WEBVTT - Surveillance: Fed Expectations with Hollenhorst 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.200 --> 0:00:13.080 with Jonathan Ferrell and Lisa Brownwitz Jay Lee. We bring 0:00:13.119 --> 0:00:17.119 you insight from the best and economics, finance, investment, and 0:00:17.239 --> 0:00:23.320 international relations. Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg 0:00:23.360 --> 0:00:29.640 dot Com, and of course on the Bloomberg Terminal. Andrew 0:00:29.680 --> 0:00:32.639 hollen Horst the City joins us now the chief US economist. 0:00:32.680 --> 0:00:34.680 And Andrew has just been fantastic through the whole of 0:00:34.720 --> 0:00:36.479 this year. I have to s Andrew, congrats to you 0:00:36.520 --> 0:00:37.959 in the whole of the team, because I remember when 0:00:37.960 --> 0:00:40.000 you first came out with those calls for fifty basis 0:00:40.040 --> 0:00:43.040 point at every meeting, then definitely five and everyone started 0:00:43.080 --> 0:00:46.000 to laugh Andrew, and it quickly became consensus. Where are 0:00:46.040 --> 0:00:48.080 you now going into year? Rand is the rest of 0:00:48.080 --> 0:00:50.080 the pack on Wall Street talks about a step down 0:00:50.080 --> 0:00:54.480 of financial conditions, starts to weez, Yeah, thanks so much, Jonathan, 0:00:54.520 --> 0:00:57.240 and thanks for having me on. We're you know, for 0:00:57.320 --> 0:00:59.760 our base case, we still think that the Fed might 0:01:00.000 --> 0:01:03.800 and somewhat below five percent policy rates, but we would 0:01:03.880 --> 0:01:07.520 not be surprised by levels above five percent. I think 0:01:07.560 --> 0:01:09.840 anything up to five and a half percent would not 0:01:09.920 --> 0:01:12.640 be too surprising at this point, and you know, it 0:01:12.680 --> 0:01:14.440 really goes back and kind of thinking all the way 0:01:14.440 --> 0:01:17.640 back in terms of why this Fed has been more 0:01:17.680 --> 0:01:19.760 hawkish and why we're getting higher policy rates. That's what 0:01:19.920 --> 0:01:22.120 you were just talking about it in the European context, 0:01:22.200 --> 0:01:25.440 we just have inflation data that continues to surprise to 0:01:25.520 --> 0:01:28.720 the upside, that continues to push policy rates higher. Actually 0:01:28.720 --> 0:01:32.120 think the Chairman navigates this conversation in the news conference 0:01:32.120 --> 0:01:34.440 center this week. Given that they don't have the full 0:01:34.440 --> 0:01:39.360 costs no fresh s EP until December, it's really difficult. 0:01:39.400 --> 0:01:42.240 In December, you do have a lot more variables that 0:01:42.280 --> 0:01:45.120 you can use to try to guide towards a step 0:01:45.120 --> 0:01:48.640 down in the pace of policy rate increase, but at 0:01:48.640 --> 0:01:52.640 the same time not trigger a loosening of financial conditions. 0:01:52.640 --> 0:01:54.280 And I think we saw a little of that last 0:01:54.320 --> 0:01:56.480 week as the market got excited about the fact that 0:01:56.800 --> 0:01:59.560 the FED might be slowing the pace from a seventy 0:02:00.080 --> 0:02:02.880 point hike at this week's meeting to a fifty basis 0:02:02.920 --> 0:02:04.920 point hike in December. And we think that is what's 0:02:04.920 --> 0:02:08.799 going to happen, and that's not necessarily a do wish outcome. You, 0:02:08.960 --> 0:02:11.480 the hiking fifty basis points is still a larger than 0:02:11.600 --> 0:02:15.040 usual sized hike. The Fed could continue to hike at 0:02:15.040 --> 0:02:19.480 those larger sized hike sizes for extended period of time 0:02:19.520 --> 0:02:22.680 get to higher policy rates. So there's nothing inherently dobish 0:02:23.080 --> 0:02:26.079 about hiking at a slower pace. What the Fed needs 0:02:26.120 --> 0:02:28.120 to do is communicate that, and you're right. At the 0:02:28.160 --> 0:02:30.760 December meeting there's a summary of economic projections that can 0:02:30.800 --> 0:02:33.680 show higher dots suggesting the policy rates will move higher. 0:02:34.520 --> 0:02:37.040 It's really just gonna come down to communication. In the 0:02:37.040 --> 0:02:40.720 press conference at Wednesday's meeting, Ken Powell talk about slowing 0:02:40.720 --> 0:02:44.200 down the pace, but still indicate resolve on fighting inflation. 