1 00:00:00,120 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,680 --> 00:00:15,480 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,760 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,920 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,960 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,319 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:37,240 Speaker 2: Terminal and the Bloomberg Business app. What has been happening 10 00:00:37,280 --> 00:00:39,800 Speaker 2: to the gold price is not just unusual in terms 11 00:00:39,840 --> 00:00:43,720 Speaker 2: of traditional economic and financial influences, it also goes beyond 12 00:00:44,000 --> 00:00:47,640 Speaker 2: strict geopolitical influences. The capture a broader phenomenon which is 13 00:00:47,640 --> 00:00:50,800 Speaker 2: building secular momentum. Mohammad joins us now for more. Mohammad, 14 00:00:50,840 --> 00:00:53,200 Speaker 2: Welcome to the program sir, always looking forward to roundom 15 00:00:53,240 --> 00:00:55,080 Speaker 2: out the week with you. This got a lot of 16 00:00:55,080 --> 00:00:57,880 Speaker 2: attention in the Financial Times this week. Just take it 17 00:00:57,920 --> 00:01:00,280 Speaker 2: from the top four US. What are you trying to 18 00:01:00,280 --> 00:01:03,240 Speaker 2: get people to pay attention to not just why the 19 00:01:03,360 --> 00:01:05,959 Speaker 2: move is higher, but what is behind it and how 20 00:01:06,000 --> 00:01:07,240 Speaker 2: long this has been building for. 21 00:01:09,160 --> 00:01:11,000 Speaker 3: And thanks for having me, John Lord. Gold is up 22 00:01:11,080 --> 00:01:13,840 Speaker 3: thirty two percent year to date. That's compared to twenty 23 00:01:13,880 --> 00:01:17,840 Speaker 3: two percent for the SMP. When we try to relate 24 00:01:18,440 --> 00:01:22,000 Speaker 3: the moves in goal this year to the traditional economic 25 00:01:22,120 --> 00:01:26,840 Speaker 3: and financial variables interest rates, inflation, the dollar, you know them, 26 00:01:27,520 --> 00:01:31,200 Speaker 3: the relationships have broken down. It has been a very 27 00:01:31,440 --> 00:01:34,679 Speaker 3: sort of linear move up and it's something that's continuing 28 00:01:34,720 --> 00:01:37,280 Speaker 3: for a while now. Then you ask the question who's 29 00:01:37,360 --> 00:01:41,760 Speaker 3: buying and you start getting the answer that what is 30 00:01:41,800 --> 00:01:46,000 Speaker 3: happening to gold goes well beyond economics and finance, goes 31 00:01:46,040 --> 00:01:50,760 Speaker 3: well beyond the fluctuations dull politics. There's something secular going 32 00:01:50,800 --> 00:01:55,560 Speaker 3: on and that has two elements. One is slow diversification 33 00:01:55,680 --> 00:01:59,559 Speaker 3: away from the dollar in the reserves of central banks 34 00:01:59,600 --> 00:02:04,080 Speaker 3: around the world, and the other one is a slow 35 00:02:04,240 --> 00:02:08,280 Speaker 3: diversification away from the dollar payment system. Now, the good 36 00:02:08,360 --> 00:02:12,040 Speaker 3: news for the US is both are slow because you 37 00:02:12,080 --> 00:02:15,800 Speaker 3: cannot replace something with nothing. People are still building alternatives. 38 00:02:16,160 --> 00:02:18,560 Speaker 3: The bad news is that the momentum is building up. 39 00:02:18,600 --> 00:02:21,760 Speaker 3: So this is something that people have to take seriously 40 00:02:21,800 --> 00:02:25,040 Speaker 3: in the US if they want to maintain the influence 41 00:02:25,040 --> 00:02:25,800 Speaker 3: that the US has. 42 00:02:25,720 --> 00:02:28,079 Speaker 2: Globally, Mohamma, do you think this is a fairly recent 43 00:02:28,120 --> 00:02:30,760 Speaker 2: trend or something that's been building for a number of years, 44 00:02:30,760 --> 00:02:31,760 Speaker 2: maybe even decades. 45 00:02:33,720 --> 00:02:38,840 Speaker 3: It's multi year, but it's been accelerated recently by two events. 46 00:02:38,880 --> 00:02:41,760 Speaker 3: So it's multi year because there has been some questioning 47 00:02:42,440 --> 00:02:45,400 Speaker 3: about the US being a good steward of the global system. 48 00:02:45,720 --> 00:02:48,880 Speaker 3: The global financial crisis was the first shock. The weaponization 49 00:02:49,120 --> 00:02:52,400 Speaker 3: of trade and investment was a second shock. The way 50 00:02:52,760 --> 00:02:56,160 Speaker 3: the US treated inflation was a third shock. So there's 51 00:02:56,200 --> 00:03:01,320 Speaker 3: been questions built, and we've seen little pipes being institutions, 52 00:03:01,480 --> 00:03:06,080 Speaker 3: payments system. But then there's been two more frequent, more 53 00:03:06,840 --> 00:03:11,359 Speaker 3: recent events that have accelerated that. One is Russia being 54 00:03:11,440 --> 00:03:14,840 Speaker 3: able to continue to trade and grow while being kicked 55 00:03:14,840 --> 00:03:17,520 Speaker 3: out of Swift. That has gotten a lot of people 56 00:03:17,560 --> 00:03:20,760 Speaker 3: paying attention. How did Russia do this? And of course 57 00:03:20,760 --> 00:03:24,040 Speaker 3: the answer is they built a very clunky system that 58 00:03:24,200 --> 00:03:28,160 Speaker 3: involves four other countries, but it works and they avoid 59 00:03:28,160 --> 00:03:31,480 Speaker 3: the dollar completely. That's first of all. Second development is 60 00:03:31,520 --> 00:03:34,320 Speaker 3: what's been happening in the least where the majority of 61 00:03:34,360 --> 00:03:36,960 Speaker 3: countries around the world have viewed the US as an 62 00:03:37,000 --> 00:03:41,840 Speaker 3: inconsistent backer of human rights and an inconsistent back of 63 00:03:41,880 --> 00:03:45,320 Speaker 3: international law. So you've had those two recent developments that 64 00:03:45,400 --> 00:03:48,040 Speaker 3: have accelerated something that's been in play for a while. 