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 Keene, 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 --> 00:00:29,800 Speaker 2: Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business app. 7 00:00:29,880 --> 00:00:33,919 Speaker 2: Where this seth Carpenter at, the chief global economist at 8 00:00:33,960 --> 00:00:36,199 Speaker 2: Morgan Stanley. Is this just about in our start? Are 9 00:00:36,200 --> 00:00:38,800 Speaker 2: we all John Williams this morning and we're readjusting? I 10 00:00:38,960 --> 00:00:41,080 Speaker 2: clared it with me last week at a Bloomberg event. 11 00:00:41,520 --> 00:00:44,240 Speaker 2: At two point zero percent is not two point six percent? 12 00:00:44,320 --> 00:00:46,800 Speaker 2: I mean, are we really talking, as Mike aludes tou 13 00:00:46,840 --> 00:00:51,200 Speaker 2: there about a new inflation regime? 14 00:00:52,000 --> 00:00:53,960 Speaker 3: I think you want to separate out a couple of things. 15 00:00:53,960 --> 00:00:56,040 Speaker 3: One is the new inflation regime, and there if you're 16 00:00:56,040 --> 00:00:58,840 Speaker 3: comparing it to where we were from the financial crisis 17 00:00:58,840 --> 00:01:02,440 Speaker 3: through COVID to say, yes, right, the FED was consistently 18 00:01:02,480 --> 00:01:04,480 Speaker 3: missing it's inflation target to the downside. 19 00:01:04,520 --> 00:01:06,640 Speaker 4: I call it a quarter percentage point. 20 00:01:07,400 --> 00:01:09,959 Speaker 3: We're above, clearly above target now and over the next 21 00:01:09,959 --> 00:01:11,720 Speaker 3: several years they want to bring it down, but I'm 22 00:01:11,720 --> 00:01:13,560 Speaker 3: not sure they want to go back to the old 23 00:01:13,640 --> 00:01:15,920 Speaker 3: days of you know, being below two percent on a 24 00:01:15,959 --> 00:01:18,240 Speaker 3: regular basis. So if they're going to be averaging a 25 00:01:18,240 --> 00:01:21,119 Speaker 3: little higher during expansions, call it a tenth or two above. 26 00:01:21,440 --> 00:01:24,880 Speaker 3: You know, you're talking about twenty five to fifty basis 27 00:01:24,880 --> 00:01:26,800 Speaker 3: points high inflation, so that's got to be there. I 28 00:01:26,800 --> 00:01:29,040 Speaker 3: don't think we're talking about the difference between two percent 29 00:01:29,080 --> 00:01:30,440 Speaker 3: inflation and three percent of I. 30 00:01:30,440 --> 00:01:32,200 Speaker 2: Want to tell you on radio on television where we're 31 00:01:32,200 --> 00:01:34,720 Speaker 2: heading here, what half are we have. We have Dark 32 00:01:34,800 --> 00:01:38,440 Speaker 2: Carpenter with this on the broader economics of this moment. 33 00:01:38,920 --> 00:01:42,319 Speaker 2: Ira Jersey schedule to join us just exquisite here on 34 00:01:42,400 --> 00:01:45,119 Speaker 2: fixed income dynamics, and then we do even better. Mark 35 00:01:45,160 --> 00:01:47,960 Speaker 2: Cabana is going to darken the door. Who's just expert 36 00:01:48,120 --> 00:01:51,480 Speaker 2: on your world about you know, the different tranches of 37 00:01:51,520 --> 00:01:52,160 Speaker 2: the auctions. 38 00:01:52,360 --> 00:01:54,240 Speaker 5: I want to dig into what the implications are of 39 00:01:54,240 --> 00:01:57,080 Speaker 5: this announcement sas and to me, I'm looking at the 40 00:01:57,160 --> 00:01:59,640 Speaker 5: idea that they're really going to force the front end 41 00:01:59,680 --> 00:02:01,720 Speaker 5: to a lot of the heavy lifting here. Does that 42 00:02:01,760 --> 00:02:04,040 Speaker 5: pose a greater risk than people realize. 43 00:02:04,560 --> 00:02:07,600 Speaker 3: So my view is no, the way I would think 44 00:02:07,600 --> 00:02:09,440 Speaker 3: about it. There was a speculation that back and forth 45 00:02:09,480 --> 00:02:11,880 Speaker 3: a little bit earlier, did the Treasury just react to 46 00:02:11,919 --> 00:02:14,000 Speaker 3: the market. And I think you want to remember that 47 00:02:14,040 --> 00:02:16,920 Speaker 3: the folks there at Treasury, Josh Frost, the assistant secretary, 48 00:02:17,000 --> 00:02:21,160 Speaker 3: the career staff in debt management, they have a structure now, 49 00:02:21,200 --> 00:02:22,760 Speaker 3: they have a framework for how to think about what 50 00:02:22,800 --> 00:02:25,280 Speaker 3: to issue, and they're looking at what is the market 51 00:02:25,360 --> 00:02:27,880 Speaker 3: saying about where the market wants to pay up and 52 00:02:27,919 --> 00:02:31,200 Speaker 3: where the market's demanding a discount, and at the margin, 53 00:02:31,400 --> 00:02:33,480 Speaker 3: they'll lean a little bit more to where the market 54 00:02:33,520 --> 00:02:35,400 Speaker 3: wants the paper and lean a little bit away from 55 00:02:35,440 --> 00:02:38,000 Speaker 3: the place where the market's pulling back. And we've seen 56 00:02:38,040 --> 00:02:39,880 Speaker 3: over the past several months a big sell off in 57 00:02:39,960 --> 00:02:42,520 Speaker 3: the long end. It showed up, you know, in models 58 00:02:42,560 --> 00:02:45,799 Speaker 3: speak and the term premium, and they're paying attention to that. 59 00:02:45,880 --> 00:02:47,679 Speaker 3: It's not that one week to the next, or one 60 00:02:47,680 --> 00:02:49,440 Speaker 3: month to the next, or even one quar to the next, 61 00:02:49,680 --> 00:02:50,440 Speaker 3: is it sustained. 62 00:02:50,600 --> 00:02:52,799 Speaker 5: What we are seeing is very much a strong move 63 00:02:52,840 --> 00:02:56,320 Speaker 5: on the long end in that thirty year yield plunging 64 00:02:56,400 --> 00:02:59,720 Speaker 5: back below five percent. As we were talking about do 65 00:02:59,760 --> 00:03:02,280 Speaker 5: you think I think that this indicates that really what 66 00:03:02,280 --> 00:03:06,040 Speaker 5: we're seeing in yields is entirely a supply driven story 67 00:03:06,280 --> 00:03:09,320 Speaker 5: more than anything in terms of an economic read on 68 00:03:09,440 --> 00:03:11,359 Speaker 5: strength and inflation in the US. 69 00:03:11,639 --> 00:03:15,040 Speaker 3: So no, it's so hard depending on any single thing. 70 00:03:15,040 --> 00:03:17,440 Speaker 3: When I talk to our clients here in New York, 71 00:03:17,600 --> 00:03:20,120 Speaker 3: in London, around the world who are trading in treasuries, 72 00:03:20,480 --> 00:03:23,040 Speaker 3: there are a whole set of different narratives, one of 73 00:03:23,080 --> 00:03:26,040 Speaker 3: which has been supplied. People have been worrying about the deficit, 74 00:03:26,080 --> 00:03:28,840 Speaker 3: which is exactly why Secretary Yellen came out and said 75 00:03:29,000 --> 00:03:32,480 Speaker 3: it's not the deficit. People are worrying about stronger growth. 76 00:03:32,639 --> 00:03:35,400 Speaker 3: Q three GDP data was very strong, There's no two 77 00:03:35,440 --> 00:03:37,720 Speaker 3: ways about it, and so that contributed to it. Other 78 00:03:37,760 --> 00:03:39,720 Speaker 3: people are worrying about is there going to be a 79 00:03:39,840 --> 00:03:42,320 Speaker 3: pullback from risk by global investors. 80 00:03:42,320 --> 00:03:43,720 Speaker 4: Other people are looking at the back of Japan. 81 00:03:43,760 --> 00:03:46,560 Speaker 3: We just had that meeting right where they effectively de 82 00:03:46,640 --> 00:03:48,520 Speaker 3: facto got rid of yield crop control. So it's not 83 00:03:48,680 --> 00:03:51,080 Speaker 3: just one single thing, it's everything coming together. 84 00:03:51,280 --> 00:03:53,880 Speaker 5: So what's your compass at a time where we're expecting 85 00:03:54,000 --> 00:03:57,000 Speaker 5: the FED to come out today too in varying shades 86 00:03:57,040 --> 00:03:59,120 Speaker 5: of we have no idea and we will see just 87 00:03:59,160 --> 00:04:01,760 Speaker 5: along with you, what is your guiding loadstar. 