moving

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<v Speaker 1>to evacuate consular workers from Sudan this weekend at Baxter

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<v Speaker 1>has Global News from the nine to sixty news room

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<v Speaker 1>in San Francisco, Ed.

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<v Speaker 3>Yeah, exactly right, Brian, Both UK and US for example,

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<v Speaker 3>managed to airlift their diplomats to safety. Prime Minister Rishusunak

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<v Speaker 3>saying the operation was a total success, imit a significant

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<v Speaker 3>escalation of violence and threats to embassy staff. Meanwhile, the

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<v Speaker 3>US flew hundreds of Special Service members by helicopter under

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<v Speaker 3>the protection and the hazard of dark.

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<v Speaker 2>Anytime you're flying at one hundred knots very close to

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<v Speaker 2>the ground in pitch black, there's certainly some risk there.

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<v Speaker 3>Lieutenant General dasim the operation was fast and clean, with

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<v Speaker 3>service members spending less than an hour on the ground

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<v Speaker 3>and cartoon. Meanwhile, work is underway to get hundreds of

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<v Speaker 3>aid workers out as well. Senator Mark Warner on ABC

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<v Speaker 3>has heard here on Bloomberg says many countries are involved.

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<v Speaker 10>We are working with a lot of international partners in

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<v Speaker 10>this case, partners from them at least even believe working

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<v Speaker 10>with China and Europeans to say those aid workers, we

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<v Speaker 10>need to find a safe way to get them out.

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<v Speaker 3>Warner says one path is to establish a corridor to

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<v Speaker 3>evacuate them. Meanwhile, Italy and France also coordinating evacuation plans

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<v Speaker 3>as we speak. European states are reacting with fury to

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<v Speaker 3>a Chinese envoy who's questioning the independence of former Soviet

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<v Speaker 3>Union countries. Chinese ambassador to France lu Chau saying that

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<v Speaker 3>ex Soviet Union countries do not have effective status under

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<v Speaker 3>international law as a sovereign nation. The diplomatic firestorm threatens

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<v Speaker 3>to overshadow China's attempts to portray itself as a peacemaker

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<v Speaker 3>in Russia's war in Ukraine. House Speaker Kevin McCarthy says

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<v Speaker 3>the House will pass his one point five trillion dollar

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<v Speaker 3>debt ceiling increase plan this week.

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<v Speaker 11>When we send this to the Senate, we're showing that, yes,

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<v Speaker 11>we're able to raise the debt ceiling into the next year.

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<v Speaker 11>But what we're doing is we're being responsible fiscally and

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<v Speaker 11>bringing our house back in order. It doesn't solve all

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<v Speaker 11>our problem, but it gets us on the right path,

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<v Speaker 11>and Churtis gets us to the negotiating table.

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<v Speaker 3>McCarthy on Fox did dodge when asked whether he has

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<v Speaker 3>the two hundred and eighteen Republican votes he needs. He

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<v Speaker 3>says they are about five members who can still sink it,

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<v Speaker 3>but he thinks the Conference will pass it along. The

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<v Speaker 3>race for the Republican nomination in the United States is

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<v Speaker 3>in full swing. Ron Dea Santis and Utah.

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<v Speaker 11>Republicans need to shake the culture of losing that has

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<v Speaker 11>developed in recent years.

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<v Speaker 3>Others in Iowa, Tim Scott, Joe.

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<v Speaker 8>Biden and the radical left has created a blueprint on

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<v Speaker 8>how to ruin America.

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<v Speaker 3>I gotta tell you not on my watch, Mike Pence.

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<v Speaker 2>They also want a new brand of leadership, but at

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<v Speaker 2>least has the possibility of bringing our country together around

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<v Speaker 2>the major challenges that we're facing.

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<v Speaker 3>And Donald Trump, we will make America great again. Yes,

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<v Speaker 3>that was this weekend Global News, powered by more than

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<v Speaker 3>twenty seven hundred journalists and analysts and over one hundred

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<v Speaker 3>twenty countries. In San Francisco, I met Baxter. This is Bloomberg.

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<v Speaker 1>I'm Brian Curtis, along with Rashad Salomon. Our guest is Priamsra,

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<v Speaker 1>global head of rate Strategy at TD Securities.

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<v Speaker 6>Bri.

