1
00:00:05,120 --> 00:00:09,200
Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene, along

2
00:00:09,240 --> 00:00:13,080
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Leye. We bring

3
00:00:13,119 --> 00:00:17,159
Speaker 1: you insight from the best and economics, finance, investment, and

4
00:00:17,280 --> 00:00:23,280
Speaker 1: international relations. Find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg

5
00:00:23,360 --> 00:00:30,240
Speaker 1: dot Com, and of course, on the Bloomberg terminal. One

6
00:00:30,320 --> 00:00:32,760
Speaker 1: day of price action is hot to taw. We had

7
00:00:32,760 --> 00:00:35,559
Speaker 1: three big central bank decisions last week. I wouldn't run

8
00:00:35,560 --> 00:00:37,360
Speaker 1: away with a clean Nate narrative off the back of

9
00:00:37,400 --> 00:00:39,800
Speaker 1: Friday Smith. No, there is no clean Neat narrative, although

10
00:00:39,840 --> 00:00:42,120
Speaker 1: if we're going to give it one. Billy has a

11
00:00:42,200 --> 00:00:44,479
Speaker 1: bird's eye view not only on the United States and Europe,

12
00:00:44,479 --> 00:00:46,279
Speaker 1: but also in China, and I do want to get

13
00:00:46,280 --> 00:00:49,320
Speaker 1: to China, Billy chief economists at the Milkin Institute. But

14
00:00:49,360 --> 00:00:51,640
Speaker 1: before we get there, I want your sense of some

15
00:00:51,680 --> 00:00:53,320
Speaker 1: of the moves that we saw on the bond market,

16
00:00:53,320 --> 00:00:55,680
Speaker 1: the whip sawing action that we saw people pricing in

17
00:00:55,800 --> 00:00:59,160
Speaker 1: rate hikes and then frankly going absolutely in the other way.

18
00:00:59,400 --> 00:01:01,720
Speaker 1: When some play says it made sense, in others not

19
00:01:01,840 --> 00:01:04,200
Speaker 1: so much. Does this mean to you that we're going

20
00:01:04,240 --> 00:01:07,039
Speaker 1: to see slower growth. Is there any fundamental narrative that

21
00:01:07,080 --> 00:01:09,560
Speaker 1: we can pin to this. The one thing that came

22
00:01:09,560 --> 00:01:12,240
Speaker 1: out of the BUILD and Global conferences that economists and

23
00:01:12,400 --> 00:01:15,360
Speaker 1: market practitioners and portfolio managers really have a very different

24
00:01:15,440 --> 00:01:19,720
Speaker 1: view of inflation. Uh. The portfolio managers and bond managers

25
00:01:19,720 --> 00:01:22,240
Speaker 1: were all obsessed with the fact that prices are high

26
00:01:22,240 --> 00:01:24,560
Speaker 1: and can go higher. Uh. And and there's no shout

27
00:01:24,600 --> 00:01:27,880
Speaker 1: of transitory is just completely fair voting um. Economists are

28
00:01:27,880 --> 00:01:31,080
Speaker 1: still towing the fedline, which says that we have some

29
00:01:31,360 --> 00:01:35,360
Speaker 1: transitorent but persistent influences keeping prices high and and and

30
00:01:35,400 --> 00:01:37,440
Speaker 1: one of those influences is the fact that we have

31
00:01:37,480 --> 00:01:40,400
Speaker 1: these bottom nights slowing down growth. That's really the key.

32
00:01:40,600 --> 00:01:42,800
Speaker 1: How much is growth gonna be slowing down? And how

33
00:01:42,840 --> 00:01:45,319
Speaker 1: much of the future is being priced in on the

34
00:01:45,440 --> 00:01:47,520
Speaker 1: on the slow downside, and how much of it is

35
00:01:47,520 --> 00:01:50,120
Speaker 1: the persistent high price And that's where you see the

36
00:01:50,200 --> 00:01:52,640
Speaker 1: tension and bill. A lot of this is actually stemming

37
00:01:52,680 --> 00:01:55,880
Speaker 1: from what's happening in China as the Communist Party meets

38
00:01:55,880 --> 00:01:58,680
Speaker 1: for its annual plan. M I am wondering the price

39
00:01:58,760 --> 00:02:01,960
Speaker 1: increases that we're seeing or how much does this indicate

40
00:02:02,040 --> 00:02:05,480
Speaker 1: frankly a protracted increase in prices around the world that

41
00:02:05,560 --> 00:02:09,840
Speaker 1: people perhaps are not accounting for this sort of deglobalization

42
00:02:09,960 --> 00:02:13,960
Speaker 1: and frankly changed regime in China filtering into prices and

43
00:02:14,000 --> 00:02:17,800
Speaker 1: slower growth Globally, China is really being hit by confluence

44
00:02:17,840 --> 00:02:21,560
Speaker 1: of domestic and global factors. Uh. This the one thing

45
00:02:21,560 --> 00:02:23,560
Speaker 1: that we see in China which is almost a microcause

46
00:02:23,680 --> 00:02:27,320
Speaker 1: what we're seeing globally is the sense that producer prices

47
00:02:27,360 --> 00:02:30,160
Speaker 1: are double digits, arising by ten percent, and yet consumer

48
00:02:30,200 --> 00:02:33,200
Speaker 1: prices are maybees point seven percent and project to go

49
00:02:33,280 --> 00:02:36,000
Speaker 1: up to one point four percent with the new release. Uh.