0:02:44.400 --> 0:02:47.639 What's more damaging for the economy getting to five or 0:02:47.639 --> 0:02:50.280 five and a half percent and then cutting perhaps six 0:02:50.320 --> 0:02:52.880 months later. We're getting to four and three quarters percent 0:02:52.960 --> 0:02:56.120 and holding it for two years straight, I think, but 0:02:56.240 --> 0:02:58.440 would be damaging for the economy, and I think to 0:02:58.520 --> 0:03:01.760 their credit, FED officials have recognized this is to allow 0:03:01.840 --> 0:03:05.680 inflation to persist levels that are well above target. I mean, 0:03:05.720 --> 0:03:07.960 you you were just talking, and you know, we're kind 0:03:08.000 --> 0:03:10.640 of joking about the idea, could we get a three percent, 0:03:10.680 --> 0:03:15.080 four percent, five percent inflation target. But implicitly that's what 0:03:15.200 --> 0:03:18.920 happens if the FED continues to miss on their inflation mandate. 0:03:18.960 --> 0:03:21.480 If you continue to miss to the upside on inflation, 0:03:22.040 --> 0:03:26.360 then you embed in the economy higher rate of inflation. 0:03:26.440 --> 0:03:28.240 And I think we're already seeing some of the costs, 0:03:28.280 --> 0:03:31.880 some of the uncertainty associated with not knowing how much wages, 0:03:31.919 --> 0:03:34.760 how much prices will be going up. That's the real 0:03:34.880 --> 0:03:38.080 risk for FED officials. And that's why stopping too early 0:03:39.000 --> 0:03:43.440 is a risk and could imply actually hiking further at 0:03:43.440 --> 0:03:45.640 a later date. So so you do have upside risk, 0:03:45.680 --> 0:03:48.720 you have downside risk. It's a complicated scenario. I think 0:03:48.800 --> 0:03:51.520 the primary risk right now is still the risk that 0:03:51.560 --> 0:03:54.680 inflation remains too high. Andrew, you said something really important 0:03:54.720 --> 0:03:58.720 there that by basically undershooting inflation again and again, they're 0:03:58.760 --> 0:04:02.080 basically communicating the inflation is going to remain higher than 0:04:02.120 --> 0:04:04.120 their target. This sort of speaks to what Diane Swank 0:04:04.200 --> 0:04:07.320 was talking about their projections being fantasy land. How much 0:04:07.360 --> 0:04:09.800 do you think they've already done that by not really 0:04:09.800 --> 0:04:13.600 communicating some sort of downturn or something that is more realistic. 0:04:13.640 --> 0:04:17.240 According to the economists, projections in terms of what kind 0:04:17.240 --> 0:04:19.480 of pain needs to happen in this economy to get 0:04:19.520 --> 0:04:22.520 inflation under control. I think it would be helpful if 0:04:22.520 --> 0:04:25.800 FED officials concentrated a little bit more on the fact 0:04:25.839 --> 0:04:29.800 that labor markets likely need to loosen significantly to bring 0:04:29.839 --> 0:04:33.320 down inflation. It's a very unfortunate reality. It's a reality 0:04:33.360 --> 0:04:37.080 that nobody wants to be dealing with. But the empirical 0:04:37.160 --> 0:04:40.479 fact is that to bring inflation down from levels like 0:04:40.520 --> 0:04:43.000 the levels that we're seeing in the US and Europe 0:04:43.040 --> 0:04:47.080 elsewhere involves a significant loosening of the labor market. And 0:04:47.320 --> 0:04:51.279 that's almost a euphemism for saying the unemployment rate rises. 0:04:51.800 --> 0:04:55.520 Millions of people who currently have jobs no longer have jobs. 0:04:55.960 --> 0:04:59.080 It's a horrible outcome for the economy. That is the 0:04:59.120 --> 0:05:02.600 cost of aation that's too high, and the issue now 0:05:02.680 --> 0:05:06.039 is minimizing the further cost of that. So I think 0:05:06.040 --> 0:05:08.600 that's right least. I think there should be more direct 0:05:08.600 --> 0:05:12.839 communication about the pain that's associated with breaking down inflation. 