WEBVTT - Stocks Stare Down a 'Low Bar' 0:00:13.640 --> 0:00:16.640 Hello, and welcome to What Goes Up a Bloomberg Weekly 0:00:16.720 --> 0:00:20.200 Markets podcast. I'm Sarah Ponzak, a reporter on the cross 0:00:20.239 --> 0:00:23.800 at that team, and I'm Chris Nag, executive editor for Bloomberg. 0:00:23.880 --> 0:00:26.279 Infor Mike Reagan, who is vacationing and we have no 0:00:26.360 --> 0:00:29.320 further information on his whereabouts. Mike's enjoying himself, will leave 0:00:29.400 --> 0:00:31.800 him out of the episode with Thankfully, Chris is here 0:00:32.159 --> 0:00:34.720 with us to take his place. This week on the show, 0:00:34.760 --> 0:00:38.960 though second quarter earning season has officially started, we'll walk 0:00:39.000 --> 0:00:41.720 through how it's shaping up so far and the Trump 0:00:41.720 --> 0:00:46.760 administration keeps mentioning the idea of dollar devaluation, Could the 0:00:46.880 --> 0:00:50.519 US actually intervene and what would that look like? And 0:00:50.560 --> 0:00:52.960 of course we'll close out the episode with our very 0:00:53.040 --> 0:00:56.320 own tradition, the craziest thing I ever saw in markets 0:00:56.760 --> 0:00:59.360 this week. But thankfully we have some great guests to 0:00:59.480 --> 0:01:02.840 join us this week. First, we have Evan Brown. He 0:01:03.040 --> 0:01:06.240 is the head of multi assets Strategy at UBS Asset 0:01:06.319 --> 0:01:09.680 Management and he was also an associate at the New 0:01:09.760 --> 0:01:12.800 York Federal Reserve back in oh six to oh nine. 0:01:12.840 --> 0:01:14.400 So that means you're gonna tell us exactly what's going 0:01:14.440 --> 0:01:18.280 to happen on U. That's right. I know I can 0:01:18.319 --> 0:01:22.200 read J pals. Yeah, no problem at all. And then 0:01:22.240 --> 0:01:25.759 we also have Lennan new In. Thankfully she covers finance 0:01:25.760 --> 0:01:28.520 and Wall Street for Bloomberg News, so she's here in 0:01:28.560 --> 0:01:31.039 a very busy week that she had. That's right. And 0:01:31.120 --> 0:01:32.880 in my past life I was in markets geek too, 0:01:33.000 --> 0:01:37.000 so she can play in and everything dollar devaluation as well. Evan, 0:01:37.120 --> 0:01:39.160 I do want to start with you. I know we 0:01:39.200 --> 0:01:42.119 are not very far along in the earning season at all, 0:01:42.240 --> 0:01:45.920 very early days, but we came into it very low bar. 0:01:46.200 --> 0:01:48.320 From what we've seen so far. What can we actually 0:01:48.320 --> 0:01:52.440 take away from it? So we've mainly seen earnings come 0:01:52.440 --> 0:01:54.920 out for for the banks, and I actually think the 0:01:55.000 --> 0:01:59.200 news on that front talking about the big banks focused 0:01:59.200 --> 0:02:04.080 on the consumer businesses. It's been recentably good um, seeing 0:02:04.600 --> 0:02:09.359 consumer loan growth, business loan growth, The economy generally looks 0:02:10.360 --> 0:02:14.520 decent um and the guidance has been decent. So, like 0:02:14.560 --> 0:02:17.440 you said, it is early days, but a low bar, 0:02:17.600 --> 0:02:21.079 and and right now earnings are coming in. Okay. Bloomberg 0:02:21.160 --> 0:02:23.000 is a story up right now saying that banks are 0:02:23.120 --> 0:02:26.720 undoubtedly the hugest Wall Street banks, They mean are having 0:02:26.720 --> 0:02:30.400 their worst quarter in some like a decade or something 0:02:30.440 --> 0:02:34.000 for trading. Is that meaningful to anyone but a bunch 0:02:34.040 --> 0:02:39.880 of insanely rich New Yorkers. Well it's not. Uh. I 0:02:39.919 --> 0:02:45.040 think it's more comments of the challenging environment for markets 0:02:45.080 --> 0:02:48.040 and the lack of volatility and the lack of trends 0:02:48.160 --> 0:02:50.520 that we're seeing across markets. Just people are not trading 0:02:50.560 --> 0:02:53.280 that much and conviction is low, especially when you have 0:02:53.360 --> 0:02:56.799 the trade tensions and the Lake. So um, that's more 0:02:56.840 --> 0:02:59.799 of a specific comment on how the markets have been 0:03:00.000 --> 0:03:02.480 as opposed to how