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Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along

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Speaker 1: with Jonathan Farrow and Lisa Abramowitz. Join us each day

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Speaker 1: for insight from the best and economics, geopolitics, finance and investment.

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Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and

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Speaker 1: anywhere you get your podcasts, and always on Bloomberg dot Com,

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Speaker 1: the Bloomberg Terminal, and the Bloomberg Business app. This is

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Speaker 1: a joy. It's a joy always to speak to Claudiasm.

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Speaker 1: She's founder of some consulting, Bloomberg opinion columnists and formal

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Speaker 1: Federal Reserve economists. But far more when you're that young

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Speaker 1: and you come out of Michigan and you're codified with

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Speaker 1: the rule in your name, there's very few people in

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Speaker 1: the economics game they can say that, Claudia, where did

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Speaker 1: the same rule come from? Was that a paper you

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Speaker 1: did in your spare time on a trip to Europe

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Speaker 1: and said, I think I'm going to come up with

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Speaker 1: a rule. How did the Sam rule get invented?

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Speaker 2: The reason the Sam rule exists is it was part

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Speaker 2: of a policy proposal. I had to automatically send out

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Speaker 2: stimulus checks during a recession and to calibrate how much

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Speaker 2: you send out how often, So it really was a

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Speaker 2: sidebar to the policy proposal. It's turned out to be

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Speaker 2: considered relatively useful to people watching recessions, but that was

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Speaker 2: never the.

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Speaker 1: Right point of it. The heritage of Michigan with Betsy

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Speaker 1: Stevenson and others there with Claudia some the Sam rules

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Speaker 1: now full front and center. Kolbe Smith writing it up

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Speaker 1: in the Ft ten days ago. How many states are

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Speaker 1: in recession based on the Claudia Sam rule.

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Speaker 2: Right, Well, there's different ways you can calculate it at

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Speaker 2: the state level, but somewhere around ten or less states

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Speaker 2: are in a place where their unemployment rate at the

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Speaker 2: state level has risen more than a half a percentage point.

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Speaker 2: So that's kind of the rule at the national level.

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Speaker 2: We're not calibrated at the state level. And yet I

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Speaker 2: think it's a good exercise to look under the hood

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Speaker 2: and see how various states are doing in terms of

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Speaker 2: their unemployment. And a big one within that group that has,

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Speaker 2: you know, this higher increase in unemployment is California, and

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Speaker 2: that's a that's a big state.

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Speaker 3: If you do look at some of these pockets of pain,

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Speaker 3: and then you look at the overall aggregate, Does it

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Speaker 3: make the overall aggregate look worse or better? Because some

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Speaker 3: of the increase that we've seen in unemployment have really

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Speaker 3: been driven by a few pockets of pain, right, And that's.

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Speaker 2: The thing to look at. In a state like California,

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Speaker 2: there's been some very specific areas of distress. So you

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Speaker 2: think about the tech sector, which is important to California's economy.

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Speaker 2: And the question now is where we see these pockets

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Speaker 2: of stress, do they spread? Do they resolve themselves kind

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Speaker 2: of locally? And right now that is we can't know

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Speaker 2: that yet, but that's something to be watching. Is that

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Speaker 2: spread that will could eventually push the whole economy into

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Speaker 2: a recession.

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Speaker 3: A lot of people have said that we can't necessarily

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Speaker 3: get a recession and we can't necessarily get an employment

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Speaker 3: creeping that much high. If you have consumer spending where

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Speaker 3: it is, you say, it's not a mystery. So what

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Speaker 3: is this non mystery telling you in terms of how

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Speaker 3: long it can continue?

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Speaker 1: Right?

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Speaker 2: So it was really careful when we look at various

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Speaker 2: numbers to understand who's actually measured and how they're put together.

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Speaker 2: Something like GDP, something like personal consumption expenditures that we

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Speaker 2: look at that's reflecting mainly a lot of high income

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Speaker 2: individuals who are spending, whereas we look at something like

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Speaker 2: the unemployment rate, everybody counts equally, So I think it's

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Speaker 2: where GDP there's like this tension between consumers keep spending

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Speaker 2: and spending. But that's in a setting where these data

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Speaker 2: tell us a lot more about someone like Elon Musk

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Speaker 2: than they do a Walmart cashier. Right, So we have

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Speaker 2: to be a little careful how the data are construction.

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Speaker 2: And I think that's why the unemployment rate, which is

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Speaker 2: a much more egalitarian measure of what's going on, that's

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Speaker 2: a good way to look and that looks strong too.

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Speaker 1: Claudia, I'm so glad you brought up California. I was

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Speaker 1: gonnaware of this, folks. I mean, I know California's ormuson.

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Speaker 1: I thought list it was maybe the sixth or seventh

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Speaker 1: global economy if you take it by itself. I'm wrong,

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Speaker 1: it's the fourth. It's the United States, folks, China, Japan,

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Speaker 1: and then the fourth economy would be California taken by itself.

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Speaker 1: I mean, I think the financial media and frankly much

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Speaker 1: of economics, Claudia gets us totally wrong. They're these dominant

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Speaker 1: states that are all Florida, California, maybe New York, and

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Speaker 1: I'll let you decide the others Texas clearly, but are

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Speaker 1: those three states not in recession while others struggle? Is

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Speaker 1: is there something to size in America that gives us

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Speaker 1: a better stability.

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Speaker 2: It's really a mixed bag at this point. Again, we're

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Speaker 2: trying to figure out is the weakness contained or has

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Speaker 2: it started spreading. California is the biggest one that's up

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Speaker 2: in a it's unemployment race in employment rates have risen notably.

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Speaker 1: I look, Claudia at the FED meeting turned to that

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Speaker 1: if we could, and the shock and all of it.

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Speaker 1: We had two major economists say, okay, well then why

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Speaker 1: didn't they just raise rates? Were you surprised that after

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Speaker 1: the verbiage they just didn't raise rates in an Arthur

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Speaker 1: Burns kind of way?

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Speaker 2: I was, though, I'll give him credit, this is the

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Speaker 2: most hawkish pause I could have imagined, right going out

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Speaker 2: and saying we're going to have two more rate increases.

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Speaker 2: That's likely, not likely, just means that people are putting

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Speaker 2: fifty percent or greater odds on needing to raise rates.

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Speaker 2: So it's not necessarily a done deal. I'm sure there

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Speaker 2: was a robust debate at this meeting about what the

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Speaker 2: policy chain should be, but wow, that really that summary

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Speaker 2: of economic projection is really, you know, nailed it home.

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Speaker 2: We're going to raise and it should have been a

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Speaker 2: really clear signal forget about the chance of cutting this year.

