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Speaker 2: We got to get to one of the key bullmarket indicators.
Speaker 2: Ed your Donny Joints.
Speaker 3: Ed, what's the name of your dog?
Speaker 4: Well, Max, Max's always likes to show up here. And
Speaker 4: for those of you on radio, the Max indicator continues
Speaker 4: to see a bullmarket.
Speaker 3: Max is snoozing on the couch. Max on the market
Speaker 3: right shoulder. And because he's his head is closer to
Speaker 3: the armrest. That's any bullish indicator. Paul. Max's signal get
Speaker 3: us going, Yeah, he's very mellow.
Speaker 5: And thanks so much for joining here. Eventful Jackson Hole.
Speaker 5: Last week Tom Keen and his team were out there
Speaker 5: reporting on that. What did you take away from FRED
Speaker 5: chairman j Palse.
Speaker 4: Well, I think what was important and what the market
Speaker 4: sense was that he didn't say something he had earlier
Speaker 4: this year, started saying that we are in no rush
Speaker 4: to lower interst rates, referring to the Federal Open Market Committee,
Speaker 4: and at Jackson Hole on Friday, he did not say
Speaker 4: we are in no rush to lower interst rates. He
Speaker 4: basically said, well, we maybe were ready to make some
Speaker 4: adjustments here, and the market heard that as FED put
Speaker 4: is coming. And what was interesting is he also didn't
Speaker 4: mention that, oh, by the way, between now and the
Speaker 4: September sixteen, seventeenth meeting, there'll be more economic indicators, and
Speaker 4: those indicators are very important. There'll be two inflation indicators
Speaker 4: in peril employment, and they might change the change everybody's
Speaker 4: mind about what the FED should do next.
Speaker 5: Yeah, I mean, I think he suggested that maybe the
Speaker 5: labor dynamic of this economy is taking a little bit
Speaker 5: of precedence for the FED visa VI inflation. But boy,
Speaker 5: he can't discount inflation perking up because it just we
Speaker 5: had more tariffs announced today with the furniture. So how
Speaker 5: do you think about inflation.
Speaker 4: Well, he himself said that tariff effects on inflation can
Speaker 4: be sort of a one shot deal.
Speaker 3: Said.
Speaker 4: The problem is if the tariff implementation isn't one shot
Speaker 4: and kind of gets spread over time, that could continue
Speaker 4: to create some inflationary pressures. I think what also is
Speaker 4: missing in the discussion here and he didn't discuss it,
Speaker 4: is that there's some indications that services inflation. Maybe if
Speaker 4: it's not heating up, it's certainly not cooling off. I
Speaker 4: think what tariffs have done. If they've stalled the progress
Speaker 4: on getting down to two percent and now we're kind
Speaker 4: of stalled at three percent because durable goods inflation has
Speaker 4: come up, and that's clearly an indication of the tariffs
Speaker 4: and one of the.
Speaker 2: Great triumphs of the Ardent and folks. I'd link this
Speaker 2: with the great technical analyst Welthanka, for it is the
Speaker 2: belief in revenue growth, in earnings. I mentioned nominal GDP,
Speaker 2: the animal spirit of the nation at your Denny member
Speaker 2: at Jackson Hall that I have in eighteen twenty years before.
Speaker 2: If we get an elevated nominal GDP through real growth
Speaker 2: or inflation for a stock market, does it really matter
Speaker 2: which is pushing nominal GDP up?
Speaker 3: We just go, don't we? Yeah, revenues or revenues.
Speaker 4: The PE time Z is done in nominal terms and
Speaker 4: the E is in nominal terms, so that's correct. We
Speaker 4: look at the revenues and then we look at earnings,
Speaker 4: and the implication is profit margins. And what we see
Speaker 4: in the data is that the first and second quarter
Speaker 4: earnings were remarkably strong, much stronger than expected that they
Speaker 4: usually is a positive earning surprise, but there was particularly
Speaker 4: strong in both quarters. And now during the second quarter,
Speaker 4: we have earnings on the S and P five hundred
Speaker 4: at an all time record high, and no wonder the
Speaker 4: stock market is an all time record high. Of course,
Speaker 4: it helps that the valuation multiple is elevated at twenty two.
Speaker 4: But I'm thinking the bill market continues here on earnings,
Speaker 4: and I think that earnings will continue to push stock
Speaker 4: prices higher.
Speaker 2: Bottle that, folks, and whether you agree or disagree with
Speaker 2: Edgar Denny, go to the beginning of that conversation where
Speaker 2: he's agnosket agnostic on why we have buoyant nominal GDP.
Speaker 2: This is sacrilegion the modern days, Paul, And I'm sorry,
Speaker 2: doctor you.
Speaker 3: Denny is correct. Nominal gets everything going. That's right.
Speaker 5: So we did they have pretty strong earnings here. How
Speaker 5: do you think about our earnings strong enough to support
Speaker 5: this market going forward?
Speaker 3: Well, I think so. Here's my arithmetic on that.
Speaker 4: I think by year end we could get to sixty
Speaker 4: six hundred on the S and B five hundred, that's
Speaker 4: not that far off, and I think we can get
Speaker 4: to seventy seven hundred by the end of next year.
Speaker 3: And my assumption is that by.
