Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keane, along
Speaker 1: with Jonathan Faroe and Lisa Abramowitz. Join us each day
Speaker 1: for insight from the best and economics, geopolitics, finance and investment.
Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and
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Speaker 1: get out there Newtonian calculus today to look at that,
Speaker 1: to your Yale, they'll go to logs. Michael McKee and
Speaker 1: I really, well, we really don't do that. Bramo doesn't
Speaker 1: really do that. But someone that can go to logs
Speaker 1: and look at the rates of change of our economy
Speaker 1: is Lorettemester of the Cleveland Fed. She is definitive in
Speaker 1: mathematics out of Columbia and Princeton and joins our Michael
Speaker 1: McKee here at our world headquarters. Michael, thank you very much, Tom,
Speaker 1: and we'd like to welcome Cleveland Fed President or Atemester,
Speaker 1: to our viewers and listeners worldwide here on Bloomberg. Tom said,
Speaker 1: you're the math expert. You look at the ADP numbers,
Speaker 1: we might as well. Start with that because it's just
Speaker 1: out one hundred forty five thousand. I know there's questions
Speaker 1: about their methodology or what it means, but what do
Speaker 1: you take away from it? Well, we have to look
Speaker 1: at all the data, So that's a data point that
Speaker 1: we're going to look at. We're going to get the
Speaker 1: employment report on Friday, so there's just a lot of
Speaker 1: data coming in and we're going to use that to
Speaker 1: assess not only where the economy has been, but where
Speaker 1: it's going, because, as you know, it's about where the
Speaker 1: economy is going. That's really important for setting monetary policy. Well,
Speaker 1: that was one of the questions that they were just
Speaker 1: asking me in the surveillance studio. How do you know
Speaker 1: what you're looking for when the data are in the
Speaker 1: rearview mirror. Well, you know, the data and the rear
Speaker 1: immunal is important because it tells you something about where
Speaker 1: the economy is going. So you don't throw that data away.
Speaker 1: But you also have to do a lot of other
Speaker 1: kind of reconnaissance. So you know, the nice thing about
Speaker 1: having feder reserve banks across the country is that we
Speaker 1: can talk to contacts in our districts. You know, whether
Speaker 1: it be labor market contacts or business contacts to really
Speaker 1: find out what's happening on the ground at the moment,
Speaker 1: and that information, anecdotal information is very helpful as well.
Speaker 1: And then we do surveys and other kinds of work
Speaker 1: timely information. So all of that goes into sort of
Speaker 1: formulating monetary policy. So I think it's wrong to think like, oh,
Speaker 1: we're looking only in the rearview mirror at data that's
Speaker 1: from a month ago or two months ago. That data
Speaker 1: is actually helpful for looking at trends. And then we
Speaker 1: also augment that with other data about what's really happening
Speaker 1: on the ground on main street for businesses that have
Speaker 1: to cope with this economy, Well, what's happening on main street?
Speaker 1: It kind of two parts in general, what are you
Speaker 1: hearing and then what are you hearing from bankers in
Speaker 1: your district about credit quality? Right, so credit quality is
Speaker 1: still fine. Bankers are telling us that that isn't really
Speaker 1: a problem. It might have ticked up a tad, but
Speaker 1: it certainly is still low, very low by historical standards,
Speaker 1: So that isn't a focus. Now the bankers have, you know,
Speaker 1: struggled with retaining deposits storing the March tensions in the
Speaker 1: banking industry, but that has stabilized since then in terms
Speaker 1: of credit quality, in terms of credit standards. You know,
Speaker 1: they had already been tightening credit standards as interest rates
Speaker 1: went up, so they're continuing to do that. They're continuing
Speaker 1: to monitor, you know, their customers, they're continuing to monitor
Speaker 1: going forward in terms of making sure that their well
Speaker 1: positioned for the economy with higher industrates. In terms of
Speaker 1: the businesses themselves, of course, they are preparing right for
Speaker 1: I would say some slowdown in the economy, but a
Speaker 1: lot of the firms are still telling us that their
Speaker 1: conditions are still pretty good. They're worried about the economy
Speaker 1: in general, and so they're being a little defensive now,
Speaker 1: some pullback in some of their investments spending. But again,
Speaker 1: it doesn't feel like everyone thinks that we're going to
Speaker 1: have a deep recession. It's just they're trying to be
Speaker 1: more cautious so that they're well prepared for whatever happens
Speaker 1: in the economy in the future. Well, the recession argument
Speaker 1: that a lot of people are making sort of depends
Speaker 1: on the idea that the full weight of all the
Speaker 1: cumulative weight of your rate increases hasn't hit the economy yet.