0:05:13.160 --> 0:05:16.000 Andrew A consensu even you're hesitating to say out loud, 0:05:16.400 --> 0:05:19.280 I'm waiting two around the program, around the table, and 0:05:19.360 --> 0:05:22.120 surveillance every single morning. And Andrew, I think they've still 0:05:22.120 --> 0:05:24.080 got to do a better job of communicating this, and 0:05:24.080 --> 0:05:25.599 it's not for me to do it for them. Andrew, 0:05:25.640 --> 0:05:28.360 how did they tell us the higher unemployment is a 0:05:28.440 --> 0:05:31.159 price worth paying to get inflation down. What's the answer 0:05:31.160 --> 0:05:35.360 to that. Yeah, it's a very hard message to deliver, frankly, 0:05:35.880 --> 0:05:39.560 and I think that the answer is to be clear 0:05:39.760 --> 0:05:43.479 the forthright, to talk about the historical evidence, talk about 0:05:43.480 --> 0:05:45.719 the theory the theory that we have. You look at 0:05:45.720 --> 0:05:50.000 the employment cost index last week, up one point two 0:05:50.000 --> 0:05:53.520 percent quarter on quarter. This is well above a pace 0:05:53.560 --> 0:05:57.400 of wage increase that would be consistent with two percent inflation. 0:05:57.839 --> 0:05:59.840 And so I think that's just one indication a very 0:06:00.040 --> 0:06:04.200 height labor market that's going to drive inflationary pressure. There's 0:06:04.360 --> 0:06:08.640 strong theoretical reasons, they're strong empirical reasons to think that 0:06:08.640 --> 0:06:11.640 that doesn't change without a loosening of the labor market. 0:06:11.680 --> 0:06:13.320 So I just think that we need to be clear 0:06:13.360 --> 0:06:16.039 and forthright about that. And and to your point, Jonathan, 0:06:16.200 --> 0:06:18.679 it is an unfortunate reality, and I think that means 0:06:18.720 --> 0:06:22.000 that FED officials and others have been reluctant to comment 0:06:22.040 --> 0:06:24.680 on it openly. Andrew. We get unemployment from Friday, we 0:06:24.720 --> 0:06:26.960 get the jobs report in America right now, I'm looking 0:06:26.960 --> 0:06:29.600 at pay rolls, the survey, the matin estimate about one 0:06:29.680 --> 0:06:32.120 ninety from a previous two sixty three. Andrew, can you 0:06:32.120 --> 0:06:34.640 tell me if the year ist progressed, if you sense 0:06:34.720 --> 0:06:37.280 that perhaps this unemployment rate needs to go higher than 0:06:37.320 --> 0:06:39.320 you thought it did at the start of the year. 0:06:41.080 --> 0:06:43.160 So I think there is a sense that maybe the 0:06:43.240 --> 0:06:45.720 unemployment rate doesn't need to go higher, but that the 0:06:45.800 --> 0:06:48.359 amount of restriction needed in the economy may need to 0:06:48.360 --> 0:06:51.159 be more to get to a higher unemployment rate. So 0:06:51.200 --> 0:06:53.440 we think that the unemployment rate may need to get 0:06:53.440 --> 0:06:55.880 to something around five and a half percent to bring 0:06:55.920 --> 0:06:58.400 down inflation. That would be a lot higher than three 0:06:58.440 --> 0:07:01.760 point five percent where we are now Historically, it wouldn't 0:07:01.800 --> 0:07:04.400 be as high as what we've seen in other recessions. Um. 0:07:04.400 --> 0:07:06.040 So there is some good news there if you want 0:07:06.040 --> 0:07:08.680 to see it that way. UM. I think that the 0:07:08.680 --> 0:07:11.480 the issue is the labor market. Data continues to be 0:07:11.600 --> 0:07:14.920 very resilient. A hundred and ninety thousand new jobs in 0:07:14.960 --> 0:07:18.600 a month is going to be strong enough to continue 0:07:18.600 --> 0:07:21.000 to put downward pressure on the unemployment rate. So we 0:07:21.080 --> 0:07:24.160 have a tight labor market generating wage pressure that's too high, 0:07:24.600 --> 0:07:27.440 and that labor market looks like it may be tightening further. 