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<v Speaker 1>I mentioned there that at least last week we had

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<v Speaker 1>a drop in volatility in the bond market. Is that

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<v Speaker 1>just temporary or do you think that we've sort of

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<v Speaker 1>come to a point where we understand, at least in

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<v Speaker 1>the short term, what the Fed will do and where

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<v Speaker 1>rates will move.

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<v Speaker 12>Sure, thanks for having me on. I think in the

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<v Speaker 12>near term, yes, we're almost priced for a twenty five

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<v Speaker 12>hike in May. We do expect the FED to hike

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<v Speaker 12>twenty five but I think really volatility is likely to

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<v Speaker 12>pick up after that because we're not hearing much from

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<v Speaker 12>the FED about the meeting after that or how long

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<v Speaker 12>are they going to pause, or when are they going

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<v Speaker 12>to cut What is that threshold of pain at which

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<v Speaker 12>point the FED will start to cut rates? And I

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<v Speaker 12>think the data is turning. We're getting mixed data. We're

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<v Speaker 12>seeing the slowing. It's not obvious whether we're heading into

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<v Speaker 12>a recession or is this a soft landing. So I

0:12:46.280 --> 0:12:49.319
<v Speaker 12>think there's enough uncertainty on the economic outlook as well

0:12:49.320 --> 0:12:52.040
<v Speaker 12>as how the FED might respond, So I think volatility

0:12:52.240 --> 0:12:55.240
<v Speaker 12>will go back up. But in the next week or two,

0:12:55.280 --> 0:12:57.760
<v Speaker 12>as we're heading into the May FED meeting, I think

0:12:57.800 --> 0:13:00.400
<v Speaker 12>we can stabilize because we're sort of well priced, and

0:13:00.440 --> 0:13:02.160
<v Speaker 12>I think the Fed might be happy with the way

0:13:02.160 --> 0:13:03.760
<v Speaker 12>the market's price just now.

0:13:05.280 --> 0:13:07.720
<v Speaker 8>How closely do you think they're watching events in Congress

0:13:07.800 --> 0:13:10.240
<v Speaker 8>right now with regards to the budget, etc. And the

0:13:10.280 --> 0:13:10.840
<v Speaker 8>debt ceiling.

0:13:12.240 --> 0:13:14.200
<v Speaker 12>I think they have to be watching it closely, but

0:13:14.280 --> 0:13:16.920
<v Speaker 12>they have to be very careful not to influence it

0:13:17.440 --> 0:13:21.040
<v Speaker 12>or not to make it explicitly influence their policy because

0:13:21.080 --> 0:13:23.280
<v Speaker 12>it is up to Congress to raise the dead ceiling,

0:13:23.320 --> 0:13:26.760
<v Speaker 12>which I really hope happens. I think it's going to

0:13:26.800 --> 0:13:30.360
<v Speaker 12>go down to the wire and thatmanship is going to

0:13:30.360 --> 0:13:33.360
<v Speaker 12>tighten financial conditions, which then impact growth, and the FED

0:13:33.360 --> 0:13:35.920
<v Speaker 12>would respond to that, but I don't think they want

0:13:35.960 --> 0:13:39.960
<v Speaker 12>to respond preemptively or do anything that would make the

0:13:40.000 --> 0:13:43.400
<v Speaker 12>dead ceiling passage more difficult for Congress. So I think

0:13:43.400 --> 0:13:45.760
<v Speaker 12>they watch it for the impact that it has on

0:13:45.800 --> 0:13:48.480
<v Speaker 12>financial conditions and on growth. I also think if there

0:13:48.480 --> 0:13:50.480
<v Speaker 12>are spending cuts and that's the way we get the

0:13:50.480 --> 0:13:53.920
<v Speaker 12>dead ceiling raised, that's our base case view. That's negative

0:13:53.920 --> 0:13:56.360
<v Speaker 12>for growth because then you have fiscal tightening at the

0:13:56.400 --> 0:13:59.120
<v Speaker 12>same time as credit channel tightening, which we think is

0:13:59.160 --> 0:14:02.880
<v Speaker 12>happening with the Bank and the lagged impact of Montrey policy,

0:14:03.120 --> 0:14:05.800
<v Speaker 12>So then you're setting up for a bigger slowdown later

0:14:05.840 --> 0:14:08.760
<v Speaker 12>this year. But that's only if there are these spending cuts.

