WEBVTT - Bloomberg Surveillance TV: August 6, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.240 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:36.919 Terminal and the Bloomberg Business app. We begin with our 0:00:36.960 --> 0:00:39.800 soft story, stocks rebounding from a three day global slump, 0:00:39.960 --> 0:00:42.199 Jim Carron and Morgan Stanley saying the self is a 0:00:42.240 --> 0:00:45.680 correction rather than the start of a bear market, writing, 0:00:45.720 --> 0:00:48.280 the magnitude is not unusual, but the speed at which 0:00:48.360 --> 0:00:51.280 is happening is. As long as we have a soft landing, 0:00:51.440 --> 0:00:54.320 then we think the self represents a reset of prices, 0:00:54.400 --> 0:00:59.000 a buying opportunity. But cautiously patiently, Jim joins us. Now 0:00:59.200 --> 0:01:02.279 cautiously patiently, Jim, let's get into this. If we learn 0:01:02.360 --> 0:01:05.200 more about positioning than we did about fundamentals in the 0:01:05.240 --> 0:01:06.400 last couple of days. 0:01:07.560 --> 0:01:10.920 Absolutely I think that this move in the market has 0:01:11.000 --> 0:01:14.160 a lot more to do with positioning over leverage in 0:01:14.160 --> 0:01:19.600 some cases volatility then it does the economic fundamentals. And look, 0:01:19.920 --> 0:01:21.800 you were just talking about it on the show. I mean, 0:01:21.840 --> 0:01:24.399 we have a yen carry trade that's going through, we 0:01:24.560 --> 0:01:28.640 have you know, other crowded positions. Now we have to 0:01:28.680 --> 0:01:31.560 recognize that the markets were in a period of very 0:01:31.600 --> 0:01:34.039 low volatility. I mean the Vicks you know, just a 0:01:34.080 --> 0:01:37.240 month ago was somewhere around you know, eleven or twelve. 0:01:37.600 --> 0:01:39.520 Twenty four hours ago it went. 0:01:39.360 --> 0:01:43.360 To sixty five, and effectively that is a significant move 0:01:43.480 --> 0:01:44.720 which causes people. 0:01:44.440 --> 0:01:45.920 To de risk very quickly. 0:01:45.959 --> 0:01:50.279 So many the low volatility period allowed people to build 0:01:50.440 --> 0:01:53.280 very crowded positions and actually get rewarded for them. 0:01:53.600 --> 0:01:55.480 So I think what stops this, and this. 0:01:55.440 --> 0:01:58.840 Is always the question mark, is when an asymmetry starts 0:01:58.880 --> 0:02:02.400 to appear, meaning that at there's more upside risks than 0:02:02.440 --> 0:02:05.840 downside risk, or the upside and downside risk components bounce. 0:02:06.160 --> 0:02:07.400 Where is that level in the market. 0:02:07.480 --> 0:02:09.760 It's hard to say, because, like you were saying, that 0:02:09.800 --> 0:02:12.200 there are many of these positions still probably need to 0:02:12.200 --> 0:02:15.440 get unwowed. So yes, we may have a reprieve today. Yes, 0:02:15.480 --> 0:02:18.079 we may bounce back today, but that only may give 0:02:18.120 --> 0:02:21.040 people the opportunity to sell again in order to get 0:02:21.080 --> 0:02:24.480 their positions and their volatility more squared. Even if you 0:02:24.520 --> 0:02:27.840 look at the put call ratios in the equity markets 0:02:27.919 --> 0:02:30.799 and everything, we're talking about moves. I mean you said 0:02:30.800 --> 0:02:33.040 it earlier. I mean we had nineteen eighty seven, you know, 0:02:33.240 --> 0:02:35.400 for the Nikai, you know, type of the move, and 0:02:35.440 --> 0:02:37.600 then two thousand and eight. This is like the stock 0:02:37.639 --> 0:02:40.239 market crash of eighty seven. This is a financial crisis 0:02:40.280 --> 0:02:42.240 in two thousand and eight. These are the types of 0:02:42.280 --> 0:02:46.000 moves we're having today. I don't think the economic fundamentals 0:02:46.560 --> 0:02:51.000 justify nineteen eighty seven or two thousand and eight, to 0:02:51.240 --> 0:02:53.680 justify these moves. And I think what people are looking 0:02:53.720 --> 0:02:57.040 at is they're looking at these moves and they're extrapolating 0:02:57.080 --> 0:03:00.600 from these moves a fundamental economic story. I think the 0:03:00.639 --> 0:03:05.000 fundamental component of this is very slow moving. Yes, things 0:03:05.040 --> 0:03:08.040 are slowing down, Yes, policy rates are high. Yes the 0:03:08.080 --> 0:03:11.040 Fed's likely to cut rates this year, But I don't 0:03:11.040 --> 0:03:14.120 think it necessarily derails you know where we were before. 