1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,520 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:22,760 Speaker 1: at Bloomberg dot com slash podcast. Let's bring in daniel 7 00:00:22,840 --> 00:00:25,920 Speaker 1: d Martino Booth, CEO and chief strategist for Quill Intelligence, 8 00:00:26,120 --> 00:00:28,479 Speaker 1: one of the leading voices of my opinion on the FED, 9 00:00:28,520 --> 00:00:31,120 Speaker 1: on and on this economy. She's a former advisor to 10 00:00:31,160 --> 00:00:33,520 Speaker 1: Fedo Reserve Bank of Dallas, so she knows FED speak 11 00:00:33,600 --> 00:00:35,680 Speaker 1: when she hears it. Danielle, thank you for being in 12 00:00:35,720 --> 00:00:37,520 Speaker 1: our studio. I think it's been more than two years 13 00:00:37,560 --> 00:00:40,239 Speaker 1: on my show at least than you've been in the studio. Um. 14 00:00:40,280 --> 00:00:43,360 Speaker 1: Now to me, we're back. When Danielle D Martino Booth 15 00:00:43,560 --> 00:00:46,240 Speaker 1: flies up from Dallas comes in studio, we're back. Well, 16 00:00:46,440 --> 00:00:49,199 Speaker 1: I'm not the only one this place is buzzing. Let's 17 00:00:49,200 --> 00:00:52,080 Speaker 1: see if humanity it's getting getting better, getting better every time? 18 00:00:52,080 --> 00:00:55,680 Speaker 1: All right, what would surprise you from the FED this afternoon? 19 00:00:55,680 --> 00:00:59,040 Speaker 1: What would spook the markets from the Fed serve, you know, 20 00:00:59,280 --> 00:01:01,720 Speaker 1: as confident as we're seeing market pricing. I think that 21 00:01:01,760 --> 00:01:04,120 Speaker 1: if if Powell was to allude to kind of the 22 00:01:04,360 --> 00:01:07,679 Speaker 1: Bullard bomb of seventy basis points, I don't think markets 23 00:01:07,680 --> 00:01:10,720 Speaker 1: would take that very easily. I think they want for 24 00:01:10,800 --> 00:01:12,559 Speaker 1: him to stick to If it's going to be fifty 25 00:01:12,560 --> 00:01:14,959 Speaker 1: basis points, let's be consistent going forward and plan on 26 00:01:15,000 --> 00:01:17,200 Speaker 1: that in June and July. And by the way, caveat 27 00:01:17,240 --> 00:01:19,920 Speaker 1: that chair pal by saying we're going to remain dated dependent. 28 00:01:20,480 --> 00:01:23,480 Speaker 1: And the market is expected, the market was expecting in 29 00:01:23,560 --> 00:01:26,200 Speaker 1: March a little bit more detail on the launch of 30 00:01:26,240 --> 00:01:28,120 Speaker 1: quantitative easing and how they're going to ramp up to 31 00:01:28,120 --> 00:01:30,840 Speaker 1: this dollars a month. I think the market is going 32 00:01:30,880 --> 00:01:35,000 Speaker 1: to demand details today on that also starting off this month. 33 00:01:36,920 --> 00:01:39,640 Speaker 1: I think it's the balance sheet that's caught most of 34 00:01:39,640 --> 00:01:42,080 Speaker 1: my attention, right, I think as as as I would 35 00:01:42,120 --> 00:01:45,280 Speaker 1: say the entire investor community has, because we've never really 36 00:01:46,120 --> 00:01:49,840 Speaker 1: been able to successfully execute q T. Right, We've only 37 00:01:49,840 --> 00:01:51,800 Speaker 1: ever done this once before, and we had to kind 38 00:01:51,840 --> 00:01:53,120 Speaker 1: of backtrack. And when I say we, I mean the 39 00:01:53,160 --> 00:01:55,400 Speaker 