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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller. Every business day we bring

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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast

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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and

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Speaker 1: at Bloomberg dot com slash podcast. We've got pretty groupeda

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Speaker 1: here with me because Matt Miller is we have no

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Speaker 1: idea where he is. Wes He's in the ocean somewhere.

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Speaker 1: He'll be back at some point, but he's missing. An

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Speaker 1: all star round table here. Neil Grossman, former c I

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Speaker 1: O with t k n G Capital, Danielle di Martino

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Speaker 1: Booth Quill Intelligence, both in our Bloomberg Interactive Broker Studio,

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Speaker 1: stars from Paul Gold stars for me because you're not

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Speaker 1: phoning it in your coming. All right, guys, here's my takeaway.

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Speaker 1: I don't know anything, but you guys are the experts.

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Speaker 1: But listening to Pal yesterday, I just felt like he's

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Speaker 1: over doing. He's over compensating. Danielle, do you agree. I

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Speaker 1: don't think he's overcompensating as much as he is. He's

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Speaker 1: kind of the new sheriff in town, and he really is.

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Speaker 1: I maintained that his aim is to kill the feed PUT.

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Speaker 1: And if you want to do that, then you disregard

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Speaker 1: any signs of slowing inflation, You disregard any kind of

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Speaker 1: anecdotal data on the employment market. You just stick to

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Speaker 1: the lad the most lagging data in order to continue

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Speaker 1: pushing through with your agenda. If your agenda is to

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Speaker 1: kill the FED put, this agenda to kill the FED put,

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Speaker 1: or is it? Do we take him out his word? Neil,

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Speaker 1: I'm just here to fight inflation. I well, first of all,

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Speaker 1: I agree with Danielle. I think the problem is that

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Speaker 1: he's doing as little in the sense as he did before.

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Speaker 1: I mean, if you want to we had hyper liquidity

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Speaker 1: for generation, and in fact, I think it's not only

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Speaker 1: killing the fed PUT, but the problem with letting stocks rise.

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Speaker 1: I mean, you look, you went from thirty four and

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Speaker 1: changed to almost four thousand and week or ten days.

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Speaker 1: Ask yourself what four s and P points equates to

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Speaker 1: in liquidity. And the bottom line is if they're going

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Speaker 1: to reflate the stock market while you still have I

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Speaker 1: I don't totally agree. Yes, there are signs inflation is

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Speaker 1: coming down. But the real question, by let's let's throw

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Speaker 1: back in a really interesting word called transitory. We are

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Speaker 1: going to have a transitory period now where prices moderate.

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Speaker 1: My guess is by next June or so, we're gonna

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Speaker 1: probably at four and a half to five and a

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Speaker 1: half six inflation. But the real question is going to

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Speaker 1: be where we settle in after that period. And my

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Speaker 1: guess is we're gonna be lucky if it's three to five,

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Speaker 1: and it's going to have high the upside risk if

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Speaker 1: they don't do why did they talk about two? By

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Speaker 1: the way, Well, there's their mandate zero. Let's keep that

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Speaker 1: in mind, price stability. If anyone has any mathematical training,

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Speaker 1: zero rate of change. Well, green Span maintained that zero

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Speaker 1: was the absolute ideal rate, and it was not until

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Speaker 1: green Span left that Bernanke and Yellen were able to

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Speaker 1: tag team and impose that two percent inflation target. That

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Speaker 1: became very arbitrary. Well, so I would not agree with

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Speaker 1: you with not or I think the problem is they

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Speaker 1: have a dual mandate, which is full employment and price

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Speaker 1: stability has nothing to do with equities. The problem is

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Speaker 1: it becomes a two factor optimization problem and you it's

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Speaker 1: almost impossible to get both near zero. The sad thing

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Speaker 1: is they actually had it almost perfectly in a sense,

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Speaker 1: with one and a quarter one and a half inflation

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Speaker 1: and roughly in unemployment at these rates, and and um

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Speaker 1: Powell and BERNANKI decided they wanted to say that's not

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Speaker 1: good enough. We want to push inflation up, by the

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Speaker 1: way the two percent averaging, which they've gone for it,

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Speaker 1: so I think he should do. You're gonna have to

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Speaker 1: run inflation at one percent or less for almost a

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Speaker 1: decade to get back to a two percent average. They've

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Speaker 1: let the cat out of the bag, and the distortions

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Speaker 1: with this type of inflation are gonna are gonna propagate

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Speaker 1: through this economy and for a long time to come. Well, Danielle,

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Speaker 1: that brings me to a question on the fiscal role

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Speaker 1: that Washington, Washington plays. We're looking at two percent long

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Speaker 1: term inflation target? Is that taking into account these massive

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Speaker 1: moves from Washington to bring a lot of this manufacturing

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Speaker 1: right back here state side, things cost more money. Wage

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Speaker 1: spiral is a very real thing. Doesn't that kind of

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Speaker 1: throw the two percent long term inflation target out the window?

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Speaker 1: The whole idea of on shoring, is that there's an

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Speaker 1: implicit agreement to have wages run higher than they have before,

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Speaker 1: given what caused off shoring to begin with, which was

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Speaker 1: desperately seeking lower wages somewhere in Asia. So, uh, you know,

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Speaker 1: if this is really the long term goal, and you

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Speaker 1: see in company earnings reports and conference calls that there

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Speaker 1: are tons of mentions of freend shoring, reshoring, talking about

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Speaker 1: building stronger ties between Canada, Mexico, and the United States,

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Speaker 1: all of this is going to be inflationary on a

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Speaker 1: long term structural basis in order to reverse years of

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Speaker 1: effectively China exporting deflation to the United States via lower

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Speaker 1: wage costs. But then why is the Fed still sticking

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Speaker 1: to that two inflation target? Then I think right now

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Speaker 1: that the two percent inflation target gives j. Powell cover

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Speaker 1: because it's such a difficult number to get back to.

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Speaker 1: But he keeps repeating the number two, meaning don't get

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Speaker 1: your hopes up that that I'm going to pivot if

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Speaker 1: it hits four. Maybe. Well, first of all, again, this

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Speaker 1: is the problem, and this is my legal side, you know,

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Speaker 1: as a lawyer as well, um the shop. Um, the

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Speaker 1: the problem is there's there's a statutory authorization. The FED

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Speaker 1: is an agency that is created and it's been given

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Speaker 1: a legal obligation. It really shouldn't be up to the

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Speaker 1: FED to read deefine, which by the way, they have

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Speaker 1: been doing for a long time. But for the FED

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Speaker 1: to simply say we don't really care and inflation shouldn't

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Speaker 1: be that's congress is obligation. Congress can change it. Otherwise,

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Speaker 1: the FED should be looking at what the authorization statutes

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Speaker 1: say and they should be following it. And that actually,

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Speaker 1: again one of the things I like to say about economists,

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Speaker 1: they're not really mathematicians. They use the wrong mathematical manifold,

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Speaker 1: the manifold they should be using as a five or

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Speaker 1: ten year lens. And trying to do things for three

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Speaker 1: weeks to have a shorter time span than a tweet

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Speaker 1: is a bad idea. Like a true trader, Danielle, are

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Speaker 1: we going into recession here? I just had the bunch

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Speaker 1: of transportation companies saying they don't see it, but boy,

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Speaker 1: everybody else seems to see it. Well, it's ironic that

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Speaker 1: you say transportation companies, because truckers are going out of

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Speaker 1: business at the fastest pace in two thousand eighteen. Right

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Speaker 1: now and transportations in a pickle um. But no, I

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Speaker 1: I don't think that there should be a debate anymore

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Speaker 1: about whether or not we're going into recession. When the

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Speaker 1: conference board queries uh CEO of them say that we

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Speaker 1: are or almost in a recession and thereby you know,

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Speaker 1: therefore they are in cost cutting mode. I would point

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Speaker 1: out that the I S M Services UH survey that

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Speaker 1: just came out a few minutes ago showed that that

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Speaker 1: employment actually such a contraction last month. So if if

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Speaker 1: the employment caboose is finally going to come into the station,

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Speaker 1: I mean, that's that's the final nail and the coffin

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Speaker 1: of the recession debate. I'm confused, Neil, when it comes

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Speaker 1: to what you're actually supposed to do in this environment

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Speaker 1: in terms of the trade itself, because it kind of

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Speaker 1: felt like the bowl case for the equity market and

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Speaker 1: arguably for yields as well, was the idea that the

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Speaker 1: terminal rate would stall out at five percent and that

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Speaker 1: was going to be the peak policy rate. But it

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Speaker 1: keeps kind of shifting higher and higher every every couple

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Speaker 1: of months, So it kind of feels like there's this

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Speaker 1: consistent upside risk that just doesn't go away. What do

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Speaker 1: you trade in that environment? Well, a couple of things.