the economy. Well, why is that true? 0:03:02.480 --> 0:03:05.520 Though the market I've noticed or doing rather well this year? 0:03:05.600 --> 0:03:09.120 Up we're like halfway through the year. What's the problem. Yeah, 0:03:09.280 --> 0:03:13.120 it's just uh, it's it's too easy. No, it's um 0:03:13.919 --> 0:03:16.880 when when every asset goes up and there's not a 0:03:16.919 --> 0:03:21.240 lot of differentiation and and uh, you're not getting kind 0:03:21.240 --> 0:03:24.160 of also the same kind of conviction. Like just as 0:03:24.320 --> 0:03:27.040 as as much as markets are going up, we're seeing 0:03:27.080 --> 0:03:30.120 outflows from investors and a lot of what's being griven 0:03:30.120 --> 0:03:33.040 as corporate buybacks in the Lake and so the client 0:03:33.160 --> 0:03:35.400 flow that you would see on these trading desks has 0:03:35.480 --> 0:03:38.400 just not been that active. Come in here, because I 0:03:38.400 --> 0:03:40.400 know you've been in very early every single day this 0:03:40.480 --> 0:03:43.680 week ahead of each of the big bank earning releases. Yes, 0:03:43.760 --> 0:03:46.680 I have what you sound so happy about that. What 0:03:46.880 --> 0:03:49.760 have been the big standouts, whether that is a company 0:03:49.880 --> 0:03:52.400 or a certain trend, whatever that may be. So Evan 0:03:52.440 --> 0:03:55.960 summed it up, but it's basically main street good trading bad. Um. 0:03:56.080 --> 0:03:58.360 So we've seen that the big main street banks, the 0:03:58.360 --> 0:04:00.480 ones that have a big presence and then sumer side 0:04:00.480 --> 0:04:03.160 of the market have done really well. Um. The Bank 0:04:03.160 --> 0:04:06.040 of America, the bank that I cover, reach record profits 0:04:06.080 --> 0:04:10.200 for five quarters in a row. Um. So generally banks 0:04:10.240 --> 0:04:13.200 that have a big consumer facing business are doing extremely well. 0:04:13.440 --> 0:04:15.440 The question is when that's going to turn around, when 0:04:15.440 --> 0:04:17.440 the guidance is going to roll over. Um. You know, 0:04:17.480 --> 0:04:20.560 we did hear some warnings about that this week throughout 0:04:20.600 --> 0:04:24.719 the consumer banks, so JP Morgan whilst Fargo City, But 0:04:25.160 --> 0:04:28.159 for the time being they're doing pretty well. One area 0:04:28.200 --> 0:04:30.000 that has been a little bit softer has been net 0:04:30.040 --> 0:04:33.680 interest income net interest margins. JP Diamond came out and 0:04:33.720 --> 0:04:36.760 basically described it as blowing in the way. You can't 0:04:36.760 --> 0:04:39.280 know which way it's going to go right, well, it's 0:04:39.279 --> 0:04:42.359 blowing against them right now, right right. So when you 0:04:42.440 --> 0:04:47.120 actually look at this unit, this entry into the bank's 0:04:47.440 --> 0:04:51.000 balance sheets, how big of an example, how big of 0:04:51.040 --> 0:04:53.640 an effect has it actually been. It's their main revenue driver, 0:04:53.839 --> 0:04:56.720 so it's very, very important, and Jamie Diamond is kind 0:04:56.720 --> 0:04:59.120 of diminishing it's importance. But at the same time, it's 0:04:59.120 --> 0:05:01.360 a key and put people are looking at. And again 0:05:01.360 --> 0:05:02.720 we're gonna have to bring it all back to j 0:05:02.880 --> 0:05:05.839 Powell because if rates are cut on July thirty one, 0:05:05.920 --> 0:05:08.159 and that's going to really squeeze those margins for banks. 0:05:08.160 --> 0:05:11.000 So they're watching that very closely, and analysts ask them 0:05:11.040 --> 0:05:13.839 about this multiple times on every call this week, so 0:05:13.880 --> 0:05:16.760 it's a huge focus. How does the whole calculus work. 0:05:16.760 --> 0:05:19.279 I mean, I get that the profitability of the loans 0:05:19.560 --> 0:05:23.160 goes down, doesn't the volume go up potentially or at 0:05:23.200 --> 0:05:26.120 least to sustained because the lower rates keep the economy 0:05:26.200 --> 0:05:29.920 potentially potentially, And they did make this point as well, 0:05:29.960 --> 0:05:32.880 which is that you know, the even if they're squeezed 0:05:32.880 --> 0:05:36.040 on one side, potentially act activity in the economy goes 0:05:36.120 --> 0:05:39.520 up elsewhere. But I think generally it's not seen as 0:05:39.520 --> 0:05:42.919 a good thing. Interest rates are the input here, and 0:05:42.960 --> 0:05:45.560 that brings us to the FED over at EUB seven. 