65 00:03:48,200 --> 00:03:50,400 Speaker 4: Mom, and I'm glad you mentioned what's going on with Russia. 66 00:03:50,480 --> 00:03:54,000 Speaker 4: John and I spoke to Deleep Singing yesterday, Biden's Deputy 67 00:03:54,040 --> 00:03:57,120 Speaker 4: National Security Advisor for International Economics, and we asked him this, 68 00:03:57,640 --> 00:04:00,400 Speaker 4: what do you say to those that say sanctions don't work, 69 00:04:00,520 --> 00:04:03,480 Speaker 4: they just create new markets? And his response is, well, 70 00:04:03,480 --> 00:04:06,480 Speaker 4: what's your alternative? You have to do something. I guess 71 00:04:06,480 --> 00:04:08,040 Speaker 4: the question is what is the alternative? 72 00:04:09,480 --> 00:04:13,640 Speaker 3: So that's a really hard question, and Marie, there is 73 00:04:13,680 --> 00:04:16,560 Speaker 3: no easy alternative. I think if you look back, those 74 00:04:16,640 --> 00:04:20,320 Speaker 3: who impose those sanctions now wish they had gone far 75 00:04:20,480 --> 00:04:25,680 Speaker 3: further straight away, that this slowgmentation of sanction has given 76 00:04:25,720 --> 00:04:29,720 Speaker 3: Russia enormous time to build alternative systems. That if you're 77 00:04:29,720 --> 00:04:33,560 Speaker 3: serious about sanctions, then you should be willing to absorb 78 00:04:33,600 --> 00:04:36,040 Speaker 3: the cost of sanctions to you, and that's something that 79 00:04:36,120 --> 00:04:38,360 Speaker 3: neither Europe nor the US was willing to do. Initially, 80 00:04:38,560 --> 00:04:41,120 Speaker 3: that were very worried about the blowback in terms of 81 00:04:41,160 --> 00:04:44,880 Speaker 3: oil prices in particular, But looking back now, I suspect 82 00:04:45,040 --> 00:04:47,240 Speaker 3: that they wish that they had gone further initially. 83 00:04:47,640 --> 00:04:49,640 Speaker 4: Well, that's part of the problem when a lot of 84 00:04:49,640 --> 00:04:51,720 Speaker 4: critics of this White House is why have a price cap, 85 00:04:51,839 --> 00:04:54,680 Speaker 4: just sanction the actual oil and gas and cut off 86 00:04:54,720 --> 00:04:57,480 Speaker 4: the funds that Putin is using to continue to wage 87 00:04:57,480 --> 00:05:00,720 Speaker 4: this war. Putin is hosting the Brick Summit. He says, 88 00:05:00,720 --> 00:05:04,400 Speaker 4: it's now a multi multipolar world is emerging. Do you agree? 89 00:05:05,880 --> 00:05:09,039 Speaker 3: So? Certainly the Bridge submit is involving more countries and 90 00:05:09,120 --> 00:05:11,880 Speaker 3: more heads of state. But to jump from there to 91 00:05:11,880 --> 00:05:15,880 Speaker 3: say a multi multipolar world, that's way too far. It 92 00:05:16,000 --> 00:05:19,120 Speaker 3: is still at a very very early stage. It's going 93 00:05:19,160 --> 00:05:23,000 Speaker 3: to be very hard to get them to unite around 94 00:05:23,320 --> 00:05:29,200 Speaker 3: certain issues. So we should pay attention. I think if 95 00:05:29,240 --> 00:05:31,360 Speaker 3: you want to worry about a multipolar world, you worry 96 00:05:31,400 --> 00:05:36,039 Speaker 3: about China. China is creating institutions. The US is not 97 00:05:36,120 --> 00:05:39,760 Speaker 3: part of the Asian Infrastructure Investment Bank, and that institution 98 00:05:39,920 --> 00:05:44,000 Speaker 3: is growing and it's collaborating with the World Bank. China 99 00:05:44,080 --> 00:05:48,920 Speaker 3: is building little pipes around the system fifty by later 100 00:05:48,920 --> 00:05:52,640 Speaker 3: of payments agreement with other countries that completely exclude the dollar. 101 00:05:53,080 --> 00:05:57,120 Speaker 3: So if you're looking at the alternative architecture, pay attention 102 00:05:57,200 --> 00:05:59,240 Speaker 3: to China. Now, I want to stress there is no 103 00:05:59,400 --> 00:06:02,359 Speaker 3: other current to replace the dollar at the core of 104 00:06:02,400 --> 00:06:05,760 Speaker 3: the system, and there's no other payment system to replace 105 00:06:05,800 --> 00:06:08,680 Speaker 3: the dollar payment system. But you can build pipes around it, 106 00:06:08,880 --> 00:06:10,719 Speaker 3: and that's what starts fragmenting the system. 107 00:06:10,800 --> 00:06:12,800 Speaker 2: And as we know, China has been buying a lot 108 00:06:12,800 --> 00:06:14,960 Speaker 2: of gold. So Mohammed, let's bring it home a little bit. 109 00:06:15,040 --> 00:06:17,400 Speaker 2: We've talked a lot about international forces, let's talk about 110 00:06:17,440 --> 00:06:18,200 Speaker 2: domestic once. 111 00:06:18,680 --> 00:06:19,680 Speaker 1: The US deficit. 112 00:06:20,120 --> 00:06:22,960 Speaker 2: Now, if you look at traditional financial indicators like the 113 00:06:23,000 --> 00:06:26,679 Speaker 2: treasury market and foreign exchange treasuries, we are seeing higher yields. 114 00:06:26,839 --> 00:06:29,080 Speaker 2: But what we're not seeing in the FX market is 115 00:06:29,120 --> 00:06:31,160 Speaker 2: a week of dollar. We're not seeing a week of dollar. 