1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,400 Speaker 2: with Lisa Bromwitz and am Marie Hordernt. Join us each 4 00:00:18,480 --> 00:00:21,360 Speaker 2: day for insight from the best in markets, economics, and 5 00:00:21,400 --> 00:00:24,720 Speaker 2: geopolitics from our global headquarters in New York City. We 6 00:00:24,760 --> 00:00:27,400 Speaker 2: are live on Bloomberg Television weekday mornings from six to 7 00:00:27,480 --> 00:00:31,000 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify, 8 00:00:31,200 --> 00:00:33,479 Speaker 2: or anywhere else you listen, and as always on the 9 00:00:33,479 --> 00:00:38,000 Speaker 2: Bloomberg Terminal and the Bloomberg Business App. Team over at RBC, writing, 10 00:00:38,080 --> 00:00:41,120 Speaker 2: while this may have temporarily calmed markets, households are still 11 00:00:41,159 --> 00:00:44,519 Speaker 2: grappling with the after effects of significant inflation over the 12 00:00:44,520 --> 00:00:47,839 Speaker 2: past five years. Francis Donald of RBC joined us now 13 00:00:47,840 --> 00:00:49,080 Speaker 2: from More Francisco, Morning to You. 14 00:00:49,120 --> 00:00:49,640 Speaker 3: Good Morning. 15 00:00:49,800 --> 00:00:51,559 Speaker 2: Spoke to a lot of people yesterday and they all 16 00:00:51,600 --> 00:00:53,680 Speaker 2: said a very similar thing. We're going to see the 17 00:00:53,680 --> 00:00:55,480 Speaker 2: past through today. We're going to see it today. Then 18 00:00:55,480 --> 00:00:56,680 Speaker 2: we didn't see it, and they said we're going to 19 00:00:56,720 --> 00:00:59,080 Speaker 2: see it next month and the month after. Your team's 20 00:00:59,080 --> 00:01:01,560 Speaker 2: taken a different approach to this. Just walk us through it. 21 00:01:01,560 --> 00:01:03,600 Speaker 3: It's going to be a couple more months, and there's 22 00:01:03,640 --> 00:01:05,760 Speaker 3: a range of reasons why, and one of them is 23 00:01:05,800 --> 00:01:08,600 Speaker 3: you might remember this massive inventory build that we saw 24 00:01:08,640 --> 00:01:10,679 Speaker 3: in the past few months. That means there's plenty of 25 00:01:10,720 --> 00:01:13,440 Speaker 3: inventories that did not get hit with those tariffs yet, 26 00:01:13,680 --> 00:01:15,240 Speaker 3: and that's going to take some time. We've got to 27 00:01:15,280 --> 00:01:18,520 Speaker 3: see that inventory depletion. We saw this in twenty eighteen 28 00:01:18,520 --> 00:01:21,360 Speaker 3: with washing machines, three to five months before we saw 29 00:01:21,400 --> 00:01:23,000 Speaker 3: it show up in the data, so there is some 30 00:01:23,080 --> 00:01:25,600 Speaker 3: precedent there. We also don't know how many of these 31 00:01:25,680 --> 00:01:28,600 Speaker 3: tariffs are going to come through in CPI versus PPI, 32 00:01:28,920 --> 00:01:30,319 Speaker 3: so we're still going it's going to be a couple 33 00:01:30,319 --> 00:01:32,200 Speaker 3: more months before we see this. And I think that's 34 00:01:32,240 --> 00:01:34,800 Speaker 3: the reason why. While I'm happy to see that inflation 35 00:01:34,920 --> 00:01:38,000 Speaker 3: is not accelerating right now, two things One it's a 36 00:01:38,040 --> 00:01:41,679 Speaker 3: bit early, and second, inflation is not just a tariff story. 37 00:01:42,000 --> 00:01:44,880 Speaker 3: Inflation is actually also a story with respect to a 38 00:01:44,920 --> 00:01:48,440 Speaker 3: tight labor market. We have a very strong ultra wealthy consumer, 39 00:01:48,480 --> 00:01:51,440 Speaker 3: we have big governments, so there's structural forces under inflation 40 00:01:51,520 --> 00:01:54,640 Speaker 3: as well. And actually, while tariffs are important, they're not 41 00:01:54,800 --> 00:01:56,440 Speaker 3: the most important story with inflation. 42 00:01:56,640 --> 00:01:59,040 Speaker 2: Credits even the tame for the approach you've taken so far. 43 00:01:59,120 --> 00:02:00,960 Speaker 2: Let's sit on the labor mind. I think I agree 44 00:02:00,960 --> 00:02:03,240 Speaker 2: with you that it's ultimately very important for the pass 45 00:02:03,320 --> 00:02:06,200 Speaker 2: through and whether we can stomach it as consumers. This 46 00:02:06,240 --> 00:02:08,639 Speaker 2: is something we discussed over the last several weeks. It's 47 00:02:08,639 --> 00:02:12,200 Speaker 2: the labor market tight enough for individuals to demount high 48 00:02:12,240 --> 00:02:14,119 Speaker 2: wages to fund high prices. 49 00:02:14,760 --> 00:02:17,840 Speaker 3: So in my view, Americans don't need to worry about 50 00:02:17,880 --> 00:02:20,240 Speaker 3: losing their jobs this year, but they do need to 51 00:02:20,280 --> 00:02:23,440 Speaker 3: worry about their grocery bill. And in this particular case, 52 00:02:23,480 --> 00:02:26,480 Speaker 3: we have to segment which consumer is doing what, because 53 00:02:26,480 --> 00:02:29,200 Speaker 3: if you're a low in middle income household right now, yeah, 54 00:02:29,200 --> 00:02:32,919 Speaker 3: you probably have a job, but rent food prices, those 55 00:02:32,960 --> 00:02:35,799 Speaker 3: are up almost thirty percent in the past five years. 56 00:02:36,000 --> 00:02:39,240 Speaker 3: And even though on aggregate we've seen wages rise more 57 00:02:39,320 --> 00:02:41,959 Speaker 3: than the inflation over the past few years, that's not 58 00:02:41,960 --> 00:02:45,240 Speaker 3: true for low and middle income Americans, whose inflation basket 59 00:02:45,560 --> 00:02:48,920 Speaker 3: is tilted towards those areas that have seen larger inflation. 60 00:02:49,360 --> 00:02:51,960 Speaker 3: So we can't paint the same brush with inflation or 61 00:02:52,000 --> 00:02:55,079 Speaker 3: wages to the entire consumer household. Now, if you're trying 62 00:02:55,080 --> 00:02:56,680 Speaker 3: to get a sense of what are retail sales going 63 00:02:56,720 --> 00:02:59,359 Speaker 3: to do. If you're forecasting GDP, you pretty much are 64 00:02:59,360 --> 00:03:02,880 Speaker 3: focusing proportionalately on that high income household and they're going 65 00:03:02,960 --> 00:03:06,280 Speaker 3: to be just fine in this environment. But forecasting GDP 66 00:03:06,480 --> 00:03:08,840 Speaker 3: and saying what's best for the American economy and American 67 00:03:08,880 --> 00:03:10,440 Speaker 3: people is a very different thing. 