1 00:00:05,120 --> 00:00:07,119 Speaker 1: This is the Bloomberg Surveillance Podcast. 2 00:00:07,160 --> 00:00:11,080 Speaker 2: I'm Tom Keane, along with Jonathan Farrow and Lisa Abramowitz. 3 00:00:11,280 --> 00:00:15,760 Speaker 2: Join us each day for insight from the best an economics, geopolitics, 4 00:00:15,760 --> 00:00:20,720 Speaker 2: finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 5 00:00:20,960 --> 00:00:25,400 Speaker 2: Spotify and anywhere you get your podcasts, and always on 6 00:00:25,520 --> 00:00:29,880 Speaker 2: Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business App. 7 00:00:30,160 --> 00:00:32,080 Speaker 2: What we are going to do now is speak to 8 00:00:32,120 --> 00:00:35,680 Speaker 2: Ian Bremer, president of Eurasia Group. He's author of the 9 00:00:35,720 --> 00:00:39,800 Speaker 2: Power of Crisis and far more, identifying the risks of 10 00:00:39,840 --> 00:00:42,680 Speaker 2: the world at the beginning of the year with Bloomberg Surveillance, 11 00:00:43,440 --> 00:00:46,440 Speaker 2: with all the tenrosts of the world, if you will, 12 00:00:46,479 --> 00:00:48,600 Speaker 2: for twenty twenty three. I'm not sure this was on 13 00:00:48,680 --> 00:00:52,519 Speaker 2: the risk, but here we are amid this classis it. 14 00:00:52,640 --> 00:00:54,600 Speaker 3: Was number one. 15 00:00:55,000 --> 00:00:57,520 Speaker 2: It was number one, rogue rogue Russia. 16 00:00:57,680 --> 00:00:59,880 Speaker 3: You and I were there at the beginning of January. 17 00:01:00,120 --> 00:01:02,360 Speaker 2: Well, thank you and thank you for your guidance and 18 00:01:02,480 --> 00:01:04,920 Speaker 2: leadership on that. In Bremer, I'm going to go to 19 00:01:05,000 --> 00:01:08,360 Speaker 2: one statistic now in the Wall Street Journal Federation of 20 00:01:08,440 --> 00:01:13,039 Speaker 2: American Scientists, Russia has one thousand six hundred and seventy 21 00:01:13,120 --> 00:01:20,080 Speaker 2: four deployed strategic weapons pointed at Europe and other points 22 00:01:20,720 --> 00:01:24,920 Speaker 2: as well, brief us on the nuclear risk that we 23 00:01:25,080 --> 00:01:26,039 Speaker 2: face this morning. 24 00:01:28,360 --> 00:01:35,640 Speaker 3: Look, this is the most powerful rogue regime on the 25 00:01:35,680 --> 00:01:41,480 Speaker 3: world stage today by a very long margin. And Putin, 26 00:01:42,160 --> 00:01:49,240 Speaker 3: who is facing unprecedented pressure from a disastrous war on 27 00:01:49,440 --> 00:01:54,200 Speaker 3: Ukraine that he has been fighting ineffectively for the last 28 00:01:54,520 --> 00:01:59,920 Speaker 3: nearly year and a half now also faces unprecedented challenge 29 00:02:00,360 --> 00:02:04,680 Speaker 3: domestically to his own power. Over the last forty eight 30 00:02:04,760 --> 00:02:07,880 Speaker 3: hours by far, the worst forty eight hours since he 31 00:02:08,000 --> 00:02:11,160 Speaker 3: became president of Russia. This is a man who also 32 00:02:11,200 --> 00:02:14,440 Speaker 3: controls the largest nuclear arsenal in the world. I don't 33 00:02:14,480 --> 00:02:17,200 Speaker 3: think I need to spell out more clearly what an 34 00:02:17,280 --> 00:02:22,560 Speaker 3: existential threat that poses to all of us. And he's 35 00:02:22,600 --> 00:02:24,720 Speaker 3: a war criminal, and he's thought to be a war 36 00:02:24,760 --> 00:02:27,880 Speaker 3: criminal by the entirety of the G seven, the US, NATO, 37 00:02:28,080 --> 00:02:32,040 Speaker 3: all of the American allies. It is very hard to 38 00:02:32,120 --> 00:02:33,520 Speaker 3: find a way back from that. 39 00:02:33,680 --> 00:02:33,920 Speaker 4: Tom. 40 00:02:33,960 --> 00:02:35,919 Speaker 3: When you and I talk about war criminals, we talk 41 00:02:35,960 --> 00:02:42,359 Speaker 3: about people like Bashier and Kadafi, and those are people 42 00:02:42,360 --> 00:02:44,600 Speaker 3: that Melosevich, those are people that end up dead or 43 00:02:44,600 --> 00:02:46,760 Speaker 3: in prison but you know, the only way to get 44 00:02:46,800 --> 00:02:49,960 Speaker 3: from here to there with Putin involves an enormous amount 45 00:02:50,000 --> 00:02:53,280 Speaker 3: of danger. And that's why the story with mister progosion 46 00:02:53,360 --> 00:02:54,639 Speaker 3: this weekend was so important. 47 00:02:54,720 --> 00:02:57,919 Speaker 2: Ian with your European Eurrasior Group coverage, and I'm gonna 48 00:02:57,960 --> 00:03:00,080 Speaker 2: go back. I'm going to pick two presidents in this 49 00:03:00,120 --> 00:03:03,240 Speaker 2: is not political folks, but the youngst over Dick Cheney 50 00:03:03,280 --> 00:03:05,560 Speaker 2: years ago and some of the youngs of the military 51 00:03:05,639 --> 00:03:08,840 Speaker 2: over President Trump. Do you have an understanding of the 52 00:03:08,880 --> 00:03:13,280 Speaker 2: military command and control of their missiles versus the very 53 00:03:13,320 --> 00:03:14,800 Speaker 2: focused group in the Kremlin. 54 00:03:17,240 --> 00:03:22,560 Speaker 3: Look, I think that we have greater concern about the 55 00:03:22,680 --> 00:03:29,120 Speaker 3: disposition not just of Russian's nukes, but also it's biological capabilities, 56 00:03:29,639 --> 00:03:34,120 Speaker 3: and it's criminal cybergangs who are the strongest and most 57 00:03:34,160 --> 00:03:39,000 Speaker 3: capable of any country in the world. And that's all 58 00:03:39,360 --> 00:03:46,000 Speaker 3: been you know, marshaled through Russian state power. And you know, 59 00:03:46,120 --> 00:03:49,600 Speaker 3: if you say how dangerous is that today? It I 60 00:03:49,640 --> 00:03:52,880 Speaker 3: do want to remind everybody that you know, Putin's been 61 00:03:52,920 --> 00:03:57,080 Speaker 3: tested in an unprecedented fashion, but none of his senior 62 00:03:57,120 --> 00:04:04,840 Speaker 3: military advisors, are government leaders or major oligarchs blinked, None 63 00:04:04,880 --> 00:04:08,560 Speaker 3: of them defected, none of them came out against Putin 64 00:04:08,600 --> 00:04:14,880 Speaker 3: and his regime as Progosian and Wagner were marching onto 65 00:04:14,960 --> 00:04:21,400 Speaker 3: Moscow largely uncontested over the course of the weekend. So 66 00:04:22,160 --> 00:04:25,040 Speaker 3: I don't think we have a reason to believe that 67 00:04:25,040 --> 00:04:27,960 Speaker 3: that there is a challenge to that today, but it's 68 00:04:28,080 --> 00:04:30,000 Speaker 3: absolutely uncertain going forward. 