0:07:27.960 --> 0:07:31.520 The only evidence of the contrary job openings the Joeld's 0:07:31.560 --> 0:07:34.680 job openings numbers. Those have started to come down. We 0:07:34.760 --> 0:07:36.360 get a new reading on that this week, so I 0:07:36.360 --> 0:07:39.400 think that's going to be important. But overall, low initial 0:07:39.440 --> 0:07:42.000 jobless claims, there's just a lot of evidence that this 0:07:42.080 --> 0:07:45.120 is a labor market that has not slowed sufficiently to 0:07:45.240 --> 0:07:47.440 bring down that wage of pressure. And Joe starts to 0:07:47.520 --> 0:07:50.160 coming up tomorrow with the SEMs Wealth and then onto 0:07:50.200 --> 0:07:53.000 the Federals IF on Wednesday, and onto the Pyros report 0:07:53.000 --> 0:07:55.640 on Friday. Would awake Andrew, Thank you sir as always 0:07:55.680 --> 0:07:58.080 Andrew Hollen, host of sitting on the lightest and what 0:07:58.080 --> 0:08:05.720 they're looking for from this FET this week. I'm going 0:08:05.760 --> 0:08:07.840 to send you on this right now. The Director of 0:08:07.920 --> 0:08:10.560 Research Energy Aspects Emorrator. Can we start there. Typically we 0:08:10.560 --> 0:08:12.200 talk about the near term story, let's get out to 0:08:12.240 --> 0:08:15.200 next year, just briefly. How vulnerable is the United States 0:08:15.200 --> 0:08:18.200 now with the SPR at a four decade low. I 0:08:18.240 --> 0:08:21.120 think it's the great question. Um, We've calculated this and 0:08:21.160 --> 0:08:24.040 even before Prince Ample Lizzie said this last week, we 0:08:24.160 --> 0:08:27.000 kind of highlighted the fact that right now the SPR 0:08:27.200 --> 0:08:31.720 is actually being used to uh, pretty much influenced prices, 0:08:31.760 --> 0:08:36.120 whereas its objective was very much for supply mitigation. So remember, 0:08:36.160 --> 0:08:39.240 the SPR also has legislative releases that was agreed back 0:08:39.280 --> 0:08:41.920 in twenty seventeen. So that's another hundred million barrels that's 0:08:41.920 --> 0:08:44.640 going to come out. Will end the year this year 0:08:44.679 --> 0:08:47.120 at just below four hundred million barrels about three hundred 0:08:47.160 --> 0:08:50.520 and eighty. Deduct another hundred from the legislative releases over 0:08:50.559 --> 0:08:54.000 the next three years. It doesn't leave the administration with 0:08:54.240 --> 0:08:57.400 much more than sixty million barrels. We believe that they 0:08:57.400 --> 0:09:00.400 could do without running into issues with the e e 0:09:00.600 --> 0:09:03.360 S at least requirement to have at least ninety days 0:09:03.400 --> 0:09:06.400 of net import cover. Now, of course, you can continue 0:09:06.400 --> 0:09:08.880 to run it down below that number, but I will 0:09:08.960 --> 0:09:11.080 can I will say this again and again that this 0:09:11.160 --> 0:09:15.240 is a time of energy security and running down sprs 0:09:15.240 --> 0:09:18.520 to influence prices is probably not the most prudent strategy. 0:09:18.640 --> 0:09:20.760 Do you think it leaves America even more exposed to 0:09:20.880 --> 0:09:24.960 the whims of opening next year if you don't have SPR, 0:09:25.280 --> 0:09:27.680 or rather, let me rephrase, if you were using SPR 0:09:27.760 --> 0:09:31.760 to offset um supply disruptions, that's very different. But if 0:09:31.760 --> 0:09:34.720 you're using SPR to just keep a cap on prices, 0:09:34.760 --> 0:09:38.120 then yeah, absolutely, because we've said this before as well. 0:09:38.160 --> 0:09:39.760 But if you are going to use the SPR to 0:09:39.840 --> 0:09:42.719 combat OPEC, that's like turning up to a gunfight with 0:09:42.760 --> 0:09:45.080 a knife, because it's OPEC has millions of barrels per 0:09:45.120 --> 0:09:47.840 day of production that they could cut or raise, where 0:09:47.880 --> 0:09:51.120 the SPR is ultimately a finite volume which also will 0:09:51.160 --> 0:09:53.199 need to be replenished at some stage. I'm going to 0:09:53.240 --> 0:09:55.760 given the fact that there isn't this relief valve of 0:09:55.800 --> 0:09:58.000 the SPR that potentially could be tapped in a major 0:09:58.040 --> 0:10:01.320 way next year, and given the facts OPEC plus has 0:10:01.360 --> 0:10:05.600 that leverage over the US and other nations, are we 0:10:05.640 --> 0:10:08.040 ever going to see seventy two dollars a barrel kind 0:10:08.040 --> 0:10:10.800 of price levels where this administration said they would like 0:10:10.840 --> 0:10:14.400 to refill the SPR. We don't think so. No. I mean, 0:10:14.400 --> 0:10:18.120 if anything, fifth of December, when the EU embargo and 0:10:18.200 --> 0:10:20.880 Russian crew starts, that's