Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along
Speaker 1: with Jonathan Ferrell and Lisa Brownowitz Jailey. We bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple Podcast, sun Cloud, Bloomberg dot Com,
Speaker 1: and of course on the Bloomberg terminal. Right now, Lisa
Speaker 1: Bramins and Tom keenan we digress, and we digress to
Speaker 1: corporate management in moving forward in this pandemic, Anthony Kapjanos,
Speaker 1: with Marriott the CEO and Tony Capiano out of Cornell Hotel,
Speaker 1: has had the toughest task in management of any corporate
Speaker 1: officer in America, filling his shoes of the great Arne
Speaker 1: Soords and I'm gonna go to Cornell Hotel and Arne
Speaker 1: Soords and life is service. How have you managed this
Speaker 1: tough task? Well? I had the first of all, thanks
Speaker 1: for having me. It's great to be back in per
Speaker 1: sin In Studio. I had the good fortune of working
Speaker 1: with Arnie for almost a quarter of a century. I
Speaker 1: think the easiest way to manage through the grief that
Speaker 1: that the Marriott family has experienced is to honor his
Speaker 1: legacy by continuing all the great work he had done
Speaker 1: and continuing the company down the path that he had
Speaker 1: set forth for us. Cornell Hotel didn't have a course
Speaker 1: pandemic one oh one. They may now what they may now?
Speaker 1: What have you learned? A few things? I think I've
Speaker 1: learned how valuable our culture is. I've found how resilient
Speaker 1: and adaptable are people are around the world. I've learned
Speaker 1: how much people miss travel, and I've learned how responsive
Speaker 1: we need to be to these sorts of crises. We
Speaker 1: had to not only stabilize the company's balance sheet in
Speaker 1: a matter of weeks, but roll out all new operating
Speaker 1: and um cleanliness protocols in a hundred and thirty three
Speaker 1: countries around the world in a matter of weeks, Tony,
Speaker 1: How difficult is it to hire enough personnel to meet
Speaker 1: the credible demand of people who do want to get
Speaker 1: back on the road. It varies by market, Lisa. In
Speaker 1: the markets here in the US where we've seen demands
Speaker 1: spike most rapidly California, Texas, Florida, it is challenging, and
Speaker 1: we're competing for labor not only with other hospitality and
Speaker 1: travel companies, but with those industries that have thrived, some
Speaker 1: of the online retailers and the like. We really have
Speaker 1: to be much more proactive and deliberate about reminding folks
Speaker 1: about the appeal and the opportunities that exist in traveling tours. Meanwhile,
Speaker 1: as we're dealing with a number of supply chain kinks
Speaker 1: and certainly labor market frictions, were also dealing with a
Speaker 1: different international backdrop, and we had President Biden come out
Speaker 1: and warned companies about doing business in Hong Kong. How
Speaker 1: are you dealing with these types of saber rattling warnings
Speaker 1: and possibly even more than saber rattling, particularly with respect
Speaker 1: to China, where I know that you guys were planning
Speaker 1: to expand. Well, we continue to expand in China. It's
Speaker 1: our biggest, second biggest market globally. We've got four hundred
Speaker 1: hotels open, another four hundred in the pipeline. I think
Speaker 1: we're helped a bit Virtually the entirety of our footprint
Speaker 1: and pipeline are owned by Chinese owners, and so we
Speaker 1: are viewed a bit more as a Chinese company versus
Speaker 1: an American company in terms of the ownership of the
Speaker 1: assets there um. But again we've got to navigate these
Speaker 1: complexities in a hundred and thirty three countries around the world.
Speaker 1: And it's really I think starts with being good corporate citizens.
Speaker 1: Best thing you ever did was restore the old King
Speaker 1: cole mural at the St. Regis Hotel in New York.