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Speaker 1: Right now, I think UM number one. From a dollar perspective,

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Speaker 1: this probably still raises um the strength of the dollar,

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Speaker 1: at least in the short term. You're seeing, for example,

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Speaker 1: commodities come off today. I think probably commodity prices have

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Speaker 1: some pressure, which of course is what they what they want.

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Speaker 1: I've been having a rougher time trying to figure out

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Speaker 1: what I would do with the yield curve. I'm looking

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Speaker 1: for a point where I can actually put on a

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Speaker 1: yield curse steep and her. I think the long end

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Speaker 1: of the yeld curve is still too low, but you know,

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Speaker 1: you're still fighting with the adjustment at the front of

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Speaker 1: the curve. And from a broader perspective, what I like

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Speaker 1: to in this environment I use I use optionality because

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Speaker 1: I think with higher volatility prices, even though we have

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Speaker 1: had the haven't had the explosion in volatility that you

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Speaker 1: might like to see, volatility is still high enough that

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Speaker 1: you can put on trades with very very favorable break even. So, um,

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Speaker 1: that's sort of what I've been doing. Um. Hey, Daniel,

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Speaker 1: you know, I'm a simple equity guy, and I get

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Speaker 1: the inflation talk. I get the recession talk. I think

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Speaker 1: I've got that. What else am I missing? What's the

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Speaker 1: thing out there that you think maybe investors or people

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Speaker 1: in general are just not talking about enough, are thinking

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Speaker 1: about enough? So I think I think what is getting

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Speaker 1: left behind is any talk or discussion of what's happening

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Speaker 1: in the credit markets. You've seen rates volatility, The VIX

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Speaker 1: is like subdued, Yes, it's like it under a rock.

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Speaker 1: But rates volatility viewed through the move index has just

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Speaker 1: gone ballistic. It's at the highest level since two thousand seven,

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Speaker 1: and it's basically saying there's a credit event lurking out,

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Speaker 1: lurking out there, and we forget that in two thousand eighteen,

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Speaker 1: the last time we were trying quantitative tightening that it

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Speaker 1: was a credit event that actually bled through into the

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Speaker 1: equity market at around this time of the year, heading

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Speaker 1: into Thanksgiving in the holidays that caused that that Christmas

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Speaker 1: Eve sell off in two thousand eighteen, which by the way,

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Speaker 1: prompted the first pal pivot. That's right, That's right, So, Neil,

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Speaker 1: I mean again, I'll I'll put it to you. What

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Speaker 1: what am I missing? I'm a simple guy. Well, let's

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Speaker 1: buy stock. Let's go to things for going back. Let's

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Speaker 1: go back to the Fed for one moment. That there

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Speaker 1: are two things they're watching, employment and inflation, and the

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Speaker 1: employment one is beginning to rise in priority because the

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Speaker 1: unemployment rate has stults so low. You have to understand,

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Speaker 1: if you went back in history up until COVID and

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Speaker 1: what happened afterwards, the single highest twelve month average job

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Speaker 1: creation was about three thirty thousand a month. Even after

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Speaker 1: last month's number, we're still at four hundred fifty one

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Speaker 1: thousand a month. So and and an historical basis, the

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Speaker 1: general view has been that a hundred hundred fifty thousand

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Speaker 1: is a static employment market. Now, we have a very

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Speaker 1: low um job participation rate, and so if you can

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Speaker 1: get a large jump that would help bring that, you know,

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Speaker 1: push up the unemployment rate. But if we're not going

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Speaker 1: to get that, To get a four and a half

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Speaker 1: percent unemployment rate, which they're talking about is going to

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Speaker 1: take a lot of work, and even that, well you

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Speaker 1: just have to look at them. It may happen next

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Speaker 1: year this time, but it's not going to happen easily.

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Speaker 1: For six months. You're gonna have to lay off, you're

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Speaker 1: gonna have to have losing jobs two hundred thousand a

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Speaker 1: month for six months net to get there. So I'm

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Speaker 1: gonna push back a little bit if you if you

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Speaker 1: look into the weekly jobless claims data, which appears to

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Speaker 1: be benign on the surface, you'll see that in early

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Speaker 1: September that jobless claims nationwide we're down. In the subsequent

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Speaker 1: weeks up until this morning's data, now they're down. Continuing

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Speaker 1: claims bottomed out in early May. They have continued to

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Speaker 1: quietly march upwards. Continuing claims is the one that you

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Speaker 1: should follow more closely because that's people actually week after

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Speaker 1: week collecting unemployment insurance. So that's an early May low

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Speaker 1: point that I think there's an unemployment rate shock building

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Speaker 1: in this system right now. Just just what this economy needs.

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Speaker 1: Al Right, guys, thank you so much for spending this

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Speaker 1: extended a period of time with us. We really appreciated

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Speaker 1: smart discussion. That's what we tried to do here. Neo Grossman,

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Speaker 1: former CEO of t k n G Capital, and Daniel D.

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Speaker 1: Martino Booth of Quill Intelligence, both in the Bloomberg Interactive

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Speaker 1: Broker studio. They are not mailing it in so the guys,

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Speaker 1: you get gold stars here. Read on the screen for

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Speaker 1: your equities. We've got the ten year treasury yielding four

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Speaker 1: point one four percent here. I want to check in

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Speaker 1: with a professional who does this stuff for a living

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Speaker 1: to get a sense of where we go from here,

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Speaker 1: because we have a Federal Reserve that is raising rates

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Speaker 1: and they may go even higher than market initially anticipated.

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Speaker 1: Brent Shooty, he's a chief investment strategist for Northwestern UH Mutual.

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Speaker 1: We got an NBA from Chicago, so that means he

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Speaker 1: likes numbers. I'm not a real big numbers guy, but

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Speaker 1: that's why we talk to these smart people. So, Brett,

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Speaker 1: what did you take away from FED Chairman Pal yesterday?

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Speaker 1: Because that seemed to move the markets yesterday afternoon and today,

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Speaker 1: so I think it's good. I started talking about long

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Speaker 1: and variable legs and so they've done a lot already,

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Speaker 1: and the economy is weak. We can talk about that

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Speaker 1: because I keep hering the economy strong, and I think

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Speaker 1: we're one jobs report away from ending that conversation, which

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Speaker 1: maybe tomorrow's um but in general, I'm glad they brought

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Speaker 1: that conversation in. But to me, the FED is still

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Speaker 1: too backwards looking Um, they are looking at the CPI

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Speaker 1: data and that's what they're looking at. And they're so

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Speaker 1: worried about the US to the nineteen seventies that they're

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Speaker 1: going to go too far. I don't. I don't think

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Speaker 1: they have to do much more of anything. I think

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Speaker 1: you're seeing the economy weekend. I think you're seeing all

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Speaker 1: the forward looking variables of inflation coming down. That's why

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Speaker 1: I think the market is actually starting to come off

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Speaker 1: the boil. Just are starting to rally just a bit

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Speaker 1: today or at least erase some the losses because the

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Speaker 1: market sees the potential for a week jobs report tomorrow

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Speaker 1: and then what happens to me, I think that's gonna

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Speaker 1: be done soon. One of the things that stuck out

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Speaker 1: to me which Harryan Powell spoke yesterday was he said, well,

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Speaker 1: the risk to overtightening is still less than undertightening. And

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Speaker 1: the logic he kind of put out was if we overtightened,

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Speaker 1: we can use our policy tools a k a. Cutting

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Speaker 1: rates to kind of reverse and back pedal a little bit.