1: Federal Reserve. I had no hand in it, but I 40 00:01:55,480 --> 00:01:58,960 Speaker 1: used to use. We we we the people um but 41 00:01:59,200 --> 00:02:01,760 Speaker 1: talked to us about what is the likelihood of not 42 00:02:01,840 --> 00:02:04,360 Speaker 1: necessarily the rate high side of it, but the balance 43 00:02:04,360 --> 00:02:07,280 Speaker 1: sheet being executed correctly. Well, I think we have to 44 00:02:07,320 --> 00:02:08,800 Speaker 1: bear in mind that there was this there was this 45 00:02:08,880 --> 00:02:11,760 Speaker 1: quirky third quarter corporate tax payment that was due that 46 00:02:11,919 --> 00:02:15,440 Speaker 1: kind of launched the not QE illiquidity era in two 47 00:02:15,520 --> 00:02:18,200 Speaker 1: thousand nineteen that so spooked the markets. Right now we're 48 00:02:18,240 --> 00:02:20,880 Speaker 1: seeing reserves already declined because tax receipts are up so 49 00:02:20,960 --> 00:02:23,320 Speaker 1: much and Americans are about to pay their property taxes. 50 00:02:23,600 --> 00:02:26,079 Speaker 1: So as this is with with this as a backdrop, 51 00:02:26,200 --> 00:02:29,079 Speaker 1: the FEDS about to launch QT, so there's already liquidity 52 00:02:29,120 --> 00:02:32,160 Speaker 1: coming out of the market, reserves coming down as the 53 00:02:32,160 --> 00:02:34,000 Speaker 1: FEDS getting ready to launch. So not everything is in 54 00:02:34,000 --> 00:02:36,160 Speaker 1: their control with Quante Dave tightening, and certainly out of 55 00:02:36,200 --> 00:02:39,320 Speaker 1: the magnitude and scale that they're contemplating, and most of 56 00:02:39,320 --> 00:02:42,359 Speaker 1: their mortgage backed securities are at such low cubans that 57 00:02:42,400 --> 00:02:44,880 Speaker 1: the Fed would effectively had to book a loss. It 58 00:02:44,880 --> 00:02:46,960 Speaker 1: wouldn't look like that, but there would be certainly some 59 00:02:46,960 --> 00:02:48,799 Speaker 1: progressives on the Hill who would view it as a 60 00:02:48,840 --> 00:02:50,880 Speaker 1: loss if they actually had to go as far as 61 00:02:50,880 --> 00:02:52,960 Speaker 1: the nuclear option. I call it the nuclear option. That's 62 00:02:53,080 --> 00:02:56,120 Speaker 1: selling mortgage backed securities off that balance sheet to hit 63 00:02:56,120 --> 00:02:59,400 Speaker 1: that bogie that they've got. The FED, you know, in 64 00:02:59,440 --> 00:03:02,960 Speaker 1: the past, has reacted to market volatility um and maybe 65 00:03:02,960 --> 00:03:04,720 Speaker 1: being a little bit more cautious, and we have I 66 00:03:04,720 --> 00:03:06,760 Speaker 1: would argue, we have a volable marketplace so far here 67 00:03:06,760 --> 00:03:10,680 Speaker 1: in two get the SMP down or so. Do you 68 00:03:10,680 --> 00:03:13,200 Speaker 1: think that might impact their actions here? They might be 69 00:03:13,240 --> 00:03:15,440 Speaker 1: even maybe a little bit more cautious and what markets 70 00:03:15,480 --> 00:03:17,600 Speaker 1: pricing in No. I think that that. I think that 71 00:03:17,639 --> 00:03:20,400 Speaker 1: the strike price of the foot of the FED puts 72 00:03:20,480 --> 00:03:23,359 Speaker 1: has changed dramatically. I think that he realizes. I think 73 00:03:23,360 --> 00:03:26,120 Speaker 1: that Powell and others realized that speculations become rife in 74 00:03:26,160 --> 00:03:28,839 Speaker 1: the stock market. I think they want to cool housing down, 75 00:03:28,880 --> 00:03:31,040 Speaker 1: and I'm I'm being polite and diplomatic on that. I 76 00:03:31,040 --> 00:03:33,520 Speaker 1: don't think they'll go so far, however, as to break credit. 