50
00:02:36,040 --> 00:02:39,200
Speaker 1: And that's where you see the authoritarian control of being

51
00:02:39,200 --> 00:02:42,520
Speaker 1: able to manage retail prices and of course at the

52
00:02:42,520 --> 00:02:45,480
Speaker 1: expense of profit compression. One of the things that they're

53
00:02:45,520 --> 00:02:48,280
Speaker 1: banking on is that she jimpings leadership, and that's what

54
00:02:48,280 --> 00:02:51,480
Speaker 1: they're they're trying to have the historical review to justify

55
00:02:51,639 --> 00:02:54,560
Speaker 1: is that she jimpings leadership will produce enough productivity gains

56
00:02:54,720 --> 00:02:57,400
Speaker 1: to be able to keep margins up and to keep

57
00:02:57,760 --> 00:03:01,760
Speaker 1: Chinese companies profitable. Is that life leadership bill a growing

58
00:03:01,840 --> 00:03:06,079
Speaker 1: risk for this economy. Boy, you know, John, that everyone

59
00:03:06,200 --> 00:03:09,240
Speaker 1: is really looking towards the sense of how is it

60
00:03:09,280 --> 00:03:11,079
Speaker 1: that Hi Jinping is going to be able to pull

61
00:03:11,120 --> 00:03:15,360
Speaker 1: off the return to miles doctrines of common prosperity, creating

62
00:03:15,360 --> 00:03:17,720
Speaker 1: a moderately prosper to comedy for everyone, and at the

63
00:03:17,760 --> 00:03:22,079
Speaker 1: same time focus innovation on domestic sources and domestic sources

64
00:03:22,080 --> 00:03:24,840
Speaker 1: of growth and domestic sources for export, and at the

65
00:03:24,840 --> 00:03:29,040
Speaker 1: same and keep it done in a way that allows

66
00:03:29,200 --> 00:03:31,480
Speaker 1: the rest of the world to be part of China's growth.

67
00:03:32,040 --> 00:03:34,760
Speaker 1: The chijin Ping leadership is something that they're going to

68
00:03:34,840 --> 00:03:37,480
Speaker 1: come out with and say, the one thought we have

69
00:03:37,520 --> 00:03:40,040
Speaker 1: to keep in mind is that Mao Zedong allowed China

70
00:03:40,120 --> 00:03:43,600
Speaker 1: to stand up and unified China. Uh Doping made China rich,

71
00:03:43,720 --> 00:03:46,360
Speaker 1: But Hijin Ping, who is the one who has made

72
00:03:46,440 --> 00:03:49,440
Speaker 1: China strong and allows China to stand up among the

73
00:03:49,480 --> 00:03:52,360
Speaker 1: League of Nations as the first among equals. That's the

74
00:03:52,440 --> 00:03:55,040
Speaker 1: historical review that will come out in this meeting to

75
00:03:55,160 --> 00:03:58,960
Speaker 1: justify we need Chijimping's leadership. That's the rhetoric. And I

76
00:03:58,960 --> 00:04:02,800
Speaker 1: think the sacrifices gonna be towards focusing on domestic growth,

77
00:04:02,880 --> 00:04:05,520
Speaker 1: sacrificing innovation, and and doing it in a way that

78
00:04:05,600 --> 00:04:09,480
Speaker 1: preserves the Communist Party's power as opposed to productivity and growth.

79
00:04:09,520 --> 00:04:11,560
Speaker 1: Will you mentioned the power of the international states, what

80
00:04:11,600 --> 00:04:15,880
Speaker 1: about domestically, How strong is that power right now? You know,

81
00:04:16,320 --> 00:04:18,880
Speaker 1: there are mixed reports from the outside. It looks like

82
00:04:18,920 --> 00:04:21,160
Speaker 1: there's a unified frond. Jijan Ping has you know, got

83
00:04:21,240 --> 00:04:23,960
Speaker 1: abolished term limits and now he's in for life. But

84
00:04:24,040 --> 00:04:26,279
Speaker 1: he's worried that he's not going to get enough support

85
00:04:26,440 --> 00:04:28,719
Speaker 1: to be able to carry out these policies. It's not

86
00:04:28,800 --> 00:04:31,200
Speaker 1: so much at the top levels that he's afraid of,

87
00:04:31,360 --> 00:04:34,040
Speaker 1: but the municipal governments and and state and local governments

88
00:04:34,080 --> 00:04:37,360
Speaker 1: that have to implement these policies. There's a huge tension

89
00:04:37,440 --> 00:04:40,159
Speaker 1: right now, let's say, caused by saying the energy crisis.

90
00:04:40,760 --> 00:04:43,720
Speaker 1: The federal government sucks in all the taxes, but the

91
00:04:43,760 --> 00:04:47,120
Speaker 1: federal the local, state, local governments have to manage their

92
00:04:47,120 --> 00:04:51,160
Speaker 1: expenditures and and manage their budgets. That tension between state

93
00:04:51,200 --> 00:04:53,520
Speaker 1: and local governments and the federal government is something that

94
00:04:53,600 --> 00:04:56,560
Speaker 1: Chimping has to manage. And between now and the time

95
00:04:56,600 --> 00:05:00,919
Speaker 1: of the next UH National Parties Congress UH National People's

96
00:05:00,920 --> 00:05:03,719
Speaker 1: Congress in the next year, that has to be solidified

97
00:05:03,720 --> 00:05:06,880
Speaker 1: because he has to have a unanimous call for him

98
00:05:06,920 --> 00:05:10,640
Speaker 1: to stay in power. Do we see a slowdown in

99
00:05:10,720 --> 00:05:14,320
Speaker 1: growth that's becomes a problem for the global economy bill

100
00:05:14,560 --> 00:05:18,520
Speaker 1: in China? Oh yeah, because right now China is suffering

101
00:05:18,520 --> 00:05:21,600
Speaker 1: from an energy crisis, which is stall production and transhipments.