Speaker 1: You don't have to restore it in Hong Kong. You
Speaker 1: have a Saint Regis in Hong Kong that is an
Speaker 1: absolute palace. The reality is you've got to get fat
Speaker 1: cat bankers into that St. Regis and Hong Kong. How
Speaker 1: are you going to do that given the politics of Beijing, Well,
Speaker 1: it will certainly be a challenge. What's interesting is, at
Speaker 1: least through the pandemic, given the condition of borders in China,
Speaker 1: UM China is relying almost entirely on domestic demand. But
Speaker 1: we look at corporate business travel in China in market
Speaker 1: right now, we were six percent ahead of where we
Speaker 1: were in March of nineteen. So the volume is there,
Speaker 1: the pricing powers there, but the mix is different because
Speaker 1: it's largely domestic demand. Tony, what about globally, are you
Speaker 1: starting to see global travel wax or Wayne? Given the
Speaker 1: increase in delta variant around the world, it varies by market,
Speaker 1: and one of the nice things about our businesses we
Speaker 1: track and analyze the data in real time. When the
Speaker 1: EU came out with a fairly opaque statement about borders
Speaker 1: opening to international travel, we saw booking volume jump for
Speaker 1: in two weeks. When Greece came out with more specific
Speaker 1: details on what was going to be required to enter
Speaker 1: the country, we immediately exceeded demand booking volumes from two
Speaker 1: thousand nineteen. Then you shift to other parts of the world,
Speaker 1: countries like India that are still struggling mightily with the pandemic,
Speaker 1: we see really muted demand patterns. Honestly, I just actually
Speaker 1: traveled interne nationally and it was amazing to see how
Speaker 1: everyone felt like they were getting in just into the wire,
Speaker 1: and they were all checking the news to see what
Speaker 1: additional restrictions might be in place. On the way back,
Speaker 1: things were different, including the number of times a housekeeper
Speaker 1: would come into your hotel room to change the towels,
Speaker 1: the concern about being in the same room at the
Speaker 1: same time, buffets that would not be out there for
Speaker 1: you to take the way that they previously were. How
Speaker 1: much of this is going to be the new normal
Speaker 1: going forward? I think There will be changes we've made
Speaker 1: that will endure through the beyond the pandemic. Some of
Speaker 1: the contactless technology we've put in place, the ability to
Speaker 1: check in, check out on the app, chat with the
Speaker 1: hotel staff through your device. We've got mobile key and
Speaker 1: more than four thousand hotels around the world. I think
Speaker 1: a lot of that will continue. Things like housekeeping, how
Speaker 1: we deliver food and beverage service will evolve on a
Speaker 1: market by market basis. If you were in China today,
Speaker 1: the buffets which are so popular, they're back. I look
Speaker 1: at Goldman Sachs arguing about raising pay of junior bankers.
Speaker 1: Do you have to raise the pay of your line
Speaker 1: employees because of employers like Amazon competing at a lower
Speaker 1: wage in an all in benefit package in some markets? Absolutely,
Speaker 1: Amazon and Jesse and Bezos, they're affecting your base way.
Speaker 1: I think they're affecting to me this entirely of travel
Speaker 1: on tourism, how doing What is what is Amazon doing
Speaker 1: in a juggernaut to affect your employee pay Stork, I
Speaker 1: think their entry level wage rates are putting pressure on
Speaker 1: wage rates in certain markets. Um and I I think
Speaker 1: one of the things we're wrestling with a bit. The
Speaker 1: employment market at large has often viewed travel on tourism
Speaker 1: as a bit of a safe harbor industry, and I
Speaker 1: think some of that confidence has been rattled a bit
Speaker 1: when you look at global occupancies dropping down into the
Speaker 1: low teens at the outset of the pandemic, all of
Speaker 1: that travel on tourism companies had to make heart wrenching
Speaker 1: to visions around furloughs and job eliminations, and I think
Speaker 1: we've got to do a lot of work to restore
Speaker 1: confidence that this is an industry that you can build
Speaker 1: a long term career, get to work. I need lobster
Speaker 1: role in all right Coast to Coast, Tony Cupiano with
Speaker 1: us their chief executive officer, arguably the CEO of the
Speaker 1: year on the death of Earning Sorensen as well Kenner
Speaker 1: Leon with us, and I do want to say, folks,
Speaker 1: and it's just an opinion, but when we look at
Speaker 1: four or five, six, seven banks, the chart presentation a
Speaker 1: Bank of America and the heat of an earnings release
Speaker 1: is absolutely best in class. There's no other way to
Speaker 1: put it. Ken Ley on where Us was c f
Speaker 1: R A. Ken Brian moynann has a courage to put
Speaker 1: the efficiency ratio up in a gorgeous chart before the pandemic.
