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Speaker 1: and the Bloomberg Business Opup. Will we get back to
Speaker 1: two percent yield? That'll be a great story. I believe
Speaker 1: that's price up and yield down if I get it right.
Speaker 1: Kathy Jones now gives perspective. She fixed income strategists in
Speaker 1: your kitchen this weekend of what to Do, she's with
Speaker 1: Charles Schwab. I am absolutely fascinated with an always open
Speaker 1: question to you and les Anne Saunders. What are people
Speaker 1: at Schwab doing with their fixed income money?
Speaker 2: Yeah, so, what we see amongst sort of the majority
Speaker 2: of the clients is they've been staying very short in duration.
Speaker 2: They're starting to move out. They're starting to get some
Speaker 2: confidence that they can move a little bit further out
Speaker 2: the curve. They're staying at high quality treasuries, very very
Speaker 2: popular along the CDs, not really dipping their toes into
Speaker 2: low quality. But you know, at these yields, Uni bonds,
Speaker 2: investment great corporates, treasuries are looking attractive and they're getting
Speaker 2: a little bit more confident about stretching out duration.
Speaker 1: The pros are worried about liquidity, whatever that means in
Speaker 1: the bond market. Should our viewers and listeners be worried
Speaker 1: about liquidity and full faith and credit simple to buy
Speaker 1: duration bonds.
Speaker 3: Yeah.
Speaker 2: I don't think for the average investor the liquidity issue
Speaker 2: is going to be a big one. I think for traders,
Speaker 2: I think for people like us navigating the markets for
Speaker 2: our clients. It's an issue, but I also don't think
Speaker 2: it's a critical issue right.
Speaker 3: Now in the market.
Speaker 4: You are the one person who I was most looking
Speaker 4: forward to speaking to today. I really want to get
Speaker 4: your understanding of what happened with the failed auction yesterday
Speaker 4: and whether you give any credence whatsoever to this idea
Speaker 4: that the hack of ICBC, of the US unit of
Speaker 4: ICBC had something to do with how poor it went off.
Speaker 2: You know, I don't really know for sure. It is
Speaker 2: an open question because we haven't had something like this
Speaker 2: happen before. It seemed like the win issued market was
Speaker 2: okay going into it. There were a lot of questions
Speaker 2: because we've had such a big rally at the long end.
Speaker 2: You know, who would show up after rates dropped so much?
Speaker 2: So are there some questions about that? And then you
Speaker 2: start to get the Powell comments, and then you get
Speaker 2: the hack whatever that may have had to do with it.
Speaker 2: So I think it's kind of a constellation of things.
Speaker 2: But we've had such a big rally going into it,
Speaker 2: after the ten year went well and the three year
Speaker 2: went well. I think that had something to do with
Speaker 2: people stepping back.
Speaker 4: What sort of signifies to you that we're actually getting
Speaker 4: stability in longer term bond yields enough to get some
Speaker 4: conviction to have some sort of trade that can last
Speaker 4: more than a couple of days.
Speaker 2: Yeah, we don't have it yet, especially the further out
Speaker 2: the curve you go, you go beyond ten years, you
Speaker 2: really don't have it. Even the ten year I mean,
Speaker 2: look at the volatility we've had recently, up fifty basis points,
Speaker 2: down fifty basis points. I don't think we're there yet.
Speaker 2: I think the market needs conviction that the FED is
Speaker 2: really done and that you know, the hold has some
Speaker 2: sort of timeframe that you can anticipate, and then we
Speaker 2: start to get that stability. We thought we had it,
Speaker 2: and then Paul spoken, we don't have it.
Speaker 4: How much does this really have to do, though, with
Speaker 4: the FED and it's policy at a time when people
Speaker 4: are citing fiscal policy, where people are citing potential inflation,
Speaker 4: where people are citing just simply, where are the buyers
Speaker 4: going to come from at a time of changing policy overseas.
Speaker 2: Yeah, we haven't. So I tend to think it really
Speaker 2: has to do with three things that always influence the
Speaker 2: trend and rates. What the FED is doing, because you
Speaker 2: have to discount that. There's no way you can get
Speaker 2: around the FED, no matter how hard you try. What
Speaker 2: inflation is doing, which is tending to recede, and then
Speaker 2: how the economy is performing, and then you get into
Speaker 2: these other things like supply and who's buying, you know,
Speaker 2: in China and Japan. But actually the foreign flows have
Speaker 2: been pretty steady despite all this chatter. We've had the
Speaker 2: four and flows hold pretty steady. The reserves are pretty steady,
Speaker 2: So I'm less worried about that. Fiscal policy. Obviously it's
Speaker 2: a concern, But is it a concern today versus yesterday
Speaker 2: versus a week ago. That's a hard argument to me.
Speaker 1: One year out, am I clipping coupons? Or can I
Speaker 1: actually invest for total return after a three year nightmare?
Speaker 2: I think you can get some total return. It's not
Speaker 2: that hard when you've got a coupon this large to
Speaker 2: get a positive total return.
Speaker 1: I'm going to clip the coupon and I'm going to
Speaker 1: get some capital gain out.
Speaker 2: Twelve months I think twelve months from now. Yeah, we
Speaker 2: have fair value, say in tens, right around four to
Speaker 2: four and a quarter, and so if we get there,
Speaker 2: if we get even close to there, I'm going to
Speaker 2: have a positive return.