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Speaker 3: It wasn't, Claudia, And what you hear is, yes, perhaps

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Speaker 3: people aren't necessarily pricing in rate cuts, but as we

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Speaker 3: heard from Ben Laidler, people are fighting the Fed. They

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Speaker 3: continue to disbelieve that they're going to raise rates once

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Speaker 3: even twice, especially not twice more this year, and that

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Speaker 3: they're probably done for the cycle. Stuart Heiser saying that

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Speaker 3: this is one of the biggest risks to the melt

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Speaker 3: up that he sees continuing. All things being equal, what's

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Speaker 3: your probability that you assigned to the FED being able

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Speaker 3: to go once or twice more based on what you

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Speaker 3: were just saying. Unemployment probably the best gauge of how

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Speaker 3: strong the economy is, and it still is pretty good.

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Speaker 2: Right, But that's all the more reason in the FED

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Speaker 2: size to raise rates, right, and inflation has proved sticky, right,

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Speaker 2: I mean the signal July could be it's a live meeting,

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Speaker 2: we could raise again. Then they have a month of

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Speaker 2: data between now and the July meeting, Like what are

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Speaker 2: they really gonna learn that they didn't know already? So

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Speaker 2: I take them at their word for at least that

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Speaker 2: first increase, But again, this has got to be hanging

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Speaker 2: on a knife's edge because otherwise just raise rates, Like

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Speaker 2: what are they waiting for if they think that's necessary.

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Speaker 2: I still think that they're going to keep on to

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Speaker 2: the holding the rates high, and inflation is just too

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Speaker 2: high for them to be that comfortable to cut.

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Speaker 3: Which is one reason why people are really curious to

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Speaker 3: hear what Ja Palla has to say. He's heading to

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Speaker 3: Capitol Hill Wednesday, Tomorrow and Thursday, and he's going to

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Speaker 3: be testifying for first time since the banking crisis kind

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Speaker 3: of arose. How much do you expect him to double

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Speaker 3: down and to say, you know what, you guys are

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Speaker 3: getting it wrong. We're going to raise rates further. You

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Speaker 3: can't just rally into strength and expect us to do

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Speaker 3: nothing right.

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Speaker 2: And I think, you know, reading the monetary policy report

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Speaker 2: that goes along with you know, when he testifies, it

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Speaker 2: certainly has that flavor. You know, there are boxes on

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Speaker 2: how we think about what's happened in the banking sector.

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Speaker 2: They still are very I mean they're lying, this is

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Speaker 2: very isolated, This doesn't have anything to do with interest

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Speaker 2: rate policy. I mean, I think you can see in

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Speaker 2: that report the same emphasizing these same points. So, like

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Speaker 2: you said, doubling down on what he's already said. And

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Speaker 2: I don't think, I mean, he's not going to want

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Speaker 2: to go so far from that script because they really

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Speaker 2: did want this to be hawkish.

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Speaker 1: Claudie. One final question, what's our history of guessing or

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Speaker 1: gaming or judging the trend and the second derivative of disinflation?

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Speaker 1: Do we get that right? Ever?

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Speaker 2: Really? I mean, and there's if you go with the

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Speaker 2: historical record, I mean, within a reasonable amount of time

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Speaker 2: facing this disinflationary cycle, how to do enough?

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Speaker 1: How not to do enough?

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Speaker 2: Because again, this is not Volkar Fed that walked in

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Speaker 2: and said we want this and we want it now,

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Speaker 2: So there isn't much to compare it to. I mean, frankly,

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Speaker 2: the Fed's forecast, especially in the out years, it's like, wow,

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Speaker 2: that's pretty optimistic. And yet they could pull this off.

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Speaker 2: I mean, there's still signs of it, but I think

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Speaker 2: they're gonna be very cautious in stepping back even if

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Speaker 2: inflation starts to fall.

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Speaker 1: I mean, it's really really, it's really really important here

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Speaker 1: and I guess that comes down to the disinflation trend.

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Speaker 1: And in housing, we get housing data today Pantheon folks,

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Speaker 1: and this was a wonderful article over the weekend. They

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Speaker 1: were just blistering that the housing confidence in housing certitude

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Speaker 1: claudiusom is just wrong, harsh language. They said, housing in America,

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Speaker 1: the hope of it is divorced from reality. Have we

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Speaker 1: can become too complacent about the ramifications in real estate

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Speaker 1: of these high interest rates, waiting and hoping for that disinflation, right?

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Speaker 2: Well, I mean housing is one of the primary sectors

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Speaker 2: that the FED should be working through to get to

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Speaker 2: the real economy. I mean, that's one of the most

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Speaker 2: interest rate sensitive sectors and it's been I mean we've

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Speaker 2: seen initially a lot of optimism pulled out and now

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Speaker 2: maybe more put back into the market. And as with

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Speaker 2: all of these pieces, the FED cannot move the economy

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Speaker 2: on a dime.

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Speaker 1: Right.

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Speaker 2: There's a lot of of going on in the pieces,

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Speaker 2: but that's a primary transmission mechanism into the rest of

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Speaker 2: the economy.

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Speaker 1: Claudia, thank you so much and congratulations on the amount

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Speaker 1: of work we see on the some rule out there

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Speaker 1: in this third quarter now third quarter almost almost third

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Speaker 1: quarter of twenty twenty three, Claudia, Sam of some research

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Speaker 1: in the equity space. We've really focused on this this

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Speaker 1: morning because we've listened to you on radio and television

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Speaker 1: and you want to know equity opinion around equity's bonds, currencies, commodities.

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Speaker 1: Mister Kronnert is equity strategists and managing director at City Group,

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Speaker 1: where Thrillty could join us this morning. Scott Kronter, what

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Speaker 1: a strange time. I want you to describe right now

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Speaker 1: how you address in writing fear of missing out? Where

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Speaker 1: is that in an equity strategy right now?

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Speaker 4: Well, where it is right now is in the performance

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Speaker 4: games you've seen in this tech growth component of large

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Speaker 4: cap equities, and it's also increasingly showing up in a

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Speaker 4: lot of our positioning data. So over the weekend, our

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Speaker 4: quant colleagues pointed out that looking at the future's positioning,

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Speaker 4: it's about as bullish as you've seen since the global

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Speaker 4: financial crisis. So there certainly has been a crowding in

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Speaker 4: effect underway. As this Nasdaq led rally is really kicked in.

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Speaker 1: I am my head is spinning because I'll see on

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Speaker 1: a given day, the bet is negative, the bet is caution,

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Speaker 1: the bet is woe as me. We're all going to die,

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Speaker 1: the bull market's going to end. And then you just

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Speaker 1: said the bet is actually that people are very bullish.

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Speaker 1: You can't have it both ways, which is it?

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Speaker 4: Well, the starting point is the fear that was kicking

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Speaker 4: in last year is the FED peak hawkishness was kicking in,

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Speaker 4: and we were really concerned about recession risk. So you

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Speaker 4: went into this year with probably a little bit more

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Speaker 4: concerned positioning related to this megacap growth coport, which felt

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Speaker 4: the impact of the of the multiple compression last year. Heck,

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Speaker 4: we're using this four thousand target that we can get

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Speaker 4: to the same target we used start of the year.