77 00:03:33,880 --> 00:03:36,080 Speaker 1: So I think that what they're paying attention to is 78 00:03:36,120 --> 00:03:37,800 Speaker 1: the fact that we've seen a doubling and triple see 79 00:03:37,840 --> 00:03:40,200 Speaker 1: high yields. You know it's north of ten percent. How 80 00:03:40,280 --> 00:03:43,520 Speaker 1: yield is actually high, and so you don't want, you know, 81 00:03:43,720 --> 00:03:47,400 Speaker 1: Bloomberg's bankruptcy tracker bc y go. It's a great thing 82 00:03:47,440 --> 00:03:50,200 Speaker 1: to follow and even know about it. It's ticked up. 83 00:03:50,520 --> 00:03:53,040 Speaker 1: It's ticked up after hitting an all time low in February, 84 00:03:53,160 --> 00:03:55,920 Speaker 1: so you're starting to see some insolvency issues creep in. 85 00:03:56,160 --> 00:03:58,560 Speaker 1: There's a trillion dollars of non financial debt to be 86 00:03:58,600 --> 00:04:02,880 Speaker 1: refinanced in two thousand twenty two alone globally, Danielle, So 87 00:04:03,000 --> 00:04:05,640 Speaker 1: we have the FED today. Are you in the camp 88 00:04:05,680 --> 00:04:09,600 Speaker 1: that says the FED is behind the curve, ears behind 89 00:04:09,760 --> 00:04:12,960 Speaker 1: the market? Um? And if you are in that camp, 90 00:04:13,040 --> 00:04:15,400 Speaker 1: can they do anything about it? I don't think there's 91 00:04:15,400 --> 00:04:17,080 Speaker 1: any way to make up for lost time. And I 92 00:04:17,680 --> 00:04:20,360 Speaker 1: clearly I'm in Randy Coral's camp as well, because he 93 00:04:20,440 --> 00:04:22,160 Speaker 1: came out and said flat out, we would have been 94 00:04:22,160 --> 00:04:24,720 Speaker 1: acting sooner had there not been a crisis of leadership 95 00:04:24,839 --> 00:04:27,160 Speaker 1: inside the FED, and so I think that it has 96 00:04:27,160 --> 00:04:29,160 Speaker 1: been widely acknowledged. I think that the FED is in 97 00:04:29,240 --> 00:04:31,920 Speaker 1: a pickle when it comes to continuing to ease credit 98 00:04:32,000 --> 00:04:34,040 Speaker 1: by virtue of having such a massive footprint in the 99 00:04:34,040 --> 00:04:37,880 Speaker 1: mortgage back securities market. And I don't think there's an easy, 100 00:04:38,320 --> 00:04:41,080 Speaker 1: elegant way out. I don't think that there's a reasonable 101 00:04:41,080 --> 00:04:44,080 Speaker 1: path that anybody can paint of a soft landing. Really wow. Alright, 102 00:04:44,080 --> 00:04:48,040 Speaker 1: So let we're also talking off air about China Germany 103 00:04:48,320 --> 00:04:52,279 Speaker 1: recession risks there and how that may drag the US 104 00:04:52,640 --> 00:04:54,720 Speaker 1: into a recession. How do you think about those dynamics. 