Speaker 1: Plus we throw in the banking maybe tightening credit standards
Speaker 1: a little more. Are you worried about the second half
Speaker 1: of the year. Well, I do think that growth this
Speaker 1: year is going to be well below trend. And you're
Speaker 1: right the banking tensions certainly. Typically when you see that happening,
Speaker 1: you do see banks pullback on their credit standards and
Speaker 1: tightening their tightened their credit standards. We don't know right
Speaker 1: now either the ration of those effects from what happened
Speaker 1: in March or how strong those effects will be. So
Speaker 1: we do expect that to happen, but right now we're
Speaker 1: in that time where we're assessing, talking to the bankers,
Speaker 1: looking at things like the SLUICE, which is the Senior
Speaker 1: Loan Officer Opinion Survey, to get a really good sense
Speaker 1: of where bankers are. As I said, even before the
Speaker 1: March tensions in the industry, banking industry, you know, the
Speaker 1: banks were pulling back and tightening credit standards, and that's
Speaker 1: kind of normal. That's the normal flow of monetary policy
Speaker 1: tightening throughout the economy. That's one of the ways it
Speaker 1: gets pushed down into the economy. So that's fine. That's
Speaker 1: kind of what we are intending in terms of making
Speaker 1: sure that we can slow down demand so that we
Speaker 1: get a better balance between demand and supply and reduce
Speaker 1: those price pressures. And now we're assessing whether the tensions
Speaker 1: in the banking industry have augmented that, and that's part
Speaker 1: of what the evaluation will be as we go in
Speaker 1: to the next FOMC meeting. In terms of calibrating monetary policy. Well,
Speaker 1: you're in New York. All the big trading guests are
Speaker 1: only a few blocks away from us, and they're calibrating
Speaker 1: recession right now, and that you're going to be cutting
Speaker 1: rates not once, two or three times before times by
Speaker 1: next January. How do you process that view versus yours? Well,
Speaker 1: you know, we've seen periods where the markets have one
Speaker 1: view of what's going to happen in the economy and
Speaker 1: the FED has another view, and you know, we certainly
Speaker 1: take information from that. You know, we see what they're
Speaker 1: doing and we're saying, Okay, that's their view, what's happening.
Speaker 1: We have our own forecast. We just put out forecasts
Speaker 1: at the last of home C meeting, and if you
Speaker 1: look at those, we did say that growth this year
Speaker 1: was going to be very much below trend growth, and
Speaker 1: so I think we see things a little bit differently
Speaker 1: in terms of what the appropriate monetary policy is given
Speaker 1: where the economy is and where it's going. We certainly
Speaker 1: are focused on in and making sure that inflation gets
Speaker 1: back down to two percent over time. Well as the
Speaker 1: idea of four rate cuts in the next year crazy, well,
Speaker 1: it certainly isn't my policy path. I mean, I think
Speaker 1: we're going to have to go a little bit higher
Speaker 1: from where we are a little bit more and then
Speaker 1: hold there for some time in order to make sure
Speaker 1: that inflation is on that sustainable downward path to two percent.
Speaker 1: That doesn't mean we're going to continue to raise rates
Speaker 1: until inflation gets back to two percent. We're going to
Speaker 1: be sort of calibrating in order to see that inflation
Speaker 1: is going to move down. In my own forecast is
Speaker 1: that it will take some time to get inflation back down,
Speaker 1: but I you know, I think we're going to make
Speaker 1: some appreciable progress this year and then continue to make
Speaker 1: progress next year and then hit two percent in twenty
Speaker 1: twenty five. What's your trajectory for inflation? Where can we
Speaker 1: end the year and how fast would we get there. Yeah,
Speaker 1: so I'm about three and three quarters percent by the
Speaker 1: end of this year, continued progress next year, maybe two
Speaker 1: and three quarters, and then two percent in twenty twenty five.