68 00:03:10,520 --> 00:03:13,040 Speaker 1: When you're talking about underline inflation, you're saying tariffs aren't 69 00:03:13,040 --> 00:03:13,680 Speaker 1: the biggest story. 70 00:03:13,720 --> 00:03:14,280 Speaker 2: What is it? 71 00:03:14,360 --> 00:03:16,519 Speaker 1: Is it the labor market or is it big government? 72 00:03:16,560 --> 00:03:19,640 Speaker 3: Well, there's structural forces and it's both these things. So 73 00:03:19,639 --> 00:03:22,560 Speaker 3: when we talk about the labor market, we're not talking about, oh, 74 00:03:22,600 --> 00:03:25,440 Speaker 3: there's so much cyclical demand here, the economy is booming. 75 00:03:25,639 --> 00:03:28,080 Speaker 3: We're talking a lot about demographics, and we think of 76 00:03:28,080 --> 00:03:31,200 Speaker 3: demographics as being a ten year horizon story, but the 77 00:03:31,200 --> 00:03:35,080 Speaker 3: demographic crisis is accelerating. Every single month we see more 78 00:03:35,120 --> 00:03:38,680 Speaker 3: retirees than we did the week before, the month before. 79 00:03:39,000 --> 00:03:42,000 Speaker 3: That's creating huge exits out of this labor market, and 80 00:03:42,080 --> 00:03:45,240 Speaker 3: there's not enough replacement demand. So that unemployment rate, even 81 00:03:45,280 --> 00:03:47,600 Speaker 3: though we believe the economy will soften this year, we 82 00:03:47,680 --> 00:03:50,720 Speaker 3: have it peaking around four five, four six percent. I mean, 83 00:03:50,760 --> 00:03:53,040 Speaker 3: I'm well enough to remember when that was an extraordinarily 84 00:03:53,120 --> 00:03:55,320 Speaker 3: strong labor market. That's going to be our bar for 85 00:03:55,360 --> 00:03:57,960 Speaker 3: a weaker labor market right now. We can't use the 86 00:03:58,000 --> 00:04:01,280 Speaker 3: unemployment rate anymore as a cyclical indicator of growth. We 87 00:04:01,360 --> 00:04:03,440 Speaker 3: have to turn towards other area. You're talking about retirees. 88 00:04:03,480 --> 00:04:06,440 Speaker 1: What about Trump's immigration policy, what's that doing to labor market? 89 00:04:06,560 --> 00:04:08,640 Speaker 3: Well, that's going to amplify the issue that I remember 90 00:04:08,720 --> 00:04:11,240 Speaker 3: being here at the end of twenty twenty five and saying, yeah, 91 00:04:11,240 --> 00:04:12,920 Speaker 3: tariffs are going to be a big deal, but keep 92 00:04:12,920 --> 00:04:16,960 Speaker 3: your eye on the immigration story. In our view, how 93 00:04:17,040 --> 00:04:19,200 Speaker 3: much available labor is actually going to be the big 94 00:04:19,240 --> 00:04:21,800 Speaker 3: issue in twenty twenty six and twenty twenty seven. We've 95 00:04:21,839 --> 00:04:25,520 Speaker 3: said it before. America doesn't need jobs. America needs workers. 96 00:04:25,680 --> 00:04:27,360 Speaker 3: And if you want to see a boom economy, you 97 00:04:27,400 --> 00:04:29,320 Speaker 3: got to have people not just who are willing to 98 00:04:29,320 --> 00:04:32,360 Speaker 3: do those jobs, but actually in the labor force. Sometimes 99 00:04:32,400 --> 00:04:33,840 Speaker 3: we get pushed back and they say, oh, well, the 100 00:04:33,920 --> 00:04:36,520 Speaker 3: labor force is that there's been a decline since two 101 00:04:36,520 --> 00:04:39,559 Speaker 3: thousand and one. The labor force participation rate is around 102 00:04:39,600 --> 00:04:43,200 Speaker 3: sixty three percent, but prime age worker labor force participation 103 00:04:43,360 --> 00:04:46,159 Speaker 3: rate in the United States eighteen to fifty four is 104 00:04:46,200 --> 00:04:48,240 Speaker 3: near its highest ever. So there's not a lot of 105 00:04:48,279 --> 00:04:50,400 Speaker 3: folks sitting on the sidelines right now who are of 106 00:04:50,480 --> 00:04:53,040 Speaker 3: that age. And this is having impact on a month 107 00:04:53,120 --> 00:04:55,919 Speaker 3: to month data. Now a structural trend that's showing up 108 00:04:55,960 --> 00:04:57,800 Speaker 3: in the cyclical data as something we need to monitor. 109 00:04:57,880 --> 00:04:59,480 Speaker 2: It's going to take time to figure out, and we 110 00:04:59,520 --> 00:05:01,840 Speaker 2: need to be a minded about potential outcomes because I've 111 00:05:01,839 --> 00:05:04,440 Speaker 2: been surprised so many different ways since the pandemic with 112 00:05:04,480 --> 00:05:07,440 Speaker 2: regards to the economy. How much flexibility does the Federal 113 00:05:07,440 --> 00:05:08,160 Speaker 2: Reserve have with. 114 00:05:08,120 --> 00:05:11,120 Speaker 3: That in mind, Well, not enough, and so the key 115 00:05:11,240 --> 00:05:12,880 Speaker 3: is just going to be what side of the mandator 116 00:05:12,880 --> 00:05:15,680 Speaker 3: are they focusing on and also how are they being 117 00:05:15,680 --> 00:05:18,200 Speaker 3: flexible with respect to how the data is changing in 118 00:05:18,200 --> 00:05:22,640 Speaker 3: this environment. CPI is one indication of what's happening with inflation, 119 00:05:22,800 --> 00:05:25,360 Speaker 3: but we're going to see a dashboard of inflation that's 120 00:05:25,360 --> 00:05:27,760 Speaker 3: going to see problems in some area of prices and 121 00:05:27,880 --> 00:05:29,960 Speaker 3: other areas where it's going to be okay. So this 122 00:05:30,040 --> 00:05:32,800 Speaker 3: isn't just a divergent economy in terms of growth in 123 00:05:32,880 --> 00:05:35,159 Speaker 3: terms of consumers. It's also going to be a divergent 124 00:05:35,200 --> 00:05:38,279 Speaker 3: economy with respective prices that's going to complicate the fence job. 125 00:05:38,320 --> 00:05:41,160 Speaker 2: You've heard of Trump derangement syndrome, no data of Renmack 126 00:05:41,279 --> 00:05:43,880 Speaker 2: is kinded a new term that the Treasury Secretary used yesterday, 127 00:05:43,960 --> 00:05:47,680 Speaker 2: Tariff derangement