116 00:06:31,160 --> 00:06:33,040 Speaker 2: And some people might suggest that that's not a real 117 00:06:33,080 --> 00:06:35,120 Speaker 2: worry about the deficit. Then no real side of a 118 00:06:35,120 --> 00:06:37,960 Speaker 2: bias strike away from dollar denominated assets. You're not seeing 119 00:06:38,000 --> 00:06:40,640 Speaker 2: the Euro, the yen, or the Chinese. You runt much 120 00:06:40,680 --> 00:06:43,120 Speaker 2: stronger off the back of this. Now, some people might 121 00:06:43,160 --> 00:06:45,680 Speaker 2: push back and go back to your story, Mohammed and say, actually, 122 00:06:45,680 --> 00:06:50,320 Speaker 2: you are seeing the dollar depreciate, You're seeing depreciate against gold. Mohammad, 123 00:06:50,680 --> 00:06:52,800 Speaker 2: can you share your thoughts with us about whether we 124 00:06:52,839 --> 00:06:55,880 Speaker 2: are starting to see some concerns creep in about the 125 00:06:55,960 --> 00:06:58,360 Speaker 2: US deficit into financial markets. 126 00:07:00,000 --> 00:07:04,400 Speaker 3: First, let's start with currencies. Currencies are relative prices, so 127 00:07:05,640 --> 00:07:09,240 Speaker 3: you would not pick up concern about the US deficit 128 00:07:09,360 --> 00:07:12,760 Speaker 3: because other countries have their own debt and deficit problems. 129 00:07:13,160 --> 00:07:15,160 Speaker 3: You know. I go back to this notion the US 130 00:07:15,200 --> 00:07:17,840 Speaker 3: is the cleanest dirty shirt, So you will not pick 131 00:07:17,920 --> 00:07:20,720 Speaker 3: up in the currency in the relative price. So you 132 00:07:20,760 --> 00:07:22,760 Speaker 3: have to look at an absolute price. And that's why 133 00:07:22,800 --> 00:07:26,680 Speaker 3: people competit dollar to gold. Gold is a store of value. 134 00:07:26,720 --> 00:07:29,560 Speaker 3: Gold is not really a currency or unit of account. 135 00:07:29,560 --> 00:07:31,760 Speaker 3: It is a store of value. And people look at 136 00:07:31,760 --> 00:07:36,720 Speaker 3: that and say, well, relative to gold, the dollar is depreciating. Now, 137 00:07:36,760 --> 00:07:41,000 Speaker 3: why is it doing this. I talk a little bit 138 00:07:41,040 --> 00:07:44,120 Speaker 3: about that, but it's not just the impact of the debt. 139 00:07:44,120 --> 00:07:46,400 Speaker 3: I mean the impact of the debt is making people 140 00:07:46,680 --> 00:07:51,040 Speaker 3: wonder about how over the very long term. I want 141 00:07:51,040 --> 00:07:57,160 Speaker 3: to stress the credit worthiness of the US bond yield 142 00:07:57,240 --> 00:07:59,680 Speaker 3: levels are now being impacted on by four things, and 143 00:07:59,720 --> 00:08:01,560 Speaker 3: you pay. No one has been able to tell what 144 00:08:01,640 --> 00:08:04,760 Speaker 3: it is. One is US economic exceptionalism. We are simply 145 00:08:04,800 --> 00:08:09,600 Speaker 3: growing better. Look at the recent IMF revisions, US up 146 00:08:10,000 --> 00:08:13,720 Speaker 3: in terms of growth rate. Second thing is the WE calibration, 147 00:08:13,760 --> 00:08:16,840 Speaker 3: although I hate that word, the WE calibration of expectations 148 00:08:16,840 --> 00:08:19,560 Speaker 3: for the FED and the question mark as to what's 149 00:08:19,600 --> 00:08:24,520 Speaker 3: fifty basis points in September in October a mistake. The 150 00:08:24,640 --> 00:08:30,040 Speaker 3: third issue is the debt, and the fourth issue has 151 00:08:30,080 --> 00:08:33,800 Speaker 3: to do with the overall sort of confidence in there. 152 00:08:34,240 --> 00:08:36,600 Speaker 3: No one's been able to tell me John, with any 153 00:08:36,600 --> 00:08:40,600 Speaker 3: degree of confidence the relative weight of the four. So yes, 154 00:08:40,760 --> 00:08:42,439 Speaker 3: that may be an issue, but I'm not sure how 155 00:08:42,440 --> 00:08:42,880 Speaker 3: big it is. 156 00:08:43,200 --> 00:08:47,600 Speaker 4: Muhammad, you forgot one provision. One topic the US presidential election. 157 00:08:47,800 --> 00:08:50,320 Speaker 4: Is that impacting gold right now? Is that impacting bond 158 00:08:50,360 --> 00:08:51,040 Speaker 4: yield right now? 159 00:08:51,880 --> 00:08:56,120 Speaker 3: So certain people feel it's impacting bond yields and they 160 00:08:56,160 --> 00:08:58,839 Speaker 3: throw it in there, and then you ask, how is 161 00:08:58,880 --> 00:09:01,880 Speaker 3: it impacting bond yield exactly? Is it the tariffs? Is 162 00:09:01,920 --> 00:09:06,040 Speaker 3: it industrial policy? What exactly is playing out in there? 163 00:09:07,120 --> 00:09:09,840 Speaker 3: And then it's hard to answer. So I'll add it 164 00:09:09,920 --> 00:09:13,040 Speaker 3: if you want to the list. But I suspect that 165 00:09:13,040 --> 00:09:15,000 Speaker 3: that the coefficient on that is not as high as 166 00:09:15,080 --> 00:09:19,560 Speaker 3: coefficient on some other things, particularly US economic exceptionalism and 167 00:09:19,600 --> 00:09:20,240 Speaker 3: FED policy. 168 00:09:20,360 --> 00:09:23,040 Speaker 2: Mohammed. Just a final word, Yankees or Dudgers. That's so 169 00:09:23,120 --> 00:09:23,600 Speaker 2: we want to know. 170 00:09:24,320 --> 00:09:26,160 Speaker 3: And movie sitting right next to you, and she has 171 00:09:26,200 --> 00:09:29,079 Speaker 3: a she has a wonderful New York Yankees cup on there. 