Speaker 4: Going into next week when we get CPI. How volatile
Speaker 4: is the market and how potentially massive could some of
Speaker 4: the moves be on the heels of either an upside
Speaker 4: or downside surprise.
Speaker 2: Yeah, we're I don't think we're done with the volatility, Lisa.
Speaker 2: I think it's here to stay for a while until
Speaker 2: we got either that you confidence about where the Fed
Speaker 2: is and where it's going, which I don't think the
Speaker 2: Fed really wants to give us too much confidence, right.
Speaker 2: I think they want to keep the market a little
Speaker 2: bit off off center, or we start to get those
Speaker 2: labor market numbers that are just so soft that the
Speaker 2: market says, oh okay, now the Fed really has to start.
Speaker 5: Easing Kathy John Cholsh swap Washingsta Marie at the Baumann
Speaker 5: famous iph we'll.
Speaker 1: Ask it right now. Let's do this. Let's say we're
Speaker 1: going to conflate two stories together here this morning, we
Speaker 1: have a wonderful Bloomberg poll, some real acuity about where
Speaker 1: we are twelve months out from an election, and also,
Speaker 1: of course mister Manchin's comments from West Virginia joining us
Speaker 1: now Emory Horn and Bloomberg luxury correspondent in Washington. Let's
Speaker 1: get that out of the way. Emory right now is
Speaker 1: luxury so yesterday is it over in Washington.
Speaker 6: I don't know if it was ever alive in Washington him,
Speaker 6: but there is a sale at the moment, private sale
Speaker 6: if you know who to know at bal Maa.
Speaker 3: So you can go check that out.
Speaker 1: There we go. You're stalking you your weekend shopping with
Speaker 1: Amory hard and Emory I want to conflate these two together.
Speaker 1: I've got Joe Manchin, who has lived fifty percent votes
Speaker 1: in West Virginia from the special election of Robert Byrd
Speaker 1: fifty three percent eight years ago. Just to cut to
Speaker 1: the chase before the poll chat, did he make this
Speaker 1: decision because he really thought he couldn't win.
Speaker 3: I think that's part of it.
Speaker 6: If you look at a recent Emerson poll and you
Speaker 6: have him against Republican Governor Jim Justice, he's trailing by
Speaker 6: about thirteen points. So this was going to be an
Speaker 6: incredibly challenging race for him, and he's already flirted with
Speaker 6: the fact that this was going to be the end
Speaker 6: of his time in the Senate. He talked about the
Speaker 6: fact that he does think there needs to be a
Speaker 6: conversation about the middle, but also you have to look
Speaker 6: at the reality of what he's facing in West Virginia
Speaker 6: and that was likely going to be a defeat.
Speaker 1: Gregory Courtney and Marlow writing up our poll piece, it'll
Speaker 1: be talked about, I know across all of your world today.
Speaker 1: Is there a middle in our Bloomberg poll or does
Speaker 1: it show this mass polarity. Is the Joe Manchin middle
Speaker 1: out there in the Bloomberg poll?
Speaker 6: Well, there absolutely is because there's one key finding when
Speaker 6: it comes to RFK, and that's that he is taking
Speaker 6: from both When you look at twenty twenty voters, he's
Speaker 6: definitely taking from Biden.
Speaker 3: But when you look at how voters feel.
Speaker 6: Right now, he is attracting Democrats because of his name Cachet,
Speaker 6: right he's a Kennedy, But he is also attracting Trump voters,
Speaker 6: and that has a lot to do with the fact
Speaker 6: that he has a lot of a dialogue over the
Speaker 6: past two years when it comes to when it comes
Speaker 6: to COVID nineteen.
Speaker 3: And this anti vax movement.
Speaker 6: So he has ten percent, he has obviously a ton
Speaker 6: of name, idea and recognition, but there is this idea
Speaker 6: of what we're calling quote double haters, and that's about
Speaker 6: nineteen percent we're seeing in our poll, and that's people
Speaker 6: who don't like the current president Joe Biden, and definitely
Speaker 6: don't like the former president dot or Trump.
Speaker 5: Double haters.
Speaker 3: I love that. I think we're going to have to
Speaker 3: use that.
Speaker 4: There is this question as I look through some of
Speaker 4: the pole results about how President Biden could turn this around.
Speaker 3: We have a year left.
Speaker 4: Is there some material policy projection that you can hear
Speaker 4: about from the Democrats coalescing around the border, some sort
Speaker 4: of bipartisan agreement to try to deal with some of
Speaker 4: the problems that people are highlighting.
Speaker 3: So I think there's two things that stand down here.
Speaker 6: One is that overwhelmingly in this poll of swing state voters,
Speaker 6: they want to see more being done at the southern border.
Speaker 6: It's sixty eight percent to twenty percent in terms of
Speaker 6: twenty percent disapprove of what's being done. When you look
Speaker 6: at the disapproval across things like Israel, Ukraine, that that
Speaker 6: number is more.
Speaker 3: So what you're seeing here is that.
Speaker 6: Not a lot of people, a lot of people really want.
Speaker 3: To see more work being done on the southern border.
Speaker 6: But Biden has put this all together in one big bill,
Speaker 6: and potentially because people are less concerned about, say, what's
Speaker 6: going on in Ukraine or China at the moment, that
Speaker 6: they are fine with having separate bills.