Speaker 4: The end of this year, when we're thinking about what
Speaker 4: earnings could be next year, we'll be looking at analys
Speaker 4: talking about three hundred dollars per share, and then at
Speaker 4: the end of next year, I think they'll be talking
Speaker 4: about three hundred and fifty dollars per share. Multiply those
Speaker 4: by the current twenty two multiple and evaluation marketable and
Speaker 4: you get sixty six hundred and seventy seven hundred.
Speaker 3: The tech moment that we're in, ed Yard Denny.
Speaker 2: Does that change the way any of us calculate our
Speaker 2: so called terminal value? If we have a see if
Speaker 2: a one oh one five year view or seven year
Speaker 2: study of terminal value is a new terminal.
Speaker 3: Value out more, just as we think we're going to
Speaker 3: grow so much.
Speaker 4: Well, I think that if you just kind of take
Speaker 4: normal assumptions of what the economy can deliver and has
Speaker 4: delivered in the past, you get to ten thousand on
Speaker 4: the S and P five hundred by the end of
Speaker 4: the decade. That's the end of twenty twenty nine, and
Speaker 4: the assumption there is that earnings expectations get up to
Speaker 4: four hundred dollars a share. And again that's all pretty straightforward,
Speaker 4: consistent with the kind of growth rate of six seven
Speaker 4: eight percent that we've seen in earnings over the years.
Speaker 4: And if we get better than that, the market I
Speaker 4: could very well close even higher than that.
Speaker 5: And how concerned are you, if at all, about some
Speaker 5: of the concentration we see in this market. A lot
Speaker 5: of folks are saying it's just too too concentrated here
Speaker 5: with some of those big tech names.
Speaker 4: It doesn't bother me at all other than the fact
Speaker 4: that you know, it's I haven't been concentrated in my
Speaker 4: own portfolio like that. It's it's hard to be that
Speaker 4: concentrated to own thirty percent of your portfolio. And seven
Speaker 4: stocks is not exactly diversification, but it is what it is.
Speaker 4: And the ETFs that reflect the S and P five
Speaker 4: hundred obviously are in fact divers are in fact showing
Speaker 4: the concentration of thirty percent market capitalization accounted for by
Speaker 4: the seven stocks. You know, there's stock markets around the
Speaker 4: world that are very concentrated, have been concentrated for years
Speaker 4: and I think there's nothing terrible about what's happening here.
Speaker 4: And by the way, if the Fed in fact doesn't
Speaker 4: listen to me and goes ahead and lowers interest rates,
Speaker 4: then we'll continue to see the broadening in the market
Speaker 4: to smidcaps.
Speaker 3: See her Denny is a governor vice chairman. Shure it'd
Speaker 3: be too much, folks.
Speaker 2: I use the famous Secunda interpolation calculator on the Bloomberg
Speaker 2: at your Denny said, end of the decade, Paul ten thousand, SPX, folks.
Speaker 2: Are you ready. I've never done this before. I've never
Speaker 2: said this before. Paul dow seventy thousand seven zero yep,
Speaker 2: seventy thousand, end of the decade, Ed, your Denny.
Speaker 5: We're at forty five right now. Hey, Ed, talk to
Speaker 5: us about just kind of where else in the marketplace
Speaker 5: that you find value here? Is that to the except
Speaker 5: people are looking for? Hey, I just need to find
Speaker 5: some decent value here, and I don't need to chase
Speaker 5: the hottest thing out There are certain sectors out there
Speaker 5: that you like.
Speaker 3: Well.
Speaker 4: I still do prefer the large caps over the smid caps,
Speaker 4: but you know, I also pay attention to what the
Speaker 4: market's doing and respect what the market is saying, and
Speaker 4: clearly there's a move here towards cheaper stocks. So therefore
Speaker 4: people are looking at the smaller and MidCap sector. Within those,
Speaker 4: I would kind of focus on the sectors that we
Speaker 4: like in the large caps, which would be information technology,
Speaker 4: industrials and financials. So I think you can look in
Speaker 4: that part of the market cap segment to find cheaper stocks.
Speaker 4: I mean, the S and P five hundred is twenty
Speaker 4: two forward pe the large cap, the MidCap and small
Speaker 4: caps are at fourteen fifteen. So yeah, there are certainly
Speaker 4: a lot cheaper we're just kind of waiting for their
Speaker 4: earnings to improve. The problem I had with smid caps
Speaker 4: is they keep getting snapped up by the lodge caps
Speaker 4: every time. You know, you never get to own a
Speaker 4: Microsoft because before it before it becomes a Microsoft, to
Speaker 4: get snapped up by Microsoft, the leverag is up its technologies.
Speaker 5: How about in a fixed income space, ED, how do
Speaker 5: you think about just the allocation stocks and bonds these days?
Speaker 3: Well, I think bonds are basically where they should be.
Speaker 4: I think we've normalized the bond yield where it was
Speaker 4: before the Great Financial Crisis. So I'm thinking that the
Speaker 4: ten year bond yield should in fact be about four
Speaker 4: and a half percent plus minus twenty five basis points,
Speaker 4: and we've been in that range really since the beginning
Speaker 4: of the year, and I think that's kind of settling down.