0:14:08.760 --> 0:14:10.960
<v Speaker 12>So I think they have to be watching it, but

0:14:11.080 --> 0:14:14.120
<v Speaker 12>not maybe comment on it until something actually happens.

0:14:15.400 --> 0:14:17.920
<v Speaker 1>In trying to make that assessment about whether or not

0:14:18.000 --> 0:14:21.240
<v Speaker 1>we have a soft landing or a mild recession, or

0:14:21.400 --> 0:14:24.640
<v Speaker 1>indeed something worse come. So what's the most important set

0:14:24.640 --> 0:14:25.600
<v Speaker 1>of metrics to watch.

0:14:27.200 --> 0:14:30.440
<v Speaker 12>It's tricky. We're watching everything, but I would say the

0:14:30.640 --> 0:14:33.920
<v Speaker 12>high frequency metrics. So we're looking at high frequency measures

0:14:33.960 --> 0:14:38.280
<v Speaker 12>of the employment situation. We're also watching high frequency spending,

0:14:38.320 --> 0:14:41.440
<v Speaker 12>consumer spending. I think that's the early read. Labor market,

0:14:41.480 --> 0:14:44.560
<v Speaker 12>inflation are all pretty lagging indicators. But let's see how

0:14:44.600 --> 0:14:45.760
<v Speaker 12>the consumer's shaping up.

0:14:47.400 --> 0:14:50.400
<v Speaker 8>Okay, well, then that's just the thing that the consumer

0:14:50.440 --> 0:14:53.000
<v Speaker 8>seems to be doing fine. And you know, we used

0:14:53.040 --> 0:14:56.520
<v Speaker 8>to talk about the indefatigable American consumer. They're proving to

0:14:56.560 --> 0:14:58.640
<v Speaker 8>be just that for the time being at least, But

0:14:58.680 --> 0:14:59.960
<v Speaker 8>there are some cracks emerging.

0:15:00.120 --> 0:15:05.120
<v Speaker 12>They're not there are I think ISM services showed a

0:15:05.120 --> 0:15:09.280
<v Speaker 12>big slowdown. That's the early read on consumer demand for services.

0:15:09.440 --> 0:15:12.360
<v Speaker 12>Now the pmis were okay, but that ISM services was

0:15:13.160 --> 0:15:16.760
<v Speaker 12>a little bit concerning. I think consumption is slowing on services,

0:15:17.320 --> 0:15:20.640
<v Speaker 12>and so we're watching things like that. We're watching consumer confidence.

0:15:20.960 --> 0:15:23.840
<v Speaker 12>There are cracks, as you pointed out, and I'm also

0:15:23.880 --> 0:15:26.800
<v Speaker 12>watching the consumer savings buffer. You know, the consumer still

0:15:26.800 --> 0:15:29.040
<v Speaker 12>has savings, which is why they've continued to spend the

0:15:29.120 --> 0:15:32.720
<v Speaker 12>labor market strong as that savings buffer runs out and

0:15:32.800 --> 0:15:35.680
<v Speaker 12>you can't take out another credit card because banks are tightening.

0:15:35.880 --> 0:15:38.480
<v Speaker 12>I think that's when the consumer can slow down more sharply,

0:15:38.520 --> 0:15:40.160
<v Speaker 12>and that's what we're looking to see in the second

0:15:40.160 --> 0:15:40.760
<v Speaker 12>half of the year.

0:15:41.520 --> 0:15:44.960
<v Speaker 1>PRIA, how nervous are you about the rapidity with which

0:15:45.000 --> 0:15:48.600
<v Speaker 1>markets react? And if you go back to two thousand

0:15:48.640 --> 0:15:51.600
<v Speaker 1>and eight, even the stock market for instance, and even

0:15:51.640 --> 0:15:54.880
<v Speaker 1>the level of the vics, we're pretty well contained and

0:15:54.920 --> 0:15:59.760
<v Speaker 1>pretty in a nice position, actually only say three weeks

0:15:59.760 --> 0:16:04.040
<v Speaker 1>before or just completely going haywire. Is that something that

0:16:04.080 --> 0:16:08.400
<v Speaker 1>as someone who analyzes markets, troubles you or does it?

0:16:09.160 --> 0:16:11.360
<v Speaker 1>I mean, it's just a fact of life.

