1 00:00:00,120 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 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 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,240 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 --> 00:00:36,879 Speaker 2: Terminal and the Bloomberg Business app. We begin with our 10 00:00:36,880 --> 00:00:40,280 Speaker 2: top story, the Groat rotation taking a breather going into 11 00:00:40,320 --> 00:00:43,400 Speaker 2: Microsoft earnings after the closing bow. Bob Dollar Crossmark writing 12 00:00:43,479 --> 00:00:47,000 Speaker 2: this small cats typically outperform in the early stages of 13 00:00:47,120 --> 00:00:51,080 Speaker 2: economic expansions. We caution against chasing these gains at such 14 00:00:51,080 --> 00:00:54,280 Speaker 2: a late stage of the cycle, even though cheap valuations 15 00:00:54,320 --> 00:00:57,720 Speaker 2: may offer some cushion. Bob joined us now for more Bob, 16 00:00:57,720 --> 00:00:59,360 Speaker 2: what ift to catch up with you, buddy. As always, 17 00:00:59,400 --> 00:01:02,360 Speaker 2: let's look ahead of the earnings later. Microsoft kicks it 18 00:01:02,400 --> 00:01:05,280 Speaker 2: all off for the Max seven numbers that report this week. 19 00:01:05,319 --> 00:01:07,400 Speaker 2: What are you looking for and how do you gauge 20 00:01:07,440 --> 00:01:10,200 Speaker 2: what investors are woulding to reward and what they seem 21 00:01:10,319 --> 00:01:12,639 Speaker 2: like they want to punish over the last few weeks. 22 00:01:13,440 --> 00:01:16,560 Speaker 3: I think the bar is high for these companies, Jonathan, 23 00:01:17,040 --> 00:01:19,840 Speaker 3: and they're going to have to make those numbers more 24 00:01:19,920 --> 00:01:22,800 Speaker 3: likely exceed them for the stocks to be okay. 25 00:01:23,440 --> 00:01:25,160 Speaker 4: People are looking for excuses to. 26 00:01:25,120 --> 00:01:28,840 Speaker 3: Trim these names and oh they just reported, Yeah, I 27 00:01:28,840 --> 00:01:30,199 Speaker 3: own some of them, let. 28 00:01:30,120 --> 00:01:30,640 Speaker 4: Me trim it. 29 00:01:30,720 --> 00:01:35,120 Speaker 3: I think that's the general trend in these names expectations. 30 00:01:35,160 --> 00:01:39,000 Speaker 2: I Danives of Wetbush with even bigger expectations, is looking 31 00:01:39,000 --> 00:01:41,360 Speaker 2: for an even bigger rally in big tech. We believe 32 00:01:41,440 --> 00:01:44,039 Speaker 2: this week and the rest of two Q earnings will 33 00:01:44,080 --> 00:01:46,679 Speaker 2: be a major positive catalyst for the tech sector. We 34 00:01:46,760 --> 00:01:49,360 Speaker 2: expect tech stocks to be up another fifteen to twenty 35 00:01:49,360 --> 00:01:52,040 Speaker 2: percent for the year, adding to the robust tech gains 36 00:01:52,280 --> 00:01:54,840 Speaker 2: in the first half of twenty four Bob, what would 37 00:01:54,840 --> 00:01:59,560 Speaker 2: deliver fifteen to twenty percent upside for tech stocks? Where's 38 00:01:59,560 --> 00:02:00,480 Speaker 2: that going to come from? 39 00:02:00,920 --> 00:02:03,880 Speaker 3: There in lies the debate that we're going to have 40 00:02:04,000 --> 00:02:08,120 Speaker 3: to have a further leg in AI. We're going to 41 00:02:08,200 --> 00:02:13,639 Speaker 3: have to have exceeding earnings expectations. Earning estimates moving up 42 00:02:14,040 --> 00:02:16,320 Speaker 3: in my view, to get another fifteen to twenty percent. 43 00:02:16,360 --> 00:02:17,800 Speaker 4: People own these stocks. 44 00:02:18,040 --> 00:02:21,600 Speaker 3: It's not like they're undiscovered, so to buy more of them, 45 00:02:21,919 --> 00:02:24,480 Speaker 3: we're going to need better news that it's hard for 46 00:02:24,480 --> 00:02:25,440 Speaker 3: you and media anticipate. 47 00:02:25,520 --> 00:02:27,359 Speaker 5: We should talk about the flip side of that, which 48 00:02:27,440 --> 00:02:29,680 Speaker 5: is how much more downside could there potentially be in 49 00:02:29,720 --> 00:02:32,520 Speaker 5: the tech sector. John was talking about Bank of America research, 50 00:02:32,800 --> 00:02:36,239 Speaker 5: saying time to show monetization. Since the first quarter, there 51 00:02:36,360 --> 00:02:41,160 Speaker 5: is nine dollars spended in capex revision for every one 52 00:02:41,240 --> 00:02:44,280 Speaker 5: dollar in additional sales of hyperscalers. In other words, we're 53 00:02:44,280 --> 00:02:47,440 Speaker 5: not seeing it translate into profits. So directly, are you 54 00:02:47,520 --> 00:02:49,639 Speaker 5: seeing that as a reason to sell some of these 55 00:02:49,639 --> 00:02:52,119 Speaker 5: stocks in an ongoing basis or do you think that's 56 00:02:52,160 --> 00:02:55,079 Speaker 5: been basically what's behind the declines that we've seen so far. 57 00:02:56,040 --> 00:02:58,560 Speaker 3: I think that's what's behind the decline. That doesn't mean 58 00:02:58,600 --> 00:02:59,760 Speaker 3: there isn't more of that to. 59 00:03:01,440 --> 00:03:01,840 Speaker 4: Repeat. 60 00:03:02,080 --> 00:03:05,000 Speaker 3: The people have big profits in these stocks and they 61 00:03:05,080 --> 00:03:07,720 Speaker 3: see other stocks beginning to move and sort of trim 62 00:03:07,760 --> 00:03:09,120 Speaker 3: these to buy some of the others. 63 00:03:09,480 --> 00:03:11,400 Speaker 4: I'm not convinced that rotation. 64 00:03:11,160 --> 00:03:14,040 Speaker 3: Is over, which generally means for a sloppy market as 65 00:03:14,080 --> 00:03:17,200 Speaker 3: we've seen this rotation here in the months of July. 66 00:03:17,360 --> 00:03:20,400 Speaker 3: The market's kind of move sidewise as people are trying 67 00:03:20,400 --> 00:03:22,880 Speaker 3: to figure all out. As you used the word earlier, 68 00:03:23,240 --> 00:03:24,040 Speaker 3: it's confusing. 69 00:03:24,520 --> 00:03:26,880 Speaker 5: Yes, that's the story of the entire year. In the 70 00:03:26,919 --> 00:03:29,239 Speaker 5: past couple of years, there is this issue. You said 71 00:03:29,240 --> 00:03:32,520 Speaker 5: that you're not convinced that the rotation is over. The 72 00:03:32,639 --> 00:03:35,520 Speaker 5: rotation has been curious because it's been marked by the 73 00:03:35,560 --> 00:03:39,120 Speaker 5: companies that are most leveraged to the economic cycle at 74 00:03:39,120 --> 00:03:42,280 Speaker 5: a time when we're talking about weakening, we're talking about cooling, 75 00:03:42,480 --> 00:03:45,800 Speaker 5: we're talking about companies disappointing, and talking about consumers that 76 00:03:45,840 --> 00:03:47,120 Speaker 5: are very pre sensitive. 77 00:03:47,440 --> 00:03:48,440 Speaker 6: How does that make sense? 78 00:03:49,400 --> 00:03:51,160 Speaker 4: It doesn't in my view. 79 00:03:51,200 --> 00:03:54,360 Speaker 3: I agree with your set of statements and trying to 80 00:03:54,360 --> 00:03:58,240 Speaker 3: square the circle. Look, people have gotten very complacent. In 81 00:03:58,320 --> 00:04:01,640 Speaker 3: my view, the economy is just fine. Earnings will be 82 00:04:01,760 --> 00:04:05,600 Speaker 3: good to Fed'll get inflation down to two. I'll hold 83 00:04:05,640 --> 00:04:08,720 Speaker 3: my nose and buy stocks at twenty two times forward 84 00:04:08,760 --> 00:04:11,960 Speaker 3: twenty six times trailing earnings. 