syndrome. Does the Federal Reserve have TDS? 128 00:05:48,520 --> 00:05:50,800 Speaker 3: Okay, Well, we don't know what the policy's going to 129 00:05:50,800 --> 00:05:53,120 Speaker 3: be and we don't actually know exactly how it's going 130 00:05:53,120 --> 00:05:55,240 Speaker 3: to impact the economy. So we have two sources of 131 00:05:55,320 --> 00:05:58,520 Speaker 3: uncertainty in play. And that's why I say yes, tariffs 132 00:05:58,520 --> 00:06:01,440 Speaker 3: are hugely important. When we look at inflation forecast, it 133 00:06:01,480 --> 00:06:03,560 Speaker 3: can be as much as half a percentage point on 134 00:06:03,640 --> 00:06:06,120 Speaker 3: headline CPI, which could be make or break for the Fed. 135 00:06:06,600 --> 00:06:08,359 Speaker 3: But the time right now is to focus on what 136 00:06:08,400 --> 00:06:11,200 Speaker 3: are these underlying trends that are happening this key shape 137 00:06:11,240 --> 00:06:14,600 Speaker 3: that's involved in the economy. Massive government spending, which can 138 00:06:14,720 --> 00:06:18,080 Speaker 3: argue is muting the economic cycle in play. We got 139 00:06:18,080 --> 00:06:20,520 Speaker 3: to talk about that labor market and how things are changing, 140 00:06:20,680 --> 00:06:22,120 Speaker 3: and we have to talk about some of these other 141 00:06:22,160 --> 00:06:25,440 Speaker 3: issues like a very extended, troubled electrical grid that is 142 00:06:25,520 --> 00:06:28,279 Speaker 3: limiting the ability to move forward. These are things that 143 00:06:28,360 --> 00:06:30,960 Speaker 3: exist with or without trade in tariffs and I can 144 00:06:31,000 --> 00:06:33,360 Speaker 3: come up with a whole economic view on which the 145 00:06:33,480 --> 00:06:35,400 Speaker 3: teriff is sort of the whip cream on top of 146 00:06:35,440 --> 00:06:38,440 Speaker 3: the ice cream, but not actually the core meal. Even 147 00:06:38,520 --> 00:06:40,200 Speaker 3: if right now it's the area where we have the 148 00:06:40,200 --> 00:06:40,960 Speaker 3: most volatility. 149 00:06:41,080 --> 00:06:43,440 Speaker 2: Sometimes I'll take that's the cool meal. Francis donald a 150 00:06:43,520 --> 00:06:55,440 Speaker 2: vampi sick just to turn back to the market. So 151 00:06:55,560 --> 00:06:57,800 Speaker 2: let's talk about crude giving back some of the gangs today. 152 00:06:57,960 --> 00:07:01,000 Speaker 2: After smiking on reports of rising tens in the Middle East, 153 00:07:01,040 --> 00:07:03,440 Speaker 2: the US ordering some of its embassy staff and Bangtann 154 00:07:03,480 --> 00:07:06,440 Speaker 2: to Leisa region due to heightened security risk. Joining US now, 155 00:07:06,440 --> 00:07:09,800 Speaker 2: as the former senior US intelligence official Norman Rule, No'm 156 00:07:09,800 --> 00:07:11,920 Speaker 2: welcome to the program, Sir. We always enjoy leaning on 157 00:07:11,960 --> 00:07:13,680 Speaker 2: your expertise and a sign like this, could you just 158 00:07:13,720 --> 00:07:16,320 Speaker 2: frame for us whether this is the real deal, something 159 00:07:16,360 --> 00:07:18,200 Speaker 2: to be concerned about, or just one of those things 160 00:07:18,240 --> 00:07:21,440 Speaker 2: that we typically see every few months out of this region. 161 00:07:22,640 --> 00:07:25,160 Speaker 4: Good morning, Well, it's something to be concerned about. What 162 00:07:25,240 --> 00:07:28,559 Speaker 4: we're watching her Three issues that are coming together after 163 00:07:28,880 --> 00:07:32,880 Speaker 4: months of work, the lack of progress in the Iran talks, 164 00:07:32,960 --> 00:07:37,640 Speaker 4: the dangerous expansion of Iran's nuclear program, and right now 165 00:07:37,720 --> 00:07:40,560 Speaker 4: the IA Board of Governors finding that iron is in 166 00:07:40,680 --> 00:07:44,800 Speaker 4: non compliance with its nuclear safeguard obligations under the Non 167 00:07:44,840 --> 00:07:49,840 Speaker 4: Proliferation Treaty. The DUMP administration is committed to diplomacy, but 168 00:07:49,920 --> 00:07:53,400 Speaker 4: it shows every sign of willing to use military force 169 00:07:53,440 --> 00:07:56,400 Speaker 4: to prevent Iran from acquiring a nuclear weapon, and the 170 00:07:57,040 --> 00:07:59,760 Speaker 4: actions taken over the last twenty four hours are meant 171 00:08:00,080 --> 00:08:05,520 Speaker 4: signal Iran that that intent is indeed sincere without raising 172 00:08:06,200 --> 00:08:09,320 Speaker 4: the temperature in the region significantly. 173 00:08:09,560 --> 00:08:11,600 Speaker 1: Norman, what does it say to you that the ia 174 00:08:11,800 --> 00:08:14,680 Speaker 1: Board of Governors is saying Iran is non compliant of 175 00:08:14,720 --> 00:08:16,960 Speaker 1: its obligation? What does this mean? I mean we're going 176 00:08:17,000 --> 00:08:20,080 Speaker 1: to see more countries take more action and sanctions on Tehran. 177 00:08:21,160 --> 00:08:24,520 Speaker 4: Well, first, the issues that the iae has worked on 178 00:08:24,600 --> 00:08:28,280 Speaker 4: in the last few weeks are long standing, in some 179 00:08:28,360 --> 00:08:33,280 Speaker 4: cases for many years. But diplomacy has very slow wheels, 180 00:08:33,280 --> 00:08:36,000 Speaker 4: and people put a lot of effort into trying to 181 00:08:36,040 --> 00:08:39,840 Speaker 4: avoid this step. Indeed, this censure of Iran is the 182 00:08:39,880 --> 00:08:42,640 Speaker 4: first time something like this has been done in twenty years. 