0:16:11.800 --> 0:16:14.200
<v Speaker 12>I think it is a fact of life. Now the

0:16:14.240 --> 0:16:16.720
<v Speaker 12>markets are more fragile. I think part of it is

0:16:16.840 --> 0:16:20.640
<v Speaker 12>regulatory changes posts two thousand and eight have made banks

0:16:20.640 --> 0:16:23.400
<v Speaker 12>and dealers less able to take risk. So I think

0:16:23.440 --> 0:16:26.800
<v Speaker 12>that warehousing capacity on the dealer side is just not there,

0:16:26.800 --> 0:16:29.400
<v Speaker 12>so you're going to react more. And then, frankly, the

0:16:29.440 --> 0:16:33.400
<v Speaker 12>FED has a lot less policy flexibility now with inflation

0:16:33.520 --> 0:16:36.480
<v Speaker 12>that high. Even if growth starts to slow down, I

0:16:36.480 --> 0:16:39.240
<v Speaker 12>think the FED will struggle to cut rates that fast,

0:16:39.440 --> 0:16:41.680
<v Speaker 12>which they had that flexibility. I think for the last

0:16:41.680 --> 0:16:44.280
<v Speaker 12>twenty years because there was no inflation fear. So I

0:16:44.280 --> 0:16:48.120
<v Speaker 12>think there's good reason for the fragility. But I think

0:16:48.160 --> 0:16:50.320
<v Speaker 12>that is something I'm glad you brought it up. That

0:16:50.400 --> 0:16:52.720
<v Speaker 12>something every investor should keep at the back of their mind,

0:16:52.920 --> 0:16:55.600
<v Speaker 12>and that means you should have liquid assets just to

0:16:55.640 --> 0:16:58.800
<v Speaker 12>prevent fire sales because market's going to overreact. We went

0:16:58.880 --> 0:17:02.360
<v Speaker 12>from earlier in the year no landing to hard landing

0:17:02.400 --> 0:17:05.000
<v Speaker 12>to soft landing, all in a spate of four months.

0:17:05.000 --> 0:17:07.960
<v Speaker 12>We've talked about literally every possibility in the economy, and

0:17:08.000 --> 0:17:10.840
<v Speaker 12>that just tells you the market's very quick to price

0:17:10.880 --> 0:17:14.000
<v Speaker 12>in a certain outcome we should be. I think that's

0:17:14.040 --> 0:17:14.960
<v Speaker 12>the new normal trend.

0:17:15.600 --> 0:17:18.320
<v Speaker 1>Maybe it's a good thing. Maybe it forces on people

0:17:18.600 --> 0:17:22.800
<v Speaker 1>a little bit of more conservatism instead of looking at

0:17:23.080 --> 0:17:27.440
<v Speaker 1>the stock market as a casino. I mean, I'm not sure.

0:17:27.440 --> 0:17:29.680
<v Speaker 1>I mean, it's there for everyone to use the way

0:17:29.720 --> 0:17:32.240
<v Speaker 1>that they see fit. That's the way the system works.

0:17:32.720 --> 0:17:35.400
<v Speaker 1>But maybe a little conservatism is a good thing.

0:17:36.520 --> 0:17:40.040
<v Speaker 12>Now, that's fair and appreciating the importance of liquidity and

0:17:40.040 --> 0:17:43.880
<v Speaker 12>a diversified portfolio. Bonds are giving you five percent four

0:17:43.920 --> 0:17:47.840
<v Speaker 12>percent depending on which bond you're picking, interest rates and

0:17:48.000 --> 0:17:50.919
<v Speaker 12>is likely to be less volatile than risk acids, So

0:17:51.200 --> 0:17:53.960
<v Speaker 12>making sure you've got something in your portfolio when the

0:17:54.000 --> 0:17:57.399
<v Speaker 12>stock market's struggling, or making sure you've got enough liquid assets.

0:17:57.400 --> 0:18:00.679
<v Speaker 12>I think we have to think about portfolio construction differently

0:18:00.720 --> 0:18:03.160
<v Speaker 12>now with the market that's a lot more volatile.

0:18:03.880 --> 0:18:06.840
<v Speaker 8>Well something okay, and you know you look at the

0:18:06.920 --> 0:18:09.480
<v Speaker 8>yield curve and you'd say that perhaps the best place

0:18:09.480 --> 0:18:12.960
<v Speaker 8>to invest is obviously short duration, given more juice there.