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Speaker 1: But I have to ask if, if if the Federal

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Speaker 1: Reserve has undergone so much scrutiny for perhaps using of

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Speaker 1: the idea of cutting rates to the point where created

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Speaker 1: kind of a bubble in asset prices, which I think

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Speaker 1: is consensus now that it did. Can we really take

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Speaker 1: to your power at his word that he's willing to

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Speaker 1: cut rates when it has gone too far. I think

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Speaker 1: you hit the nail on the head. I mean to me,

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Speaker 1: if you recall. So the odd thing about all this

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Speaker 1: is that you know, two or three years ago we're

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Speaker 1: talking about deflation and talking about getting inflation up, and

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Speaker 1: the Federal Reserve would tell you, look, we have all

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Speaker 1: the tools necessary, so when inflation rises, we know how

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Speaker 1: to stomp it out. But we don't know how to

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Speaker 1: create inflation. We don't know how to create recoveries that

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Speaker 1: are really robust yet. And so think about what he

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Speaker 1: told you yesterday. He told you the exact opposite. What

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Speaker 1: just goes to show you how how how kind of

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Speaker 1: reactionary this Federal Reserve is. And to me, I don't

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Speaker 1: think that's as easy as that. I do think they

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Speaker 1: will cut rates. But what I worry about is that

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Speaker 1: you have all these people who have been rehired into

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Speaker 1: the labor market. I worry that they're going to lose

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Speaker 1: their jobs and then become disenfranchised and drop out of

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Speaker 1: the labor market for some time, which will hurt our

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Speaker 1: economic growth. I don't think the FED needs to eviscerate

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Speaker 1: the labor market to get inflation down. I think it's happening,

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Speaker 1: and I think it's so um. I don't know what

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Speaker 1: the correct word is. I think his comments were a

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Speaker 1: little out of line with what reality actually is. Pretty

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Speaker 1: guess where Brent in the Northwestern Mutual folks reside is

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Speaker 1: the Chicago. No, it's even better than that. Remember my

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Speaker 1: favorite financial market that is most overlooked Milwaukee is Milwaukee.

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Speaker 1: The wicked smart people Milwaukee. I was there two or

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Speaker 1: three times a year when I was a cellsider, because

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Speaker 1: there's some smart people there, you know, Northwestern Mutual. We've

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Speaker 1: got the strong folks, lots of good I've never been. Oh,

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Speaker 1: it's awesome, especially in the winter. You go there for

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Speaker 1: the winter car Yeah, we gotta get blue Market Field trip. Yes,

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Speaker 1: we'll go to walk and you do it in January,

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Speaker 1: go to like the winter festival where it's like twelve

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Speaker 1: below and the people like a happy planning out the

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Speaker 1: air conditioning all day today. If all not ready for Milwaukee,

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Speaker 1: winter comes exactly all right, Brett, So what do you

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Speaker 1: guys thinking at Northwestern Mutual? And by the way, you

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Speaker 1: have some of my money, so so behave carefully. What

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Speaker 1: do you guys think about a recession here? Is it

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Speaker 1: gonna are we gonna have one? Is it going to

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Speaker 1: be a deep one, a long one? What are your thoughts?

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Speaker 1: I mean, I unless the FED decides to keep going

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Speaker 1: and tightening into it, I think it's going to be

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Speaker 1: mild just given the state of the consumer. And that's

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Speaker 1: brought up quite a bit. But the consumers in as

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Speaker 1: good as shape as they have been since nineteen seventy

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Speaker 1: from a balance sheet perspective and from an income statement perspective, yes,

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Speaker 1: rising grates will road that UM. But if you look

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Speaker 1: at what mortgages have been delivered the past thirteen years,

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Speaker 1: or what mortgages have been chosen by consumers, they're fixed

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Speaker 1: and so it will happen with a with a lag

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Speaker 1: UM as far as kind of harming that UM that

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Speaker 1: income statement. So there's still in good shape. Uh. And

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Speaker 1: I think that's an important effect. You know, at the

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Speaker 1: beginning year we call for an uneven recession UM, and

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Speaker 1: I think you're seeing that right now. I think parts

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Speaker 1: of the economy are in recession. You're seeing job losses there,

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Speaker 1: which I I do think the jobs market is weakening.

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Speaker 1: I can give you a data point here in a second, UM,

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Speaker 1: but I think you're seeing the services side kind of

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Speaker 1: carry away. It's not a recession yet there, and so

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Speaker 1: overall I think it's mild. I think it's uneven. Uh,

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Speaker 1: And I'm hopeful that the opposite side of this is

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Speaker 1: much better. With the standpoint of both stocks and bonds, which,

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Speaker 1: as you mentioned in kind of creating your bubble comments,

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Speaker 1: they've both been repriced to more reasonable levels. Right now,

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Speaker 1: the Broactly's aggregate yield five, people are hiding in the

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Speaker 1: front of the yield curve unnecessarily that began the year one.

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Speaker 1: I think people should think about, um not hiding in

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Speaker 1: the front and not hiding in cash and beginning to

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Speaker 1: potentially lock in some of these rates that are a

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Speaker 1: little bit higher longer term as a just in case

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Speaker 1: we go back down to based upon the Fed's reactionary

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Speaker 1: has pretty kind of opened with the FED actually cutting

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Speaker 1: rates back down to again front. What does that then

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Speaker 1: mean for the equity market if we have now priced

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Speaker 1: in or are pricing in, for example, even higher terminal

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Speaker 1: rate than five percent, which, by the way, just a

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Speaker 1: couple of months ago was such a contrarian take, especially

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Speaker 1: from Anna long over Economics way ahead of the game

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Speaker 1: on that call. But if we if the if the

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Speaker 1: goal post basically keeps changing, does that just mean that

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Speaker 1: the bull case for equities may never resurface, or at

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Speaker 1: least that's what it feels like. I'm sure for a

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Speaker 1: lot of short term traders. No, I mean, I certainly

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Speaker 1: it will. And I think if you've looked, I mean

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Speaker 1: the cheaper parts of the market that we've encouraged people

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Speaker 1: to invest in network under love, that are unloved for

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Speaker 1: the prior four or five years, are the areas of

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Speaker 1: the market that are actually doing well, and they're actually

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Speaker 1: cheap right now. Um. And so I'm not suggesting that

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Speaker 1: earnings might not fall some more. But if you look

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Speaker 1: at small caps, the S and P six hundred, not

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Speaker 1: the Rustle two thousand, they traded around eleven times earnings,

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Speaker 1: eleven and a half times rings cut my earning. Um certainly, Um,

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Speaker 1: you know it won't be pleasant, but they're still roomed

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Speaker 1: um from that standpoint of margin of safety. And I

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Speaker 1: think on the opposite side of this, if we're able

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Speaker 1: to get past this inflation without too much damage inflicted

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Speaker 1: by the FED, think about the opposite side of that

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Speaker 1: and asset class being one that typically performs well earlier

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Speaker 1: in an economic cycle. And so I just think it's

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Speaker 1: a little bit different position that people aren't used to.

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Speaker 1: They're used to buying tech stocks, are used to buying

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Speaker 1: growth stocks. UM. I still think value owes opportunities. UM,

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Speaker 1: you can own sector neutral value, which we own. You

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Speaker 1: can own US UH small caps and dare I say

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Speaker 1: at some point UH international stocks after we get past

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Speaker 1: the FED talking tough and overtightening. The opposite side of this,

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Speaker 1: if you're a US based investor, could have currency strength

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Speaker 1: that will that will be a tail wind, not a

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Speaker 1: headwind like it has been over the past few months.

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Speaker 1: All Right, Brent, great stuff. We appreciate it as always.