105 00:04:54,839 --> 00:04:57,240 Speaker 1: In fact, there was some great math that Bloomberg Economics 106 00:04:57,240 --> 00:04:59,400 Speaker 1: did that they published yesterday that shows that if there's 107 00:04:59,440 --> 00:05:01,919 Speaker 1: one thing that's going turn US inflation around, it's if 108 00:05:01,960 --> 00:05:04,880 Speaker 1: China stays in a funk. And we fully anticipate that 109 00:05:04,920 --> 00:05:06,839 Speaker 1: to be the case. And so if this carries out 110 00:05:06,880 --> 00:05:10,000 Speaker 1: in Beijing, and I'm watching Bloomberg Asia every night when 111 00:05:10,000 --> 00:05:11,760 Speaker 1: it comes on the air, If this carries out from 112 00:05:11,760 --> 00:05:14,760 Speaker 1: Shanghai into Beijing and we carry this through may that 113 00:05:14,800 --> 00:05:17,640 Speaker 1: means that China is effectively in recession, that Germany, that 114 00:05:17,800 --> 00:05:20,880 Speaker 1: the world's third largest exporter is in recession. So you 115 00:05:20,920 --> 00:05:22,719 Speaker 1: tell me how the United States, stuck in the middle, 116 00:05:22,720 --> 00:05:25,320 Speaker 1: is the world's second largest exporter, How how do they 117 00:05:25,360 --> 00:05:28,520 Speaker 1: resist that gravitational pull of the two other largest exporting 118 00:05:28,600 --> 00:05:31,440 Speaker 1: nations being in recession. If we were to enter into recession, 119 00:05:31,680 --> 00:05:34,080 Speaker 1: do you have any sense of how deep, how long 120 00:05:34,120 --> 00:05:37,680 Speaker 1: it may be. You know, that's also a secondary question. 121 00:05:38,200 --> 00:05:40,800 Speaker 1: So it was interesting. UM an interview from Milkin yesterday 122 00:05:40,800 --> 00:05:43,000 Speaker 1: and Bloomberg talked about, you know, the hopes this was 123 00:05:43,040 --> 00:05:45,880 Speaker 1: the President Coke from Goldman Sachs, the hope it would 124 00:05:45,880 --> 00:05:49,240 Speaker 1: be a shallow recession. I just can't say, there's so 125 00:05:49,240 --> 00:05:51,360 Speaker 1: many If you look at trend, we should have six 126 00:05:51,400 --> 00:05:53,800 Speaker 1: million more Americans in the workforce right now. They want 127 00:05:53,800 --> 00:05:55,520 Speaker 1: to do where are they had we stayed on pre 128 00:05:55,560 --> 00:05:59,000 Speaker 1: pentemic trend, So there's already that initial drag. And again 129 00:05:59,040 --> 00:06:02,560 Speaker 1: then I I'll reiterate what Amazon said was really important. 130 00:06:02,760 --> 00:06:04,800 Speaker 1: They said we're not going to stop at attrition with 131 00:06:04,839 --> 00:06:07,320 Speaker 1: our warehouses. We built too many warehouses, we hired too 132 00:06:07,320 --> 00:06:09,760 Speaker 1: many people. They effectively said, we're gonna we're gonna fire 133 00:06:09,760 --> 00:06:11,880 Speaker 1: a hundred thousand people, and that's going to reduce our headcount. 134 00:06:12,279 --> 00:06:13,839 Speaker 1: This is kind of the first this is kind of 135 00:06:13,839 --> 00:06:15,480 Speaker 1: the first volley, if you will. And if you look 136 00:06:15,520 --> 00:06:18,760 Speaker 1: at indeed dot com job postings, they decisively turned in 137 00:06:18,839 --> 00:06:21,960 Speaker 1: very early February because I thought that labor market was 138 00:06:22,040 --> 00:06:25,360 Speaker 1: just rock solid, and I guess we'll get some more data. Well, 139 00:06:25,360 --> 00:06:27,320 Speaker 1: this is something that was a point of pride for 140 00:06:27,360 --> 00:06:30,800 Speaker 1: a while. I remember in early twenty you had ground 141 00:06:30,800 --> 00:06:32,880 Speaker 1: Powell coming out and saying we have a great labor market. 