Speaker 3: What we see Republicans are trying to do.
Speaker 6: I'd also note that this is a hard line for
Speaker 6: the president to walk right now because still in our poll,
Speaker 6: like our poll showed.
Speaker 3: Last month, the economy rates number one.
Speaker 6: More than forty percent of respondents say that is their
Speaker 6: top priority.
Speaker 3: When you look at the.
Speaker 6: Foreign policy concerns, one percent care about China, three percent
Speaker 6: care about what's going on in Israel. So immigration, the economy, abortion,
Speaker 6: those are ranking much higher in this poll.
Speaker 4: And can I just ask a stupid question, is it
Speaker 4: when we talk about economy, are we just talking about inflation?
Speaker 6: Well, that's what people are feeling, because the data shows
Speaker 6: that there's a lot of other optimism happening in the economy.
Speaker 3: This administration continues to use.
Speaker 6: The superlative that for twenty one months the unemployment rate
Speaker 6: has been below four percent.
Speaker 3: That is a huge achievement, and that shows that we
Speaker 3: do have a very strong labor market.
Speaker 6: But time and time again, what people are concerned with
Speaker 6: is price of gasoline, price of groceries, their price of
Speaker 6: rental insurance that spiked over the summer. Mark Zandi in
Speaker 6: September came out and talked about the fact that before
Speaker 6: the pandemic, where prices are now, an average family that
Speaker 6: is making medium income is paying seven hundred and thirty
Speaker 6: four dollars more. And that's the problem with what the
Speaker 6: President is saying. The economy is doing better and people
Speaker 6: are just not feeling it.
Speaker 5: Amichat frustrated? Is this White House with these pulls.
Speaker 3: Very frustrated?
Speaker 6: The President was asked about it yesterday and he says,
Speaker 6: you're just looking at CNN, You're just looking at New
Speaker 6: York Times. Well, this is our second Bloomberg News Morning
Speaker 6: Consult poll that focuses on the states that matter. These
Speaker 6: are the states that win elections. I think what the
Speaker 6: White House feels right now, or the campaign feels right now,
Speaker 6: is that Tuesday they had a great night, But Tuesday
Speaker 6: was all about abortion And is that going to be
Speaker 6: top of mine of voters come November of next year?
Speaker 3: These are very interesting races. In Virginia.
Speaker 6: Glennyunkin made it about a fifteen week limit in Kentucky.
Speaker 3: It was kind of a unicorn.
Speaker 6: Governor race in Ohio is specifically about abortion, and when
Speaker 6: you have roe Vivaid being struck down by the Supreme Court,
Speaker 6: it means that the states are looking at abortion.
Speaker 3: So these are very state specific issues.
Speaker 1: I look, Amory, and I thoughd you're dead out on
Speaker 1: the Zandi point. To me, the inflation's not the statistics
Speaker 1: we talk about on Bloomberg surveillance. It's the level from
Speaker 1: twenty nineteen. I think everyone out there, including me, is
Speaker 1: looking at every single item back to late twenty nineteen,
Speaker 1: very early at twenty and that's how you get to
Speaker 1: that seven hundred dollars paychecks.
Speaker 5: It's great, that's the issue. Take and just to me,
Speaker 5: it's that part of the matter. IMH, thank you. I'm
Speaker 5: Marie down in Washington day say.
Speaker 1: Let's do this right now, and this is going to
Speaker 1: be fascinating a first time in Las Vegas. And what
Speaker 1: you need to know is in the vicinity of Tuesday
Speaker 1: it will be seventy three degrees in Las Vegas. It
Speaker 1: doesn't matter if you run a race at ten pm
Speaker 1: at night Pacific time, one am Eastern time, six am
Speaker 1: in the morning in Bambury, England and the rest of it.
Speaker 1: Christian Horner's team principal and CEO of Oracle Red Bull
Speaker 1: Racing and John I'm sorry, it's about tires.
Speaker 5: That's what the experts Christian. It could well be about tires.
Speaker 5: Good morning to you, sir, and thank you for being
Speaker 5: with us. I think we have to start by saying
Speaker 5: congratulations on an absolutely dominant season for you and the team.
Speaker 5: We've spent some time talking about that. In just a moment.
Speaker 5: Let's go where Tom went. Just approaching a new track
Speaker 5: you haven't had time with, you haven't raced on before,
Speaker 5: and we track temperatures that could be very very low. Christian,
Speaker 5: what's the approach for you and the team going into
Speaker 5: an event like that one take a jacket? Is it
Speaker 5: that simple?
Speaker 7: Oh yeah, I was watching Max on the simulator yesterday
Speaker 7: driving around the circuit.
Speaker 8: It looks a great track.
Speaker 7: I mean it's going to be super fast, there's going
Speaker 7: to be a lot of overtaking opportunities and a tire
Speaker 7: as it could be like driving on ice, you know,
Speaker 7: which just adds another dimension. So, particularly on a road course,
Speaker 7: on a street circuit that can test the drivers and
Speaker 7: the team to the absolute maximum, Christian.
Speaker 5: When it comes to stuff like qualifying, then how do
Speaker 5: you prepare to put that fast lap in that you
Speaker 5: try to do to get that quality in? How do
Speaker 5: you do that? What do you do set up with
Speaker 5: three laps before you go for the qualifying lap, what
Speaker 5: do you do?