172 00:09:29,080 --> 00:09:31,200 Speaker 3: I told I told her in an earlier thing that 173 00:09:31,320 --> 00:09:34,120 Speaker 3: for the first time ever, I may be thinking of 174 00:09:34,200 --> 00:09:35,760 Speaker 3: abandoning the National League. 175 00:09:36,280 --> 00:09:48,439 Speaker 2: Mohammed Dalarian, Big cold there, Mohammed of Queen's College, Cambridge. 176 00:09:49,679 --> 00:09:52,480 Speaker 2: Tamala Harris and Donald Trump heading deeper into their oppositions 177 00:09:52,520 --> 00:09:55,400 Speaker 2: backyard and the penultimate week of the election race, Trump 178 00:09:55,440 --> 00:09:57,560 Speaker 2: gearing out for a rally over the weekend of Madison 179 00:09:57,600 --> 00:10:00,640 Speaker 2: Square Garden, with Harris heading to Houston, Texas, as both 180 00:10:00,679 --> 00:10:03,199 Speaker 2: candidates look to grab attention in the last few days 181 00:10:03,280 --> 00:10:05,760 Speaker 2: of the campaign. At mos of Raymond James writing, the 182 00:10:05,760 --> 00:10:08,839 Speaker 2: recent shift in sentiment and polling appears to favor former 183 00:10:08,880 --> 00:10:12,360 Speaker 2: President Donald Trump, but given the surprise results of recent elections, 184 00:10:12,400 --> 00:10:15,120 Speaker 2: we continue to view the presidential election as a US 185 00:10:15,320 --> 00:10:17,559 Speaker 2: up at John des now for more and welcome back 186 00:10:17,559 --> 00:10:19,720 Speaker 2: to the program sir. Let's talk about this trend of 187 00:10:19,720 --> 00:10:22,480 Speaker 2: going against your all positions backyard. How powerful do you 188 00:10:22,480 --> 00:10:23,280 Speaker 2: think that effort is? 189 00:10:24,360 --> 00:10:26,800 Speaker 5: So, John, I think it's an important way of trying 190 00:10:26,800 --> 00:10:30,440 Speaker 5: to nationalize the race in the final days here. Going 191 00:10:30,480 --> 00:10:33,840 Speaker 5: to Texas gives an opportunity to give the Senate candidate 192 00:10:34,440 --> 00:10:38,479 Speaker 5: that is challenging Ted Cruz Allrad a boost of support, 193 00:10:38,880 --> 00:10:41,400 Speaker 5: but it also gives an opportunity for Kamala Harris to 194 00:10:41,440 --> 00:10:44,240 Speaker 5: talk about abortion. We're going to see her next week 195 00:10:44,280 --> 00:10:47,199 Speaker 5: on the National Mall. She is in the early stage 196 00:10:47,280 --> 00:10:51,120 Speaker 5: of making that closing argument. For former President Donald Trump. 197 00:10:51,320 --> 00:10:54,440 Speaker 5: What we're going to see is the stadium tour trying 198 00:10:54,480 --> 00:10:58,160 Speaker 5: to show that his movement is truly national. So we 199 00:10:58,200 --> 00:11:01,600 Speaker 5: have had a range on the swing states, but in 200 00:11:01,640 --> 00:11:03,680 Speaker 5: the closing days here, I do think you try to 201 00:11:03,800 --> 00:11:07,520 Speaker 5: nationalize the race, make that closing arguments, and try to 202 00:11:07,520 --> 00:11:10,160 Speaker 5: have that attention in all states and try to see 203 00:11:10,160 --> 00:11:11,960 Speaker 5: if you can go on the offensive. See if there's 204 00:11:12,000 --> 00:11:15,720 Speaker 5: some state that doesn't seem to be on anyone's map right. 205 00:11:15,520 --> 00:11:16,960 Speaker 1: Now that could flip. 206 00:11:17,240 --> 00:11:19,320 Speaker 5: We saw that in twenty sixteen, we saw that in 207 00:11:19,360 --> 00:11:20,000 Speaker 5: twenty twenty. 208 00:11:20,200 --> 00:11:21,560 Speaker 1: Will we see that again here. 209 00:11:21,400 --> 00:11:24,080 Speaker 4: In twenty four For Kamala Harris, Houston makes sense because 210 00:11:24,080 --> 00:11:26,600 Speaker 4: she's going to be joined by Beyonce, and as you say, 211 00:11:26,679 --> 00:11:29,000 Speaker 4: she wants to talk with this issue of reproductive rights. 212 00:11:29,120 --> 00:11:31,959 Speaker 4: Is one of the states that has one of the 213 00:11:32,000 --> 00:11:36,080 Speaker 4: most stringent abortion roles in the country. But why is 214 00:11:36,120 --> 00:11:38,600 Speaker 4: Donald Trump once again in New York. He was in 215 00:11:38,640 --> 00:11:41,400 Speaker 4: the Bronx earlier this year. He was just in Nasau County. 216 00:11:41,679 --> 00:11:42,480 Speaker 4: Why the Garden. 217 00:11:44,040 --> 00:11:46,040 Speaker 5: Well, you know, there are a number of things about 218 00:11:46,040 --> 00:11:49,960 Speaker 5: the Trump campaign that I would not always say this 219 00:11:50,000 --> 00:11:53,440 Speaker 5: is a traditional campaign. I do think he does want 220 00:11:53,480 --> 00:11:57,040 Speaker 5: to have this rally at some of these major kind 221 00:11:57,040 --> 00:12:00,680 Speaker 5: of venues, showing that there's enthusiasm. And I think part 222 00:12:00,720 --> 00:12:03,200 Speaker 5: of what they tried to have from the Trump campaign 223 00:12:03,200 --> 00:12:06,679 Speaker 5: is saying that this is a movement that's national and 224 00:12:06,760 --> 00:12:09,760 Speaker 5: even though there are some states that they are exceptionally 225 00:12:09,840 --> 00:12:14,280 Speaker 5: unlikely to win, there is a strong basis support. New 226 00:12:14,360 --> 00:12:16,800 Speaker 5: York is also critical for the race for the House 227 00:12:16,840 --> 00:12:20,079 Speaker 5: of Representatives. We look at New York, we look at California. 