88 00:04:02,440 --> 00:04:04,640 Speaker 3: So we're trying to figure out, along with the Fed, 89 00:04:04,680 --> 00:04:07,320 Speaker 3: sort of what's going on with the economy. The strong 90 00:04:07,400 --> 00:04:10,280 Speaker 3: Q three data and notwithstanding there are some signs of 91 00:04:10,320 --> 00:04:15,040 Speaker 3: the economy slowing down. The last jobs report super strong, 92 00:04:15,120 --> 00:04:16,520 Speaker 3: but if you look at the trend over the past 93 00:04:16,560 --> 00:04:18,839 Speaker 3: eighteen month, clear downward trend. If you look at the 94 00:04:18,880 --> 00:04:22,080 Speaker 3: GDP data, consumption spending holding in, but a lot of 95 00:04:22,120 --> 00:04:26,320 Speaker 3: the strength was in inventories. Capex was not very strong 96 00:04:26,360 --> 00:04:28,719 Speaker 3: at all, and so we are seeing that slowing. And 97 00:04:28,760 --> 00:04:30,800 Speaker 3: so what we think is the Feds look in the 98 00:04:30,800 --> 00:04:34,000 Speaker 3: same data we are. They're driving by feel a little 99 00:04:34,000 --> 00:04:36,160 Speaker 3: bit and they're not going to hike today. We don't 100 00:04:36,200 --> 00:04:39,120 Speaker 3: think they're going to hike in December because inflation just 101 00:04:39,240 --> 00:04:42,680 Speaker 3: keeps undershooting their own forecast for where they thought inflation 102 00:04:42,760 --> 00:04:43,520 Speaker 3: was going to be this year. 103 00:04:43,720 --> 00:04:47,640 Speaker 2: What does the job dynamic look like with an ellen 104 00:04:47,800 --> 00:04:51,920 Speaker 2: Zetner's sub one percent Q four GDP. 105 00:04:52,320 --> 00:04:54,159 Speaker 3: Well, I think there This is where we want to 106 00:04:54,279 --> 00:04:56,560 Speaker 3: keep in mind that there's so many swings from one 107 00:04:56,600 --> 00:04:58,560 Speaker 3: quarter the next to some of the spending data. Like 108 00:04:58,600 --> 00:05:01,280 Speaker 3: I said, the inventory, the numbers, that was never going 109 00:05:01,360 --> 00:05:02,400 Speaker 3: to be the primary driver. 110 00:05:02,480 --> 00:05:04,840 Speaker 1: So she starts giving you gloom on the job economy. 111 00:05:05,040 --> 00:05:05,440 Speaker 4: Not at all. 112 00:05:05,480 --> 00:05:07,919 Speaker 3: I will say that we have a Morgan Stanley Ellen 113 00:05:07,960 --> 00:05:09,920 Speaker 3: and I and the rest of the team have been 114 00:05:10,000 --> 00:05:12,839 Speaker 3: consistent from the beginning of this hiking cycle to say, 115 00:05:13,240 --> 00:05:15,240 Speaker 3: the Fed's gonna hike, They're going to bring down inflation, 116 00:05:15,279 --> 00:05:16,839 Speaker 3: but we are not going into recession. 117 00:05:17,120 --> 00:05:18,279 Speaker 4: It is not doing gloom. 118 00:05:18,279 --> 00:05:20,719 Speaker 2: Well, she's expert on the American consumer. What is Zenner 119 00:05:20,760 --> 00:05:22,160 Speaker 2: when she gets fired up? 120 00:05:22,200 --> 00:05:22,960 Speaker 1: You know she does. 121 00:05:23,400 --> 00:05:26,159 Speaker 2: When Zender gets fired up about the American consumer, what 122 00:05:26,240 --> 00:05:26,839 Speaker 2: is she saying? 123 00:05:27,600 --> 00:05:29,520 Speaker 3: Lots of things, but in particular, one of the key 124 00:05:29,560 --> 00:05:31,800 Speaker 3: risks that maybe people are overlooking for why there should 125 00:05:31,800 --> 00:05:34,560 Speaker 3: be a slowdown in the fourth quarter is student loans. Right, 126 00:05:34,600 --> 00:05:37,040 Speaker 3: there is a moratorium on student loans that's been lifted. 127 00:05:37,080 --> 00:05:40,680 Speaker 3: We're starting to see that payback starting to happen, and 128 00:05:41,000 --> 00:05:44,039 Speaker 3: that has to crimp consumer disposable incomes. 129 00:05:44,160 --> 00:05:46,719 Speaker 4: That matters durable goods. 130 00:05:46,880 --> 00:05:47,040 Speaker 6: Right. 131 00:05:47,200 --> 00:05:49,360 Speaker 4: Interest rates are high, credit card rates are high. 132 00:05:49,680 --> 00:05:52,440 Speaker 3: People financing cars and other things, it's just costing more 133 00:05:52,480 --> 00:05:53,919 Speaker 3: and so they'll pull back on the spending. 134 00:05:54,560 --> 00:05:57,280 Speaker 1: It just extraorded her. Seth Carpenter, thank you so much, 135 00:05:58,240 --> 00:05:59,320 Speaker 1: really really appreciate it. 136 00:05:59,360 --> 00:06:07,360 Speaker 2: With Morgan's stay, he writes piercing notes for Bank of America. 137 00:06:07,400 --> 00:06:09,080 Speaker 1: There's no other way to put it. Out of US 138 00:06:09,200 --> 00:06:11,320 Speaker 1: rates strategy, He's aged in the. 139 00:06:11,279 --> 00:06:14,520 Speaker 2: Last ten minutes. Mark Cabana joins us this morning. So 140 00:06:14,600 --> 00:06:17,760 Speaker 2: I'm like refunding, so what, I don't care. Everybody's in 141 00:06:17,839 --> 00:06:20,080 Speaker 2: a ladder. It comes out, and to me it was 142 00:06:20,160 --> 00:06:21,720 Speaker 2: sort of I don't you know, I really don't care. 143 00:06:21,800 --> 00:06:24,480 Speaker 2: Jenny Allen said, we're gonna do short paper. Yeah, we're 144 00:06:24,520 --> 00:06:28,960 Speaker 2: gonna do long paper. But we're the United States. Our 145 00:06:29,000 --> 00:06:32,560 Speaker 2: listeners are viewers who are not sophisticated. Do they need 146 00:06:32,600 --> 00:06:36,039 Speaker 2: to fear the fiscal system of America? 147 00:06:36,240 --> 00:06:38,640 Speaker 7: No, you shouldn't fear the fiscal system because the US 148 00:06:38,680 --> 00:06:40,400 Speaker 7: economy is still going to be very robust. 149 00:06:40,600 --> 00:06:42,520 Speaker 8: There will be buyers for treasury paper. 150 00:06:42,920 --> 00:06:45,320 Speaker 7: It's just a matter of at what level will they 151 00:06:45,360 --> 00:06:49,760 Speaker 7: step in, And we've had a relative lack of buying recently, 152 00:06:50,120 --> 00:06:51,839 Speaker 7: but that's meant that yields have had to adjust, and 153 00:06:51,880 --> 00:06:55,160 Speaker 7: as they've adjusted, that should incentivize more investors to think 154 00:06:55,200 --> 00:06:58,560 Speaker 7: about owning bonds and we do think that rates are 155 00:06:58,560 --> 00:07:01,240 Speaker 7: going to keep rising or they're going to stay elevated. Really, 156 00:07:01,360 --> 00:07:03,920 Speaker 7: until you see one of two things. Number One, until 157 00:07:03,920 --> 00:07:05,839 Speaker 7: you see the macro data slow, we don't think that 158 00:07:05,880 --> 00:07:09,240 Speaker 7: you've really seen that yet. Or two until you see 159 00:07:09,440 --> 00:07:12,280 Speaker 7: d risking, until you see investors who think, you know 160 00:07:12,320 --> 00:07:14,720 Speaker 7: what rates are kind of high, really yields almost a 161 00:07:14,760 --> 00:07:16,800 Speaker 7: two and a half percent at the tenure point. That's 162 00:07:16,840 --> 00:07:18,760 Speaker 7: a decent own and maybe I should think about de 163 00:07:18,920 --> 00:07:20,200 Speaker 7: risking in my portfolio. 164 00:07:20,720 --> 00:07:22,560 Speaker 1: This is such a valuable conversation. 165 00:07:22,720 --> 00:07:24,760 Speaker 2: Then I got to get to what we see on 166 00:07:24,880 --> 00:07:27,360 Speaker 2: balance sheets right now, mark to market and the rest 167 00:07:27,440 --> 00:07:28,120 Speaker 2: of it in bonds. 168 00:07:28,120 --> 00:07:31,760 Speaker 1: But let's stay on this theme right now of our new. 169 00:07:31,800 --> 00:07:36,640 Speaker 9: Higher yield regime. How far out are you in the longer? 170 00:07:36,760 --> 00:07:39,840 Speaker 9: I mean, if take any given yield, any given spread, 171 00:07:40,360 --> 00:07:43,200 Speaker 9: is there a cabana one year, is it a cabana 172 00:07:43,320 --> 00:07:46,680 Speaker 9: three years? How do you see the regime of longer? 173 00:07:47,040 --> 00:07:49,240 Speaker 7: Well, we just think that rates are going to have 174 00:07:49,280 --> 00:07:52,560 Speaker 7: to stay higher for longer. Not to reiterate the Fed mantra, 175 00:07:52,600 --> 00:07:55,040 Speaker 7: but we really believe it because we've seen an economy 176 00:07:55,080 --> 00:07:58,040 Speaker 7: that's been so resilient in the face of relatively elevated 177 00:07:58,080 --> 00:08:00,520 Speaker 7: interest rates. And as long as that happens, that just 178 00:08:00,640 --> 00:08:01,720 Speaker 7: is going to mean that the f it doesn't have 179 00:08:01,760 --> 00:08:03,600 Speaker 7: to cut for a while. Now, when I think about longer, 180 00:08:04,000 --> 00:08:05,720 Speaker 7: I personally think about five years plus. 181 00:08:06,040 --> 00:08:08,280 Speaker 1: Oh wow, okay, my attention. 182 00:08:09,080 --> 00:08:13,360 Speaker 7: Just because you know, most investors who really focus on 183 00:08:13,400 --> 00:08:17,520 Speaker 7: liquidity and liquidity management, they think generally two years, three years. 184 00:08:18,160 --> 00:08:20,520 Speaker 7: But when I think about intermediate to long end, I 185 00:08:20,560 --> 00:08:21,760 Speaker 7: think about five years plus. 186 00:08:21,920 --> 00:08:24,200 Speaker 2: Okay, And I'm going to invent this phrase right now. 187 00:08:24,240 --> 00:08:26,080 Speaker 2: I haven't seen it anywhere else. I want to copyright 188 00:08:26,120 --> 00:08:26,400 Speaker 2: on this. 189 00:08:26,400 --> 00:08:28,880 Speaker 1: If you use it. Is it normal for longer? 190 00:08:29,000 --> 00:08:31,040 Speaker 2: Is that really what we're talking about, is we're back 191 00:08:31,080 --> 00:08:32,280 Speaker 2: to a normal rate regime. 