Speaker 7: Well, that's all going to come out of where we
Speaker 7: run on Friday for the first time, sorry, on Thursday
Speaker 7: for the first time. We're going to be learning, you know,
Speaker 7: what it takes to get these paradi tires up to
Speaker 7: temperature and is it going to be multiple laps in
Speaker 7: qualifying rather than a single lap. So it could be
Speaker 7: really interesting to see how that's how that's going to
Speaker 7: play out. There's going to be a lot of data
Speaker 7: to look at, and yeah, the simulators are going to
Speaker 7: be working flat out on certainly Thursday evening.
Speaker 5: Christian. Any worries that this could just be a bit
Speaker 5: of a disaster, could end up in chaos.
Speaker 7: Well, look, street races are always dramatic, you know, we've
Speaker 7: seen that Singapore with sin in Azerbaijan and of course
Speaker 7: Monte Carlo, and this one promises to be a big one.
Speaker 8: I think it's going to be one of the biggest
Speaker 8: viewed events in the.
Speaker 7: Sporting calendar this year, and so you know, I'm confident
Speaker 7: it's going to be a you know, a great success.
Speaker 1: Christian Owner. I was appalled by the accident very early
Speaker 1: in the Brazil race. Your Perez was very much involved
Speaker 1: in that. How do you make the start of the
Speaker 1: races safer?
Speaker 8: I don't think you can.
Speaker 7: I mean, you've got cars that will accelerate from not
Speaker 7: to one hundred miles an hour in less than two seconds,
Speaker 7: and you've got twenty very competitive drivers all going, you know,
Speaker 7: to try and make position into that first turn.
Speaker 8: So inevitably sometimes there is going to be contact.
Speaker 7: But the safety of the cars, the safety of the
Speaker 7: circuits has increased dramatically, and you know, thankfully we're seeing,
Speaker 7: you know, drivers walking away from what sometimes looked like
Speaker 7: very nasty accidents.
Speaker 5: Christian, you said, twenty competitive drivers, arguably this nineteen and
Speaker 5: then this one guy on his own out in the front.
Speaker 5: I want to talk about that. The domination of Max Versteppan.
Speaker 5: He's still so young, Christian, He's taken over Alan Prost,
Speaker 5: He's basically on course to take over Vettel, maybe even
Speaker 5: in the next couple of races. In terms of race wins.
Speaker 5: When you go back over the legends of this sport
Speaker 5: that you've been so close to over the years, fanjo Senna, Schumacher,
Speaker 5: even more recently Hamilton, Where does Max rank for you?
Speaker 5: What separates him from the rest?
Speaker 9: Well, of course, it's.
Speaker 7: Always incredibly difficult to compare drivers from different generations, but
Speaker 7: what I think is safe to say with what Max
Speaker 7: has achieved in a short period of time, with now
Speaker 7: three World Championships, fifty or fifty two conpret victories.
Speaker 8: Is an incredible, incredible record.
Speaker 7: And I think that he can now be spoken about
Speaker 7: in the same sentence in category as some of the
Speaker 7: greatest drivers that the sports has ever seen.
Speaker 5: How far do you think he can go, Christian, Well,
Speaker 5: I think.
Speaker 7: You know, he's still so young, he's still evolving as
Speaker 7: a driver, and particularly as he gains more experience, so
Speaker 7: and a lot depends on the equipment that we can
Speaker 7: give him, but I think he can achieve a lot more.
Speaker 7: He's motivated, he's hungry, and yeah, he's he just loves
Speaker 7: his racing. You can see that he's not interesting anything
Speaker 7: else other than just going racing.
Speaker 5: He's been dominant. Your whole team has been absolutely dominant.
Speaker 5: I remember Ferrari being accused of making a spot boring
Speaker 5: in the Schumacher years. Do you take it as a
Speaker 5: compliment when you hear those kind of act sections thrown
Speaker 5: at your team.
Speaker 7: Well, it means that we're doing our job and that
Speaker 7: we're winning. But one thing that's guaranteed in this spart
Speaker 7: is that nothing stands still. And I think with stable regulations,
Speaker 7: we can already see teams improving behind us, and I
Speaker 7: think the next year it's going to converge.
Speaker 8: And we're roo for a much more tight championship next year.
Speaker 7: And also, you know twenty five before another reset with
Speaker 7: new regulations for twenty twenty six. So yeah, I'm expecting
Speaker 7: a much much tougher year in twenty twenty four.
Speaker 1: Christian to that point, And you know, I have my
Speaker 1: autosport at home. John Ferrell made me get it. I
Speaker 1: try to read it. I try to understand it. A
Speaker 1: lot of your brethren are really trying to fix their
Speaker 1: cars now for next year. What do you do when
Speaker 1: you're as strong as you've been about tweaking the platform
Speaker 1: into the next season? Do you leave it alone? Do
Speaker 1: you leave the car the same as we're stapping is
Speaker 1: known this year, or do you actually try to make improvements.
Speaker 7: Well, you're always looking to improve because you can guarantee
Speaker 7: our competitors are going to be going to be improving.