85 00:04:11,720 --> 00:04:14,040 Speaker 4: That's our hard road for me to ride, I. 86 00:04:14,080 --> 00:04:16,360 Speaker 2: Have to say, Bob, I think everyone once said both ways. 87 00:04:16,400 --> 00:04:18,480 Speaker 2: When inflation was up and rates for climbing, we were 88 00:04:18,520 --> 00:04:21,880 Speaker 2: talking about wider margins, better margins because they had pricing power. 89 00:04:22,200 --> 00:04:25,040 Speaker 2: Doesn't the opposite apply here, Bob, that when you start 90 00:04:25,080 --> 00:04:29,159 Speaker 2: to see disinflation, even more disinflation in our future, it 91 00:04:29,279 --> 00:04:31,680 Speaker 2: just means a loss of pricing power, which goes back 92 00:04:31,720 --> 00:04:33,640 Speaker 2: to the point you're trying to make, which ultimately is 93 00:04:34,040 --> 00:04:37,560 Speaker 2: why by cyclicals here. Isn't that the biggest headwind to that? 94 00:04:37,600 --> 00:04:37,920 Speaker 7: Bet? 95 00:04:38,520 --> 00:04:39,360 Speaker 4: I think that's right. 96 00:04:39,440 --> 00:04:41,400 Speaker 3: And the companies are waking up to the fact that 97 00:04:41,440 --> 00:04:44,800 Speaker 3: they've moved prices up and they're starting to get resistance, 98 00:04:46,240 --> 00:04:50,120 Speaker 3: particularly in the mead income consumers, and that's new over 99 00:04:50,120 --> 00:04:51,600 Speaker 3: the last bunch of weeks. 100 00:04:51,800 --> 00:04:54,360 Speaker 4: And that can't be sustained without more weakening. So what 101 00:04:54,360 --> 00:04:54,880 Speaker 4: do they do. 102 00:04:55,200 --> 00:04:57,840 Speaker 3: They say, we got to cut costs somewhere, and maybe 103 00:04:57,880 --> 00:04:59,840 Speaker 3: we won't hire a worker or two, maybe we'll let 104 00:04:59,839 --> 00:05:02,200 Speaker 3: it or two go. And that's why you're starting to 105 00:05:02,240 --> 00:05:04,200 Speaker 3: get some sloppiness and the employment data. 106 00:05:04,279 --> 00:05:06,400 Speaker 2: So we've got a decent idea of what you don't like, 107 00:05:06,640 --> 00:05:08,400 Speaker 2: what you want to stay away from. Give us an 108 00:05:08,440 --> 00:05:11,640 Speaker 2: idea of what you do like, but you gravitating towards I. 109 00:05:11,760 --> 00:05:17,359 Speaker 3: Come back to the common factors of earnings, persistence, earnings predictability, 110 00:05:17,480 --> 00:05:21,239 Speaker 3: and strong free cash flow. That's my defense, if you will, 111 00:05:21,680 --> 00:05:23,479 Speaker 3: against the kinds of things we're. 112 00:05:23,279 --> 00:05:26,279 Speaker 4: Talking about here. Those stocks have done fine as the 113 00:05:26,320 --> 00:05:27,280 Speaker 4: market has moved up. 114 00:05:27,320 --> 00:05:29,320 Speaker 3: I think they'll show their stuff even more if we 115 00:05:29,360 --> 00:05:32,000 Speaker 3: get into a selling squall or some sort of sloppy 116 00:05:32,040 --> 00:05:32,800 Speaker 3: sidewise action. 117 00:05:33,160 --> 00:05:35,839 Speaker 5: Is there a reason why you just are focusing on stocks? 118 00:05:35,880 --> 00:05:37,680 Speaker 5: Is that just because that was the conversation? Are you 119 00:05:37,720 --> 00:05:40,040 Speaker 5: just trying to avoid bonds that stocks are both the 120 00:05:40,160 --> 00:05:43,360 Speaker 5: risk factor as well as the havens factor depending on. 121 00:05:43,240 --> 00:05:47,159 Speaker 3: Where you go, only because that's the conversation. I would 122 00:05:47,200 --> 00:05:51,880 Speaker 3: own some bonds here. Look, the economy is slowing. While 123 00:05:52,160 --> 00:05:55,080 Speaker 3: second quarter earnings have been just fine, third and fourth 124 00:05:55,200 --> 00:05:58,880 Speaker 3: quarter earnings estimate revisions have been to the downside, So 125 00:05:59,000 --> 00:06:01,400 Speaker 3: the sloppiness is kicking in. And when that happens, you 126 00:06:01,520 --> 00:06:03,280 Speaker 3: probably won't want to own a bond or two. 127 00:06:04,040 --> 00:06:06,280 Speaker 5: Which kind is this something that you're worried about in 128 00:06:06,360 --> 00:06:09,360 Speaker 5: terms of longer term or a medium term is sort 129 00:06:09,400 --> 00:06:11,440 Speaker 5: of the sweet spot? Or do you think that right 130 00:06:11,480 --> 00:06:13,240 Speaker 5: now it's time to lock things in. 131 00:06:14,360 --> 00:06:18,400 Speaker 3: I would own quality, meaning more treasuries than corporates and 132 00:06:18,440 --> 00:06:19,000 Speaker 3: high yields. 133 00:06:19,040 --> 00:06:21,480 Speaker 4: Look corporate highield spreads are pretty tight. 134 00:06:21,240 --> 00:06:24,719 Speaker 3: As you know, and if and as the economy weekends, 135 00:06:24,800 --> 00:06:28,560 Speaker 3: the questions about how long will that weakness last probably 136 00:06:28,600 --> 00:06:32,080 Speaker 3: causes these very tight spreads to widen some and therefore 137 00:06:32,080 --> 00:06:33,520 Speaker 3: the Gouvey's probably outperformed. 138 00:06:33,640 --> 00:06:36,000 Speaker 2: Interesting boff. Thank you, sir. I appreciate the updates. It's 139 00:06:36,000 --> 00:06:38,480 Speaker 2: going to say across smock you as well, sir. Think 140 00:06:38,520 --> 00:06:51,840 Speaker 2: weake ahead. It's time to the election. With fewer than 141 00:06:51,839 --> 00:06:54,640 Speaker 2: one hundred days until voters head to the polls. If 142 00:06:54,640 --> 00:06:57,640 Speaker 2: re elected former President Donald Trump is why they expected 143 00:06:57,720 --> 00:07:00,520 Speaker 2: to a point, a so called Capitol Hill cabinet full 144 00:07:00,680 --> 00:07:04,800 Speaker 2: of congressman A potential shortlist includes Republican Senator Bill Haggerty, 145 00:07:05,080 --> 00:07:07,919 Speaker 2: who is being floated as a pick for Treasury Secretary. 