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Speaker 1: Brent Shooty, chief investment strategist for north Western Mutual based

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Speaker 1: in what I think is a financial powerhouse hub of Milwaukee, Wisconsin.

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Speaker 1: I'm telling you there's a four or five six really

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Speaker 1: good firms in that town. I think it's you know,

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Speaker 1: you go to Chicago, yeah, but you gotta go to

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Speaker 1: Milwaukee when you're touring the Midwest and seeing the smart

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Speaker 1: money managers check it out. Yeah, we'll do it. Do

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Speaker 1: it in February when they have their winter carnival. It's

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Speaker 1: like twenty below. When the people are happy, they don't

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Speaker 1: mind it. It's it's good stuff, Nathan. We've got so

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Speaker 1: much tech stories to digest, and but it's the it's

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Speaker 1: the I don't want to say tier two companies, but

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Speaker 1: not your megacap tech companies, your qual calms, your Twitters,

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Speaker 1: your pelotons. We were given strict instructions by our producer

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Speaker 1: Slash DJ slash bouncer Eric Molow to run the gambit

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Speaker 1: with blah blow. Well, we do have quite a lot

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Speaker 1: to talk about with Ed Ludlow or West Coast correspondent

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Speaker 1: out there. The are you in the nine sixties studios

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Speaker 1: in San Francisco? Their Ed, I am in the nine

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Speaker 1: sixties studios. Hello from the nine sixties studios. Gotta flog

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Speaker 1: all the frequencies, Ed, what is going on with Twitter?

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Speaker 1: How how deep is this ax gonna fall? We heard

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Speaker 1: seventy five percent first, now something like fifty. What's going on? Yeah?

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Speaker 1: I mean deep? We reported Kurt Wagner and I last

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Speaker 1: night that the list was finalized at around thirty seven

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Speaker 1: hundred Twitter staffers to be laid off. Um. There was

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Speaker 1: a meeting I understand, between Elon Musk and some of

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Speaker 1: the allies he's brought in to run the place, Jason

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Speaker 1: Callicanis and David Zachs and and Shri ram Um from

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Speaker 1: A sixteen and and they are finalizing this. I'm told

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Speaker 1: that staff will be informed of their their situation on Friday,

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Speaker 1: whether they're laid off or not. But I think it's

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Speaker 1: a bit more than that. Remember they Twitter is one

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Speaker 1: of these companies that has a sort very broad work

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Speaker 1: from home remote working policy, and my understanding is that

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Speaker 1: Musk is going to cancel that you have to be

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Speaker 1: in the office if you're if you survive. Um And

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Speaker 1: the expectation from Twitter insiders is actually a lot of

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Speaker 1: people will resign anyway because they don't want to work

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Speaker 1: in an office. Should we believe that this kind of

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Speaker 1: eight dollar Twitter verification thing is really going to pan

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Speaker 1: out in terms of making Twitter a legitimate, uh legitimately

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Speaker 1: monetized company. It's really interesting, isn't it. Kurt and I

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Speaker 1: also reported yesterday that this change eight dollar Twitter blue

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Speaker 1: could happen as soon as Monday, and the big focuses

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Speaker 1: on verification, Right, you're paying for the privilege of a

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Speaker 1: blue check rather than being verified because you are actually

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Speaker 1: who you say you are. There are four hundred and

429
00:21:47,119 --> 00:21:50,639
Speaker 1: fifty thousand ish verified users currently, So you guys do

430
00:21:50,680 --> 00:21:52,879
Speaker 1: the math. Eight dollars a month times four hundred and

431
00:21:52,880 --> 00:21:55,960
Speaker 1: fifty thousand times by twelve months of the year. It's

432
00:21:55,960 --> 00:21:59,480
Speaker 1: a it's a it's a negligible sum of money relative

433
00:21:59,560 --> 00:22:02,520
Speaker 1: to the core advertising business that it stands as it stands.

434
00:22:02,880 --> 00:22:07,000
Speaker 1: But take this as a whole layoffs an eight dollar

435
00:22:07,080 --> 00:22:10,879
Speaker 1: premium subscription service coupled with the existing ad platform, and

436
00:22:10,920 --> 00:22:14,320
Speaker 1: there's a real focused on cost cutting and profitability here

437
00:22:14,359 --> 00:22:16,720
Speaker 1: from Musk. If you think about the debt burden on

438
00:22:16,720 --> 00:22:19,719
Speaker 1: this company as well, which is incredibly important. Yeah, it's

439
00:22:19,760 --> 00:22:21,800
Speaker 1: going to be a long road ahead in terms of

440
00:22:21,920 --> 00:22:25,120
Speaker 1: a turnaround here and the volatility that I think we're

441
00:22:25,160 --> 00:22:27,679
Speaker 1: probably going to see for quite some time when it

442
00:22:27,720 --> 00:22:31,560
Speaker 1: comes to Twitter. But what about Peloton here, we got

443
00:22:31,600 --> 00:22:35,240
Speaker 1: weaker than expected earnings there, but you hear from the

444
00:22:35,240 --> 00:22:39,880
Speaker 1: management they're saying they're well on track to their turnaround plan. Yeah,

445
00:22:39,880 --> 00:22:42,960
Speaker 1: it's fighting talk from from Barry McCarthy. The ship is

446
00:22:43,359 --> 00:22:46,720
Speaker 1: turning around. The data doesn't not back that up. That

447
00:22:46,880 --> 00:22:48,760
Speaker 1: the forecast of the final three months of this year

448
00:22:48,800 --> 00:22:51,679
Speaker 1: seven hundred millions to seven five million dollars of sales

449
00:22:51,960 --> 00:22:54,880
Speaker 1: well below what the street was looking to profit well

450
00:22:54,920 --> 00:22:58,000
Speaker 1: below or the loss wider than expected. I should say,

451
00:22:58,080 --> 00:23:00,480
Speaker 1: the real thing the streets seizing on is that the

452
00:23:00,520 --> 00:23:02,960
Speaker 1: growth doesn't appear to be anywhere. Where is the growth

453
00:23:03,000 --> 00:23:06,600
Speaker 1: coming from. Um subscriber revenue did beat in the court

454
00:23:06,600 --> 00:23:09,320
Speaker 1: had just gone, but the overall number of apps subscribers,

455
00:23:09,320 --> 00:23:12,199
Speaker 1: the people that are using Peloton software dropped off. And

456
00:23:12,240 --> 00:23:14,160
Speaker 1: the story here is supposed to be a company that's

457
00:23:14,160 --> 00:23:17,760
Speaker 1: moving away from bikes and treadmills to that software emphasis.

458
00:23:18,000 --> 00:23:20,480
Speaker 1: But the user base is getting smaller. That's not a

459
00:23:20,480 --> 00:23:22,520
Speaker 1: good sign. I think the other thing as well is

460
00:23:22,560 --> 00:23:25,200
Speaker 1: that we actually have no evidence from Peloton, no matter

461
00:23:25,240 --> 00:23:29,160
Speaker 1: how hard they try to restructure, that the consumer has

462
00:23:29,280 --> 00:23:32,399
Speaker 1: normalized in the post pandemic period on how it uses

463
00:23:32,440 --> 00:23:35,640
Speaker 1: at home fitness technology. We know about people going back

464
00:23:35,680 --> 00:23:38,000
Speaker 1: to Too Jim's, but there is not actually evidence that

465
00:23:38,040 --> 00:23:41,439
Speaker 1: we're getting a picture for the future of how somebody

466
00:23:41,520 --> 00:23:44,400
Speaker 1: uses a peloton piece of hardware, all the classes at home.