183 00:08:43,720 --> 00:08:48,080 Speaker 4: This will require now that the IAEA pushed this towards 184 00:08:48,120 --> 00:08:50,960 Speaker 4: the UN Security Counsole for what is known to snap 185 00:08:51,120 --> 00:08:55,200 Speaker 4: back to in essence, restore all UN Security Console sanctions 186 00:08:55,240 --> 00:08:58,800 Speaker 4: on Iran, probably in September. They have until October, but 187 00:08:58,840 --> 00:09:02,600 Speaker 4: since Russia takes over the UN Security Council in October, 188 00:09:02,600 --> 00:09:06,760 Speaker 4: that's unlikely to happen. What we're seeing is that Europe 189 00:09:07,400 --> 00:09:12,200 Speaker 4: is seeing that diplomacy is coming to its end. There 190 00:09:12,200 --> 00:09:14,720 Speaker 4: are no other options here, and they are agreeing with 191 00:09:14,800 --> 00:09:17,600 Speaker 4: the United States that the more severe pressure needs to 192 00:09:17,600 --> 00:09:20,920 Speaker 4: be placed on Iran. And again, Iran's nuclear program is 193 00:09:20,960 --> 00:09:25,120 Speaker 4: reaching a very advanced stage. Most of its enrichment capacity 194 00:09:25,160 --> 00:09:28,800 Speaker 4: is now being devoted to military which is not nuclear weapons, 195 00:09:28,880 --> 00:09:31,839 Speaker 4: but still military great enrichment for which it has no 196 00:09:32,559 --> 00:09:33,480 Speaker 4: actual purpose. 197 00:09:34,280 --> 00:09:39,360 Speaker 1: Well norm maybe in even further breach of IEA obligations. 198 00:09:39,400 --> 00:09:41,200 Speaker 1: What we're hearing today is that Iran says they're going 199 00:09:41,240 --> 00:09:45,280 Speaker 1: to establish a new uranium enrichment center in response to 200 00:09:45,320 --> 00:09:48,760 Speaker 1: this decision. At the same time, the Omani foreign minister 201 00:09:49,000 --> 00:09:51,559 Speaker 1: confirmed that the sixth round of talks between Iran and 202 00:09:51,600 --> 00:09:54,360 Speaker 1: the United States is still set to go on on Sunday. 203 00:09:54,840 --> 00:09:57,280 Speaker 1: How is there a path for diplomacy if Tehran is 204 00:09:57,280 --> 00:10:01,160 Speaker 1: continuing to enrich uranium and announcing new centers. 205 00:10:01,720 --> 00:10:03,840 Speaker 4: It's a great point. I think you're seeing several things here. 206 00:10:03,920 --> 00:10:07,120 Speaker 4: At first, I think whatever Iran announces it planned to do, 207 00:10:07,160 --> 00:10:10,480 Speaker 4: in any case, it's just using the IEA Board of 208 00:10:10,480 --> 00:10:14,720 Speaker 4: Governor's resolution as an excuse. It's likely going to expand 209 00:10:14,840 --> 00:10:18,040 Speaker 4: its scale of nuclear enrichment, as I say, to continue 210 00:10:18,160 --> 00:10:22,439 Speaker 4: its program in this dangerous direction. We should be most 211 00:10:22,520 --> 00:10:27,200 Speaker 4: concerned if it further restricts ie access to its program, 212 00:10:27,240 --> 00:10:29,360 Speaker 4: which it has been doing for a number of years, 213 00:10:29,400 --> 00:10:32,760 Speaker 4: that would be most concerning. Iran, however, has all the 214 00:10:32,800 --> 00:10:36,800 Speaker 4: reason in the world to continue talks to drag out 215 00:10:36,840 --> 00:10:39,240 Speaker 4: this process, and that is what has been of greatest 216 00:10:39,280 --> 00:10:43,240 Speaker 4: concern to the Trump administration and others, because again, there 217 00:10:43,440 --> 00:10:47,480 Speaker 4: has been no substantial progress in the talks. Iran refuses 218 00:10:47,520 --> 00:10:51,640 Speaker 4: to halt domestic enrichment, to close any facilities, and to 219 00:10:51,720 --> 00:10:55,920 Speaker 4: halt advanced research and development. And unless you have significant 220 00:10:56,040 --> 00:11:00,520 Speaker 4: constraints on those activities, besides temporary constraints, do have a 221 00:11:00,559 --> 00:11:03,240 Speaker 4: program that any moment can be turned into a nuclear 222 00:11:03,280 --> 00:11:04,160 Speaker 4: weapons program? 223 00:11:04,440 --> 00:11:07,040 Speaker 1: Normal, what kind of attack would it look like? Given 224 00:11:07,040 --> 00:11:09,360 Speaker 1: the fact that we do have reports that Israel is 225 00:11:09,400 --> 00:11:13,079 Speaker 1: ready to launch an operation into Iran, well, to. 226 00:11:13,040 --> 00:11:15,840 Speaker 4: Be clear, there is no evidence that we're facing an 227 00:11:15,920 --> 00:11:19,240 Speaker 4: imminent attack by the United States or Israel on Iran. 228 00:11:19,280 --> 00:11:22,560 Speaker 4: Although such a likelihood is increasingly likely, it will grow 229 00:11:22,760 --> 00:11:26,640 Speaker 4: likely more likely as a Uran refuses to cooperate. Such 230 00:11:26,679 --> 00:11:29,400 Speaker 4: an attack would be would have a number of different 231 00:11:29,480 --> 00:11:32,440 Speaker 4: elements to it. It is certainly unlikely to take place 232 00:11:32,520 --> 00:11:35,920 Speaker 4: in a single strike. Iran knows this. Iran has almost 233 00:11:35,960 --> 00:11:41,160 Speaker 4: certainly been preparing to live through such an attack and 234 00:11:41,240 --> 00:11:44,920 Speaker 4: to respond with its own ballistic missiles and other tools 235 00:11:44,960 --> 00:11:51,240 Speaker 4: against Israel. It will be a prolonged event, both diplomatically 236 00:11:51,320 --> 00:11:54,920 Speaker 4: as well as militarily. But again, the United States has 237 00:11:55,080 --> 00:12:00,320 Speaker 4: more than sufficient capacity to overwhelm anything Iran may seek 238 00:12:00,360 --> 00:12:01,920 Speaker 4: to use to defend itself. 239 00:12:02,040 --> 00:12:03,839 Speaker 2: And no, thanks for your signed today, no doubt will 240 00:12:03,840 --> 00:12:16,679 Speaker 2: catch up against soon. Norman Roll there of csis I 241 00:12:16,800 --> 00:12:19,440 Speaker 2: stand back to trade China, affirming a US trade deal 242 00:12:19,640 --> 00:12:22,320 Speaker 2: announced earlier this week. Officials out in the country always 243 00:12:22,400 --> 00:12:25,360 Speaker 2: quote keeps its word. Joining us now is Adam Posen 244 00:12:25,600 --> 00:12:28,800 Speaker 2: of the Peniston Institute. Adam, welcome back to the program sir. 245 00:12:28,960 --> 00:12:31,440 Speaker 2: Let's talk about what ultimately you've been engaged with over 246 00:12:31,480 --> 00:12:33,640 Speaker 2: the past week or so. I think yesterday, after the 247 00:12:33,640 --> 00:12:36,880 Speaker 2: inflation print, there might have been some excitement that maybe 248 00:12:36,880 --> 00:12:38,760 Speaker 2: we could escape the higher prices off the back of 249 00:12:38,760 --> 00:12:42,400 Speaker 2: the policy we've seen implemented over the last month or so. Adam, 250 00:12:42,440 --> 00:12:44,160 Speaker 2: do you think maybe we're getting a little bit too 251 00:12:44,200 --> 00:12:45,040 Speaker 2: excited too soon. 252 00:12:45,960 --> 00:12:48,520 Speaker 5: I think we're being too excited too soon, Jonathan, for 253 00:12:48,559 --> 00:12:52,360 Speaker 5: two reasons. First, as you imply, there is still a chance, 254 00:12:52,440 --> 00:12:54,839 Speaker 5: and in fact, I think a very great chance, that 255 00:12:55,280 --> 00:12:58,240 Speaker 5: we are just at the start of the terror cycle. 