146 00:07:07,920 --> 00:07:10,560 Speaker 2: The senator joins us right now, Senator, it's great to 147 00:07:10,560 --> 00:07:12,440 Speaker 2: catch up me, sir. We tried to do this last week, 148 00:07:12,480 --> 00:07:14,640 Speaker 2: so this is our second attempt. I think this one's 149 00:07:14,640 --> 00:07:15,120 Speaker 2: going to work. 150 00:07:15,280 --> 00:07:17,160 Speaker 8: Good to be back with you, Jonathan Lisa, thank you. 151 00:07:17,280 --> 00:07:19,360 Speaker 2: Let's start with foreign exchange if we can, Sir. We 152 00:07:19,400 --> 00:07:21,280 Speaker 2: caught up with the former president here at Bloomberg just 153 00:07:21,320 --> 00:07:24,119 Speaker 2: a number of weeks ago, and in Bloomberg Business Week. 154 00:07:24,200 --> 00:07:26,320 Speaker 2: He told us that he believes we have a bit 155 00:07:26,360 --> 00:07:29,360 Speaker 2: of a currency problem in the United States for America. Senator, 156 00:07:29,400 --> 00:07:31,720 Speaker 2: I would love your perspective on that, whether you agree 157 00:07:31,840 --> 00:07:33,960 Speaker 2: with a former president on that issue, and what kind 158 00:07:33,960 --> 00:07:36,240 Speaker 2: of policy tools do you think the government has to 159 00:07:36,320 --> 00:07:36,880 Speaker 2: address it. 160 00:07:37,880 --> 00:07:39,480 Speaker 8: We have a number of problems with the economy. I 161 00:07:39,480 --> 00:07:41,840 Speaker 8: think the biggest one, however, and it's related is inflation, 162 00:07:42,520 --> 00:07:45,240 Speaker 8: and inflation is driving higher interest rates. Of course, that 163 00:07:45,280 --> 00:07:47,960 Speaker 8: has a direct impact on our currency. But President Trump's 164 00:07:47,960 --> 00:07:51,040 Speaker 8: policies will have an immediate impact to bring inflation down 165 00:07:51,080 --> 00:07:54,320 Speaker 8: because he's going to end this administration's war on fossil fuels, 166 00:07:54,520 --> 00:07:57,880 Speaker 8: bring energy costs down, go back to a deregulatory construct 167 00:07:57,880 --> 00:08:00,720 Speaker 8: as he did in the prior administration, taking the regulatory 168 00:08:00,720 --> 00:08:03,600 Speaker 8: and compliance barriers. All of these will have a lowering 169 00:08:03,640 --> 00:08:05,680 Speaker 8: impact on cost here in America. It will have a 170 00:08:05,720 --> 00:08:09,040 Speaker 8: lower impact on inflation. Those will be directly beneficiary, and 171 00:08:09,040 --> 00:08:11,760 Speaker 8: it basically help make the case then to bring rates 172 00:08:11,760 --> 00:08:14,920 Speaker 8: down and therefore bring our currency into a different position. 173 00:08:15,040 --> 00:08:17,080 Speaker 2: The Senator, there are two other proposals as well, which 174 00:08:17,080 --> 00:08:19,920 Speaker 2: I'm sure you're familiar with. Much higher tariffs are much 175 00:08:19,960 --> 00:08:22,880 Speaker 2: tougher stance on immigration. I'm not going to sit here 176 00:08:22,880 --> 00:08:24,680 Speaker 2: and say whether that's the right or wrong thing to do. 177 00:08:24,760 --> 00:08:27,680 Speaker 2: I just want to talk about outcomes and consequences. Deutsche Bank, 178 00:08:27,840 --> 00:08:30,680 Speaker 2: like others on Wall Street, Senators you know, have pointed 179 00:08:30,680 --> 00:08:33,280 Speaker 2: out the tariffs and their associated stronger implications for the 180 00:08:33,360 --> 00:08:36,079 Speaker 2: dollar are significantly more likely to be the dominant market 181 00:08:36,120 --> 00:08:39,959 Speaker 2: outcome than policies to pursue a week of dollar. Senator, 182 00:08:40,000 --> 00:08:43,199 Speaker 2: my question to you would be, why wouldn't higher tariffs 183 00:08:43,240 --> 00:08:46,920 Speaker 2: and a toughest stance and immigration ultimately just lead to stagflation. 184 00:08:48,120 --> 00:08:50,880 Speaker 8: Look, I'm fully aware of the concerns surrounding tariffs. Will 185 00:08:50,920 --> 00:08:53,520 Speaker 8: let me make this point. The United States of America 186 00:08:53,600 --> 00:08:56,000 Speaker 8: has the lowest tariff barriers of any major economy in 187 00:08:56,040 --> 00:08:58,560 Speaker 8: the world. The converse of that statement is that our 188 00:08:58,600 --> 00:09:02,080 Speaker 8: major trading partners do not have the similar terroists. They 189 00:09:02,080 --> 00:09:04,240 Speaker 8: have much higher tariffs. Therefore, we have a real lack 190 00:09:04,280 --> 00:09:06,959 Speaker 8: of reciprocity. That's not fair. That's something that needs to 191 00:09:06,960 --> 00:09:08,920 Speaker 8: be addressed. Many of these issues date back all the 192 00:09:08,920 --> 00:09:11,560 Speaker 8: way to World War Two. But there's come a time 193 00:09:11,600 --> 00:09:13,720 Speaker 8: and a place to step up an address than President 194 00:09:13,760 --> 00:09:15,800 Speaker 8: Trump wants to see them addressed. We want to see 195 00:09:15,880 --> 00:09:18,679 Speaker 8: more reciprocal and fair trading terms. The time has come 196 00:09:18,720 --> 00:09:20,720 Speaker 8: to get that accomplished, Senator. 197 00:09:20,880 --> 00:09:23,440 Speaker 5: From a market perspective, people are struggling with these two 198 00:09:23,480 --> 00:09:26,600 Speaker 5: goals sort of national security fairness on one hand, and 199 00:09:26,640 --> 00:09:29,920 Speaker 5: on the other hand, the idea of the advantage of 200 00:09:29,960 --> 00:09:34,640 Speaker 5: a weaker currency for trade purposes, which takes permanence pre eminence. 201 00:09:36,000 --> 00:09:38,720 Speaker 8: Well, I think it's something that always has to be balanced, Lisa, 202 00:09:38,720 --> 00:09:41,319 Speaker 8: and I think you'll see any administration do their best 203 00:09:41,360 --> 00:09:43,040 Speaker 8: to do it. I think President Trump did an excellent 204 00:09:43,120 --> 00:09:46,079 Speaker 8: job of that during his first administration. The playbook is 205 00:09:46,160 --> 00:09:48,920 Speaker 8: laid out there. We were strong, we were tough with China. 206 00:09:49,080 --> 00:09:51,480 Speaker 8: At the same time, we brought economic growth that was 207 00:09:51,480 --> 00:09:53,320 Speaker 8: twice the rate of any of the major economy at 208 00:09:53,360 --> 00:09:55,800 Speaker 8: the same time here in America. So we can do both. 209 00:09:55,840 --> 00:09:57,400 Speaker 8: We can walk and shoo them at the same time. 210 00:09:57,440 --> 00:09:59,559 Speaker 8: I think that's the challenge. The most important thing, though, 211 00:09:59,600 --> 00:10:01,720 Speaker 8: is that and Trump will come in and in these 212 00:10:01,720 --> 00:10:05,480 Speaker 8: reckless policies domestically that have created inflation that has caused 213 00:10:05,480 --> 00:10:08,160 Speaker 8: so many knog on effects. Again, back to energy independence, 214 00:10:08,280 --> 00:10:10,080 Speaker 8: we need to get there. Not only will it be 215 00:10:10,080 --> 00:10:12,599 Speaker 8: important for lowering inflation here, but it'll be an important 216 00:10:12,679 --> 00:10:15,920 Speaker 8: geostrategic tool as we become much stronger allies who were 217 00:10:15,920 --> 00:10:19,640 Speaker 8: able to export our energy to places like Europe and Asia. 218 00:10:19,679 --> 00:10:20,559 Speaker 6: All right, let's go there. 219 00:10:20,600 --> 00:10:22,520 Speaker 5: You've mentioned it a couple of times, this idea of 220 00:10:22,880 --> 00:10:25,800 Speaker 5: war on fossil fuels, as well as the idea of 221 00:10:26,160 --> 00:10:29,280 Speaker 5: not really achieving the goal of energy and dependence. We're 222 00:10:29,320 --> 00:10:31,719 Speaker 5: pumping more oil in the United States. We're producing more 223 00:10:31,760 --> 00:10:35,280 Speaker 5: oil than ever before, more than thirteen million barrels a day. 224 00:10:35,559 --> 00:10:39,440 Speaker 5: This is something unseen before in terms of production from 225 00:10:39,520 --> 00:10:41,920 Speaker 5: any other nation. How can you say that it's a 226 00:10:41,920 --> 00:10:43,800 Speaker 5: war on fossil fuels at a time where it is. 227 00:10:43,760 --> 00:10:45,679 Speaker 4: Record production at LISTA. 