102
00:05:22,760 --> 00:05:26,400
Speaker 1: The notion of having a common prosperity has has has

103
00:05:26,440 --> 00:05:31,160
Speaker 1: really focused Chinese policy on hitting the most productive companies

104
00:05:31,279 --> 00:05:35,240
Speaker 1: in all of China, the internet companies. They're also hitting

105
00:05:35,240 --> 00:05:37,880
Speaker 1: on education, which is something that they've been trying to

106
00:05:38,000 --> 00:05:41,240
Speaker 1: use to try to bootstrap themselves to increase human capital.

107
00:05:41,480 --> 00:05:44,080
Speaker 1: So managing these policies is something that we in the

108
00:05:44,080 --> 00:05:46,440
Speaker 1: West would have to worry about. His investors because the

109
00:05:46,560 --> 00:05:49,000
Speaker 1: role for investment is going to be clearly not one,

110
00:05:49,160 --> 00:05:51,400
Speaker 1: not a primary role, but only in so far as

111
00:05:51,440 --> 00:05:55,279
Speaker 1: Western investment will help China become help trying to be

112
00:05:55,320 --> 00:05:58,680
Speaker 1: as manufacturing conduits to the rest of the world. If

113
00:05:58,720 --> 00:06:01,720
Speaker 1: you can help China take its innovations out to the

114
00:06:01,800 --> 00:06:04,080
Speaker 1: rest of the world, you've got a successful business. If

115
00:06:04,120 --> 00:06:07,720
Speaker 1: you're in a competing business with Chinese innovation, you're in trouble.

116
00:06:08,000 --> 00:06:12,680
Speaker 1: But longer term, I mean, does this uh have the

117
00:06:12,720 --> 00:06:17,000
Speaker 1: potential to cement sheese legacy as one of the most

118
00:06:17,080 --> 00:06:22,120
Speaker 1: successful leaders. Can he really achieve common prosperity? That's the

119
00:06:22,160 --> 00:06:25,760
Speaker 1: big bet um. We know that Shenjen, for example, is

120
00:06:25,760 --> 00:06:29,640
Speaker 1: a model city off and China's Silicon valley. It's become

121
00:06:29,720 --> 00:06:32,880
Speaker 1: successful because it was copied China's model, Hong Kong's model

122
00:06:32,880 --> 00:06:36,279
Speaker 1: of innovation, which is the experiment. Chi Jinping's latest speech

123
00:06:36,320 --> 00:06:40,040
Speaker 1: on Shinjen says, you should innovate with this eye towards

124
00:06:40,080 --> 00:06:42,640
Speaker 1: the needs of the center. In other words, they're managing

125
00:06:43,000 --> 00:06:45,960
Speaker 1: direction of innovation. They're managing the direction in which these

126
00:06:45,960 --> 00:06:48,960
Speaker 1: companies have to focus their growth. That's a dangerous game

127
00:06:49,000 --> 00:06:51,240
Speaker 1: because that may or may not work. And most of

128
00:06:51,240 --> 00:06:54,359
Speaker 1: the experience we've had with managed growth and industrial policy

129
00:06:54,560 --> 00:06:57,200
Speaker 1: is that most industrial policies fail. Height Bill, thank you,

130
00:06:57,240 --> 00:06:58,880
Speaker 1: sir as owise, it's going to catch you up, Bill,

131
00:06:58,960 --> 00:07:07,120
Speaker 1: leader of the milk An Institute. Let's get to George

132
00:07:07,120 --> 00:07:10,400
Speaker 1: Santa Velos, global head of FFX research at Deutsche Bank Adda, London.

133
00:07:10,400 --> 00:07:12,120
Speaker 1: George always going to catch up with you, sir. I

134
00:07:12,120 --> 00:07:13,880
Speaker 1: want to start right here. Is something least has been

135
00:07:13,920 --> 00:07:16,280
Speaker 1: on top of through this morning. What did you make

136
00:07:16,320 --> 00:07:18,880
Speaker 1: of the bond market move off the back of really

137
00:07:18,960 --> 00:07:22,320
Speaker 1: solid payrolls data in America. George, that makes sense to you.

138
00:07:24,000 --> 00:07:26,640
Speaker 1: Good morning, John. So, I think it's just worth taking

139
00:07:26,640 --> 00:07:29,640
Speaker 1: a step back and looking at this year and if

140
00:07:29,680 --> 00:07:31,920
Speaker 1: you think about what's been thrown at the bond market,

141
00:07:32,000 --> 00:07:35,360
Speaker 1: You've had the highest inflation in thirty years, had the

142
00:07:35,400 --> 00:07:40,640
Speaker 1: fastest growth rates essentially on record, and yet if you

143
00:07:40,680 --> 00:07:42,600
Speaker 1: take a look at the long end of the US

144
00:07:42,680 --> 00:07:46,480
Speaker 1: curve five year, five year real rates, break evens nominals,

145
00:07:46,800 --> 00:07:49,320
Speaker 1: they're basically where they were in February. And I think

146
00:07:49,360 --> 00:07:53,080
Speaker 1: that pattern we saw on Friday as part of this

147
00:07:53,160 --> 00:07:56,760
Speaker 1: theme that there's something bigger going on in the bond

148
00:07:56,840 --> 00:07:59,840
Speaker 1: market than just the inflation story. And to me, it's

149
00:08:00,000 --> 00:08:03,560
Speaker 1: in a story of excess savings, very low our star,

150
00:08:03,880 --> 00:08:06,600
Speaker 1: and I think unless we understand what is going on there,

151
00:08:06,880 --> 00:08:09,480
Speaker 1: it's going to be very, very difficult to understand anything

152
00:08:09,480 --> 00:08:11,920
Speaker 1: else in the market at the moment. Well, Georgia, it's

153
00:08:11,960 --> 00:08:13,760
Speaker 1: your job to try to understand it. So what are

154
00:08:13,800 --> 00:08:15,920
Speaker 1: some of the theories that you're coming out, especially as

155
00:08:15,920 --> 00:08:18,440
Speaker 1: we hear all these discussions that the savings rate is

156
00:08:18,480 --> 00:08:21,080
Speaker 1: coming down, that people are actually spending their savings, and

157
00:08:21,160 --> 00:08:24,200
Speaker 1: yet we are not seeing a material change in the

158
00:08:24,240 --> 00:08:27,200
Speaker 1: outlook for yields, at least as portrayed by the bond market.

