WEBVTT - FX, Twitter CEO, and ESG ETFs (Podcast) 0:00:00.840 --> 0:00:04.000 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:05.280 my co host Matt Miller. 0:00:05.640 --> 0:00:09.600 Every business day we bring you interviews from CEOs, market pros, 0:00:09.720 --> 0:00:13.600 and Bloomberg experts, along with essential market moven news. 0:00:14.160 --> 0:00:17.279 Find the Bloomberg Markets podcast called Apple Podcasts or wherever 0:00:17.400 --> 0:00:20.480 you listen to podcasts, and at Bloomberg dot com slash podcast. 0:00:21.000 --> 0:00:21.279 All right. 0:00:21.320 --> 0:00:24.400 We also had some news critty this morning for I 0:00:24.400 --> 0:00:27.920 guess Twitter, which is now owned personally by Elon Musk, 0:00:28.640 --> 0:00:30.840 so no longer trains publicly, but Twitter is still a 0:00:30.880 --> 0:00:33.479 big news name they pulled. I went over to the 0:00:33.600 --> 0:00:36.400 NBC Universal and got one other senior executives, Linda Yakarino, 0:00:36.479 --> 0:00:39.120 to be the CEO of Twitter. It's kind of some 0:00:39.159 --> 0:00:41.880 big news in the world of advertising and digital advertising. 0:00:42.320 --> 0:00:45.080 Mandy Sing joins us. He's a techan also Bloomberg Intelligence, 0:00:45.320 --> 0:00:47.320 So Mandy, but I know Twitter is no longer public, 0:00:47.360 --> 0:00:50.200 but I mean, I guess if nothing else, you could say, 0:00:50.560 --> 0:00:53.320 Elon Musk is serious about trying to, you know, try 0:00:53.320 --> 0:00:56.560 to rebuild Twitter as a digital advertising platform. 0:00:58.120 --> 0:01:03.000 Yeah, and it's trusting to see him a point and executive, 0:01:03.160 --> 0:01:07.520 you know, from a traditional media company. Obviously she's seasoned, 0:01:07.640 --> 0:01:10.920 but I would be intrusted to know if he had 0:01:10.959 --> 0:01:14.440 more than one candidate in mind in terms of, you know, 0:01:14.560 --> 0:01:18.600 bringing someone for CEO role. And look, I think that's 0:01:18.720 --> 0:01:22.160 the part that they need stability on. I mean, from 0:01:22.200 --> 0:01:25.200 what we have read so far, Twitter has been losing 0:01:25.280 --> 0:01:29.160 advertising dollars since the time have been private, So if 0:01:29.160 --> 0:01:34.680 somebody can study the ship on that front, clearly engagement has. 0:01:34.480 --> 0:01:36.920 Been stable, I think for the most part. 0:01:37.000 --> 0:01:40.000 So it's advertising dollars that was a cost for concern 0:01:40.120 --> 0:01:41.920 and maybe it's a good thing. 0:01:42.000 --> 0:01:44.280 So Mandy, I know you follow Google, I know you 0:01:44.319 --> 0:01:47.880 follow Meta and all that digital advertising space. What's the 0:01:47.920 --> 0:01:50.920 feeling on Madison Avenue now and amongst advertisers, like do 0:01:51.040 --> 0:01:53.280 they even want to put their dollars on Twitter? Have 0:01:53.360 --> 0:01:55.279 they pulled their dollars off? Do we have any sense 0:01:56.160 --> 0:01:58.280 of kind of how they're viewing Twitter these days as 0:01:58.280 --> 0:01:58.680 an option? 0:02:00.080 --> 0:02:00.280 Yeah? 0:02:00.320 --> 0:02:05.440 So I think overall this earning season, the company's printed 0:02:05.560 --> 0:02:09.960 better than expected results, even though expectations work quite low, 0:02:10.120 --> 0:02:14.280 and my senses, even though Twitter is losing market share, 0:02:15.520 --> 0:02:20.120 things seem to be stabilizing and generative. AI overall is 0:02:20.160 --> 0:02:23.320 a positive for all the digital ad companies. We saw 0:02:23.440 --> 0:02:27.600 Meta just announced AI Sandbox. I think every digital ad 0:02:27.639 --> 0:02:30.280 company is going to try to do something similar in 0:02:30.360 --> 0:02:33.200 terms of you know, self serve ads using generative AI 0:02:33.840 --> 0:02:37.880 to make ads more personable, and that is where that 0:02:38.040 --> 0:02:41.640 linear to digital shift is still going to continue. So 0:02:41.919 --> 0:02:45.480 I think platforms like Twitter and even the smaller ones 0:02:45.960 --> 0:02:50.760 will benefit from that trend. Obviously, things are still kind 0:02:50.800 --> 0:02:54.480 of quite slow in terms of the ad growth, but 0:02:54.840 --> 0:02:57.640 my sense is we probably are close to a bottom 0:02:57.680 --> 0:03:00.600 in terms of the ad pricing headwinds over the last 0:03:00.680 --> 0:03:01.480 few quarters. 