467
00:23:45,119 --> 00:23:47,520
Speaker 1: What is the addressable market there? That's the concern from

468
00:23:47,520 --> 00:23:50,800
Speaker 1: the street. I want to ask you about qual Calm

469
00:23:50,840 --> 00:23:52,840
Speaker 1: as well. We got about when it's left. We were

470
00:23:52,840 --> 00:23:55,760
Speaker 1: told to run the gamuts, were running the gambut qual

471
00:23:55,840 --> 00:23:57,800
Speaker 1: Calm as well. What's interesting to me about qual Calm

472
00:23:57,840 --> 00:24:01,880
Speaker 1: is that they're talking about this ass of iPhone deceleration

473
00:24:02,560 --> 00:24:05,480
Speaker 1: and there is this macroeconomic concern, but the bigger exposure

474
00:24:05,720 --> 00:24:07,680
Speaker 1: is to China. I'm curious about how a lot of

475
00:24:07,720 --> 00:24:11,639
Speaker 1: these chip companies, given COVID nineteen lockdowns are kind of

476
00:24:11,640 --> 00:24:14,439
Speaker 1: a regular feature, are navigating some of this. You know,

477
00:24:14,520 --> 00:24:17,399
Speaker 1: according to Qualcom, it's a simple formula that the COVID

478
00:24:17,440 --> 00:24:22,760
Speaker 1: lockdowns in China are impacting handset demand. Um broadly. There

479
00:24:22,800 --> 00:24:24,960
Speaker 1: are two key things to take away from Qualcolm. They

480
00:24:25,000 --> 00:24:27,760
Speaker 1: had said that for four year twenty two hand set

481
00:24:27,800 --> 00:24:31,159
Speaker 1: shipments would drop single digits. They're now saying as of

482
00:24:31,240 --> 00:24:33,720
Speaker 1: last night it will be double digits. Qualcom is the

483
00:24:33,720 --> 00:24:36,600
Speaker 1: biggest maker of smartphone processes and it's the main modem

484
00:24:36,640 --> 00:24:39,400
Speaker 1: maker for iPhone. So pick up your iPhone in your hand.

485
00:24:39,480 --> 00:24:41,720
Speaker 1: Just believe me, there's a little piece of Qualcom in there.

486
00:24:41,880 --> 00:24:44,000
Speaker 1: There are a good lens of what's happening. The other

487
00:24:44,040 --> 00:24:46,680
Speaker 1: thing is what's happening in the chip sector. Supply has

488
00:24:46,720 --> 00:24:49,840
Speaker 1: got better very quickly. Demand has dropped off a cliff,

489
00:24:49,920 --> 00:24:53,560
Speaker 1: largely attributed to China. What does that mean inventories? Customers

490
00:24:53,600 --> 00:24:55,840
Speaker 1: have eight to ten weeks of inventory. What does that

491
00:24:55,840 --> 00:24:59,000
Speaker 1: mean by extension, They're not ordering more chips, They're waiting

492
00:24:59,040 --> 00:25:01,280
Speaker 1: to work through those in and trees, a reverse of

493
00:25:01,280 --> 00:25:03,720
Speaker 1: what we've been talking about for two years. And Calcolm

494
00:25:03,800 --> 00:25:06,600
Speaker 1: see that phenomenon lasting a couple of quarters. It was

495
00:25:06,640 --> 00:25:08,920
Speaker 1: not a good earnings print and a good outlook, and

496
00:25:08,960 --> 00:25:11,400
Speaker 1: the streets worried, but a little bit of sympathy for Qualcolm.

497
00:25:11,640 --> 00:25:15,280
Speaker 1: The third quarter calendar quarter was a record revenue quarter

498
00:25:15,359 --> 00:25:19,280
Speaker 1: for Qualcom, So congratulations to them real quick. And Nicola

499
00:25:19,600 --> 00:25:21,240
Speaker 1: looks like it's going to be a little while longer

500
00:25:21,280 --> 00:25:24,840
Speaker 1: before they get to part the territory. Nicola bad. They

501
00:25:24,840 --> 00:25:27,280
Speaker 1: will not be three trucks this year. They will have

502
00:25:27,320 --> 00:25:30,520
Speaker 1: a much worse year in and then expected. Customers are

503
00:25:30,600 --> 00:25:33,639
Speaker 1: very hesitant. They're not investing in electrification and they're not

504
00:25:33,720 --> 00:25:37,080
Speaker 1: investing in the charging infrastructure that that helps actually move

505
00:25:37,119 --> 00:25:40,480
Speaker 1: towards a battery electric truck, some limited progress on a

506
00:25:40,520 --> 00:25:43,239
Speaker 1: hydrogen fuel cell truck. We're a long way away from

507
00:25:43,280 --> 00:25:45,480
Speaker 1: this company making meaningful money. I had to get you

508
00:25:45,840 --> 00:25:48,320
Speaker 1: electric vehicles one last time before we let you go,

509
00:25:48,400 --> 00:25:55,240
Speaker 1: and thanks for that. We have a truly transnational broadcast

510
00:25:55,600 --> 00:26:00,480
Speaker 1: Eric Coast to coast, San Francisco to d C, New York.

511
00:26:00,600 --> 00:26:03,200
Speaker 1: Very exciting stuff. We just need someone from Milwaukee. Maybe

512
00:26:03,200 --> 00:26:09,480
Speaker 1: Paul Will will call in. Well Ed Ludlaw West Coast correspondent.

513
00:26:09,640 --> 00:26:16,200
Speaker 1: We thank you as always creating a Nathan Hagar filling

514
00:26:16,280 --> 00:26:18,760
Speaker 1: in on a really exciting day. Nathan, I mean like

515
00:26:18,960 --> 00:26:21,520
Speaker 1: this is a post fed You're seeing a very strange

516
00:26:21,520 --> 00:26:23,680
Speaker 1: reaction in the stock market. It feels like there isn't

517
00:26:23,840 --> 00:26:27,920
Speaker 1: really a consensus on whether or not the terminal rate

518
00:26:28,640 --> 00:26:32,159
Speaker 1: could go much much higher. As a chairman, Powell is

519
00:26:32,240 --> 00:26:35,080
Speaker 1: is certainly suggesting in his press conference, never less, bonds

520
00:26:35,320 --> 00:26:39,679
Speaker 1: are selling across across the spectrum, across maturities. There's a

521
00:26:39,720 --> 00:26:42,400
Speaker 1: lot to digest here. And when we have this kind

522
00:26:42,400 --> 00:26:45,000
Speaker 1: of conundrum of where do we even start, there's only

523
00:26:45,040 --> 00:26:47,760
Speaker 1: one person to bring into the conversation, That of course

524
00:26:48,080 --> 00:26:50,639
Speaker 1: is Liz McCormick. She's our chief markets correspondent on the

525
00:26:50,640 --> 00:26:54,320
Speaker 1: effects and rate space, writing a pretty interesting story about

526
00:26:54,400 --> 00:26:56,479
Speaker 1: all the FED is still enemy number one for a

527
00:26:56,480 --> 00:26:58,880
Speaker 1: lot of these Wall Street traders. Liz, thank you as

528
00:26:58,920 --> 00:27:02,320
Speaker 1: always for joy eating us. It's hard to pick a

529
00:27:02,359 --> 00:27:04,400
Speaker 1: place to start because there's so much going on here.