0:03:14.480 --> 0:03:17.360 So I think that this is somewhat overdone. Doesn't mean 0:03:17.360 --> 0:03:19.320 that we can't go down. But if it does, I 0:03:19.360 --> 0:03:20.160 still think that we. 0:03:20.160 --> 0:03:23.160 Are in more of a secular bull market. This is 0:03:23.200 --> 0:03:23.560 not the. 0:03:23.480 --> 0:03:25.919 Start of a bear market, and we are going to 0:03:25.960 --> 0:03:29.880 be looking at opportunities to add to risk. In fact, 0:03:29.960 --> 0:03:32.280 what we're doing on our team at Morgan Stanley Investment 0:03:32.320 --> 0:03:35.720 Management is we are going on a you know, you know, 0:03:35.880 --> 0:03:38.080 we're creating our list right We want to shop on sale. 0:03:38.120 --> 0:03:40.000 We want to find many of the positions that we 0:03:40.000 --> 0:03:42.400 weren't able to get into that have run away from 0:03:42.440 --> 0:03:44.840 us to high prices, that might be on sale and 0:03:44.920 --> 0:03:49.160 might be looking interesting. So there are opportunities out there, 0:03:49.160 --> 0:03:51.400 but you've got to be cautious, patient, don't do it 0:03:51.440 --> 0:03:52.000 all at once. 0:03:52.400 --> 0:03:54.520 Let's unpack some of that. Then, what's some sale right 0:03:54.560 --> 0:03:56.840 now has been on sale over the last few days 0:03:57.160 --> 0:03:59.200 that you've dipped a toWin soup, but you like him 0:03:59.280 --> 0:03:59.800 as starts to. 0:04:01.760 --> 0:04:03.960 Well, I mean one of them has just been broadly 0:04:04.120 --> 0:04:07.320 the you know, the Nikai Japanese equities. I mean that, 0:04:07.400 --> 0:04:09.240 you know that's one and now we were along that 0:04:09.360 --> 0:04:10.680 now you know, don't get me wrong, I mean you 0:04:10.680 --> 0:04:13.320 know we got along that in March of twenty twenty three, 0:04:13.400 --> 0:04:15.840 so we've been riding that up quite a bit. But 0:04:16.080 --> 0:04:18.000 you know, like anything else that goes up, we weren't 0:04:18.000 --> 0:04:20.240 long enough. So you know, with some of the set back, 0:04:20.320 --> 0:04:22.000 these are things that we started to take a look 0:04:22.040 --> 0:04:25.600 at other things like some of the semiconductor stocks and 0:04:25.800 --> 0:04:28.280 and those and those sectors start to look start to 0:04:28.320 --> 0:04:33.200 look relatively interesting to us. Looking at factors, so thinking 0:04:33.240 --> 0:04:35.920 about quality. So we like to think about buying quality 0:04:35.960 --> 0:04:38.039 but at a reasonable price. So this is you know, 0:04:38.080 --> 0:04:43.120 these are balance sheet factors, strong balance sheet companies and 0:04:43.120 --> 0:04:47.200 in high quality factors, interest coverage, things like that are 0:04:47.240 --> 0:04:51.400 are still are just looking more attractive today, where even 0:04:51.440 --> 0:04:54.159 if we want to broaden out our portfolio, diversify it 0:04:54.200 --> 0:04:56.760 more away from large cap and big tech, I think 0:04:56.800 --> 0:04:59.680 that I think that there are some some good sect 0:05:00.000 --> 0:05:02.839 sgments of the market and some good quality factors that 0:05:02.880 --> 0:05:06.159 are out there that actually represent you know that you 0:05:06.200 --> 0:05:08.919 know that can actually represent an opportunity. Now, what I 0:05:08.960 --> 0:05:11.599 do think is a little bit overdone though. To fund 