69 00:04:30,440 --> 00:04:34,000 Speaker 4: Do you think that Russia is more or less risky 70 00:04:34,240 --> 00:04:37,440 Speaker 4: with Vladimir Putin still at the helm of this statehood, 71 00:04:37,600 --> 00:04:39,600 Speaker 4: given that he has a known energy. 72 00:04:41,000 --> 00:04:43,640 Speaker 3: It would have been more risky under Pregosion, But this 73 00:04:43,720 --> 00:04:48,200 Speaker 3: is a clear case. I mean, Progosion is a former convict, 74 00:04:48,839 --> 00:04:55,599 Speaker 3: massively emotionally unstable, known torturer, personally responsible for lots of 75 00:04:55,680 --> 00:05:00,840 Speaker 3: war crimes in Ukraine and elsewhere, also emotionally dealing with 76 00:05:00,960 --> 00:05:04,359 Speaker 3: being on the front lines and facing the assassination of 77 00:05:04,400 --> 00:05:07,840 Speaker 3: several close officers around him just in the past months. 78 00:05:08,040 --> 00:05:10,280 Speaker 3: None of us can put ourselves in his emotional state 79 00:05:10,360 --> 00:05:12,120 Speaker 3: right now. So yeah, I think it would have been 80 00:05:12,160 --> 00:05:15,120 Speaker 3: even more unstable under Progosian, definitely, But this is a 81 00:05:15,120 --> 00:05:18,800 Speaker 3: clear case where the enemy of our enemy is our enemy. 82 00:05:19,320 --> 00:05:21,839 Speaker 3: I don't think there was anyone in NATO that was 83 00:05:21,960 --> 00:05:26,520 Speaker 3: rooting for Progosian to take over in Moscow this weekend. 84 00:05:26,760 --> 00:05:32,880 Speaker 4: How do you read the interference or involvement of Jijinpang's diplomats, 85 00:05:32,920 --> 00:05:36,120 Speaker 4: the idea that they actually did whole discussions with Russia 86 00:05:36,160 --> 00:05:39,800 Speaker 4: with Vladimir Putin's right hand men over the weekend, but 87 00:05:39,839 --> 00:05:41,080 Speaker 4: didn't seem to get involved. 88 00:05:41,880 --> 00:05:44,760 Speaker 3: That's right. The deputy Foreign minister had a trip that 89 00:05:44,839 --> 00:05:49,960 Speaker 3: had already been scheduled. They certainly didn't cancel it. China 90 00:05:50,040 --> 00:05:54,360 Speaker 3: basically discussed this as an internal Russian affair, which is 91 00:05:54,400 --> 00:05:58,400 Speaker 3: pretty close to what NATO had to say. Putin facing 92 00:05:58,440 --> 00:06:01,520 Speaker 3: the worst challenge of his life career and his best 93 00:06:01,520 --> 00:06:07,480 Speaker 3: friend on the global stage, Shijin Ping offered no military support, 94 00:06:07,640 --> 00:06:11,800 Speaker 3: offered no direct defense. I mean, you don't usually talk 95 00:06:11,800 --> 00:06:14,320 Speaker 3: about Kazakhstan, but I'll mention it. A year and a 96 00:06:14,400 --> 00:06:17,360 Speaker 3: half ago, before the Russian invasion of Ukraine, there was 97 00:06:17,400 --> 00:06:22,000 Speaker 3: a kup in Kazakhstan, and Putin sent two thousand paratroopers 98 00:06:22,040 --> 00:06:25,880 Speaker 3: to help keep President Okayev's chestnuts out of the fire. 99 00:06:26,200 --> 00:06:29,080 Speaker 3: And then just over this weekend he said, hey, this 100 00:06:29,120 --> 00:06:31,680 Speaker 3: is a Russian matter. I've got nothing to say. Putin 101 00:06:31,720 --> 00:06:35,240 Speaker 3: really does not have real friends on the global stage. 102 00:06:35,240 --> 00:06:37,040 Speaker 3: A lot of people want to buy his oil for cheap, 103 00:06:37,200 --> 00:06:39,440 Speaker 3: A lot of people prepare to do business with him, 104 00:06:40,040 --> 00:06:42,200 Speaker 3: not a lot of people prepare to take any domestic 105 00:06:42,360 --> 00:06:44,200 Speaker 3: risks to help him. 106 00:06:44,120 --> 00:06:47,080 Speaker 2: Ian Is this an opportunity given the shock of all this, 107 00:06:47,279 --> 00:06:48,920 Speaker 2: We have no idea what's going to happen in the 108 00:06:48,960 --> 00:06:51,359 Speaker 2: next twelve hours or one hundred and twenty days. 109 00:06:51,760 --> 00:06:53,520 Speaker 1: But is this a save face. 110 00:06:53,360 --> 00:06:58,320 Speaker 2: Moment where Turkey welcomed Sweden in to NATO? Is it 111 00:06:58,360 --> 00:07:00,960 Speaker 2: a big enough deal where it's a change agent for 112 00:07:01,040 --> 00:07:04,320 Speaker 2: a successfully elected ere to one. 113 00:07:04,480 --> 00:07:06,200 Speaker 3: I think that was going to happen anyway, but it 114 00:07:06,279 --> 00:07:10,880 Speaker 3: probably happens more quickly now. I saw Stoltenberg from NATO 115 00:07:11,280 --> 00:07:14,920 Speaker 3: make some statements in that direction in the last twenty 116 00:07:14,960 --> 00:07:18,400 Speaker 3: four hours. This is also an opportunity for the Ukrainians. 