228 00:12:20,200 --> 00:12:25,680 Speaker 5: There are eight Republicans in toss ups districts. If Harris 229 00:12:25,760 --> 00:12:29,680 Speaker 5: is able to mobilize her base, she's probably going to 230 00:12:29,679 --> 00:12:32,560 Speaker 5: see the Democrats win control of the House of Representatives. 231 00:12:32,760 --> 00:12:36,040 Speaker 5: If Donald Trump is able to stabilize and kind of 232 00:12:36,080 --> 00:12:38,880 Speaker 5: get his base out on Long Island in some of 233 00:12:38,880 --> 00:12:41,600 Speaker 5: the close in suburb districts. 234 00:12:41,200 --> 00:12:41,720 Speaker 1: In New York. 235 00:12:42,080 --> 00:12:45,439 Speaker 5: Maybe a couple of those Republicans hang on. Maybe Republicans 236 00:12:45,480 --> 00:12:46,920 Speaker 5: hang on to their House majority. 237 00:12:47,400 --> 00:12:51,040 Speaker 4: And you mentioned the Texas Senate race. This is Ted Cruz, 238 00:12:51,040 --> 00:12:54,199 Speaker 4: a seat that he is defending. This morning. I was 239 00:12:54,240 --> 00:12:57,200 Speaker 4: looking at polling. It's Republican backed, but they do some 240 00:12:57,280 --> 00:13:01,640 Speaker 4: good polling the Senate Opportunity Fund. They now have Nevada 241 00:13:02,080 --> 00:13:05,720 Speaker 4: Rosen and Brown tied. What are you seeing in some 242 00:13:05,880 --> 00:13:08,400 Speaker 4: of the down ballot ticket races. 243 00:13:09,600 --> 00:13:11,960 Speaker 5: They're really really close, And I think what we have 244 00:13:12,040 --> 00:13:15,000 Speaker 5: seen in Nevada is a consistent lead for Senator Rosen 245 00:13:15,080 --> 00:13:19,240 Speaker 5: throughout this cycle, but with the early voting coming in Nevada, 246 00:13:19,920 --> 00:13:23,160 Speaker 5: there's been a tilt to Republicans at least that's what 247 00:13:23,320 --> 00:13:26,360 Speaker 5: the non priorcs and prognosticators out there and some of 248 00:13:26,440 --> 00:13:30,760 Speaker 5: the press that do a great job in Nevada kind 249 00:13:30,760 --> 00:13:34,240 Speaker 5: of following that. So they're seeing a tight, maybe slight 250 00:13:34,320 --> 00:13:37,040 Speaker 5: lead for Donald Trump in Nevada. 251 00:13:37,080 --> 00:13:39,560 Speaker 1: So investing a little bit. 252 00:13:39,360 --> 00:13:43,240 Speaker 5: More seeing if Sam Brown, the Republican contender, can maybe 253 00:13:43,640 --> 00:13:46,679 Speaker 5: catch that seat, even though he's been down the whole cycle. 254 00:13:47,200 --> 00:13:49,000 Speaker 5: At this part of the game, it is also a 255 00:13:49,000 --> 00:13:53,400 Speaker 5: bit of a chess match between these campaign committees. Making 256 00:13:53,440 --> 00:13:56,440 Speaker 5: a couple million dollar investment in one seat is trying 257 00:13:56,480 --> 00:13:59,000 Speaker 5: to get that last push from donors to say, oh, 258 00:13:59,040 --> 00:14:01,960 Speaker 5: we're on the offense. People like to be with the 259 00:14:02,000 --> 00:14:04,320 Speaker 5: link winning team, and so the more you're on the 260 00:14:04,360 --> 00:14:07,679 Speaker 5: offensive going into the final stretch, the more you can 261 00:14:07,679 --> 00:14:08,200 Speaker 5: get your. 262 00:14:08,080 --> 00:14:09,160 Speaker 1: Donors to pony up. 263 00:14:09,760 --> 00:14:11,840 Speaker 5: Donors don't like to give money if they think the 264 00:14:11,880 --> 00:14:15,240 Speaker 5: campaign's losing. And so again, it's probably part of a 265 00:14:15,360 --> 00:14:19,840 Speaker 5: national strategy by both the senatorial campaign arms the Republican 266 00:14:19,880 --> 00:14:23,240 Speaker 5: and Democrats to say that there is an offensive opportunity. 267 00:14:23,400 --> 00:14:26,560 Speaker 5: Is it for Texas for Democrats? Is it for Nevada 268 00:14:26,600 --> 00:14:29,520 Speaker 5: for Republicans? Some of this is a little bit of 269 00:14:29,600 --> 00:14:32,920 Speaker 5: bluffing at this point, But we have to wait to 270 00:14:32,960 --> 00:14:35,840 Speaker 5: election day to see whose bets were actually the correct 271 00:14:35,880 --> 00:14:36,400 Speaker 5: bet to make. 272 00:14:36,600 --> 00:14:38,560 Speaker 2: And let's talk about that. How long it's going to 273 00:14:38,560 --> 00:14:40,280 Speaker 2: take to actually find out the answer to some of 274 00:14:40,280 --> 00:14:43,080 Speaker 2: the questions we have. One thing we know is that 275 00:14:43,120 --> 00:14:44,680 Speaker 2: it will take a long time to count some of 276 00:14:44,720 --> 00:14:47,160 Speaker 2: these votes. Ed, what are you telling clients about when 277 00:14:47,200 --> 00:14:49,800 Speaker 2: you expect to actually see a result to this election? 278 00:14:51,200 --> 00:14:52,520 Speaker 1: So, John, my hope. 279 00:14:52,680 --> 00:14:55,760 Speaker 5: For this election and my hope for the markets is 280 00:14:55,800 --> 00:14:58,160 Speaker 5: that what we've gone back and we've looked at many 281 00:14:58,240 --> 00:15:00,640 Speaker 5: past elections and what we're at fifth fifty in the 282 00:15:00,680 --> 00:15:03,280 Speaker 5: presidential race, and we look at a number of these. 