when you're going to see the 0:10:20.920 --> 0:10:25.040 real supply disruptions kick in. Because this is about shipping disruptions, right, 0:10:25.080 --> 0:10:27.400 We're just having to tie up so many ships now 0:10:27.600 --> 0:10:29.920 to move Russian crewed all the way to the east. 0:10:30.160 --> 0:10:33.040 We will start to see some Russian productions shot in 0:10:33.240 --> 0:10:35.959 and that's only going to get worse next year. So 0:10:36.080 --> 0:10:38.400 we just do not see how we get down to 0:10:38.800 --> 0:10:42.720 the seventies unless and until the economy really collapses and 0:10:42.880 --> 0:10:45.800 China doesn't actually start to get better, which we expect 0:10:45.880 --> 0:10:48.400 should start to happen from April next year. I'm ready 0:10:48.400 --> 0:10:50.920 based on some of the supply disruptions that you're expecting 0:10:50.960 --> 0:10:53.360 heading into the winter, and we are getting signs that 0:10:53.480 --> 0:10:55.160 you know, it has been mild so far, but the 0:10:55.280 --> 0:10:58.560 UK there are just reports that they could see a 0:10:58.600 --> 0:11:02.000 colder winter than usual. Where could you see oil prices 0:11:02.040 --> 0:11:05.120 going and how does that translate to gasoline prices at 0:11:05.160 --> 0:11:08.199 this highly political moment. I mean, look, we are expecting 0:11:08.200 --> 0:11:12.079 prices to go towards hundred dollars produced into into the 0:11:12.160 --> 0:11:15.240 year end and really trade into the hundred and tents 0:11:15.240 --> 0:11:18.400 and hundred and twenties for most of next year. Uh. 0:11:18.400 --> 0:11:20.880 And the biggest upside, like you mentioned, is the winter. 0:11:20.960 --> 0:11:22.880 Of course, weather is always going to be a erratic, 0:11:22.960 --> 0:11:26.600 and you know, nobody can really predict weather, but even otherwise, 0:11:26.640 --> 0:11:28.960 stocks are just very very low. Now you do ask 0:11:29.000 --> 0:11:31.320 about gasoline, it's a fair question. Gasoline prices in the 0:11:31.440 --> 0:11:34.520 US have continued to rise because there's so many refineries 0:11:34.760 --> 0:11:37.040 that are still down, and let's not forget the French 0:11:37.080 --> 0:11:40.040 strikes that are still ongoing. We're not producing enough. But 0:11:40.240 --> 0:11:42.480 I will highlight its diesel that we need to be 0:11:42.520 --> 0:11:46.120 really worried about. Diesel stocks are at near record lows. 0:11:46.160 --> 0:11:48.720 We just haven't built over the summer, and that's what 0:11:48.880 --> 0:11:50.839 we tend to use in the winter if it does 0:11:50.880 --> 0:11:53.280 get very, very cold. And I think that's a much 0:11:53.320 --> 0:11:56.120 bigger concern for the administration right now. So we are 0:11:56.200 --> 0:12:00.280 expecting potentially some form of intervention by the administration, should 0:12:00.320 --> 0:12:02.600 maybe saying you have to hold x amount of diesel 0:12:02.679 --> 0:12:05.360 stocks in the New York Harbor before you can export 0:12:05.360 --> 0:12:07.480 from Path three and Rita. I've got about forty seconds 0:12:07.480 --> 0:12:09.120 on the clock. I want to squeeze this in. We've 0:12:09.120 --> 0:12:11.360 been talking about this now for the best part of 0:12:11.480 --> 0:12:14.400 what eight months, called it nine months close to and Rita. 0:12:14.520 --> 0:12:16.720 Have you seen any effort either from Europe or the 0:12:16.760 --> 0:12:20.599 United States to build out refining capacity in a material way. No, 0:12:20.880 --> 0:12:23.040 quite the opposite. And it's a great question, because you know, 0:12:23.080 --> 0:12:25.720 if anything, Europe is talking about windfall taxes on refining 0:12:26.160 --> 0:12:28.559 um and this is going to be the biggest bottleneck. 