192 00:08:32,520 --> 00:08:34,760 Speaker 7: Well, it's certainly we're back to a regime that looks 193 00:08:34,800 --> 00:08:38,000 Speaker 7: a lot more similar to the pre financial crisis than 194 00:08:38,040 --> 00:08:39,200 Speaker 7: the post financial crisis. 195 00:08:39,240 --> 00:08:40,920 Speaker 1: You've got a five year window on that. So what 196 00:08:40,960 --> 00:08:42,199 Speaker 1: maturity do you buy? 197 00:08:42,360 --> 00:08:47,000 Speaker 2: I'm in cash, I'm really comfortable at Bank of America. 198 00:08:47,120 --> 00:08:50,400 Speaker 2: What maturre do you buy given a five year normal 199 00:08:50,440 --> 00:08:51,240 Speaker 2: for longer view? 200 00:08:51,280 --> 00:08:55,679 Speaker 7: Well, it really depends upon what your overall investment horizon 201 00:08:55,800 --> 00:08:58,200 Speaker 7: is and where your preferences are. We think that if 202 00:08:58,240 --> 00:09:00,400 Speaker 7: you're focused at the front end, you probably we want 203 00:09:00,400 --> 00:09:03,559 Speaker 7: to be neutral to slightly overweight your benchmark. And if 204 00:09:03,600 --> 00:09:05,920 Speaker 7: you're a more long term investor, we think that you 205 00:09:05,960 --> 00:09:08,240 Speaker 7: at best want to be neutral right now, and you 206 00:09:08,280 --> 00:09:10,240 Speaker 7: want to stay neutral until you see those signs of 207 00:09:10,240 --> 00:09:13,560 Speaker 7: feedback that tell you that higher interest rates are finally 208 00:09:13,679 --> 00:09:16,760 Speaker 7: slowing the economy, not just one data point here or there, 209 00:09:16,800 --> 00:09:20,080 Speaker 7: but in the tier one stuff in labor more clearly 210 00:09:20,160 --> 00:09:23,640 Speaker 7: an inflation. You want to stay neutral until you see 211 00:09:23,640 --> 00:09:26,160 Speaker 7: those signs, or until you believe that there's a clearer 212 00:09:26,360 --> 00:09:29,400 Speaker 7: and more definitive negative feedback from risk assets, which I 213 00:09:29,480 --> 00:09:32,600 Speaker 7: don't think that we have really seen sufficiently yet. 214 00:09:32,640 --> 00:09:36,840 Speaker 2: I love to bust Brian moynihan's chops because he, like 215 00:09:37,040 --> 00:09:40,400 Speaker 2: no other CEO, quotes his research staff and I'll go 216 00:09:40,520 --> 00:09:43,160 Speaker 2: blah blah blah about Bonzi and his own Cabana says, 217 00:09:43,520 --> 00:09:45,640 Speaker 2: So let's get the report from Cabana that you would 218 00:09:45,640 --> 00:09:46,559 Speaker 2: give to Brian. 219 00:09:46,280 --> 00:09:47,880 Speaker 1: Moynihan right now. 220 00:09:48,080 --> 00:09:52,920 Speaker 2: I got balance sheets, nationwide, mark to market I get, 221 00:09:53,200 --> 00:09:57,439 Speaker 2: and I got everything else with massive bond losses, priced down, 222 00:09:58,000 --> 00:10:01,880 Speaker 2: yield up. Should our listeners and viewers be afraid of 223 00:10:01,920 --> 00:10:05,400 Speaker 2: this non marked market garbage on balance sheets. 224 00:10:05,559 --> 00:10:07,839 Speaker 7: Well, I think you're talking about bank balance sheets, and 225 00:10:07,880 --> 00:10:10,240 Speaker 7: we do appreciate that. Brian reads our research. He's a 226 00:10:10,280 --> 00:10:13,800 Speaker 7: staunch supporter, and we really do appreciate that. We think 227 00:10:13,840 --> 00:10:15,839 Speaker 7: that what banks are doing right now is that they 228 00:10:15,840 --> 00:10:20,280 Speaker 7: are really prizing liquidity. They really want to hold as 229 00:10:20,360 --> 00:10:23,520 Speaker 7: much liquidity as possible. They're choosing to hold cash, they're 230 00:10:23,600 --> 00:10:28,200 Speaker 7: keeping reserves with the FED, and they're not buying bonds, 231 00:10:28,240 --> 00:10:31,760 Speaker 7: they're not buying treasuries or mortgages, and they're prizing liquidity 232 00:10:31,800 --> 00:10:34,920 Speaker 7: because they know that they need to meet their outflow needs. 233 00:10:35,240 --> 00:10:38,160 Speaker 7: They know that their securities book is not particularly liquid 234 00:10:38,280 --> 00:10:40,520 Speaker 7: because it's so low in value. You don't want to 235 00:10:40,559 --> 00:10:42,760 Speaker 7: sell and realize the loss. We saw what happened with 236 00:10:42,760 --> 00:10:43,480 Speaker 7: some of the regional band. 237 00:10:43,600 --> 00:10:44,280 Speaker 6: So what do you do? 238 00:10:44,400 --> 00:10:45,160 Speaker 1: This is the key thing. 239 00:10:45,240 --> 00:10:46,360 Speaker 8: So what do you do if you're a bank? 240 00:10:46,600 --> 00:10:47,840 Speaker 1: What do you do if your bank? 241 00:10:48,160 --> 00:10:50,760 Speaker 2: If you've got all this out there and you don't 242 00:10:50,800 --> 00:10:54,360 Speaker 2: want to sell, just like you said, but things can happen, 243 00:10:54,440 --> 00:10:55,440 Speaker 2: things can change. 244 00:10:55,559 --> 00:10:57,439 Speaker 1: How do you process that reality? 245 00:10:57,520 --> 00:10:59,200 Speaker 7: If you're a bank, what you're doing right now as 246 00:10:59,240 --> 00:11:02,160 Speaker 7: you're holding that is the game. That's why the Fed 247 00:11:02,200 --> 00:11:05,000 Speaker 7: shrunk their balance sheet through QT by a trillion dollars, 248 00:11:05,040 --> 00:11:07,600 Speaker 7: and you've seen bank cash holdings not move down very 249 00:11:07,640 --> 00:11:10,360 Speaker 7: much at all. They are bidding up on the liability 250 00:11:10,360 --> 00:11:13,360 Speaker 7: side of the balance sheet. They're issuing CDs, time deposits, etc. 251 00:11:13,960 --> 00:11:16,959 Speaker 7: To take in more money because they're seeing retail outflows. 252 00:11:17,000 --> 00:11:19,440 Speaker 7: And then they're holding cash and they're going to continue 253 00:11:19,440 --> 00:11:22,440 Speaker 7: to do that until they see signs that the economy 254 00:11:22,480 --> 00:11:24,960 Speaker 7: is turning, until they know that their loan growth is 255 00:11:25,080 --> 00:11:27,959 Speaker 7: really slowed down and maybe negative on a year over 256 00:11:28,040 --> 00:11:31,600 Speaker 7: year six month average or whatnot. And they're gonna wait 257 00:11:31,640 --> 00:11:33,960 Speaker 7: until the economy slows more meaningfully to extend out the 258 00:11:33,960 --> 00:11:36,680 Speaker 7: curve and buy those bonds. Right now, banks are not 259 00:11:37,040 --> 00:11:40,880 Speaker 7: buying duration. They've been shrinking their treasury and agency holdings, 260 00:11:41,000 --> 00:11:43,480 Speaker 7: and they're going to wait to add duration until they 261 00:11:43,480 --> 00:11:46,440 Speaker 7: see definitive signs that the economy is turned. And so again, 262 00:11:46,440 --> 00:11:48,720 Speaker 7: what banks are doing right now, it's holding out liquidity 263 00:11:48,800 --> 00:11:51,080 Speaker 7: because that is the most valuable thing that they seem 264 00:11:51,120 --> 00:11:51,960 Speaker 7: to believe that what. 265 00:11:51,840 --> 00:11:55,480 Speaker 2: Does holding out liquidity mean for mere mortals that can't 266 00:11:55,520 --> 00:11:59,400 Speaker 2: hold out liquidity? Small business? Torsten Slocke at Apollo talks 267 00:11:59,440 --> 00:12:02,679 Speaker 2: about ten percent small business loans as well. I saw 268 00:12:02,720 --> 00:12:04,840 Speaker 2: a thirty one percent charge card the other day. It 269 00:12:04,880 --> 00:12:05,920 Speaker 2: wasn't Bank of America, of. 270 00:12:05,960 --> 00:12:09,120 Speaker 1: Course, thirty one percent charge card interest rate the other day. 271 00:12:09,120 --> 00:12:10,559 Speaker 4: What does the public. 272 00:12:10,280 --> 00:12:14,880 Speaker 2: Do given price down, yield up banks saying I'm scared stiff, 273 00:12:14,920 --> 00:12:15,800 Speaker 2: I got a whole cash. 274 00:12:15,840 --> 00:12:17,680 Speaker 8: Look, it's a tough time to be a borrower. I 275 00:12:17,679 --> 00:12:18,600 Speaker 8: think we know that, right. 276 00:12:18,640 --> 00:12:20,240 Speaker 7: It's tough time to move, it's a tough time to 277 00:12:20,240 --> 00:12:21,800 Speaker 7: buy a home, it's a tough time to be a 278 00:12:21,840 --> 00:12:24,360 Speaker 7: business if you need a loan. And that's exactly what 279 00:12:24,360 --> 00:12:26,280 Speaker 7: monetary policy is trying to do, right, It's trying to 280 00:12:26,320 --> 00:12:31,560 Speaker 7: slow down activity by reducing demand for loans and borrowing. 281 00:12:32,040 --> 00:12:33,480 Speaker 7: And so if you're a small business and you do 282 00:12:33,559 --> 00:12:35,520 Speaker 7: need a loan, well you need to think about, Okay, 283 00:12:35,720 --> 00:12:39,560 Speaker 7: what other liquidity sources do I have? Can I draw 284 00:12:39,600 --> 00:12:41,439 Speaker 7: on any other type of liquidity? And then you've got 285 00:12:41,480 --> 00:12:44,120 Speaker 7: to ask yourself do I really need to expand? Do 286 00:12:44,240 --> 00:12:47,520 Speaker 7: I need to make that next investment? And you got 287 00:12:47,559 --> 00:12:49,360 Speaker 7: to make sure that you can clear a much higher 288 00:12:49,440 --> 00:12:51,840 Speaker 7: hurdle rate in order to justify those costs. 