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Speaker 4: Start of the year we looked bullish versus the futures

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Speaker 4: implied positioning. Midyear we're hanging on to this target. Now

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Speaker 4: we're looking bearish. So you know, there has been a

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Speaker 4: pretty good seesaw a work here. I think the point

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Speaker 4: we're making is is that what comes with this price

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Speaker 4: action is an implicit expectation around fundamental follow through. And

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Speaker 4: our concern quite simply is in the shorter term for

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Speaker 4: all of the AIU four you kicking in, the higher

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Speaker 4: you go now, the higher the implicit expectations you set

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Speaker 4: up for. And that just sets a pretty high bar

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Speaker 4: going into the Q two reporting period.

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Speaker 3: So you think that this is going to be an

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Speaker 3: earnings led decline because we're going to see some sort

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Speaker 3: of declined to get down to your target of four

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Speaker 3: thousand before going up to where you see it eventually

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Speaker 3: ending up, which is around where we are right now.

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Speaker 3: So is that really going to be the catalyst big

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Speaker 3: tech earnings reports that disappoint I think we're going.

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Speaker 4: To find across the board. I mean, every company in

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Speaker 4: the country better have an AI strategy that they're talking about.

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Speaker 4: As you go into Q two a reporting period, the

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Speaker 4: issue is going to be to what degree does that

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Speaker 4: show up in fundamentals. And it wasn't that long ago

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Speaker 4: that we were thinking AI was sort of a twenty

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Speaker 4: five event. It's been pulled forward for to see if

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Speaker 4: some of the big tech names of late. I just

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Speaker 4: think that what we're going to run into is this

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Speaker 4: disconnect with how hard the market is run versus where

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Speaker 4: earnings expectations are. We started the year two thirteen for

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Speaker 4: twenty twenty three earnings. We're up to two fifteen now,

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Speaker 4: and so are our call around earnings. Resilience has been

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Speaker 4: very solid here. It's just a question of to what

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Speaker 4: degree a lot of expectations are being priced in, perhaps

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Speaker 4: too quickly.

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Speaker 3: So you think the people who think the FED is

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Speaker 3: going to be the killer of this rally are overstating

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Speaker 3: things that there's going to be some sort of additional

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Speaker 3: rate hike or two and perhaps stick your inflation. That

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Speaker 3: could really underline some of evaluations that have gotten baked

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Speaker 3: in here. Do you dismiss that?

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Speaker 4: Well, I think that's part of the part of the equation, right,

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Speaker 4: So we're kind of coming at it more fundamentally based.

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Speaker 4: But to your point least, I mean, you're still looking

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Speaker 4: at at a FED that it's going to need to

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Speaker 4: see a little bit stronger deceleration and inflation metrics to

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Speaker 4: feel comfortable changing tune again here city the house view

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Speaker 4: is another one or two hikes, and we're looking at

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Speaker 4: a FED fund's futures curve that is quickly right sized

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Speaker 4: over the past couple of months and is now pretty comfortable.

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Speaker 4: You're looking at a five percent FED funds level into

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Speaker 4: the end of the year. So every step we go

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Speaker 4: in terms of nudging up targets for the SMP, you

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Speaker 4: still have to compare that to the return on cash.

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Speaker 4: It's a pretty interesting trade off that investors are facing

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Speaker 4: right now on this, but there's no doubt in our

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Speaker 4: mind that a higher for longer FED higher than expected

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Speaker 4: versus two months ago. The interest rate backdrop, all of

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Speaker 4: this plays into a an ernie sorry, an interest rate

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Speaker 4: tailwind that does keep somewhat of a lid on where

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Speaker 4: valuations can go.

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Speaker 1: Where's lid on valuations three years out, five years out.

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Speaker 1: I'm not talking about buying hold Scott Chriner, But you've

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Speaker 1: been doing this long enough to know the percentage of

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Speaker 1: money that's in the game for what for the financial

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Speaker 1: media is long long term like thirty six months. How

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Speaker 1: do you scope thirty six months given all the angst

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Speaker 1: that's out there.

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Speaker 4: So it's not easy to do tom clearly. So the

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Speaker 4: way we've kind of come at it. Heck, a year

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Speaker 4: or so ago, we were saying, hey, geopolitical risk premium

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Speaker 4: is going to knock a couple of multiple turns off

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Speaker 4: the SMP. Now we're looking at this disconnect with how

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Speaker 4: you're going to value growth versus cyclicals and defenses within

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Speaker 4: the market. The way we're thinking about it is that

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Speaker 4: what's happening under the surface and this is going to

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Speaker 4: be a direct AI and an indirect AI influence the

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Speaker 4: opportunity for productivity improvement across the S and P five

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Speaker 4: hundred in broader equity on the economic landscape here in

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Speaker 4: the US, we think is going to get really interesting here.

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Speaker 4: So longer term, we're pretty comfortable the market can hold

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Speaker 4: a higher valuation. Purtsey a megacap growth and tech, but

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Speaker 4: also because the rest of the market is going to

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Speaker 4: prove out that it's less cyclical than historically perceived. And

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Speaker 4: I think AI, in addition to other forms of technology

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Speaker 4: that have aided and embedded productivity improvements, end up underscoring

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Speaker 4: a higher valuation than many investors have gotten comfortable with.

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Speaker 4: So from our view, this is all timing. We think

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Speaker 4: we've run pretty hard. We need to digest the move.

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Speaker 4: But the setup here is we navigate this recession risk

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Speaker 4: in the second half of this year is for is

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Speaker 4: higher for longer coming out the other side.

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Speaker 1: Scott Croner, thank you so much for the brief with

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Speaker 1: City Group. If you're a retail investor in your a

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Speaker 1: yield hog, you're looking at a twenty year duration, thirty

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Speaker 1: year unibond, whatever it may be, to grab that yield,

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Speaker 1: and you have been absolutely slammed over the last twenty

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Speaker 1: four months of Bloomberg total Return Index down anywhere from

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Speaker 1: thirteen to fifteen to seventeen percent, an end of the

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Speaker 1: great bond party. Megan Swivers extremely acute at this with

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Speaker 1: Georgetown Finance and Mathematics, director of US Rates Strategy at

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Speaker 1: Bank of America as well. I'm going to start with

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Speaker 1: the basic retail question. It was up, up and away

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Speaker 1: for ten years, fifteen years, whatever, we got absolutely slammed,

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Speaker 1: priced down, let's say fifteen percent to be kind, We've come.

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Speaker 5: Back a little bit now what Yeah, Tom, I think

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Speaker 5: this is really the question on everyone's mind right now.