0:03:01.600 --> 0:03:04.320 Well, of course, we're seeing that Twitter is a private 0:03:04.320 --> 0:03:06.639 company now, so we can't necessarily see a stock reaction there, 0:03:06.639 --> 0:03:09.840 but you can in Tesla, Bailey walk us through the 0:03:09.880 --> 0:03:10.400 logic there. 0:03:10.639 --> 0:03:12.480 Yeah, right now, the stock over the past few days 0:03:12.560 --> 0:03:15.560 up more than three percent, sharply outperforming the Nasdaq, which 0:03:15.600 --> 0:03:18.160 is flat. And the big focus right now for investors 0:03:18.440 --> 0:03:21.360 is that Elon can now refocus his attention on Tesla 0:03:21.480 --> 0:03:25.120 with a new CEO overseeing Twitter or ex Corp, whatever 0:03:25.120 --> 0:03:27.480 you want to call it, and that would free him up. 0:03:27.480 --> 0:03:29.520 And that's been kind of the main thesis or one 0:03:29.520 --> 0:03:33.200 of the big question marks around Tesla's path forward was 0:03:33.520 --> 0:03:37.000 how distracted Cannelon must be and continue to deliver results 0:03:37.040 --> 0:03:39.960 and to continue to deliver growth. And that seems to 0:03:40.000 --> 0:03:43.680 be why you're seeing investors already rewarding Tesla just because 0:03:43.760 --> 0:03:45.920 now it does seem like he can recenter that attention. 0:03:46.800 --> 0:03:48.880 All right, Bailly Lipschultz, thank you so much for joining us. 0:03:48.880 --> 0:03:51.880 Billy Lipschialt he covers all the markets for Bloomberg News 0:03:52.280 --> 0:03:54.760 and man Deep Singh. He's a tech analyst, senior tech 0:03:54.840 --> 0:03:56.360 dude over at Bloomberg Intelligence. 0:03:57.800 --> 0:04:01.640 You're listening to the Team Kensher live program Bloomberg Markets 0:04:01.680 --> 0:04:04.760 weekdays at ten am Eastern on Bloomberg dot Com, the 0:04:04.840 --> 0:04:08.000 iHeartRadio app, and the Bloomberg Business app, or listen on 0:04:08.040 --> 0:04:09.960 demand wherever you get your podcast. 0:04:11.920 --> 0:04:14.480 Jane Foley also doing the work she's had of FX 0:04:14.480 --> 0:04:15.640 Strategy a robobank. 0:04:16.040 --> 0:04:17.160 So Jane, let's just start there. 0:04:17.160 --> 0:04:19.359 I mean, you see some economic data there that is 0:04:19.440 --> 0:04:22.120 just really disappointing in the near term and then kind 0:04:22.160 --> 0:04:25.240 of inflationary looking out five to ten years. You know, 0:04:25.279 --> 0:04:28.920 from your perspective in the currency markets, what do. 0:04:28.839 --> 0:04:29.520 You make of that data? 0:04:30.560 --> 0:04:32.200 Well, I mean that's a bit of a worry isn't it. 0:04:32.240 --> 0:04:36.279 And certainly the inflation expectations number does lend itself to 0:04:36.320 --> 0:04:40.200 the higher for longer interest rates story. Now, clearly consumer 0:04:40.279 --> 0:04:43.400 sentiment is down, and you know that that could be 0:04:43.440 --> 0:04:46.640 a reaction to the concerns about that the debt ceiling, 0:04:46.680 --> 0:04:48.800 and maybe that would be something that would respond if 0:04:48.800 --> 0:04:52.640 these debt ceiling issues were sorted out. But at the 0:04:52.680 --> 0:04:55.720 same time, you know it, with inflation higher, you know, 0:04:55.720 --> 0:04:58.120 you've you've got to assume that the Fed will keep 0:04:58.120 --> 0:05:01.120 on pressing to get that down to its two percent target. 