289 00:12:51,960 --> 00:12:53,439 Speaker 8: That's how monetary policy works. 290 00:12:53,480 --> 00:12:56,360 Speaker 7: It should slow down activity through the lending channel, and 291 00:12:56,440 --> 00:12:58,880 Speaker 7: to some extent we're seeing that, but it hasn't happened, 292 00:12:58,880 --> 00:13:00,800 Speaker 7: I think to the extent of the FED, like Mark. 293 00:13:00,600 --> 00:13:11,320 Speaker 2: Commander, thank you so much. With the Bank of America 294 00:13:13,760 --> 00:13:16,160 Speaker 2: joining us now to begin strong on this day of 295 00:13:16,200 --> 00:13:18,960 Speaker 2: a Federal Reserve meeting is Dominic Constem. He's head of 296 00:13:19,000 --> 00:13:24,160 Speaker 2: macro strategy at Mosile Americas. For years literally iconic Credit 297 00:13:24,200 --> 00:13:27,840 Speaker 2: Suite were thrilled that doctor Constem could join us today. Dominica, 298 00:13:27,840 --> 00:13:32,000 Speaker 2: I give you the phrase super restrictive. Is Jerome Powell's 299 00:13:32,120 --> 00:13:37,760 Speaker 2: FED combined with market action a super restrictive FED. 300 00:13:40,280 --> 00:13:44,839 Speaker 10: Well, yeah, in the context of the sustainability of the 301 00:13:46,080 --> 00:13:50,439 Speaker 10: US consumer, and if you like the overhang of debts 302 00:13:50,480 --> 00:13:54,440 Speaker 10: refinancing in the corporate sector really beginning in twenty twenty five, 303 00:13:55,240 --> 00:13:58,760 Speaker 10: you know, clearing the front end is super restrictive, and 304 00:13:58,800 --> 00:14:02,240 Speaker 10: it's going to have to get first quite aggressively. As 305 00:14:02,280 --> 00:14:06,560 Speaker 10: some stage that the issue is a timing, and you 306 00:14:06,559 --> 00:14:10,119 Speaker 10: know that timing has been pushed out because the consumer 307 00:14:10,600 --> 00:14:13,719 Speaker 10: who's got great balance sheet, has decided that even as 308 00:14:13,760 --> 00:14:17,240 Speaker 10: they spent all their fiscal excess that they were given 309 00:14:17,640 --> 00:14:20,960 Speaker 10: after COVID, they're deciding to leverage up even with interest 310 00:14:21,040 --> 00:14:22,640 Speaker 10: rates as high as they are, but they can do 311 00:14:22,680 --> 00:14:24,720 Speaker 10: that because of the balance sheet, So that kind of 312 00:14:24,720 --> 00:14:29,000 Speaker 10: delays the impact of this super restrictiveness, which is kind 313 00:14:29,000 --> 00:14:30,680 Speaker 10: of a bit of a conungrum for the Fed. 314 00:14:31,000 --> 00:14:31,520 Speaker 4: So that's the. 315 00:14:31,600 --> 00:14:35,160 Speaker 1: Price for longer, not higher for longer, but just longer. 316 00:14:35,280 --> 00:14:37,920 Speaker 2: What is the cost did your own power of a 317 00:14:38,040 --> 00:14:40,040 Speaker 2: longer strategy at these levels? 318 00:14:41,280 --> 00:14:44,400 Speaker 10: Well, I think what's happened in the last couple of 319 00:14:44,400 --> 00:14:47,560 Speaker 10: months really has been that the Fed has decided that, 320 00:14:47,600 --> 00:14:50,760 Speaker 10: you know, because effectively they are super restrictive, they didn't 321 00:14:50,800 --> 00:14:53,560 Speaker 10: want to keep on pushing up short rates, you know, 322 00:14:54,040 --> 00:14:56,920 Speaker 10: don't not quickly go to six percent. So they've emphasized 323 00:14:56,920 --> 00:15:00,000 Speaker 10: this idea that they're just going to hold at a high. 324 00:14:59,840 --> 00:15:01,920 Speaker 6: Level for that much longer. 325 00:15:02,120 --> 00:15:05,680 Speaker 10: But ironically that directly feeds into a sell off in 326 00:15:05,720 --> 00:15:09,200 Speaker 10: the back end, the idea that what we call term premium, 327 00:15:09,320 --> 00:15:13,240 Speaker 10: this risk premium that's short rates you end up being 328 00:15:13,320 --> 00:15:17,320 Speaker 10: higher than the equivalent tenor of a longer dated treasury. 329 00:15:17,400 --> 00:15:20,280 Speaker 10: That's term premium that gets priced into the market, which 330 00:15:20,320 --> 00:15:23,000 Speaker 10: is why you've had this enormous sort of bare steepening 331 00:15:23,080 --> 00:15:25,760 Speaker 10: going on with the tens going up to close to 332 00:15:25,800 --> 00:15:29,240 Speaker 10: five percent thirties, nifiing the corter, et cetera. And in 333 00:15:29,240 --> 00:15:31,760 Speaker 10: a way that that's not a bad thing if you 334 00:15:31,800 --> 00:15:34,720 Speaker 10: want to slow the economy, but because that will undermine 335 00:15:34,760 --> 00:15:37,720 Speaker 10: and is undermining risk assets, and it will help to 336 00:15:38,120 --> 00:15:39,840 Speaker 10: tighten financial conditions overall. 337 00:15:40,080 --> 00:15:42,520 Speaker 6: So that's the impact of what the Fed is doing. 338 00:15:42,960 --> 00:15:46,000 Speaker 10: There is a risk though, that they run because you 339 00:15:46,040 --> 00:15:49,120 Speaker 10: get people concerned about the as you mentioned earlier, the 340 00:15:49,440 --> 00:15:52,360 Speaker 10: refinancing of the Treasury. You know, when they decide to 341 00:15:52,400 --> 00:15:54,920 Speaker 10: issue longer dated debts that now it is coming in 342 00:15:54,960 --> 00:15:57,560 Speaker 10: at much higher interest rates, and you start worrying about 343 00:15:57,560 --> 00:16:00,000 Speaker 10: a vicious circle where if you can't reduce a debt 344 00:16:00,560 --> 00:16:03,840 Speaker 10: so through spending cuts, well you've got another problem because 345 00:16:03,880 --> 00:16:06,480 Speaker 10: your interest service costs are going up at the same time. 346 00:16:07,000 --> 00:16:09,240 Speaker 10: And that's kind of get people worried about this idea 347 00:16:09,680 --> 00:16:12,480 Speaker 10: that Treasury isn't going to be able to sustainably fund 348 00:16:12,560 --> 00:16:15,400 Speaker 10: itself down the road, particularly when you get those sort 349 00:16:15,400 --> 00:16:17,440 Speaker 10: of you know, bigger issues coming up, the structural issues 350 00:16:17,440 --> 00:16:19,880 Speaker 10: coming up that will mean higher deficits. 351 00:16:20,040 --> 00:16:22,840 Speaker 5: There's always been a sort of uncomfortable tension, especially now 352 00:16:22,840 --> 00:16:25,680 Speaker 5: between the Treasury Department and the Federal Reserve, especially because 353 00:16:25,720 --> 00:16:29,000 Speaker 5: the Treasury Department is helmed by the one and only 354 00:16:29,080 --> 00:16:31,160 Speaker 5: Janet Yellen who used to head the FED. 355 00:16:31,360 --> 00:16:32,840 Speaker 11: How much is a treasure you're going to. 356 00:16:32,760 --> 00:16:35,480 Speaker 5: Try to game out the market and kind of give 357 00:16:35,480 --> 00:16:38,720 Speaker 5: a helping hand to the Fed by not concentrating some 358 00:16:38,800 --> 00:16:41,640 Speaker 5: of those debt sales in the longer end, sell tea 359 00:16:41,680 --> 00:16:45,400 Speaker 5: bills and hold a pad and wait for things to normalize. 360 00:16:46,720 --> 00:16:49,680 Speaker 10: Well, I mean, it's obviously a great question and issue. 361 00:16:49,720 --> 00:16:53,120 Speaker 10: I mean, strictly speaking, I don't think Treasury really should 362 00:16:53,200 --> 00:16:56,640 Speaker 10: gain things too much. You know, they're not really traders 363 00:16:56,640 --> 00:16:59,040 Speaker 10: as such, and if they were, then you know, maybe 364 00:16:59,040 --> 00:17:02,080 Speaker 10: God help us. I mean, the idea I think is is, 365 00:17:02,520 --> 00:17:06,080 Speaker 10: you know, you do have rollover risk, so you know, 366 00:17:06,119 --> 00:17:09,359 Speaker 10: no one really knows how quickly long term rates might 367 00:17:09,520 --> 00:17:12,399 Speaker 10: might reverse, even if we go into some slowing you know, 368 00:17:12,400 --> 00:17:15,000 Speaker 10: where is this sort of mutual rate It might you know, 369 00:17:15,119 --> 00:17:18,600 Speaker 10: might be higher and maybe ten years trading around you know, five. 370 00:17:18,400 --> 00:17:19,879 Speaker 6: Percent is the sort of new norm. 371 00:17:20,160 --> 00:17:22,560 Speaker 10: So I think it wouldn't be appropriate for the Treasury 372 00:17:22,680 --> 00:17:24,960 Speaker 10: to really try and game the markets or a near 373 00:17:25,040 --> 00:17:27,920 Speaker 10: term and sort of second guests that short term rates 374 00:17:27,960 --> 00:17:30,000 Speaker 10: are going to come crashing down and they'll be able 375 00:17:30,040 --> 00:17:34,800 Speaker 10: to refinance themselves down the road by extending maturity later. 