0:05:11.760 --> 0:05:13.880 some of this is a bit of the move in 0:05:13.920 --> 0:05:16.279 the interest rate markets. I think the bond yields have 0:05:16.440 --> 0:05:20.239 priced in, you know, FED cuts going down to four percent, 0:05:20.440 --> 0:05:23.160 maybe even maybe even three and a half percent, depending 0:05:23.200 --> 0:05:24.960 on how you want to look at it. I think 0:05:24.960 --> 0:05:28.120 the bond market has moved quite aggressively. And you know, 0:05:28.480 --> 0:05:30.200 even if you look at the bond market from point 0:05:30.200 --> 0:05:31.720 to point, if we if we look at the start 0:05:31.760 --> 0:05:33.720 of the year this year, ten year treasury yields are 0:05:33.760 --> 0:05:37.560 about four percent on January first, today they're at three 0:05:37.560 --> 0:05:38.000 eighty five. 0:05:38.200 --> 0:05:39.120 Okay, So there's. 0:05:38.960 --> 0:05:41.279 Been now clearly there's been moved up and yielding between 0:05:41.279 --> 0:05:43.159 then and now it's come back down and the speed 0:05:43.200 --> 0:05:46.040 of the move. But point to point, the bond market 0:05:46.160 --> 0:05:49.880 is actually relatively steady. It's it's giving you, it's giving 0:05:49.880 --> 0:05:53.120 you a nice little coupon, and returns are up around 0:05:53.160 --> 0:05:56.159 three percent in fixed income, which is okay, right, you know, 0:05:56.240 --> 0:05:58.839 and this is kind of what you want. But the 0:05:58.839 --> 0:06:01.320 point though there is that most of this right now, 0:06:01.360 --> 0:06:04.040 most of the return is now coming from is now 0:06:04.080 --> 0:06:06.680 coming from the yield move lower. And I think that 0:06:06.680 --> 0:06:08.640 that might be a little bit on the overdone side. 0:06:08.680 --> 0:06:11.520 So we may fund some of our equity positions by 0:06:12.400 --> 0:06:15.160 selling some of our bond positions because interest rates went 0:06:15.200 --> 0:06:15.760 down so much. 0:06:15.680 --> 0:06:19.040 And the price is appreciated quite rapidly, so okay, So 0:06:19.080 --> 0:06:21.880 if we're in the secular bowl market for equities, bonds 0:06:21.880 --> 0:06:25.000 have moved too far to three point five? What is 0:06:25.160 --> 0:06:27.800 more reasonable, Jim? What sort of an analogous trade to 0:06:27.839 --> 0:06:28.919 what you see on equities? 0:06:30.800 --> 0:06:33.440 So I mean, you know, the way that I kind 0:06:33.440 --> 0:06:36.599 of think of it is as a range type of trade. 0:06:36.640 --> 0:06:39.279 So for me, the level fifty two hundred and the 0:06:39.360 --> 0:06:43.040 S and P five hundred, you know, represents the beginning 0:06:43.360 --> 0:06:46.320 levels that you would want to start to think about buying. 0:06:46.839 --> 0:06:49.640 And the reason I say that is, I hee everything 0:06:49.720 --> 0:06:52.240 off of what I believe is a level that's more 0:06:52.320 --> 0:06:55.320 fair for equities today. If I look at the SMP 0:06:55.760 --> 0:06:58.160 of around fifty three fifty, and that's roughly nineteen and 0:06:58.200 --> 0:07:02.000 a half, you know, pe that's a nineteen point five 0:07:02.120 --> 0:07:07.400 multiple on two seventy five earnings pulling forward from twenty 0:07:07.480 --> 0:07:11.240 twenty five. So if I think about the overshoot that 0:07:11.280 --> 0:07:14.120 we've recently had, you know that went up to fifty 0:07:14.120 --> 0:07:16.800 five hundred, fifty six hundred, and I think about that 0:07:16.840 --> 0:07:19.680 more symmetrically, it tells me that fifty one fifty to 0:07:19.680 --> 0:07:22.680 fifty two hundred on the downside, from that fifty three 0:07:22.680 --> 0:07:25.040 to fifty center actually. 