0:05:01.240 --> 0:05:04.000 And therefore, you know, at what cost to the economy 0:05:04.040 --> 0:05:05.800 are we going to see? You know, that recession in 0:05:05.839 --> 0:05:08.120 the latter half of this year and no let up 0:05:08.120 --> 0:05:10.640 and interest rates And I think that's quite likely this 0:05:10.720 --> 0:05:12.520 scenario that we are going to see. 0:05:13.080 --> 0:05:16.200 Jane, what is the bear case here for the dollar? 0:05:16.240 --> 0:05:20.039 It feels like, if you're talking about a recession, you 0:05:20.080 --> 0:05:22.839 buy the dollar. If you're talking about a US debt default, 0:05:23.040 --> 0:05:25.120 you go to safety in buy the dollar. What is 0:05:25.160 --> 0:05:26.760 the bare case for the green back? 0:05:27.680 --> 0:05:30.400 Well, to be honest, you know, for those reasons that 0:05:30.440 --> 0:05:32.599 we do think that the dollar will come back in 0:05:32.600 --> 0:05:34.159 the second half of the year. We think you're a 0:05:34.200 --> 0:05:36.000 dollar you know, could slip to it to one oh 0:05:36.080 --> 0:05:38.640 six in the second half of the year, and as 0:05:38.680 --> 0:05:41.960 the market prices out interest rate hikes, and as safe 0:05:42.000 --> 0:05:44.280 haven bids get stuck in. Because let's face it, if 0:05:44.279 --> 0:05:47.080 the US economy does hit recession at a time when 0:05:47.080 --> 0:05:50.040 we might have just stagnation for the Eurozone and where 0:05:50.600 --> 0:05:54.000 the Chinese economy is or the Chinese recovery is disappointing, 0:05:54.120 --> 0:05:57.200 you know many forecasters who really wants to move into 0:05:57.360 --> 0:06:00.600 to high risk and I certainly thinking in that environment 0:06:00.800 --> 0:06:02.960 that you would buy the dollar. So that is our forecast. 0:06:03.000 --> 0:06:05.240 But your question is what would turn it, you know, 0:06:05.240 --> 0:06:10.120 what would make the dollar you know, sell off and 0:06:10.680 --> 0:06:13.520 go stronger. And I think in that scenario, we would 0:06:13.680 --> 0:06:17.800 have to have a scenario where the global economy is 0:06:17.800 --> 0:06:21.039 looking really good, where the market wants to buy on 0:06:21.200 --> 0:06:24.520 pile more into the high risk because that is generally 0:06:24.560 --> 0:06:28.120 what happens, that the dollar has a pretty good inverted 0:06:28.200 --> 0:06:33.120 correlation with risky assets, and when the global economic outlook 0:06:33.560 --> 0:06:36.200 has been good and people piling to risk assets, the 0:06:36.240 --> 0:06:38.960 dollar does it poorly. And I don't think that's what 0:06:38.960 --> 0:06:40.640 we're going to see in the second half of this year. 0:06:40.960 --> 0:06:43.480 So, but it does sound like, ultimately, when we're talking 0:06:43.480 --> 0:06:45.719 about even the ball case for the dollar, which you 0:06:45.760 --> 0:06:50.920 have beautifully laid out, the idea of interest rate differentials, 0:06:51.040 --> 0:06:54.520 the idea of a hawkish ECB or a hawkish BOE 0:06:55.200 --> 0:07:00.000 kind of driving the euro and pound strength, that doesn't 0:07:00.160 --> 0:07:03.000 seem to be what's driving the narrative for the dollar anymore. 0:07:03.040 --> 0:07:05.719 It's no longer about interest rates as much as it was, 0:07:05.800 --> 0:07:06.440 say a year ago. 0:07:06.480 --> 0:07:07.360 Would you agree with that? 0:07:08.240 --> 0:07:10.160 Well, you know what, I think we can actually look 0:07:10.200 --> 0:07:13.000 and see what is in the price and the market 0:07:13.040 --> 0:07:16.520 has already got more ECB interest rate hikes priced in, 0:07:16.560 --> 0:07:19.560 it's already got more Bank of England interust rates priced in. 0:07:19.600 --> 0:07:21.680 And I think if we take the euro, for instance, 0:07:22.800 --> 0:07:25.880 over and above what is already priced in, can the 0:07:25.960 --> 0:07:29.640 market make an even better call for buying the euro? 0:07:29.960 --> 0:07:33.800 And I think at this stage probably not, because what 0:07:33.840 --> 0:07:35.680 we've had for the Euro since the start of the 0:07:35.760 --> 0:07:39.240 year is relief, better than expected news. Because