376 00:17:35,040 --> 00:17:37,480 Speaker 10: So I think they'll they'll probably extend the duration. I 377 00:17:37,520 --> 00:17:40,480 Speaker 10: think the estimates are kind of you know, you know, 378 00:17:40,480 --> 00:17:43,280 Speaker 10: seem about right, this sort of one hundred and fourteen 379 00:17:43,320 --> 00:17:45,800 Speaker 10: billion and putting it in coupons. And because of the 380 00:17:46,000 --> 00:17:47,840 Speaker 10: announcement we had earlier in the week, they can cut 381 00:17:47,880 --> 00:17:52,280 Speaker 10: bill supply bits. So that's our expectation and no gaining 382 00:17:52,320 --> 00:17:52,560 Speaker 10: of it. 383 00:17:52,640 --> 00:17:54,440 Speaker 5: Basically, a lot of people expect this to be a 384 00:17:54,480 --> 00:17:57,639 Speaker 5: boring meeting, sibad or Jappa calling it a placeholder, Steven 385 00:17:57,720 --> 00:18:00,080 Speaker 5: Linder saying, how many ways can you say we'll see? 386 00:18:00,160 --> 00:18:01,919 Speaker 5: I mean, this is basically going to be a holding 387 00:18:02,000 --> 00:18:04,679 Speaker 5: kind of pattern. And yet we see a dissonance growing 388 00:18:04,800 --> 00:18:09,680 Speaker 5: where the market sees and escalating's chance of excelling, reaccelerating inflation. 389 00:18:10,160 --> 00:18:12,639 Speaker 11: At the same time that the Feds kind of seeming. 390 00:18:12,280 --> 00:18:14,720 Speaker 5: To subtly agree with Janet Yella and saying that yields 391 00:18:14,720 --> 00:18:15,680 Speaker 5: are going to go back down. 392 00:18:16,160 --> 00:18:17,879 Speaker 11: Do you think they're going to bridge that gap today? 393 00:18:19,040 --> 00:18:20,760 Speaker 10: Well, they could do. I mean they've always got the 394 00:18:20,800 --> 00:18:22,000 Speaker 10: option to. I mean that there are a couple of 395 00:18:22,040 --> 00:18:24,439 Speaker 10: interesting things going on. I mean, obviously this sell off 396 00:18:24,480 --> 00:18:26,879 Speaker 10: in the long end is very interesting, and I think 397 00:18:26,920 --> 00:18:31,520 Speaker 10: they can definitely address that in the conference call and 398 00:18:31,600 --> 00:18:33,560 Speaker 10: basically say that's doing some of the work for them 399 00:18:33,680 --> 00:18:36,360 Speaker 10: and be a bit more optimistic. They can also be actually, 400 00:18:36,560 --> 00:18:38,679 Speaker 10: even though inflation has been a bit sticky on the 401 00:18:38,760 --> 00:18:41,280 Speaker 10: very latest prints, they could be a bit more optimistic 402 00:18:41,320 --> 00:18:43,960 Speaker 10: on that. We've done some background analysis on that, and 403 00:18:44,000 --> 00:18:46,639 Speaker 10: the reason why inflation has been a bit stick is 404 00:18:46,720 --> 00:18:48,800 Speaker 10: it's really been on the demand side, less on the 405 00:18:48,800 --> 00:18:51,760 Speaker 10: supply side type thing. And I think that's encouraging because 406 00:18:51,800 --> 00:18:54,919 Speaker 10: that's something a little bit more understandable and sort of 407 00:18:54,920 --> 00:18:57,800 Speaker 10: indicative that, you know, the underlying trend lower is still 408 00:18:57,840 --> 00:19:00,600 Speaker 10: in place for inflation, and obviously the global inflation picture 409 00:19:00,600 --> 00:19:02,679 Speaker 10: has been looking a bit better, so I think they 410 00:19:02,720 --> 00:19:05,440 Speaker 10: can basically, you know, I don't think it'll be an 411 00:19:05,480 --> 00:19:09,480 Speaker 10: uninteresting meeting or press conference. It's just really a question 412 00:19:09,520 --> 00:19:11,920 Speaker 10: of how far power wants to go down the road 413 00:19:12,080 --> 00:19:15,439 Speaker 10: and try and sort of reassure markets. One interesting thing 414 00:19:15,480 --> 00:19:17,400 Speaker 10: I always think is that you know, to what extent 415 00:19:17,520 --> 00:19:21,680 Speaker 10: to the FED really anticipate or understand that their actions 416 00:19:22,080 --> 00:19:24,800 Speaker 10: at the September meeting was going to lead to this 417 00:19:24,920 --> 00:19:26,760 Speaker 10: sort of you know, near one hundred base on itseel 418 00:19:26,760 --> 00:19:29,520 Speaker 10: off in the long end. I mean, it's been quite dramatic, 419 00:19:29,600 --> 00:19:31,960 Speaker 10: And did they really expect that way? 420 00:19:32,040 --> 00:19:34,040 Speaker 2: Yes, this is a question dominic and why this is 421 00:19:34,040 --> 00:19:36,360 Speaker 2: outside your remit. But we've known each other for years, 422 00:19:36,400 --> 00:19:38,359 Speaker 2: So I'm going to go from the macro of constant 423 00:19:38,960 --> 00:19:43,800 Speaker 2: to commercial banking. Bernanky taught us at Princeton that financial 424 00:19:43,960 --> 00:19:48,960 Speaker 2: structure and strength matters. I'm looking at the technical construct 425 00:19:48,960 --> 00:19:51,280 Speaker 2: of the American banking system and. 426 00:19:51,280 --> 00:19:52,960 Speaker 1: I don't like what I see. 427 00:19:53,400 --> 00:19:57,480 Speaker 2: Should the FED fold in what's happening to the banks 428 00:19:57,680 --> 00:20:01,720 Speaker 2: right now? Should they today pay attention in their meetings 429 00:20:02,160 --> 00:20:06,080 Speaker 2: to the weakness that we see in commercial banking equity prices? 430 00:20:07,680 --> 00:20:08,320 Speaker 6: Absolutely? 431 00:20:08,400 --> 00:20:11,160 Speaker 10: And I think the thing that so many people miss 432 00:20:11,280 --> 00:20:14,480 Speaker 10: is they think that banks are kind of less important 433 00:20:14,520 --> 00:20:19,600 Speaker 10: now than they were before because of alternative banking, you know, fintech, 434 00:20:19,720 --> 00:20:23,320 Speaker 10: private equity, you know, other forms of leverage if you like, 435 00:20:23,359 --> 00:20:26,320 Speaker 10: in the system that they people think seem to think, 436 00:20:26,440 --> 00:20:29,880 Speaker 10: you know, credit is created elsewhere. Credit is that there's 437 00:20:29,880 --> 00:20:33,479 Speaker 10: something called outside money, which is a central bank, and 438 00:20:33,520 --> 00:20:37,320 Speaker 10: they start the credit creation process there's in something called 439 00:20:37,359 --> 00:20:40,800 Speaker 10: inside money, which is the banking system, and they continue 440 00:20:40,800 --> 00:20:43,600 Speaker 10: the credit creation process. And to be honest, that pretty 441 00:20:43,680 --> 00:20:46,480 Speaker 10: much is where how credit is created. Money it can 442 00:20:46,520 --> 00:20:49,080 Speaker 10: only be created by the FED and the banks to 443 00:20:49,200 --> 00:20:52,240 Speaker 10: the bank multiplier. It cannot be created by private equity. 444 00:20:52,320 --> 00:20:54,520 Speaker 10: They have to get their leverage from somewhere. And so 445 00:20:54,680 --> 00:20:56,800 Speaker 10: I think you always have to go to the banking system, 446 00:20:56,920 --> 00:20:59,359 Speaker 10: and you always have to focus on if the banks 447 00:20:59,400 --> 00:21:02,479 Speaker 10: are kind of doing their job, even if the leverage 448 00:21:02,480 --> 00:21:05,520 Speaker 10: overrule in the system is getting higher and higher, and 449 00:21:05,520 --> 00:21:08,080 Speaker 10: the relatives of the banks, they're the ultimate ones who 450 00:21:08,119 --> 00:21:11,040 Speaker 10: if they pull the plug, let alone the FED putting 451 00:21:11,040 --> 00:21:14,040 Speaker 10: the plug, then the whole kind of system can start 452 00:21:14,080 --> 00:21:14,640 Speaker 10: to implode. 453 00:21:14,760 --> 00:21:16,320 Speaker 6: So I do think it's very important. 454 00:21:15,960 --> 00:21:17,800 Speaker 10: What's happening in the banks, and I think it's a 455 00:21:17,920 --> 00:21:22,240 Speaker 10: big concern that obviously lending is slowing down. There is 456 00:21:22,240 --> 00:21:27,320 Speaker 10: obviously regulation and there's some credit some cattle restrictions taking place, 457 00:21:27,840 --> 00:21:30,000 Speaker 10: but that's all part of the cycle. And as long 458 00:21:30,040 --> 00:21:32,000 Speaker 10: as the FED is there to pick up the pieces 459 00:21:32,040 --> 00:21:33,560 Speaker 10: at the end of it, we're fine. 460 00:21:33,960 --> 00:21:35,679 Speaker 6: But those pieces will need to be picked up. 461 00:21:35,800 --> 00:21:38,240 Speaker 2: You sound like Alan Meltzer, the late Great Alan Meltzer, 462 00:21:38,359 --> 00:21:41,240 Speaker 2: lender of letters. Who are dom I got thirty seconds? 