256 00:12:58,400 --> 00:13:01,400 Speaker 5: I appeared before the Senate Finds Democrats and a hearing 257 00:13:01,520 --> 00:13:05,319 Speaker 5: yesterday and there were small businesses, array of them sitting 258 00:13:05,320 --> 00:13:08,320 Speaker 5: next to me talking about how they are having to 259 00:13:08,360 --> 00:13:11,920 Speaker 5: make hard decisions on what teriffs to purchase or what 260 00:13:12,040 --> 00:13:14,680 Speaker 5: to cut back on. And we're seeing that in all 261 00:13:14,760 --> 00:13:17,080 Speaker 5: kinds of data, even though it's not in the New 262 00:13:17,160 --> 00:13:21,920 Speaker 5: York Fed inflation expectations admittedly, and so I think the 263 00:13:21,960 --> 00:13:24,480 Speaker 5: Fed's right to sit tight. But the other thing that's 264 00:13:24,520 --> 00:13:26,320 Speaker 5: going on is we're not going to duck this as 265 00:13:26,360 --> 00:13:30,600 Speaker 5: a real income hit. There's huge income hit because we're 266 00:13:30,640 --> 00:13:34,319 Speaker 5: losing purchasing power of things people want to buy through TIFFs. 267 00:13:34,800 --> 00:13:37,640 Speaker 5: Where it's a real income hit because uncertainty has gone 268 00:13:37,720 --> 00:13:40,360 Speaker 5: up and it's going to remain up as the non 269 00:13:40,480 --> 00:13:44,480 Speaker 5: deals of the last month's show, And so we might 270 00:13:44,679 --> 00:13:48,439 Speaker 5: end up possibly with not that much inflation, but incomes 271 00:13:48,440 --> 00:13:49,040 Speaker 5: are going to be. 272 00:13:49,040 --> 00:13:52,040 Speaker 1: Hit, Adam. When you look at the core inflation yesterday 273 00:13:52,200 --> 00:13:56,079 Speaker 1: we saw the decline was from airlines, cars, clothing. There 274 00:13:56,120 --> 00:13:57,720 Speaker 1: was a drop across the board. When it comes to 275 00:13:57,880 --> 00:14:01,200 Speaker 1: energy prices, when do you think it'll actually hit the 276 00:14:01,240 --> 00:14:01,839 Speaker 1: hard data? 277 00:14:03,000 --> 00:14:06,320 Speaker 5: It's a fair question. Memory And after four months of 278 00:14:07,040 --> 00:14:11,679 Speaker 5: under expectations inflation, even somebody like me who's been forecasting 279 00:14:11,720 --> 00:14:14,360 Speaker 5: inflation to go up, has to take a pause. Four 280 00:14:14,400 --> 00:14:18,320 Speaker 5: months in a row is real information. But the fact 281 00:14:18,400 --> 00:14:21,760 Speaker 5: remains that the used cars new and used cars number 282 00:14:21,840 --> 00:14:25,680 Speaker 5: is weird, to use a technical term, given what we 283 00:14:25,840 --> 00:14:28,840 Speaker 5: know is going on at Forward, at GM, at Toyota, 284 00:14:29,000 --> 00:14:31,800 Speaker 5: stillantis at Honda, given what we know is happening to 285 00:14:31,840 --> 00:14:35,040 Speaker 5: their supply chains, given what we know is happening to 286 00:14:35,120 --> 00:14:40,840 Speaker 5: credit availability for cars. It's odd. Doesn't mean it's not 287 00:14:41,040 --> 00:14:43,960 Speaker 5: literally true, but I wouldn't put too much weight on it. 288 00:14:44,480 --> 00:14:49,000 Speaker 5: But more than that, I think it's just needs to 289 00:14:49,040 --> 00:14:52,000 Speaker 5: be as the FED I think is rightly doing by waiting. 290 00:14:52,640 --> 00:14:54,680 Speaker 5: You need to wait to see what happens if it 291 00:14:54,720 --> 00:14:59,720 Speaker 5: turns out there isn't inflation, then great, and we just 292 00:14:59,800 --> 00:15:01,360 Speaker 5: have to deal with the real income laws. 293 00:15:01,920 --> 00:15:05,200 Speaker 1: Well, Adam, what about if we do get trade deals 294 00:15:05,240 --> 00:15:06,960 Speaker 1: and this is all wrapped up in terms of the 295 00:15:07,040 --> 00:15:10,200 Speaker 1: uncertainty by the middle or the end to the summer. 296 00:15:11,240 --> 00:15:15,160 Speaker 5: It still doesn't fix the underlying problems. Emmery, I mean 297 00:15:15,480 --> 00:15:19,200 Speaker 5: two things. First is again two things again, it's both 298 00:15:19,240 --> 00:15:23,240 Speaker 5: direct and uncertainty. The direct effect is we still have 299 00:15:23,320 --> 00:15:26,920 Speaker 5: tariffs that are twenty times on average as high as 300 00:15:26,960 --> 00:15:30,320 Speaker 5: they were for eighty years, and that has to work 301 00:15:30,360 --> 00:15:34,760 Speaker 5: through the system, and that is paid for by American 302 00:15:34,800 --> 00:15:38,560 Speaker 5: companies or American consumers or American companies who buy inputs, 303 00:15:39,360 --> 00:15:44,040 Speaker 5: so full stop, that's there. Second, because of the nature 304 00:15:44,080 --> 00:15:46,680 Speaker 5: of the tariffs that they're not done through legislation, they're 305 00:15:46,680 --> 00:15:51,280 Speaker 5: done through presidential emergency power, executive orders. And because everything 306 00:15:51,320 --> 00:15:55,480 Speaker 5: gets negotiated, everything's up for negotiation at all times, the 307 00:15:55,560 --> 00:15:59,120 Speaker 5: uncertainty doesn't go away. I know Jonathan hates it when 308 00:15:59,120 --> 00:16:01,600 Speaker 5: I bring up Brexit, but the analogy is to Brexit. 309 00:16:01,680 --> 00:16:04,320 Speaker 5: From twenty sixteen to twenty twenty, people kept saying, well, 310 00:16:04,320 --> 00:16:06,560 Speaker 5: once the uncertainties resolves, once we know if it's a 311 00:16:06,560 --> 00:16:09,480 Speaker 5: harder soft Brexit, It'll be okay. And I kept saying, 312 00:16:09,520 --> 00:16:11,920 Speaker 5: the problem with Brexit is an uncertainty, the problem with 313 00:16:12,040 --> 00:16:15,760 Speaker 5: about Brexit, problem with Brexit is Brexit, and so it's 314 00:16:15,800 --> 00:16:18,280 Speaker 5: not the same thing. But there is that parallel here. 315 00:16:18,680 --> 00:16:20,800 Speaker 5: The regime has changed, and we're seeing that in the 316 00:16:20,840 --> 00:16:23,560 Speaker 5: fixed income markets. We're seeing that in the currency markets. 