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Speaker 5: You know, you have yields at relatively attractive levels, but

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Speaker 5: is now the time to be buying? And what history

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Speaker 5: tells us is that you really need to wait until

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Speaker 5: that final fed hike of the cycle to feel more

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Speaker 5: comfortable and confident in going long duration. At this point,

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Speaker 5: and what we see from investors. The survey that we

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Speaker 5: conducted at ba A. One of them is this Global

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Speaker 5: FX and Rate Sentiment Survey, which is a really cool

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Speaker 5: survey of global benchmark investors, has a pretty long history

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Speaker 5: two decades or so, and that tells us that right

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Speaker 5: now investors have more confidence being long uvest duration than

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Speaker 5: they have really at any point in time during that survey.

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Speaker 1: Give us some maturity time on this, I mean, let's

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Speaker 1: frame this out. The FED is at the two year space,

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Speaker 1: The belly of the curve is five to seven years

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Speaker 1: long duration. Does that click in at ten years or

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Speaker 1: is it a different maturity?

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Speaker 5: I mean, you can think of it across the curve.

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Speaker 6: Really.

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Speaker 5: What you see though, and what we've been guiding investors tours,

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Speaker 5: is when you're talking about long duration, talking further out

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Speaker 5: the curve, ten year, thirty year rates, and those are

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Speaker 5: more limited in terms of how much they can increase

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Speaker 5: on the back of the FED continuing to hike versus

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Speaker 5: the front end of the curve will be pulled higher

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Speaker 5: with the FED delivering more rate hikes likely.

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Speaker 1: I The problem I have with this is everybody likes

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Speaker 1: to talk spread market and all these other professional distractions.

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Speaker 1: I get it. Everybody read for Bosi. I'm dazzled. Forget

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Speaker 1: about it. The fact is bonds went down fifteen percent

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Speaker 1: just as a round number one hundred became part became

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Speaker 1: eighty five. That's all there is to it. We've come

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Speaker 1: back a little bit to eighty seven, eighty eight, ninety,

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Speaker 1: whatever that number is. Are you, as a bond investor

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Speaker 1: investing for total return or someone somewhere out there you

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Speaker 1: get back to what we remember? Or is this the

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Speaker 1: new level we're dealing with?

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Speaker 5: I mean to me, Tom, the answer to that question

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Speaker 5: comes down to the inflation outlook, and right now, if

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Speaker 5: you look at market price and kind of following up

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Speaker 5: on the prior segment here, the market has a lot

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Speaker 5: of confidence that the Fed's going to be able to

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Speaker 5: see infleetion back down to two percent in a year.

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Speaker 5: And if indeed that is the trajectory, then you want

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Speaker 5: to get price on the exactly you're going to be

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Speaker 5: able to see the FED cut alongside that.

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Speaker 1: The other thing you say in your research note is issuance.

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Speaker 1: And this is where all my radars, Lise and I

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Speaker 1: talk about this all the time. What are CFOs going

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Speaker 1: to do in this milieu. I mean to me, you know,

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Speaker 1: there's going to be the big guys call up to

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Speaker 1: make four phone calls, including the Bank of America, and

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Speaker 1: they sell a gazillion bonds. But is a total What

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Speaker 1: will CFOs do on issuance? Yeah?

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Speaker 5: I think that that is another important question here, And

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Speaker 5: on the back of this repositioning that we've seen from

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Speaker 5: investors more broadly, what you have Treasury doing now that

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Speaker 5: we're beyond the debt limit is increasing issuance. This first

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Speaker 5: wave is going to be in bills pretty easily absorbed

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Speaker 5: because if you look at the Fed's overnight reverse reboat facility,

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Speaker 5: you got a lot of cash sitting on the sidelines.

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Speaker 5: They can go out and buy that. But the question here,

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Speaker 5: right is this longer duration stuff ten years and out.

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Speaker 5: Who are the marginal buyers of that going to be?

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Speaker 5: And I think at the end of the day, that's

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Speaker 5: another risk to this very consensus view in the market

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Speaker 5: that we currently see, which is wanting to be launderation

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Speaker 5: at these But.

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Speaker 1: The consensus view, folks, to frame this as simply as

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Speaker 1: we can, You're going to look out to ten years,

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Speaker 1: which seems forever away. Two thousand and thirty three two

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Speaker 1: thousand and thirty four. You're going to buy it and

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Speaker 1: you're going to clip the coupon. If the price goes down,

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Speaker 1: you've still got the coupon to carry to help you.

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Speaker 1: But the hope and prayer of the market now the

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Speaker 1: consensus is price up along with that to a really

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Speaker 1: pretty significant total return.

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Speaker 5: Right, that's exactly right. And again, you know, if the

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Speaker 5: Fed is able to see the inflation levels that the

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Speaker 5: market expects at this point, it makes sense for the

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Speaker 5: Fed to get towards a more neutral policy rate sett

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Speaker 5: and call it two and a half three percent, which

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Speaker 5: means that you're going to have downward pressure on those

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Speaker 5: yields at the back end. But really the challenging thing

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Speaker 5: and the risky thing for investors is is stickier inflation.

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Speaker 5: And currently the Fed really doesn't have a lot of

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Speaker 5: confidence in their forecasts. We don't think that they're going

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Speaker 5: to stop hiking until they see core CPI coming closer

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Speaker 5: to two tenths one tenth of a percent. You're at

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Speaker 5: four tenths.

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Speaker 1: So what's your ten years call year end or one

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Speaker 1: year up, whichever way you frame that.

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Speaker 5: Yeah, so year end we have three point fifty, so

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Speaker 5: a bit lower than the levels that we're currently sitting at,

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Speaker 5: and that is really due in part to the fact

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Speaker 5: that we're going to be beyond the fed's final rate

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Speaker 5: hike of the cycle, and you're going to have more

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Speaker 5: conviction on what the inflation at look will be. But

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Speaker 5: in general, we're not expecting this very massive fall in rates.

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Speaker 5: It's it's looking near term like you're pretty much going

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Speaker 5: to be sitting in this range between three twenty five three.

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Speaker 1: So I don't know if you get into portfolio construction.

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Speaker 1: I got like gateways to go here folks with the

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Speaker 1: Megan Swineber. But the answer here is it's real simple.

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Speaker 1: Do you single point, do you barbell or do you

436
00:23:00,640 --> 00:23:03,720
Speaker 1: ladder out maturities if you're scared stiff with the stock market?

437
00:23:03,960 --> 00:23:07,360
Speaker 5: Yeah, and that's the that's the important point here too.