we had 0:07:39.240 --> 0:07:41.960 in mid winter here in Europe, guess prices have come down. 0:07:41.960 --> 0:07:44.520 We didn't have the recession in Germany, and we've seen 0:07:44.640 --> 0:07:47.520 a hawky GCB. But now that that's all priced in 0:07:47.880 --> 0:07:50.720 what are we facing when we're facing probably stagnation in 0:07:50.960 --> 0:07:52.680 H two and so is that a reason to buy 0:07:52.680 --> 0:07:55.240 the euro world? Probably not. And the market's already long 0:07:55.880 --> 0:07:59.800 and so I think interest rate differentials are still very 0:07:59.880 --> 0:08:02.520 much at play, but we've got to compare them to 0:08:02.560 --> 0:08:03.640 what's already in the price. 0:08:04.520 --> 0:08:08.520 And Jane, I'm just looking at the pounds sterling. You know, 0:08:08.560 --> 0:08:11.560 it's up seventeen eighteen percent off of that low. What's 0:08:11.600 --> 0:08:12.240 going on there? 0:08:13.400 --> 0:08:16.800 Well, you know it has had a good run, but 0:08:16.880 --> 0:08:19.080 actually in the last twenty four hours or so, it's 0:08:19.120 --> 0:08:21.920 it's really beginning to fail. And again, you know, similar 0:08:21.920 --> 0:08:23.520 to the Euro, there's a lot of better news in 0:08:23.560 --> 0:08:26.080 the price. If we look back in March, Sterning was 0:08:26.080 --> 0:08:28.440 the best performing G ten currency in March and that 0:08:28.480 --> 0:08:31.440 reflected a slow or better than expected data which we're 0:08:31.440 --> 0:08:34.080 coming through there. So you could argue that although the 0:08:34.080 --> 0:08:37.960 Bank of England increased its forecast for GDP yesterday and 0:08:38.000 --> 0:08:40.760 also for inflation, when the markets sort of already knew that, 0:08:40.880 --> 0:08:44.280 it was already perhaps prepared for more interstrate hikes or 0:08:44.280 --> 0:08:46.679 another interstrate hike care from the Bank of England before 0:08:47.280 --> 0:08:50.079 you know, before the peak, and so from that point 0:08:50.080 --> 0:08:53.880 of view, because sterling failed or cable failed to hold 0:08:53.880 --> 0:08:56.760 its higher levels. And let's say also the dollar was 0:08:56.760 --> 0:08:59.319 on the front foot yesterday because it failed to go higher. 0:08:59.360 --> 0:09:02.360 Well you know, the technicals began to sour and it 0:09:02.400 --> 0:09:04.360 went lower instead. And I think we are at the 0:09:04.400 --> 0:09:08.200 point now whereby it's we've had enough better news for 0:09:08.280 --> 0:09:10.880 the UK for the market to close its short positions. 0:09:11.280 --> 0:09:12.719 But have we got the sort of news that the 0:09:12.760 --> 0:09:15.360 market wants to build long stirling positions from this point? 0:09:15.440 --> 0:09:18.640 And I think probably not, because although these GDP numbers 0:09:18.640 --> 0:09:21.960 were revised up, they've been revised up to a stagnationary 0:09:22.120 --> 0:09:26.240 or even a statulationary environment, and a better outlook for 0:09:26.280 --> 0:09:28.840 the UK economy is what we've got. That doesn't mean 0:09:28.880 --> 0:09:33.640 to say it's good, certainly not well, how how what. 0:09:33.640 --> 0:09:35.600 Is it like in in London? Says in England these days? 0:09:35.640 --> 0:09:39.000 What's just kind of the feeling for the average brit 0:09:39.080 --> 0:09:41.640 right now as it relates to the economy, the outlook? 