530
00:27:04,400 --> 00:27:07,560
Speaker 1: But if five percent is no longer the terminal rate

531
00:27:07,640 --> 00:27:10,760
Speaker 1: in March of as was price didn't going into the meeting,

532
00:27:11,119 --> 00:27:14,240
Speaker 1: how high can we go? Yeah? Boy, it's like a

533
00:27:14,280 --> 00:27:18,200
Speaker 1: brain spending time, right, Um, it's I think all bets

534
00:27:18,200 --> 00:27:22,320
Speaker 1: are off now, Like how was just so crystal clear? Like, hey,

535
00:27:22,440 --> 00:27:25,959
Speaker 1: the data we saw since last meeting means our rates

536
00:27:26,000 --> 00:27:28,679
Speaker 1: that we're going to project or higher, and so the

537
00:27:28,720 --> 00:27:32,160
Speaker 1: markets pricing the terminal rate, it's interesting creating like out

538
00:27:32,160 --> 00:27:34,639
Speaker 1: to June. It's it's got to have five point TwUI

539
00:27:34,640 --> 00:27:38,000
Speaker 1: ish now, right, So and you don't see barely any

540
00:27:38,119 --> 00:27:40,040
Speaker 1: cuts by the end of the year. So that's like

541
00:27:40,160 --> 00:27:43,760
Speaker 1: FED higher keeps going higher and it's very slow to

542
00:27:44,119 --> 00:27:46,119
Speaker 1: cut rates, you know. So that's kind of a double

543
00:27:46,160 --> 00:27:51,120
Speaker 1: problem for bond investors, right, high rates and sticky high rates. Yeah,

544
00:27:51,160 --> 00:27:54,440
Speaker 1: it keeps getting pushed back and back and back and

545
00:27:54,560 --> 00:27:57,640
Speaker 1: now we're seeing the inversion on the two's ten year

546
00:27:57,720 --> 00:28:00,639
Speaker 1: at fifty five basis point. And so I'm looking at

547
00:28:00,640 --> 00:28:02,919
Speaker 1: a chart on it where it's like a spread that

548
00:28:02,920 --> 00:28:06,399
Speaker 1: we're not we haven't seen since the early days of

549
00:28:06,440 --> 00:28:10,959
Speaker 1: the Reagan administration. It makes you wonder how much further

550
00:28:11,359 --> 00:28:15,480
Speaker 1: the idea of long and deep recession could be going

551
00:28:15,640 --> 00:28:19,359
Speaker 1: in the bond market. Well, yeah, that's totally interesting, and

552
00:28:19,400 --> 00:28:23,040
Speaker 1: I think you know our Jersey and our Blueberg the

553
00:28:23,119 --> 00:28:25,400
Speaker 1: Eye Group had a note saying, you know that that

554
00:28:25,440 --> 00:28:28,119
Speaker 1: inversion is going to go further right beyond these like

555
00:28:28,200 --> 00:28:31,560
Speaker 1: already like you're saying historic levels. And but the Feds

556
00:28:31,560 --> 00:28:33,879
Speaker 1: in a bind, right, I mean, Pal said yesterday the

557
00:28:34,400 --> 00:28:36,720
Speaker 1: kind of path to a soft landing is getting worse.

558
00:28:36,800 --> 00:28:39,560
Speaker 1: But they they're backs to the wall with inflation high.

559
00:28:39,680 --> 00:28:42,400
Speaker 1: So yeah, Nathan, it could be that they have to

560
00:28:42,440 --> 00:28:46,000
Speaker 1: go so far and the recession maybe a worse recession

561
00:28:46,040 --> 00:28:49,000
Speaker 1: than it would have been, right because the system, like

562
00:28:49,080 --> 00:28:51,480
Speaker 1: look at the housing market. Luckily, I'm not buying a

563
00:28:51,520 --> 00:28:57,960
Speaker 1: house now, but over seven percent. Yeah, Les, I asked

564
00:28:57,960 --> 00:29:00,480
Speaker 1: this question to to I think a source of yours actually,

565
00:29:00,520 --> 00:29:03,480
Speaker 1: Danielle DiMartino Booth, who is a favorite of our show.

566
00:29:03,800 --> 00:29:06,240
Speaker 1: We talked a little bit about this comment that Chairman

567
00:29:06,280 --> 00:29:08,840
Speaker 1: Powell had made his press conference. He said, well, the

568
00:29:08,920 --> 00:29:11,600
Speaker 1: risk of overtightening is actually perhaps not that bad. And

569
00:29:11,600 --> 00:29:13,720
Speaker 1: I'm paraphrasing, of course, but he says, we can always

570
00:29:13,760 --> 00:29:16,360
Speaker 1: take a u turn. We can always kind of use

571
00:29:16,400 --> 00:29:18,840
Speaker 1: the tools in our toolbox and and cut rates if

572
00:29:18,840 --> 00:29:21,040
Speaker 1: we if we go too far. But Liz, in an

573
00:29:21,160 --> 00:29:23,680
Speaker 1: environment where the Federal Reserve has gotten a lot of

574
00:29:23,720 --> 00:29:27,160
Speaker 1: scrutiny for using those rates, um and for quantitative easing

575
00:29:27,200 --> 00:29:31,560
Speaker 1: as well, is there perhaps some hurdles for Chairman Powell

576
00:29:31,560 --> 00:29:36,120
Speaker 1: to actually cut rates when the time comes. Yeah, I

577
00:29:36,120 --> 00:29:38,640
Speaker 1: mean that you're right. It's a good point. And I

578
00:29:38,800 --> 00:29:43,000
Speaker 1: really like Danielle like you said too. But yeah, I

579
00:29:43,040 --> 00:29:45,840
Speaker 1: mean it's not so easy, right, you know. Like um,

580
00:29:45,880 --> 00:29:48,000
Speaker 1: he seemed to say, well now, and he said in

581
00:29:48,040 --> 00:29:50,280
Speaker 1: the past it was vice versa. But now, like you said,

582
00:29:50,320 --> 00:29:52,720
Speaker 1: he said, the risks are you know, we let inflation

583
00:29:53,040 --> 00:29:56,360
Speaker 1: stay too long, we can you know, and that's a problem.

584
00:29:56,360 --> 00:29:59,040
Speaker 1: So we can always cut rates. But you're right, Um,

585
00:29:59,120 --> 00:30:01,320
Speaker 1: you know, they they're in a situation where it may

586
00:30:01,320 --> 00:30:04,440
Speaker 1: not be that easy, especially you know, created them to

587
00:30:04,560 --> 00:30:07,680
Speaker 1: kind of redeploy que. There's a lot of political pushback

588
00:30:07,760 --> 00:30:11,680
Speaker 1: against that, right, you know, So I don't think he's

589
00:30:11,680 --> 00:30:14,960
Speaker 1: got it too easy on either way. You know. Yeah,

590
00:30:15,000 --> 00:30:17,840
Speaker 1: if they turn around too soon, and if they were

591
00:30:17,880 --> 00:30:20,560
Speaker 1: to pivot, which they definitely didn't yesterday, and they let

592
00:30:20,560 --> 00:30:23,800
Speaker 1: inflation get too bad, then then they got to double

593
00:30:23,840 --> 00:30:26,720
Speaker 1: down and then hike again. But I think you're right

594
00:30:26,760 --> 00:30:29,160
Speaker 1: that it may not be too easy if they crush

595
00:30:29,280 --> 00:30:33,200
Speaker 1: this economy just to quickly revive it. So could things

596
00:30:33,280 --> 00:30:36,960
Speaker 1: get worse before they get better next year for the Fed,

597
00:30:37,040 --> 00:30:41,440
Speaker 1: laz And Well, I think sounds land. We should all

598
00:30:41,480 --> 00:30:43,720
Speaker 1: not look at our retirement accounts now. I think it's

599
00:30:43,720 --> 00:30:48,600
Speaker 1: going to get worse for everything, Like stocks are obviously

600
00:30:48,640 --> 00:30:51,280
Speaker 1: taking it on the chin, the bond markets down. We've

601
00:30:51,480 --> 00:30:53,800
Speaker 1: we've had that sixty forty. There was no place to

602
00:30:53,880 --> 00:30:56,440
Speaker 1: hide in the last year or two. And if the

603
00:30:56,520 --> 00:30:59,800
Speaker 1: Fed we've got two CPI reports before their next meeting,

604
00:30:59,840 --> 00:31:03,280
Speaker 1: if they're still strong, I mean, nothing will change as

605
00:31:03,360 --> 00:31:05,960
Speaker 1: far as them seeming hawkers. So I think rates could

606
00:31:06,000 --> 00:31:09,360
Speaker 1: go higher. This kind of sixty forty pain could last.