0:07:24.640 --> 0:07:29.720 Starts to look relatively attractive. So today it would look 0:07:29.760 --> 0:07:31.040 like we're a little above that. 0:07:31.400 --> 0:07:33.920 But like I was saying earlier, with this rally in 0:07:33.960 --> 0:07:36.440 the market, what this may do is it may give 0:07:36.520 --> 0:07:39.440 some of those positions that still needs to be unwound 0:07:39.760 --> 0:07:41.800 the opportunity to sell it to some of the strength, 0:07:42.520 --> 0:07:44.640 and they could push prices back down. But that's where 0:07:44.640 --> 0:07:48.640 the asymmetry begins around fifty two hundred, around fifty one 0:07:48.680 --> 0:07:50.280 to fifteen in the S and P five hundred. 0:07:51.160 --> 0:07:54.320 I believe the upside potential for markets relative to. 0:07:54.320 --> 0:07:57.080 The downside, even if you have a deeper correction, inequities 0:07:57.400 --> 0:08:00.200 becomes more symmetrical. So that's where I start to pull 0:08:00.240 --> 0:08:02.200 out the buy tickets. And that's what we're looking to 0:08:02.280 --> 0:08:03.640 do at this point. 0:08:03.680 --> 0:08:03.840 Now. 0:08:03.880 --> 0:08:05.800 If I thought we were in a secular bear market, 0:08:05.800 --> 0:08:07.200 and if I thought this was going to be the 0:08:07.240 --> 0:08:09.960 start of something really big now, then I wouldn't do it. 0:08:10.000 --> 0:08:11.840 I mean I would think that, you know, the downside 0:08:11.880 --> 0:08:15.080 has a lot more room to go, But that's not 0:08:15.200 --> 0:08:17.960 where we are in my view. I think we're you know, 0:08:18.160 --> 0:08:21.400 the economy is cooling, it's not collapsing. Yes, you know, 0:08:21.600 --> 0:08:25.600 earnings may start to slow as forecasts come out, unemployment 0:08:25.640 --> 0:08:28.960 great rises, there's less strength from the consumer. 0:08:29.400 --> 0:08:32.040 Certainly, that's going to be a little bit of a drag. 0:08:32.520 --> 0:08:34.920 But you know, in many cases, I still think that 0:08:34.960 --> 0:08:38.160 the jobs market is going to maintain, you know, relative strength. 0:08:38.440 --> 0:08:40.520 The people who are very bearish. 0:08:40.400 --> 0:08:43.680 On the bond, I should say, on the equity markets 0:08:43.920 --> 0:08:47.480 are people who believe that the unemployment rate is going 0:08:47.559 --> 0:08:50.160 to five six percent, right that we're going to have 0:08:50.240 --> 0:08:51.920 this major adjustment higher. 0:08:52.000 --> 0:08:54.600 There's going to be this big layoff spree that's going 0:08:54.640 --> 0:08:55.080 to come through. 0:08:55.520 --> 0:09:01.000 Right now, layoffs aren't actually showing any real meaningful acceleration, yes, 0:09:01.080 --> 0:09:03.720 you know, I mean temporary workers aren't being hired, is 0:09:03.760 --> 0:09:06.040 you know, rehired as quickly. And there is some softening 0:09:06.200 --> 0:09:08.320 in the labor market. That's good for the FAD because 0:09:08.320 --> 0:09:13.079 it lowers wages in lowering wage inflation keeps inflation down. 0:09:13.440 --> 0:09:17.560 But I don't think necessarily it's an overall collapse in 0:09:17.600 --> 0:09:20.680 the market. I view it more as a normalization, and 0:09:20.720 --> 0:09:24.439 we have to draw that distinction. Is this a significant 0:09:24.480 --> 0:09:27.920 negative change or are we just normalizing? And I think 0:09:27.920 --> 0:09:29.000 we're more or less. 0:09:28.760 --> 0:09:30.520 Normalizing at this point. 0:09:30.600 --> 0:09:32.880 But there's going to be overshoots to the downside, and 0:09:32.920 --> 0:09:35.760 I think those overshoots can represent buying opportunities. 