0:05:45.640 --> 0:05:47.600 What is your guys take on what's going to happen 0:05:47.640 --> 0:05:48.840 at the end of the month that we're gonna get 0:05:48.880 --> 0:05:51.640 a twenty basis point cut fifty basis points are nothing 0:05:51.680 --> 0:05:54.000 at all. I think we will get a cut. That 0:05:54.160 --> 0:05:58.360 seems quite clear after last week's uh Ja Palace testimony 0:05:58.600 --> 0:06:02.760 where he essentially focus st on every potential negative thing 0:06:02.839 --> 0:06:05.760 and downplay at anything positive going on in the economy, 0:06:05.800 --> 0:06:09.280 and so he wants to cut. There will be a cut. So, 0:06:09.480 --> 0:06:12.159 as you say, the question is between twenty basis points 0:06:12.160 --> 0:06:16.320 and fifty basis points, And to be honest, we're really 0:06:16.360 --> 0:06:19.360 not sure at this point. It seems that there there 0:06:19.400 --> 0:06:22.200 are arguments for doing fifty basis points. If you are 0:06:22.200 --> 0:06:25.240 concerned about the economy, why not uh do it in 0:06:25.320 --> 0:06:27.760 one go and and kind of shock the market and 0:06:27.760 --> 0:06:30.719 and uh um try to steep in the yield curve. 0:06:30.839 --> 0:06:34.200 That's that's something that is being discussed at the FED 0:06:34.240 --> 0:06:37.400 and markets in general. Um. On the other hand, you 0:06:37.480 --> 0:06:40.760 do have other members of the FED who do don't 0:06:40.760 --> 0:06:43.440 think there's a case for a ray cut. At all. Um, 0:06:43.600 --> 0:06:47.159 we're we're we're hearing from a few names, uh Kaplan 0:06:47.320 --> 0:06:49.560 and Boss Stitch and in a few of the regional 0:06:49.560 --> 0:06:51.960 FED presidents. And so it's gonna have to be a 0:06:51.960 --> 0:06:56.279 consensus building exercise. And and usually the the the the 0:06:56.360 --> 0:06:59.600 chair is able to to get their their way. Um. 0:06:59.680 --> 0:07:02.560 But but it is notable that you you do have 0:07:03.360 --> 0:07:06.280 people who just don't even think a cut is necessary 0:07:06.279 --> 0:07:07.760 on the FED. Right now, I can sort of see 0:07:07.760 --> 0:07:09.360 where they're coming from. I mean, you can you can 0:07:09.520 --> 0:07:12.360 easily form form arguments on on both sides of the 0:07:12.600 --> 0:07:15.120 on both sides of the art. Um. One thing that 0:07:15.160 --> 0:07:17.480 somebody mentioned to me today, I don't even know how 0:07:17.840 --> 0:07:21.560 legitimate this is, but his point was that what they 0:07:21.600 --> 0:07:23.800 don't want to be what they want to avoid. Ultimately, 0:07:23.840 --> 0:07:25.960 it's not a recession they want to avoid, seeming like 0:07:26.000 --> 0:07:28.240 they were Ben bernankey, like they were sort of fiddling 0:07:28.280 --> 0:07:32.560 as the economy fell into the UH into a hole. 0:07:32.800 --> 0:07:35.680 And only, you know, six months later, did anyone realize 0:07:35.680 --> 0:07:39.640 doesn't have any residents. I think that that certainly this 0:07:39.760 --> 0:07:44.920 is a risk management cut, right. It's a tremendous uncertainty 0:07:44.960 --> 0:07:49.600 we know about about trade tensions and so they acknowledge 0:07:49.600 --> 0:07:52.240 that maybe the economy doesn't look so bad right now, 0:07:52.800 --> 0:07:56.120 but just in case, let's air on the side of 0:07:56.120 --> 0:07:59.640 being a little easier, and uh, you know, we're like, 0:07:59.800 --> 0:08:03.560 we can do that because inflation is relatively low. John Williams, 0:08:03.600 --> 0:08:05.920 New York Fed President, he kind of made his voice 0:08:05.960 --> 0:08:07.960 known this week as well. He put out a speech 0:08:08.240 --> 0:08:10.600 on Thursday and it was called Living Life near the 0:08:10.680 --> 0:08:13.880 zero lower Bound, and my inbox had