159
00:08:28,640 --> 00:08:30,880
Speaker 1: So if you go back to the two thousands, you

160
00:08:30,960 --> 00:08:33,680
Speaker 1: also had the bond conundrum. Back then it was called

161
00:08:33,679 --> 00:08:37,480
Speaker 1: the Greenspan conundrum and ended up being china Um. I

162
00:08:37,520 --> 00:08:40,080
Speaker 1: think that this new source of excess savings now in

163
00:08:40,120 --> 00:08:45,400
Speaker 1: the market is essentially the fiscal stimulus we had last year.

164
00:08:45,400 --> 00:08:47,520
Speaker 1: And if you look at what's happened to that, even

165
00:08:47,559 --> 00:08:49,960
Speaker 1: though saving rates are coming down, saving rates are a

166
00:08:50,000 --> 00:08:52,880
Speaker 1: flow concept. What happened to all the money that was

167
00:08:52,920 --> 00:08:56,760
Speaker 1: given last year in payout, It's been stored in bank accounts.

168
00:08:56,800 --> 00:08:58,440
Speaker 1: And then if you look at what banks are doing,

169
00:08:58,720 --> 00:09:00,960
Speaker 1: banks are using those depart is, it's and going back

170
00:09:00,960 --> 00:09:03,400
Speaker 1: and buying fixed income again. So when I when I

171
00:09:03,440 --> 00:09:05,200
Speaker 1: look at a lot of the flow metrics, they're just

172
00:09:05,240 --> 00:09:08,560
Speaker 1: suggesting a recycling of savings. Obviously that's what's keeping asset

173
00:09:08,600 --> 00:09:12,439
Speaker 1: prices elevated. But then there's there's also this additional question

174
00:09:12,760 --> 00:09:15,480
Speaker 1: of where is trend growth, and this trend growth coming down,

175
00:09:15,800 --> 00:09:17,960
Speaker 1: meaning central banks won't be able to hike as much.

176
00:09:18,200 --> 00:09:20,599
Speaker 1: And if you look at some indicators, for example, the

177
00:09:20,720 --> 00:09:24,520
Speaker 1: spread between forward looking and backward looking UM consumer confidence

178
00:09:24,559 --> 00:09:27,880
Speaker 1: metrics that suggestive of a very very very flat curve,

179
00:09:28,200 --> 00:09:30,520
Speaker 1: and some curves are starting to invert, for example an

180
00:09:30,520 --> 00:09:34,040
Speaker 1: emerging market. So i'd say number one flow flow flow,

181
00:09:34,440 --> 00:09:36,960
Speaker 1: there's huge amount of excess saving in the system, and

182
00:09:37,080 --> 00:09:40,120
Speaker 1: number two terminal rates are also pretty low. So even

183
00:09:40,160 --> 00:09:42,200
Speaker 1: though we're pricing a lot in the front ends, you

184
00:09:42,400 --> 00:09:44,839
Speaker 1: really struggling to price the back end, George, a lot

185
00:09:44,880 --> 00:09:48,320
Speaker 1: of that those excess savings has gone into crypto. Um.

186
00:09:48,360 --> 00:09:51,280
Speaker 1: The total market cap of cryptocurrencies is now more than

187
00:09:51,360 --> 00:09:56,240
Speaker 1: three trillion dollars. What do you make as chief of

188
00:09:56,360 --> 00:10:02,520
Speaker 1: FX Research on bitcoin at sixties six grand? So crypto

189
00:10:02,600 --> 00:10:05,240
Speaker 1: is an error we're starting to look at as well. Obviously,

190
00:10:05,280 --> 00:10:09,040
Speaker 1: as the market size is growing, it becomes a bigger relevance.

191
00:10:09,520 --> 00:10:12,520
Speaker 1: But to me, the ultimate again, it's a symptom of

192
00:10:12,640 --> 00:10:15,800
Speaker 1: these excess savings in the market that are trying to

193
00:10:15,880 --> 00:10:18,200
Speaker 1: find a home. And then of course we need to

194
00:10:18,200 --> 00:10:21,719
Speaker 1: look at the impact of crypto in terms of the

195
00:10:22,000 --> 00:10:24,800
Speaker 1: structure of payment systems, and I think that's probably one

196
00:10:24,800 --> 00:10:29,160
Speaker 1: of the most underestimated areas or underappreciated areas of crypto,

197
00:10:29,240 --> 00:10:33,000
Speaker 1: these new developments and decentralized finance, they have the potential

198
00:10:33,120 --> 00:10:37,160
Speaker 1: to change the way the banking system looks in ten years,

199
00:10:37,240 --> 00:10:39,000
Speaker 1: and we're also trying to spend a bit of time

200
00:10:39,080 --> 00:10:41,480
Speaker 1: understanding that as well, George, before you run, let's talk

201
00:10:41,480 --> 00:10:43,880
Speaker 1: about a currency pave in following closely. It's cable, the