0:09:35.760 --> 0:09:38.160 And yet, Jim, here we are. I want to squeaze 0:09:38.160 --> 0:09:40.320 this in because I think this is so important. You 0:09:40.360 --> 0:09:42.200 say that what we've learned in the last few days 0:09:42.440 --> 0:09:45.640 is we've learned more about positioning than we have about fundamentals, 0:09:45.679 --> 0:09:47.240 and I think a lot of people might agree with you. 0:09:47.720 --> 0:09:49.640 I just want to reflect on what another gym said 0:09:49.640 --> 0:09:52.640 earlier this morning over at Deutsche Bank. Jim read what 0:09:52.720 --> 0:09:55.480 a once in a lifetime GFC period could not do, 0:09:56.000 --> 0:09:58.560 and a liquid August day in twenty twenty four with 0:09:58.640 --> 0:10:02.200 one band weather related pay print for fuel did with 0:10:02.320 --> 0:10:05.640 Sumi's for a period of time yesterday. What would have 0:10:05.679 --> 0:10:08.400 happened if we'd seen a negative payroll print? Jim, I've 0:10:08.400 --> 0:10:11.000 got to ask this because I just wonder how franchile 0:10:11.120 --> 0:10:14.320 this market actually is. So if you're saying this is 0:10:14.360 --> 0:10:17.160 just normalization and nothing nefarious, I wonder what happens to 0:10:17.200 --> 0:10:19.840 this market when we do have to confront something more nefarious. 0:10:20.200 --> 0:10:21.440 Just how unstable are things? 0:10:21.520 --> 0:10:25.240 Jim, Yeah, listen, I think it's a good point. 0:10:25.280 --> 0:10:29.200 I mean, if we have a material deterioration in the data, 0:10:29.840 --> 0:10:32.199 then I would argue that, yes, I mean, maybe there 0:10:32.280 --> 0:10:35.600 is something bigger that's going on. So if I compare 0:10:35.640 --> 0:10:37.800 that to the you know, to many of the crowded 0:10:37.800 --> 0:10:40.840 positions that are likely still out there, you know, look, 0:10:40.920 --> 0:10:43.720 you know, we could have another five to seven percent 0:10:43.960 --> 0:10:48.240 downside correction. It's not uncommon to have about a ten 0:10:48.280 --> 0:10:50.319 percent correction in the equity markets. I mean, this is 0:10:50.400 --> 0:10:52.880 kind of a normal thing that you know, that happens 0:10:53.040 --> 0:10:56.280 on a regular basis. But but that you know, I 0:10:56.280 --> 0:10:58.520 think that kind of misses the point. I mean, if 0:10:58.559 --> 0:11:02.000 we start to get something inex of a twenty percent correction, 0:11:02.440 --> 0:11:03.640 that's typically. 0:11:03.200 --> 0:11:05.679 The signal where you know where a bear. 0:11:05.559 --> 0:11:07.840 Market might be starting, or there might be something bigger 0:11:08.120 --> 0:11:09.360 that's actually taking place. 0:11:09.720 --> 0:11:11.679 But right now, when you look at. 0:11:11.480 --> 0:11:14.880 Corrections eight, ten percent, eleven percent, you know, which is 0:11:14.880 --> 0:11:17.280 what we've which is what we've roughly had over the 0:11:17.360 --> 0:11:20.280 past forty eight hours, let's say, you know, Monday and Friday. 0:11:22.040 --> 0:11:25.720 This isn't something that is overly unusual. 0:11:25.760 --> 0:11:27.800 And I think that we as investors need to be 0:11:27.840 --> 0:11:29.240 patient and we need to take this in. 0:11:29.200 --> 0:11:30.079 Stride a little bit. 0:11:30.320 --> 0:11:31.959 And that's why I keep going back to this right 0:11:32.120 --> 0:11:35.240 We have to ask ourselves a fundamental question. Are is 0:11:35.280 --> 0:11:37.200 this the start of something bigger? And is this a 0:11:37.200 --> 0:11:39.800 bear market? Is that what's happening right now? Are we 0:11:39.960 --> 0:11:42.880 going to see an absolute collapse at this point in 0:11:42.960 --> 0:11:46.880 sudden stop and economic activity? Is that what's happening right now? 0:11:46.920 --> 0:11:49.640 If it's not, then I still think that the bull 0:11:49.720 --> 0:11:51.840 trend is intact and we want to be able to 0:11:51.880 --> 0:11:53.160 find places to buy. 0:11:53.120 --> 0:11:54.440 Good at Jim enjoyed this. 0:11:54.520 --> 0:12:07.000 Thank you, said Neil Data of Renmack right in the following. 