317 00:16:23,920 --> 00:16:27,160 Speaker 5: People do not view the US assets, or US policy 318 00:16:27,280 --> 00:16:30,200 Speaker 5: or US fiscal policy as safe as it once was. 319 00:16:30,560 --> 00:16:33,720 Speaker 5: It's not gone to heck, but it is less safe 320 00:16:34,000 --> 00:16:37,440 Speaker 5: more than zero risk asset, and that has a cascade 321 00:16:37,440 --> 00:16:39,480 Speaker 5: of effects that will not go away. 322 00:16:40,120 --> 00:16:42,560 Speaker 2: Adam, if you asked me seriously what Brexit is, what 323 00:16:42,600 --> 00:16:44,840 Speaker 2: it was, I cann't tell you. I still following the 324 00:16:44,840 --> 00:16:46,680 Speaker 2: conversation a long time ago. I just feel lucky to 325 00:16:46,680 --> 00:16:48,680 Speaker 2: live in America and no longer than the UK. Is 326 00:16:48,720 --> 00:16:50,960 Speaker 2: trite that story anymore? Did you give up to one, Marie, 327 00:16:51,040 --> 00:16:52,440 Speaker 2: I sort of did. 328 00:16:52,680 --> 00:16:54,240 Speaker 1: I did give up, especially because I moved to the 329 00:16:54,320 --> 00:16:57,800 Speaker 1: UK at a one seventy two handle self Brexit breasit 330 00:16:57,840 --> 00:16:59,080 Speaker 1: I'm still left after Brexit. 331 00:16:59,240 --> 00:17:01,000 Speaker 2: Enough of that, Enough of that. I wanted to get 332 00:17:01,040 --> 00:17:03,400 Speaker 2: your view on the next FED chair and the kind 333 00:17:03,400 --> 00:17:06,000 Speaker 2: of characteristics that you would like to see from the 334 00:17:06,000 --> 00:17:08,560 Speaker 2: incoming FED chair after of course, Cham and Paus steps 335 00:17:08,600 --> 00:17:09,880 Speaker 2: aside next year. 336 00:17:10,560 --> 00:17:18,040 Speaker 5: Right, I think Jonathan as Ben Burnanki, Thomas Lobocker, Rick 337 00:17:18,119 --> 00:17:21,600 Speaker 5: Michian and I argued for after Greenspan, it should matter 338 00:17:21,680 --> 00:17:25,000 Speaker 5: less who the chair is. It should be a system. 339 00:17:25,080 --> 00:17:28,440 Speaker 5: It should be less about the personality. Obviously it does matter. 340 00:17:28,560 --> 00:17:31,560 Speaker 5: J Powell has had unique attributes that have mostly been 341 00:17:31,640 --> 00:17:38,120 Speaker 5: extremely great leadership. I think the next chair is going 342 00:17:38,160 --> 00:17:42,080 Speaker 5: to end up having a very simple job because they're 343 00:17:42,160 --> 00:17:45,480 Speaker 5: either going to get lucky because AI kicks in and so, 344 00:17:45,640 --> 00:17:48,240 Speaker 5: like green Span in the mid nineties, you get higher 345 00:17:48,280 --> 00:17:51,240 Speaker 5: growth and lower inflation and they can sit back and 346 00:17:51,359 --> 00:17:55,639 Speaker 5: thereby please President Trump, or inflation will be obvious and 347 00:17:55,760 --> 00:17:57,920 Speaker 5: the committee will leave them no choice and they'll have 348 00:17:57,960 --> 00:18:00,399 Speaker 5: to hike. So there's going to be a lot of 349 00:18:00,480 --> 00:18:04,480 Speaker 5: hype around who's the next year and if there is 350 00:18:04,520 --> 00:18:07,080 Speaker 5: a crisis, it matters whether it's been Burnanki or not. 351 00:18:07,359 --> 00:18:10,080 Speaker 5: I don't mean to dismiss that, sure, but I think 352 00:18:10,119 --> 00:18:13,040 Speaker 5: people are overdoing it. The FED will do what the 353 00:18:13,080 --> 00:18:13,680 Speaker 5: FED does. 354 00:18:14,119 --> 00:18:15,800 Speaker 2: Let's talk about Adam. Let's talk about what the FED 355 00:18:15,880 --> 00:18:17,879 Speaker 2: will do and what they'll do next. You said for 356 00:18:17,960 --> 00:18:19,360 Speaker 2: quite a while there's a real risk of the next 357 00:18:19,400 --> 00:18:21,720 Speaker 2: move might be an interest rate hike. And you also 358 00:18:21,760 --> 00:18:24,440 Speaker 2: acknowledge this morning that four months of self that expected 359 00:18:24,480 --> 00:18:27,320 Speaker 2: inflation is not nois it's information. So Adam, with that 360 00:18:27,359 --> 00:18:28,920 Speaker 2: in mind, what's the view now and what you would 361 00:18:28,960 --> 00:18:30,159 Speaker 2: expect to come from. 362 00:18:30,000 --> 00:18:32,919 Speaker 5: The Fed, you're right to call me on that. I 363 00:18:32,920 --> 00:18:35,480 Speaker 5: had been expecting higher inflation this year, and I was 364 00:18:35,520 --> 00:18:38,159 Speaker 5: expecting that the FED would be hiking before the end 365 00:18:38,200 --> 00:18:41,119 Speaker 5: of the year a few months ago, even before this 366 00:18:41,200 --> 00:18:44,240 Speaker 5: run of data, I changed my forecast. It was still 367 00:18:44,280 --> 00:18:46,920 Speaker 5: out of market, out of consensus, and remains a bit 368 00:18:47,000 --> 00:18:50,160 Speaker 5: so that the Fed is not going to be cutting 369 00:18:50,880 --> 00:18:54,159 Speaker 5: until November December at the earliest, and if they do, 370 00:18:54,240 --> 00:18:56,280 Speaker 5: it's only going to be two cuts before the end 371 00:18:56,280 --> 00:18:58,439 Speaker 5: of the year. There are a bunch of reasons for 372 00:18:58,520 --> 00:19:01,240 Speaker 5: them to sit still. Some of them were articulately by 373 00:19:01,240 --> 00:19:06,920 Speaker 5: feder Atlanta president Raphael Bostick the other day. The general 374 00:19:07,000 --> 00:19:09,679 Speaker 5: sense of the committee, I think is broadly right that 375 00:19:10,440 --> 00:19:13,320 Speaker 5: we're not falling off a cliff in terms of unemployment 376 00:19:13,359 --> 00:19:16,520 Speaker 5: or growth. So anyway forecasts, they're going to sit tight 377 00:19:16,760 --> 00:19:19,280 Speaker 5: and they're going to sit tight at least through September, 378 00:19:19,520 --> 00:19:23,680 Speaker 5: probably till fourth quarter, and I think if they do 379 00:19:23,760 --> 00:19:25,879 Speaker 5: puty cuts in the fourth quarter that are likely you're 380 00:19:25,880 --> 00:19:27,640 Speaker 5: going to have still likely to have to take them 381 00:19:27,640 --> 00:19:29,600 Speaker 5: back by in the middle of twenty twenty six. 382 00:19:29,840 --> 00:19:33,520 Speaker 2: Interesting, Adam, we get new information, the outlook changes. I 383 00:19:33,560 --> 00:19:36,880 Speaker 2: appreciate the update. Adam Poston at the Peterson Institute. Thank you, sir, 384 00:19:37,080 --> 00:19:49,920 Speaker 2: Thank you very much. Still ahead, Ben last on this afternoon, 385 00:19:50,119 --> 00:19:53,119 Speaker 2: thirty year debck coming to market, Lindsay Rosno, Goldent Sachs. 