283 00:15:03,480 --> 00:15:06,240 Speaker 1: Cases in the Senate where those are kind. 284 00:15:06,080 --> 00:15:08,840 Speaker 5: Of toss up, which implies fifty to fifty, they tend 285 00:15:08,880 --> 00:15:12,040 Speaker 5: to all break in one direction. And so if we 286 00:15:12,080 --> 00:15:15,440 Speaker 5: do have seven swing states, we could see it break 287 00:15:15,560 --> 00:15:18,840 Speaker 5: five to two six ' one in the end. And 288 00:15:18,960 --> 00:15:21,600 Speaker 5: if we are seeing that break in that direction, we 289 00:15:21,680 --> 00:15:27,040 Speaker 5: will know probably early on kind of Wednesday morning after 290 00:15:27,080 --> 00:15:30,240 Speaker 5: the election, kind of largely who's won. If it comes 291 00:15:30,280 --> 00:15:32,520 Speaker 5: down to one state, that could be a week, that 292 00:15:32,560 --> 00:15:35,960 Speaker 5: could be a couple a month or more before we 293 00:15:36,040 --> 00:15:38,200 Speaker 5: know who that is. I don't want to have that happen. 294 00:15:38,720 --> 00:15:42,200 Speaker 5: Pennsylvania was called Saturday after the election. 295 00:15:42,440 --> 00:15:44,600 Speaker 1: Nevadom was called Saturday after the election. 296 00:15:44,960 --> 00:15:48,320 Speaker 5: It was sixteen days before North Carolina was called in 297 00:15:48,400 --> 00:15:50,600 Speaker 5: the twenty twenty election. I don't want to be waiting 298 00:15:50,640 --> 00:15:53,120 Speaker 5: sixteen days. So my hope is that we do have 299 00:15:53,160 --> 00:15:56,160 Speaker 5: a decisive break on election day. It will be pretty 300 00:15:56,200 --> 00:15:59,040 Speaker 5: clear election night, if not early Wednesday morning. 301 00:15:58,920 --> 00:16:02,080 Speaker 4: And the most important county in Arizona Maricopa County. Their 302 00:16:02,120 --> 00:16:04,760 Speaker 4: officials are saying it could take ten to thirteen days. 303 00:16:04,800 --> 00:16:06,640 Speaker 4: What if this comes down to Arizona. 304 00:16:07,120 --> 00:16:10,960 Speaker 5: Well, that's the deciding factor. Where it's like we did 305 00:16:11,000 --> 00:16:13,240 Speaker 5: look back into twenty twenty. We put out a note. 306 00:16:13,400 --> 00:16:15,480 Speaker 5: A number of clients at Raymond James have been asking 307 00:16:15,560 --> 00:16:16,560 Speaker 5: us when will we know? 308 00:16:16,720 --> 00:16:19,320 Speaker 1: So we'd get a chart of every single. 309 00:16:19,080 --> 00:16:22,200 Speaker 5: State that we got the calls, and it was interesting 310 00:16:22,240 --> 00:16:25,200 Speaker 5: that most of the kind of swing states that are 311 00:16:26,040 --> 00:16:31,680 Speaker 5: being discussed this year were called Saturday or after the election. 312 00:16:32,760 --> 00:16:35,640 Speaker 5: My gut tells me that we probably will have a 313 00:16:35,720 --> 00:16:39,480 Speaker 5: clear kind of direction on election night, if not early 314 00:16:39,520 --> 00:16:43,320 Speaker 5: on Wednesday, it probably will take until a week or 315 00:16:43,360 --> 00:16:46,120 Speaker 5: more for the final certification of these results. 316 00:16:46,360 --> 00:16:48,640 Speaker 1: We just don't want to be back in the two thousand. 317 00:16:48,480 --> 00:16:51,280 Speaker 5: Land where it gets litigated or we have election denial 318 00:16:51,320 --> 00:16:55,040 Speaker 5: two point zero because we have different vote counting methods 319 00:16:55,960 --> 00:16:59,000 Speaker 5: which kind of will favor one candidate early versus the other. 320 00:16:59,240 --> 00:17:01,840 Speaker 1: There are bloom states, there are rad mirage states. 321 00:17:02,000 --> 00:17:04,080 Speaker 4: Is there any concern that it might take days for 322 00:17:04,200 --> 00:17:05,600 Speaker 4: some of the down ballot seats. 323 00:17:06,680 --> 00:17:08,240 Speaker 5: Yeah, I mean, I think we could be in a 324 00:17:08,280 --> 00:17:11,399 Speaker 5: scenario if it's a very close House or representative race. 325 00:17:12,040 --> 00:17:15,439 Speaker 5: New York and California, as I mentioned, are two states 326 00:17:15,440 --> 00:17:19,240 Speaker 5: that could determine the outcome of this majority in the 327 00:17:19,240 --> 00:17:23,560 Speaker 5: House of Representatives. New York and California are really slow 328 00:17:23,840 --> 00:17:28,720 Speaker 5: to count votes, especially on absentee ballots, and so they're 329 00:17:28,720 --> 00:17:31,240 Speaker 5: not normally swing states. They're not going to be swing 330 00:17:31,240 --> 00:17:34,000 Speaker 5: states at the presidential level, so they don't get the attention. 331 00:17:34,640 --> 00:17:38,880 Speaker 5: But on some primaries where they have gone into kind 332 00:17:38,880 --> 00:17:43,000 Speaker 5: of a very close final count, it's been weeks at 333 00:17:43,040 --> 00:17:45,040 Speaker 5: times before we know the final result of some of 334 00:17:45,040 --> 00:17:49,840 Speaker 5: those House races. It's arguably unacceptable, but that's just the 335 00:17:49,880 --> 00:17:52,280 Speaker 5: reality of the way their systems are set up. So 336 00:17:53,440 --> 00:17:57,080 Speaker 5: we probably know kind of the result of the presidential 337 00:17:57,080 --> 00:17:59,520 Speaker 5: election before we know the results of the final House 338 00:17:59,520 --> 00:18:02,600 Speaker 5: and Senate races for twenty twenty four. 339 00:18:02,640 --> 00:18:04,399 Speaker 2: Here and we all agree with you. The fact that 340 00:18:04,440 --> 00:18:06,040 Speaker 2: this has been such an issue for such a long 341 00:18:06,080 --> 00:18:09,560 Speaker 2: time and still hasn't been addressed is unacceptable, and thank you, sir. 342 00:18:09,680 --> 00:18:21,760 Speaker 2: At most of Raymond James there don't get around of table. 