228 00:10:45,720 --> 00:10:47,520 Speaker 8: It clearly is a war on fossil fuels. Because Joe 229 00:10:47,520 --> 00:10:49,559 Speaker 8: Biden came in and took federal lands off the map 230 00:10:49,760 --> 00:10:52,720 Speaker 8: immediately upon taking office. That's a quarter of our capacity 231 00:10:52,840 --> 00:10:55,640 Speaker 8: right there. What you're not saying is that there was 232 00:10:55,679 --> 00:10:58,520 Speaker 8: a trajectory that was much more rapid, much higher. We 233 00:10:58,559 --> 00:11:01,160 Speaker 8: took ourselves off of that growth through and we flattened it. 234 00:11:01,360 --> 00:11:03,560 Speaker 8: We continue to produce, but demand is outstripping it. Think 235 00:11:03,600 --> 00:11:05,720 Speaker 8: about the demand for electricity here in America. If you 236 00:11:05,720 --> 00:11:08,240 Speaker 8: think about what we're going to need for artificial intelligence, 237 00:11:08,360 --> 00:11:10,800 Speaker 8: the electrification of the grid, We've got to get back 238 00:11:10,840 --> 00:11:13,199 Speaker 8: into the energy production business full blast. We have the 239 00:11:13,240 --> 00:11:15,960 Speaker 8: technology to do it. This administration has done everything they 240 00:11:15,960 --> 00:11:17,640 Speaker 8: can to slow that down. We need to get back 241 00:11:17,640 --> 00:11:19,719 Speaker 8: on a rapid growth path that'll put us on a 242 00:11:19,800 --> 00:11:23,120 Speaker 8: trajectory to be not only stronger here domestically in lower inflation, 243 00:11:23,160 --> 00:11:25,439 Speaker 8: but also stronger partners with our allies. 244 00:11:25,440 --> 00:11:28,160 Speaker 2: So, Senator, right now, we're producing thirteen point three million 245 00:11:28,240 --> 00:11:31,800 Speaker 2: powers of crude every single day, as Lisa points it out, 246 00:11:31,840 --> 00:11:34,079 Speaker 2: that's a record. It's more than anyone on the planet. 247 00:11:34,400 --> 00:11:36,480 Speaker 2: How much crude do you think America should be and 248 00:11:36,520 --> 00:11:37,760 Speaker 2: can be produc sick? 249 00:11:38,760 --> 00:11:40,520 Speaker 8: We should be producing more than anybody else in the 250 00:11:40,559 --> 00:11:42,280 Speaker 8: world as we are. We need to produce more LNG 251 00:11:42,800 --> 00:11:45,080 Speaker 8: and we need to become the strongest energy partner there is. 252 00:11:45,200 --> 00:11:47,640 Speaker 8: You think about pipeline capacity and the difficulty of getting 253 00:11:47,640 --> 00:11:50,920 Speaker 8: permits of this administration. You think about the difficulty beginning 254 00:11:50,960 --> 00:11:53,520 Speaker 8: or refinery started here in America. All of these log 255 00:11:53,600 --> 00:11:56,840 Speaker 8: jms and difficulties make it less possible for us, make 256 00:11:56,880 --> 00:11:58,720 Speaker 8: it more difficult for us to be the best possible 257 00:11:58,720 --> 00:11:59,560 Speaker 8: ally that we could. 258 00:11:59,640 --> 00:12:00,560 Speaker 4: We need to expand it. 259 00:12:00,600 --> 00:12:02,480 Speaker 8: We need to realize that this is a true source 260 00:12:02,520 --> 00:12:04,839 Speaker 8: of competitive advantage for the United States of America. 261 00:12:05,200 --> 00:12:06,000 Speaker 4: Let's exploit it. 262 00:12:06,160 --> 00:12:08,160 Speaker 2: Let's talk about who is an ally and who isn't 263 00:12:08,200 --> 00:12:10,480 Speaker 2: an ally. There's lots of conversations about what's going to 264 00:12:10,480 --> 00:12:13,760 Speaker 2: happen we trade policy and China. I think we've sort 265 00:12:13,760 --> 00:12:16,880 Speaker 2: of exhausted that conversation many times after the last few weeks, Senator, 266 00:12:16,920 --> 00:12:19,120 Speaker 2: I want to talk about Mexico. I want your view 267 00:12:19,160 --> 00:12:22,480 Speaker 2: on Mexico. We saw from Elon Musk of Tesla that 268 00:12:22,559 --> 00:12:25,480 Speaker 2: he's holding back investment decisions in the country because he 269 00:12:25,559 --> 00:12:27,520 Speaker 2: thinks there might be a change in the next year 270 00:12:27,760 --> 00:12:31,160 Speaker 2: that makes it difficult to produce automobiles over in Mexico. 271 00:12:31,200 --> 00:12:35,520 Speaker 2: We've heard similar thoughts from aller manufacturers elsewhere worldwide. What 272 00:12:35,600 --> 00:12:38,480 Speaker 2: is happening in Mexico and what kind of changes would 273 00:12:38,480 --> 00:12:39,360 Speaker 2: you like to see? 274 00:12:40,080 --> 00:12:43,079 Speaker 8: Well, in twenty twenty six, the USMCA is up for renegotiation. 275 00:12:43,160 --> 00:12:45,520 Speaker 8: I think one of the greatest concerns is the fact 276 00:12:45,559 --> 00:12:48,280 Speaker 8: that Chinese ev makers are looking to in run the 277 00:12:48,320 --> 00:12:51,840 Speaker 8: Usmcit in run tariffs and use the USMCA in Mexico 278 00:12:51,880 --> 00:12:54,040 Speaker 8: market in particular, as it means to get into the 279 00:12:54,120 --> 00:12:58,079 Speaker 8: US market and they're using their subsidized product destroy the 280 00:12:58,120 --> 00:13:00,199 Speaker 8: US market. That's going to have to take a very 281 00:13:00,200 --> 00:13:02,800 Speaker 8: solid look. I think also with respect to Mexico itself, 282 00:13:03,160 --> 00:13:06,960 Speaker 8: we've seen some very concerning behavior there the prior administration 283 00:13:07,040 --> 00:13:10,520 Speaker 8: there under Amlow actually nationalizing American company's assets. 284 00:13:10,640 --> 00:13:11,679 Speaker 4: We've got to address that. 285 00:13:11,760 --> 00:13:14,000 Speaker 8: I intend to speak with the new administration there very 286 00:13:14,000 --> 00:13:15,960 Speaker 8: soon about what we can do to make certain we 287 00:13:16,040 --> 00:13:19,600 Speaker 8: have much better and much stronger relationship there with Mexico 288 00:13:19,640 --> 00:13:20,400 Speaker 8: in fairer terms. 289 00:13:20,640 --> 00:13:21,000 Speaker 6: Senator. 290 00:13:21,000 --> 00:13:22,560 Speaker 5: The last time we tried to talk, you were at 291 00:13:22,559 --> 00:13:25,720 Speaker 5: a bitcoin conference, and this was our cryptocurrency conference, and 292 00:13:25,760 --> 00:13:29,400 Speaker 5: that was where the former President Trump was speaking and fundraising. 293 00:13:29,480 --> 00:13:31,560 Speaker 5: And we've been asking this question on the show. 294 00:13:32,200 --> 00:13:32,960 Speaker 2: Why bitcoin? 295 00:13:33,200 --> 00:13:33,760 Speaker 7: Why now? 296 00:13:33,880 --> 00:13:38,199 Speaker 5: Why crypto assets? What's sort of the motivation to really 297 00:13:38,320 --> 00:13:41,439 Speaker 5: embrace a network of crypto assets and become the preeminent 298 00:13:41,960 --> 00:13:45,520 Speaker 5: network on the planet from a republican sort of stance. 