463 00:21:41,520 --> 00:21:45,760 Speaker 2: Are you concerned the massive shift from deposits to money 464 00:21:45,760 --> 00:21:50,840 Speaker 2: market funds? Is that going to destabilize the system. 465 00:21:50,960 --> 00:21:53,520 Speaker 10: Well, it's been a challenge, but to be fair, that 466 00:21:53,640 --> 00:21:58,000 Speaker 10: TGA build up that the Treasury has done has actually 467 00:21:58,400 --> 00:22:00,800 Speaker 10: come at the expense a lot of the money market 468 00:22:00,840 --> 00:22:03,000 Speaker 10: funds and the repo there. So I think, you know, 469 00:22:03,040 --> 00:22:07,080 Speaker 10: the Fed has actually managed this process relatively well with 470 00:22:07,160 --> 00:22:09,919 Speaker 10: the help of the Treasury rebuilding TJA with all that 471 00:22:09,960 --> 00:22:13,320 Speaker 10: bill issuance, so you know, you know, it's it's a 472 00:22:13,320 --> 00:22:16,160 Speaker 10: relatively orderly process, but it's obviously something that you've got 473 00:22:16,160 --> 00:22:18,400 Speaker 10: to keep watching. You don't want excess reserves to get 474 00:22:18,400 --> 00:22:19,639 Speaker 10: too low in the banking system. 475 00:22:19,840 --> 00:22:21,919 Speaker 1: Is that to Constant? Thank you so much, Dominic Constant 476 00:22:21,960 --> 00:22:24,600 Speaker 1: with the Missouri Are they just a terrific brief Therey. 477 00:22:28,400 --> 00:22:31,600 Speaker 2: Joining US doctor Wynn Thinn, global head of Currency Strategy 478 00:22:31,640 --> 00:22:35,359 Speaker 2: around brothers Harriman win Thin. You were at the altar 479 00:22:35,560 --> 00:22:41,480 Speaker 2: of Robert Mundel at Columbia who invented our international currency dynamics. 480 00:22:42,080 --> 00:22:45,120 Speaker 2: Is there a theory to what Japan is doing? Are 481 00:22:45,200 --> 00:22:47,119 Speaker 2: they making up original theory? 482 00:22:48,920 --> 00:22:51,600 Speaker 12: Well, first of all, thanks, thanks, as always a pleasure 483 00:22:51,760 --> 00:22:55,760 Speaker 12: to appear here with you guys. To me, it's an experiment, 484 00:22:56,359 --> 00:22:58,840 Speaker 12: it's an ongoing experiment. You know, Japan has been fighting 485 00:22:58,920 --> 00:23:02,040 Speaker 12: deflation for decades and they've thrown everything at the wall 486 00:23:02,080 --> 00:23:05,200 Speaker 12: to see what sticks. The latest iteration was negative rates 487 00:23:05,280 --> 00:23:08,560 Speaker 12: and he locor control and by hooker, by crooked, it's 488 00:23:08,920 --> 00:23:12,399 Speaker 12: it's finally getting out of deflation. It's obviously the positive 489 00:23:12,400 --> 00:23:15,199 Speaker 12: makers are very nervous there getting you know, starting these 490 00:23:15,240 --> 00:23:17,280 Speaker 12: poses is the easy part. Getting out of them is 491 00:23:17,280 --> 00:23:19,000 Speaker 12: always the hard part. We saw the FED struggle with 492 00:23:19,040 --> 00:23:21,240 Speaker 12: getting out of q back after a great financial crisis. 493 00:23:21,680 --> 00:23:23,080 Speaker 6: So what we've been seeing. 494 00:23:23,040 --> 00:23:25,560 Speaker 12: Unfold over the last year is just a really haphazard 495 00:23:26,160 --> 00:23:28,240 Speaker 12: so again throwing stuff at the wall to see what works. 496 00:23:28,240 --> 00:23:31,080 Speaker 12: It's been again more out of fear and concern than 497 00:23:31,080 --> 00:23:33,520 Speaker 12: anything else. They don't want to upset the opera card 498 00:23:33,640 --> 00:23:37,359 Speaker 12: that the recovery is, by many measures, you know, quite 499 00:23:38,200 --> 00:23:41,920 Speaker 12: modest and vulnerable, and so that's what we're seeing. I 500 00:23:42,000 --> 00:23:45,439 Speaker 12: do think that that Japan will exit accommodations fully in early. 501 00:23:45,359 --> 00:23:47,040 Speaker 6: Times, and by that I mean a ray hike. 502 00:23:47,240 --> 00:23:49,920 Speaker 2: Why should our why should our viewers and listeners care 503 00:23:50,000 --> 00:23:52,760 Speaker 2: in the Western world, it just seems to be removed 504 00:23:52,920 --> 00:23:56,480 Speaker 2: and over there. For example, comparing the yuan the ren 505 00:23:56,560 --> 00:23:59,760 Speaker 2: menbi in China to Japanese. Yeah, and even with we 506 00:24:00,240 --> 00:24:04,760 Speaker 2: you want versus a dollar, it's studying how weak the Japanese. 507 00:24:04,400 --> 00:24:08,640 Speaker 1: Yen is versus ren memby. Why do I care in America? 508 00:24:10,160 --> 00:24:12,879 Speaker 12: Well, I think, as you guys pointed out just earlier 509 00:24:12,920 --> 00:24:16,720 Speaker 12: in the segment, Japanese investors have been have been basically 510 00:24:17,160 --> 00:24:21,920 Speaker 12: leaving Japan and chasing yield and returns elsewhere. And that's 511 00:24:21,960 --> 00:24:24,200 Speaker 12: because of the zero rate interest policy and heal com control. 512 00:24:24,400 --> 00:24:27,679 Speaker 12: Domestic eiels aren't attractive enough. So we've seen massive capital 513 00:24:27,720 --> 00:24:30,360 Speaker 12: outflows of Japan over the last years, if not decades. 514 00:24:31,080 --> 00:24:33,840 Speaker 12: If we get that infection point where things change and 515 00:24:33,960 --> 00:24:37,639 Speaker 12: actually rates are allowed to go back to market based levels, 516 00:24:38,440 --> 00:24:41,000 Speaker 12: I think the fear of at least in Japan and others, 517 00:24:41,119 --> 00:24:43,320 Speaker 12: is that that wave of capital will come back from 518 00:24:43,520 --> 00:24:46,439 Speaker 12: crashing back. And already seen announcements some of the Japanese 519 00:24:46,480 --> 00:24:48,639 Speaker 12: life insurers that they planned the second half of this 520 00:24:48,680 --> 00:24:54,120 Speaker 12: fiscal year to underweight foreign investments, foreign bonds and overweight 521 00:24:54,240 --> 00:24:58,520 Speaker 12: jgb's in anticipation of normalization. So there's also the capital 522 00:24:58,560 --> 00:25:00,600 Speaker 12: flow stories that I think, you know, coming in a 523 00:25:00,680 --> 00:25:02,200 Speaker 12: time when we don't know what the Fed's doing, we 524 00:25:02,240 --> 00:25:05,639 Speaker 12: don't know what's going on in Europe with the Middle East. 525 00:25:05,920 --> 00:25:08,320 Speaker 12: It's just another sort of added uncertainty that Marcus had 526 00:25:08,359 --> 00:25:10,040 Speaker 12: that jests and I think that's what I think investors 527 00:25:10,040 --> 00:25:11,120 Speaker 12: in general are worried about. 528 00:25:11,240 --> 00:25:14,440 Speaker 5: It's almost deliberate ambiguity. Is deliberate ambiguity by the Bank 529 00:25:14,480 --> 00:25:17,760 Speaker 5: of Japan going to actually create some sort of soft 530 00:25:17,920 --> 00:25:21,720 Speaker 5: gradual increase in yields and some sort of controlled departure 531 00:25:21,880 --> 00:25:22,919 Speaker 5: from yaled curve control. 532 00:25:23,720 --> 00:25:25,160 Speaker 12: Yeah, yeah, at least I think that's what we're seeing. 533 00:25:25,400 --> 00:25:27,639 Speaker 12: In fact, in my opinion, Yeald curve control is dead. 534 00:25:27,640 --> 00:25:30,080 Speaker 12: It's deader than Elvis right now, as far as I 535 00:25:30,119 --> 00:25:34,399 Speaker 12: can tell, they've they've introduced this ambiguity where it's now 536 00:25:34,440 --> 00:25:35,720 Speaker 12: one percent is now reference point. 537 00:25:35,960 --> 00:25:36,760 Speaker 6: Who knows what that means. 538 00:25:36,880 --> 00:25:40,120 Speaker 12: So the market will will prod and tested the Bank 539 00:25:40,200 --> 00:25:41,840 Speaker 12: of Japan not just on heels but also on the 540 00:25:41,880 --> 00:25:44,280 Speaker 12: dollary in and it's gonna be a cat and mouse game. 541 00:25:45,040 --> 00:25:48,720 Speaker 12: But really, for all intents and purposes, jgbills are going up. 542 00:25:48,800 --> 00:25:49,600 Speaker 6: They have been going up. 543 00:25:49,640 --> 00:25:51,439 Speaker 12: They will continue go up. We'll go above that one 544 00:25:51,480 --> 00:25:56,399 Speaker 12: percent sort of reference point within days, and you know 545 00:25:56,440 --> 00:26:00,679 Speaker 12: the upside I think natural sort of target for the markets. 546 00:26:01,640 --> 00:26:03,080 Speaker 12: Where we go from there well dependent what's going on 547 00:26:03,160 --> 00:26:06,440 Speaker 12: in other global market, especially US treasuries. But again, this 548 00:26:06,600 --> 00:26:09,760 Speaker 12: is normal. This is you know, we've been it's very 549 00:26:10,119 --> 00:26:12,560 Speaker 12: what I would say, an abnormal period. And it's been 550 00:26:12,600 --> 00:26:15,280 Speaker 12: going on for decades in Japan of zero rates, negative rates, 551 00:26:16,040 --> 00:26:18,600 Speaker 12: year clear control and it's abnormal. And I think that 552 00:26:18,720 --> 00:26:21,159 Speaker 12: they're trying to exit that, but are obviously very very 553 00:26:21,160 --> 00:26:22,439 Speaker 12: scared of the ramification at least. 