0:09:43.040 --> 0:09:44.640 What can you what can you share with us? 0:09:45.040 --> 0:09:46.840 Well, you know, you know, the first thing I would 0:09:46.880 --> 0:09:50.120 share is that the feeling in London is usually very 0:09:50.120 --> 0:09:53.920 different to other The economy London and the Southeast tends 0:09:53.960 --> 0:09:55.839 to be a lot more prosperous, but you know, I 0:09:56.160 --> 0:09:59.040 do know that around the country as a whole. You know, 0:09:59.040 --> 0:10:00.800 over the last year or so, there has been a 0:10:00.840 --> 0:10:03.760 real streep rise in food banks and the amount of 0:10:03.760 --> 0:10:06.880 people using food banks. So because of living crisis on 0:10:06.880 --> 0:10:10.760 an individual basis has been extremely painful for an awful 0:10:10.800 --> 0:10:14.000 lot of people. That's said, because the labor market is 0:10:14.120 --> 0:10:16.920 tight and because most people you know who want a 0:10:17.000 --> 0:10:19.360 job have got a job. What we have seen is 0:10:19.440 --> 0:10:23.240 aggregate demand has been stronger than expected and that's what's 0:10:23.320 --> 0:10:28.160 led to this improved GDP outlook and actually improved level 0:10:28.320 --> 0:10:31.079 for the government coffers even because there's been more taxes 0:10:31.120 --> 0:10:34.280 being paid. So we've had this better than expected outcome 0:10:34.760 --> 0:10:38.080 on an aggregate basis, But on an individual basis, there's 0:10:38.080 --> 0:10:40.920 an awful lot of people really feeling the pinch because 0:10:40.920 --> 0:10:43.160 of higher inflation and higher interest rates. 0:10:43.480 --> 0:10:46.440 Well, speaking of really feeling the pinch, there's a fun 0:10:46.480 --> 0:10:48.240 fact I think from the I'm of Spring meetings that 0:10:48.760 --> 0:10:50.960 I just can't let go of the idea that is 0:10:51.000 --> 0:10:54.319 going to take years for the British economy to climb 0:10:54.400 --> 0:10:58.280 their way out of this kind of recessionary period. What 0:10:58.320 --> 0:11:00.840 does that do to the currency? I mean, we're looking 0:11:00.840 --> 0:11:02.959 at one twenty four on the cable rate right now. 0:11:03.400 --> 0:11:06.360 How much upside, how much downside is there? 0:11:07.559 --> 0:11:11.280 Well, you know, but perhaps a better example of that is, 0:11:11.559 --> 0:11:13.600 you know, I can tell you that that Sterling has 0:11:13.640 --> 0:11:18.440 still not recovered to its levels against the Euro that 0:11:18.480 --> 0:11:22.680 were there before the Brexit referendum in twenty sixty. So 0:11:22.960 --> 0:11:25.400 from that point of view, I think that reflects perhaps 0:11:25.640 --> 0:11:29.120 also the weakness of business investment, for instance in the UK, 0:11:29.440 --> 0:11:31.960 a lot of the political uncertainty that we've had in 0:11:32.040 --> 0:11:36.120 recent years, and that has certainly over the last year 0:11:36.400 --> 0:11:39.800 or two and before that created this this theory of doubt, 0:11:40.200 --> 0:11:44.720 this sentiment of doubt and uncertainty surrounding the UK economy 0:11:44.760 --> 0:11:49.200 and also sterling. Now with respect to cable, obviously that's 0:11:49.200 --> 0:11:52.920 governed quite a lot about what the dollar does, and 0:11:52.960 --> 0:11:55.079 I think in the second half of the year cable's 0:11:55.120 --> 0:11:58.000 going to be more about the dollar perhaps than about sterling. 0:11:58.040 --> 0:12:01.680 But even though sterling has covered a lot against the 0:12:01.720 --> 0:12:08.120 dollars in say much historically, it's still below its medium levels. 0:12:08.520 --> 0:12:10.160 Jane Fowley, thank you so much for joining us. We 0:12:10.160 --> 0:12:13.560 always appreciate getting your perspective. Jane Foley, head of FX 0:12:13.600 --> 0:12:17.240 strategy at Robobanks. She is based in London. I always 0:12:17.280 --> 0:12:21.160 appreciate getting that view as well. So again the currency markets. 0:12:21.160 --> 0:12:24.160 Looking at the Bloomberg Dollar Index, it's up three tenths 0:12:24.200 --> 0:12:25.120 of one percent today. 0:12:25.360 --> 0:12:28.479 You're listening to the tape canser, our live program Bloomberg 0:12:28.520 --> 0:12:32.120 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:12:32.160 --> 0:12:35.400 tune in app, Bloomberg dot Com, and the Bloomberg Business App. 0:12:35.440 --> 0:12:38.240 You can also listen live on Amazon Alexa from our 0:12:38.280 --> 0:12:42.640 flagship New York station, Just say Alexa playing Bloomberg eleven. 