Speaker 1: The number was a brilliant six. After the pandemic and
Speaker 1: in the pandemic, it's not do you have a belief
Speaker 1: that the bank can you get back to the constructive
Speaker 1: efficiency ratios of the past or is that day's gone by.
Speaker 1: It's only for the problem banks where the efficiency ratios
Speaker 1: will stay elevated, and that would be perhaps City Group
Speaker 1: and Wells Fargo. But for Bank America JP Morgan, the
Speaker 1: answer is yes. And then you've got to look at
Speaker 1: what is the efficiency UM it's essentially and how they
Speaker 1: operate and with their investments in digital and technology and
Speaker 1: enables them to improve that ratio. So it's a semple
Speaker 1: ratio that captures their whole business. UM. It's kind of
Speaker 1: a second derivative for analysts as as we look at
Speaker 1: what is performance, I see a moonshot on the chart
Speaker 1: kenn Ley on and it's what John Farrow was talking about.
Speaker 1: We're using digital, we're using our phones, the zell z
Speaker 1: E L L E. Folks, we all move money around
Speaker 1: to our kids on it um Kenner Leon, what does
Speaker 1: zel mean for Brian moynihan James Diamond and the rest
Speaker 1: just up up we go. In cell phone payments, you
Speaker 1: want to definitely be a player and take advantage of
Speaker 1: how society is changing behavior, how they shop and how
Speaker 1: they spend. But don't get distracted, and I don't think
Speaker 1: Brian moynihan and Management is a Bank of America that
Speaker 1: a physical presence will help them now for the delayed
Speaker 1: rebound of the consumer for banking and small business small
Speaker 1: business loans, they come to a local branch or to
Speaker 1: a financial center. So we're also seeing market share gain
Speaker 1: of the large banks in even the top mark metropolitan
Speaker 1: markets in the US. So it's it's kind of a
Speaker 1: boring strategy, but incrementally that's going to help them, especially
Speaker 1: when we see a pickup and loan activity. Unfortunately, Tom,
Speaker 1: I think that's what confidence in not for Q three
Speaker 1: of this year, and maybe we get a glimpse of
Speaker 1: that later this year, and down to what's happened on
Speaker 1: the fiscal side, can for you to get a decent
Speaker 1: read on what was happening with loan growth. You know,
Speaker 1: so much of the catalysts here for for loan growth
Speaker 1: is really the consumer. It's not commercial corporate. Their flush
Speaker 1: with cash or they have access in the US markets
Speaker 1: to the capital markets, and we saw that in fixed
Speaker 1: income underwriting. But you know, for the consumer, it's you
Speaker 1: look at the FED data. Of course, many metrics households
Speaker 1: saving the ratio of debt relative to their to their income,
Speaker 1: and they're at record low. So it might be we
Speaker 1: got technology going, but the consumer is more conservative. It's
Speaker 1: like coming out of the depression of the thirties or
Speaker 1: the financial crisis. They're saying, we're gonna pay our bills
Speaker 1: and we're not gonna let these credit card balances rise
Speaker 1: as much as they can. That's a big story as
Speaker 1: we go into the next quarter because we're going to
Speaker 1: see if that's really true. The big distinction there, of course,
Speaker 1: they've come out of this one. I'm aggregate not pull or.