202
00:10:43,880 --> 00:10:47,360
Speaker 1: pound sterling against the US dollar one thirty five twenty six,

203
00:10:47,400 --> 00:10:50,439
Speaker 1: just looking at our forecast in our survey forecast into

204
00:10:50,480 --> 00:10:52,600
Speaker 1: year and one thirty seven, just a little bit north

205
00:10:52,640 --> 00:10:54,280
Speaker 1: of where we are at the moment, George, where are

206
00:10:54,280 --> 00:10:55,839
Speaker 1: you on that currency pay at the moment? Given what

207
00:10:55,880 --> 00:10:59,839
Speaker 1: we heard from Governor Bailey in the past week, so,

208
00:11:00,200 --> 00:11:02,920
Speaker 1: we have been negative on the pound since September. It

209
00:11:03,000 --> 00:11:05,000
Speaker 1: proved quite difficult to hold them to that view as

210
00:11:05,040 --> 00:11:07,840
Speaker 1: you saw that massive repricing in the front tense. But

211
00:11:07,880 --> 00:11:11,280
Speaker 1: the key observation here is the repricing was entirely driven

212
00:11:11,280 --> 00:11:15,600
Speaker 1: by inflation expectations. Real rates in the UK have stayed very,

213
00:11:15,720 --> 00:11:18,440
Speaker 1: very low. We're worried about the growth outlook in terms

214
00:11:18,480 --> 00:11:21,679
Speaker 1: of a big fiscal tightening that's coming in, and then

215
00:11:21,720 --> 00:11:24,160
Speaker 1: of course you have these new Brexit risks. There is

216
00:11:24,160 --> 00:11:27,520
Speaker 1: a genuine risk that the entire deal unraveled. So we

217
00:11:27,600 --> 00:11:31,000
Speaker 1: maintain a bearish view on the pound. And I think

218
00:11:31,200 --> 00:11:34,040
Speaker 1: the risks are you see Cable for example, break to

219
00:11:34,240 --> 00:11:38,000
Speaker 1: new multi week cloths incoming weeks. Interesting, Could we not

220
00:11:38,040 --> 00:11:41,439
Speaker 1: do bre exit again? I thought we were done with that, George, honestly,

221
00:11:41,520 --> 00:11:44,600
Speaker 1: George Saravellos there of Deutsche Bank out of London, in

222
00:11:44,640 --> 00:11:46,640
Speaker 1: our headquarters in the city of London too. That's good

223
00:11:46,679 --> 00:11:52,959
Speaker 1: to see. We start with John stealth As, the chief

224
00:11:53,040 --> 00:11:56,679
Speaker 1: investment strategist at Oppenheimer Asset Management. John Greater, catch up, sir,

225
00:11:57,000 --> 00:11:59,600
Speaker 1: We've got an infrastructure agreement Dan in Washington. Our head

226
00:11:59,640 --> 00:12:01,120
Speaker 1: to d C in a couple of moments to catch

227
00:12:01,200 --> 00:12:04,320
Speaker 1: up with Amrie Horden, Washington correspondent, on that the data

228
00:12:04,360 --> 00:12:06,640
Speaker 1: in America, the i S M last week, the payrolls

229
00:12:06,679 --> 00:12:09,440
Speaker 1: report is decent. The chairman his patient for an echoy

230
00:12:09,480 --> 00:12:13,320
Speaker 1: market ball. Thank you, Johnny. You're feeling good. Yeah, I'm

231
00:12:13,320 --> 00:12:15,679
Speaker 1: feeling very good about it. I think last week was

232
00:12:15,800 --> 00:12:18,480
Speaker 1: was celebration of all of the above of what you

233
00:12:18,600 --> 00:12:21,520
Speaker 1: just mentioned. But beyond that, what you've got is this

234
00:12:21,559 --> 00:12:23,880
Speaker 1: week you will probably get you know, a little bit

235
00:12:23,880 --> 00:12:27,160
Speaker 1: of testing UH, and some people take short term profits

236
00:12:27,200 --> 00:12:30,200
Speaker 1: in here, But the direction looks up from here to

237
00:12:30,280 --> 00:12:33,040
Speaker 1: the end of the year. The fundamentals are good and

238
00:12:33,160 --> 00:12:36,000
Speaker 1: we are about where we should be based on all

239
00:12:36,080 --> 00:12:40,480
Speaker 1: that happened in and since then, both positive and negative

240
00:12:41,640 --> 00:12:44,400
Speaker 1: here until the end of the year. What about after that, John,

241
00:12:44,400 --> 00:12:46,040
Speaker 1: and when people are talking about how it gets a

242
00:12:46,080 --> 00:12:49,239
Speaker 1: little bit trickier with potentially FED rate hikes, with potentially

243
00:12:49,559 --> 00:12:53,920
Speaker 1: harder comps year over year. I think, first off least

244
00:12:54,040 --> 00:12:56,600
Speaker 1: I think the market wanted to see the FED taper.

245
00:12:57,360 --> 00:13:00,320
Speaker 1: I think the market feels and at least it's got

246
00:13:00,320 --> 00:13:03,840
Speaker 1: a six month period uh next year where the Fed

247
00:13:03,880 --> 00:13:06,680
Speaker 1: will be tapering UH, and then after that they'll be

248
00:13:06,720 --> 00:13:09,160
Speaker 1: worry about where do they take the FED funds rate?

249
00:13:09,480 --> 00:13:12,240
Speaker 1: But the reality is what we look at it from

250
00:13:12,240 --> 00:13:14,440
Speaker 1: our perspective. As you know, I've been in this business

251
00:13:14,440 --> 00:13:17,080
Speaker 1: for thirty eight years. The FED is a very different

252
00:13:17,120 --> 00:13:21,599
Speaker 1: FED than it was under Arthur Burns or under a Greenspan.