Speaker 7: They will be copying some of the philosophy, you know,
Speaker 7: of our Chihove. That's undoubted. We're already seeing that starting
Speaker 7: to happen, and we just got to keep trying to
Speaker 7: move the goalpost. I try, you know, to try and
Speaker 7: keep developing and improving ourselves. And so, of course, you know,
Speaker 7: for the last few months the facts, you've been very,
Speaker 7: very focused on that. But of course you start to
Speaker 7: get into diminishing returns and you know it's going to
Speaker 7: be tough to improve the RB twenty next year significantly
Speaker 7: from where RB nineteen has.
Speaker 9: Been this year.
Speaker 1: Take us into the pit because to some of us,
Speaker 1: you know, I watch Netflix and I think I'm an expert.
Speaker 1: I'm not, Christian Horner. Take us into the pit stop
Speaker 1: or you're you know, your two point three seconds two
Speaker 1: point eight steconds. How do you train for that excellence
Speaker 1: versus the other teams?
Speaker 8: Well, it's the same same as in any discipline.
Speaker 7: It's all about practice, it's about analysis, it's about the
Speaker 7: small incremental things, just where the driver stops. You know,
Speaker 7: if he's two inches too long, then that will affect
Speaker 7: the timing of the stop. So it's rehearsal, is practice,
Speaker 7: is positioning the right people in the right roles, is
Speaker 7: having the right attitude and the determination to continually to
Speaker 7: continually improve and of.
Speaker 8: Course be consistent.
Speaker 5: Christian, let's talk about next year. You've got two drivers,
Speaker 5: both under contract. There is a question mark over one
Speaker 5: of them. Check out the driver you have in the
Speaker 5: cars in the coming weekends. Are they going to be
Speaker 5: the same two next year?
Speaker 7: The only people will keep put in the pre the
Speaker 7: question marker you guys, I mean people pleasing the Checko's
Speaker 7: going to be our driver, you know, next year. And
Speaker 7: you know he's had a tough, a tough six weeks,
Speaker 7: but he started to rEFInd his form. I thought the
Speaker 7: race that he drove in in Sat Paolo was very strong,
Speaker 7: his race in Austin was strong, and you know he's
Speaker 7: finding his form again. He's second in the World Championship.
Speaker 7: He's over thirty points ahead of Lewis Hamilton with two
Speaker 7: races to go, so you know, let's see what he
Speaker 7: can do over these next couple of races, but he
Speaker 7: will be our driver alongside Max in twenty twenty four.
Speaker 5: As a team. Are you expecting Max to help him
Speaker 5: secure that second position or does he have to do
Speaker 5: this on his own?
Speaker 8: No, I don't think.
Speaker 7: I don't think he'll need the help from Max, to
Speaker 7: be honest with you, I think he just needs to
Speaker 7: finish either ahead or just.
Speaker 8: Behind Lewis this weekend to secure that that second position.
Speaker 7: I think you know, we're treating these from any races
Speaker 7: as cup finals, and that's that's how we've operated since
Speaker 7: winning the championship a few races agoing Katar, and each
Speaker 7: race holds huge importance to us and to race in Vegas. Yeah,
Speaker 7: it's going to be a phenomenal thing and we're going
Speaker 7: to be chasing our twentieth victory of the year there
Speaker 7: for sure. And it's just very nice of them to
Speaker 7: put a race on to celebrate my fiftieth birthday, particularly.
Speaker 5: Christian, you asked for it. Happy Birthday. It's fantastic catch
Speaker 5: over these Congratulations on an absolutely dominant season. It's just
Speaker 5: been phenomenal to see play out all year. And thank
Speaker 5: you also, Christian, to you and the team for being
Speaker 5: a fantastic partner with this program over the last few
Speaker 5: months as well. Christian Horner their team Prince Sports, CEO
Speaker 5: of Oracle Red Bull Racing, joined US now Chief market
Speaker 5: strategistic FS Investments, Troy. Wonderful to have you with us
Speaker 5: on a program. Let's start with fixed income. Did we
Speaker 5: confuse a bond market rally for bond market stability?
Speaker 9: Yeah?
Speaker 10: So, I mean, first of all, humility is an order
Speaker 10: for any forecaster right now. But so much of this cycle,
Speaker 10: whether it's rates or equities, is there's market price action,
Speaker 10: and then there's narratives that follow that price action. And
Speaker 10: you know, if you think of the way yields have
Speaker 10: gone higher this cycle, We've got to three and a
Speaker 10: quarter for a pico second rally back, then we got
Speaker 10: to four and a quarter for a.
Speaker 9: Nanosecond, and Tom really like this one.
Speaker 10: We got to five for a femto second and then
Speaker 10: rally back hard because positioning was so arish, and so
Speaker 10: we came back down hard, and then the narrative builds
Speaker 10: that you know, we've reached the peak and yields and
Speaker 10: then of course you either have a bad auction or
Speaker 10: you have Powell pushing back, and you know you have
Speaker 10: a twenty base point gap higher.
Speaker 1: The geek from MIT is ten to the minus nine
Speaker 1: this morning, Troy Geyski, let's go to the reality. Get
Speaker 1: out the calendar. Everybody's got to catch up. I saw.
Speaker 1: I'm going to give credit to gold and Sacks a
Speaker 1: chart out out hedge funds were out of the market
Speaker 1: before eight day rally. You talk about the edge. You
Speaker 1: own the word alpha. How do we create alpha? Not
Speaker 1: the year in? How do I create alpha out to
Speaker 1: the summer of twenty four Well, so I.