Speaker 1: And I think that's a good progress. But you got
Speaker 1: to remember we've been at high inflation, well over two
Speaker 1: percent for quite some time, and that's why it's imperative
Speaker 1: that we continue to make progress and then we continue
Speaker 1: on this path. Now, we're going to be judicious about it.
Speaker 1: We're not going to, you know, you throw the baby
Speaker 1: out with the bathwater, as they say. We're going to
Speaker 1: make sure that we're making good judgments along the way.
Speaker 1: But it is crucial that we get inflation back down
Speaker 1: in a timely way to two percent. Well, you're talking
Speaker 1: about throwing the baby out with the bathwater. But the
Speaker 1: old adage is the Fed titans until something breaks. What
Speaker 1: would you say the balance of risks is now between
Speaker 1: something breaking on the growth side and unemployment side and inflation. Yeah, Well,
Speaker 1: I'm hoping we don't tighten until something breaks. I don't
Speaker 1: think that's the strategy that I would like to follow.
Speaker 1: I think we've got to be judicious about and try
Speaker 1: to calibrate our policy in the correct way. I mean,
Speaker 1: we've made a lot of progress in terms of where
Speaker 1: we started. When we started raising rates, we were at
Speaker 1: zero right, and we've come a long way. So we're
Speaker 1: making progress on getting to where we need to get to.
Speaker 1: And my own view is that we're going to have
Speaker 1: to go a little bit further, but we're certainly well
Speaker 1: on the way of where we need to get to.
Speaker 1: And then we hold for a while, and yes, we
Speaker 1: can recalibrate our policy if the economy evolves differently than
Speaker 1: we're anticipating, and that's the nature of monetary policy making.
Speaker 1: You want to be able to take all the information
Speaker 1: in set a policy path that is consistent with getting
Speaker 1: back to full employment, maximum employment and price stability. And
Speaker 1: then if the economy evolves differently than you anticipate, then
Speaker 1: you might have to adjust your policy path and you
Speaker 1: need to be open to that, and especially in a
Speaker 1: situation like this where there is high uncertainty. There were
Speaker 1: high uncertainty and the economy before we had the tensions
Speaker 1: in the banking system. That tension in the banking sy
Speaker 1: some of the stresses in the bank in those banks
Speaker 1: has added more uncertainty, and so you've got to be
Speaker 1: willing to sort of take in more information, look at
Speaker 1: it and reassess if need be in terms of where
Speaker 1: policy needs to get to. Well, you say we should
Speaker 1: do a little more. The consensus median dot was five
Speaker 1: point one, which would be one more rate move. Are
Speaker 1: you in the group that was above that? How far
Speaker 1: do you think? Well, I see a little more inflation
Speaker 1: pressures than the median in the SAP from the December
Speaker 1: sep so I probably am a little bit higher than
Speaker 1: the median dot. But again, I'm open to making sure
Speaker 1: that we're setting policy to get inflation back down to
Speaker 1: two percent. So I'm open in terms of let's take
Speaker 1: in what the economy is telling us about where it's going.
Speaker 1: Let's make sure that we get inflation on that sustainable
Speaker 1: downward path. So I'm not you know, we've made a
Speaker 1: lot of progress, and I'm willing to sort of let's
Speaker 1: take it in and look at where the economy is going.
Speaker 1: Own view is that we'll have to go above five percent,
Speaker 1: but exactly how much, precisely how much, and precisely how
Speaker 1: long it has to stay above. We've got to be
Speaker 1: open to allowing the economy to tell us is great
Speaker 1: increase on May third, a certainty basically locked in at
Speaker 1: this point too soon. I heard the promo before you're right.