299 00:13:45,960 --> 00:13:50,480 Speaker 5: Is this something that is concrete and why, Lisa? 300 00:13:50,640 --> 00:13:52,880 Speaker 8: I think this is something that has evolved over time. 301 00:13:52,960 --> 00:13:56,480 Speaker 8: I first began looking into crypto in the previous administration 302 00:13:56,559 --> 00:13:59,120 Speaker 8: in twenty eighteen. That was my first engagement. I initially 303 00:13:59,320 --> 00:14:01,560 Speaker 8: started at a p of skepticism, as I think many of 304 00:14:01,559 --> 00:14:04,120 Speaker 8: my colleagues do. But when I begin to understand the 305 00:14:04,160 --> 00:14:07,880 Speaker 8: underlying technology and realizing the potential for dramatic productivity gains, 306 00:14:08,280 --> 00:14:09,800 Speaker 8: what I thought to myself is, we need to make 307 00:14:09,840 --> 00:14:11,760 Speaker 8: certain that it happens here in America. The last thing 308 00:14:11,760 --> 00:14:13,959 Speaker 8: we want is to see what happened with the semiconductor 309 00:14:13,960 --> 00:14:16,440 Speaker 8: industry where it got pushed off shore and weakened us 310 00:14:16,440 --> 00:14:19,240 Speaker 8: from a geopolitical standpoint. We need to see this innovation 311 00:14:19,320 --> 00:14:22,400 Speaker 8: happening here. I've been in many conversations with President Trump. 312 00:14:22,560 --> 00:14:25,520 Speaker 8: His thinking is likewise involved, and he's embracing the fact 313 00:14:25,560 --> 00:14:27,680 Speaker 8: that this has tremendous potential for America. 314 00:14:27,720 --> 00:14:28,800 Speaker 4: We want it to evolve here. 315 00:14:28,840 --> 00:14:31,360 Speaker 8: We want to create the ecosystem for it to thrive here, 316 00:14:31,520 --> 00:14:32,960 Speaker 8: and the last thing we need to do is push 317 00:14:33,000 --> 00:14:36,400 Speaker 8: it off shore. However, the current administration has done everything 318 00:14:36,480 --> 00:14:40,160 Speaker 8: they can to attack this industry, to push it offshore again, 319 00:14:40,240 --> 00:14:44,360 Speaker 8: to use the SEC, the CFTC, every tool at their 320 00:14:44,400 --> 00:14:47,080 Speaker 8: disposal to come in and attack this industry and refuse 321 00:14:47,160 --> 00:14:49,440 Speaker 8: to provide it with any time for a regulatory framework. 322 00:14:49,720 --> 00:14:52,280 Speaker 8: President Trump made the statement at the Bitcoin conference that 323 00:14:52,320 --> 00:14:54,640 Speaker 8: one of the first things he'll do is change out 324 00:14:54,560 --> 00:14:57,920 Speaker 8: that the administration's leadership, Gary Ginzlury said will be fired. 325 00:14:58,000 --> 00:14:59,280 Speaker 4: That brought people to. 326 00:14:59,200 --> 00:15:02,400 Speaker 8: Their feet in al He's going to end Operation Chokepoint 327 00:15:02,480 --> 00:15:04,880 Speaker 8: that's been taking place in the crypto industry here in America, 328 00:15:05,040 --> 00:15:06,720 Speaker 8: and he's going to try to create the environment here 329 00:15:06,760 --> 00:15:08,720 Speaker 8: where the industry can thrive, and we'll see the next 330 00:15:08,760 --> 00:15:11,360 Speaker 8: wave of innovation happening right here in America. 331 00:15:11,560 --> 00:15:13,680 Speaker 2: Senator, We've got to dance around the issue about your future. 332 00:15:13,720 --> 00:15:15,200 Speaker 2: So this is how a frame mat. I've got twenty 333 00:15:15,200 --> 00:15:17,360 Speaker 2: seconds left on the clock. Your favorite city to live 334 00:15:17,400 --> 00:15:20,640 Speaker 2: in Nashville, Tokyo or Washington, d C. 335 00:15:21,120 --> 00:15:23,880 Speaker 8: Which one, No, it has to be Nashville, Tennessee. And 336 00:15:23,880 --> 00:15:25,480 Speaker 8: if you've been there at the crypto conference, you've ever 337 00:15:25,520 --> 00:15:28,560 Speaker 8: seen the energy there. It is absolutely wonderful. What's happening 338 00:15:28,560 --> 00:15:30,640 Speaker 8: broadly across my state. That's why so many people are 339 00:15:30,680 --> 00:15:31,120 Speaker 8: moving there. 340 00:15:31,240 --> 00:15:45,720 Speaker 2: Senator, thank you, sir. Beyond big tech investors also awaiting 341 00:15:45,800 --> 00:15:48,360 Speaker 2: the FED decision. The fmc's two day meeting kicking off 342 00:15:48,360 --> 00:15:51,720 Speaker 2: today fetcha jpower widely expected to give a soft signal 343 00:15:51,960 --> 00:15:55,440 Speaker 2: for a September rate cut, to discuss Tiffany wildingger Pimco 344 00:15:55,600 --> 00:15:58,560 Speaker 2: joint is alongside Stevehshutto of mis zero. To both of you, 345 00:15:58,560 --> 00:16:00,360 Speaker 2: thanks for being miters. Tiffany, I want across to you 346 00:16:00,480 --> 00:16:02,920 Speaker 2: first and get your thoughts on what we can't expect 347 00:16:02,960 --> 00:16:05,760 Speaker 2: tomorrow afternoon. What kind of changes you're looking for in 348 00:16:05,800 --> 00:16:08,240 Speaker 2: the statement of what you expect the Channel will emphasize 349 00:16:08,560 --> 00:16:09,480 Speaker 2: in the news conference. 350 00:16:11,320 --> 00:16:13,080 Speaker 1: Well, I think he's going to say that they are 351 00:16:13,080 --> 00:16:17,280 Speaker 1: more confident that inflation is starting to move back towards 352 00:16:17,360 --> 00:16:21,040 Speaker 1: their goal after progress had stalled in the first half 353 00:16:21,040 --> 00:16:23,840 Speaker 1: of this year. Of course, the fact that shelter inflation 354 00:16:24,760 --> 00:16:28,000 Speaker 1: has shown more progress and the last few inflation prints 355 00:16:28,000 --> 00:16:29,920 Speaker 1: is going to help in that, you know. But I 356 00:16:29,960 --> 00:16:32,160 Speaker 1: don't think that they're going to you know, I don't 357 00:16:32,160 --> 00:16:33,520 Speaker 1: think they're going to be in a huge rush. We 358 00:16:33,560 --> 00:16:36,760 Speaker 1: think they are going to signal a September cut. But 359 00:16:36,800 --> 00:16:40,600 Speaker 1: the economy appears to be doing okay here, so you know, 360 00:16:40,640 --> 00:16:43,040 Speaker 1: I think, you know, in terms of market pricing, you know, 361 00:16:43,080 --> 00:16:46,120 Speaker 1: they're the FED is very focused on I think cutting 362 00:16:46,160 --> 00:16:48,480 Speaker 1: maybe at a once a quarter pace, you know, taking 363 00:16:48,480 --> 00:16:50,640 Speaker 1: it slow. At least at first, unless the economy appears 364 00:16:50,680 --> 00:16:53,080 Speaker 1: to be rolling over more heavily, and I mean it doesn't, so, 365 00:16:53,400 --> 00:16:55,120 Speaker 1: you know, I think he could actually come across as 366 00:16:55,120 --> 00:16:57,760 Speaker 1: being a bit more balanced. Although we do think they 367 00:16:57,760 --> 00:16:59,640 Speaker 1: are going to cut in September relative to what markets 368 00:16:59,640 --> 00:16:59,960 Speaker 1: are priced. 369 00:17:00,400 --> 00:17:03,120 Speaker 2: We don't get an update to their assumptions their forecasts 370 00:17:03,240 --> 00:17:06,479 Speaker 2: this time around. We'll get them in September, I believe, Tiffany. 