Speaker 10: Think in time like this, most of your positioning should
Speaker 10: be and what we refer to as Northwest Prodernce strategies
Speaker 10: of the Fisher Frontier.
Speaker 9: We have lower vall.
Speaker 10: You're maturely accepting consistent returns. So you know there's a
Speaker 10: few areas we've been focused on heavily. You know, one
Speaker 10: would be prepayment sensitive rmbs because given where yields are today,
Speaker 10: there's going to be incredibly low refi activity really as
Speaker 10: far as I can see, So that's one area you're
Speaker 10: getting attractive.
Speaker 9: Carry spreads are relatively wide.
Speaker 10: We're not counting on spreads to tighten anytime soon until
Speaker 10: at least the FED stops QT, which won't happen until recession.
Speaker 10: But if there is a harder landing and they do QE,
Speaker 10: then obviously spreads are going to come in significantly, So
Speaker 10: get income plus price appreciation. Another area Tom, non speculative
Speaker 10: on the direction rates has been yield curve steepeners. You know,
Speaker 10: whether we get a bowl steepener like we had earlier
Speaker 10: this year or a bear steepner more recently, we're fairly agnostic.
Speaker 10: And then for those that can tolerate less liquidity. You know,
Speaker 10: when you think of this environment as a private lender,
Speaker 10: you have the bank stepping back, you have higher for
Speaker 10: longer and these are all floating rate loans. So what
Speaker 10: we refer to as a dare to dream scenario where
Speaker 10: we keep rates high and we can avoid recession, you're
Speaker 10: going to have very attractive income and you're not going
Speaker 10: to have the hangover of a recession. So those are
Speaker 10: three areas Tom.
Speaker 1: To translate the jargon frenzy. You just heard Gayesky's trying
Speaker 1: to capture the coupon right now, Troy, tell me about
Speaker 1: the equity markets and technology stocks. They have been on
Speaker 1: fire recently. Does the fire continue?
Speaker 9: Well, you know, when you look at an asset allocation.
Speaker 10: There's certainly no reason not to own growth, right, I mean,
Speaker 10: I never understand these arguments why you shouldn't own growth.
Speaker 10: You should own International, you should own Japan, you should
Speaker 10: own them. I mean, this is a winner take all economy,
Speaker 10: both in the US and globally, and unfortunately or fortunately
Speaker 10: depending upon how you look at it, that's really concentrated
Speaker 10: in the top five ten names in the SMP.
Speaker 1: So.
Speaker 10: The the issue we've had with big cap tech, particularly
Speaker 10: over the last several weeks or megacap tech, is, you know,
Speaker 10: are the valuations reasonable given realistic earnings going forward? Obviously
Speaker 10: earnings are not going to be nearly as strong as
Speaker 10: you were the past five seven years, and we look
Speaker 10: at those multiples. In the event of another round of
Speaker 10: multiple compression driven by FED QTT and money supply contraction,
Speaker 10: you're more than likely going to have some price declines.
Speaker 10: But as far as a secular holding, we don't know
Speaker 10: why you want to have some of your portfolio and
Speaker 10: then you look for other things to complement that in
Speaker 10: a very vall to mark environment.
Speaker 4: Can you give us a window, Troy into the debates
Speaker 4: that you have at FS Investments about your year ahead outlook?
Speaker 3: For twenty twenty four.
Speaker 9: Oh yeah, So the debates are obviously a lot of fun.
Speaker 10: But you know, when you think of the economy, you know,
Speaker 10: we've always been in the higher for longer camp. That
Speaker 10: being said, even more surprised at how resilient the economy's been.
Speaker 10: What we're trying to find tune and we don't claim
Speaker 10: to have a crystal wall for versus. What's the probability
Speaker 10: recession in the next twelve to eighteen months? Is it
Speaker 10: fifty percent, sixty percent? It's alreably higher than forty probably
Speaker 10: no higher than sixty. And what's the environment where the
Speaker 10: FED can thread the needle? What's the probability of that,
Speaker 10: whether it's forty percent or thirty or even fifty because
Speaker 10: of the increased business fixed investment, construction spending, because state
Speaker 10: and local governments can spend, because the housing market at
Speaker 10: least isn't a dramatic drag on GDP, And then in turn,
Speaker 10: what does that mean for inflation forecast? So you know,
Speaker 10: from a macro standpoint, it's trying, with again humility, to
Speaker 10: understand in which scenarios through certain trade expressions generate attracting
Speaker 10: returns and in which other scenarios, do you get better
Speaker 10: upside or better convexity, A phrase that I know Tom
Speaker 10: loves well, Troy.
Speaker 4: Given the range of potential outcomes, our longer term treasuries
Speaker 4: virtually uninvestable unless yields are so high to compensate for
Speaker 4: all of those scenarios.
Speaker 9: So that gets back to the scenario analysis.
Speaker 10: We have cautioned everyone fixed income that again, every time
Speaker 10: market fields are popped up, just be aware before it's
Speaker 10: said and done, before we have that next recession, you
Speaker 10: could really get hammered with a bear steepener. And that's
Speaker 10: obviously what happened up until recently. You clearly have better
Speaker 10: risk reward and fixed income today than a year ago
Speaker 10: or two years ago. But until we have that recessionary outcome,
Speaker 10: or until at least market's truly priced it in, not
Speaker 10: fictitiously price it in, but truly price it in, you know,
Speaker 10: all you're going to earn it is your yield, and
Speaker 10: you're gonna have tremendous amounts of volatility. So we don't
Speaker 10: think it's time yet.