Speaker 1: That is the big distinction this time around. I know
Speaker 1: Alison Williams and bloom Bag Intelligence, you as well, Lisa,
Speaker 1: have written about this in the last twenty four hours,
Speaker 1: that distinction between main street and Wall Street companies and
Speaker 1: consumers and how that cash is being deployed. The idea
Speaker 1: here that you can bet more reliably, and that's what
Speaker 1: we're seeing in the stock price on banking on mergers
Speaker 1: and acquisitions, deal making, other types of financial markets activity
Speaker 1: than for consumers to be profligate with their spending. Can
Speaker 1: going forward, can we continue to rely? Can investors continue
Speaker 1: to rely on the banking activity to support any lag
Speaker 1: in lending until that picks back up. The banks are
Speaker 1: are strong, the balance sheets are incredibly at great levels,
Speaker 1: and return of capital. So I think for the consumer,
Speaker 1: the banks are solid. And for the investor, uh, there's
Speaker 1: return of capital. We have substantial increases of dividend and
Speaker 1: buy back they could do after the Federal Reserve stress tests.
Speaker 1: And keep in mind the whole battle here again they
Speaker 1: after capturing wallet share of consumer spending. But we didn't
Speaker 1: talk about today. Uh. The strong results of the asset
Speaker 1: management and wealth management businesses here today for Bank America,
Speaker 1: but all the large banks. UH. And this is great
Speaker 1: because this drives for investors confidence on recurring revenue and
Speaker 1: cash flow. Kenley on CFR right, thank you, sir Kenley
Speaker 1: on that wank in on these numbers. Let's bring it, David,
Speaker 1: George Robert w vad City of Research Analysts for US banks.
Speaker 1: David's your first take on the numbers place. I think
Speaker 1: overall John, it's it's great to be here. I think
Speaker 1: the numbers overall were pretty good and continued to reflect
Speaker 1: an improving economy and that's evident in activity levels as
Speaker 1: well as a very strong credit quality really across the board. So, David,
Speaker 1: when we take a look at these numbers, one thing
Speaker 1: that has popped all of the bank earnings has been
Speaker 1: the lack of loan growth. And I'm wondering to the
Speaker 1: extent that there is loan growth, it is a come
Speaker 1: among the wealth there individuals. How much is that sort
Speaker 1: of keep point here that wealthier individuals are borrowing versus
Speaker 1: their assets that they don't have to liquidate portfolios that
Speaker 1: are currently invested in equity markets. Yeah, we've seen that.
Speaker 1: It's a great point. We've seen fairly significant growth um,
Speaker 1: Lisa in what I would call security spased loans and
Speaker 1: as you as you refer to wealthy individuals basically using
Speaker 1: their stock portfolios and wealth portfolios to uh to use
Speaker 1: a debt for other purposes, could be to buy home
Speaker 1: or other or other measures. So we're also seeing a
Speaker 1: pickup in credit card growth. So Jp Morgan, yesterday I
Speaker 1: had eight percent card growth, and we've seen the card
Speaker 1: stocks are act pretty positively. But other than that, loan
Speaker 1: to make one of demand continues to be pretty soft.
Speaker 1: David George, you want you to parachute in Mackenzie or
Speaker 1: Bain or the other great thinkers out five years Which
Speaker 1: of these banks is best position for five years out? Um?
Speaker 1: I really think that the industry, Uh, Tom, I'm trying
Speaker 1: not to make any headlines. I think that the industry
Speaker 1: in many ways is as in good as shape as
Speaker 1: it's ever been, particularly from a risk perspective. I think
Speaker 1: that the regulatory framework of the c CAR has made
Speaker 1: many of these companies, and I say this as a positive,
Speaker 1: very utility like in nature with respect to the predictability
Speaker 1: of their revenues, predictability of their earnings, and the general
Speaker 1: um lower risk um perspective of these business models. They've
Speaker 1: all got a ton of capital, significant access liquidity, and
Speaker 1: we've obviously this industry has been part of the solution
Speaker 1: to the pandemic rather than the problem like it was.