142 00:06:32,920 --> 00:06:35,120 Speaker 1: It's really tight, and now that's kind of become a 143 00:06:35,279 --> 00:06:37,880 Speaker 1: negative almost he says that we have an extremely tight 144 00:06:37,960 --> 00:06:40,520 Speaker 1: labor market. This is something we have to address. Do 145 00:06:40,600 --> 00:06:42,600 Speaker 1: we have to address it? I think the market is 146 00:06:42,640 --> 00:06:44,360 Speaker 1: going to take care of addressing it on its own. 147 00:06:44,680 --> 00:06:47,400 Speaker 1: I mean, you don't have goods consumption step back to 148 00:06:47,480 --> 00:06:50,039 Speaker 1: the extent that Amazon told us that goods consumption was 149 00:06:50,040 --> 00:06:53,159 Speaker 1: stepping back. You don't have good consumption stepping back and 150 00:06:53,200 --> 00:06:56,240 Speaker 1: inflation running where it is for essentials uh and and 151 00:06:56,400 --> 00:06:58,400 Speaker 1: landlords trying to make up on what they lost during 152 00:06:58,440 --> 00:07:01,520 Speaker 1: the rental ediction moratorium. So you've got your three essential energy, gas, 153 00:07:01,839 --> 00:07:05,719 Speaker 1: and housing. You don't have inflation running amok and and 154 00:07:05,720 --> 00:07:07,479 Speaker 1: and try and say services are going to make up 155 00:07:07,520 --> 00:07:10,080 Speaker 1: for it. But is there. Sorry I was gonna say, 156 00:07:10,160 --> 00:07:13,240 Speaker 1: I gotta, I gotta get in here, but there not 157 00:07:13,320 --> 00:07:15,440 Speaker 1: to make it too simplistic of an approach, but if 158 00:07:15,480 --> 00:07:19,400 Speaker 1: we're looking at declining demand, a slowing demand from the 159 00:07:19,440 --> 00:07:23,640 Speaker 1: American consumer specifically, and you're also seeing slower supply chains 160 00:07:23,800 --> 00:07:26,720 Speaker 1: MSS or slower exports. You mentioned China, you mentioned Germany 161 00:07:26,920 --> 00:07:29,720 Speaker 1: in terms of net exports. Does that in some way 162 00:07:29,880 --> 00:07:32,680 Speaker 1: cancel out a little bit. Well, the one thing that 163 00:07:32,720 --> 00:07:34,679 Speaker 1: we don't have to worry about as much, and bless 164 00:07:34,720 --> 00:07:37,120 Speaker 1: j Pal's heart, is the supply change in structure, because 165 00:07:37,160 --> 00:07:39,280 Speaker 1: what we're seeing is this magnificent build. If you look 166 00:07:39,280 --> 00:07:41,840 Speaker 1: at if you look at the company earnings conference calls, 167 00:07:42,320 --> 00:07:44,400 Speaker 1: there are so many companies that are saying, we've got 168 00:07:44,520 --> 00:07:47,400 Speaker 1: enough inventory on hand, it's no longer a crisis. But 169 00:07:47,480 --> 00:07:49,600 Speaker 1: now we have to consider the fact that warehouse expenses 170 00:07:49,600 --> 00:07:51,440 Speaker 1: are higher than they've ever been, and they have an 171 00:07:51,440 --> 00:07:54,760 Speaker 1: expense to carry this inventory that not a single operations 172 00:07:54,760 --> 00:07:57,400 Speaker 1: manager in the current generations accustomed to because their entire 173 00:07:57,440 --> 00:07:59,200 Speaker 1: career has been just in time as opposed to just 174 00:07:59,280 --> 00:08:01,960 Speaker 1: in case. I learned just in time back in business 175 00:08:02,000 --> 00:08:04,800 Speaker 1: school in the late eighties early nineties. Is that a 176 00:08:04,920 --> 00:08:06,720 Speaker 1: thing of the past. Do you think is that taken 177 00:08:06,720 --> 00:08:09,840 Speaker 1: a big blow? The stockpiling that we've seen suggests as much. 178 00:08:09,880 --> 00:08:11,840 Speaker 1: I mean, they were so burned by not being able 179 00:08:11,880 --> 00:08:14,040 Speaker 1: to get the product on hand to keep the production 180 00:08:14,040 --> 00:08:16,600 Speaker 1: lines up and running that they do have inventory on 181 00:08:16,640 --> 00:08:19,160 Speaker 1: hand now. So it's there's not the same crisis because 182 00:08:19,160 --> 00:08:20,960 Speaker 1: of what's happening in China, because there's not the same 183 00:08:21,000 --> 00:08:25,080 Speaker 1: demand pull from our ports, because because supplies have been replenished. 184 00:08:25,600 --> 00:08:27,880 Speaker 1: So as it relates to what we're here from the 185 00:08:27,920 --> 00:08:32,040 Speaker 1: FED today, um like I kind of felt like the 186 00:08:32,080 --> 00:08:34,520 Speaker 1: inflation we're experiencing today isn't so much a result of 187 00:08:34,559 --> 00:08:36,280 Speaker 1: the FED, because the FED has been easy for a 188 00:08:36,320 --> 00:08:39,240 Speaker 1: long time. It was a pandemic, it was a supply chain, 189 00:08:39,320 --> 00:08:41,480 Speaker 1: and once that stuff plays out, inflation will play out. 190 00:08:41,720 --> 00:08:44,280 Speaker 1: So I'm surprised that people are depending so much on 191 00:08:44,320 --> 00:08:48,280 Speaker 1: this Federal Reserve detain inflation. It's it's it's wrong headed, 192 00:08:48,400 --> 00:08:50,040 Speaker 1: and a lot of it was all that. You know, 193 00:08:50,040 --> 00:08:53,760 Speaker 1: when you pump forty of US GDP via fiscal stimulus 194 00:08:53,800 --> 00:08:55,760 Speaker 1: into the economy, you're gonna generate a heck of a 195 00:08:55,800 --> 00:08:57,880 Speaker 1: lot of inflation. And that, in my opinion, is why 196 00:08:58,160 --> 00:09:00,640 Speaker 1: President might have initially scheduled his press conference for two 197 00:09:00,640 --> 00:09:03,840 Speaker 1: o'clock thinking he could compete with the FED statement being released, 198 00:09:03,880 --> 00:09:06,360 Speaker 1: which obviously he moved that back to eleven am, figuring 199 00:09:06,360 --> 00:09:08,360 Speaker 1: out that he couldn't. But it was I mean, I 200 00:09:08,440 --> 00:09:11,120 Speaker 1: think initially it was literally an attempt to distract from 201 00:09:11,160 --> 00:09:14,160 Speaker 1: a fifty basis point right hip, And I don't know 202 00:09:14,160 --> 00:09:16,760 Speaker 1: if you've already hit this, but we also are expecting 203 00:09:16,800 --> 00:09:20,360 Speaker 1: comments from President Biden today at two o'clock as well. No, no, 204 00:09:20,480 --> 00:09:22,800 Speaker 1: he moved it to eleven. Oh to eleven. I'm so sorry, 205 00:09:23,080 --> 00:09:26,360 Speaker 1: but what did at one point? And the topic of 206 00:09:26,440 --> 00:09:30,079 Speaker 1: this conversation even at eleven is going to be about 207 00:09:30,120 --> 00:09:34,040 Speaker 1: economic growth? How much of a concern is this fifty 208 00:09:34,040 --> 00:09:38,040 Speaker 1: basis point hike? Is this going to scare the consumer 209 