Speaker 9: To extend duration cavil nearly, but.
Speaker 10: You more than likely want to think about that and
Speaker 10: understand that in a recessionary scenario, you don't have as
Speaker 10: much upside as you've had historically because you know, like
Speaker 10: where's the ten you're going to go?
Speaker 9: Front end goes to three ten, youre goes to three
Speaker 9: and a quarter three and a half.
Speaker 10: So you have upside, but not like the GFC or
Speaker 10: the Eurozone crisis or the pandemic or two thousand and
Speaker 10: oh two. But if we stay in the stair to
Speaker 10: dream scenario and the FED can thread the needle, you're
Speaker 10: gonna get no price upside. You're going to have still
Speaker 10: a relatively blow yield compared to when we had inflation
Speaker 10: this high in the past, and you could get some
Speaker 10: adverse market price action again like we did yesterday.
Speaker 5: A repeat yesterday. Isn't that what many people want right now? Troy?
Speaker 5: Thank you sir. It's going to catch on, buddy, as
Speaker 5: O whis troguscae of FS investments following a state day
Speaker 5: of losses on the S and P five hundred, I.
Speaker 1: Have not spoken about Byron Weed, what a joy it
Speaker 1: was for me sliding in here at Bloomberg and the
Speaker 1: privileged Steve Roach at Morgan Stanley, Barton Biggs. I have
Speaker 1: the clearest memories of talking to Barton he died tragically
Speaker 1: too young, and Byron Ween with a full life dying recently,
Speaker 1: Byron Ween with a wisdom and what he did, and
Speaker 1: his annual guestimates of the future, and Doug cast joining
Speaker 1: now who knew Byron better than me? And I think
Speaker 1: what Doug cast to me the ultimate thing I could
Speaker 1: say about Byron Ween. He was so good that when
Speaker 1: he got something wrong, you studied why he got it wrong.
Speaker 5: It was just that good.
Speaker 11: It's like what Yogi Berra said about my cousin Sandy
Speaker 11: when he went twenty five and five. I know why
Speaker 11: he won twenty five games, but I don't know how
Speaker 11: he lost five ell.
Speaker 1: It's like that. I mean, Byron came out with X
Speaker 1: number of calls and he was right, and everybody was that,
Speaker 1: but the humility met him.
Speaker 11: I met him back in nineteen eighty we formed something
Speaker 11: called the First Tuesday of the Month Club with Julian Robertson,
Speaker 11: with Lee Cooperman, who was at Goldman Sachs at the time,
Speaker 11: Susan Byrne, who was a JP Morgan and not yet
Speaker 11: form Westwood Management, Lou Margoliz, who ran Solomon's institutional business,
Speaker 11: David Rocker from Rocker Partners, and of course someone who
Speaker 11: Barton Biggs called in his Hedgehoging book the bearded prophet
Speaker 11: of the Apocalypse, Tony Salupo, who was the head trader
Speaker 11: of Michael Steinhardt and we dueled. Look he we quickly
Speaker 11: became friends. He became an important mentor to me. We
Speaker 11: dueled in our annual surprise lists. Since two thousand and two,
Speaker 11: I so anxiously awaited his constructive criticism and his responses
Speaker 11: to my list on TheStreet dot com. I still write it.
Speaker 11: But the most important thing to me is someone with
Speaker 11: a short selling bias concerning the multiple economic tragedies and
Speaker 11: the market swoons over the last several decades. It was
Speaker 11: also easy to get barished at the bottoms when things
Speaker 11: were obvious, but Byron taught me something in an immortal phrase,
Speaker 11: he said, disasters have a way of not happening, and
Speaker 11: that dictum embolded me in March of two thousand and nine,
Speaker 11: in May of twenty twenty and over at twenty twenty
Speaker 11: two to buy stocks. And the second favorite quote I
Speaker 11: have from Byron is something that he wrote about in
Speaker 11: the Jewish Journal when he hit eighty years of age.
Speaker 11: He said quote, I still ski, I play tennis, I sail,
Speaker 11: and make love, although my skills at all of these
Speaker 11: have slightly deteriorated.
Speaker 1: Well, that's a perfect security and.
Speaker 11: First time long.
Speaker 4: Time Tom, really, I will say, Doug trying to shift
Speaker 4: gears a little bit. When you're talking about catastrophes don't happen,
Speaker 4: How then do you get bearish at a time where
Speaker 4: the catastrophe is what hasn't happened, and everyone has been
Speaker 4: surprised by that.
Speaker 11: Well, as we discussed in my last bloomber Of interview
Speaker 11: about two or three weeks ago, we've had fourteen years
Speaker 11: of absurdly loose monetary policy, when coupled with aggressive fiscal
Speaker 11: largess in large measure of reaction from the COVID epidemic.