Speaker 4: So if you're very a conservative investor, I think you
Speaker 4: can buy yourself a ten year treasury and feel fairly
Speaker 4: comfortable that you know, if you have to sell.
Speaker 3: It early, you're not going to take a hit at
Speaker 3: your Denny.
Speaker 2: On index funds, Paul and I were looking at the
Speaker 2: ownership of Nvidia before, and of course it's hugely index
Speaker 2: fund based. I mean, in the old days of CJ.
Speaker 2: Lawrence said, your Denny it was individual stocks. You actually
Speaker 2: know perhaps what you were buying your Denny index funds?
Speaker 2: Is it made our thinking sloppy.
Speaker 4: Well, it's you know, I have a kind of a
Speaker 4: realistic view of things, and my motto wants something like
Speaker 4: this is it is what it is. The ETFs are
Speaker 4: here to stay. I think you can certainly argue that
Speaker 4: they've kind of mucked up valuation because if somebody says,
Speaker 4: you know, I want to be in the market, and
Speaker 4: all they do is jump into the s and P
Speaker 4: five hundred, they are contributing to the high valuation of
Speaker 4: the Magnificent seven because it's so concentrated. But it is
Speaker 4: still a market. There's still plenty of people who can
Speaker 4: trade it one way or the other, and so I
Speaker 4: think the market is still efficient. Paul, get one worry
Speaker 4: in here. Max needs this morning walk exactly.
Speaker 5: Hey, yeah, talk to us about the US dollar here.
Speaker 5: The Bloomberg dollar innex is down still about nine percent
Speaker 5: from its high earlier in the year.
Speaker 6: What do you make of that?
Speaker 4: I think I'm getting a sense that I'm just one
Speaker 4: of the only bulls left on the dollar. Let's put
Speaker 4: it this way.
Speaker 3: I'm one of the only.
Speaker 4: Strategists looking at the dollar. That isn't it the bearish
Speaker 4: There's so much bearish talk about the dollar. And yet
Speaker 4: when you look at the Treasury data on monthly net
Speaker 4: capital inflows the past twelve both through June, we had
Speaker 4: a record inflow into the US equity market by foreigners
Speaker 4: that's on a net basis of over six hundred billion dollars.
Speaker 4: And you look at all capital inflows, they were one
Speaker 4: point seven trillion dollars over the past twelve months. So
Speaker 4: foreigners didn't get that that memo, that You're supposed to
Speaker 4: be selling the dollar and buying the euro, but that's
Speaker 4: what somebody's been doing that And I'm thinking that, technically speaking,
Speaker 4: were probably at the bottom of a of a channel
Speaker 4: that's still got an upward trend to it. So I'm
Speaker 4: not giving up on the dollar. I think it's still
Speaker 4: going to remain a vitally important currency.
Speaker 3: Edgar Denny, thank you so much.
Speaker 2: Just thrilled with your effort for Edgear Denny's important nodes.
Speaker 2: Go to your Denny Research. We greatly appreciate it.
Speaker 3: Stay with us.
Speaker 7: More from Bloomberg Surveillance coming up after this.
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Speaker 2: We are strong here at the end of August forget
Speaker 2: about the summer. Dildos Henry out to Trey's wanders in
Speaker 2: the Door and joins us here for an extended conversation. Okay,
Speaker 2: if you go to eight sources, there's what you do
Speaker 2: with VEDA partners. I look at Amy Walter summing it
Speaker 2: up at the political report. The Jerry Mander uproar is about,
Speaker 2: so what will Latino voters do? Who's winning the high
Speaker 2: ground for twenty six and twenty eight with Latino voters.
Speaker 8: I don't know that there's a high ground to be
Speaker 8: one right now, but there definitely is a regret trade
Speaker 8: on the Trump side, and you're seeing a migration, which
Speaker 8: is very normal for any majority party.
Speaker 9: To come back.
Speaker 8: So I wouldn't say that Democrats are winning per se,
Speaker 8: but Trump is not continuing to win.
Speaker 2: Do you look at the multiple state Jerrymander debate and
Speaker 2: say I have a winner or is it an unknown unknown?
Speaker 8: I think it has to be a permanent state of wartime,
Speaker 8: and I think that these gerrymandering redistricting cases are going
Speaker 8: to be a constant source of what we see as
Speaker 8: long as the two parties remain as competitive as they are.
Speaker 8: When you have margins that are this slim in the house,
Speaker 8: you kind of have to keep up with the Joneses,
Speaker 8: and so whatever Republicans do, Democrats are going to do,
Speaker 8: and vice versa.
Speaker 5: Henry, it it seemed like the market, at least the
Speaker 5: equity markets, to put the trade concerns kind of in
Speaker 5: a river mirror. But then I see President Trump announcing
Speaker 5: major tariff on furniture, So I forgot all about that
Speaker 5: sector stuff that could be material. Talk to us about
Speaker 5: like what's going on at the sector level, because I
Speaker 5: thought all this was in the rearview mirror.
Speaker 8: Yeah, I think the whole street would like it to
Speaker 8: be in the rear view mirror. But I honestly, and
Speaker 8: I know this is a lot to say, I think
Speaker 8: the second half of this year is going to be
Speaker 8: more volatile on tariffs than the first half of this year.