117 00:07:18,640 --> 00:07:21,240 Speaker 3: They only have about two and a half of the 118 00:07:21,320 --> 00:07:25,440 Speaker 3: eleven divisions that are in position and fully outfitted and 119 00:07:25,520 --> 00:07:28,880 Speaker 3: trained by the Americans. By the UK have been fighting 120 00:07:28,960 --> 00:07:31,680 Speaker 3: in the counter offensive thus far. They will certainly be 121 00:07:31,760 --> 00:07:34,320 Speaker 3: more optimistic about being able to take more land. That 122 00:07:34,360 --> 00:07:36,640 Speaker 3: counter offensive had not gone very well over the past 123 00:07:36,680 --> 00:07:41,480 Speaker 3: few weeks, so that's an opportunity. This also the fact 124 00:07:41,480 --> 00:07:46,440 Speaker 3: that Wagner Group is being liquidated. Their headquarters were rated 125 00:07:46,560 --> 00:07:50,240 Speaker 3: over the weekend. Their soldiers are going to have contracts 126 00:07:50,240 --> 00:07:52,680 Speaker 3: for the Ministry of Defense. The ones that were involved 127 00:07:52,720 --> 00:07:54,960 Speaker 3: directly in the fighting against Moscow, I'm sure not going 128 00:07:55,040 --> 00:07:57,480 Speaker 3: to be fighting going forward. These men, a lot of 129 00:07:57,520 --> 00:08:01,000 Speaker 3: them are former criminals. They're not trained, they're brutal in 130 00:08:01,040 --> 00:08:03,880 Speaker 3: the field. They're more likely to engage in torture and 131 00:08:03,960 --> 00:08:08,160 Speaker 3: other sorts of horrendous behaviors. The fact that Wagner's being 132 00:08:08,160 --> 00:08:12,280 Speaker 3: liquidated is good news for the world and for Russia, 133 00:08:12,360 --> 00:08:15,480 Speaker 3: for Ukraine, but also for countries like Mali and like 134 00:08:15,560 --> 00:08:19,200 Speaker 3: Libya where the Central African Republic where they've been operating. 135 00:08:19,400 --> 00:08:21,640 Speaker 3: It's a very good thing that the world's most powerful 136 00:08:21,640 --> 00:08:25,559 Speaker 3: paramilitary organization with no oversight other than Putin is gone today. 137 00:08:25,560 --> 00:08:27,680 Speaker 2: That's a good thing, Doctor Bremer, Thank you so much 138 00:08:27,720 --> 00:08:30,720 Speaker 2: for your time this morning. Ian Bremer, of course, of 139 00:08:31,240 --> 00:08:44,920 Speaker 2: Eurasia Group forty three eighty three on SPX. Right now, 140 00:08:45,000 --> 00:08:47,920 Speaker 2: someone watching this as Amy lou Silverman had a derivative 141 00:08:47,960 --> 00:08:52,520 Speaker 2: strategy RBC Capital Markets. My head's spinning, Amy, It's like 142 00:08:52,559 --> 00:08:55,520 Speaker 2: the fifth Cross moment. It's out worse than krtosis and 143 00:08:56,120 --> 00:08:59,480 Speaker 2: the rest of it. Over the weekend, how did you 144 00:08:59,640 --> 00:09:01,800 Speaker 2: start the bullbeard debate? 145 00:09:04,080 --> 00:09:07,240 Speaker 5: Yeah, obviously, you know, incorporate into the weekend was just 146 00:09:07,280 --> 00:09:10,679 Speaker 5: the geopolitical news. And I will tell you, coming into 147 00:09:10,720 --> 00:09:14,760 Speaker 5: this weekend, volatility Tom had just been pummeled. You know. 148 00:09:14,880 --> 00:09:16,760 Speaker 5: One thing we were talking about is just when you 149 00:09:16,800 --> 00:09:19,679 Speaker 5: look at Apple, which is twenty percent of the contribution 150 00:09:19,760 --> 00:09:22,160 Speaker 5: of return to the S and P this year, twenty percent, 151 00:09:22,559 --> 00:09:24,920 Speaker 5: it's at a two, five and ten year low from 152 00:09:24,960 --> 00:09:27,440 Speaker 5: an options perspective, So you know, the burken of the 153 00:09:27,480 --> 00:09:30,280 Speaker 5: market is on sale. And then on top of that, 154 00:09:30,400 --> 00:09:33,800 Speaker 5: now you get this geopolitical instability. What does that mean? 155 00:09:33,840 --> 00:09:36,520 Speaker 5: It's tough, but I just have to say that when 156 00:09:36,559 --> 00:09:40,120 Speaker 5: you introduce this level of uncertainty, it's hard not to see, 157 00:09:40,240 --> 00:09:42,760 Speaker 5: you know, option price levels as quite compelling. 158 00:09:42,800 --> 00:09:46,079 Speaker 2: When you see a lack of volatility of Vicks fourteen 159 00:09:46,160 --> 00:09:47,840 Speaker 2: point four to three, We had a twelve print at 160 00:09:47,880 --> 00:09:48,280 Speaker 2: one point. 161 00:09:48,360 --> 00:09:52,680 Speaker 1: Just as a general amateur statement, how do bulls hedge? 162 00:09:53,440 --> 00:09:59,160 Speaker 2: Are you able to constructively and effectively hedge your success 163 00:09:59,440 --> 00:09:59,959 Speaker 2: right now? 164 00:10:02,280 --> 00:10:06,280 Speaker 5: Yeah, So that's an interesting question because of the following observation. 165 00:10:06,880 --> 00:10:09,959 Speaker 5: The one thing that's been happening in options right now 166 00:10:10,280 --> 00:10:14,840 Speaker 5: is volatility and spot price has actually been positively correlated. 167 00:10:14,920 --> 00:10:17,600 Speaker 5: That's that's not normal. So usually you know, your VIX 168 00:10:17,679 --> 00:10:20,680 Speaker 5: goes up when your S ANDP goes down, and vice versa. 169 00:10:20,840 --> 00:10:22,839 Speaker 5: We've been having VIX and SMP go up at the 170 00:10:22,880 --> 00:10:25,800 Speaker 5: same time. One of the reasons for this is because 171 00:10:25,840 --> 00:10:29,000 Speaker 5: of those bulls, Tom, because folks are still reaching for 172 00:10:29,040 --> 00:10:32,280 Speaker 5: that right tail, they're doing it through options, and that's 173 00:10:32,280 --> 00:10:35,360 Speaker 5: a function of why you're seeing both volatility and spot 174 00:10:35,400 --> 00:10:37,319 Speaker 5: price rise in some instances. 175 00:10:37,760 --> 00:10:42,080 Speaker 4: Amy, how are you tracking the potential terrorisks being exploited 176 00:10:42,360 --> 00:10:45,200 Speaker 4: or expressed following this weekend's event, So you're starting to 177 00:10:45,240 --> 00:10:48,360 Speaker 4: see shifts in how people are putting on tail risk Kedges. 