0:12:29.040 --> 0:12:31.600 Next year. We have a few Midleastern refineries starting up, 0:12:31.640 --> 0:12:35.360 but after that after we just don't have enough refining 0:12:35.360 --> 0:12:38.079 capacity to meet all demands. And that right there is 0:12:38.120 --> 0:12:40.800 the problem. I'm really send thank you, Director of Researcher 0:12:41.360 --> 0:12:55.040 and as you aspects, thank you. If you get me one, 0:12:55.080 --> 0:12:56.640 I will do it. Is standing by the head of 0:12:56.720 --> 0:12:59.840 US Multi sector fixed income as should as at least 0:12:59.840 --> 0:13:01.880 at FED of aselve on Wednesday. All this chat about 0:13:01.880 --> 0:13:04.720 a step down. What even the team thinking about when 0:13:04.760 --> 0:13:08.160 you go into this November matin. Well, you know, I 0:13:08.160 --> 0:13:11.640 don't see any reason for them to commit to down 0:13:11.679 --> 0:13:14.679 shifting on Wednesday. UM. I think that they will let 0:13:14.720 --> 0:13:17.760 us know that they're considering it. But we have, as 0:13:17.760 --> 0:13:21.160 you said, John, two CPI prints between now. We're between 0:13:21.160 --> 0:13:24.200 Wednesday and the December meetings. So what's the point in 0:13:24.280 --> 0:13:26.880 saying here's what we're going to do, it's time to downshift. 0:13:26.920 --> 0:13:28.840 I think they're gonna say, hey, look, if we see 0:13:28.880 --> 0:13:32.360 inflation moderating to some degree, will will We're open to it. 0:13:32.440 --> 0:13:34.320 We realized we piped a lot. It's going to take 0:13:34.360 --> 0:13:37.480 some time for this policy, these this tighter policy to 0:13:37.520 --> 0:13:41.120 actually have an effect. Um. But as you said, they've 0:13:41.559 --> 0:13:44.400 the central banks have been wrong before, and they've they've 0:13:44.400 --> 0:13:46.040 said they're going to back off a bit and then 0:13:46.080 --> 0:13:48.199 they end up having to kind of go full throttle. 0:13:48.280 --> 0:13:50.640 So I just don't see why they pre commit quite yet. 0:13:50.640 --> 0:13:52.199 They don't have much to point to in the way 0:13:52.200 --> 0:13:54.880 of inflation moderating here. In the meantime, people are looking 0:13:54.880 --> 0:13:57.000 long term and they're trying to get a better sense 0:13:57.040 --> 0:13:59.439 of long terms and short term is so difficult to project. 0:13:59.440 --> 0:14:02.440 And Brian why scene of Morgan Stanley earlier this morning 0:14:02.520 --> 0:14:05.360 saying that he likes long dated treasuries because regardless of 0:14:05.360 --> 0:14:07.400 what they're gonna do, it's gonna slow growth and slow 0:14:07.440 --> 0:14:09.959 inflation over the longer term to make four percent yield 0:14:10.080 --> 0:14:13.679 on a tenure treasury attractive. Do you agree? I think that, Yeah, 0:14:13.720 --> 0:14:14.880 I think there's a lot of merit to that. I 0:14:14.880 --> 0:14:16.920 think it depends on your time horizon. If you're a 0:14:16.920 --> 0:14:19.560 long term investor now, certainly will you have a better 0:14:19.680 --> 0:14:24.440 entry point tactically between now and the next six months, probably, Um, 0:14:24.520 --> 0:14:27.440 But again it depends on your your time horizon. On 0:14:27.520 --> 0:14:29.880 this nice feature over for the weekend in a Wall 0:14:29.920 --> 0:14:33.240 Street Journal had about five or six investors being interviewed 0:14:33.240 --> 0:14:36.680 about three and the opportunities just jumped down from Rick 0:14:36.720 --> 0:14:41.000 reader FROMO he said, I'm more excited going into three 0:14:41.240 --> 0:14:44.800 than I've been in a really long time. You hear 0:14:44.840 --> 0:14:48.440 that a lot from the fixed income team, don't you 0:14:48.680 --> 0:14:51.080 A lot? I really do. Okay, I hear that also 0:14:51.160 --> 0:14:53.720 because I lived through the era of people railing and 0:14:53.760 --> 0:14:57.000 comployed ero rates complaining we're not getting anything. This is ridiculous. 0:14:57.000 --> 0:14:59.640 It doesn't make any sense. Now they're getting nine percent 0:14:59.720 --> 0:15:02.560 average yields on things that actually look better because these 0:15:02.560 --> 0:15:04.800 companies have preserved cash for those people who have been 0:15:04.800 --> 0:15:07.240 sitting in cash complaining about low rates. I haven't heard 0:15:07.320 --> 0:15:09.760 enough from them about saying, yes, we're going to take 0:15:10.480 --> 0:15:13.960 take some opportunities here at Lisa. Does that resonate with 0:15:14.000 --> 0:15:16.480 you what Rick really said over the weekend, I'm more 0:15:16.520 --> 0:15:19.000 excited going into three than I've been in a really 0:15:19.000 --> 0:15:21.920 long time. It absolutely does. I mean that was basically 0:15:21.960 --> 0:15:25.360 the title of our market paper as well. And you 0:15:25.360 --> 0:15:28.920 know it's to Lisa's point, you don't even need to 0:15:28.920 --> 0:15:30.960 go to high yield to get interesting yields. I mean, 0:15:31.080 --> 0:15:34.200 HSBC came with a bond deal last week seventh north 0:15:34.200 --> 0:15:36.960 of seven percent. It's a four year piece of paper. 