been flooded with 0:08:14.000 --> 0:08:17.440 analysts and commentary basically saying that now John Williams is 0:08:17.440 --> 0:08:19.840 setting the stage for a rate cut. This is huge 0:08:19.880 --> 0:08:21.880 because he has a lot of influence on the board 0:08:21.960 --> 0:08:25.480 as well. Lynnon coming back to you, if we get 0:08:25.960 --> 0:08:29.040 a fifty basis point rate cut or even twenty five, say, 0:08:29.200 --> 0:08:32.440 is that actually good or bad for the banks? I've 0:08:32.440 --> 0:08:34.520 heard some people make the case, alright, you have lower 0:08:34.520 --> 0:08:36.360 interest rates, that's bad for the banks. But at the 0:08:36.400 --> 0:08:39.560 same time, theoretically you could see the yield curve steep 0:08:39.559 --> 0:08:41.720 in because on the short end you'll have rates go down, 0:08:41.960 --> 0:08:45.560 and then on the long end you could potentially hopefully 0:08:45.640 --> 0:08:48.200 is the inflation pick up a bit? I think generally 0:08:48.240 --> 0:08:50.760 it's being read as a bad thing for banks, But 0:08:51.000 --> 0:08:53.760 again these implications are lumpy. A lot of the banks 0:08:53.800 --> 0:08:56.360 on the earnings calls this week did mention, Okay, if 0:08:56.400 --> 0:08:58.520 we get an x basis point cut, this is how 0:08:58.600 --> 0:09:02.240 much it will affect our new So from a pure 0:09:02.320 --> 0:09:06.200 numbers perspective, that is a downside. However, the banks were 0:09:06.200 --> 0:09:08.200 also talking about the fact that clients have been on 0:09:08.240 --> 0:09:10.920 the sidelines. We heard sidelines like million times this week 0:09:10.960 --> 0:09:13.840 because people are unsure about the interest rate environment. They're 0:09:13.880 --> 0:09:16.160 unsure about how much the FED is going to cut, 0:09:16.760 --> 0:09:19.200 you know, if at all, and so they've been waiting 0:09:19.240 --> 0:09:22.760 for that certainty. So perhaps when certainty comes and when 0:09:22.760 --> 0:09:24.960 the Fed makes it more clear what they're gonna do, 0:09:25.400 --> 0:09:28.280 clients will start to reposition their portfolios and we might 0:09:28.320 --> 0:09:30.360 see some of that activity that's been waiting on the 0:09:30.400 --> 0:09:33.640 sidelines come back into the game. Is things like credit 0:09:33.720 --> 0:09:35.560 quality and stuff like that. Does that is that a 0:09:35.559 --> 0:09:37.439 factor for banks at all at this point or is 0:09:37.480 --> 0:09:42.079 they just just it's just rock solid, it's pristine, it's wonderful. 0:09:42.160 --> 0:09:44.120 Right now, no one has said anything bad about credit 0:09:44.200 --> 0:09:46.520 quality this week. In fact, Bank of America actually made 0:09:46.559 --> 0:09:51.240 fewer provisions for loan losses this quarter, so right now 0:09:51.320 --> 0:09:53.599 it's just looking pretty good. Another thing that could potentially 0:09:53.880 --> 0:09:56.160 gave cover for more rate cuts. You love to hear 0:09:56.240 --> 0:10:15.000 pristine than when it comes to credit quality from Ladan Evan. 0:10:15.080 --> 0:10:17.280 I know over at U b S, you guys brought 0:10:17.320 --> 0:10:20.959 down your recommendation, brought down your rating on US equities 0:10:21.000 --> 0:10:23.920 to neutral. What's really the reasoning behind this? Is it 0:10:24.080 --> 0:10:26.320 just the fact that we've seen such a crazy gain 0:10:26.400 --> 0:10:28.200 already this year and you might as well wait and 0:10:28.200 --> 0:10:31.920 see what happens. So we took our exposure to equities 0:10:31.960 --> 0:10:34.280 down mainly because we just think a lot of the 0:10:34.280 --> 0:10:36.640 good news is in the price we've we've seen. It's 0:10:36.640 --> 0:10:39.400 not so much that we've had such a great year 0:10:39.400 --> 0:10:42.920 of equities, it's that the year and equities has all 0:10:42.960 --> 0:10:46.920 been driven by a multiple expansion as opposed to expectations 0:10:46.920 --> 0:10:49.520 of earnings rising. And so a lot of that is 0:10:49.559 --> 0:10:52.160 based on a more devish fed and we think that's 0:10:52.520 --> 0:10:55.960 in large