Speaker 8: And that's because as soon as this week, if not
Speaker 8: in the next couple weeks, the Federal Circuit Court of
Speaker 8: Appeals has been to rule on whether the President has
Speaker 8: the authority to maintain these AIPA tariffs, which is where
Speaker 8: we're getting two point seven trillion.
Speaker 9: Dollars worth of revenue happens.
Speaker 8: Well, it's widely anticipated that the courts are going to
Speaker 8: side with the Court of International Trade, which determined unanimously
Speaker 8: that Trump does not have the authority to impose these tariffs.
Speaker 8: So what must happen thereafter is the President has to
Speaker 8: pivot to Section two thirty two and three zero one tariffs,
Speaker 8: which is where the furniture announcement came from So for clients,
Speaker 8: what I've said for the last couple of weeks now
Speaker 8: is watch to see if the administration starts to launch
Speaker 8: new investigations on a sector basis, And they launched two
Speaker 8: last week win turbines and furniture. And it's because the
Speaker 8: Department of Justice is aware that they're very likely to
Speaker 8: lose this case and the entire IEPA structure will be upending.
Speaker 3: So is the simplistic phrase, it doesn't go to the
Speaker 3: Supreme Court?
Speaker 9: It doesn't, it does?
Speaker 3: It will?
Speaker 9: I mean that's the expectation if they choose to take
Speaker 9: it up, Yes, which they will.
Speaker 5: I mean, the Trump and the administration they're on a
Speaker 5: winning streak here. I mean, they've got tons of momentum.
Speaker 5: It just feels like, so why wouldn't they take everything
Speaker 5: to the Supreme Court.
Speaker 8: They're certainly going to try. They're obviously telegraphing that this
Speaker 8: is going to be the biggest disaster since the nineteen
Speaker 8: twenties if they don't have this continued tariff authority, which
Speaker 8: is ironic because obviously that's the last time we had
Speaker 8: tariffs of this magnitude in the first place. But the
Speaker 8: administration is definitely prepared to go to the Supreme Court,
Speaker 8: and they're very likely to lose at the Court of Appeals.
Speaker 8: And it becomes is this a constitutional legal case or
Speaker 8: is it more about politics? And that's where you're winning
Speaker 8: sort of argument comes in.
Speaker 5: So, I mean, I guess investors here we should not
Speaker 5: get too complacent. Is that kind of what we're saying here? No,
Speaker 5: because the stock market's setting all time highs here and
Speaker 5: it seems again the market seems so discounted that risk
Speaker 5: here a little bit.
Speaker 8: Well, I think the number one thing I'd say is
Speaker 8: that when Powell says we could see tariffs be a
Speaker 8: one and done kind of event, think about what's happening.
Speaker 8: We're getting deminimus changed for I don't know the fourth, fifth, sixth.
Speaker 9: Time this week.
Speaker 8: We're getting fifty percent tires put on India. Now we're
Speaker 8: having additional tires put on furniture. Those tariffs are going
Speaker 8: on countries that we already have fifty percent TIFFs on, whether.
Speaker 9: It's India, China, Vietnam.
Speaker 8: I mean, the sector analysts are the ones that are
Speaker 8: really going to struggle for the back half this year.
Speaker 2: What is Henrietta Tres's inside story on the body language
Speaker 2: from a collective White House. The perception is it's all
Speaker 2: about President Trump. I get that, But are the cabinet
Speaker 2: members and the advisors are they working?
Speaker 4: Is one.
Speaker 8: I think it's everything everywhere, all at once. If you
Speaker 8: are a cabinet secretary for Defense or the IRS or
Speaker 8: Treasury or wherever, find an issue that you can seize
Speaker 8: on and blow it out of the water, whatever you
Speaker 8: can do to draw attention to whatever your issue is
Speaker 8: of the day. We're looking for all news items, all
Speaker 8: headlines at all times.
Speaker 5: Midterms, I don't know, it's a year away. What's the
Speaker 5: current thinking about midterms?
Speaker 8: Heare current thinking is basically the default to conventional wisdom,
Speaker 8: which is that on average, the majority party loses twenty
Speaker 8: four seats in the House. And I think Democrats are
Speaker 8: more and more excited about the opportunities that they have
Speaker 8: in the United States Senate with Sheret Brown and Ohio,
Speaker 8: with Tom Tillis dropping out in North Carolina, seeing Susan
Speaker 8: Collins in Maine, they launched a new candidate in the
Speaker 8: last couple of weeks. Everybody's excited, ready to get into
Speaker 8: the election probably be a pretty high turned out event.
Speaker 9: So do you feel that the Senate's in play barely?
Speaker 8: Yeah, want to be too optimistic about it. I would
Speaker 8: anticipate that Republicans are still the majority next year.
Speaker 9: And in the House, I think the House should flip.
Speaker 8: Just statistically, they should flip by anywhere between you know,
Speaker 8: five and twenty five seats.
Speaker 3: Take us back to Civix one on one, What does
Speaker 3: that mean for the president?
Speaker 8: That means indictments, That means all day, every day, oversight, investigation,
Speaker 8: subpoenas for every cabinet, secretary, every official. You'll usually see
Speaker 8: massive turnover in an administration in that scenario, but Trump's
Speaker 8: life gets very uncomfortable, which is obviously why they're trying
Speaker 8: so hard to redistrict Texas for example.