0:12:07.320 --> 0:12:09.679 The time for debate is over. The FED needs to 0:12:09.720 --> 0:12:12.679 recalibrate policy now. Our call is that the FED delivers 0:12:12.720 --> 0:12:15.640 a fifty basis point cut in September, with at least 0:12:15.679 --> 0:12:18.360 another fifty basis points of cut spread across the next 0:12:18.360 --> 0:12:21.960 two meetings. Going more in September makes up for not 0:12:22.080 --> 0:12:25.320 going in July. Neil joins us now for more. Neil, 0:12:25.360 --> 0:12:27.320 I said the Fed's being cool, calm and collected. Some 0:12:27.320 --> 0:12:31.079 people watching might say cool, calm and complacent. But you 0:12:31.120 --> 0:12:32.880 say the following, and I think you note in the 0:12:32.960 --> 0:12:36.040 last week following payrolls on Friday is an important one. 0:12:36.280 --> 0:12:38.760 You said they've stepped on a nail, not a bed 0:12:38.800 --> 0:12:40.960 of nails, and you went on to say this is 0:12:41.040 --> 0:12:44.080 easy to fix, Neil, Why is this so easy to fix? 0:12:45.559 --> 0:12:47.440 Well, thanks for having me on, John. I think it's 0:12:47.440 --> 0:12:50.600 easy to fix because there's nothing structurally wrong with the 0:12:50.720 --> 0:12:54.840 US economy. Everything that ails the economy is a function 0:12:54.960 --> 0:12:59.080 of tight monetary policy. I mean, nobody's talking about a 0:12:59.160 --> 0:13:02.800 troubled asset relief program. No one's talking about a resolution 0:13:02.920 --> 0:13:07.199 trust corporation. So, you know, I think that that's important 0:13:07.240 --> 0:13:10.040 to keep in mind. What we're dealing with is simply 0:13:10.080 --> 0:13:14.440 a function of the FED keeping rates too high, and 0:13:14.480 --> 0:13:17.440 that means that lower rates can be the solution to 0:13:17.520 --> 0:13:20.440 what ails the economy. You know, I think for the 0:13:20.440 --> 0:13:23.720 FED it's important. You know, they talk about not wanting 0:13:23.800 --> 0:13:27.160 to make one data point too important, but it feels 0:13:27.200 --> 0:13:29.200 like that's what they're doing. I mean, you already see 0:13:29.200 --> 0:13:34.520 this with the debate between fifty or twenty five in September. Well, 0:13:34.559 --> 0:13:36.520 you know, if the job's number comes in strong for 0:13:36.600 --> 0:13:39.520 the for the August reading, we'll go twenty five. But 0:13:39.559 --> 0:13:42.880 if it does what it did last month, will go fifty. 0:13:43.200 --> 0:13:45.960 I mean, that's that's ridiculous. We already know the revisions 0:13:45.960 --> 0:13:48.640 to these numbers are negative, right, So whatever the number is, 0:13:48.679 --> 0:13:51.760 it's going to it's gonna be weaker, you know, in hindsight. 0:13:52.440 --> 0:13:56.880 And the unemployment rate continues to march higher, and we 0:13:57.000 --> 0:13:59.600 know that the momentum under the economy is weak, and 0:13:59.679 --> 0:14:02.439 we know that there's an asymmetry with respect to how 0:14:02.920 --> 0:14:07.760 you know, firms deal with bouts of market volatility. Higher 0:14:07.800 --> 0:14:11.520 market volatility spooks them a lot more than lower volatility 0:14:11.559 --> 0:14:15.400 makes them feel good typically, So you know, I just 0:14:15.440 --> 0:14:17.400 think they I've been saying it, they need to get 0:14:17.440 --> 0:14:19.480 on with it. But I think the longer they wait, 0:14:19.520 --> 0:14:21.320 the more they'll end up having to do, which is 0:14:21.320 --> 0:14:23.600 why I say that not only will they go fifty, 0:14:23.680 --> 0:14:25.840 but I do think they'll go at least fifty more 0:14:25.880 --> 0:14:29.560 in the final two meetings of the year. So that's 0:14:29.600 --> 0:14:31.840 sort of how I'm thinking about it. But as I say, 0:14:31.920 --> 0:14:34.320 I mean, I do think the markets will respond reasonably 0:14:34.400 --> 0:14:38.640 well to lower interest rates, and I think that that will, 0:14:38.840 --> 0:14:40.400 you know, help stabilize the economy. 