part priced in at this point. Uh And 0:10:55.960 --> 0:10:59.440 and we think that, you know, the global environment is 0:11:00.040 --> 0:11:03.360 still a little bit murky. We we do. And we 0:11:03.440 --> 0:11:05.760 came out of the G twenty, and there was euphoria 0:11:05.920 --> 0:11:07.720 out of the out of the G twenty that we 0:11:07.720 --> 0:11:10.840 we didn't get fresh teriffs. But when you look around, 0:11:11.320 --> 0:11:14.800 not much has has changed. I mean, maybe there's a 0:11:14.840 --> 0:11:18.120 cease fire, but uh, there doesn't seem to be at 0:11:18.120 --> 0:11:20.880 this point clear signs of dialogue or any kind of 0:11:20.880 --> 0:11:24.840 movement towards towards any kind of deal at this point. 0:11:24.840 --> 0:11:27.199 And so I think there's some downside risk to to 0:11:27.320 --> 0:11:32.600 business investment. Uh and and UH still China, Europe, some 0:11:32.679 --> 0:11:34.720 of the data is a little bit a little bit murky. 0:11:34.880 --> 0:11:38.760 So UM, in general equities, we've we've taken down a 0:11:38.760 --> 0:11:41.320 little bit, having been overweight for most of this year. 0:11:41.880 --> 0:11:44.439 It's true that we're up a ton in two thousand nineteen. 0:11:44.480 --> 0:11:46.600 I saw someone else saying a couple of days ago 0:11:46.640 --> 0:11:48.600 that if you sort of annualize it over the last 0:11:48.600 --> 0:11:51.240 two years, it's not that huge Martin. We're basically about 0:11:51.280 --> 0:11:53.400 where we were, well maybe a little few percentage point 0:11:53.440 --> 0:11:55.840 above where we were at the beginning of two thousand 0:11:55.880 --> 0:11:58.000 and eighteen. Isn't that strange given that we just had 0:11:58.080 --> 0:12:00.280 the biggest tax cut in the history of America. I mean, 0:12:00.280 --> 0:12:01.880 you would think that earnings would have driven something a 0:12:01.880 --> 0:12:04.959 little bit more significant than that by now. So it's 0:12:04.960 --> 0:12:07.960 a great question I think what the point is is 0:12:08.040 --> 0:12:11.400 that the tax cut, which took effect in two thousand eighteen, 0:12:12.160 --> 0:12:15.760 really got priced into markets in two thousand seventeen, such 0:12:15.840 --> 0:12:20.079 that you you come into the start of two thousand 0:12:20.160 --> 0:12:23.080 eighteen and it's basically priced in at that point, and 0:12:23.120 --> 0:12:26.240 then President Trump starts the trade wars, right and so 0:12:26.720 --> 0:12:29.800 uh Ever, since the trade wars started, we've basically been 0:12:29.840 --> 0:12:33.000 flat in the smp um. You know, maybe a little 0:12:33.000 --> 0:12:35.640 bit higher, but but that gives some contact. It's interesting 0:12:35.679 --> 0:12:37.720 what the turn of the year does to people's opinion 0:12:37.720 --> 0:12:39.520 of the market. Everyone's walking around like we're having this 0:12:39.600 --> 0:12:41.880 drake energy better than here, and we're not that far 0:12:41.920 --> 0:12:45.240 above where we began in the beginning of what fourth quarters. 0:12:45.800 --> 0:12:49.640 You go from one government policy, though the tax plan, 0:12:49.840 --> 0:12:55.200 to another, and that is potentially currency manipulation at this point. 0:12:55.320 --> 0:12:59.959 President Chump tweeted earlier this month about Europe and China 0:13:00.080 --> 0:13:02.559 how they have been manipulating their currency and saying that 0:13:02.600 --> 0:13:05.120 the US should match it, and Evan, I know you've 0:13:05.160 --> 0:13:08.760 been looking a lot into this. Is this even possible 0:13:08.800 --> 0:13:11.480 if the US were to come in and manipulate the dollar, 0:13:11.559 --> 0:13:14.640 what would that actually look like? Well, manipulate as a 0:13:14.679 --> 0:13:20.560 strong word, I think someone else's words when I just 0:13:20.679 --> 0:13:25.600 use the President can authorize the Treasury to intervene in 0:13:25.600 --> 0:13:29.560 foreign exchange markets. It's a Treasury department that does own 0:13:30.400 --> 0:13:34.520 foreign exchange policy. And if you add up UH dollar 0:13:34.640 --> 0:13:37.679 liquidity SDRs which can be converted into dollars, and then 0:13:38.000 --> 0:13:40.480 for an exchange reserves that can be swapped into dollars, 0:13:40.720 --> 0:13:44.240 it's about billion dollars worth of mm oh. They have 0:13:44.360 --> 0:13:47.800 to intervene in foreign exchange markets, and then the treasure 0:13:47.840 --> 0:13:51.200 the FED actually has the same amount, and traditionally on 0:13:51.200 --> 0:13:54.080 on its own balance sheet, the SOMMA balance sheet. Traditionally 0:13:54.520 --> 0:13:58.800 the Treasury and the Fed have acted in concert to intervene. 