Speaker 11: It's distorted our economy, Bramo and our markets. It's resulted
Speaker 11: in an economy that for up till now, has been
Speaker 11: immunized and has contributed to a much longer lag for
Speaker 11: the tightening and monetary policy to take home any other
Speaker 11: cycle in history. But this is going to change, and
Speaker 11: the best distortion is in the housing market. The existing
Speaker 11: home turnover is frozen for obvious reasons. That said, affordability
Speaker 11: has been so extended that the price will shortly be paid.
Speaker 11: Alan Abelson at Baron's used to say, as night follows day,
Speaker 11: and as a night follows day, the legged impact and
Speaker 11: the economicdownturn is going to soon be upon us through
Speaker 11: a by gloom.
Speaker 1: Here I got Bramo and Cass digging a hole. But
Speaker 1: the fact is, and this goes to Byron Wien and
Speaker 1: Barton Biggs, Doug Cass, we came out of seventy four
Speaker 1: with that shock bullmarket. Then we paused, and then I'm
Speaker 1: going to guess in seventy seven somewhere we got a
Speaker 1: second leg of a bullmarket. Is this a second leg
Speaker 1: off the October low that we saw in twenty two.
Speaker 11: I don't think so. I think the question is not
Speaker 11: whether one should be short. I should be short, but
Speaker 11: how should I should be I think the mistake that
Speaker 11: many are making, and you've discussed this in the last
Speaker 11: forty eight hours, is that everyone's looking at the slight
Speaker 11: improvement in the rate of inflation over the last couple
Speaker 11: of months, thanks in large measure obviously to the lower
Speaker 11: price of oil. But the real concern to me, and
Speaker 11: the real reason, there's growing evidence that the consumers starting
Speaker 11: to roll over, and roll over badly. Is that stacked inflation.
Speaker 11: The cumulative rise over the last three years is debilitating
Speaker 11: and you're seeing that in all sorts of industries. You
Speaker 11: see the Agios shares down, it's the largest liquor distributor
Speaker 11: in the world, it's down fifteen percent. There's weakness, the extermination,
Speaker 11: the bug extermination. Companies are suffering because it's a discretionary
Speaker 11: expenditure that is being pulled down. As we mentioned before,
Speaker 11: pet companies are suffering because the discretionary items like play
Speaker 11: toys and Chewy's are reduced. But the real big story
Speaker 11: in this market is that it hasn't been a bull market.
Speaker 11: It's it's been a market that that is so bifurcated.
Speaker 11: Never in history has it been so bifurcated. And I
Speaker 11: look back into stuff that Byron that Bob Farrell used
Speaker 11: to say in his Lessons to invest In, and he
Speaker 11: used to say that markets are the strongest when they
Speaker 11: brought and weakest when they're narrow to a handful of
Speaker 11: blue chip names. And that's exactly what's occurring.
Speaker 4: But it's been apparing for a long time.
Speaker 11: At DOUG and just well, the market has made no
Speaker 11: progress November twenty one. There's been a lot of action.
Speaker 11: There's a lot of opportunity trading opportunities. Remember Bramo, let's
Speaker 11: look at the twenty twenty one top, which was an
Speaker 11: important top, and we're not far off from it. The
Speaker 11: yield today on the one year is five point four
Speaker 11: percent on treasuries. It was thirty pieces points then as
Speaker 11: important two years ago the economy was progressing well. Today
Speaker 11: we're on the customer recession, and that helps to explain
Speaker 11: that we have a paper thin equity risk premiums or
Speaker 11: tens lower returns.
Speaker 4: There's a question around how to be short.
Speaker 3: If you are short, can you go short a.
Speaker 4: Whole index or are you taking a look at the
Speaker 4: losses and say small caps and leaning into that and
Speaker 4: saying that if we're going to get a recession, that's
Speaker 4: the surest bet.
Speaker 11: Sure. I think the best bet today is an odd
Speaker 11: pairs bet, which you are talking about. If you look
Speaker 11: at the ratio of equal weighted SMP relative to the
Speaker 11: capitalization weighted SMP, it's fallen to the lowest level since
Speaker 11: September twenty twenty. If you look at the chart, that
Speaker 11: indicates that the Nasdaq has outperformed the Russell Index. It's
Speaker 11: the largest margin in twenty seven years. And finally, technology
Speaker 11: stocks have hid an all time high relative to the
Speaker 11: SMP index. So my pair trade and by the way,
Speaker 11: oh also short interest in the magnetums and seven is
Speaker 11: that an all time loss? And my pay trade is
Speaker 11: long Russell Index and short cues short the NATAE.
Speaker 1: Quick question here, My trade is long KOFE and long Otani.
Speaker 1: Is Otani the new Sandy kofex boy.
Speaker 11: I guess sort he gave out sixty thousand gloves to
Speaker 11: kids in elementary school in Japan. He's a great guy.
Speaker 1: What it seems he gonna play for Cut to the chase.
Speaker 1: You know everybody down there. He's in Florida. Doug's like
Speaker 1: dining with all the owners. Who's in Orlando.
Speaker 11: TOWNI now he'll end up with the Yankees.
Speaker 1: There we go, Dougcast. Thank you so much for Seabury's
Speaker 1: there for our New York City audience. Subscribe to the
Speaker 1: Bloomberg Surveillance podcast on Apple, Spotify and anywhere else you
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Speaker 1: live on Bloomberg Television and always I'm the Bloomberg Terminal.
Speaker 1: Thanks for listening. I'm Tom Keen, and this is Bloomberg.
Speaker 10: I d