253
00:13:22,000 --> 00:13:26,199
Speaker 1: This is the Bernankee legacy FED. Highly transparent, UH, it

254
00:13:26,240 --> 00:13:32,640
Speaker 1: is highie communicative. It telegraphs moves and the market denies

255
00:13:32,720 --> 00:13:35,720
Speaker 1: what the FED sees. Our market players do with their

256
00:13:35,760 --> 00:13:38,800
Speaker 1: own expense. Uh, you know, the FED is your friend

257
00:13:38,880 --> 00:13:41,240
Speaker 1: during this period. It's been the friend of Main Street

258
00:13:41,320 --> 00:13:43,760
Speaker 1: and the Wall Street. If you look at it, even

259
00:13:43,800 --> 00:13:46,800
Speaker 1: with friends like the Fed, can we really do better

260
00:13:46,800 --> 00:13:49,960
Speaker 1: than a twenty nine percent gain year to date? John,

261
00:13:49,960 --> 00:13:51,440
Speaker 1: and the S and P. I mean, that's up there

262
00:13:51,480 --> 00:13:55,320
Speaker 1: with the greatest gains of all time. Well, you know

263
00:13:55,640 --> 00:13:59,000
Speaker 1: about the everybody for against the S and P uh

264
00:13:59,080 --> 00:14:03,360
Speaker 1: six hundred small cap higher qualities small caps in the

265
00:14:03,400 --> 00:14:07,040
Speaker 1: RUSTLL two thousand has actually been beating the S and

266
00:14:07,120 --> 00:14:09,720
Speaker 1: P five hundred this year. We'd have to think, you know,

267
00:14:09,840 --> 00:14:13,160
Speaker 1: this is all about the the the better comps that

268
00:14:13,320 --> 00:14:17,000
Speaker 1: we've had for earning season. But the better comps the

269
00:14:17,080 --> 00:14:19,280
Speaker 1: reality of it, even though you know, it's a softer

270
00:14:19,440 --> 00:14:23,280
Speaker 1: hurdle or a lower hurdle than we've ever seen for

271
00:14:23,280 --> 00:14:26,400
Speaker 1: for earnings in that sense, on a comparative basis, Uh,

272
00:14:26,520 --> 00:14:29,920
Speaker 1: the things are getting better and considering the depth of

273
00:14:29,920 --> 00:14:33,400
Speaker 1: the crisis, this is remarkable, really is when we look

274
00:14:33,440 --> 00:14:35,960
Speaker 1: at John, the people talking about a re acceleration in

275
00:14:36,000 --> 00:14:37,920
Speaker 1: the economy. Its a year end into new year. I'm

276
00:14:37,960 --> 00:14:41,080
Speaker 1: hearing people talking about the return of the reopening trade

277
00:14:41,120 --> 00:14:43,560
Speaker 1: back into the small caps etcetera. What if ice he

278
00:14:43,640 --> 00:14:45,360
Speaker 1: given it to clients at a moment on that, John,

279
00:14:46,240 --> 00:14:49,160
Speaker 1: we've been saying for actually for a few years now.

280
00:14:49,240 --> 00:14:53,560
Speaker 1: We're pretty much either near or actually market cap agnostic.

281
00:14:53,920 --> 00:14:57,600
Speaker 1: So we spread the chips across the table. When it

282
00:14:57,640 --> 00:15:01,920
Speaker 1: comes to large caps, small cap mid caps. Mid caps

283
00:15:01,920 --> 00:15:05,200
Speaker 1: are terrific, we believe, and we also right now are

284
00:15:05,280 --> 00:15:10,400
Speaker 1: barbelled growth and value. Garber growth growth at a relatively

285
00:15:10,480 --> 00:15:15,040
Speaker 1: reasonable price. In growth and value, we want growthier value.

286
00:15:15,400 --> 00:15:19,200
Speaker 1: You can still get yield that you know, it's better

287
00:15:19,240 --> 00:15:23,359
Speaker 1: than the tenure with the potential for a capital appreciation.

288
00:15:23,840 --> 00:15:26,080
Speaker 1: John always going to cash out with you, sir, John, stuff,

289
00:15:26,080 --> 00:15:29,400
Speaker 1: it's there a bull from Oppenheimer Asset Management. Thank you, sir,

290
00:15:29,440 --> 00:15:37,520
Speaker 1: thank you very much joining us now, Whendy Schiller, the

291
00:15:37,600 --> 00:15:39,680
Speaker 1: Brown University. When do you want to start with? This

292
00:15:39,800 --> 00:15:42,200
Speaker 1: is something that's come up again and again, time after time,

293
00:15:42,600 --> 00:15:46,760
Speaker 1: year after year. The Republicans are very diverse as a party,

294
00:15:47,040 --> 00:15:49,240
Speaker 1: just like the Democratic Party. Said at a Holly is

295
00:15:49,240 --> 00:15:51,160
Speaker 1: nothing like said at a Romney. Yet when they go

296
00:15:51,240 --> 00:15:54,400
Speaker 1: out and speak, they're all on message. And then when

297
00:15:54,440 --> 00:15:56,200
Speaker 1: they need to pivot, they all do and they get

298
00:15:56,200 --> 00:15:58,480
Speaker 1: back on the very same message. The word echo is

299
00:15:58,480 --> 00:16:02,040
Speaker 1: phenomenal white of the Democrats when they struggle doing that,

300
00:16:02,040 --> 00:16:04,280
Speaker 1: why can't they take the win over the weekend and

301
00:16:04,440 --> 00:16:07,640
Speaker 1: run with it. Well, there's there's two reasons. One is

302
00:16:07,640 --> 00:16:11,760
Speaker 1: the Democratic Party regionally, geographically is more diverse. They represent

303
00:16:11,960 --> 00:16:15,440
Speaker 1: a more diverse set of constituents from you know, suburban

304
00:16:15,480 --> 00:16:18,840
Speaker 1: women for example, who have supported the Democratic Party recently,

305
00:16:19,400 --> 00:16:23,280
Speaker 1: to working class people all over the country, urban, some rural.