607
00:31:09,360 --> 00:31:12,120
Speaker 1: And I'm not an equity analysts. I'm just saying you

608
00:31:12,160 --> 00:31:15,160
Speaker 1: know what I see on the screens. But yeah, and

609
00:31:15,200 --> 00:31:18,480
Speaker 1: you know, Pal, that's what they need, even though senators

610
00:31:18,520 --> 00:31:20,760
Speaker 1: like Elizabeth Warrener saying we don't want too much pain,

611
00:31:20,800 --> 00:31:22,960
Speaker 1: but Pale saying, sadly, we're going to have to have

612
00:31:23,000 --> 00:31:26,080
Speaker 1: some pain for the American people. Otherwise the pain could

613
00:31:26,080 --> 00:31:29,160
Speaker 1: be worse if we have inflation for years and years entrenched.

614
00:31:30,040 --> 00:31:33,320
Speaker 1: List thirty seconds here the bull case for the dollar.

615
00:31:33,640 --> 00:31:37,040
Speaker 1: Does it turn around or does it decrease the minute

616
00:31:37,040 --> 00:31:39,440
Speaker 1: there is actually some sort of stalling out on the

617
00:31:39,520 --> 00:31:44,240
Speaker 1: terminal rate. Well, wow, the bull case for the dollar,

618
00:31:44,320 --> 00:31:46,720
Speaker 1: which was maybe seeming to kind of falter a little,

619
00:31:46,760 --> 00:31:50,960
Speaker 1: it just got supercharged, right. Um. But I think if

620
00:31:50,960 --> 00:31:54,160
Speaker 1: the terminal rate keeps getting pushed higher, and you have

621
00:31:54,240 --> 00:31:56,680
Speaker 1: other central banks like the B A a B today

622
00:31:56,760 --> 00:32:00,920
Speaker 1: saying hey, pull back your peak rates, you've aout this divergence.

623
00:32:00,960 --> 00:32:03,040
Speaker 1: So I think for now there's not a lot to

624
00:32:03,160 --> 00:32:06,520
Speaker 1: stop the dollar higher unless we get like two really

625
00:32:06,600 --> 00:32:10,760
Speaker 1: soft cpis, which I'm not predicting. Certainly something to watch.

626
00:32:10,880 --> 00:32:14,720
Speaker 1: Liz McCormick, our chief Global Market macro markets correspondent, We

627
00:32:14,800 --> 00:32:20,560
Speaker 1: thank you as always, Okay, Davian Sasaur, the chief e

628
00:32:20,720 --> 00:32:23,600
Speaker 1: M fix income strategist over at Bloomberg Intelligence and fellow

629
00:32:23,640 --> 00:32:27,800
Speaker 1: sports fan joins us right here in studio. And and

630
00:32:27,800 --> 00:32:30,280
Speaker 1: it's a special day because it's the day after the

631
00:32:30,320 --> 00:32:32,560
Speaker 1: Federal Reserve meetings, So naturally we have to talk about

632
00:32:32,600 --> 00:32:35,520
Speaker 1: not just the U S or the UK or whatever

633
00:32:35,560 --> 00:32:37,000
Speaker 1: other country want to talk about. We have talked about

634
00:32:37,000 --> 00:32:40,360
Speaker 1: the emerging markets complex broadly, especially on a day when

635
00:32:40,400 --> 00:32:42,760
Speaker 1: the dollar is actually higher and stronger by about six

636
00:32:42,800 --> 00:32:47,120
Speaker 1: tenths of one percent Damien twenty thousand foot view. If

637
00:32:47,120 --> 00:32:49,640
Speaker 1: that's even high enough. What's going on with e M

638
00:32:49,680 --> 00:32:52,680
Speaker 1: when it comes to the federal reserves? Ripple effect? Okay,

639
00:32:52,680 --> 00:32:55,160
Speaker 1: the ripple effect is this all the US dollar pegs

640
00:32:55,160 --> 00:32:57,240
Speaker 1: are the countries that try to peg their currencies to

641
00:32:57,280 --> 00:32:59,840
Speaker 1: the dollar. I'm talking Hong Kong for example. Have allum

642
00:33:00,040 --> 00:33:02,320
Speaker 1: have all adjusted? Right? So you have banks like HSBC

643
00:33:02,440 --> 00:33:06,320
Speaker 1: and Standard Chartered hiring charging higher rates to depositors on

644
00:33:06,360 --> 00:33:08,360
Speaker 1: the ground there as a result of the FED move.

645
00:33:08,560 --> 00:33:10,640
Speaker 1: And we see the trickle effect. I mean check although

646
00:33:10,640 --> 00:33:13,600
Speaker 1: they left rates on hold. Just this morning, you had

647
00:33:13,640 --> 00:33:16,720
Speaker 1: Malaysia raised rates by tips overnight. So you've got more

648
00:33:16,720 --> 00:33:18,240
Speaker 1: coming and next week is going to be a big week.

649
00:33:18,280 --> 00:33:20,840
Speaker 1: You've got Poland, you've got Mexico, You've got Peru, so

650
00:33:20,880 --> 00:33:24,560
Speaker 1: we expect more central bank rate hikes ahead. However, the

651
00:33:24,600 --> 00:33:28,960
Speaker 1: pace is certainly decelerating. Critty, how much more volatility can

652
00:33:28,960 --> 00:33:33,480
Speaker 1: we expect for e M from China sort of keeping

653
00:33:33,560 --> 00:33:38,400
Speaker 1: us guessing on what they're doing with COVID zero. Nathan. Fundamentally,

654
00:33:38,440 --> 00:33:40,440
Speaker 1: the whole pyramid in China is collapsing as we speak.

655
00:33:40,480 --> 00:33:42,400
Speaker 1: And what I mean by that is what started with

656
00:33:42,440 --> 00:33:44,840
Speaker 1: weak property developers. And this is all about real estate.

657
00:33:44,920 --> 00:33:47,880
Speaker 1: Mind you ever Grand Agile have you know, has really

658
00:33:47,920 --> 00:33:51,000
Speaker 1: moved to stronger hands Country Garden von k and now

659
00:33:51,000 --> 00:33:55,200
Speaker 1: it's pushed into you know, government government backed property developers

660
00:33:55,240 --> 00:33:58,680
Speaker 1: like Cify and Greenland, with potential for spill over into

661
00:33:58,760 --> 00:34:02,120
Speaker 1: the municipal market inch which is the lower local government

662
00:34:02,160 --> 00:34:05,800
Speaker 1: financing vehicle market. So we've got two hundred billion dollars

663
00:34:05,800 --> 00:34:08,200
Speaker 1: of enthore and offshore deet coming due through the end

664
00:34:08,200 --> 00:34:12,600
Speaker 1: of three that's a lot of money of China dollar.

665
00:34:12,640 --> 00:34:16,080
Speaker 1: Property bonds now trade below seventy cents on the dollar. Nathan.

666
00:34:16,160 --> 00:34:18,799
Speaker 1: I mean, we have some real pain there. So fundamentally,

667
00:34:18,880 --> 00:34:20,800
Speaker 1: I think the property crisis is going to get worse,

668
00:34:21,160 --> 00:34:23,879
Speaker 1: and it's got potential for trickle down effect into municipalities,

669
00:34:23,880 --> 00:34:26,240
Speaker 1: into cities and prefectures, and I think that's still playing

670
00:34:26,239 --> 00:34:29,400
Speaker 1: itself out, all right, Damian. We covered e M. We

671
00:34:29,480 --> 00:34:33,440
Speaker 1: covered the US, sort of we covered China. H I.

672
00:34:33,520 --> 00:34:35,839
Speaker 1: We have to talk about some real nerdy stuff here,

673
00:34:35,880 --> 00:34:38,520
Speaker 1: and that of course is Brazil. There is a cross,

674
00:34:39,040 --> 00:34:41,600
Speaker 1: a currency cross that I love to talk about, and

675
00:34:41,640 --> 00:34:43,680
Speaker 1: we don't talk about it enough. We really got to

676
00:34:43,760 --> 00:34:45,439
Speaker 1: learn out about it over on the Market's Live team

677
00:34:45,560 --> 00:34:49,160
Speaker 1: back in the day. The Brazilian Real versus the Mexican pain.