0:14:40.600 --> 0:14:42.400 Credit to you, Neil, You've been calling for this for 0:14:42.400 --> 0:14:44.160 a while. I just want to pick up on an 0:14:44.160 --> 0:14:46.440 important distinction I hear from you loud and clear, what 0:14:46.440 --> 0:14:48.480 you think they should do do you think they are 0:14:48.600 --> 0:14:52.120 dependent on that job support in August on going twenty 0:14:52.120 --> 0:14:54.560 five versus fifty? Do you think it comes down to that? 0:14:55.480 --> 0:14:57.800 I mean it seems that way. Look at the Wall 0:14:57.800 --> 0:15:00.800 Street Journal this morning. You know, they had an article 0:15:00.840 --> 0:15:04.560 talking about how the next employment report is going to 0:15:04.560 --> 0:15:08.360 basically determine whether or not they go fifty or twenty five. 0:15:09.800 --> 0:15:12.400 But you know, Powell has also talked about how it's 0:15:12.440 --> 0:15:15.600 the totality of the data. What if core inflation comes 0:15:15.680 --> 0:15:21.080 out very soft in the next report for July. You know, 0:15:21.080 --> 0:15:23.360 I think that there's a reasonably good chance of that happening. 0:15:23.400 --> 0:15:26.600 Giving what we know about the deflation in cars, the 0:15:26.640 --> 0:15:30.240 cracking in housing, rental inflation, and the ongoing weakness and 0:15:30.320 --> 0:15:33.080 non housing services, there's good reason to think that we'll 0:15:33.080 --> 0:15:36.000 get another dud on core inflation. So now not only 0:15:37.400 --> 0:15:42.400 is the employment figures weakening, but core inflation is converging 0:15:42.400 --> 0:15:45.680 on to two percent more rapidly than they thought after 0:15:45.760 --> 0:15:50.520 the first quarter. So it's also about the outlook, right John, 0:15:50.600 --> 0:15:54.320 I mean, what's the upside case for why employment will 0:15:54.320 --> 0:15:56.320 pick up we get a weather bounce back. I mean, 0:15:56.360 --> 0:16:00.360 it's crazy housing is slowing. If you look at the 0:16:00.680 --> 0:16:02.680 number of new homes that have been sold that haven't 0:16:02.720 --> 0:16:05.680 been started that's down over thirty percent against last year. 0:16:06.200 --> 0:16:10.560 That's going to bleed into single family residential construction. It's 0:16:10.640 --> 0:16:14.000 unlikely that we get the kind of inventory investment rebound 0:16:14.040 --> 0:16:15.720 that we got in Q two in the back half 0:16:15.720 --> 0:16:17.960 of the year. That's going to weigh on manufacturing and 0:16:18.040 --> 0:16:21.280 total hours worked in manufacturing already slowing over the last 0:16:21.320 --> 0:16:24.720 three months, and the fact that the labor markets have 0:16:24.760 --> 0:16:27.400 slowed means what incomes are slowing, which will take some 0:16:27.520 --> 0:16:30.280 of the upward momentum out of consumer spending, which the 0:16:30.320 --> 0:16:33.720 FED has been optimistic about. So it's not about just 0:16:33.880 --> 0:16:36.760 waiting for this data to come out. It's also about 0:16:36.760 --> 0:16:39.560 thinking about what the outlook might be. You know, in 0:16:39.640 --> 0:16:44.280 my mind, the data already justify a fifty basis point move. 0:16:44.320 --> 0:16:47.360 I mean, the fact that the unemployment rate is up 0:16:47.360 --> 0:16:50.480 to four point three percent, that's thirty basis points higher 0:16:50.520 --> 0:16:52.280 than where they think it's going to be by year end. 0:16:52.280 --> 0:16:54.480 You put that into a standard kind of tail rom model, 0:16:54.520 --> 0:16:57.120 you get at least an additional sixty basis points worth 0:16:57.120 --> 0:17:01.360 of rate cuts. So it's not about just the data 0:17:01.440 --> 0:17:03.280 as it's come in. Though they keep wanting to make 0:17:03.320 --> 0:17:06.680 it about that, it's also about the economic outlook, and 0:17:06.960 --> 0:17:08.840 you know, I don't think there's really a right tail 0:17:08.960 --> 0:17:12.320 for growth. I think the distribution of risks is skewed 0:17:12.359 --> 0:17:14.800 to the downside, and it's important for the FED to 0:17:14.840 --> 0:17:17.760 neutralize those downside risks by easing monetary policy. 