Speaker 1: I'm going to tell you that we have a lot
Speaker 1: more data to get to and we'll see as we
Speaker 1: get there what's happening in the economy. Again, the economy
Speaker 1: is going to tell us where it wants us to
Speaker 1: get to. Well, Loretta Mester says, I'm right, and so
Speaker 1: that's a great place to stop the interview. Thank you
Speaker 1: very much for joining us today here in New York,
Speaker 1: and we'll look on May third to see if I'm
Speaker 1: still right. I'll send it back to you, Michael McKee,
Speaker 1: thank you so much. We are here in our studios
Speaker 1: looking at markets on the move off that ADP report,
Speaker 1: maybe even off what we heard from doctor Mester as well.
Speaker 1: My major takeaway there I heard elements of dragging is
Speaker 1: Loretta Mester are confidently looked out to twenty twenty five,
Speaker 1: a longer timeline than maybe what we would see for
Speaker 1: many One of the great joys of speaking with Claudia
Speaker 1: Sam Yes a former FED economist and Sam consulting and
Speaker 1: writing for Bloomberg Opinion and always controversial. I got eight
Speaker 1: ways to go here, folks, and I'm gonna go to
Speaker 1: the sam you don't know which is she voraciously reads
Speaker 1: top flight fed research. Claudia, Sam, you go to San
Speaker 1: Francisco and Adam Shapiro, and you say his mix of
Speaker 1: what is driving this inflation is something we need to
Speaker 1: focus on, and that is the part of inflation off
Speaker 1: of the plant pandemic that is supply driven or supply side.
Speaker 1: Explain that. I think a big mistake that we're making
Speaker 1: at this point is acting like we can use past
Speaker 1: relationships in the economy to tell us what to do.
Speaker 1: The pandemic was extremely disruptive, and we see that across
Speaker 1: many of our peer countries. Set aside monetary policy, set
Speaker 1: aside fiscal policy, and I'm concerned as time passes that
Speaker 1: that gets pushed to the side. And that's why I
Speaker 1: go to Adam Shapiro's research. I think he is one
Speaker 1: of many who is carefully trying to figure out that
Speaker 1: supply that demand. The theme that I'm seeing into the
Speaker 1: IMF and World Bank meetings in my conversation Claudia tomorrow
Speaker 1: with doctor Georgieva at the IMF is that the analysis
Speaker 1: now like I've never seen, is linking monetary policy with
Speaker 1: our fiscal debt and our fiscal dynamics as well. Can
Speaker 1: we meld together monetary and fiscal analysis, whether we agree
Speaker 1: or agree to disagree, There are definitely some connections. I'm
Speaker 1: not sure the ones that we're making in terms of
Speaker 1: financing the fiscal debt. I mean that is a direct
Speaker 1: effect of these interest rates going up so quickly. I
Speaker 1: have pushed for and I think you're seeing some signs
Speaker 1: of it, particularly in Europe, understanding we cannot let the
Speaker 1: FED go it alone on inflation. The tools they use
Speaker 1: are going to cause a lot of pain, and there
Speaker 1: are things that fiscal authorities can do. It's just we
Speaker 1: don't have a lot of practice at that. Claudia, have
Speaker 1: you been surprised by how resilient the economic data has
Speaker 1: been up until this point. I've been very thankful. I mean,
Speaker 1: the Fed is trying to get a slow path back
Speaker 1: to inflation down, so no recession, no severe recession. That's
Speaker 1: where markets disagree with them. And the only way the
Speaker 1: Fed gets that done with the kind of rate increases
Speaker 1: they've had is if the consumers keep coming back, right
Speaker 1: and if the jobs remain there, even if it slows
Speaker 1: down like we are starting from a position of strength
Speaker 1: that has never been the case going into one of
Speaker 1: these cycles. How high should the Barbie Claudia for the
Speaker 1: Fed to cut rates, given that they still do have
Speaker 1: the issue of inflation very much front and center. Again,
Speaker 1: we have this disagreement about what kind of recession, if
Speaker 1: any were faced. I think if we go into a
Speaker 1: severe recession and the Fed holds on to this, we
Speaker 1: must stay the course no matter what, that would be
Speaker 1: a big mistake, you know. But I take them at
Speaker 1: their word, I really do. They are going to keep
Speaker 1: at this until inflation is moving down two percent. Whether
Speaker 1: I agree with that or not. Tell me about the
Speaker 1: speeds that were worth right now? Geta gopinath that the
Speaker 1: IMF talks about this about. I think it's like a
Speaker 1: general policy English if you will, for Notonian calculus. The
Speaker 1: rates of change right now, including the huge surgery saw
Speaker 1: on interest rates, has to be front and center. What
Speaker 1: are those speeds right now that we're seeing in interest
Speaker 1: rates as it folds into Fed policy. This is one
Speaker 1: contention I have with how the Fed thinks about the
Speaker 1: interest rates. They're very focused on the level, like getting
Speaker 1: the inflation adjusted function above and it's like, come on,
Speaker 1: like you raised interest rates so quickly, we know interest
Speaker 1: rate risk is there. That if we don't learn any
Speaker 1: lesson from Silicon Valley Bank in terms of the interest
Speaker 1: rate risk and monetary policy, that isn't absolutely missed opportunity.