306
00:16:23,800 --> 00:16:26,640
Speaker 1: Uh so there. It's just really hard when you're representing

307
00:16:26,920 --> 00:16:29,920
Speaker 1: you know, a lot of different kinds of people with views.

308
00:16:30,000 --> 00:16:32,880
Speaker 1: So that's the one problem. And the second problem is

309
00:16:32,920 --> 00:16:34,920
Speaker 1: they believe in government and they want to do a

310
00:16:34,920 --> 00:16:37,200
Speaker 1: lot of things in government. They want the federal government

311
00:16:37,240 --> 00:16:38,800
Speaker 1: to do a lot of things, and that has a

312
00:16:38,800 --> 00:16:41,120
Speaker 1: lot of costs and benefits to different people, and it

313
00:16:41,160 --> 00:16:43,880
Speaker 1: takes a while to explain. And the you know, the

314
00:16:43,920 --> 00:16:47,120
Speaker 1: advantage of the of the Republicans is they believe in limited, small,

315
00:16:47,440 --> 00:16:50,840
Speaker 1: federal government. They don't want to do many things, so

316
00:16:50,960 --> 00:16:53,640
Speaker 1: they can obstruct and block and it's a much simpler message.

317
00:16:53,760 --> 00:16:57,040
Speaker 1: Who's getting the independent vote right now, Wendy, I think

318
00:16:57,040 --> 00:16:59,160
Speaker 1: there's no question that the independents are feeling much more

319
00:16:59,160 --> 00:17:02,240
Speaker 1: comfortable with the pub lookings now. That's probably because Trump

320
00:17:02,320 --> 00:17:04,439
Speaker 1: is out and about that. They don't see Trump as

321
00:17:04,480 --> 00:17:07,560
Speaker 1: a looming factor and getting back into power, for example,

322
00:17:07,800 --> 00:17:10,960
Speaker 1: So they're assessing Republican candidates on their own merits rather

323
00:17:11,000 --> 00:17:13,920
Speaker 1: than being associated with Trump. That's something the Democrats were

324
00:17:14,040 --> 00:17:16,480
Speaker 1: counting on. I think they have to revamp their strategy.

325
00:17:16,800 --> 00:17:19,040
Speaker 1: So you look at New Jersey, obviously, a pretty deeply

326
00:17:19,080 --> 00:17:22,159
Speaker 1: blue state took that Republican candidate quite seriously. That was

327
00:17:22,160 --> 00:17:24,280
Speaker 1: a narrow victory for the government of New Jersey and

328
00:17:24,320 --> 00:17:27,040
Speaker 1: that really shook up the Democrats. Virginia didn't shake them

329
00:17:27,080 --> 00:17:30,520
Speaker 1: up quite as much. But an incumbent, theoretically popular government

330
00:17:30,560 --> 00:17:35,720
Speaker 1: governor who's a Democrat who barely hangs on. That tells liberals, moderates,

331
00:17:35,800 --> 00:17:38,080
Speaker 1: all the Democrats that they have got to get their

332
00:17:38,119 --> 00:17:41,040
Speaker 1: act together and revamp because they're all in trouble with

333
00:17:41,080 --> 00:17:45,000
Speaker 1: that very group independence and suburban Wendy, what's the analog today,

334
00:17:45,400 --> 00:17:47,840
Speaker 1: Given the fact that we're seeing inflation as a major

335
00:17:47,960 --> 00:17:51,399
Speaker 1: voting issue for the first time in decades, how much

336
00:17:51,560 --> 00:17:54,360
Speaker 1: can we really change the equation heading into mid terms?

337
00:17:54,440 --> 00:17:57,840
Speaker 1: If gas prices stay where they are, well This isn't

338
00:17:57,840 --> 00:18:00,359
Speaker 1: really important that even you know, a local bakery from example,

339
00:18:00,440 --> 00:18:02,800
Speaker 1: I go to, you know, they raise their bread prices

340
00:18:02,800 --> 00:18:04,800
Speaker 1: by seventy five cents. They have a fairly low to

341
00:18:04,880 --> 00:18:08,040
Speaker 1: middle income constituency for that bakery, but they were hit

342
00:18:08,080 --> 00:18:10,760
Speaker 1: they had to raise their prices. So it's getting really

343
00:18:10,800 --> 00:18:14,280
Speaker 1: down to the ground, right, you know, grassroots people are

344
00:18:14,320 --> 00:18:18,080
Speaker 1: feeling inflation. It's gas prices, but it's everywhere at every level.

345
00:18:18,280 --> 00:18:20,640
Speaker 1: And that's what the Democrats haven't quite figured out how

346
00:18:20,640 --> 00:18:24,439
Speaker 1: to fix. It's their constituency that's getting hurt like everybody else.

347
00:18:24,800 --> 00:18:27,879
Speaker 1: So and people are pretty cynical and conspiracy oriented by

348
00:18:27,920 --> 00:18:30,800
Speaker 1: gas prices. You know, they always think they go up automatically.

349
00:18:30,800 --> 00:18:32,960
Speaker 1: They don't really understand why they go up. And the

350
00:18:33,000 --> 00:18:35,920
Speaker 1: easiest person to blame is the income of government. One

351
00:18:35,920 --> 00:18:40,080
Speaker 1: of the other concerns is taxes, right, rising taxes, Wendy.