554 00:26:22,280 --> 00:26:24,440 Speaker 1: Some moments ago, the d X y unraveling. 555 00:26:24,560 --> 00:26:26,960 Speaker 2: Right now one oh six point ninety one, we're really 556 00:26:27,040 --> 00:26:29,600 Speaker 2: buttressed up here against the one oh seven on DXY 557 00:26:29,680 --> 00:26:32,680 Speaker 2: and is clearly yet led by en dynamics. And this 558 00:26:32,800 --> 00:26:35,000 Speaker 2: goes like the banking stocks. I'm sorry, you just have 559 00:26:35,119 --> 00:26:38,359 Speaker 2: to look at the Bloomberg screen and it's screaming a 560 00:26:38,520 --> 00:26:42,280 Speaker 2: certain level of tension out there this morning without being 561 00:26:42,400 --> 00:26:44,159 Speaker 2: you know, a toxic brew of gloom. 562 00:26:44,240 --> 00:26:46,760 Speaker 1: I mean, it's just the markets. 563 00:26:46,400 --> 00:26:49,479 Speaker 2: Are speaking before this FED meeting, and it's not all 564 00:26:49,560 --> 00:26:51,200 Speaker 2: the managed message of the elites. 565 00:26:51,520 --> 00:26:52,760 Speaker 11: When to that point. 566 00:26:53,080 --> 00:26:55,800 Speaker 5: How disruptive is the fact that the dollar has continued 567 00:26:55,840 --> 00:26:58,680 Speaker 5: to strengthen and not weaken as so many people thought 568 00:26:58,920 --> 00:26:59,280 Speaker 5: this year. 569 00:27:00,200 --> 00:27:02,120 Speaker 12: Well and for the for the US, it's good because 570 00:27:02,160 --> 00:27:06,119 Speaker 12: the stronger currency helps to limit important inflation. What we 571 00:27:06,280 --> 00:27:09,720 Speaker 12: were seeing particularly stress is with emerging markets, especially in Asia, 572 00:27:09,880 --> 00:27:12,240 Speaker 12: that's being double whemmed by the yen, n by the dollar. 573 00:27:12,600 --> 00:27:15,280 Speaker 12: But basically we've seen many many emerging market center banks 574 00:27:15,480 --> 00:27:19,280 Speaker 12: intervene to help support their own currency. We've seen surprise 575 00:27:19,359 --> 00:27:22,680 Speaker 12: rate hikes, we saw that from Indonesia last month, and 576 00:27:22,800 --> 00:27:26,240 Speaker 12: we've also seen countries that are cutting weights slow. They're 577 00:27:26,320 --> 00:27:28,960 Speaker 12: easy because the currencies are coming under pressure. So it's 578 00:27:29,000 --> 00:27:31,280 Speaker 12: to me it's really a toxic root for emerging markets. 579 00:27:31,320 --> 00:27:35,400 Speaker 12: That is a height height money conditions in the US, 580 00:27:35,920 --> 00:27:40,680 Speaker 12: slowing global growth slow in China, and easing cycles in 581 00:27:40,720 --> 00:27:43,000 Speaker 12: emerging markets, and that's all to be a very toxic 582 00:27:43,119 --> 00:27:44,280 Speaker 12: row for emerging market currency. 583 00:27:44,359 --> 00:27:46,400 Speaker 5: You should have seen Tom King's face when you said 584 00:27:46,440 --> 00:27:50,040 Speaker 5: toxic brew. His ears perked up and he was fully. 585 00:27:49,880 --> 00:27:53,000 Speaker 2: Into Robert Mondel used to say, Robert Mandel would be 586 00:27:53,040 --> 00:27:55,320 Speaker 2: in a lecture and he say, look, you know the 587 00:27:55,440 --> 00:27:59,040 Speaker 2: Mundell triangulation and in partically ununified currency. 588 00:27:59,160 --> 00:27:59,919 Speaker 1: It's one big time. 589 00:28:00,800 --> 00:28:02,960 Speaker 5: This is a difficult time because people have been throwing 590 00:28:03,040 --> 00:28:05,399 Speaker 5: around people have it thrown around where it's like toxic 591 00:28:05,520 --> 00:28:08,400 Speaker 5: brew for quite a while. And yet we have been 592 00:28:08,600 --> 00:28:12,240 Speaker 5: in a sort of uneasy equilibrium all year that's really 593 00:28:12,320 --> 00:28:15,320 Speaker 5: been tapped off by a US dynamism. 594 00:28:15,440 --> 00:28:16,439 Speaker 11: You go, what do you mean? 595 00:28:16,680 --> 00:28:18,600 Speaker 2: I don't think it's been an an easy equilibrium. I 596 00:28:18,680 --> 00:28:20,960 Speaker 2: think the markets are talking here. You know, I'm going 597 00:28:21,000 --> 00:28:23,280 Speaker 2: back and forth, Doug cass here on the banks, you 598 00:28:23,359 --> 00:28:24,920 Speaker 2: can rationalize. 599 00:28:24,359 --> 00:28:27,880 Speaker 1: Us all you want. Yen one Fifty's why we're talking 600 00:28:27,920 --> 00:28:28,639 Speaker 1: to win thin. 601 00:28:28,760 --> 00:28:29,840 Speaker 11: So win way in on that. 602 00:28:30,280 --> 00:28:32,960 Speaker 5: Are things breaking down in a more material way that'll 603 00:28:33,040 --> 00:28:35,320 Speaker 5: lead to more traumatic moves in effects. 604 00:28:36,600 --> 00:28:40,000 Speaker 12: Well, I think was the main driver that's really taking 605 00:28:40,000 --> 00:28:42,360 Speaker 12: anyone by surprise. This is the continued strength of the 606 00:28:42,480 --> 00:28:45,880 Speaker 12: US economy and by that extension the US. 607 00:28:45,760 --> 00:28:47,440 Speaker 6: Dollar, the FED and all that. 608 00:28:48,160 --> 00:28:51,440 Speaker 12: I'm of the opinion that the Fed will probably get 609 00:28:51,520 --> 00:28:53,400 Speaker 12: us into a recession next year. But I don't look 610 00:28:53,400 --> 00:28:55,920 Speaker 12: for anything quote unquote break by break, we mean like 611 00:28:55,960 --> 00:28:58,560 Speaker 12: a financial crisis, banking crisis some sort. We had to 612 00:28:58,600 --> 00:29:01,160 Speaker 12: scare back in March with SVB but we found that was, 613 00:29:01,360 --> 00:29:03,719 Speaker 12: you know, to me, an idiosyncratic. 614 00:29:03,280 --> 00:29:05,120 Speaker 6: Situation with SVB and signature. 615 00:29:05,880 --> 00:29:07,960 Speaker 12: So to me, you know, all the stress tests suggest 616 00:29:09,280 --> 00:29:12,280 Speaker 12: that that the global financials remains fairly resilient. 617 00:29:12,360 --> 00:29:14,600 Speaker 6: Now look, that's like we all know that. 618 00:29:14,880 --> 00:29:17,280 Speaker 12: That doesn't mean you know, a whole lot when when 619 00:29:17,360 --> 00:29:19,640 Speaker 12: when push comes to show. But I do think that 620 00:29:19,760 --> 00:29:23,000 Speaker 12: we are sorting this post gred financial crisis uh so 621 00:29:23,160 --> 00:29:27,320 Speaker 12: situation where yes, the institutions and and overseers and regulators 622 00:29:27,480 --> 00:29:29,120 Speaker 12: are all sort of on the same page and and 623 00:29:29,760 --> 00:29:33,400 Speaker 12: hopefully uh willing and able to head off a crisis. Now, 624 00:29:33,440 --> 00:29:35,080 Speaker 12: well we see pockets of stress. You know, we've had 625 00:29:35,160 --> 00:29:38,160 Speaker 12: frontier markets blowing up, emerging markets or Canade remain in 626 00:29:38,200 --> 00:29:42,240 Speaker 12: the stress look UK, uh Europe or into recession. But 627 00:29:42,600 --> 00:29:44,400 Speaker 12: you know, nothing again, nothing sort of broken. 628 00:29:44,520 --> 00:29:45,400 Speaker 6: This is sort of a normal thing. 629 00:29:45,400 --> 00:29:45,680 Speaker 5: I used. 630 00:29:45,800 --> 00:29:47,760 Speaker 12: I'll leave this, you know with the final thought is that, 631 00:29:48,040 --> 00:29:50,760 Speaker 12: let's say, normal sort of situation terms of down town 632 00:29:51,400 --> 00:29:54,320 Speaker 12: going too faster in the US, that's hiking, We're gonna slow, 633 00:29:54,360 --> 00:29:56,480 Speaker 12: we maybe go into recession, but then the whole cycle 634 00:29:56,520 --> 00:29:56,960 Speaker 12: starts over. 635 00:29:57,840 --> 00:29:58,840 Speaker 6: It's not something to worry about. 636 00:29:58,840 --> 00:30:00,920 Speaker 1: I've got to leave it there. Doctor, Thank you so much, 637 00:30:01,000 --> 00:30:03,000 Speaker 1: he says Brown Brothers Harriman. 638 00:30:13,040 --> 00:30:15,400 Speaker 5: There's been an issue in the US side of things, 639 00:30:15,440 --> 00:30:17,760 Speaker 5: first of all how deeply the US troops will get involved, 640 00:30:17,840 --> 00:30:21,200 Speaker 5: but also how much aid can actually get passed to 641 00:30:21,360 --> 00:30:24,239 Speaker 5: go towards supporting both Israel and Ukraine, which no one 642 00:30:24,320 --> 00:30:26,240 Speaker 5: is talking about. Jennifer Flytt and covering all of this 643 00:30:26,760 --> 00:30:29,400 Speaker 5: fantastic guests to really analyze it for US head of 644 00:30:29,520 --> 00:30:32,320 Speaker 5: US Government Affairs at INVESCO, Jennifer, what do you make 645 00:30:32,440 --> 00:30:34,680 Speaker 5: of this split that we've seen with the House proposing 646 00:30:35,440 --> 00:30:39,880 Speaker 5: a separate bill to fund Israel that yesterday President Biden said, Vito. 647 00:30:40,600 --> 00:30:44,040 Speaker 13: Right, he issued a veto threat. That's correct. Yesterday. We're 648 00:30:44,040 --> 00:30:46,600 Speaker 13: going to see what the House can do. I think 649 00:30:46,640 --> 00:30:48,920 Speaker 13: it's still an open question if they have. 650 00:30:49,040 --> 00:30:53,560 Speaker 14: The support because they have paired the Israeli funding with 651 00:30:54,080 --> 00:30:55,280 Speaker 14: an offset. 