Speaker 2: Well, you're so savvy at this, and Paul's got eighteen
Speaker 2: questions I should cut in by hand. Is he a
Speaker 2: lame duck the first Wednesday of November twenty twenty six?
Speaker 3: Yeah?
Speaker 9: Absolutely.
Speaker 8: If Democrats win the House the second they're sworn in,
Speaker 8: over it's over.
Speaker 9: Yeah.
Speaker 8: But you know, in this administration, he's doing so much
Speaker 8: with tariffs and executive actions that even though he's already
Speaker 8: a lame duck president, already the last administration that he'll have. It's,
Speaker 8: you know, guns blazing all the way, no shortage of activity.
Speaker 5: So is there any sense that the Democratic Party needs
Speaker 5: a just a fundamental redo to really challenge not just
Speaker 5: President Trump here, but you know, maybe the President Trumps supporters,
Speaker 5: that the MAGA supporters, and just that that that branch
Speaker 5: of the Republican Party which seems to be in such
Speaker 5: control of that party. Is there sense that the Democratic
Speaker 5: Party needs a complete rebrand?
Speaker 9: Absolutely?
Speaker 8: And I think they're having that fight, and they keep
Speaker 8: launching new little child balloons.
Speaker 9: Something's got to stick, but they're trying.
Speaker 3: Henrietta Trees with a.
Speaker 2: Saveta partner, thrilled to ever in the studio here to
Speaker 2: get your last week of the summer started futures at
Speaker 2: negative twenty, the Vicks of fourteen level pulls back fifteen
Speaker 2: point one four.
Speaker 3: But there is a cadence in August cadence to it
Speaker 3: right now, a lot of good economic data coming up
Speaker 3: this week. How's the mayor?
Speaker 2: Yes? Is there an the national interest in the mayor
Speaker 2: race of New York City? Mister momma DONI I guess
Speaker 2: trouble work in the bar this weekend.
Speaker 8: I saw that I don't think I could bench one
Speaker 8: hundred and thirty five. I'm pretty sure that's not what
Speaker 8: I trained for. But yeah, no, I think that there's
Speaker 8: a lot of interest because of the attention that it's
Speaker 8: captured in New York City and the number of you know,
Speaker 8: extremely high net worth, very involved social advocates in the
Speaker 8: finance world even that really want to see this race
Speaker 8: go in a different direction. When I go to client
Speaker 8: meetings and I'll be doing that all week, we talk
Speaker 8: about it a lot. People feel very intently about it
Speaker 8: and making sure that there's some other direction.
Speaker 9: People get excited.
Speaker 5: All right, it's September. I don't have to worry about
Speaker 5: my government shutting down. Soon's what's going on in Washington
Speaker 5: when the folks come back from their recess.
Speaker 9: Yeah, I do think we have to worry about a shutdown.
Speaker 8: I'm at twenty five percent ons that we shut down
Speaker 8: on October first.
Speaker 9: That's really high for me.
Speaker 8: I'm usually fade that whole noise, and I'm at five
Speaker 8: percent ordinarily.
Speaker 9: But this year, to your exact point about.
Speaker 8: Democrats not having a message, Chuck Schumer got you know,
Speaker 8: steamrolled for not shutting the government down when he had
Speaker 8: the chance. In the first quarter of this year, and
Speaker 8: I think this is the next best opportunity. It also
Speaker 8: serves to gum up the works for the majority party,
Speaker 8: so the minority generally likes to have really short lived crs.
Speaker 9: When we get back, we're.
Speaker 8: Going to debate something called the National Defense Authorization Act,
Speaker 8: which is roughly nine hundred and thirty billion dollars of
Speaker 8: spending on defense, which will complicate you know, the FEDCE
Speaker 8: nomination of Stephen Miron. There's a lot that they need
Speaker 8: to do.
Speaker 3: It goes through the pacifics of this.
Speaker 2: Again, if the Democrats are in the minority, they can
Speaker 2: affect a government shutdown.
Speaker 9: Yes, exactly, yeah to our global audience. Sure.
Speaker 8: So the senator, the Republican senators have fifty three seats,
Speaker 8: and you need sixty votes to keep the government open.
Speaker 8: And it's usually this very contentious debate, and everybody hems
Speaker 8: and haws and fights about pork barrel spending and you know,
Speaker 8: individual military bases in their distracting. You get a very protracted,
Speaker 8: long debate about how to fund the Department of Education
Speaker 8: or Justice or commerce. And the minority party is in
Speaker 8: a position of power because they're going to need to
Speaker 8: deliver probably what will be ten to twenty seats, especially
Speaker 8: on the House side. Hakiem Jeffries is going to be
Speaker 8: responsible for delivering the bulk of the votes for whatever
Speaker 8: government funding bill they passed.
Speaker 9: He doesn't want to do that right well, which which
Speaker 9: is why you shut down.
Speaker 5: But I mean, but do I want to who gets
Speaker 5: the blame for shutdown there? Is it the majority party
Speaker 5: or is it the Democrats who in fact did not
Speaker 5: deliver the votes.
Speaker 8: Historically the president takes the blame. The longest shut down
Speaker 8: in history was under President Trump. You shut it down
Speaker 8: for thirty five days in that war with Pelosi over Christmas.