343 00:18:21,840 --> 00:18:24,639 Speaker 2: Sonny meskit A ups, Sonny, good morning. It's got to 344 00:18:24,680 --> 00:18:27,160 Speaker 2: see you just had a conversation with definitely about payrolls 345 00:18:27,200 --> 00:18:29,640 Speaker 2: next week, base case for her seventy k if you've 346 00:18:29,640 --> 00:18:31,520 Speaker 2: got a base case, and how difficult is it to 347 00:18:31,560 --> 00:18:33,720 Speaker 2: just pick a number at the sky and roll with 348 00:18:33,760 --> 00:18:34,520 Speaker 2: it for next week? 349 00:18:34,760 --> 00:18:37,159 Speaker 6: So tough. And we've talked about this before actually on 350 00:18:37,200 --> 00:18:41,440 Speaker 6: this program specifically, the report that we got last time 351 00:18:41,560 --> 00:18:44,440 Speaker 6: was probably the last clean report for the year given 352 00:18:44,480 --> 00:18:47,880 Speaker 6: all these hurricane effects and such. And Waller came out 353 00:18:47,920 --> 00:18:51,520 Speaker 6: recently and said, look, this next report can be down 354 00:18:51,560 --> 00:18:54,159 Speaker 6: by one hundred cage as from the weather effects. So 355 00:18:54,320 --> 00:18:56,040 Speaker 6: we just think that the Fed is going to have 356 00:18:56,080 --> 00:18:59,080 Speaker 6: to look through this one off weather impact, as horrible 357 00:18:59,119 --> 00:19:01,160 Speaker 6: as it is for the unity is that are impacted. 358 00:19:01,280 --> 00:19:03,240 Speaker 2: And actually know this treasury market has been doing much 359 00:19:03,240 --> 00:19:06,479 Speaker 2: of the same thing, lening on retail sales, upside surprise, 360 00:19:06,560 --> 00:19:08,879 Speaker 2: jobless claims back to pre hurricane levels. We've set that 361 00:19:08,960 --> 00:19:11,480 Speaker 2: repeatedly through this morning, and we've had a move on 362 00:19:11,520 --> 00:19:13,720 Speaker 2: a ten uere of something like fifty to sixty banks 363 00:19:13,800 --> 00:19:16,359 Speaker 2: Is points since the Fed cut interest rates by fifty 364 00:19:16,400 --> 00:19:19,560 Speaker 2: Banks's points. What's driving treasuries now right now for you? 365 00:19:19,560 --> 00:19:22,440 Speaker 2: Because the debate we've had on this program, data or politics, 366 00:19:22,440 --> 00:19:24,199 Speaker 2: politics or data, a mix of the two or one 367 00:19:24,280 --> 00:19:24,600 Speaker 2: or the other. 368 00:19:25,200 --> 00:19:27,560 Speaker 6: We think, look, it's three things driving rates right now. 369 00:19:27,640 --> 00:19:31,600 Speaker 6: Uncertainty around inflation, uncertainty around years from growth, with the 370 00:19:31,640 --> 00:19:35,720 Speaker 6: fiscal trajectory is from both candidates, and the broader fiscal 371 00:19:35,800 --> 00:19:38,800 Speaker 6: trajectory of the United States that may potentially come more 372 00:19:38,880 --> 00:19:42,199 Speaker 6: into a focus as we near the election. All speed to. 373 00:19:42,160 --> 00:19:46,080 Speaker 4: Political strategists who say the proposals don on Trump has 374 00:19:46,200 --> 00:19:48,399 Speaker 4: right now and he's putting out there is worse for 375 00:19:48,440 --> 00:19:51,200 Speaker 4: the deficit. You don't think that's true. You think both 376 00:19:51,280 --> 00:19:53,320 Speaker 4: camps are pretty bad for the deficit. 377 00:19:53,800 --> 00:19:56,520 Speaker 6: Well, so we actually differ a bit from consensus here. 378 00:19:56,680 --> 00:19:59,000 Speaker 6: We've done some modeling around this, and we think that 379 00:19:59,440 --> 00:20:02,959 Speaker 6: Kamala here would probably extend the deficit by about two trillion, 380 00:20:03,119 --> 00:20:05,879 Speaker 6: whereas Trump would extend the deficit by just over four trillion. 381 00:20:06,200 --> 00:20:08,119 Speaker 6: In the grand scheme of things in the wall of 382 00:20:08,160 --> 00:20:12,000 Speaker 6: the entitlements that are coming more and more into focus 383 00:20:12,000 --> 00:20:15,520 Speaker 6: for the markets, and also the TCGA extension and then 384 00:20:15,640 --> 00:20:19,040 Speaker 6: the immigration policies that would impact the labor market and 385 00:20:19,080 --> 00:20:22,560 Speaker 6: therefore inflation and growth, we think that those differences are 386 00:20:22,560 --> 00:20:23,800 Speaker 6: actually not the biggest. 387 00:20:24,080 --> 00:20:26,680 Speaker 4: So do you find it odd that the bond market 388 00:20:26,720 --> 00:20:30,880 Speaker 4: is pricing in Trump, Well, we think that. 389 00:20:30,960 --> 00:20:33,720 Speaker 6: You know, over the weekend, for example, we saw him 390 00:20:33,760 --> 00:20:37,080 Speaker 6: improving the polls, and historically Trump has done a bit 391 00:20:37,119 --> 00:20:40,239 Speaker 6: better in elections than polls have shown, so it's not 392 00:20:40,440 --> 00:20:43,639 Speaker 6: exactly unusual that the market is giving him more credence 393 00:20:43,720 --> 00:20:44,120 Speaker 6: right now. 394 00:20:44,520 --> 00:20:46,080 Speaker 2: Do you think we're WoT priced for it in the 395 00:20:46,119 --> 00:20:48,199 Speaker 2: treasury market? Because we've gone back and forth on this 396 00:20:48,280 --> 00:20:50,480 Speaker 2: a lot. There is a massive difference between a Trump 397 00:20:50,480 --> 00:20:53,480 Speaker 2: presidency and a full GOP sweep. And I've heard from 398 00:20:53,480 --> 00:20:56,440 Speaker 2: the likes of Bemos in Lincoln who suggested that outside 399 00:20:56,440 --> 00:20:59,159 Speaker 2: of a GOP sweep, it's difficult to see ten year 400 00:20:59,240 --> 00:21:02,520 Speaker 2: treasury yields anywhere between twenty thirty forty fifty basis points 401 00:21:02,600 --> 00:21:04,720 Speaker 2: higher from here. How our price do you think we 402 00:21:04,800 --> 00:21:06,639 Speaker 2: are for eather scenario at the moment? 