0:12:42.360 --> 0:12:46.440 Thirty going on again that you mission data. 0:12:46.480 --> 0:12:48.160 I mean, it's just ugly any way. 0:12:48.320 --> 0:12:51.720 You look at current conditions, worse than people than we 0:12:51.760 --> 0:12:54.319 had thought, inflation going to be higher than we had thought. 0:12:54.360 --> 0:12:56.560 There's just not a good way to spin that. Robert 0:12:56.600 --> 0:12:58.760 Teeter joins us. He's head of investment policy and the 0:12:58.800 --> 0:13:01.520 Strategy Group at Silvercrest Asset Management CRETY. 0:13:01.520 --> 0:13:03.760 It's interesting to note that he joins us in studio. 0:13:04.200 --> 0:13:04.400 Yeah. 0:13:04.440 --> 0:13:06.520 Yeah, Bloomberg employees aren't even in the building. 0:13:06.559 --> 0:13:09.480 I was ordinarily that would get a gold star from Paul. Yeah, 0:13:09.520 --> 0:13:12.200 on like a day like today, it's like three gold stars, 0:13:12.240 --> 0:13:13.000 maybe a trophy. 0:13:13.080 --> 0:13:15.520 I don't know exactly, So Robert, let's just start with 0:13:15.559 --> 0:13:16.880 some ego data that you missed. 0:13:16.960 --> 0:13:19.640 Data came out. I don't know, man, it just doesn't 0:13:19.679 --> 0:13:22.120 look good anyway, Slice, what did you make of it? 0:13:22.480 --> 0:13:24.200 Yeah, So, I think the two things I focused on 0:13:24.240 --> 0:13:26.480 the most were the sentiment side, which looks, you know, 0:13:26.600 --> 0:13:29.720 very negative. Most sentiment indicators have been very negative. It's 0:13:29.760 --> 0:13:32.760 quite an interesting disconnect between the relatively strong job market 0:13:32.840 --> 0:13:36.559 and just continued persistent negative sentiment. So I think that's 0:13:36.600 --> 0:13:38.920 an interesting disconnect that will resolve at some point one 0:13:38.920 --> 0:13:41.120 way or the other. I think more towards sentiment improving. 0:13:42.000 --> 0:13:44.160 You look at the component of it related to inflation 0:13:44.280 --> 0:13:47.679 expectations ticking up, that's not that much of a surprise 0:13:47.720 --> 0:13:49.839 to me. While it was better than, you know, higher, hotter, 0:13:49.920 --> 0:13:53.160 worse than expectations, it is something that we've been hearing 0:13:53.200 --> 0:13:55.680 for months and months now that inflation's going to be 0:13:55.720 --> 0:13:57.840 sticky and persistent, and so I'm not that surprised to 0:13:57.840 --> 0:14:00.280 see it show up in the survey data. The number 0:14:00.280 --> 0:14:02.720 that it's at, it's a bit elevated but not terrible 0:14:02.720 --> 0:14:03.360 in my opinion. 0:14:03.840 --> 0:14:04.920 Let's talk about the dead ceiling. 0:14:05.040 --> 0:14:06.080 Sharlotte, Oh, that's fun. 0:14:06.160 --> 0:14:06.400 Yeah. 0:14:06.400 --> 0:14:10.840 Always it feels like there is a concern about just 0:14:10.960 --> 0:14:13.520 how bad it'll get. Talk to us about the layers 0:14:13.720 --> 0:14:14.640 of messy mess here. 0:14:14.840 --> 0:14:16.400 Yeah, I think that's a great way to think of it. 0:14:16.559 --> 0:14:18.839 I do think like most people that in the end, 0:14:19.480 --> 0:14:21.720 cooler heads will prevail and we will get a solution. 0:14:22.080 --> 0:14:24.080 The question is what's the path look like from here 0:14:24.120 --> 0:14:25.720 to there? And I think the path could get a 0:14:25.720 --> 0:14:27.800 bit messy, and I think that sets the stage for 0:14:28.320 --> 0:14:30.400 you know how we have to think about the state 0:14:30.440 --> 0:14:32.520 of politics in the US going forward being a risk 0:14:32.560 --> 0:14:34.640 factor in the economy. And so I do think we'll 0:14:34.640 --> 0:14:36.520 get resolution. I think that's a good thing, but it 0:14:36.560 --> 0:14:37.440 could get a little bit. 0:14:37.320 --> 0:14:39.160 Messy because what are the options here? 0:14:39.160 --> 0:14:39.440 Though? 