438
00:23:08,200 --> 00:23:12,560
Speaker 5: Rates duration and portfolios is the world's risk off asset,

439
00:23:13,000 --> 00:23:15,480
Speaker 5: and if you have more of this pressure here on

440
00:23:15,520 --> 00:23:19,960
Speaker 5: the equity market, you're more inclined to see rates be

441
00:23:20,119 --> 00:23:23,560
Speaker 5: that buffer, be that hedge. A key point here though,

442
00:23:23,720 --> 00:23:26,159
Speaker 5: is whether or not we're going to see this recession

443
00:23:26,640 --> 00:23:29,439
Speaker 5: that many economists we're calling for at the at the

444
00:23:29,480 --> 00:23:32,960
Speaker 5: start of the year. The data has been so resilient, right,

445
00:23:33,000 --> 00:23:35,440
Speaker 5: The US economy is just a lot more resilient than

446
00:23:35,440 --> 00:23:39,120
Speaker 5: what the FED what economists. More broadly, we're ultimately giving

447
00:23:39,160 --> 00:23:42,280
Speaker 5: it credit for, which limits how much you can really

448
00:23:42,320 --> 00:23:46,159
Speaker 5: see the equity market fall and rates fall alongside it.

449
00:23:46,280 --> 00:23:47,760
Speaker 1: I got to go out to the long term space.

450
00:23:47,800 --> 00:23:49,840
Speaker 1: It's great when you see Apple Computer put out a

451
00:23:49,880 --> 00:23:51,960
Speaker 1: thirty year piece or whatever, and you know it's sold

452
00:23:52,000 --> 00:23:56,240
Speaker 1: in two seconds as well. What is the plus minus

453
00:23:56,359 --> 00:23:59,679
Speaker 1: of long, long duration, full faith and credit right now?

454
00:23:59,800 --> 00:24:01,919
Speaker 5: Yeah, yeah, you know, I think you have to be

455
00:24:02,119 --> 00:24:05,240
Speaker 5: a little bit more humble about how far rates can fall.

456
00:24:05,320 --> 00:24:08,680
Speaker 5: The FED when they were implementing the flexible average inflation

457
00:24:08,760 --> 00:24:12,040
Speaker 5: targeting strategy, a big part of that, right was being

458
00:24:12,040 --> 00:24:14,919
Speaker 5: able to see nominal rates move higher, be able to

459
00:24:15,040 --> 00:24:17,960
Speaker 5: build in some buffer when they're cutting. So I think

460
00:24:18,000 --> 00:24:21,119
Speaker 5: that the probability that the FED cuts down to the

461
00:24:21,200 --> 00:24:24,359
Speaker 5: zero lower bound is more limited here. You probably have

462
00:24:24,440 --> 00:24:27,320
Speaker 5: to think that that in a FED cutting cycle, when

463
00:24:27,359 --> 00:24:30,520
Speaker 5: we're in more this mild recession, it's closer to two

464
00:24:30,520 --> 00:24:32,280
Speaker 5: and a half percent than it is falling all the

465
00:24:32,320 --> 00:24:33,320
Speaker 5: way back down to zero.

466
00:24:33,480 --> 00:24:35,920
Speaker 1: I mean, I'm looking here, and you know, it's amazing

467
00:24:35,960 --> 00:24:38,840
Speaker 1: how this is the trap, folks. You gotta be careful here.

468
00:24:39,320 --> 00:24:41,760
Speaker 1: As many of you know, I bought the one hundred

469
00:24:41,880 --> 00:24:44,480
Speaker 1: year Austria. It's like now in ninety seven, I'm down

470
00:24:44,800 --> 00:24:48,200
Speaker 1: seventy percent in that piece right now and it's off,

471
00:24:48,280 --> 00:24:50,760
Speaker 1: it's on the mat. I mean, even with some of

472
00:24:50,800 --> 00:24:55,640
Speaker 1: the constructive things of Europe or whatever, the Austrian ninety

473
00:24:55,760 --> 00:24:58,880
Speaker 1: seven year piece is still it hasn't come up as

474
00:24:59,160 --> 00:25:05,119
Speaker 1: that's a trap you're talking about on a less you know, inflammatory.

475
00:25:04,240 --> 00:25:07,119
Speaker 5: Basis exactly, And I mean I think near term you

476
00:25:07,160 --> 00:25:09,360
Speaker 5: have more potential for the front end to be more

477
00:25:09,440 --> 00:25:12,760
Speaker 5: viotal move higher. With the Fed continuing hike. You see

478
00:25:12,760 --> 00:25:15,800
Speaker 5: the market only pricing about another twenty five basis point

479
00:25:15,880 --> 00:25:18,520
Speaker 5: hike over the next several months. If they deliver on

480
00:25:18,680 --> 00:25:21,560
Speaker 5: two more, which is our base case call, you're going

481
00:25:21,640 --> 00:25:24,240
Speaker 5: to see more upward pressure on the front end of

482
00:25:24,280 --> 00:25:28,000
Speaker 5: the curve. So we think that investors who've really been

483
00:25:28,080 --> 00:25:30,439
Speaker 5: positioned for the end of the hiking cycle, which is

484
00:25:30,840 --> 00:25:33,920
Speaker 5: curve seepeners long duration, you need to be careful here.

485
00:25:33,920 --> 00:25:36,800
Speaker 5: And I think a good way to hedge this is

486
00:25:36,840 --> 00:25:38,560
Speaker 5: to push back on what the market's prices.

487
00:25:39,040 --> 00:25:41,040
Speaker 1: The way to hedge it is to buy Nvidio right.

488
00:25:43,040 --> 00:25:44,080
Speaker 5: I can't comment on that.

489
00:25:44,640 --> 00:25:56,920
Speaker 1: She's Megan Sweibers, thank you for compliance for Bank of America.

490
00:25:59,280 --> 00:26:02,600
Speaker 1: Sometimes I and very often, there can be a book

491
00:26:02,600 --> 00:26:04,600
Speaker 1: of the summer or the book of the year, and

492
00:26:04,680 --> 00:26:08,200
Speaker 1: it's just for whatever reason in the time, King blur,

493
00:26:08,640 --> 00:26:13,960
Speaker 1: I blow it. I blew it. With Sebastian Page's phenomenal

494
00:26:14,560 --> 00:26:17,560
Speaker 1: Beyond Diversification, I'm going to give them the highest regard

495
00:26:17,640 --> 00:26:21,479
Speaker 1: on this. This is the most important adult Wall Street

496
00:26:21,560 --> 00:26:27,800
Speaker 1: book since Richard Bernstein's classic volume on value and growth.

497
00:26:28,160 --> 00:26:30,800
Speaker 1: I can't say enough about it. Every time I look

498
00:26:30,840 --> 00:26:33,719
Speaker 1: at it, I'm blown away by the acuity. Joining us

499
00:26:33,720 --> 00:26:37,960
Speaker 1: this morning, the author of Beyond Diversification, Sebastian Page, shingles

500
00:26:38,000 --> 00:26:41,080
Speaker 1: out at t row Price. Sebastian, I'm going to get

501
00:26:41,160 --> 00:26:44,720
Speaker 1: right to it. You talk about quack remedies. What's the

502
00:26:44,840 --> 00:26:51,200
Speaker 1: quackness of asset allocation in twenty twenty three.