Speaker 1: And as Lauretta Mester was saying, we see the effects
Speaker 1: in the standards, lending standards. It is there, it's coming.
Speaker 1: The last place it shows up is inflation, right, you
Speaker 1: know it's in train. I want to cite this carefully
Speaker 1: off of Gopenf's work. We'll be talking with gy to
Speaker 1: gopen Ff here next week at the IMF gy to
Speaker 1: Gopenef talking about the speed effects that are out there.
Speaker 1: What would be the effect doctor, some of lower rates
Speaker 1: or a pause? Dare I say how about pause? Pause? Pause?
Speaker 1: Would our world fall apart? No? I think it would
Speaker 1: give the world a chance to catch up with what
Speaker 1: the FED has been doing. J. Powell has been very
Speaker 1: clear we have started a disinflationary cycle. We know it's
Speaker 1: coming in housing that that just is a LaGG Just
Speaker 1: let everybody catch up. This is a speed issue. The
Speaker 1: FED went really fast. There is an argument for it.
Speaker 1: Just let it work right, have some faith in what
Speaker 1: you've done so far, and that's why pushing harder it
Speaker 1: could go to a very bad I can't say how
Speaker 1: controversial the tone is there from doctor some within the
Speaker 1: economics now she is just saying, there's a school of Thunnis.
Speaker 1: Would everyone just calm down, stop listening and watching bluebird
Speaker 1: surveillance and just slow down and breathe that's out there
Speaker 1: and analyze what exactly has happened to change the labor
Speaker 1: market really kind of fundamentally since the pandemic, Claudia, can
Speaker 1: you make sense of this? There was a recent study
Speaker 1: that came out that showed Americans are spending substantially less
Speaker 1: time working and they were pre pandemic about about half
Speaker 1: an hour, which doesn't sound like a lot. But this
Speaker 1: is adding to the constraints in the labor market. How
Speaker 1: much is the FED taking into consideration some pretty profound
Speaker 1: structural changes when they look to what they need to
Speaker 1: see with respect to unemployment rates as well as wages.
Speaker 1: So not enough, But this is not a criticism of
Speaker 1: the Fed. Again, we are in some uncharted territory and
Speaker 1: just because we get a study last week doesn't mean
Speaker 1: they were able to integrate it in the rate decision
Speaker 1: in January. Right, this is there are a lot of
Speaker 1: pieces coming together, whether it's work from home, whether it's
Speaker 1: getting the retirement done. They're just a lot going on.
Speaker 1: And I have a lot of concern that when they
Speaker 1: are doing the forecasting, those models are based on past
Speaker 1: relationships and they're not able to integrate what community members
Speaker 1: are telling them. I mean, I saw this. That's really
Speaker 1: hard to bring in in real time. It's really hard
Speaker 1: to bring research in. The bar is high to use
Speaker 1: these things in policymaking. Claudias, well, we'll have to leave it.