0:14:39.640 --> 0:14:39.880 Yeah. 0:14:39.960 --> 0:14:41.680 So I think one of the things is that whenever 0:14:41.680 --> 0:14:44.120 you saw the release from Secretary Yellen talking about the 0:14:44.240 --> 0:14:46.280 X state, you know, making it June first and trying 0:14:46.520 --> 0:14:49.280 to get everyone focused in on June first as a deadline, 0:14:49.360 --> 0:14:51.560 there was also some language in there that indicated the 0:14:51.560 --> 0:14:53.560 fact that, well, it could be several weeks after that, 0:14:53.640 --> 0:14:56.240 and so you could have this rolling crisis situation where 0:14:56.240 --> 0:14:58.120 where you push and push and push into June one, 0:14:58.160 --> 0:15:01.440 don't get a resolution, and glide another couple of weeks, 0:15:01.440 --> 0:15:02.920 and then hope that, you know, we get to those 0:15:02.960 --> 0:15:04.600 dates where more money comes in the door and the 0:15:04.680 --> 0:15:07.000 X date gets pushed out further. I think that's a 0:15:07.000 --> 0:15:09.520 pretty tough situation for markets, because you'll just be looking 0:15:09.520 --> 0:15:11.840 at a rolling series of crises overcoming weeks. So I 0:15:11.840 --> 0:15:13.960 think if we don't get that resolution by June one, 0:15:14.360 --> 0:15:16.440 we could be in for some real choppiness after that. 0:15:16.520 --> 0:15:18.680 All right, So I don't know what do you do here? 0:15:18.760 --> 0:15:20.880 I mean, it's there's a lot of what ifs out there, 0:15:20.880 --> 0:15:24.240 and most notably I guess I guess this. You know 0:15:25.040 --> 0:15:27.200 this stuff about the debt ceiling, but there's a lot 0:15:27.240 --> 0:15:28.840 of cross currents out there. How are you when you 0:15:28.920 --> 0:15:31.200 talk to clients, what are you kind of how you 0:15:31.280 --> 0:15:33.280 kind of framing out the next six to twelve months? 0:15:33.560 --> 0:15:35.760 Yeah, So I sort of start with the economy and 0:15:35.800 --> 0:15:37.720 where we are today, and I think we're running at 0:15:37.720 --> 0:15:39.400 about one and a half percent growth. So I look 0:15:39.400 --> 0:15:41.760 at the real time models, I look at mobility indicators, 0:15:41.800 --> 0:15:43.480 spending and things like that. I think we're a little 0:15:43.520 --> 0:15:46.080 north of one percent. We have a pretty strong job market, 0:15:46.120 --> 0:15:48.520 and so that's consistent with that sort of stability as 0:15:48.560 --> 0:15:50.920 far as the economy is concerned. When you look out 0:15:50.960 --> 0:15:52.640 in the near term, though, you know, we're certainly going 0:15:52.680 --> 0:15:54.760 to have some continued drag from the from the credit 0:15:54.800 --> 0:15:56.960 crunch and from the things going on in the banking sector. 0:15:57.040 --> 0:15:59.440 So there we've modeled that out. We looked at the 0:15:59.520 --> 0:16:03.280 eighties and nineties SNL crisis very different, similar in terms 0:16:03.320 --> 0:16:05.560 of dollar amounts, but very dissimilar in terms of the 0:16:05.560 --> 0:16:07.880 eighties nineties. You had hundreds of banks failing every year, 0:16:07.920 --> 0:16:12.080 and so we estimate something like thirty percent of stress 0:16:11.880 --> 0:16:14.200 of the eighties today and to us that leads to 0:16:14.240 --> 0:16:16.800 about a one percent GDP decline, So that gets us 0:16:16.800 --> 0:16:19.200 pretty close to that flat line of you know, flat 0:16:19.240 --> 0:16:20.720 growth for coming quarters. 0:16:21.000 --> 0:16:23.600 Oh my gosh, thirty percent of the pain in the eighties, 0:16:23.840 --> 0:16:25.480 that's not that's that's something. 