403 00:21:07,080 --> 00:21:10,120 Speaker 6: Well, we think that fundamentally, if we start pricing in 404 00:21:10,600 --> 00:21:13,600 Speaker 6: a wide deficit like seven percent of GDP going forward 405 00:21:13,880 --> 00:21:17,280 Speaker 6: while we're growing at say, at trend of nominal four 406 00:21:17,320 --> 00:21:20,520 Speaker 6: percent GDP, if this is not a good trajectory, this 407 00:21:20,600 --> 00:21:22,639 Speaker 6: is going to drive the term premium up in and 408 00:21:22,680 --> 00:21:24,119 Speaker 6: of its zone, right, and there's going to be a 409 00:21:24,119 --> 00:21:26,640 Speaker 6: crowding out effect in terms of growth. Then on top 410 00:21:26,680 --> 00:21:28,720 Speaker 6: of it, we have the debt ceiling coming up, which 411 00:21:28,760 --> 00:21:31,399 Speaker 6: can be punted further by Congress, for example, in the 412 00:21:31,520 --> 00:21:35,879 Speaker 6: next year, but increases uncertainty therefore for businesses and households. 413 00:21:36,000 --> 00:21:38,680 Speaker 6: So there's lots going on in the treasury market right now. 414 00:21:38,800 --> 00:21:41,840 Speaker 4: When you rank twenty twenty five, and the concerns is 415 00:21:41,840 --> 00:21:45,280 Speaker 4: it deat ceiling, TCGA, then tariffs what gives you most 416 00:21:45,520 --> 00:21:46,480 Speaker 4: the cost for concern? 417 00:21:47,240 --> 00:21:51,360 Speaker 6: Well, the tariff scenario is actually very interesting scenario because 418 00:21:52,040 --> 00:21:55,800 Speaker 6: tariffs only on China would actually not in our modeling, 419 00:21:55,880 --> 00:21:58,160 Speaker 6: have as big of an impact on the US economy 420 00:21:58,200 --> 00:22:01,879 Speaker 6: specifically as all our terror Why well, because all our 421 00:22:01,920 --> 00:22:03,480 Speaker 6: tariffs would be there would be much less of a 422 00:22:03,520 --> 00:22:07,080 Speaker 6: substitution affecting more potential retaliation from the trading partners. So 423 00:22:07,119 --> 00:22:09,440 Speaker 6: it's a really a sexflationary environment and that would be 424 00:22:09,520 --> 00:22:10,200 Speaker 6: quite impactful. 425 00:22:10,200 --> 00:22:11,440 Speaker 4: But wouldn't China retaliate? 426 00:22:12,400 --> 00:22:17,119 Speaker 6: China would, but they're a smaller portion now of our economy. 427 00:22:17,200 --> 00:22:19,159 Speaker 6: The interaction with them was a smaller portion of our 428 00:22:19,200 --> 00:22:21,320 Speaker 6: economy than pre COVID. There's been a lot of a 429 00:22:21,320 --> 00:22:22,760 Speaker 6: substitution effect already. 430 00:22:23,000 --> 00:22:25,040 Speaker 2: We know how much this would hit Europe and we've 431 00:22:25,040 --> 00:22:27,199 Speaker 2: started to see a big divergence, a gap open up 432 00:22:27,200 --> 00:22:29,320 Speaker 2: between the German tenure and the US tenure as well. 433 00:22:29,720 --> 00:22:32,240 Speaker 2: Are you expected some form of divergence Street twenty twenty 434 00:22:32,240 --> 00:22:35,520 Speaker 2: five between the US and Europe across growth, across rates, 435 00:22:35,680 --> 00:22:36,960 Speaker 2: across central bank policy. 436 00:22:37,440 --> 00:22:41,200 Speaker 6: Well, we've had some divergence already, right, Other central banks 437 00:22:41,240 --> 00:22:43,280 Speaker 6: have started easing a lot earlier than we have, and 438 00:22:43,320 --> 00:22:46,280 Speaker 6: that we've had stronger growth. I think one of the 439 00:22:46,320 --> 00:22:51,040 Speaker 6: differences that we do see going forward potentially is what 440 00:22:51,160 --> 00:22:56,080 Speaker 6: happens with inflation, because we see inflation actually surprising to 441 00:22:56,080 --> 00:22:59,520 Speaker 6: the upside into the first quarter of next year, and 442 00:22:59,560 --> 00:23:01,879 Speaker 6: whether this happens in Europe or not, for example, is 443 00:23:01,880 --> 00:23:05,800 Speaker 6: a different story. We also think, interestingly that part of 444 00:23:05,840 --> 00:23:10,000 Speaker 6: the decline in inflation globally has been not necessarily the 445 00:23:10,040 --> 00:23:13,080 Speaker 6: central bank phenomenon. So that means that it's actually more 446 00:23:13,080 --> 00:23:16,280 Speaker 6: difficult for central banks to control if we see upside 447 00:23:16,320 --> 00:23:17,240 Speaker 6: surprises as well. 448 00:23:17,359 --> 00:23:19,880 Speaker 2: It's a really really important final point. Sondra is great 449 00:23:19,880 --> 00:23:23,199 Speaker 2: to see you, Sonya Mskin of UBS. This is the 450 00:23:23,240 --> 00:23:27,480 Speaker 2: Bloomberg Surveillance Podcast, bringing you the best in markets, economics, 451 00:23:27,480 --> 00:23:30,440 Speaker 2: and geopolitics. You can Watch the show live on Bloomberg 452 00:23:30,480 --> 00:23:33,640 Speaker 2: TV weekday mornings from six am to nine am Eastern. 453 00:23:33,920 --> 00:23:37,280 Speaker 2: Subscribe to the podcast on Apple, Spotify, or anywhere else 454 00:23:37,320 --> 00:23:40,000 Speaker 2: you listen, and as always, on the Bloomberg Terminal and 455 00:23:40,040 --> 00:23:41,200 Speaker 2: the Bloomberg Business app.