371 00:17:06,520 --> 00:17:09,480 Speaker 2: I'm looking at their current forecast for unemployment. They've got 372 00:17:09,480 --> 00:17:12,120 Speaker 2: that for twenty twenty four four percent. That's below where 373 00:17:12,119 --> 00:17:14,840 Speaker 2: we are right now. You mentioned maybe them going in 374 00:17:14,920 --> 00:17:18,480 Speaker 2: September and cunning once every quarter. What would your assumptions 375 00:17:18,520 --> 00:17:21,359 Speaker 2: be in the labor market for unemployment, given that's your 376 00:17:21,400 --> 00:17:22,440 Speaker 2: call for interest rights. 377 00:17:24,119 --> 00:17:27,440 Speaker 1: Yeah, I mean so we think unemployment probably ends around 378 00:17:27,520 --> 00:17:30,479 Speaker 1: where it is now, you know, for too, maybe a 379 00:17:30,480 --> 00:17:31,240 Speaker 1: little bit higher. 380 00:17:31,280 --> 00:17:34,120 Speaker 6: You know, the labor markets are are normalizing, you know. 381 00:17:34,040 --> 00:17:37,080 Speaker 1: But we think the important fact here is that you 382 00:17:37,240 --> 00:17:40,679 Speaker 1: haven't seen a lot of you know, actual layoffs. If 383 00:17:40,720 --> 00:17:44,439 Speaker 1: you just look at the level of employment, employment you know, 384 00:17:44,720 --> 00:17:48,040 Speaker 1: has not really declined. Those are usually the hallmarks of recession. So, 385 00:17:48,160 --> 00:17:49,920 Speaker 1: you know, we think we're seeing a labor market here, 386 00:17:49,960 --> 00:17:52,760 Speaker 1: which is easing. Certainly, we've had a lot of supply, 387 00:17:52,960 --> 00:17:56,320 Speaker 1: more supply coming into labor market as a result of immigration, you. 388 00:17:56,359 --> 00:17:58,280 Speaker 6: Know, and that appears to be the story to us. 389 00:17:58,320 --> 00:18:00,560 Speaker 1: And I think that still allows them, you know, to 390 00:18:00,680 --> 00:18:04,040 Speaker 1: kind of you cut and do it at a pace 391 00:18:04,600 --> 00:18:06,640 Speaker 1: that isn't hurried like we see in a recession. 392 00:18:06,920 --> 00:18:09,040 Speaker 5: Steve Should, I know that you're sympathetic to the view 393 00:18:09,040 --> 00:18:11,080 Speaker 5: that they don't have to rush. You've been talking about 394 00:18:11,119 --> 00:18:13,800 Speaker 5: the potential for no cuts being actually okay for twenty 395 00:18:13,840 --> 00:18:16,520 Speaker 5: twenty four, given the fact that there's plenty of momentum 396 00:18:16,600 --> 00:18:20,360 Speaker 5: under the hood. Do you still feel that way that, frankly, 397 00:18:20,440 --> 00:18:24,480 Speaker 5: all this talk about even cutting rates tomorrow is premature, 398 00:18:24,680 --> 00:18:26,320 Speaker 5: and that you think they should really hold off and 399 00:18:26,359 --> 00:18:27,920 Speaker 5: be more patient than many people think. 400 00:18:28,880 --> 00:18:31,399 Speaker 9: I mean to answer you a question real specifically, they're winning. 401 00:18:32,160 --> 00:18:34,520 Speaker 9: They're winning without having done anything, which is the most 402 00:18:34,560 --> 00:18:38,240 Speaker 9: interesting aspect of this. The promise of rate cuts has 403 00:18:38,320 --> 00:18:42,040 Speaker 9: led to financial market conditions which are much more accommodative 404 00:18:42,080 --> 00:18:45,280 Speaker 9: than the federal funds rate implies. So therefore there's a 405 00:18:45,359 --> 00:18:47,600 Speaker 9: question as to whether or not they actually have to 406 00:18:47,640 --> 00:18:51,480 Speaker 9: adjust the federal funds rate the reality is they run 407 00:18:51,520 --> 00:18:54,000 Speaker 9: the risk if they do adjust the federal funds rate 408 00:18:54,440 --> 00:18:58,680 Speaker 9: of people over anticipating what they will do. I think 409 00:18:58,680 --> 00:19:01,119 Speaker 9: they would be very happy over the long term with 410 00:19:01,200 --> 00:19:04,840 Speaker 9: a gradual reduction in rates. But you've got a federal 411 00:19:04,880 --> 00:19:08,600 Speaker 9: reserve that is dominated by political economists who are very, 412 00:19:08,720 --> 00:19:13,600 Speaker 9: very much sympathetic with a much more aggressive monetary policy reduction. 413 00:19:14,080 --> 00:19:17,520 Speaker 9: And therefore the market reads that and is likely to say, Okay, 414 00:19:17,560 --> 00:19:20,840 Speaker 9: once they cut, it's not going to be every other meeting. 415 00:19:20,840 --> 00:19:23,280 Speaker 9: It's not going to be once a quarter, it's going 416 00:19:23,359 --> 00:19:24,720 Speaker 9: to be every meeting. 417 00:19:25,160 --> 00:19:26,320 Speaker 7: And that's why when you. 418 00:19:26,240 --> 00:19:29,400 Speaker 9: Look at the forward structure of rates, for example, Sofa 419 00:19:29,600 --> 00:19:32,640 Speaker 9: Sofa going out out over the next year or so 420 00:19:33,040 --> 00:19:35,280 Speaker 9: is telling you that the market's assuming we're going to 421 00:19:35,280 --> 00:19:37,480 Speaker 9: get to a two percent fed funds rate, where I 422 00:19:37,480 --> 00:19:39,760 Speaker 9: think a lot of economists would be sitting there saying, well, 423 00:19:39,800 --> 00:19:41,639 Speaker 9: maybe we get to three or maybe we get to 424 00:19:41,680 --> 00:19:44,520 Speaker 9: three and a half. The reality is the market's priced 425 00:19:44,520 --> 00:19:47,800 Speaker 9: in much more, which is why financial markets are so accommodative, 426 00:19:48,000 --> 00:19:49,919 Speaker 9: which is why they're winning without doing anything. 427 00:19:50,160 --> 00:19:52,919 Speaker 5: Stevie said political economists and that they're in favor of 428 00:19:52,960 --> 00:19:55,840 Speaker 5: a much more aggressive rate cutting path. Can you tease 429 00:19:55,960 --> 00:19:58,560 Speaker 5: that out, because some people might hear that and say, Okay, 430 00:19:58,600 --> 00:20:00,560 Speaker 5: they want to cut rates that they say for an 431 00:20:00,600 --> 00:20:02,399 Speaker 5: administration or another. 432 00:20:03,280 --> 00:20:04,879 Speaker 6: Is what you're saying a little bit different? 433 00:20:05,960 --> 00:20:09,480 Speaker 9: Yeah, I mean you've got people here who are policy wants. 434 00:20:09,560 --> 00:20:12,720 Speaker 9: They want to play with the levers of monetary policy. 435 00:20:13,040 --> 00:20:15,840 Speaker 9: They want the idea the administration likes to play with 436 00:20:15,920 --> 00:20:17,560 Speaker 9: the levers of fiscal policy. 437 00:20:17,960 --> 00:20:19,360 Speaker 7: This is a throwback to. 438 00:20:19,320 --> 00:20:22,840 Speaker 9: The nineteen fifties nineteen sixties, where we had a group. 439 00:20:22,680 --> 00:20:24,440 Speaker 7: Of economists that came in that thought they. 440 00:20:24,320 --> 00:20:28,160 Speaker 9: Could use you know, monetary and fiscal policy to craft 441 00:20:28,480 --> 00:20:32,399 Speaker 9: an economy more suiting to their liking. And we're trying 442 00:20:32,440 --> 00:20:34,720 Speaker 9: to do exactly the same thing here again. 443 00:20:35,040 --> 00:20:35,200 Speaker 4: Now. 444 00:20:35,240 --> 00:20:37,760 Speaker 9: The results of what happened in the sixties and seventies 445 00:20:37,880 --> 00:20:41,000 Speaker 9: was we wound up with a stagflation environment, which I'm 446 00:20:41,000 --> 00:20:43,399 Speaker 9: not anticipating here because we had a world of excess 447 00:20:43,400 --> 00:20:43,960 Speaker 9: demand there. 