Speaker 1: As you know, Tom and the O eight oh nine
Speaker 1: time frame. What do you make of this argument that
Speaker 1: the consumer is really strong coming out of this pandemic,
Speaker 1: coming out of this crisis this time, But that's going
Speaker 1: to generate some rewards when it comes to loan growth
Speaker 1: further down the road. Do you buy into that? I do.
Speaker 1: I I'm a little worried that that consensus expectations for
Speaker 1: loan growth are overly optimistic. That the I continue to
Speaker 1: get questions from investors and and and the like about
Speaker 1: at lack of loan growth, and the story really is
Speaker 1: deposit growth. So Bank of America, as an example, had
Speaker 1: fourteen percent deposit growth and BA base got over two
Speaker 1: trillion in deposits with the T so that there is
Speaker 1: significant deposits coming into the system. So it's simply not
Speaker 1: intuitive from our perspective to expect a lot of loan
Speaker 1: growth until you see deposits start to leave the system.
Speaker 1: Once we get some sense on that, then I think
Speaker 1: you'll see loan growth improved. Now on the corporate side,
Speaker 1: I think supply chain disruptions are definitely playing a role
Speaker 1: because companies simply can't get inventory. So I do think
Speaker 1: you'll see a small step function higher once the once
Speaker 1: some of those um supply chain issues become resolved. But
Speaker 1: but but in the meantime, I think it's going to
Speaker 1: be pretty slow going. David, can you build on this
Speaker 1: idea of deposits increasing at such a quick pace given
Speaker 1: that people have been expending so much spending, is there
Speaker 1: an incoherence here and the fact that people are still
Speaker 1: stashing so much away in their savings. Well, um, it's
Speaker 1: a great question. I think part of it is just
Speaker 1: simply the government crowding out the banks. A lot of
Speaker 1: this deposit growth is simply government stimulus money finding its
Speaker 1: way into uh into bank accounts, and um, I don't
Speaker 1: really see uh um that changing much in the near
Speaker 1: term now. I think in two we should see loan
Speaker 1: growth start to get better, but it's not going to
Speaker 1: be nearly as stronger growth is maybe what we've gotten
Speaker 1: accustomed to over the last twenty to twenty five years.
Speaker 1: Do we have to give them the toaster? That's actually, John,
Speaker 1: that's a really really sophisticated question. We've given them the
Speaker 1: toast that we have to pike the toasters called John
Speaker 1: the toaster David, This is really important, John, David a
Speaker 1: firm and square, they're the toaster is a firm in
Speaker 1: those people changing the debate. What's the fear level on
Speaker 1: modern fintech for these bankers? Yeah, it's it's a good question.
Speaker 1: I think that that the industry, these these behemoth banks
Speaker 1: continue to be infringed upon really from all angles. And
Speaker 1: you you mentioned obviously some of the the fintech companies
Speaker 1: of the Firm and the like, and I think that's
Speaker 1: going to continue. UM. Where banks really differentiate themselves from
Speaker 1: my perspective UM as a longtime bank analyst seeing a
Speaker 1: lot of different cycles, is their ability to underwrite risk
Speaker 1: as well as their funding. They've got all of the
Speaker 1: same products that these fintech model line companies, but also
Speaker 1: have we think much more sophisticated credit modeling, capability, scale
Speaker 1: and funding. David love catching up with you in earning season.