Speaker 1: There are out of time, Claudia. But doctor Sam, thank
Speaker 1: you so much for joining us today, of course her
Speaker 1: work with a fed Claudia sim Consulting. Joining us now
Speaker 1: is Khaki Chountry, the head of I Shares Investment Strategy
Speaker 1: Americas at black Rock. Khaki, wanderful to catch up with
Speaker 1: you and good to see you as always, Ghak. I
Speaker 1: think we all want to know just how much demand
Speaker 1: is they're still for treasuries based on what you're saying,
Speaker 1: Good morning, guys, great to be here, and a tremendous
Speaker 1: amount of demand is what I'm going to say. So
Speaker 1: just looking at ETF flows for the first quarter of
Speaker 1: the seventy four odd billion that came into all ETFs,
Speaker 1: about seventy percent of that within fixed income. And more specifically,
Speaker 1: what I thought that these was really interesting was that
Speaker 1: investors gravitated towards the highest quality parts of the fixed
Speaker 1: income market. So you were seeing investors move towards government bonds,
Speaker 1: towards treasuries to at the very front end of the
Speaker 1: treasury curve, and then the belly. So the seven to
Speaker 1: ten year something like the IF which gives you exposure
Speaker 1: to the ten year part of the curve had its
Speaker 1: biggest inflow ever. So investors definitely want fixed income here,
Speaker 1: they want the highest quality fixed income and they want
Speaker 1: treasuries at these well, not great yields, but better yields
Speaker 1: than it was about a year ago. So gegy, within
Speaker 1: crisis and within fear, we need to find courage. What
Speaker 1: part of the ETF world is the courage need to
Speaker 1: be applied? Where should we be investing away from our
Speaker 1: full faith and credit fears? Sure term, you're absolutely right,
Speaker 1: I think investors need to stay invested. I think one
Speaker 1: thing we've learned, especially when we look at the price
Speaker 1: action in both January as well as March, where we
Speaker 1: wouldn't have necessarily expected the S and P to be
Speaker 1: up or the NAZ that to be up as much
Speaker 1: as it was. So now where should investors go in
Speaker 1: this slightly volatile environment. We look at that in our
Speaker 1: second quarter outlook that we just came out with. Number one,
Speaker 1: think about quality in the equity markets and the fixed
Speaker 1: and come markets. So within the equity market, that looks
Speaker 1: at companies that have strong cash flows, high margins, and
Speaker 1: really have the ability to have strong balance streets. So
Speaker 1: looking at quality as well as looking at growth companies,
Speaker 1: not just STACK, but all growth companies that are at
Speaker 1: a reasonable price and that can be taxed something like
Speaker 1: an X and but also can be global energy companies
Speaker 1: like an I X. So that's the equity side, and
Speaker 1: then on the fixed and come side, you guys know this.
Speaker 1: I've talked about this on your show a bunch. We
Speaker 1: think that the new regime is one of you should
Speaker 1: be buying every backup in yels. I think we're in
Speaker 1: a generational opportunity for investors to get really high quality
Speaker 1: income in the fixed and come markets. Today's yield levels
Speaker 1: not fantastic. I think the FED is not going to
Speaker 1: cut two and a half times by the end of
Speaker 1: this year. But retan we get a backup by bonds
Speaker 1: by the front end and when we get to about
Speaker 1: four percent by the agg and gargie. Certainly, index strategies
Speaker 1: work very well when you're talking about broad bond indexes.
Speaker 1: But does index based investing allow for the stock specific
Speaker 1: type of analysis that you're talking about. Do you see
Speaker 1: investors starting to shift away from equity index strategies as
Speaker 1: they start to shift toward greater quality. It's a great question, Lisa,
Speaker 1: So I'd say that obviously, I mean, this was a
Speaker 1: great month. March was a great month for influence, inter
Speaker 1: qua l quality pickers. And if we look at broad
Speaker 1: mutual funds as well as ETFs industries, I mean there
Speaker 1: has been an outflow from mutual funds as such, unusual
Speaker 1: funds and ETFs when it comes to US equity specifically.
Speaker 1: But I think the crux of your question is, you know,
Speaker 1: is there a role for both active as well as
Speaker 1: index investing for investors portfolios? And the answer is absolutely yes.