0:15:37.040 --> 0:15:39.880 I mean, I think they're gonna be paid. You're gonna 0:15:39.880 --> 0:15:43.320 be well compensated for that. Again, time horizon matters, but 0:15:43.440 --> 0:15:46.880 over the next four years return, I think that that's 0:15:46.920 --> 0:15:48.960 gonna I think that's going to be a good investment. 0:15:49.200 --> 0:15:51.600 And you're just sticking in the investment grade market. There 0:15:51.640 --> 0:15:53.520 A Lisa, how has business changed? Then? Can you walk 0:15:53.560 --> 0:15:55.360 us through that? Just over the last six months, you 0:15:55.400 --> 0:15:57.680 get the sense that people see the world the way 0:15:57.720 --> 0:15:59.880 you see the world in fixed income going into next year, 0:15:59.880 --> 0:16:02.600 this more interest from people that would typically be allocated 0:16:02.640 --> 0:16:06.120 to equities or somewhere else. Yeah, I absolutely do so. 0:16:06.200 --> 0:16:09.280 I've been to a few presented at a few conferences, 0:16:09.320 --> 0:16:11.880 and the interest in fixed income now is is much 0:16:11.960 --> 0:16:15.040 much higher. It's it's it's palpable. People are excited about it. 0:16:15.520 --> 0:16:17.440 I think there's still a little bit of nerves, right. 0:16:17.480 --> 0:16:19.560 It feels a bit like catching a falling knife here, 0:16:19.840 --> 0:16:22.200 and so there's a there's a bit of a we 0:16:22.240 --> 0:16:24.480 want to allocate but not quite yet. So I do 0:16:24.600 --> 0:16:26.640 feel like there's there, there's the risk. And we've had 0:16:26.680 --> 0:16:28.480 this a couple of times this year where you get 0:16:28.520 --> 0:16:29.760 a bit of a rally and then all of a 0:16:29.800 --> 0:16:34.800 sudden you get alert even tighter because everybody realized, I think, 0:16:34.880 --> 0:16:36.920 oh this isn't we passed the peak. We need to 0:16:36.920 --> 0:16:39.960 get in and then it's been past the last year. 0:16:40.000 --> 0:16:42.560 It's been kind of false starts. Um, But I do 0:16:42.680 --> 0:16:45.320 think that that could be the template. You know, everybody 0:16:45.400 --> 0:16:47.320 is sort of waiting, sitting on their hands a bit, 0:16:47.360 --> 0:16:49.960 but they want to get invested, but they're not. We're 0:16:49.960 --> 0:16:52.200 not quite there yet, so when we do, it could 0:16:52.200 --> 0:16:55.760 be fairly sharp. Um. But I think there's a lot 0:16:55.760 --> 0:16:57.640 of interest. I mean when you compare fixed income to 0:16:57.720 --> 0:17:00.920 private markets, when you compare them to other other public markets, 0:17:00.920 --> 0:17:03.520 I mean, fixed income is corrected a lot. I mean, 0:17:03.560 --> 0:17:07.760 it's yeah, my favorite stet right now is uh It's 0:17:07.800 --> 0:17:11.200 credit of Deutsche Bank, but they basically have the Treasury 0:17:11.200 --> 0:17:14.439 index going back to sight and I believe this was 0:17:14.720 --> 0:17:18.480 the worst return since that period. So it just gives 0:17:18.480 --> 0:17:21.199 you some context for we use the word unprecedented a 0:17:21.200 --> 0:17:24.520 lot in markets, but I think that's that's truly unprecedented. 