Speaker 1: It's good to see it than wity of research analysts
Speaker 1: on the U S banks. Steve Major, HSBC global head
Speaker 1: of fixed Income Research joins us, and I'm pleased to
Speaker 1: say it's going to be with us for the next
Speaker 1: five ten minutes. Steven want to start that with the
Speaker 1: provocative question, if I may, do you think we might
Speaker 1: have already seen the peak in this yield curve for
Speaker 1: this cycle. Yeah. I think we saw the peak of
Speaker 1: yields at the end of March, John, And what's happened
Speaker 1: since then is the market just repricing to the reality
Speaker 1: rates aren't going up anytime soon. To me, I wonder
Speaker 1: what's happened to the two percent and and and above
Speaker 1: consensus forecast because to me, to me, that wasn't particularly
Speaker 1: robust in the first place. So so so I think
Speaker 1: that there could be a scrambling of people's forecasts, as
Speaker 1: you have seen some people scramble to cover their shorts,
Speaker 1: so you know, pushed if yields are going to move
Speaker 1: towards one percent or two percent through the rest of
Speaker 1: the year, I go for one, Steve Major. We've got
Speaker 1: an awful large audience of listeners and viewers that don't
Speaker 1: have a c f A. They didn't study for bose
Speaker 1: cover to cover like you did, and they're going wait
Speaker 1: a minute, debt up, debt up, ever ever higher, and
Speaker 1: as you brilliantly show, yields continue to fall. That is
Speaker 1: the arch conundrum. How can that be? Well, first of all,
Speaker 1: the last twenty years have seen that association of higher
Speaker 1: debt and lower yield in place. Now, of course, the
Speaker 1: correlation is not causality. To go to causality, you need
Speaker 1: to think. We need to think about the debt servicing channel,
Speaker 1: and that's the cash payments that have to go towards
Speaker 1: servicing the debt. The simple point, Tom is, we cannot
Speaker 1: afford higher rates and it's very very unlikely that we
Speaker 1: will reach the height of the last cycle. Now that
Speaker 1: that seems to me to be more important than the
Speaker 1: date of the liftoff. It's it's the destiny that really matters,
Speaker 1: not the departure. Stephen, how much does this rely on
Speaker 1: an ever easy federal reserve versus just the dynamics natural
Speaker 1: in the economy. Well, look, the Feds are easy in
Speaker 1: several ways with forward guidance and the QUEI and the
Speaker 1: interest rate that it sets, and that sets up a
Speaker 1: bit of a trap because it's very, very difficult to
Speaker 1: unwind all of this. So so the death stock is
Speaker 1: huge globally, the indust rates are now and there is
Speaker 1: qui et cetera. So it's going to take a long time.
Speaker 1: Think about a super tanker turning around the Cape of
Speaker 1: Good Hope. I mean it looks it looks to me
Speaker 1: it's going to take a very long time. And that
Speaker 1: speaks to today's testimony. At best, you might get an
Speaker 1: iterative shift at some point, but nothing dramatic is going
Speaker 1: to happen today. It can't steve a lot of conversation
Speaker 1: about the reaction function over the Federal Reserve. Let's talk
Speaker 1: about the reaction function of the market. Participant to data
Speaker 1: yesterday morning got a lot of attention from a lot
Speaker 1: of people. It wasn't just a cp I print, it
Speaker 1: was how the market responded to. The cp I print
Speaker 1: didn't last too long because, as you know, we had
Speaker 1: a messy thirty year issue a little bit later in
Speaker 1: the afternoon that changed things up. But you'll read just
Speaker 1: in that period, those several hours after that inflation print,
Speaker 1: what did that tell you? Well, I think the market
Speaker 1: is displaying a sort of Pavlovian response to all of this,
Speaker 1: in that it knows that if the probability of rates
Speaker 1: going up is to increase, as it seemed to have
Speaker 1: done at the June f m C, then equally the
Speaker 1: probability of reaching the heights of the last of the
Speaker 1: last cycle I'm also going down. So so so to me,
Speaker 1: the earlier they hike that the less room they have
Speaker 1: to go up, they'll have to stop earlier. And I
Speaker 1: think that that's how the market is now understanding the
Speaker 1: Fed's reaction function. They have this flexible average inflation targeting,
Speaker 1: but they've sort of chopped off the right tail by
Speaker 1: indicating that that they may they may hike into thousand
Speaker 1: and twenty three. Steve Manajor, if we have a boom economy,
Speaker 1: whatever the numbers are so goldben Sex as far apart,
Speaker 1: are optimistic than capital economics, which is more cautious hus
Speaker 1: WEC doing their own work as well. If we have
Speaker 1: a truly boom economy, can yields go up with a
Speaker 1: boom g d P and everyone remains happy? Very unlikely
Speaker 1: that yields are going to go up even with strong growth.