503
00:26:51,280 --> 00:26:55,200
Speaker 7: Tom, it's we're going through a regime shift in asset allocation.

504
00:26:55,840 --> 00:26:59,160
Speaker 7: You know, this is a critical time in capital markets history.

505
00:26:59,359 --> 00:27:03,080
Speaker 7: In my mind, after forty years of declining rates, we

506
00:27:03,280 --> 00:27:06,720
Speaker 7: finally made a higher high end rate and we've wiped

507
00:27:06,760 --> 00:27:12,159
Speaker 7: out seventeen trillion in negative yielding debt. This begs the

508
00:27:12,240 --> 00:27:15,920
Speaker 7: question what do we do with asset allocation? Both tactically

509
00:27:16,000 --> 00:27:19,359
Speaker 7: how we navigate this regime shift, and that's been very confusing,

510
00:27:20,000 --> 00:27:23,320
Speaker 7: but also structurally the sixty forty. You often ask that

511
00:27:23,440 --> 00:27:26,520
Speaker 7: question on your show. I think the sixty forty needs

512
00:27:26,520 --> 00:27:30,399
Speaker 7: to be modernized. I think of the forty we should

513
00:27:30,480 --> 00:27:35,040
Speaker 7: add maybe fifteen to twenty percent in different alternatives and

514
00:27:35,160 --> 00:27:40,120
Speaker 7: look for equity protection strategies and so rethink diversification. This

515
00:27:40,160 --> 00:27:42,600
Speaker 7: is a critical time for doing this, Tom.

516
00:27:42,720 --> 00:27:44,840
Speaker 1: This is really important. And folks, this is with the

517
00:27:44,880 --> 00:27:47,919
Speaker 1: sharp ratio, with a risk free rate finally back to normal,

518
00:27:48,000 --> 00:27:51,080
Speaker 1: and the Sebastian page religion is you know what, folks,

519
00:27:51,160 --> 00:27:53,919
Speaker 1: that was a nice fifteen year gift. We're back to normal.

520
00:27:54,560 --> 00:27:58,440
Speaker 1: We can't go out and find private equity. We're not Blackstone,

521
00:27:58,480 --> 00:28:02,120
Speaker 1: we're not KKR, et cetera. Sebastian page. How do our

522
00:28:02,160 --> 00:28:08,480
Speaker 1: listeners and viewers participate in the Sebastian page fifty fifteen? Whatever?

523
00:28:08,520 --> 00:28:09,880
Speaker 1: The rest is an alternative.

524
00:28:11,760 --> 00:28:14,320
Speaker 7: You know, liquid alternatives are interesting if you know how

525
00:28:14,359 --> 00:28:18,560
Speaker 7: to select them. It really matters how you define liquid alternatives,

526
00:28:19,000 --> 00:28:23,760
Speaker 7: but investment strategies that focus on relative value that have

527
00:28:23,920 --> 00:28:28,280
Speaker 7: less of the traditional market exposure are also available in

528
00:28:28,320 --> 00:28:32,040
Speaker 7: liquid forms. But it also calls for rethinking how you

529
00:28:32,119 --> 00:28:36,560
Speaker 7: navigate markets tactically, how you protect for the downside. In

530
00:28:36,600 --> 00:28:40,000
Speaker 7: a nutshell, Tom, the big question for the sixty forty

531
00:28:40,480 --> 00:28:44,240
Speaker 7: is what is the role of duration or treasuries when

532
00:28:44,280 --> 00:28:46,840
Speaker 7: we get interest rate shocks. Now, to be clear, we

533
00:28:47,000 --> 00:28:50,400
Speaker 7: just had a five hundred basis points shock from the Fed.

534
00:28:50,640 --> 00:28:53,320
Speaker 7: We're not getting another one. In fact, we've been adding

535
00:28:53,400 --> 00:28:57,360
Speaker 7: duration back into our portfolios. But it's a critical question

536
00:28:57,440 --> 00:29:00,160
Speaker 7: if you look out five ten years, what is going

537
00:29:00,280 --> 00:29:02,880
Speaker 7: to be the volatility of interest rates, what is going

538
00:29:02,920 --> 00:29:05,520
Speaker 7: to be the volatility of inflation? And how do you

539
00:29:05,600 --> 00:29:09,920
Speaker 7: position your portfolio for those types of regimes. And this

540
00:29:10,000 --> 00:29:13,640
Speaker 7: goes for things like hedged equity strategies. It calls for

541
00:29:13,680 --> 00:29:18,320
Speaker 7: things like real asset equity strategies. You know, stocks that

542
00:29:18,360 --> 00:29:21,160
Speaker 7: we kind of didn't really like for the last ten

543
00:29:21,240 --> 00:29:24,520
Speaker 7: years pre pandemic, right when inflation was below two percent,

544
00:29:24,880 --> 00:29:31,360
Speaker 7: but energy companies, real estate investment trusts, metals and mining

545
00:29:31,520 --> 00:29:34,800
Speaker 7: precious metals and so on, strategies that have a levered

546
00:29:35,000 --> 00:29:38,360
Speaker 7: response to inflation shocks. This is all part of the

547
00:29:38,440 --> 00:29:41,160
Speaker 7: new regime for the next five to ten years.

548
00:29:41,240 --> 00:29:43,240
Speaker 3: Well, how much is this regime changing in real time?

549
00:29:43,320 --> 00:29:45,680
Speaker 3: There was a time, perhaps I don't know, five months ago,

550
00:29:45,720 --> 00:29:49,360
Speaker 3: when people thought that tech stocks were the most interest

551
00:29:49,400 --> 00:29:52,400
Speaker 3: rate sensitive, and yet we've seen yields rise and tech

552
00:29:52,480 --> 00:29:56,520
Speaker 3: rally in tandem. Is that connection also broken? Is that

553
00:29:56,600 --> 00:30:00,640
Speaker 3: diversification in these two areas perhaps different than it was

554
00:30:00,760 --> 00:30:01,600
Speaker 3: just five months ago.