0:13:59.240 --> 0:14:02.320 The big question right now is well, if the Treasury 0:14:02.400 --> 0:14:05.560 does decide to intervene, will the Fed necessarily follow Because 0:14:05.559 --> 0:14:10.440 typically to justify intervention, it's it's based on disorderly markets, 0:14:10.600 --> 0:14:13.480 and it's hard to argue that FX is disorderly at 0:14:13.480 --> 0:14:16.079 this point. In fact, it's barely moving, so calm, everyone's 0:14:16.120 --> 0:14:21.160 complaining about how common actually is. So if somehow the 0:14:21.200 --> 0:14:23.160 Treasury Department did decide that they were going to move 0:14:23.160 --> 0:14:26.800 on this, and in a hypothetical scenario in a hypothetical world, 0:14:27.120 --> 0:14:31.040 the FEDS said, okay, we'll match it. Does this pose 0:14:31.080 --> 0:14:33.840 any risks? I mean, what would be the fallout from this? 0:14:34.640 --> 0:14:38.480 I do think markets would initially be unsettled. Um, you know, 0:14:38.520 --> 0:14:42.400 we've had a long time, about twenty five years of 0:14:42.440 --> 0:14:44.960 a strong dollar policy, or at least a las fair 0:14:45.040 --> 0:14:47.840 dollar policy, and then all of a sudden that's changing, 0:14:47.920 --> 0:14:52.560 and that will shake markets a bit. I do think 0:14:52.560 --> 0:14:56.600 that once the dust settles, maybe a slightly weaker dollar, 0:14:56.640 --> 0:14:58.520 it's gonna be good for US equities, it's gonna be 0:14:58.520 --> 0:15:02.680 good for emerging markets, and and you go from there. Um, 0:15:02.720 --> 0:15:05.680 what I think would be really interesting, and something we're 0:15:05.680 --> 0:15:10.400 talking about, is if there's not just intervention, which there's 0:15:10.480 --> 0:15:12.760 more or less two hundred billion of AMMO, which is 0:15:14.280 --> 0:15:18.120 decent but but not huge given the size of foreign 0:15:18.120 --> 0:15:21.480 exchange markets five trillion dollars exchange during during a given day. 0:15:22.200 --> 0:15:26.560 But if the Treasury starts moving in a direction of 0:15:26.680 --> 0:15:29.840 a strategic recalibration of its reserves, if they say, hey, 0:15:29.840 --> 0:15:33.400 we've only got forty billion dollars worth of foreign exchange 0:15:33.400 --> 0:15:37.600 reserves and Europe has three fifty billion dollars in Japan 0:15:37.720 --> 0:15:40.640 has over a trillion dollars. We should have more foreign 0:15:40.680 --> 0:15:43.800 exchange reserves. We're gonna make that argument. It's only fair, 0:15:43.800 --> 0:15:47.480 it's only it makes sense to modernize our our for 0:15:47.560 --> 0:15:52.360 an for an exchange portfolio, and that sends a very 0:15:52.400 --> 0:15:55.840 powerful signal to the market that that the Treasury is 0:15:55.960 --> 0:15:59.479 looking to UH to weaken the dollar over the medium term. 0:15:59.680 --> 0:16:01.720 Is this a thing that you actually take into account 0:16:01.760 --> 0:16:04.280 the idea that this could be possible going forwards when 0:16:04.280 --> 0:16:06.080 you try to come up with the target for the 0:16:06.080 --> 0:16:08.560 dollar and other currencies. I think what you have to 0:16:08.600 --> 0:16:13.360 do is is probability weighted? So is it our base 0:16:13.400 --> 0:16:16.440 case that there's going to be intervention? No, we think 0:16:16.760 --> 0:16:22.320 ultimately probably UH Secretary Minution and others are successful and 0:16:23.040 --> 0:16:25.960 advising the President not to to move in that in 0:16:26.280 --> 0:16:31.920 that direction. But I would say there's given that President 