0:17:18.040 --> 0:17:21.960 Yet Neil mary Daily yesterday saying that risks are equal 0:17:22.160 --> 0:17:25.359 between employment and inflation. That does not sound like a 0:17:25.400 --> 0:17:28.919 woman who's ready to cut fifty basis points in September. 0:17:30.280 --> 0:17:33.560 Well, so I said, And I mean, you're right, and 0:17:33.600 --> 0:17:35.080 I do think the FED has a role to play 0:17:35.080 --> 0:17:36.359 here and trying to get on the right side of 0:17:36.359 --> 0:17:38.399 the eight ball. But what's happening in the markets? I mean, 0:17:38.440 --> 0:17:41.200 leaving aside the sort of unwind of positionings and things, 0:17:41.280 --> 0:17:43.720 I mean, the big move in yields happened in the 0:17:43.760 --> 0:17:47.639 two days following the meeting. Why because the data was weak. 0:17:48.400 --> 0:17:50.119 You know, the risks aren't balanced. As much as they 0:17:50.160 --> 0:17:52.639 want to say, this is really about them. It's not 0:17:52.680 --> 0:17:55.359 about them knowing something the market doesn't know. This is 0:17:55.400 --> 0:17:59.560 about them realizing something the market and most investors already 0:17:59.600 --> 0:18:01.800 do know. And that's why I think you know you're 0:18:01.800 --> 0:18:05.000 in this point now where if you get bad data, 0:18:05.920 --> 0:18:08.919 it's going to lead to bad market outcomes, because anything 0:18:08.960 --> 0:18:10.720 at this point that looks weak in terms of the 0:18:10.760 --> 0:18:13.760 economy will kind of fuel these bets at the Fed's behind. 0:18:13.480 --> 0:18:14.640 The curve bad news. 0:18:15.200 --> 0:18:19.840 The markets already know. The markets already know that the 0:18:20.200 --> 0:18:22.359 that the risk aren't balanced. Whether they say it or 0:18:22.400 --> 0:18:23.960 not is another matter. 0:18:24.200 --> 0:18:25.880 Just waiting for the FED to catch up. Neil, it's 0:18:25.880 --> 0:18:37.119 going to hear from you nil down to that. Td 0:18:37.240 --> 0:18:40.400 camon raising its price target on shares of Walmart eighty 0:18:40.640 --> 0:18:43.800 from seventy five, and miss Oliver Chen saying the company 0:18:43.880 --> 0:18:47.400 is well positioned to continue momentum across a leading retail 0:18:47.520 --> 0:18:50.919 tech ecosystem that stuck is up by quarter of one percent, 0:18:50.960 --> 0:18:53.879 and we're lucky. Oliver Chen's in a studio with us, Oliver, good. 0:18:53.760 --> 0:18:55.520 To see you, sir Green being here. Thanks John. 0:18:55.560 --> 0:18:58.200 Does Walmart win and everyone loses? Is that what's handling here. 0:18:58.280 --> 0:19:01.679 We're excited about Walmart because it's both defensive and offensive. 0:19:01.760 --> 0:19:04.960 On the defense side, it's a leading grosser every day. 0:19:04.960 --> 0:19:06.679 Low price is a key strategy. 0:19:07.000 --> 0:19:09.919 On the technology side, there's a lot happening to compete 0:19:09.920 --> 0:19:14.200 against Amazon, including digital marketing as well as advertising and 0:19:14.480 --> 0:19:18.679 marketplace models and platforms. So thinking about technology married with 0:19:18.760 --> 0:19:22.360 the basics of retail and features such as curbside pickup 0:19:22.440 --> 0:19:25.600 and getting a higher household income customer, and it's a 0:19:25.640 --> 0:19:29.080 low beta, defensive idea in this very choppy market. 0:19:29.480 --> 0:19:32.560 I wonder as people trade down, if they trade down 0:19:32.560 --> 0:19:36.200 even more, and how big of a thread is you know, Teamu, 0:19:36.480 --> 0:19:39.760 she In some of those kinds of names to Walmart's business. 0:19:39.840 --> 0:19:41.120 Yeah, you're bringing up a great point. 0:19:41.200 --> 0:19:45.360 So consumer discretionary, unfortunately has been in a recession for. 0:19:45.400 --> 0:19:46.200 Over a year. 0:19:46.720 --> 0:19:50.080 Timu and Sheen are spending a lot on advertising that's 0:19:50.080 --> 0:19:54.200