678
00:34:49,600 --> 00:34:51,600
Speaker 1: Love this one, I know, I do love this one

679
00:34:51,640 --> 00:34:53,520
Speaker 1: because the way I was taught it was that this

680
00:34:53,600 --> 00:34:56,480
Speaker 1: is how a lot of at least American traders on

681
00:34:56,560 --> 00:34:59,120
Speaker 1: the Western hemisphere get exposure to em. It's either Brazil

682
00:34:59,239 --> 00:35:01,040
Speaker 1: or its Mexico. It's kind of a seesaw. You kind

683
00:35:01,040 --> 00:35:04,239
Speaker 1: of trade off depending on what exposure you want. Because

684
00:35:04,239 --> 00:35:06,920
Speaker 1: there are the two large economies in Latin America in

685
00:35:07,280 --> 00:35:09,719
Speaker 1: the European kind of a MIA sphere. It used to

686
00:35:09,719 --> 00:35:12,759
Speaker 1: be I think the South African Rand versus the Turkish lear.

687
00:35:12,920 --> 00:35:15,320
Speaker 1: That of course since change. But back to the Brazilian

688
00:35:15,320 --> 00:35:18,480
Speaker 1: Real and Mexican peso. Talk to us about that pair. Well,

689
00:35:18,480 --> 00:35:20,640
Speaker 1: the reason that pair is actually interesting is because they're

690
00:35:20,640 --> 00:35:23,000
Speaker 1: both relatively high yielders. Right, So the cost of funding

691
00:35:23,000 --> 00:35:25,000
Speaker 1: if you've got to go short the rail versus the

692
00:35:25,000 --> 00:35:28,080
Speaker 1: paso or vice versa. You know, the funding cost doesn't

693
00:35:28,120 --> 00:35:30,520
Speaker 1: really penalize you so much for having to short one

694
00:35:30,560 --> 00:35:32,720
Speaker 1: of those currencies. Which is why you hear about lea iran,

695
00:35:32,800 --> 00:35:34,279
Speaker 1: which is what you're referring to. That used to be

696
00:35:34,320 --> 00:35:36,440
Speaker 1: a pretty well traded cross. But the real crust that

697
00:35:36,440 --> 00:35:39,000
Speaker 1: everybody's missing here, and it is the big money maker

698
00:35:39,080 --> 00:35:42,640
Speaker 1: in emerging markets year to date. Next Paso versus the

699
00:35:42,719 --> 00:35:45,280
Speaker 1: Japanese yen. Now I know it's the Japanese yen whatever,

700
00:35:45,320 --> 00:35:48,040
Speaker 1: but I mean it's it's a hugely liquid cross. I'm

701
00:35:48,080 --> 00:35:50,640
Speaker 1: not just talking emerging I'm talking developed markets as well.

702
00:35:51,040 --> 00:35:52,640
Speaker 1: And I mean, my goodness, I know a lot of

703
00:35:52,680 --> 00:35:54,960
Speaker 1: traders are not a p A lot of pms have

704
00:35:55,120 --> 00:35:58,080
Speaker 1: made their mint this year trading that cross while really

705
00:35:58,120 --> 00:36:00,759
Speaker 1: not trading and just buying it and holding it. Right, So, um,

706
00:36:00,800 --> 00:36:02,359
Speaker 1: so that's been a good trade. And look, I mean,

707
00:36:02,440 --> 00:36:04,160
Speaker 1: if you want to talk about Brazil, look we had

708
00:36:04,160 --> 00:36:07,480
Speaker 1: the election. You know, Balsonaro step back, you know, on

709
00:36:07,640 --> 00:36:11,120
Speaker 1: cautiously optimist, optimistic on Brazil. I mean, we had huge, huge,

710
00:36:11,160 --> 00:36:14,760
Speaker 1: foreign influence coming into Brazilian equities in October, with literally

711
00:36:14,960 --> 00:36:17,400
Speaker 1: four million dollars alone coming in on Monday, which was

712
00:36:17,440 --> 00:36:20,080
Speaker 1: the last trading day of the month, on back of

713
00:36:20,440 --> 00:36:22,480
Speaker 1: the election, on the back of the re election of Lula.

714
00:36:22,600 --> 00:36:25,360
Speaker 1: So there's some current surrounding Petro Brass whether whether or

715
00:36:25,360 --> 00:36:27,160
Speaker 1: not Lula is going to look to privatize the you know,

716
00:36:27,239 --> 00:36:29,720
Speaker 1: you know, the state of and oil company. And there's

717
00:36:29,719 --> 00:36:31,920
Speaker 1: some concern on how Lula is gonna basically govern, but

718
00:36:31,960 --> 00:36:34,799
Speaker 1: given the slim margin of victory, cretty, you know, he's

719
00:36:34,840 --> 00:36:36,600
Speaker 1: got to manage from the center. And I believe that's

720
00:36:36,600 --> 00:36:38,239
Speaker 1: what the markets are planning for. And I think there's

721
00:36:38,239 --> 00:36:41,000
Speaker 1: more to coma. You stay positive, Damian on the Brazilian

722
00:36:41,080 --> 00:36:45,239
Speaker 1: rail if the oil volatility continues interesting, I mean yes,

723
00:36:45,360 --> 00:36:48,600
Speaker 1: I do. I mean oil in Brazil. Look at commodity prices.

724
00:36:48,680 --> 00:36:51,240
Speaker 1: Have they used to have a very very large impact

725
00:36:51,360 --> 00:36:54,680
Speaker 1: on commodity producing currencies, but they really haven't had much

726
00:36:54,680 --> 00:36:56,200
Speaker 1: of an impact of late, and certainly not in the

727
00:36:56,239 --> 00:36:58,400
Speaker 1: Brazilian rail. If anything, that's gonna be medals prices. I

728
00:36:58,440 --> 00:37:00,320
Speaker 1: would think that have more like iron Ore for example,

729
00:37:00,320 --> 00:37:02,359
Speaker 1: because Paul he's a huge producer there. But you know,

730
00:37:02,400 --> 00:37:05,920
Speaker 1: for me, I mean, yeah, the Brazilian real, I'm pretty

731
00:37:05,920 --> 00:37:07,520
Speaker 1: optimistic on it. I mean, look, you want to talk

732
00:37:07,520 --> 00:37:09,440
Speaker 1: about currencies you don't want to be optimistic on. I'm

733
00:37:09,440 --> 00:37:11,600
Speaker 1: gonna point out five of them. The Chilean paste, of

734
00:37:11,640 --> 00:37:15,440
Speaker 1: the Philippine paste, of the Malaysian ringing, the Polish slotti,

735
00:37:15,560 --> 00:37:19,520
Speaker 1: and the Hungarian foreigns are all at all time lows

736
00:37:19,640 --> 00:37:23,280
Speaker 1: today right now versus the dollar. So there are more,

737
00:37:23,560 --> 00:37:26,080
Speaker 1: There's more pain out there to come. I wonder if

738
00:37:26,160 --> 00:37:29,959
Speaker 1: Damien has all these physical currencies somewhere in his office.

739
00:37:30,680 --> 00:37:32,560
Speaker 1: I have quite a few of them, actually cool, very

740
00:37:32,560 --> 00:37:36,880
Speaker 1: cool collection dollars too. Damian's as our chief em fixed

741
00:37:36,920 --> 00:37:40,680
Speaker 1: income strategists of Bloomberg Intelligence. We thank you as always

742
00:37:43,080 --> 00:37:46,160
Speaker 1: thanks for listening to the Bloomberg Markets podcast. You can

743
00:37:46,200 --> 00:37:49,960
Speaker 1: subscribe and listen to interviews with Apple Podcasts or whatever

744
00:37:50,040 --> 00:37:53,720
Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter

745
00:37:54,000 --> 00:37:57,800
Speaker 1: at Matt Miller. Put on false Sweeney I'm on Twitter

746
00:37:57,880 --> 00:38:00,840
Speaker 1: at pt Sweeney. Before the podcast, you can always catch US,

747
00:38:00,920 --> 00:38:02,320
Speaker 1: worldwide at Bloomberg Radient