0:16:31.920 --> 0:16:34.360 Trump has been tweeting about this, given that there was 0:16:34.360 --> 0:16:37.360 a report that he had actually tasked AIDS to look 0:16:37.400 --> 0:16:39.600 into how to weaken the dollar, we have to take 0:16:39.640 --> 0:16:44.120 it seriously. So maybe there's a twenty risk of it 0:16:44.240 --> 0:16:47.240 of it happening, and so we have to embed that 0:16:47.280 --> 0:16:50.440 into our our our views and way that when we 0:16:50.480 --> 0:16:54.360 consider going long dollars and in an FX portfolio. Bloomberg 0:16:54.400 --> 0:16:57.680 has had some reports out saying that behind the scenes, 0:16:58.040 --> 0:17:01.280 when President Trump has been interviewing potential FED candidates, but 0:17:01.320 --> 0:17:03.640 he's been asking them about what they think about the 0:17:03.640 --> 0:17:07.840 dollar as well. So that's pretty interesting. But even besides, 0:17:07.880 --> 0:17:13.639 you put manipulation that strong word aside, intervention aside. Is 0:17:13.680 --> 0:17:17.320 the path of least resistance still down for the dollar? 0:17:17.400 --> 0:17:19.240 It seems like people have been talking about that for 0:17:19.280 --> 0:17:22.160 a while, but now we're in this holding pattern. Yes, 0:17:22.640 --> 0:17:25.719 we think so, we think. We think it's it's not 0:17:25.800 --> 0:17:29.920 just based on potential intervention, it's based on the US 0:17:29.960 --> 0:17:33.360 economy catching down to to the rest of the world. Right. 0:17:33.400 --> 0:17:36.439 We remember we had that big fiscal stimulus which is 0:17:36.520 --> 0:17:41.520 really rolling off as we speak right now, and the 0:17:41.920 --> 0:17:45.360 rest of the world is is hanging in US economy 0:17:45.400 --> 0:17:49.399 decelerating FED cutting over time that should lead to to 0:17:49.760 --> 0:17:52.240 a week er dollar. But you guys are positive on 0:17:52.520 --> 0:17:57.080 European equities, correct, We we actually we yes, we we 0:17:57.160 --> 0:18:00.600 like European equities. Um, we think is just too much 0:18:00.640 --> 0:18:03.359 negativity on Europe. You're the only person I've heard was 0:18:03.400 --> 0:18:08.360 actually Bullis on European thoughts. Yeah, I mean, any anything 0:18:08.440 --> 0:18:11.600 you read about Europe, it's always very negative about the 0:18:11.600 --> 0:18:15.720 economy and and and the outlook. And I don't mean 0:18:15.760 --> 0:18:19.119 to downplay there's plenty of structural and political issues that 0:18:19.119 --> 0:18:22.000 that always seemed to come up in Europe. But when 0:18:22.040 --> 0:18:24.280 you look at the economic data, it's just not that bad. 0:18:24.560 --> 0:18:27.280 You know, the consumer has held in well. You would 0:18:27.560 --> 0:18:31.119 have expected investment to take a much bigger hit given 0:18:31.240 --> 0:18:36.600 the trade tensions, and investments has held up well too. So, um, 0:18:36.760 --> 0:18:38.119 we think a lot of the bad news is in 0:18:38.160 --> 0:18:41.440 the price and the European economy is actually in reasonably 0:18:41.480 --> 0:18:44.399 good shape and you can see some outperformance there. They 0:18:44.400 --> 0:18:47.840 should be benefiting from some stimulus, one would argue, it 0:18:47.880 --> 0:18:50.320 seems like it seems like they actually pull that off 0:18:50.320 --> 0:18:52.720 fairly well over there at the moment. Yea, So we've 0:18:52.720 --> 0:18:55.879 got likely some monetary stimulus coming from the e C 0:18:56.000 --> 0:18:58.880 b uh, and we have a little bit of fiscal 0:18:58.880 --> 0:19:03.520 stimulus happening, and in Europe at least not fiscal restraints. 