652 00:30:55,280 --> 00:30:58,160 Speaker 13: That directly sort of impacts. 653 00:30:57,720 --> 00:31:01,880 Speaker 14: That Inflation Reduction Act and of the irs, and so 654 00:31:02,240 --> 00:31:05,200 Speaker 14: they will lose the vast majority of Democrats. Could they 655 00:31:05,400 --> 00:31:09,280 Speaker 14: gain a couple while they lose a few of their 656 00:31:09,320 --> 00:31:10,320 Speaker 14: own Republicans? 657 00:31:10,440 --> 00:31:12,560 Speaker 13: I think that's the question, and we'll see that play 658 00:31:12,600 --> 00:31:13,400 Speaker 13: out on Thursday. 659 00:31:13,840 --> 00:31:16,960 Speaker 5: What does it tell you about the nature of funding agreements. 660 00:31:17,480 --> 00:31:20,520 Speaker 5: If funding Israel comes at the expense of cutting the 661 00:31:20,600 --> 00:31:25,560 Speaker 5: agency served with collecting taxes, well, first. 662 00:31:25,440 --> 00:31:27,440 Speaker 14: I would say this is an opening salvo for the 663 00:31:27,560 --> 00:31:30,120 Speaker 14: House because they will have to negotiate no matter what 664 00:31:30,400 --> 00:31:33,840 Speaker 14: with the Senate. Schumer has the majority leader in the Senate, 665 00:31:33,920 --> 00:31:36,640 Speaker 14: has already stated that this is dead on arrival, so 666 00:31:36,880 --> 00:31:40,640 Speaker 14: there is an expectation that there will be further negotiation. 667 00:31:41,320 --> 00:31:44,640 Speaker 14: But when it comes to offsets, this is a reflection 668 00:31:44,960 --> 00:31:47,560 Speaker 14: of what is happening in America right now with regard 669 00:31:47,600 --> 00:31:50,400 Speaker 14: to our own domestic debt our, own deficits that. 670 00:31:50,400 --> 00:31:51,280 Speaker 13: We're running right now. 671 00:31:51,480 --> 00:31:54,400 Speaker 14: And that's what Republicans and their districts really feel a 672 00:31:54,520 --> 00:31:55,520 Speaker 14: need to answer to. 673 00:31:56,560 --> 00:31:59,880 Speaker 2: Jennifer. I believe it is November first. Count it down 674 00:32:00,160 --> 00:32:04,479 Speaker 2: sixteen days to November seventeenth. It's been left in the debris. 675 00:32:04,560 --> 00:32:08,200 Speaker 2: We've forgotten about November seventeenth. Give us a brief of 676 00:32:08,280 --> 00:32:12,280 Speaker 2: the importance of November seventeenth inside the Beltleigh. 677 00:32:12,600 --> 00:32:15,520 Speaker 13: It is coming upon us very quickly. That is an 678 00:32:15,560 --> 00:32:19,920 Speaker 13: excellent point and it is not lost on most members. Also, 679 00:32:20,320 --> 00:32:21,760 Speaker 13: most members that. 680 00:32:22,160 --> 00:32:26,640 Speaker 14: Want to get Ukraine funding through the House, Republican and 681 00:32:26,840 --> 00:32:30,880 Speaker 14: Democratic members and the Continuing Resolution, which is that stop 682 00:32:31,000 --> 00:32:34,560 Speaker 14: gap that runs out on November seventeenth that has to 683 00:32:34,720 --> 00:32:39,840 Speaker 14: be extended. The Ukraine funding may have to ride on 684 00:32:40,000 --> 00:32:43,480 Speaker 14: that continuing resolution. However, they work it out and we'll 685 00:32:43,520 --> 00:32:46,840 Speaker 14: see that over the next week. They're currently drafting another 686 00:32:46,920 --> 00:32:48,320 Speaker 14: continuing resolution in the House. 687 00:32:48,560 --> 00:32:50,920 Speaker 5: Jennifer, there's real dissonance and a headline Stiffe been reading 688 00:32:51,040 --> 00:32:52,520 Speaker 5: and I am trying to square them. 689 00:32:52,600 --> 00:32:53,360 Speaker 11: I'd love your help. 690 00:32:53,600 --> 00:32:56,080 Speaker 5: Basically, on one side, you see the fight that's escalating 691 00:32:56,280 --> 00:32:58,880 Speaker 5: in Congress, it's escalating with the White House over how 692 00:32:58,920 --> 00:33:01,760 Speaker 5: to get financing to back these efforts. And then on 693 00:33:01,800 --> 00:33:04,800 Speaker 5: the other hand, we're talking about US troops potentially being 694 00:33:04,960 --> 00:33:08,960 Speaker 5: in Gaza indefinitely after the war to keep some sort 695 00:33:09,000 --> 00:33:12,200 Speaker 5: of peace. What is the appetite in the United States 696 00:33:12,480 --> 00:33:15,960 Speaker 5: to have a protracted role in some of these conflicts 697 00:33:16,160 --> 00:33:18,120 Speaker 5: that seem pretty intractable right now? 698 00:33:19,440 --> 00:33:19,840 Speaker 13: That's right. 699 00:33:20,080 --> 00:33:21,640 Speaker 15: I think there are a number of steps though that 700 00:33:21,760 --> 00:33:24,320 Speaker 15: we have to get to first, right because US troops 701 00:33:24,360 --> 00:33:26,560 Speaker 15: are in the region, of course, they are in Iraq 702 00:33:26,680 --> 00:33:29,440 Speaker 15: there in Yemen. This was discussed a little bit at 703 00:33:29,480 --> 00:33:32,960 Speaker 15: the hearing yesterday with Secretary of Blincoln and Secretary of 704 00:33:33,040 --> 00:33:33,960 Speaker 15: defense Austin. 705 00:33:35,240 --> 00:33:38,840 Speaker 13: They have been attacked over the last week two weeks. 706 00:33:39,240 --> 00:33:43,080 Speaker 14: They have had to retaliate in those attacks, and the 707 00:33:43,240 --> 00:33:46,600 Speaker 14: expectation is to deter further escalation. 708 00:33:47,760 --> 00:33:51,160 Speaker 13: That I think is the immediate issue before we get 709 00:33:51,280 --> 00:33:57,160 Speaker 13: to the longer term issues in Gaza. Israel is able 710 00:33:57,200 --> 00:33:58,200 Speaker 13: to contain that area. 711 00:33:58,440 --> 00:34:01,000 Speaker 5: There's also a really short term kind of issue with 712 00:34:01,120 --> 00:34:03,280 Speaker 5: respect to President Biden's approval rating in some of the 713 00:34:03,320 --> 00:34:05,840 Speaker 5: swing states. And there was a poll that recently came 714 00:34:05,920 --> 00:34:09,279 Speaker 5: out that more than fifty percent of Muslim Americans used 715 00:34:09,320 --> 00:34:12,400 Speaker 5: to support President Biden and now a fewer than twenty 716 00:34:12,480 --> 00:34:15,800 Speaker 5: percent currently do. How significantly is this going to color 717 00:34:15,880 --> 00:34:17,600 Speaker 5: the entire debate next year? 718 00:34:18,200 --> 00:34:19,359 Speaker 13: That's an excellent point. 719 00:34:19,480 --> 00:34:23,480 Speaker 14: I think the tension there within the Democrat Democratic Party 720 00:34:23,520 --> 00:34:26,239 Speaker 14: and seeing some of those polls, but even seeing the. 721 00:34:26,280 --> 00:34:28,800 Speaker 13: Streets right, I mean, we've seen the protrust. 722 00:34:28,680 --> 00:34:32,680 Speaker 16: Across America, not just among Arab and Muslim Americans, but 723 00:34:32,880 --> 00:34:37,480 Speaker 16: also with young people, young progressives on college campuses, and 724 00:34:37,640 --> 00:34:39,760 Speaker 16: they do see that as a threat. 725 00:34:39,880 --> 00:34:43,520 Speaker 14: So how they're going to diplomatically work within their own 726 00:34:43,600 --> 00:34:44,960 Speaker 14: party and their own voters. 727 00:34:45,920 --> 00:34:47,560 Speaker 13: I think we're starting to see that play out. 728 00:34:48,000 --> 00:34:49,000 Speaker 1: Jennifer Thank you so much. 729 00:34:49,080 --> 00:34:52,480 Speaker 2: Jennifer flintne with this with Invesco there on Washington and 730 00:34:52,600 --> 00:34:55,760 Speaker 2: the war in the Eastern Mediterranean. Subscribe to the Bloomberg 731 00:34:55,840 --> 00:34:59,759 Speaker 2: Surveillance Podcast on Apple, Spotify, and anywhere else you get 732 00:34:59,800 --> 00:35:04,600 Speaker 2: your podcasts. Listen live every weekday starting at seven am Eastern. 733 00:35:05,120 --> 00:35:09,120 Speaker 2: I'm Bloomberg dot Com, the iHeartRadio app tune In, and 734 00:35:09,200 --> 00:35:12,719 Speaker 2: the Bloomberg Business app. You can watch us live on 735 00:35:12,840 --> 00:35:16,240 Speaker 2: Bloomberg Television and always I'm the Bloomberg Terminal. 736 00:35:16,680 --> 00:35:20,840 Speaker 1: Thanks for listening. I'm Tom Keen, and this is Bloomberg