178 00:10:50,360 --> 00:10:53,160 Speaker 5: Yeah, so I think we're going to get more details 179 00:10:53,200 --> 00:10:55,319 Speaker 5: on that kind of later to daily. So just because 180 00:10:55,320 --> 00:10:57,199 Speaker 5: it happened over the weekend, but I'll tell you, you know, 181 00:10:57,240 --> 00:11:00,000 Speaker 5: I've been in Boston speaking with clients and this past 182 00:11:00,080 --> 00:11:03,040 Speaker 5: week before the news hit, it was just kind of 183 00:11:03,080 --> 00:11:06,199 Speaker 5: this overall statement of volatility is low, but I think 184 00:11:06,240 --> 00:11:09,040 Speaker 5: we still need to sell it because low volatility does 185 00:11:09,040 --> 00:11:12,400 Speaker 5: not necessarily need cheap volatility. And then over the weekend, 186 00:11:12,440 --> 00:11:15,920 Speaker 5: you introduced a pretty big left tail risk that I think, 187 00:11:16,080 --> 00:11:18,440 Speaker 5: you know, possibly could be a compelling reason for folks 188 00:11:18,480 --> 00:11:20,040 Speaker 5: to own it. So you might see that left tail 189 00:11:20,080 --> 00:11:21,000 Speaker 5: start to get bit again. 190 00:11:21,400 --> 00:11:23,440 Speaker 4: We've been talking all morning about one of the biggest 191 00:11:23,480 --> 00:11:26,120 Speaker 4: questions heading into the second half of the year is 192 00:11:26,280 --> 00:11:29,040 Speaker 4: whether this tech trade can continue or whether it's going 193 00:11:29,080 --> 00:11:32,640 Speaker 4: to get retraced substantially based on positioning. What's your read 194 00:11:32,720 --> 00:11:33,000 Speaker 4: on that? 195 00:11:34,960 --> 00:11:37,800 Speaker 5: So positioning right now, and you know, I'll just say, granted, 196 00:11:37,880 --> 00:11:41,200 Speaker 5: given the political news, this might change, but going into 197 00:11:41,240 --> 00:11:44,679 Speaker 5: this past weekend, it was still remarkably bullish. So folks 198 00:11:44,760 --> 00:11:46,719 Speaker 5: were still on that tech train. They were still on 199 00:11:46,800 --> 00:11:50,120 Speaker 5: that momentum train. And you see that in you know, 200 00:11:50,200 --> 00:11:52,640 Speaker 5: that skew in version, that call demand over the put 201 00:11:52,679 --> 00:11:56,640 Speaker 5: demand in Apple in the video, et cetera, because I mentioned, 202 00:11:56,679 --> 00:12:00,480 Speaker 5: you know, you have hedges in Apple costing kind of decade. 203 00:12:00,800 --> 00:12:03,160 Speaker 5: And really the question I think is with this threat 204 00:12:03,240 --> 00:12:06,520 Speaker 5: of the market, if tech goes, the market by definition goes. 205 00:12:06,600 --> 00:12:08,920 Speaker 5: And so that's what I think people are going to 206 00:12:08,920 --> 00:12:11,360 Speaker 5: have to start putting into their thought process going forward. 207 00:12:11,520 --> 00:12:13,320 Speaker 4: What are you recommending them? What are you saying is 208 00:12:13,320 --> 00:12:16,320 Speaker 4: the more likely outcome based and positioning based in the bullishness. 209 00:12:16,360 --> 00:12:18,720 Speaker 4: Does that make the trade more fragile or does that 210 00:12:18,760 --> 00:12:21,360 Speaker 4: give it legs because of the money still flowing in. 211 00:12:23,600 --> 00:12:26,000 Speaker 5: Yeah, you know, I think look, when you start to 212 00:12:26,040 --> 00:12:29,760 Speaker 5: introduce geopolitical risks like what we're seeing, the one thing 213 00:12:29,920 --> 00:12:32,680 Speaker 5: is the market tends to be very bad at pricing 214 00:12:32,720 --> 00:12:35,079 Speaker 5: out these risks from a left tail and a right 215 00:12:35,080 --> 00:12:37,840 Speaker 5: tail perspective. So overall, if you're going to put tail 216 00:12:37,840 --> 00:12:40,440 Speaker 5: hedges on some sort of index proxy like an Apple 217 00:12:40,559 --> 00:12:44,080 Speaker 5: for instance, those are quite inexpensive because what happens is 218 00:12:44,400 --> 00:12:47,719 Speaker 5: if it becomes more unstable, you get a correlated move down. 219 00:12:47,800 --> 00:12:51,080 Speaker 5: That's what we've seen historically, and that's why you know, 220 00:12:51,160 --> 00:12:53,360 Speaker 5: you want to just own anything that could be a 221 00:12:53,400 --> 00:12:54,720 Speaker 5: proxy to the overall market. 222 00:12:55,040 --> 00:12:58,360 Speaker 2: Amy Lawrence McDonald made a splash, I think it was 223 00:12:58,440 --> 00:13:02,120 Speaker 2: ten days ago with a lengthy, lengthy essay off the 224 00:13:02,160 --> 00:13:05,720 Speaker 2: first order mass of index funds ETFs, all the other 225 00:13:05,800 --> 00:13:08,240 Speaker 2: four oh one case stuff we do, and then the 226 00:13:08,320 --> 00:13:13,600 Speaker 2: Amy Wu Silverman space of overlaid derivative instruments on top 227 00:13:13,679 --> 00:13:17,920 Speaker 2: of this ginormous amount of money, do we have opacity 228 00:13:18,440 --> 00:13:23,320 Speaker 2: or clarity on the notional value of the derivative the 229 00:13:23,440 --> 00:13:29,360 Speaker 2: set of derivative instruments off of our gazillion dollar retirement base. 230 00:13:31,679 --> 00:13:34,679 Speaker 5: Yeah, so this has been a very hot topic, Tom, 231 00:13:34,760 --> 00:13:38,640 Speaker 5: among derivatives practitioners because so when you speak to that, 232 00:13:38,720 --> 00:13:41,600 Speaker 5: the way I'll tell you what happens practically is there's 233 00:13:41,679 --> 00:13:44,800 Speaker 5: now a lot of money going into funds where you know, 234 00:13:44,920 --> 00:13:48,320 Speaker 5: the fund is essentially long stocks, but there is a 235 00:13:48,360 --> 00:13:52,960 Speaker 5: derivative overlay strategy that's maybe selling calls collecting premium on 236 00:13:53,000 --> 00:13:56,480 Speaker 5: top of it. And so what has happened because of that, Tom, 237 00:13:56,800 --> 00:14:00,880 Speaker 5: is there has been this dampening of volatility overall because 238 00:14:00,920 --> 00:14:04,559 Speaker 5: there's so much notional going into funds that's selling volatility 239 00:14:04,600 --> 00:14:07,560 Speaker 5: into an environment that already has now breadth. And the 240 00:14:07,679 --> 00:14:10,920 Speaker 5: question is, you know, this is what derivaist practitioners are asking, 241 00:14:11,240 --> 00:14:14,760 Speaker 5: what happens when this breaks? What happens when there's big 242 00:14:14,840 --> 00:14:17,720 Speaker 5: correlated move either to