555
00:30:03,120 --> 00:30:05,720
Speaker 7: Yeah, Look, in the short run, say, I think six

556
00:30:05,760 --> 00:30:09,640
Speaker 7: to twelve months, we're navigating threacherous waters. I think the

557
00:30:10,120 --> 00:30:16,120
Speaker 7: narrative around growth stocks has been driven by different factors. Lisa, Yes,

558
00:30:16,320 --> 00:30:18,760
Speaker 7: this correlation seems to have broken a little bit, but

559
00:30:18,800 --> 00:30:21,720
Speaker 7: there's also an underlying narrative of yeah, okay, we're pretty

560
00:30:21,720 --> 00:30:25,160
Speaker 7: close to peak rates. Those big tech companies have shown

561
00:30:25,200 --> 00:30:28,719
Speaker 7: that they're focused on efficiency, and then, of course, you know,

562
00:30:28,760 --> 00:30:33,200
Speaker 7: you see positive surprises on cloud revenues, positive surprises on

563
00:30:33,240 --> 00:30:37,480
Speaker 7: digital advertising, and then you hit sort of another kind

564
00:30:37,480 --> 00:30:41,160
Speaker 7: of regime shift in AI. And that's really been part

565
00:30:41,160 --> 00:30:43,719
Speaker 7: of the story, and you've covered it at length in

566
00:30:43,760 --> 00:30:46,360
Speaker 7: your show. But you know, AI's been around for a

567
00:30:46,360 --> 00:30:49,640
Speaker 7: long time. It just seems like the large language models

568
00:30:49,640 --> 00:30:52,560
Speaker 7: and the chat GPT are kind of yet another regime

569
00:30:52,600 --> 00:30:54,800
Speaker 7: shift we're going through, and that's all part of the

570
00:30:54,920 --> 00:30:58,640
Speaker 7: value versus growth equation. Lisa. We went back to neutral

571
00:30:58,680 --> 00:31:01,920
Speaker 7: in our portfolios were value all of last year and

572
00:31:01,960 --> 00:31:05,080
Speaker 7: we benefited from that. Now we're basically back to neutral

573
00:31:05,120 --> 00:31:08,080
Speaker 7: between growth and value. We don't want to be underweight

574
00:31:08,560 --> 00:31:12,560
Speaker 7: if the AI bubble quote unquote if you will is

575
00:31:12,680 --> 00:31:15,360
Speaker 7: kind of like nineteen ninety eight, right, So we'd rather

576
00:31:15,400 --> 00:31:16,480
Speaker 7: be at neutral right now.

577
00:31:16,520 --> 00:31:18,840
Speaker 1: Semester Page, Thank you so much for joining us today

578
00:31:18,840 --> 00:31:21,600
Speaker 1: with tro Price there. I can't say enough, particularly for

579
00:31:21,680 --> 00:31:31,680
Speaker 1: pros about beyond diversification, hugely, hugely thought provoking. The Secretary

580
00:31:31,680 --> 00:31:34,080
Speaker 1: of State in Beijing getting off the airplane sort of

581
00:31:34,120 --> 00:31:36,280
Speaker 1: like the way Terry Hayes gets off the airplane at

582
00:31:36,280 --> 00:31:39,600
Speaker 1: Reagan here back when he's coming in from Dallas DFW.

583
00:31:39,640 --> 00:31:43,080
Speaker 1: He's founder of Benjia Policy and joins us this morning.

584
00:31:43,400 --> 00:31:46,240
Speaker 1: Terry just you know the basic idea of the shock

585
00:31:46,280 --> 00:31:48,320
Speaker 1: of the Secretary of State of the United States at

586
00:31:48,320 --> 00:31:51,800
Speaker 1: any country being shown or greeted to the country like

587
00:31:51,840 --> 00:31:53,600
Speaker 1: he's coming out of Reagan. You know what it's like.

588
00:31:53,640 --> 00:31:56,160
Speaker 1: You got to get from Gate ten over to gate

589
00:31:56,240 --> 00:32:01,080
Speaker 1: three quickly and your luggage is on the way was accomplished.

590
00:32:03,040 --> 00:32:06,760
Speaker 6: And those that Reagan know the infamous skate thirty five x,

591
00:32:06,760 --> 00:32:08,000
Speaker 6: and that was kind of what it.

592
00:32:07,960 --> 00:32:08,800
Speaker 1: Was there too.

593
00:32:09,840 --> 00:32:13,080
Speaker 6: What was accomplished was the ability of both countries to

594
00:32:13,120 --> 00:32:18,080
Speaker 6: say that they are continuing to communicate, that that is

595
00:32:18,080 --> 00:32:22,280
Speaker 6: calculated by both sides, is having the effect of diminishing

596
00:32:22,400 --> 00:32:27,240
Speaker 6: tensions somewhat, I argued before the meeting, and would still

597
00:32:27,320 --> 00:32:31,520
Speaker 6: argue that that's largely illusory. Uh. You know, my takeaways

598
00:32:31,560 --> 00:32:36,240
Speaker 6: really are simply that China sees the United States business community,

599
00:32:36,560 --> 00:32:42,400
Speaker 6: as you know, as its friend geopolitically and will continue

600
00:32:42,440 --> 00:32:46,800
Speaker 6: to try to push that relationship that the United did.

601
00:32:46,920 --> 00:32:49,400
Speaker 6: That China also is pushing the United States to what

602
00:32:49,400 --> 00:32:54,480
Speaker 6: they call recalibrate its its relationship in Asia, in other words,

603
00:32:54,560 --> 00:32:59,360
Speaker 6: kind of back off and and and agree that Asia

604
00:32:59,360 --> 00:33:04,000
Speaker 6: should be as Lake entirely, which is an absurd proposition

605
00:33:04,400 --> 00:33:08,800
Speaker 6: to the many countries who are our allies there. Thirdly,

606
00:33:08,840 --> 00:33:12,760
Speaker 6: there's no military communications. And fourthly, there's no mention of

607
00:33:13,840 --> 00:33:18,960
Speaker 6: Ukraine or Iran for that matter. So we've got communication,

608
00:33:19,760 --> 00:33:22,080
Speaker 6: but we don't have a lot of communication, and We

609
00:33:22,160 --> 00:33:25,400
Speaker 6: certainly on either side, don't have anything to show Terry.

610
00:33:25,440 --> 00:33:28,520
Speaker 3: This is the political tension right now. Perhaps it was

611
00:33:28,560 --> 00:33:32,000
Speaker 3: a win for President Biden in terms of not escalating

612
00:33:32,040 --> 00:33:35,640
Speaker 3: any tensions further creating some sort of open lines of communication.

613
00:33:36,240 --> 00:33:38,720
Speaker 3: Was it a win when it comes to the politics

614
00:33:38,720 --> 00:33:42,960
Speaker 3: domestically of a nation very much growing hawkish on China

615
00:33:43,120 --> 00:33:45,920
Speaker 3: and some with some calling for some sort of decoupling

616
00:33:46,160 --> 00:33:48,760
Speaker 3: which this president has pushed back against.

617
00:33:49,360 --> 00:33:53,600
Speaker 6: Well, you know, I agree that normalization of communications is

618
00:33:53,640 --> 00:33:57,920
Speaker 6: a win for President Biden. Regardless, I think that's very true.