Speaker 8: It's usually the Republican Party just because they have been
Speaker 8: the ones who were willing to shut it down. Democrats
Speaker 8: generally believe that the government is here to do good,
Speaker 8: so they like to keep it open.
Speaker 9: But we'll see if that holds this time around.
Speaker 2: Have you been in Washington for the National Guard? Do
Speaker 2: you have an anecdotal observation?
Speaker 8: I have not seen it, not live. I hear a
Speaker 8: lot about it. My friends are all there, but I
Speaker 8: haven't been there since it got launched.
Speaker 3: No, you're on recess, that's.
Speaker 5: I mean, it just seems like the Trump administrations on
Speaker 5: a role. Yeah, any way you look at it, He's
Speaker 5: winning almost everywhere, in every facet.
Speaker 10: Is that the feeling?
Speaker 3: Yeah?
Speaker 2: And Greg Vaillier's note this morning, he's piercing. He says
Speaker 2: there's a complete underestimation of support the nation is giving
Speaker 2: him for some of these topics.
Speaker 3: Is that true?
Speaker 8: That is absolutely true. I mean I lived down in Louisiana.
Speaker 8: I was out in the Marsh and grand Isle all weekend.
Speaker 8: I mean, you see Trump flags everywhere you go, Trump
Speaker 8: flags for twenty twenty eight.
Speaker 9: The support is very real.
Speaker 8: Even as they're paying the tariffs, even as prices remain
Speaker 8: high at grocery stores, they do not care. And all
Speaker 8: these opportunities to win are well translated.
Speaker 3: This is a joy.
Speaker 2: Come back again when you're on recess. Henrietta Trees with
Speaker 2: his holst of Veda Park and just lover work.
Speaker 3: Stay with us.
Speaker 7: More from Bloomberg Surveillance coming up after this.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 1: terminal the.
Speaker 2: UNADI Goldberg Joints US now head of the US Rates
Speaker 2: Strategy TD Securities. First thing I did this morning. It
Speaker 2: was mentioned repeatedly at Jackson Hole. The Japanese thirty year
Speaker 2: twenty year gives way, price down, yield higher, The United
Speaker 2: Kingdom thirty year guilt a new high, new recent high,
Speaker 2: going back decades and decades, price down, yield up.
Speaker 3: Can the same thing happen here?
Speaker 11: Yeah, I mean certainly could. I mean, it's why you've
Speaker 11: got the US Treasury talking about issuing a lot more
Speaker 11: at the front end. You know, they're not looking to
Speaker 11: issue a lot more thirty years. In fact, I'm surprised
Speaker 11: that Sexuary Vestment hasn't pulled out that trump card, which
Speaker 11: is basically threatening to decrease the size of twenty and
Speaker 11: thirty year auction sizes. That's something that they could undertake
Speaker 11: if they feel like supplying demands out of balance like
Speaker 11: it is in the UK in Japan, and those governments
Speaker 11: are already talking about issuing fewer long end bonds.
Speaker 5: So we heard Fed Cherman Jpal definitely go a little
Speaker 5: bit dubbish last week. How do you think the Fed's
Speaker 5: going to proceed with their easing cycle. Is it twenty
Speaker 5: five here, wait and see how the data is another
Speaker 5: twenty five, wait and see how.
Speaker 3: The data is.
Speaker 11: Cautiously, I would say, you know, it's interesting. This cutting
Speaker 11: cycle sort of breaks the mold of most cutting cycles.
Speaker 11: Usually it's you know, escalator up, elevator down on rates.
Speaker 11: This is quite the opposite. It's elevator up, escalator down.
Speaker 11: You know, they're very cautiously cutting rates. I think they
Speaker 11: do it very very gradually, you know TD we're thinking September, October,
Speaker 11: December cuts, then switching to a quarterly pace. I think
Speaker 11: we usually when they start to go, they want to
Speaker 11: go more than once. They know one twenty five basepain
Speaker 11: cut doesn't do much. But I think they're going to
Speaker 11: keep a very close eye on the data. If the
Speaker 11: data doesn't tell them that they should be cutting, they
Speaker 11: can pause, they can skip meetings. This is going to
Speaker 11: be a strange one.
Speaker 2: Is it in the market or will there be a
Speaker 2: shock in bonds? Is this unfolds like the shock we
Speaker 2: saw inequities on Friday?
Speaker 11: Well, it's eighty eighty five percent price or September right now,
Speaker 11: the pricing for the rest of the year, there's about
Speaker 11: thirty five basis points or so priced in, so call
Speaker 11: it fifty sixty percent of each of September, October, and December.
Speaker 11: The market knows that it doesn't know, and that pricing
Speaker 11: is going to get refined as we get closer. The
Speaker 11: problem is we're all looking at the same data prints
Speaker 11: over and over and over again, and every time we
Speaker 11: get print, the market adjusts and then we move on
Speaker 11: to the next one.
Speaker 2: If your scenario works out, will there be a shortage
Speaker 2: of longer dated paper?
Speaker 11: I think we're far from that, To be quite honest,
Speaker 11: I think there's We're far from a shortage of long
Speaker 11: data paper. I think that's why the Treasury is issuing
Speaker 11: in the front end. They view the demand as being
Speaker 11: one higher there. It'll bring rates down, but it'll you know,
Speaker 11: what's known as bull steep in the curve, will bring
Speaker 11: all rates lower, front end rates faster, the long end
Speaker 11: will simply lag. You know, I don't think long end
Speaker 11: rates go higher, but I think they come down.