the downside or to the f side. 243 00:14:17,840 --> 00:14:19,920 Speaker 5: In this case, it's actually a correlated move to the 244 00:14:20,000 --> 00:14:24,280 Speaker 5: upside that could break this because remember it's mostly overwriting, 245 00:14:24,360 --> 00:14:27,480 Speaker 5: that's where the notional is. And I do think that's 246 00:14:27,720 --> 00:14:29,880 Speaker 5: that's why you know, we fixate so much on the 247 00:14:29,960 --> 00:14:33,240 Speaker 5: breadth of tech because if AI keeps going. If that 248 00:14:33,320 --> 00:14:36,040 Speaker 5: train keeps going, that's where I have the question. But 249 00:14:36,080 --> 00:14:38,880 Speaker 5: it does seem like you know right now that maybe 250 00:14:38,920 --> 00:14:41,240 Speaker 5: some of the froth is slowly starting to leave the market, 251 00:14:41,240 --> 00:14:43,080 Speaker 5: at least from price action this past week. 252 00:14:43,320 --> 00:14:45,840 Speaker 1: Amy, thank you. What a clinic gamy with Silverman, RBC 253 00:14:45,920 --> 00:14:46,920 Speaker 1: Capital Market. 254 00:14:46,680 --> 00:14:53,160 Speaker 4: Here Colin Martin joining us now fixing come strategist at 255 00:14:53,160 --> 00:14:55,960 Speaker 4: the Schwab Center for Financial Research. Colin, did you take 256 00:14:56,000 --> 00:14:58,240 Speaker 4: a signal from that that once again we have seen 257 00:14:58,360 --> 00:15:01,720 Speaker 4: bonds reclaim their role as a stabilizing factor and the 258 00:15:01,880 --> 00:15:03,000 Speaker 4: counter hedge to risk. 259 00:15:03,480 --> 00:15:05,320 Speaker 6: Yeah, we think so. I mean, as you alluded to, 260 00:15:05,400 --> 00:15:07,360 Speaker 6: we saw yields come down a little bit, although they've 261 00:15:07,360 --> 00:15:09,800 Speaker 6: given some of that retreat back. But yes, we do 262 00:15:09,840 --> 00:15:12,240 Speaker 6: think when there are concerns like this, when there are 263 00:15:12,360 --> 00:15:15,520 Speaker 6: risks like that, you see the bid for treasuries pick up. 264 00:15:15,800 --> 00:15:17,560 Speaker 6: You see yields come down a little bit. There is 265 00:15:17,600 --> 00:15:20,600 Speaker 6: that inflationary theme a little bit in there, but as 266 00:15:20,600 --> 00:15:22,960 Speaker 6: Tom alluded to, oil hasn't done too much, and we 267 00:15:22,960 --> 00:15:24,520 Speaker 6: look at the grand scheme of thing, I don't think 268 00:15:24,520 --> 00:15:27,040 Speaker 6: that would move the needle too much in terms of 269 00:15:27,160 --> 00:15:30,360 Speaker 6: overall inflation, and especially anything that the FED would be 270 00:15:30,360 --> 00:15:33,080 Speaker 6: looking at. But to get to your question, yes, they 271 00:15:33,440 --> 00:15:35,760 Speaker 6: do offer that diversification benefit, and it's one of the 272 00:15:35,800 --> 00:15:39,280 Speaker 6: reasons why we've continued to suggest all investors consider bonds 273 00:15:39,280 --> 00:15:39,920 Speaker 6: at these levels. 274 00:15:40,080 --> 00:15:42,720 Speaker 4: Colin, if it weren't for the Russia conflict, we would 275 00:15:42,720 --> 00:15:44,920 Speaker 4: be talking about Centro, we'd be talking about the fact 276 00:15:44,920 --> 00:15:46,800 Speaker 4: that the head of the ECB, the federers or of 277 00:15:46,800 --> 00:15:48,480 Speaker 4: the Bank of Japan, and the Bank of England are 278 00:15:48,480 --> 00:15:50,800 Speaker 4: all going to be meeting on Wednesday to discuss they're 279 00:15:50,920 --> 00:15:55,200 Speaker 4: increasing fight on inflation. Do you think people are understating 280 00:15:55,280 --> 00:15:58,200 Speaker 4: or overstating how far these central banks are willing to go, 281 00:15:58,360 --> 00:16:00,680 Speaker 4: not only in how high rates go, but how long 282 00:16:00,680 --> 00:16:01,680 Speaker 4: they're willing to hold them. 283 00:16:01,560 --> 00:16:06,720 Speaker 6: There, I'd say understating both internationally and domestically. Now, we're 284 00:16:06,720 --> 00:16:09,560 Speaker 6: not expecting a ton more rate hikes from the FED, 285 00:16:09,600 --> 00:16:11,680 Speaker 6: but it does seem like one is likely. What we're 286 00:16:11,720 --> 00:16:14,000 Speaker 6: focusing on is really that length, as you just mentioned, 287 00:16:14,320 --> 00:16:17,000 Speaker 6: whether or not they hike once, more, twice more, or 288 00:16:17,040 --> 00:16:19,120 Speaker 6: even more than that. What we're focusing on is the 289 00:16:19,200 --> 00:16:21,520 Speaker 6: length of time because I think that's where really tight 290 00:16:21,600 --> 00:16:25,360 Speaker 6: financial conditions and restrictive policy comes into play. So it 291 00:16:25,400 --> 00:16:29,000 Speaker 6: doesn't give households or corporations, any type of borrower doesn't 292 00:16:29,000 --> 00:16:31,480 Speaker 6: give you that bailout down the road to then take 293 00:16:31,520 --> 00:16:34,320 Speaker 6: advantage of lower rates. The longer they hold, the more 294 00:16:34,360 --> 00:16:36,520 Speaker 6: they can reach their goals bring inflation down. So we 295 00:16:36,560 --> 00:16:39,640 Speaker 6: do think the markets are probably underestimating that, although it 296 00:16:39,680 --> 00:16:41,920 Speaker 6: has adjusted a little bit where rate cuts have essentially 297 00:16:41,920 --> 00:16:43,239 Speaker 6: been pushed back significantly. 298 00:16:43,320 --> 00:16:45,800 Speaker 2: And you're Darney published this week in Carl Keatneying over 299 00:16:45,840 --> 00:16:48,480 Speaker 2: the dust star mentions, so thank you, Carl. And it's 300 00:16:48,480 --> 00:16:50,800 Speaker 2: a basic idea of the wall of money out there. 301 00:16:50,880 --> 00:16:54,160 Speaker 2: Lawrence McDonald ten days ago said the same thing, and 302 00:16:54,160 --> 00:16:54,600 Speaker 2: there was a. 303 00:16:54,560 --> 00:16:57,040 Speaker 1: Wall of money out there. That wall of money is, 304 00:16:57,080 --> 00:17:00,280 Speaker 1: of course ninety nine percent schwab. We know it is. 305 00:17:00,280 --> 00:17:02,080 Speaker 1: There literally a shortage of bonds. 