619
00:33:58,600 --> 00:34:01,400
Speaker 6: At the same time, you know, we don't get much

620
00:34:01,440 --> 00:34:06,600
Speaker 6: more than that, you know, not much has been gotten. Secondly,

621
00:34:07,320 --> 00:34:10,200
Speaker 6: you know, my contention would be that the United States

622
00:34:10,200 --> 00:34:15,560
Speaker 6: policy towards China actually started to flip in say twenty sixteen,

623
00:34:15,640 --> 00:34:19,400
Speaker 6: twenty seventeen, even before Trump became president. And it is

624
00:34:19,440 --> 00:34:23,800
Speaker 6: among the most bipartisan and probably the most bipartisan policy

625
00:34:23,840 --> 00:34:26,960
Speaker 6: area that we've gotten Washington. So that's not going to

626
00:34:27,040 --> 00:34:32,160
Speaker 6: change either. The vast majority of Washington wants communication with China.

627
00:34:32,719 --> 00:34:36,279
Speaker 6: The vast majority of Washington also does not want a

628
00:34:36,320 --> 00:34:41,640
Speaker 6: situation where we're where we're either getting rid of our

629
00:34:41,719 --> 00:34:46,480
Speaker 6: own geopolitical interests or putting our allies in more peril

630
00:34:46,680 --> 00:34:49,200
Speaker 6: as a result of that. One of the lines, we're

631
00:34:49,239 --> 00:34:50,200
Speaker 6: not doing that right now.

632
00:34:50,760 --> 00:34:53,560
Speaker 3: One of the lines from Tony Blinken's press conference after

633
00:34:53,600 --> 00:34:55,640
Speaker 3: the meeting really stuck out, at least in a lot

634
00:34:55,680 --> 00:34:58,680
Speaker 3: of the talk shows over the weekend and yesterday. He said,

635
00:34:58,719 --> 00:35:02,000
Speaker 3: we remain committed to our China policy with the three Communicates,

636
00:35:02,000 --> 00:35:05,120
Speaker 3: the Taiwan Relation Acts, the sixth Assurances, we do not

637
00:35:05,320 --> 00:35:08,880
Speaker 3: support Taiwan's independence. We've made it clear that we oppose

638
00:35:08,920 --> 00:35:13,120
Speaker 3: any unilateral change changes to the status quo by either side.

639
00:35:13,800 --> 00:35:16,520
Speaker 3: Is that controversial, terry and how is it being sort

640
00:35:16,560 --> 00:35:18,040
Speaker 3: of spun the day after?

641
00:35:19,160 --> 00:35:22,280
Speaker 6: Well, it shouldn't be controversial, because what Secretary of Lincoln

642
00:35:22,360 --> 00:35:26,240
Speaker 6: is doing there is really underscoring that United States policy

643
00:35:26,320 --> 00:35:30,320
Speaker 6: since nineteen seventy nine in the Taiwan Relations Act, remains

644
00:35:30,360 --> 00:35:33,080
Speaker 6: the policy of the United States government, and there's been

645
00:35:33,120 --> 00:35:38,760
Speaker 6: a lot of concern, a lot of understanding and misunderstanding

646
00:35:38,840 --> 00:35:42,480
Speaker 6: around that over the past few years that frankly have

647
00:35:42,600 --> 00:35:45,800
Speaker 6: been aided and abedded by both President Trump and President

648
00:35:45,840 --> 00:35:49,040
Speaker 6: Biden in past statements. So you know what Biden's trier

649
00:35:49,040 --> 00:35:51,120
Speaker 6: e sees me. What Lincoln's trying to do is put

650
00:35:51,120 --> 00:35:54,520
Speaker 6: a floor under that by saying, look, our policy is

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00:35:54,640 --> 00:35:58,120
Speaker 6: as it was, as it was and it continues to be.

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00:35:58,440 --> 00:36:02,239
Speaker 6: Make no mistake about that. Clarity is good, Jerry.

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Speaker 1: I want to link this to our economics and our

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00:36:04,280 --> 00:36:08,280
Speaker 1: corporate relationships with China. Captain Mann is at the Bank

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00:36:08,320 --> 00:36:11,920
Speaker 1: of England. She's one of the great American international economists,

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00:36:11,920 --> 00:36:16,040
Speaker 1: and Kathy Man of MIT and Brandie makes very clear

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00:36:16,719 --> 00:36:22,560
Speaker 1: that we have a codependency with China. We need them economically, economically,

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00:36:22,960 --> 00:36:25,600
Speaker 1: they need us. She owns the high ground on the

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00:36:25,600 --> 00:36:30,560
Speaker 1: transpecific codependency. What is the relationship in these discussions in

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00:36:30,680 --> 00:36:36,160
Speaker 1: your Washington when they observe Tim Cook living that codependency

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00:36:36,200 --> 00:36:41,200
Speaker 1: at Apple and bipartisan presidents saying no, we don't want

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00:36:41,200 --> 00:36:42,480
Speaker 1: to do that. How's that work?

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00:36:43,360 --> 00:36:46,960
Speaker 6: Well, then you know the vast majority of Washington understands

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00:36:47,600 --> 00:36:52,719
Speaker 6: the codependency. You know, frankly doesn't want to upset it.

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00:36:53,520 --> 00:36:54,239
Speaker 1: I find the.

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00:36:55,640 --> 00:36:59,200
Speaker 6: I find the whole war of rhetoric here, whether it's

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00:36:59,280 --> 00:37:02,560
Speaker 6: decoupling or de risking or anything else, to be a

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00:37:02,640 --> 00:37:07,160
Speaker 6: little overblown. On the street. You know, nobody's talking about

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Speaker 6: removing Americans or American business from China. What China is

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00:37:12,320 --> 00:37:15,520
Speaker 6: trying to do at the same simultaneously, though, is trying

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00:37:15,560 --> 00:37:19,560
Speaker 6: to attract and continue to have in American business and

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00:37:19,600 --> 00:37:24,200
Speaker 6: American investment, while at the same time making the terms

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00:37:24,320 --> 00:37:29,120
Speaker 6: under which non China investment will exist to be more

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00:37:29,160 --> 00:37:33,319
Speaker 6: onerous than it already has been. Yeah, but I don't

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00:37:33,320 --> 00:37:35,799
Speaker 6: see the United States as trying to take that away.

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00:37:35,800 --> 00:37:39,120
Speaker 1: Terry Hanks, Thank you so much with Penjia policy. Subscribe

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00:37:39,120 --> 00:37:42,880
Speaker 1: to the Bloomberg Surveillance podcast on Apple, Spotify, and anywhere

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00:37:42,920 --> 00:37:47,320
Speaker 1: else you get your podcasts. Listen live every weekday starting

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00:37:47,360 --> 00:37:51,920
Speaker 1: at seven am Eastern Bloomberg dot Com, the iHeartRadio app,

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00:37:52,239 --> 00:37:55,800
Speaker 1: tune In, and the Bloomberg Business app. You can watch

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00:37:55,960 --> 00:37:59,719
Speaker 1: us live on Bloomberg Television and always on the Bloomberg

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00:37:59,800 --> 00:38:03,480
Speaker 1: term No. Thanks for listening. I'm Tom Keen, and this

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00:38:04,160 --> 00:38:04,760
Speaker 1: is Blomber