352
00:18:40,200 --> 00:18:43,080
Speaker 1: And when you look at for example, to build back

353
00:18:43,160 --> 00:18:47,560
Speaker 1: better bill, it's only one point seven five trillion. But

354
00:18:47,720 --> 00:18:51,040
Speaker 1: actually if the Democrats get the majority of them get

355
00:18:51,080 --> 00:18:53,000
Speaker 1: what they want, it's gonna balloon to more of like

356
00:18:53,040 --> 00:18:55,800
Speaker 1: a four trillion dollar number, and that has to be

357
00:18:55,880 --> 00:19:00,040
Speaker 1: paid for. How do they sell these taxing crazes of

358
00:19:00,040 --> 00:19:03,880
Speaker 1: the American public. But this is a great question. First

359
00:19:03,880 --> 00:19:05,640
Speaker 1: of all, it's a ten year bill, five or ten

360
00:19:05,720 --> 00:19:08,680
Speaker 1: year bill of infrastructures five years. This is ten years,

361
00:19:08,960 --> 00:19:12,240
Speaker 1: so it's not portullion tomorrow. That's the first mistake the

362
00:19:12,240 --> 00:19:14,879
Speaker 1: Democrats have made, right, you know, ballooning this number as

363
00:19:14,920 --> 00:19:17,399
Speaker 1: if we're spending it all in one year. But the

364
00:19:17,680 --> 00:19:20,680
Speaker 1: tax situation is interesting. They may raise taxes on people

365
00:19:20,720 --> 00:19:23,320
Speaker 1: who make, you know, join a couple four thousand dollars

366
00:19:23,400 --> 00:19:28,080
Speaker 1: or more. That's sellable sort of if you include a

367
00:19:28,240 --> 00:19:30,159
Speaker 1: rise in the amount of money you can deduct to

368
00:19:30,320 --> 00:19:32,639
Speaker 1: the state and local tax deduction that Trump took away

369
00:19:32,680 --> 00:19:35,159
Speaker 1: from mostly well off blue areas in the country, the

370
00:19:35,160 --> 00:19:38,160
Speaker 1: Democrats are going to put back, and that actually hits

371
00:19:38,160 --> 00:19:41,720
Speaker 1: people as suburban voters right where they need a break.

372
00:19:42,040 --> 00:19:44,520
Speaker 1: So they're gonna offset I think some of these, particularly

373
00:19:44,640 --> 00:19:48,000
Speaker 1: the highest tax rate with some of these greater deductions.

374
00:19:48,160 --> 00:19:50,080
Speaker 1: So I think that's the messaging they're gonna try to

375
00:19:50,119 --> 00:19:53,080
Speaker 1: engage in to not lose those voters that went with

376
00:19:53,119 --> 00:19:56,040
Speaker 1: them in. You just want one more thing to come

377
00:19:56,080 --> 00:19:57,879
Speaker 1: away from this conversation with you on what do you

378
00:19:57,920 --> 00:19:59,920
Speaker 1: think number one helps to kill to getting the next

379
00:20:00,000 --> 00:20:03,040
Speaker 1: ill done is what does it come down to? It

380
00:20:03,080 --> 00:20:05,320
Speaker 1: comes down to whether there's a perceived need for all

381
00:20:05,359 --> 00:20:07,560
Speaker 1: the programs they want to engage and they want to pass.

382
00:20:07,880 --> 00:20:10,000
Speaker 1: You know, do people really want this? We saw this

383
00:20:10,040 --> 00:20:13,199
Speaker 1: with Obamacare, a bombcaster not to be quite successful. But

384
00:20:13,280 --> 00:20:16,760
Speaker 1: when it was passed in two thousand, voters didn't know

385
00:20:16,800 --> 00:20:18,399
Speaker 1: what it was and they didn't know they needed it,

386
00:20:18,440 --> 00:20:21,320
Speaker 1: and they rejected it really in the elections in and

387
00:20:21,359 --> 00:20:24,439
Speaker 1: they gave the Republicans the House back. That's the big

388
00:20:24,440 --> 00:20:26,960
Speaker 1: liability for the Democrats going in with this really big bill.

389
00:20:27,200 --> 00:20:29,080
Speaker 1: Do people know it, understand it, and do they think

390
00:20:29,080 --> 00:20:31,320
Speaker 1: they need it? And if they don't, Republicans are gonna

391
00:20:31,320 --> 00:20:34,000
Speaker 1: have a very good November Monday. Thank you. I so

392
00:20:34,040 --> 00:20:36,280
Speaker 1: always looking forward to catching up soon. Wendy showed that

393
00:20:36,520 --> 00:20:41,399
Speaker 1: a brand university. This is the Bloomberg Surveillance Podcast. Thanks

394
00:20:41,400 --> 00:20:44,720
Speaker 1: for listening. Join us live weekdays from seven to ten

395
00:20:44,800 --> 00:20:49,240
Speaker 1: am Eastern on Bloomberg Radio and on Bloomberg Television each

396
00:20:49,359 --> 00:20:53,080
Speaker 1: day from six to nine am for insight from the

397
00:20:53,119 --> 00:20:58,320
Speaker 1: best in economics, finance, investment, and international relations. And subscribe

398
00:20:58,359 --> 00:21:03,280
Speaker 1: to the Surveillance Podcast on Apple Podcast, SoundCloud, Bloomberg dot com,

399
00:21:03,359 --> 00:21:06,600
Speaker 1: and of course, on the terminal. I'm Tom keene In.

400
00:21:06,760 --> 00:21:15,920
Speaker 1: This is Bloomberg m