448 00:20:43,960 --> 00:20:45,600 Speaker 7: We have a word of excess supply here. 449 00:20:45,800 --> 00:20:47,440 Speaker 9: But the reality is you could wind up with a 450 00:20:47,480 --> 00:20:50,320 Speaker 9: higher rate of inflation than the market is discounting. I 451 00:20:50,359 --> 00:20:52,639 Speaker 9: think the biggest risk for the market is not at 452 00:20:52,640 --> 00:20:54,480 Speaker 9: the front end of the curve. It's at the long 453 00:20:54,600 --> 00:20:56,800 Speaker 9: end of the curve because yields at the long end 454 00:20:56,840 --> 00:21:00,040 Speaker 9: of the curve and not back taking into consideration the 455 00:21:00,119 --> 00:21:02,960 Speaker 9: risk that what these policy makers are doing runs the 456 00:21:03,080 --> 00:21:06,159 Speaker 9: risk of creating an embedded higher inflation rate than is 457 00:21:06,200 --> 00:21:08,120 Speaker 9: currently priced into the long end of the curve. 458 00:21:08,280 --> 00:21:10,560 Speaker 2: Stapy suggests that there's more shants that tens trade in 459 00:21:10,600 --> 00:21:12,959 Speaker 2: the fives next year than they tried in the threes. 460 00:21:14,040 --> 00:21:17,840 Speaker 9: I think that's exactly the right scenario to think about. 461 00:21:17,920 --> 00:21:19,800 Speaker 7: That is the risk reward trade. 462 00:21:19,920 --> 00:21:22,440 Speaker 2: Yes, it's Tiffany, You're at the bombtause. What are even 463 00:21:22,440 --> 00:21:24,560 Speaker 2: the team doing with Rickonsida? How are you thinking about 464 00:21:24,600 --> 00:21:26,639 Speaker 2: the challenges to the long end of the curve in 465 00:21:26,720 --> 00:21:27,560 Speaker 2: twenty twenty five. 466 00:21:29,600 --> 00:21:31,760 Speaker 1: Yeah, I mean we we certainly think that over the 467 00:21:31,840 --> 00:21:35,480 Speaker 1: longer term, markets can price in more you know, just 468 00:21:35,600 --> 00:21:38,680 Speaker 1: more term premium, you know, as a result of the 469 00:21:38,720 --> 00:21:41,919 Speaker 1: outlook for you know, for the for the US federal 470 00:21:41,920 --> 00:21:43,480 Speaker 1: government deficits and debt. 471 00:21:43,800 --> 00:21:45,080 Speaker 6: You know, clearly this is. 472 00:21:45,280 --> 00:21:48,959 Speaker 1: We're on a you know, an unsustainable trajectory. That trajectory 473 00:21:49,080 --> 00:21:52,600 Speaker 1: is the result of you know, social security, you know, 474 00:21:52,680 --> 00:21:57,240 Speaker 1: liabilities in the future, you know, and these non discretionary 475 00:21:57,240 --> 00:22:00,000 Speaker 1: programs the US those will have to be course correct 476 00:22:00,280 --> 00:22:03,760 Speaker 1: at some point. Obviously, the big loser coming out of 477 00:22:03,760 --> 00:22:07,560 Speaker 1: the pandemic was the government balance sheet with additional debt, 478 00:22:07,800 --> 00:22:09,240 Speaker 1: you know, and at some point we agree that the 479 00:22:09,280 --> 00:22:11,520 Speaker 1: markets will need to price in some we're term premium 480 00:22:11,520 --> 00:22:13,600 Speaker 1: for that. But at the end of the day, I mean, 481 00:22:13,640 --> 00:22:15,520 Speaker 1: you could get a steeper interest rate curve. But at 482 00:22:15,560 --> 00:22:17,680 Speaker 1: the end of the day, you know, we think that 483 00:22:18,119 --> 00:22:21,439 Speaker 1: government policy makers, maybe not this administration or the next, 484 00:22:21,640 --> 00:22:23,600 Speaker 1: you know, eventually they will do the right thing and 485 00:22:23,640 --> 00:22:25,960 Speaker 1: we will you know, get some course correction. And we 486 00:22:26,000 --> 00:22:28,919 Speaker 1: think the markets are currently giving the US you know, 487 00:22:28,920 --> 00:22:30,640 Speaker 1: that longer term fiscal credibility. 488 00:22:30,800 --> 00:22:33,080 Speaker 6: So I mean, ultimately, I think it's nuanced discussion. 489 00:22:33,160 --> 00:22:35,399 Speaker 1: We think the curve can steepen, so wre term premium 490 00:22:35,440 --> 00:22:38,119 Speaker 1: can get priced, but we aren't expecting, you know, some 491 00:22:38,440 --> 00:22:41,520 Speaker 1: messy volatility to result from this. 492 00:22:41,680 --> 00:22:44,880 Speaker 5: Tiffany, what do you make of Steve's argument that these 493 00:22:45,119 --> 00:22:48,360 Speaker 5: officials on the FED are political economists who harken back 494 00:22:48,400 --> 00:22:50,080 Speaker 5: to sort of some of the philosophies of the nineteen 495 00:22:50,119 --> 00:22:53,320 Speaker 5: fifties and nineteen sixties of fine tuning everything, so they 496 00:22:53,359 --> 00:22:55,520 Speaker 5: are going to be more prone to trying to support 497 00:22:55,600 --> 00:22:58,520 Speaker 5: a market being a put essentially the way that they're 498 00:22:58,560 --> 00:23:01,639 Speaker 5: being treated in markets right now as sort of you know, 499 00:23:01,800 --> 00:23:03,960 Speaker 5: either way it's going to be okay because they can 500 00:23:03,960 --> 00:23:07,280 Speaker 5: come to the rest. You do you kind of find sympathy. 501 00:23:06,880 --> 00:23:07,440 Speaker 6: With that view. 502 00:23:09,359 --> 00:23:13,320 Speaker 1: Well, I mean, I think that now that inflation is 503 00:23:13,520 --> 00:23:16,000 Speaker 1: has moderated quite a bit, you know, and now that 504 00:23:16,080 --> 00:23:19,240 Speaker 1: people are more confident that you are still going. 505 00:23:19,080 --> 00:23:20,399 Speaker 6: To get some additional moderation. 506 00:23:20,520 --> 00:23:23,040 Speaker 1: It could be slow, probably will be bumpy, might not 507 00:23:23,200 --> 00:23:26,040 Speaker 1: get core PC inflation all the way back to two, 508 00:23:26,960 --> 00:23:27,840 Speaker 1: but could live. 509 00:23:27,720 --> 00:23:29,640 Speaker 6: With it in a two point something zone. 510 00:23:29,880 --> 00:23:32,600 Speaker 1: You know, the federal serve officials, as they should, are 511 00:23:32,600 --> 00:23:35,040 Speaker 1: going to start to focus more on, you know, the 512 00:23:35,119 --> 00:23:37,280 Speaker 1: labor market side of the mandate. 513 00:23:37,840 --> 00:23:39,679 Speaker 6: And you know, the view over the. 514 00:23:40,040 --> 00:23:42,760 Speaker 1: Last you know, several years, I would say, and even 515 00:23:42,800 --> 00:23:46,000 Speaker 1: in the long Term Strategy Review that was completed several 516 00:23:46,080 --> 00:23:47,879 Speaker 1: years ago. You know, the view is that if you 517 00:23:47,960 --> 00:23:50,280 Speaker 1: let the labor market run a little bit hot, it's 518 00:23:50,320 --> 00:23:52,960 Speaker 1: okay for the economy. It's actually good. You have people 519 00:23:52,960 --> 00:23:55,199 Speaker 1: coming back to the labor market. You know, you have 520 00:23:55,320 --> 00:23:58,359 Speaker 1: underserved communities you know that really start to benefit from that. 521 00:23:58,960 --> 00:24:01,159 Speaker 1: And I think I think that's certainly the kind of 522 00:24:01,359 --> 00:24:05,080 Speaker 1: policy views that people have, and as a result of that, 523 00:24:05,160 --> 00:24:07,359 Speaker 1: you know, they will be quick to, you know, to 524 00:24:07,400 --> 00:24:09,160 Speaker 1: start to drop interest rates. I think, you know, if 525 00:24:09,200 --> 00:24:12,000 Speaker 1: you do see a labor market that's loosening or rolling 526 00:24:12,000 --> 00:24:13,160 Speaker 1: over more than they expect. 