Speaker 3: I have real trouble with this jargon, like I've flunked
Speaker 3: it three times. In the CFA is at a bull steepener?
Speaker 3: In what way is that bull meaning? Good.
Speaker 11: So all interest rates lower, but the front end really
Speaker 11: leading the way. So you'll have kind of five year
Speaker 11: and under rates really dropping down much faster because they're
Speaker 11: responding to FED rate cuts. The long end will come
Speaker 11: down as well, just because of term structure of interest rates,
Speaker 11: but it'll come down at a much lower pace, so
Speaker 11: you'll still have longer dated rates relatively elevated.
Speaker 3: I listened to that point and I still couldn't pass
Speaker 3: it on the exact.
Speaker 5: I think I think I got it. As an equity guy,
Speaker 5: I think I got it. Ten year treasury yielding four
Speaker 5: point two eighty percent?
Speaker 9: What do you think that is?
Speaker 6: Year end?
Speaker 11: We're thinking four percent by your end, so we're a
Speaker 11: little bit lower, not too much. We've got, you know,
Speaker 11: three rate cuts penciled in, like I said, and that's
Speaker 11: the thing. Most of that will be in the very
Speaker 11: front end of the curve, So five years and under,
Speaker 11: I think that's where a lot of investors are hiding
Speaker 11: out at the moment. Nobody really wants six cent out
Speaker 11: into twenty and thirty year space. But there's been some defying.
Speaker 11: You saw the twenty year auction last week went off
Speaker 11: fairly well. You know, there was a concern that nobody
Speaker 11: would want to take it. Now you're starting to see
Speaker 11: a little bit of difying depending on the valuations.
Speaker 5: So the Fed are they focusing more on the labor
Speaker 5: market at this point and feeling like inflation's kind of
Speaker 5: in check or is that how they're thinking about it.
Speaker 6: That's really the shift to jackson Hole.
Speaker 11: If you look at the minutes of the last meeting,
Speaker 11: which came out last week, and then we're instantly dated
Speaker 11: because they thought the onus is really on the inflation
Speaker 11: data and that was the risk Powell's remarks, as jackson
Speaker 11: Hole basically said, well, now the labor market's at risk.
Speaker 11: Inflation is not quite as much of a risk as
Speaker 11: we thought. It is still very much a risk. Let's
Speaker 11: be frank. The Fed is not committing to anything. They're
Speaker 11: watching everything, but it's really on the data to dissuade
Speaker 11: them from in September rather than persuading them to.
Speaker 6: Cut in September.
Speaker 3: Wait, I don't know.
Speaker 5: I just see like all these teriffs, including just the
Speaker 5: furniture thing that came out of nowhere. For at least
Speaker 5: for me, that kind of feels like inflation to me
Speaker 5: seems to be a real concern and I'd be maybe
Speaker 5: sitting on the sidelines, but I guess the pressure is
Speaker 5: for them to do something.
Speaker 11: Well, really, what really matters here is services inflation. We
Speaker 11: know goods inflation is going to be hit. We know,
Speaker 11: you know, all these trade disruptions are going to hit
Speaker 11: that good side. If that starts to translate into services,
Speaker 11: So your barber starts to increase the price of haircuts
Speaker 11: because the razors are more expensive. Right, that would be
Speaker 11: troublesome because that really feeds through into the economy in
Speaker 11: unpredicted ways.
Speaker 6: They don't know yet. The next one is going to
Speaker 6: be a little bit hot, but we're expecting that to
Speaker 6: calm down a little bit over the next couple months.
Speaker 2: One final question, TD is Toronto Dominion wonderful? Great to
Speaker 2: seats that make believe that garden you know, the TD,
Speaker 2: like it's the TD arena, right.
Speaker 3: Yeah, the food is awesome.
Speaker 2: I gave it speech up there last year and went
Speaker 2: in and like the food is like the dive divers
Speaker 2: the leaf's loss.
Speaker 3: You know it's appropriate. Canedy Are Canadians buying less US
Speaker 3: full faith and credit paper?
Speaker 11: Interestingly enough, no, we did see foreign investors generally shedding
Speaker 11: US holdings back in the April data. The data since
Speaker 11: then has basically showing you a full bown rebound. No
Speaker 11: one's really you know, that sell America trade that everyone
Speaker 11: was talking about for months and months, it's not really
Speaker 11: going on in it is the hedge America trade. That's
Speaker 11: what's happening right now. So you hedge the foreign exchange
Speaker 11: component of it. You still buy the assets, but you
Speaker 11: realize the dollar is probably going to continue to offten
Speaker 11: a little bit, and you hedge that dollar exposure.
Speaker 3: That kid McCormick at TED Securities, I don't know. I mean,
Speaker 3: are you guys modeling a week dollar?
Speaker 6: We're thinking of a slightly weaker dollar, so about three
Speaker 6: to five percent lower by your end. You're hedging out
Speaker 6: your trade exactly.