306 00:17:02,520 --> 00:17:04,119 Speaker 6: I don't think there's a shortage of bond, not. 307 00:17:04,040 --> 00:17:06,360 Speaker 1: To Templeton's famous shortage of bonds yet. 308 00:17:06,119 --> 00:17:08,520 Speaker 6: I don't think so, not yet. And there's a lot 309 00:17:08,520 --> 00:17:11,920 Speaker 6: of money out there. We talk a lot about pandemic savings, 310 00:17:11,960 --> 00:17:13,959 Speaker 6: what's there, what's not? I think a lot of that 311 00:17:14,000 --> 00:17:16,359 Speaker 6: probably is gone. But we're still looking at wages right 312 00:17:16,440 --> 00:17:18,000 Speaker 6: right now. We're going to need to see wages come 313 00:17:18,040 --> 00:17:19,760 Speaker 6: down a little bit. We're going to see the loosening 314 00:17:19,800 --> 00:17:22,200 Speaker 6: of the labor market to really see that spending come 315 00:17:22,200 --> 00:17:24,600 Speaker 6: down to a level that that the Fed's more comfortable. 316 00:17:24,200 --> 00:17:28,080 Speaker 2: With, which just on a retirement basis, are you people 317 00:17:28,160 --> 00:17:31,480 Speaker 2: optimistic that there will be issuance by corporations in the 318 00:17:31,520 --> 00:17:35,120 Speaker 2: taxable space away from full faith and credit. Is there 319 00:17:35,119 --> 00:17:38,000 Speaker 2: going to be issuance there so we can buy the coupon? 320 00:17:38,520 --> 00:17:43,760 Speaker 2: Or is John Templeton said iconically four decades ago there 321 00:17:43,800 --> 00:17:45,400 Speaker 2: will be a shortage of bonds. 322 00:17:45,480 --> 00:17:47,840 Speaker 6: I don't think so. If we look at corporate specifically 323 00:17:47,880 --> 00:17:50,879 Speaker 6: the amount outstanding and just the investment grade world, for example, 324 00:17:50,880 --> 00:17:53,560 Speaker 6: we're looking at six trillion plus. That's a lot. I 325 00:17:53,600 --> 00:17:58,919 Speaker 6: wouldn't expect corporations on mass to suddenly start shrinking the 326 00:17:58,920 --> 00:18:00,919 Speaker 6: amount they have outstanding out I think they'll be cautious 327 00:18:00,960 --> 00:18:03,000 Speaker 6: in the near term, but we wouldn't expect a shrinking 328 00:18:03,080 --> 00:18:05,679 Speaker 6: going forward. We look at the big picture in terms 329 00:18:05,680 --> 00:18:09,119 Speaker 6: of corporate issuance, whether it's loan market, high yield market, 330 00:18:09,160 --> 00:18:12,000 Speaker 6: you get closer to ten plus trillion. Wouldn't expect that 331 00:18:12,040 --> 00:18:13,120 Speaker 6: to shrink anytime soon. 332 00:18:13,560 --> 00:18:15,960 Speaker 4: Given the fact that you don't expect a shrinkage. You 333 00:18:16,040 --> 00:18:19,399 Speaker 4: do expect companies to continue to maintain their leverage profiles. 334 00:18:19,760 --> 00:18:23,240 Speaker 4: When will high rates bite because they'll have to refinance 335 00:18:23,240 --> 00:18:24,240 Speaker 4: at some point. 336 00:18:24,080 --> 00:18:27,160 Speaker 6: Yeah, hopefully soon. We've been thinking it's going to weigh 337 00:18:27,160 --> 00:18:30,160 Speaker 6: on these corporations for a while now, and so far 338 00:18:30,320 --> 00:18:32,520 Speaker 6: it hasn't at least impacted the way the markets are 339 00:18:32,600 --> 00:18:35,720 Speaker 6: perceiving the risk there. We've seen spreads all across the 340 00:18:36,040 --> 00:18:38,200 Speaker 6: rating spectrum come down. We saw a little bit of 341 00:18:38,200 --> 00:18:41,360 Speaker 6: an uptick last week. We're expecting it to be more 342 00:18:41,400 --> 00:18:44,720 Speaker 6: pronounced in the junk market, but especially the loan market. 343 00:18:44,720 --> 00:18:46,480 Speaker 6: This is something we've been concerned with. So if you're 344 00:18:46,480 --> 00:18:49,600 Speaker 6: asking when will they hit the bottom lines here, it's 345 00:18:49,680 --> 00:18:52,200 Speaker 6: hitting the bottom lines of loan issuers right now. If 346 00:18:52,200 --> 00:18:53,919 Speaker 6: you issue loans over the past couple of years, you've 347 00:18:53,920 --> 00:18:56,160 Speaker 6: seen your interest expense double, which is the. 348 00:18:56,080 --> 00:18:58,240 Speaker 4: Reason why loans have underperformed, and you've seen that in 349 00:18:58,320 --> 00:19:01,399 Speaker 4: a pretty pronounced way. I'll so have continued to rally. 350 00:19:01,600 --> 00:19:04,000 Speaker 4: And this is a conundrum. If you look around, like 351 00:19:04,040 --> 00:19:07,919 Speaker 4: what we heard earlier this show, they see things as 352 00:19:07,960 --> 00:19:10,800 Speaker 4: being pretty good, you see employment as being pretty full. 353 00:19:11,440 --> 00:19:14,640 Speaker 4: How do you sell off at advance of a crisis 354 00:19:14,760 --> 00:19:17,640 Speaker 4: or some sort of tightening and credit conditions that will 355 00:19:17,640 --> 00:19:20,520 Speaker 4: inevitably happen at some point when these companies roll over 356 00:19:20,560 --> 00:19:20,920 Speaker 4: their debt. 357 00:19:21,000 --> 00:19:22,879 Speaker 6: Yeah, that's what we're concerned with. If we look at 358 00:19:22,880 --> 00:19:25,359 Speaker 6: the outlook, we've seen default start to pick up. If 359 00:19:25,400 --> 00:19:28,040 Speaker 6: you look at Moody's and SMP data, defaults are closer 360 00:19:28,080 --> 00:19:29,959 Speaker 6: to three percent or so, more than double what they 361 00:19:29,960 --> 00:19:32,760 Speaker 6: were a year ago. Expectations are for them to rise. 362 00:19:32,960 --> 00:19:35,119 Speaker 6: I'll go back to my point before about the length 363 00:19:35,160 --> 00:19:38,080 Speaker 6: of time that rates are so high, where those corporations 364 00:19:38,080 --> 00:19:40,679 Speaker 6: who might be sitting on the sidelines right now not 365 00:19:40,760 --> 