0:18:12.960 --> 0:18:15.600
<v Speaker 8>But it's a bit new on stemoniums and that isn't it.

0:18:15.640 --> 0:18:18.000
<v Speaker 8>I mean, where would you be going on this given

0:18:18.359 --> 0:18:20.880
<v Speaker 8>further price appreciations, perhaps down the road.

0:18:22.520 --> 0:18:24.439
<v Speaker 12>So I'm going to be a little contrading here. I

0:18:24.440 --> 0:18:27.879
<v Speaker 12>think the front end it's very attractive with these high rates,

0:18:28.240 --> 0:18:31.400
<v Speaker 12>but it's a very short term view. If you think

0:18:31.480 --> 0:18:33.760
<v Speaker 12>a little longer term in the FT's cutting rates. You know,

0:18:33.800 --> 0:18:35.639
<v Speaker 12>we can debate whether they cut rates this year or

0:18:35.720 --> 0:18:37.919
<v Speaker 12>next year, but five to five and a half on

0:18:38.000 --> 0:18:40.520
<v Speaker 12>FET funds is not normal. They're going to have to

0:18:40.520 --> 0:18:43.160
<v Speaker 12>cut rates down to two and a half three percent

0:18:43.200 --> 0:18:45.320
<v Speaker 12>in the next few years. So I actually think the

0:18:45.400 --> 0:18:48.679
<v Speaker 12>long end, the tenure, is a better investment for the

0:18:48.720 --> 0:18:51.040
<v Speaker 12>long run rather than the front end because with the

0:18:51.080 --> 0:18:53.679
<v Speaker 12>front end, you've got reinvestment risk. When the Fed starts

0:18:53.720 --> 0:18:56.800
<v Speaker 12>to cut rates, you're going to reinvest it at much

0:18:56.880 --> 0:18:59.160
<v Speaker 12>lower rates. So I actually like the tenure. I want

0:18:59.200 --> 0:19:02.359
<v Speaker 12>to keep some in the front tend for yield and flexibility,

0:19:02.560 --> 0:19:05.240
<v Speaker 12>and some in the long end for price appreciation because

0:19:05.280 --> 0:19:08.520
<v Speaker 12>that's where that's your hedge. If the economy heads into

0:19:08.560 --> 0:19:11.040
<v Speaker 12>a recession, those long end rates are going to decline

0:19:11.160 --> 0:19:13.119
<v Speaker 12>very quickly, and that's where you want to be.

0:19:13.280 --> 0:19:16.720
<v Speaker 1>Yeah, let me ask you a dumb question. Does the

0:19:16.840 --> 0:19:21.040
<v Speaker 1>ordinary investor trade treasuries a lot? For instance, the scenario

0:19:21.200 --> 0:19:24.200
<v Speaker 1>you describe is, you know, if we have ultimately those

0:19:24.240 --> 0:19:28.560
<v Speaker 1>yields going slightly lower, which would reward you for having

0:19:28.560 --> 0:19:31.440
<v Speaker 1>bought at this higher position, that you get capital appreciation

0:19:31.480 --> 0:19:33.879
<v Speaker 1>on the bond. Do do people trade treasuries a lot?

0:19:34.960 --> 0:19:35.960
<v Speaker 12>Increasingly they do.

0:19:36.119 --> 0:19:36.320
<v Speaker 4>Yes.

0:19:36.359 --> 0:19:39.560
<v Speaker 12>I think ladder portfolios are popular ETFs on the long end.

0:19:39.560 --> 0:19:42.040
<v Speaker 12>There are different ways you can position in the long end.

0:19:42.359 --> 0:19:44.479
<v Speaker 12>You can set up a treasure direct account and buy

0:19:45.080 --> 0:19:48.840
<v Speaker 12>treasuries which the Treasury issues every second week. So yes,

0:19:48.920 --> 0:19:53.520
<v Speaker 12>I think retail and institutional and in participation in longer

0:19:53.600 --> 0:19:56.320
<v Speaker 12>end treasuries has started to pick up as treasuries are

0:19:56.320 --> 0:19:57.240
<v Speaker 12>giving you some yield.

0:19:57.280 --> 0:20:03.040
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0:20:03.119 --> 0:20:06.280
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