527 00:24:13,440 --> 00:24:15,480 Speaker 5: Steve, I want to just finish up with you, because 528 00:24:15,480 --> 00:24:18,639 Speaker 5: there's this question about what the consumer is doing. Based 529 00:24:18,680 --> 00:24:20,800 Speaker 5: on some of the corporate guidance that we've been getting, 530 00:24:21,320 --> 00:24:24,040 Speaker 5: it's been sort of highlighting the pricing of the lack 531 00:24:24,040 --> 00:24:26,840 Speaker 5: of pricing power at a lot of different companies and 532 00:24:27,080 --> 00:24:29,639 Speaker 5: pointing to this question, as John's been asking repeatedly and 533 00:24:29,680 --> 00:24:31,880 Speaker 5: rightly so over the past six months, is it weakening 534 00:24:31,960 --> 00:24:35,120 Speaker 5: or week cooling or cool you know, are you changing 535 00:24:35,200 --> 00:24:36,560 Speaker 5: your view on. 536 00:24:36,480 --> 00:24:39,240 Speaker 6: Whether this is actually truly a. 537 00:24:39,520 --> 00:24:43,119 Speaker 5: Less perhaps heated economy than you thought, say a month ago. 538 00:24:44,119 --> 00:24:46,480 Speaker 9: No, I think the economy is still going to see 539 00:24:46,480 --> 00:24:48,360 Speaker 9: an inflation right at the end of the year that's 540 00:24:48,440 --> 00:24:51,520 Speaker 9: much harder than the federal reserves target. I think the 541 00:24:51,600 --> 00:24:56,560 Speaker 9: hope that the currency continues to provide the ability for 542 00:24:56,720 --> 00:25:00,399 Speaker 9: goods global goods deflation to dominate on or to have 543 00:25:00,400 --> 00:25:03,680 Speaker 9: an impact on the favorable impact on the domestic inflation 544 00:25:03,800 --> 00:25:07,680 Speaker 9: story is a risk. You know, foreign central bank policy 545 00:25:07,720 --> 00:25:10,640 Speaker 9: decisions could have an important impact on the currency. It's 546 00:25:10,680 --> 00:25:13,040 Speaker 9: not just the US and the currency has been one 547 00:25:13,040 --> 00:25:16,119 Speaker 9: of the critical components here. If the dollar were to 548 00:25:16,160 --> 00:25:19,520 Speaker 9: take a turn to the downturn downside, and you were 549 00:25:19,600 --> 00:25:22,000 Speaker 9: to take, for example, your DXY measure, and you were 550 00:25:22,040 --> 00:25:24,200 Speaker 9: to head it back towards one hundred from the one 551 00:25:24,400 --> 00:25:26,919 Speaker 9: four to one five area it's been trading in, you 552 00:25:26,920 --> 00:25:29,960 Speaker 9: could have a significant impact on goods inflation. And if 553 00:25:29,960 --> 00:25:32,600 Speaker 9: you had a significant rebounding goods inflation, you would have 554 00:25:32,680 --> 00:25:35,520 Speaker 9: a significant bounce in inflation. And therefore, it's not just 555 00:25:35,560 --> 00:25:39,960 Speaker 9: the monetary policy decisions here, it's the monetary policy decisions overseas. 556 00:25:40,000 --> 00:25:43,679 Speaker 9: And that's why you shouldn't rely on that component to 557 00:25:43,760 --> 00:25:47,640 Speaker 9: be the component that drives your inflation story, especially when. 558 00:25:47,520 --> 00:25:49,719 Speaker 7: You want to keep a labor market hot. 559 00:25:50,200 --> 00:25:53,320 Speaker 9: This concept of a hot labor market gets to the 560 00:25:53,359 --> 00:25:55,800 Speaker 9: question of, well, what is a hot labor market. The 561 00:25:55,920 --> 00:25:58,359 Speaker 9: natural rate of unemployment had always been seen to be 562 00:25:58,440 --> 00:26:02,040 Speaker 9: four point five percent. Now suddenly we've lowered the target 563 00:26:02,240 --> 00:26:04,159 Speaker 9: for where the unemployment rate should be by the end 564 00:26:04,200 --> 00:26:07,480 Speaker 9: of the year of four percent. That's a very significant 565 00:26:07,560 --> 00:26:10,679 Speaker 9: downward adjustment in the unemployment rate. So the ES the 566 00:26:10,720 --> 00:26:13,879 Speaker 9: Federal Reserve lowered the threshold to make it look as 567 00:26:13,920 --> 00:26:17,879 Speaker 9: if the labor market is accommodative. We're becoming more available 568 00:26:17,960 --> 00:26:20,159 Speaker 9: or the story of the left slack is developing in 569 00:26:20,160 --> 00:26:23,600 Speaker 9: the labor market more quickly than is actually taking place. 570 00:26:23,960 --> 00:26:25,320 Speaker 7: And this is a critical component. 571 00:26:25,359 --> 00:26:27,439 Speaker 9: You look at the claims numbers, you look at the 572 00:26:27,440 --> 00:26:31,000 Speaker 9: continuing claims numbers, You look at the number of job layoffs. 573 00:26:31,200 --> 00:26:34,040 Speaker 9: People are not getting fired, and it's harder and harder 574 00:26:34,119 --> 00:26:38,479 Speaker 9: to find skilled workers. Wage pressures aren't coming off the boil. 575 00:26:38,960 --> 00:26:42,160 Speaker 9: It has been really an environment in here where global 576 00:26:42,200 --> 00:26:45,920 Speaker 9: goods deflation has been pulling down the headline inflation. 577 00:26:46,400 --> 00:26:49,320 Speaker 7: Just like gold. Global goods inflation moved. 578 00:26:49,040 --> 00:26:51,320 Speaker 9: A lot of it up to the upside during the 579 00:26:51,320 --> 00:26:52,240 Speaker 9: COVID environment. 580 00:26:52,440 --> 00:26:53,600 Speaker 7: It's now reversed that. 581 00:26:53,960 --> 00:26:57,000 Speaker 9: But by the same token, the service component is not 582 00:26:57,280 --> 00:27:00,080 Speaker 9: coming down. And the service component is the domain a 583 00:27:00,280 --> 00:27:03,640 Speaker 9: component within the US inflationary because we are much more 584 00:27:03,640 --> 00:27:06,200 Speaker 9: of a service economy than we are a goods economy. 585 00:27:06,240 --> 00:27:08,760 Speaker 2: Hey, Steve Tiffany, big week ahead, Thanks for giving us 586 00:27:08,760 --> 00:27:10,880 Speaker 2: some time this morning. Steve a shooter there of Mizuo 587 00:27:11,119 --> 00:27:14,240 Speaker 2: Tiffany Wilding of PIMCO, two of the very best in 588 00:27:14,320 --> 00:27:17,920 Speaker 2: the world of economics. This is the Bloomberg Surveillance podcast, 589 00:27:18,040 --> 00:27:21,960 Speaker 2: bringing you the best in markets, economics, and geopolitics. You 590 00:27:22,000 --> 00:27:24,760 Speaker 2: can watch the show live on Bloomberg TV weekday mornings 591 00:27:24,760 --> 00:27:27,720 Speaker 2: from six am to nine am Eastern. Subscribe to the 592 00:27:27,760 --> 00:27:31,240 Speaker 2: podcast on Apple, Spotify, or anywhere else you listen, and 593 00:27:31,320 --> 00:27:34,400 Speaker 2: as always, on the Bloomberg Terminal and the Bloomberg Business app.