00:19:42,800 Speaker 6: looking to refinance or issue debt, they're not going to 366 00:19:42,800 --> 00:19:46,239 Speaker 6: get really be given that opportunity anytime soon. Now, Hi 367 00:19:46,320 --> 00:19:49,000 Speaker 6: Yel bonds have performed really well this year, and even 368 00:19:49,040 --> 00:19:51,120 Speaker 6: though we continue to talk about how cautious we are, 369 00:19:51,680 --> 00:19:54,640 Speaker 6: spreads remain close to four percent four and a half 370 00:19:54,640 --> 00:19:57,880 Speaker 6: percent area. We still see plenty of indicators out there 371 00:19:57,880 --> 00:20:00,200 Speaker 6: that suggest they should move higher. What we're telling our clients, 372 00:20:00,200 --> 00:20:02,760 Speaker 6: we're not saying you need to get out totally. We 373 00:20:02,800 --> 00:20:05,320 Speaker 6: are saying we're cautious. We expect spreads to rise, but 374 00:20:05,359 --> 00:20:07,720 Speaker 6: if you hold for a long period of time you 375 00:20:07,760 --> 00:20:09,639 Speaker 6: can kind of ride out those price declines and you 376 00:20:09,680 --> 00:20:12,280 Speaker 6: can see spreads rise two hundred basis points or so 377 00:20:12,760 --> 00:20:15,439 Speaker 6: and still break even or even make money over a 378 00:20:15,480 --> 00:20:18,040 Speaker 6: twelve month timeframe. We always talk about twelve months with 379 00:20:18,080 --> 00:20:20,600 Speaker 6: our clients because that's you want to really earn those 380 00:20:20,640 --> 00:20:21,880 Speaker 6: annual income payments. 381 00:20:22,800 --> 00:20:27,040 Speaker 2: Are you expecting new issuance by corporations when these ginormous 382 00:20:27,040 --> 00:20:30,919 Speaker 2: companies Apple or whatever, they'll make four phone calls and 383 00:20:30,960 --> 00:20:34,359 Speaker 2: solve five jillion dollars of bonds. But is there going 384 00:20:34,400 --> 00:20:38,479 Speaker 2: to be a solid issuance stream in taxable bonds? 385 00:20:38,680 --> 00:20:42,359 Speaker 6: I think, for ig we can see solid issuance. I 386 00:20:42,400 --> 00:20:45,520 Speaker 6: think they can withstand it. They have stronger profiles to 387 00:20:45,560 --> 00:20:48,080 Speaker 6: do that. I think we'll see a weaker high yield market. 388 00:20:48,240 --> 00:20:51,080 Speaker 6: I think investors are going to be a little bit 389 00:20:51,119 --> 00:20:54,240 Speaker 6: more cautious, and I think issuers themselves are going to 390 00:20:54,240 --> 00:20:56,960 Speaker 6: look at those numbers and decide this might not make 391 00:20:57,000 --> 00:20:57,399 Speaker 6: sense for me. 392 00:20:57,480 --> 00:20:59,440 Speaker 2: Right now, Colin, thank you so much for joining today, 393 00:20:59,440 --> 00:21:12,800 Speaker 2: Colin Martin chel Schwab. Right now we turn to the markets, 394 00:21:12,800 --> 00:21:16,080 Speaker 2: and they are markets looking for economic slowdow and Jeffrey 395 00:21:16,119 --> 00:21:18,280 Speaker 2: you joins a senior market strategist Bank. 396 00:21:18,119 --> 00:21:21,159 Speaker 1: Of New York Melon, how close are we to global recession? 397 00:21:21,359 --> 00:21:26,680 Speaker 7: Jeff, you, well, not super close yet. But if I 398 00:21:26,720 --> 00:21:29,680 Speaker 7: look at the Eurozona, IFO surveys this notion that only 399 00:21:29,720 --> 00:21:33,200 Speaker 7: a technical recession in Europe, which is not I'm going 400 00:21:33,240 --> 00:21:35,720 Speaker 7: to be prolonged. I think the ECB may need to 401 00:21:35,760 --> 00:21:39,399 Speaker 7: revisit that. So tonight's speech and the speech is over 402 00:21:39,400 --> 00:21:41,800 Speaker 7: the next few days, and by the hawks on the ECB, 403 00:21:42,320 --> 00:21:43,680 Speaker 7: I think they're going to have to be very very 404 00:21:43,680 --> 00:21:46,680 Speaker 7: careful with that language because they may now be edging 405 00:21:46,680 --> 00:21:49,639 Speaker 7: into the overtightening camp, and that's always bad for global growth. 406 00:21:50,520 --> 00:21:53,560 Speaker 2: The over tightening camp is there, and I guess this 407 00:21:53,840 --> 00:21:57,400 Speaker 2: is a demonstrable linkage between what we've witnessed over the weekend. 408 00:21:58,200 --> 00:22:03,160 Speaker 2: Are the events in the internet fragility of Russia enough 409 00:22:03,200 --> 00:22:07,480 Speaker 2: to derail the tendencies or the oomph of central banks? 410 00:22:08,920 --> 00:22:12,280 Speaker 7: I think right now they will just be observant and 411 00:22:12,480 --> 00:22:15,560 Speaker 7: see what the wider ramifications are. Of course, if this 412 00:22:15,600 --> 00:22:17,360 Speaker 7: is not the end of it, and I think many 413 00:22:17,480 --> 00:22:19,000 Speaker 7: markets do not think this is going to be the 414 00:22:19,040 --> 00:22:21,200 Speaker 7: end of it, of course, so there will be repercussions 415 00:22:21,200 --> 00:22:24,400 Speaker 7: and central banks will then react accordingly, but ultimately it's 416 00:22:24,400 --> 00:22:27,440 Speaker 7: about demand versus inflation, and again in the Eurozone on 417 00:22:27,480 --> 00:22:30,360 Speaker 7: the continent and Russia of course will play into this. 418 00:22:30,880 --> 00:22:33,160 Speaker 7: We are seeing clear signs of a demand slow down 419 00:22:33,280 --> 00:22:35,399 Speaker 7: and I think that's something that needs to be reacted to. 420 00:22:35,600 --> 00:22:38,000 Speaker 7: UK's in a different place, of course, and then of 421 00:22:38,040 --> 00:22:41,000 Speaker 7: course there's also the China situation not getting any better. 