Speaker 1: One of the things that I'm most fashionate about is
Speaker 1: the fact that investors can add ETFs to their portfolios.
Speaker 1: I share ETFs hopefully in their portfolios. Active investors can
Speaker 1: do that to generate alpha in a really liquid manner
Speaker 1: in their portfolios. So yes, you can have your active
Speaker 1: A locations, but there is a role for ETFs for liquidity,
Speaker 1: for access, for transparency as well. Just pick up on
Speaker 1: some of the words you used. I think this is important.
Speaker 1: You called this a generational opportunity, which implies that maybe
Speaker 1: it doesn't stick around, that you have to get in
Speaker 1: NAT's pickup yield. But then you said by the front end,
Speaker 1: which made me think, well, okay, if you're running by
Speaker 1: the front end, you're not really locking it in for
Speaker 1: very long Khaki, which is it wants in a generation
Speaker 1: opportunity or something that's going to stick around. So I
Speaker 1: really hope that it sticks around. But unfortunately, every time,
Speaker 1: what we've seen is as soon as yields back up
Speaker 1: to about that four percent level, we have investors both
Speaker 1: from sort of institutional investors that are pension funds, insurance
Speaker 1: companies as well as retail investors gravity towards the add
Speaker 1: gravitate towards duration. So you know, when we do get
Speaker 1: that back up, and I think we will most likely
Speaker 1: get a backup back to about three point seven once
Speaker 1: some of this fear around the banking crisis has dissipated somewhat.
Speaker 1: So I think that it's a generational opportunity when we
Speaker 1: get that backup, But for now, you should still be
Speaker 1: invested in fix income. So for now, I think allocating
Speaker 1: to the front end makes a lot of steps. Gaggy,
Speaker 1: thank you. Always enjoy catching up with you. Gagi Chatry.
Speaker 1: That a flat rock. Absolutely the bond market. The uncertainty
Speaker 1: in Washington is off the chart as well. We had
Speaker 1: a huge response to the attendance on Bloomberg Surveillance a
Speaker 1: few days ago of Michael Zelden to say he's a
Speaker 1: former federal prosecutor and an American University Washington College of Law.
Speaker 1: Barely describes his commitment not only to prosecutetorial law, but
Speaker 1: to explaining it on TV. He's one of those people
Speaker 1: that comes on in his crystal clear let's go law
Speaker 1: one on one here, sir. We did not see misdemeanors yesterday.
Speaker 1: All of the headlines today speak of felony. Explained the
Speaker 1: distinction for the former president of misdemeanor versus felony charges.
Speaker 1: A misdemeanor is something less serious than a felony. The
Speaker 1: misdemeanors in this case would have been the mere entry
Speaker 1: of false data on the books and records of the business. However,
Speaker 1: they couldn't directly charge that because that has a two
Speaker 1: year statute of limitations, and this occurred longer than two
Speaker 1: years ago. So they had to figure out a way
Speaker 1: to make those misdemeanor business record false statements into a felony.
Speaker 1: And what they did was they said that that misdemeanor
Speaker 1: was undertaken for the purpose of promoting another crime, in
Speaker 1: this case hiding from the people of New York. The
Speaker 1: true intent of what Trump was doing, which they allege,
Speaker 1: is to deprive the people of information that would have
Speaker 1: been relevant to their decision of who to vote for. Specifically,
Speaker 1: they paid three people, Stormy Stormy Daniels, McDougall at a
Speaker 1: doorman money to suppress their stories so that the voting
Speaker 1: public wouldn't know what Trump was up to in this
Speaker 1: sort of misogynistic way prior to the election. It's an
Speaker 1: interesting theory. We'll see how it plays out in practice.
Speaker 1: We could talk an hour today, Michael about this nuance.
Speaker 1: I'm going to go to what I witnessed yesterday and
Speaker 1: the silliness of microanalysis by non pros like you of
Speaker 1: who held the door for whom? Did you see a
Speaker 1: normal process yesterday? Does it matter that we're analyzing who's
Speaker 1: holding the door for a given defendant? Not at all.