0:16:25.640 --> 0:16:27.480 The eighties were pretty good to me, So I know. 0:16:27.520 --> 0:16:29.520 We always talk about we always talk about the. 0:16:29.520 --> 0:16:30.400 Eighties with me and Paul. 0:16:30.440 --> 0:16:32.760 I was not around in the eighties, surprise, surprise, but 0:16:33.080 --> 0:16:35.560 I always refer to the eighties, especially to talk about 0:16:35.560 --> 0:16:37.320 inflation and you know, Reagan and defense and all that 0:16:37.600 --> 0:16:39.120 fun stuff, and he's like, you know what I was 0:16:39.160 --> 0:16:40.920 doing in the eighties, having a great time, And I 0:16:41.000 --> 0:16:43.920 was like, yeah, same. Let's talk about the trade here, though, 0:16:43.920 --> 0:16:46.360 because it is a pretty doomsday scenario that thirty percent 0:16:46.400 --> 0:16:48.200 of the pain in the eighties is still quite a 0:16:48.240 --> 0:16:51.440 lot of pain. Is it as simple as you just 0:16:51.800 --> 0:16:54.080 liquidate your treasury holdings? Is that the trade? 0:16:54.960 --> 0:16:57.000 I don't think so. I think your bride through there 0:16:57.040 --> 0:16:58.960 is quite a premium there looking at the you know, 0:16:59.000 --> 0:17:01.960 the spread in terms of the treasuries maturing around the 0:17:02.000 --> 0:17:04.679 debt ceiling, so that's certainly a risk factor there. On 0:17:04.720 --> 0:17:06.720 the banking side, I think that I look at it 0:17:06.760 --> 0:17:09.560 across three different levels, So I think from a depositor standpoint, 0:17:09.560 --> 0:17:12.040 the crisis has basically been solved. And I think that 0:17:12.119 --> 0:17:14.000 you know, the fad, the FDIC and Treasury have been 0:17:14.119 --> 0:17:17.280 very resolute in that. As it relates to banking equities 0:17:17.440 --> 0:17:19.760 and future profits, that's still an open question mark as 0:17:19.800 --> 0:17:22.119 to what type of activity they'll have. But the reason 0:17:22.119 --> 0:17:24.240 that I think that the stress today is only thirty 0:17:24.280 --> 0:17:27.280 percent of the SNL crisis is that it hasn't become 0:17:27.280 --> 0:17:29.560 as widespread. So again, you had hundreds and hundreds of 0:17:29.600 --> 0:17:31.920 banks failing in the eighties, and that was at a 0:17:31.960 --> 0:17:34.480 period of time when there was much more pervasive in 0:17:34.520 --> 0:17:36.439 terms of the economy. You know, here we look at 0:17:36.760 --> 0:17:38.720 the banking issues, there's a lot of stress, there's a 0:17:38.720 --> 0:17:40.879 lot of big dollars involved in the takeovers that have 0:17:41.160 --> 0:17:44.120 gone under in the failures, but it's not as pervasive 0:17:44.119 --> 0:17:46.200 throughout the system. So I don't think it becomes quite 0:17:46.200 --> 0:17:47.359 as big of a risk factor. 0:17:48.480 --> 0:17:50.320 What do I go in the bond market here? I mean, 0:17:50.440 --> 0:17:52.560 I look at it to your treasury, it's almost four percent. 0:17:53.640 --> 0:17:56.000 It's not a beach of kick in the head. I think, 0:17:56.040 --> 0:17:58.639 given what happened in twenty twenty two, how are you 0:17:58.640 --> 0:18:00.879 guys thinking about the fixing space these days? 0:18:00.960 --> 0:18:03.360 Yeah, I think bonds are a pretty interesting opportunity here. 0:18:03.440 --> 0:18:05.399 I mean, do you have, as you mentioned, pretty solid yields. 0:18:05.400 --> 0:18:08.480 We've had the backdrop of continual improvements in inflation, so 0:18:08.600 --> 0:18:11.000 ten months in a row now of CPI improving. I 0:18:11.000 --> 0:18:12.840 think that continues. If you look at some of the 0:18:12.880 --> 0:18:14.840 comments in ism or some of the things you hear 0:18:14.880 --> 0:18:18.040 in earnings reports. Inventory levels are coming down they're being 0:18:18.080 --> 0:18:20.840 managed better. That points to future price improvement, points to 0:18:20.840 --> 0:18:23.800 better inflation, points to good outlook for bonds in the 0:18:23.840 --> 0:18:26.000 near term. And you're right that four percent type of 0:18:26.080 --> 0:18:28.560 level is a pretty good yield compared to where things 0:18:28.640 --> 0:18:30.520 might sit in the short term with a lot of 0:18:30.520 --> 0:18:31.879 the stress going on inequities. 0:18:31.920 --> 0:18:34.000 But then if you get stuck holding it and there 0:18:34.040 --> 0:18:37.200 is actually the very first default in history for the 0:18:37.320 --> 0:18:41.160