422 00:22:41,080 --> 00:22:43,320 Speaker 7: So you, as a Eurozone policy maker will need to 423 00:22:43,359 --> 00:22:45,840 Speaker 7: ask yourself, where's going to be the demand, Where's going 424 00:22:45,880 --> 00:22:47,600 Speaker 7: to be the risk appetite? It just doesn't seem to 425 00:22:47,600 --> 00:22:49,120 Speaker 7: be there right now, Jeff. 426 00:22:48,960 --> 00:22:51,200 Speaker 4: I'm curious. So they came in today about what kind 427 00:22:51,200 --> 00:22:53,280 Speaker 4: of tail risks were heightened on both sides and which 428 00:22:53,280 --> 00:22:55,840 Speaker 4: would seem as the more likely tail risk. It seems 429 00:22:55,920 --> 00:22:58,359 Speaker 4: evenly balanced right now. Whether you get a quick end 430 00:22:58,359 --> 00:23:01,720 Speaker 4: to the Ukrainian war leads to a real rally, or 431 00:23:01,720 --> 00:23:06,239 Speaker 4: whether we unleash exogenist threats considering a leadership vacuum at 432 00:23:06,240 --> 00:23:09,119 Speaker 4: the helm of what are the nuclear powers? How are 433 00:23:09,160 --> 00:23:11,760 Speaker 4: you expecting this to be played out by market participants? 434 00:23:12,800 --> 00:23:15,439 Speaker 7: I think the market participants in after last year, you 435 00:23:15,440 --> 00:23:17,440 Speaker 7: know there was a tail risk which they didn't anticipate, 436 00:23:17,600 --> 00:23:20,080 Speaker 7: or being far more attuned to that right now, looking 437 00:23:20,160 --> 00:23:24,399 Speaker 7: their geopolitical analysis, and you're looking at what assets are 438 00:23:24,480 --> 00:23:27,199 Speaker 7: reacted to the worst case scenarios of tail risks and 439 00:23:27,320 --> 00:23:30,080 Speaker 7: coming through, and I think the dollar will benefit accordingly 440 00:23:30,280 --> 00:23:33,040 Speaker 7: on the back of that. And also on top of 441 00:23:33,080 --> 00:23:36,359 Speaker 7: these developments, I think risk appetite unwinding, you know, due 442 00:23:36,400 --> 00:23:39,159 Speaker 7: to global growth concerns that was on the way in 443 00:23:39,320 --> 00:23:41,639 Speaker 7: any case. So we're seeing very good buying of dollar 444 00:23:41,640 --> 00:23:44,320 Speaker 7: in our underlying flow data. This carry trade, you know, 445 00:23:44,400 --> 00:23:47,360 Speaker 7: led by commodity currencies, high yielders and dore I say 446 00:23:47,359 --> 00:23:50,240 Speaker 7: it Ai stocks and things like that, that seems to 447 00:23:50,240 --> 00:23:52,120 Speaker 7: be on the custom of unwinding. You know, these things 448 00:23:52,440 --> 00:23:55,880 Speaker 7: on the margins cannot advance much further, so we are 449 00:23:56,160 --> 00:23:58,919 Speaker 7: looking at risk probably softening in the short term. You 450 00:23:58,920 --> 00:24:00,600 Speaker 7: don't want tail risk compound that. 451 00:24:00,840 --> 00:24:02,439 Speaker 4: This is fascinating. So in other words, you think that 452 00:24:02,480 --> 00:24:03,919 Speaker 4: the trade over the next few months is going to 453 00:24:03,920 --> 00:24:06,240 Speaker 4: be stronger dollar weeker tech After the biggest rally in 454 00:24:06,280 --> 00:24:08,880 Speaker 4: tech stocks ever for the first half of a year. 455 00:24:09,359 --> 00:24:11,600 Speaker 7: I think we really need to be very tactical about this. 456 00:24:11,960 --> 00:24:15,600 Speaker 7: But stronger dollar against those high yielding currencies, against those 457 00:24:15,760 --> 00:24:19,200 Speaker 7: high risk beta assets which have done well over the past. 458 00:24:19,240 --> 00:24:22,200 Speaker 7: Course we're also hence, you know, even with the Fed 459 00:24:22,480 --> 00:24:25,199 Speaker 7: perhaps hiking once or twice some more, we're looking up 460 00:24:25,200 --> 00:24:28,399 Speaker 7: apps on once more. At this point, that idiosyncratic nature, 461 00:24:28,600 --> 00:24:30,680 Speaker 7: us exceptionalism, it's still very much in play. 462 00:24:31,440 --> 00:24:33,720 Speaker 2: Jeff I've got to go on narrow here with you, 463 00:24:34,160 --> 00:24:37,600 Speaker 2: thunderstructor walk into day. And of course we're all distracted 464 00:24:37,600 --> 00:24:41,160 Speaker 2: by what's going on in Europe and I see dollar 465 00:24:41,240 --> 00:24:45,080 Speaker 2: ren minby add to a stunning seven point twenty four. 466 00:24:45,760 --> 00:24:47,880 Speaker 1: You got to tell me that it's a managed move 467 00:24:47,960 --> 00:24:52,720 Speaker 1: by Beijing heir. Where's their tolerance and we create you one. 468 00:24:54,240 --> 00:24:57,879 Speaker 7: They will tolerate a weaker and absolutely as long as 469 00:24:57,920 --> 00:25:00,600 Speaker 7: it's in line with their infrastrate cuts, as long as 470 00:25:00,600 --> 00:25:02,959 Speaker 7: it's in line with the easing. It's not about levels, 471 00:25:03,000 --> 00:25:05,119 Speaker 7: it's about the pace. They're going to start sounding like 472 00:25:05,160 --> 00:25:08,120 Speaker 7: the Boja. They don't like the disruptive news. But let's 473 00:25:08,119 --> 00:25:10,280 Speaker 7: get this straight here. We go back to real rates. 474 00:25:10,320 --> 00:25:12,840 Speaker 7: You know, if you want real rates lower, you cannot 475 00:25:12,840 --> 00:25:15,400 Speaker 7: have a stronger currency, end of and that's what they're 476 00:25:15,400 --> 00:25:16,080 Speaker 7: managing right now. 477 00:25:16,240 --> 00:25:18,960 Speaker 1: Jeffy, you thank you so much, greatly appreciate it. With 478 00:25:19,119 --> 00:25:20,040 Speaker 1: be n one Melanie. 479 00:25:20,240 --> 00:25:24,040 Speaker 2: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, and 480 00:25:24,200 --> 00:25:28,400 Speaker 2: anywhere else you get your podcasts. Listen live every weekday, 481 00:25:28,640 --> 00:25:32,119 Speaker 2: starting at seven am Eastern im Bloomberg dot com, the 482 00:25:32,280 --> 00:25:34,560 Speaker 2: iHeartRadio app, tune In. 483 00:25:34,800 --> 00:25:36,240 Speaker 1: And the Bloomberg Business app. 484 00:25:36,680 --> 00:25:40,440 Speaker 2: You can watch us live on Bloomberg Television and always. 485 00:25:40,720 --> 00:25:44,560 Speaker 2: I'm the Bloomberg Terminal. Thanks for listening. I'm Tom Keen, 486 00:25:44,800 --> 00:25:46,600 Speaker 2: and this is Bloomberg