0:17:24.720 --> 0:17:27.880 Truly is Lisa, Thank you, Lisa Homebi that suttis, thank 0:17:27.920 --> 0:17:35.760 you very much. Gregfied this now chief US policy strategy, 0:17:35.880 --> 0:17:38.720 that HF investments. Greg, Let's talk about energy, and that's 0:17:38.760 --> 0:17:40.680 been a big problem for this White hastroy this year. 0:17:40.920 --> 0:17:42.600 How is that playing in the mid terms, the lack 0:17:42.600 --> 0:17:45.040 of a caherent energy strategy in the minds of so 0:17:45.119 --> 0:17:48.639 many people, Greg, I think it's playing really poorly. A 0:17:48.800 --> 0:17:51.080 great editorial in the Wall Street Journal, I think it 0:17:51.160 --> 0:17:54.159 was this morning, all the day start to blur, but 0:17:54.680 --> 0:17:58.320 talking about how dysfunctional to this energy policy has been. 0:17:58.320 --> 0:18:01.080 I mean, Joe Biden just comple aiming about prices, but 0:18:01.200 --> 0:18:04.760 in reality, one of the reasons prices have gone up 0:18:04.840 --> 0:18:08.480 is because of his policies. We can you elaborate on that, Greg, 0:18:08.520 --> 0:18:10.320 because a lot of people think that his policies have 0:18:10.440 --> 0:18:13.840 been to unleash the spr on the energy market, on 0:18:13.840 --> 0:18:17.040 the gasoline market, and that's brought down prices. What's the 0:18:17.040 --> 0:18:19.720 other side of the story. Well, the other side, Lisa, 0:18:19.880 --> 0:18:22.760 I think, is how adversarial the White House has been, 0:18:22.840 --> 0:18:26.119 starting within days of his inauguration when he killed the 0:18:26.200 --> 0:18:30.040 Keystone pipeline and then he's gone from there, you know, 0:18:30.320 --> 0:18:35.480 really beating on fossil fuels, coal, oil, natural gas and 0:18:35.600 --> 0:18:38.440 saying that renewables is the way to go. I think 0:18:38.480 --> 0:18:41.520 renewables will play a major role for the rest of 0:18:41.520 --> 0:18:45.399 this decade. But right now we need fossil fuels. Okay, 0:18:45.400 --> 0:18:47.959 So that's the case. At the same time, perhaps it's 0:18:48.000 --> 0:18:51.000 just the coherence in the message from this administration, because 0:18:51.720 --> 0:18:54.080 they have actually confirmed that kind of view and said 0:18:54.359 --> 0:18:57.480 we need to encourage investment by some of the oil majors. 0:18:58.040 --> 0:19:00.919 Where could they be more consistent? What could be the 0:19:01.040 --> 0:19:04.920 message that could read through better that perhaps the Republicans 0:19:04.920 --> 0:19:09.120 are giving In your view, well, I'd say probably regulatory policy, 0:19:09.119 --> 0:19:12.760 which has been quite restrictive. I think the industry senses 0:19:13.640 --> 0:19:17.679 regulatory policy that's quite harsh, and therefore the industry is 0:19:17.720 --> 0:19:20.800 not doing much drilling or refining or shipping. Craig, if 0:19:20.840 --> 0:19:22.840 they can keep hold of the house in a Senate, 0:19:23.240 --> 0:19:25.359 what do you think this administration would like to do next? 0:19:25.640 --> 0:19:29.920 What do you expect to happen? It's a good question, John. 0:19:30.240 --> 0:19:33.400 I think that because both sides are so bitterly divided, 0:19:33.640 --> 0:19:36.600 we have to lower our expectations for much but I 0:19:36.640 --> 0:19:40.600 do think there's a chance they'll talk about immigration. Everywhere 0:19:40.600 --> 0:19:42.720 I go around the country, I hear the same refrain, 0:19:42.960 --> 0:19:48.000 we don't have enough cooks, waiters, waitresses, carpenters, whatever. And 0:19:48.080 --> 0:19:52.240 I do think more legal immigration is really quite would 0:19:52.240 --> 0:19:55.080 be very beneficial, and I think both parties might agree 0:19:55.119 --> 0:19:57.080 on that. Greg. In the meantime, a lot of people 0:19:57.080 --> 0:19:58.720 are thinking that it's going to be good luck and 0:19:58.760 --> 0:20:00.879 markets like guid luck, and that seems to be the 0:20:00.920 --> 0:20:03.400 feeling right now. Is this going to be grid luck 0:20:03.440 --> 0:20:07.880 that's good for markets? Yeah? I think so. I think 0:20:07.880 --> 0:20:10.560 that there's not going to be anything radical, certainly nothing 0:20:10.600 --> 0:20:14.360 new on taxes, capital gains, the estate tax, the top rate. 0:20:14.680 --> 0:20:16.720 I think all of that stuff gets frozen for at 0:20:16.800 --> 0:20:20.480 least two more years. In that kind of predictability is 0:20:20.520 --> 0:20:22.720 a good story for the markets. What does that do 0:20:22.880 --> 0:20:25.920 to our alliances with other nations? And I think about 0:20:25.960 --> 0:20:30.680