0:19:04.320 --> 0:19:07.360 You know, for the first time in a while, Italy, 0:19:07.760 --> 0:19:11.760 France expanding fiscal and even Germany doing a little bit 0:19:12.280 --> 0:19:14.720 uh here. So, so there is some policy support there 0:19:14.720 --> 0:19:17.840 in Europe. As well. With that said, Chris, uh, you 0:19:17.880 --> 0:19:20.159 know what time it is? Though in the podcast, I 0:19:20.200 --> 0:19:22.800 believe I do, but remind me what we call it 0:19:23.040 --> 0:19:25.640 the craziest thing I ever saw in markets this week. 0:19:25.680 --> 0:19:29.639 I'm so excited taking Mike always brings it. So I 0:19:29.680 --> 0:19:31.920 really hope that you're gonna step up to Matt. I 0:19:32.520 --> 0:19:36.720 would have to bring anything. Like we said, every week 0:19:36.920 --> 0:19:39.720 we reach out on Twitter, we ask around see what 0:19:39.800 --> 0:19:43.159 people are noticing. So I'll start with a couple of 0:19:43.200 --> 0:19:46.520 the things that we have seen out in the Twitter sphere. 0:19:46.960 --> 0:19:50.159 I'll say, this isn't breaking the rules. Bloomer's own Dave Wilson, 0:19:50.240 --> 0:19:54.680 he's a stock market columnists, very frequent person who appears 0:19:54.720 --> 0:19:57.520 on radio on TV. He tweeted it and he said, 0:19:57.560 --> 0:19:59.560 maybe I'm not eligible, but I said, there's no rules here. 0:19:59.560 --> 0:20:01.440 It's the crazy this thing. Iri was on markets this week, 0:20:01.600 --> 0:20:05.359 So he said, trucking stocks rise one day because JB. 0:20:05.480 --> 0:20:10.000 Hunt's results go over well, and then railroad shares decline 0:20:10.040 --> 0:20:13.800 the next day because cs x's figures are disappointing. That's 0:20:13.840 --> 0:20:17.119 some contrast is supposed to do when that happen? What 0:20:17.160 --> 0:20:19.000 are you supposed to do? Normally? Such a license to 0:20:19.000 --> 0:20:22.480 print money down theory, Evan, when it comes to you guys, 0:20:22.520 --> 0:20:26.359 how you guys actually go about evaluating the economy. How 0:20:26.480 --> 0:20:29.040 much do you guys actually take into account earnings reports 0:20:29.080 --> 0:20:31.960 from some of these big transport names. We definitely look 0:20:31.960 --> 0:20:34.760 at them, and we look at the certainly look at 0:20:34.800 --> 0:20:37.399 the guidance. And you know, one thing in particular that 0:20:37.440 --> 0:20:41.240 we like to do is we're using natural language processing 0:20:41.280 --> 0:20:44.520 to to dive into the qualitative comments of all these 0:20:44.520 --> 0:20:47.960 earnings reports, and so we can we can really detect 0:20:47.960 --> 0:20:50.880 and see how the language is is shifting, and that 0:20:50.960 --> 0:20:53.760 in many ways can be actually more useful because it's 0:20:53.760 --> 0:20:57.080 more forward looking than the than the backward looking earnings reports. 0:20:57.080 --> 0:20:59.160 So it's a little bit early for us to make 0:20:59.200 --> 0:21:01.720 a strong judge tamens right now on that. But but 0:21:01.960 --> 0:21:03.720 that's what we'll be doing over the course of this 0:21:03.800 --> 0:21:08.199 earning season alright, Lenan, I think you're up. So initially 0:21:08.240 --> 0:21:10.040 I was going to talk about the dollar and the 0:21:10.119 --> 0:21:13.080 prospects of dollar intervention, but we have covered that that 0:21:13.080 --> 0:21:17.120 that is actually something crazy that started last August with 0:21:17.240 --> 0:21:20.240 the note by Michael Thoroli from JP Morgan and it 0:21:20.359 --> 0:21:22.480 made a big splash at the time because everyone thought 0:21:22.520 --> 0:21:25.160 this is crazy town. It's now part of the mainstream 0:21:25.240 --> 0:21:28.399 lexicon and part of people's thinking. Obviously I haven't looking 0:21:28.400 --> 0:21:30.960 into it and everyone is thinking about it, so that's wild. 0:21:31.200 --> 0:21:34.240 But secondly, because we've already discussed that, I wanted to 0:21:34.320 --> 0:21:37.760 raise a report that our colleague Natasha Doff in London 0:21:38.080 --> 0:21:42.119 wrote about, which was intelligent dictators are more attractive to 0:21:42.200 --> 0:21:46.840 foreign investors. So this this is a report that basically 0:21:46.880 --> 0:21:51.560 says that dictators or authoritarian rulers who are well educated, 0:21:51.600 --> 0:21:56.000 who maybe worked in business, are viewed favorably by investors. 0:21:56.040 --> 0:21:58.280 I guess because they'll kind of keep things on and 0:21:58.320 --> 0:22:01.240 even keel. Things are calm, Yeah, people are happy, yeah, 0:22:01.240 --> 0:22:03.800