Speaker 1: In fact, for a few minutes I turned on the
Speaker 1: television and I heard that comment as well, and I thought, boy,
Speaker 1: they really are struggling to fill airtime because they expected
Speaker 1: this arrangement to take place more quickly than it did.
Speaker 1: That had nothing to do with anything of substance. The
Speaker 1: only thing that mattered yesterday was that Donald Donald Trump
Speaker 1: was charged for the thirty four belonies. He pleaded not guilty.
Speaker 1: They set a next court appearance in December, and between
Speaker 1: now and then they'll be a whole host of motions
Speaker 1: filed by Trump's lawyers to try to either change the
Speaker 1: venue of this case and or to dismiss it on
Speaker 1: various legal theories. That's what's going to play out between
Speaker 1: now and December. But let's go to the media circus, Michael,
Speaker 1: because as a former federal prosecutor, how much do you
Speaker 1: have to factor that in to a what you prosecute
Speaker 1: it and be how you prosecute it given a lot
Speaker 1: of interest in a given case. Well, you have to
Speaker 1: be very careful about that. Every individual defendant is entiled
Speaker 1: to a fair trial, and you don't want to poison
Speaker 1: the possible ability of that through a media circus. Now,
Speaker 1: I think the prosecutors are going to be very circumspect
Speaker 1: about how they proceed. I think they're going to try
Speaker 1: to rein in their witnesses, particularly Michael Cohen, who's an
Speaker 1: ever present presence on television, which I find surprising. But
Speaker 1: I think that the biggest problem is going to be
Speaker 1: can Donald Trump follow the admonition of the judge to
Speaker 1: try to temper his I guess commentary on the case,
Speaker 1: and yesterday at moral ago he seemed to have ignored
Speaker 1: what the judge said on day one. As you see, Michael,
Speaker 1: how this is playing out in the media, and how
Speaker 1: this playing out politically with the Republican Party coalescing behind
Speaker 1: the former president. Do you think that this case was
Speaker 1: a mistake by Alvin Bragg, Well, it depends on what
Speaker 1: you mean by mistake. If you're thinking was this a
Speaker 1: mistake to be the first case if there are going
Speaker 1: to be other cases against Donald Trump, maybe it's not
Speaker 1: the strongest case. If you're thinking, what about accountability, Well,
Speaker 1: the president did all the activities that are charging this
Speaker 1: indictment while he was a private citizen, before he was
Speaker 1: even elected president, and most people in that circumstance would
Speaker 1: be charged with this crime. When you ask your guests
Speaker 1: as they come on for future segments this morning, asked
Speaker 1: them if they were in their business and they entered
Speaker 1: falsely these types of records, would they fear being charged?
Speaker 1: I think the answer would be, of course. Nobody would
Speaker 1: get away with that sort of business crimes in Manhattan.
Speaker 1: So it's accountability versus political strength of the media and
Speaker 1: the courts and the public perception. And I think I
Speaker 1: go with accountability. Well, Michael, what you described was the
Speaker 1: leagal lot of turning a misdemeanor into a fenone from
Speaker 1: a d A. This likes to turn fenony's into misdemeanors. Michael,
Speaker 1: it's not not somewhat concerning to you. Well, you know,
Speaker 1: I got a direct message from a friend of one
Speaker 1: yesterday saying she wished that he would be as tough
Speaker 1: on other types of crimes as he appears to be
Speaker 1: on Donald Trump and this type of crime. And I
Speaker 1: guess the point is fair enough. But it seems to
Speaker 1: me that if you believe that what the president did
Speaker 1: or the handy it did in order to win the
Speaker 1: presidency was a crime, then you bring that crime, and
Speaker 1: you bring it for all its worth, which is the
Speaker 1: fellow he charges. Michael, Thanks for bamanas today, Fellful stuffs
Speaker 1: always Michaels out in a at the American University Washington,
Speaker 1: College of Lord Sam. Subscribe to the Bloomberg Surveillance podcast
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Speaker 1: I'm Tom Keane and this is Plumber