Speaker 1: If you if you get a six percent growth this year,
Speaker 1: you have to weigh against the minus two from last year,
Speaker 1: so the average is plus two. And look, as your
Speaker 1: show has been pointing out, real yields have been falling
Speaker 1: because they are the shock resorver that comes through. Nominal
Speaker 1: yields are being controlled. If inflation expectations and risk premium rise,
Speaker 1: the real yield can only go down. That's all. That's
Speaker 1: all that's happening, Stephen. If you see the bond yields
Speaker 1: can remain low, well, this is a boom economy. Does
Speaker 1: that mean that bonds have lost their signaling power, that
Speaker 1: they don't have the same kind of predictive view on
Speaker 1: the economy that they've traditionally had. Yeah, that that that's
Speaker 1: a that's a deeply involved, complex question. And I would
Speaker 1: say that when yields were down at fifty basis points
Speaker 1: last year, they lost a lot of that signaling and
Speaker 1: also they lost the diversification benefit. But when we're at
Speaker 1: one forty or so, then then there are investors who
Speaker 1: will buy long bonds, long bonds anywhere near two percent
Speaker 1: off ballast in a portfolio. So in terms of signaling,
Speaker 1: and I think maybe maybe people are over interpreting what
Speaker 1: what the yield and the yield curve means, because look,
Speaker 1: we've had a decade or more of que and unconventional
Speaker 1: monetary policy will of course some some of the stuff
Speaker 1: from the seventies and eighties that doesn't doesn't really apply
Speaker 1: to today's economy and bond market. So Steve, just a
Speaker 1: final question from me, if I may. You and I
Speaker 1: have known each other a long long time, and I
Speaker 1: know that you've been right more than you've been wrong
Speaker 1: on this bond market. Someone just reached out to me
Speaker 1: and said exactly that, and they asked the question what
Speaker 1: will it take for the two percent crowd to be right?
Speaker 1: What would it take ultimately for you to be wrong
Speaker 1: with the two percent crowd to be right? What do
Speaker 1: you think would need to happen? Well, there needs to
Speaker 1: be something more durable on the on the employment and
Speaker 1: wages side, and I think that this is where the
Speaker 1: FED is very inclusive and in answering the questions. I'm
Speaker 1: sure that Chair Powell will will point to that the
Speaker 1: FED is helping ordinary people by getting them back to work.
Speaker 1: We're a long way from seeing durable increases and wages
Speaker 1: that that might change the inflation outlook. Okay, um, so
Speaker 1: I would I would put that as one of the risks.
Speaker 1: I guess you could have personnel changes that we're not
Speaker 1: predicting in the in the next year or so, so,
Speaker 1: you know, personnel changes at the FED. I'm not really
Speaker 1: sure how how how how problematic that would be. But yeah,
Speaker 1: the point is there are always to it all risks
Speaker 1: to the forecast, but we're trying to take that into account.
Speaker 1: There's also a risk that yields go much lower. By
Speaker 1: the way, Steve Major on the bond market, Steve just
Speaker 1: in terms of personnel change, it just quickly the coaching
Speaker 1: staff of the English football team. Do we need some
Speaker 1: changes there too? Do you need to make a bit
Speaker 1: of an adjustment there? There's been success, we got to
Speaker 1: the final. Let's think about the positive. John. I'm happy
Speaker 1: to do the positive, so just I didn't know if
Speaker 1: you would do that after talking about the bond markets
Speaker 1: so negatively for so long. And what's happening with Steve
Speaker 1: is gonna see it. It's gonna catch up as always
Speaker 1: HSBC Globe ahead of fixed income research on this bond market.
Speaker 1: Always fantastic to catch up with Steve Major Tom, and
Speaker 1: it always gets such a fantastic reception to This is
Speaker 1: the Bloomberg Surveillance Podcast. Thanks for listening. Join us live
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Speaker 1: Tom keene In. This is Bloomberg