Speaker 2: That's too much thinking for one. This has been brilliant. Seriously,
Speaker 2: Goodnightni Goldberg. He is with Ted Security. He's talked her
Speaker 2: on a dominion. Can't say enough about his work on
Speaker 2: full faith you credit.
Speaker 3: Stay with us.
Speaker 7: More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live
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Speaker 5: Got some newspapers here with Lisa Matteo. Tom, I mean
Speaker 5: it's been I mean people just want this forget about
Speaker 5: all this stuff. We do want newspapers, Lisa Matteo and.
Speaker 3: Then stock Mores. It's just too much. We have to
Speaker 3: talk to man. Yeah, continue newspapers, what do you go,
Speaker 3: let's go. H.
Speaker 9: This one's from Business Insider.
Speaker 10: Okay, so it's saying a Harvard professor he's talking out
Speaker 10: about how AI is.
Speaker 9: Doing more harm than good in education.
Speaker 10: So this was a really interesting read. His name is
Speaker 10: Alex Green, and he's telling Business Insider that it's undermining
Speaker 10: the relationship between teachers and students. And the reason why
Speaker 10: is because it's saying there's this loss of fundamental communication
Speaker 10: skills like knowledge and reasoning. Like you have some students
Speaker 10: complaining that they write this twenty page paper and then
Speaker 10: all they get back is like these tiny little comments
Speaker 10: and then a mediocre grade. And they're saying that teachers
Speaker 10: are using chat GPT to review their their twenty page
Speaker 10: paper get the comments.
Speaker 9: So that's one side.
Speaker 10: Then you have the other side too, or it says
Speaker 10: that you know, the students are losing communication skills, but
Speaker 10: he also points out another factor that AI could start
Speaker 10: hurting their career opportunities too, and he said it's frustrating
Speaker 10: for him because it's his job, it's a teacher, to
Speaker 10: help them get jobs.
Speaker 9: So that's yeah.
Speaker 5: I don't know how this whole it's a giv.
Speaker 3: Education.
Speaker 5: Yeah, I don't know how they're going to manage it.
Speaker 2: I find it an immense value. But I see the kids,
Speaker 2: including various offspring I'm identified with.
Speaker 3: You know, I'm sorry, they're just not working like we work.
Speaker 10: I guess the creative aspect of it you kind of
Speaker 10: lose because you just type it in and say, hey,
Speaker 10: tell me to do this too.
Speaker 3: You got three chapters. By Monday morning, there will be
Speaker 3: a quiz and that's gone. Yeah, I don't know.
Speaker 9: Yeah, it's a different it is.
Speaker 10: Okay, this next one, I'm not sure if you've seen
Speaker 10: the movie, but a big milestone for an animated musical
Speaker 10: that was released by Netflix.
Speaker 9: Take a listen.
Speaker 10: Okay, that is Capop Demon Hunters. Okay, Ken Faliot knows
Speaker 10: all the moves to the song. Okay, So just in
Speaker 10: case you missed it, it's about this fictional female pop group.
Speaker 10: They're facing off against a rival boy band who were
Speaker 10: actually demons, so that's a competept behind. It a debut
Speaker 10: on Netflix Bake back in like June twentieth, and it
Speaker 10: did so well that Netflix decided to release it this
Speaker 10: past Saturday and Sunday in theater as a singalong. Okay,
Speaker 10: it was the top the box office in North America,
Speaker 10: if you can believe it. Variety says expected to gross
Speaker 10: up to twenty million dollars over the weekend from that.
Speaker 10: And in case you miss it, the singalong version is
Speaker 10: actually coming back to Netflix starting today. So they're really like, really,
Speaker 10: you guys know what's going off of this. Let's it's
Speaker 10: K pop Demon Hunters.
Speaker 3: We'll do their music tomorrow.
Speaker 10: But it is, but the soundtrack top Billboard and Spotify
Speaker 10: charts and it's not a real group.
Speaker 5: Now, I mean, what is the demo here?
Speaker 6: Say young kids?
Speaker 9: It's it's young kids. I think teens. Yeah, Like my
Speaker 9: sister said, her kids are into it. My daughter's not,
Speaker 9: but some some are all right. But it's a huge,
Speaker 9: huge hit, quick one. Okay.
Speaker 10: A lot of stories about the housing market, right, so
Speaker 10: this is a growing trend. More buyers are asking to
Speaker 10: stay overnight at a home before buying it. Yeah, they're
Speaker 10: like a sleepover. Okay, it's like a test drive. Okay,
Speaker 10: there are there. It could be a price for it.
Speaker 10: One buyer agreed to pay two months to one hundred
Speaker 10: and fifty thousand dollars each month that he stayed because
Speaker 10: it included the staff, to the cars that were on
Speaker 10: the property, that kind of thing. But some people just
Speaker 10: do an overnight for free, and they're saying that this
Speaker 10: is becoming like a real thing that people want to
Speaker 10: start giving a little the house.
Speaker 5: Short state, because I'm very close to the train tracks
Speaker 5: and it's not the sound of the train itself, it's
Speaker 5: the dude blowing the horn on the train.
Speaker 10: So if you would have known that beforehand, Okay, see
Speaker 10: see you learn these by staying in the house.
Speaker 3: Lisa Mateo, thank you so much. That was a golden report.
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
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Speaker 3: Inga had pried