386 00:19:53,359 --> 00:19:55,120 Speaker 2: It's with us around the table for a preview, Linday, 387 00:19:55,160 --> 00:19:55,680 Speaker 2: it's going to see you. 388 00:19:55,800 --> 00:19:56,399 Speaker 6: Thanks for having me. 389 00:19:56,480 --> 00:19:58,200 Speaker 2: Let's talk about fixed income, the kind of risks out 390 00:19:58,240 --> 00:20:00,439 Speaker 2: that lots of people worried about the long bomb, the 391 00:20:00,480 --> 00:20:01,600 Speaker 2: thirty year issue. 392 00:20:01,560 --> 00:20:04,159 Speaker 6: Yes, and that has been trading more like risk asset 393 00:20:04,440 --> 00:20:06,639 Speaker 6: than it has been trading as a flight to quality, 394 00:20:06,680 --> 00:20:09,040 Speaker 6: which I think we're used to. The big thing here 395 00:20:09,160 --> 00:20:11,040 Speaker 6: is just trying to figure out where fiscal is on 396 00:20:11,080 --> 00:20:13,240 Speaker 6: the going forward, and what we've been telling clients is 397 00:20:13,280 --> 00:20:15,200 Speaker 6: there's no need to go into the thirty year bond. 398 00:20:15,359 --> 00:20:17,000 Speaker 6: There are a lot of bombs in the belly and 399 00:20:17,040 --> 00:20:19,159 Speaker 6: the very short end of the curve. Stay there and 400 00:20:19,560 --> 00:20:20,920 Speaker 6: you'll be better served. 401 00:20:20,680 --> 00:20:22,879 Speaker 2: If you're worried about risk and treasuries. Does it upend 402 00:20:23,160 --> 00:20:26,000 Speaker 2: how we perceive risk elsewhere in corporate credit. 403 00:20:25,880 --> 00:20:28,760 Speaker 6: Absolutely, because treasuries are the base, which is what we 404 00:20:29,000 --> 00:20:31,600 Speaker 6: then build everything off of. It's the risk premium above 405 00:20:31,640 --> 00:20:34,119 Speaker 6: it that gets us to where spread risk is valued. 406 00:20:34,560 --> 00:20:37,320 Speaker 6: So what we're seeing in the back end actually influences 407 00:20:37,359 --> 00:20:40,520 Speaker 6: our views on back end investment grade corporates, for example, 408 00:20:40,840 --> 00:20:42,400 Speaker 6: And as a result of what's happening in the back 409 00:20:42,480 --> 00:20:44,960 Speaker 6: end of the rates curve, we've actually also stayed in 410 00:20:45,040 --> 00:20:47,160 Speaker 6: the front end of the corporate curve and stayed away 411 00:20:47,160 --> 00:20:49,240 Speaker 6: from the back end of the corporate curve. 412 00:20:49,560 --> 00:20:52,240 Speaker 1: Jeff Gunlock yesterday talking to Lisa. John's been talking to 413 00:20:52,240 --> 00:20:54,080 Speaker 1: a lot about these comments, but he says, it's certainly 414 00:20:54,119 --> 00:20:56,560 Speaker 1: behaving differently than it was for the last four decades. 415 00:20:56,720 --> 00:20:58,800 Speaker 1: Things are behaving differently. So when I won't touch the 416 00:20:58,840 --> 00:21:03,359 Speaker 1: thirty year treasury, why do you think this is so 417 00:21:03,480 --> 00:21:06,600 Speaker 1: different than what we've seen with skirmishes in the last 418 00:21:06,680 --> 00:21:07,360 Speaker 1: four decades. 419 00:21:07,760 --> 00:21:10,560 Speaker 6: Yeah, I do disagree a bit in that this isn't 420 00:21:10,560 --> 00:21:15,399 Speaker 6: something we've never seen before. Questioning fiscal questioning the fiscal 421 00:21:15,400 --> 00:21:20,440 Speaker 6: sustainability or unsustainability of the government is not anything new, 422 00:21:20,480 --> 00:21:22,879 Speaker 6: and it has been a concern. What's different is the 423 00:21:22,920 --> 00:21:25,440 Speaker 6: problem's gotten larger and larger and larger. And I think 424 00:21:25,440 --> 00:21:28,480 Speaker 6: we're getting pretty close to a breaking point. And that's 425 00:21:28,480 --> 00:21:30,119 Speaker 6: what the back end of the curve is telling you. 426 00:21:30,480 --> 00:21:33,960 Speaker 6: That being said, there's always a right price for something, 427 00:21:34,440 --> 00:21:36,960 Speaker 6: and I think we're getting fairly close in the back 428 00:21:37,119 --> 00:21:40,280 Speaker 6: end to an area where it seems interesting. And certainly 429 00:21:40,280 --> 00:21:42,880 Speaker 6: we've bounced off today. Yields are lower on the back 430 00:21:42,920 --> 00:21:45,399 Speaker 6: of the economic data that we got that we're surprising, 431 00:21:46,480 --> 00:21:48,080 Speaker 6: But there will be a point in time where the 432 00:21:48,080 --> 00:21:50,320 Speaker 6: thirty year is something that you want to own because 433 00:21:50,320 --> 00:21:53,000 Speaker 6: we're putting in some real, real yield in the back end. 434 00:21:53,160 --> 00:21:55,520 Speaker 2: Let's talk about this economics it no doubt. So what's 435 00:21:55,520 --> 00:21:57,440 Speaker 2: with us Moments ago? I'm sure you heard I got 436 00:21:57,480 --> 00:22:00,560 Speaker 2: worried about the labor market and continuing claims. I wonder 437 00:22:00,600 --> 00:22:02,800 Speaker 2: what your perception of where the economy is right now 438 00:22:03,080 --> 00:22:04,840 Speaker 2: is and ultimately have that shape in your approach to 439 00:22:04,880 --> 00:22:06,120 Speaker 2: corporate credit more broadly. 440 00:22:06,400 --> 00:22:09,600 Speaker 6: Sure so, for us, the labor market is gradually softening 441 00:22:09,640 --> 00:22:12,280 Speaker 6: and I think each piece of that phrase is important. 442 00:22:12,440 --> 00:22:16,720 Speaker 6: Gradual is comfortable, and softening is actually okay. It's when 443 00:22:16,720 --> 00:22:18,840 Speaker 6: you have something that's more extreme. And I think that's 444 00:22:18,840 --> 00:22:21,280 Speaker 6: what Neil is trying to sus through, is that are 445 00:22:21,280 --> 00:22:23,960 Speaker 6: we seeing continuing claims at an alarming level? Are there 446 00:22:24,000 --> 00:22:26,920 Speaker 6: things that we should be more worried about? The non 447 00:22:26,920 --> 00:22:29,800 Speaker 6: farm payroll last Friday, I think was kind of the 448 00:22:29,800 --> 00:22:32,360 Speaker 6: beginning and telling us that we are for sure in 449 00:22:32,400 --> 00:22:33,920 Speaker 6: this softening episode. 450 00:22:34,119 --> 00:22:36,040 Speaker 1: But the read through for that for. 451 00:22:35,960 --> 00:22:38,399 Speaker 6: Us is not that the economy is falling off a cliff, 452 00:22:38,840 --> 00:22:41,240 Speaker 6: but it puts us in a position where we think 453 00:22:41,320 --> 00:22:44,359 Speaker 6: it is important that the FED begins acting. Agree with 454 00:22:44,400 --> 00:22:46,840 Speaker 6: Neil completely, it's not at the next meeting. I know 455 00:22:46,880 --> 00:22:49,199 Speaker 6: that he joked he said that they should cut, but 456 00:22:49,200 --> 00:22:51,199 Speaker 6: I don't think he really means that. We don't think 457 00:22:51,240 --> 00:22:53,199 Speaker 6: that they should cut either. But I think it'll be 458 00:22:53,200 --> 00:22:56,000 Speaker 6: really interesting to see the dots, and we are hoping 459 00:22:56,960 --> 00:23:00,280 Speaker 6: that they at least preserve one or two for twenty 460 00:23:00,320 --> 00:23:02,600 Speaker 6: twenty five. I think if it was zero, that is 461 00:23:02,640 --> 00:23:04,199 Speaker 6: really going to upset the market. 462 00:23:04,440 --> 00:23:06,679 Speaker 2: Speed matters, and it's not happening quickly, and I think 463 00:23:06,720 --> 00:23:09,280 Speaker 2: that's important not just for policy makers, but also for 464 00:23:09,280 --> 00:23:11,560 Speaker 2: corporate balance sheets. So can you describe the kind of 465 00:23:11,560 --> 00:23:13,959 Speaker 2: corporate balance street strength that you see at the moment 466 00:23:14,240 --> 00:23:17,720 Speaker 2: and how resilient corporate credit would be in a continued downstid. 467 00:23:18,440 --> 00:23:21,480 Speaker 6: Sure, so balance sheets look really good. All the things 468 00:23:21,480 --> 00:23:25,080 Speaker 6: that we look at, metrics, leverage, metrics that they've termed 469 00:23:25,080 --> 00:23:29,080 Speaker 6: out debt, thinking about just their business models. Not all 470 00:23:29,119 --> 00:23:31,800 Speaker 6: of them, but most of them are in really really 471 00:23:31,840 --> 00:23:35,840 Speaker 6: good standing. For example, we did have a fallen angel 472 00:23:35,920 --> 00:23:38,240 Speaker 6: earlier this week with Warner Brothers that's getting a lot 473 00:23:38,240 --> 00:23:40,639 Speaker 6: of fair and fair. That's the fifth largest fallen angel. 474 00:23:40,880 --> 00:23:43,320 Speaker 6: But if you take that out of the equation, we've 475 00:23:43,359 --> 00:23:47,239 Speaker 6: had a really solid investment grade corporate market that's been 476 00:23:47,320 --> 00:23:51,240 Speaker 6: extremely resilient. That makes us feel comfortable with the balance sheets. 477 00:23:51,359 --> 00:23:54,320 Speaker 6: The problem that we're dealing with right now is spreads. 478 00:23:54,560 --> 00:23:57,840 Speaker 6: So are you being compensated for the potential going forward 479 00:23:57,920 --> 00:24:01,760 Speaker 6: economic softness? Spreads are really tight right now, and they 480 00:24:01,760 --> 00:24:04,640 Speaker 6: are pricing in that everything's going to go fine. That's 481 00:24:04,640 --> 00:24:05,920 Speaker 6: where we take issue. 482 00:24:05,640 --> 00:24:08,000 Speaker 2: Our role in yields attractive enough to compensate for that. 483 00:24:08,520 --> 00:24:11,280 Speaker 6: They have certainly in some of the backup we've had 484 00:24:11,320 --> 00:24:13,600 Speaker 6: gotten to levels that have hit triggers for some of 485 00:24:13,600 --> 00:24:17,160 Speaker 6: our clients. We've seen clients saying that we're actually interested 486 00:24:17,200 --> 00:24:19,639 Speaker 6: in getting into fixed income. We want to add we're 487 00:24:19,720 --> 00:24:22,359 Speaker 6: underweight our fixed income allocation, so yes, we all in 488 00:24:22,440 --> 00:24:25,280 Speaker 6: yield is good. But what we really encourage, and I 489 00:24:25,320 --> 00:24:28,800 Speaker 6: think our clients agree is important, is active management around 490 00:24:28,840 --> 00:24:32,239 Speaker 6: this exciting guild thing because not every corporate is going 491 00:24:32,280 --> 00:24:34,320 Speaker 6: to have a solid balance sheet on the going forward, 492 00:24:34,359 --> 00:24:36,840 Speaker 6: and tariffs are happening. Maybe they're less than we thought, 493 00:24:36,840 --> 00:24:38,160 Speaker 6: but they still are happening. 494 00:24:38,240 --> 00:24:39,879 Speaker 2: So down one night, one hundred Goldman Sachs. As a 495 00:24:39,920 --> 00:24:41,320 Speaker 2: management it's the pitch. 496 00:24:41,359 --> 00:24:43,680 Speaker 6: I think, yes, that line should ring. 497 00:24:43,720 --> 00:24:46,119 Speaker 2: Thank you, Lindy, thank you. I appreciate it as always, 498 00:24:46,119 --> 00:24:49,119 Speaker 2: so Lindsay Rosen, there have goldment sex. This is the 499 00:24:49,200 --> 00:24:53,399 Speaker 2: Bloomberg Sevenans podcast, bringing you the best in markets, economics, 500 00:24:53,440 --> 00:24:55,879 Speaker 2: an gio politics. You can watch the show live on 501 00:24:55,920 --> 00:24:59,560 Speaker 2: Bloomberg TV weekday mornings from six am to nine am Eastern. 502 00:25:00,000 --> 00:25:03,240 Speaker 2: Subscribe to the podcast on Apple, Spotify or anywhere else 503 00:25:03,240 --> 00:25:05,879 Speaker 2: you listen, and as always on the Bloomberg Terminal and 504 00:25:06,000 --> 00:25:11,560 Speaker 2: the Bloomberg Business app. Mm hmm