00:09:38,200 --> 00:09:41,120 Speaker 1: or scare the American public when they see Chairman Powell 210 00:09:41,160 --> 00:09:43,400 Speaker 1: today if he does indeed deliver what the market's expecting 211 00:09:44,000 --> 00:09:46,199 Speaker 1: very well? Could I mean sixteenth two thousand, that's the 212 00:09:46,320 --> 00:09:49,080 Speaker 1: last time that they launched a fifty basis point hike. 213 00:09:49,559 --> 00:09:51,880 Speaker 1: That was one month almost to the day from from 214 00:09:51,880 --> 00:09:54,640 Speaker 1: the day the dynastic peaked before it completely imploded. And 215 00:09:54,679 --> 00:09:57,040 Speaker 1: people are beginning to draw parallels, maybe because they follow 216 00:09:57,120 --> 00:10:00,760 Speaker 1: me on Twitter. Daniel d Martino Booth follow you on Twitter. 217 00:10:00,840 --> 00:10:04,800 Speaker 1: Daniel DeMartino Booth, CEO and chief strategist for Quill Intelligence, 218 00:10:05,120 --> 00:10:07,400 Speaker 1: former advisor at the Federal Reserve Bank of Dallas. When 219 00:10:07,400 --> 00:10:09,760 Speaker 1: we talked to FED, we'd like to talk to smart 220 00:10:09,760 --> 00:10:11,760 Speaker 1: people who have experience with this stuff, and Daniel is 221 00:10:11,760 --> 00:10:18,040 Speaker 1: certainly not camp here. Let's get back to these markets here, 222 00:10:18,080 --> 00:10:21,080 Speaker 1: because it's going to be a busy day, a busy afternoon, 223 00:10:21,480 --> 00:10:24,440 Speaker 1: and probably into tomorrow. Market's gonna be digesting a lot 224 00:10:24,520 --> 00:10:27,440 Speaker 1: of commentary coming from the US Federal Reserve. Let's bring 225 00:10:27,440 --> 00:10:30,880 Speaker 1: an Anders person, chief investment Officer of Global fixed Income 226 00:10:30,960 --> 00:10:33,120 Speaker 1: for Nuvine Anders thanks so much for joining us here. 227 00:10:33,520 --> 00:10:35,800 Speaker 1: You know, we kind of we pay a lot of 228 00:10:35,800 --> 00:10:37,920 Speaker 1: attention here at Bloomberg News and Bloomberg Radio on TV 229 00:10:38,080 --> 00:10:39,920 Speaker 1: on the Federal Reserve, and when we do have these 230 00:10:40,280 --> 00:10:44,120 Speaker 1: press conferences with the chairman, this one today seems to 231 00:10:44,240 --> 00:10:46,959 Speaker 1: be even more so because we're gonna have a FED 232 00:10:47,000 --> 00:10:49,720 Speaker 1: that's gonna go really into hawkish mode here. What are 233 00:10:49,760 --> 00:10:54,640 Speaker 1: you looking for this afternoon from your Federal Reserve chairman? Sure, yeah, 234 00:10:54,760 --> 00:10:57,400 Speaker 1: we we we do believe that that they're going to 235 00:10:57,440 --> 00:10:59,959 Speaker 1: be announcing it's if two basis point tied today we're 236 00:11:00,760 --> 00:11:03,559 Speaker 1: in our mind it's been well telegraphed a Powell and 237 00:11:04,000 --> 00:11:06,960 Speaker 1: very much in line with that market expectation. So so, certainly, 238 00:11:07,559 --> 00:11:08,959 Speaker 1: as you said, it's gonna be a lot of focus 239 00:11:09,080 --> 00:11:12,839 Speaker 1: on this today, um certainly more so on the press conference, um, 240 00:11:13,640 --> 00:11:15,640 Speaker 1: you know, trying to read between the lines, what kind 241 00:11:15,679 --> 00:11:19,280 Speaker 1: of signals and inside the power of passing along. That 242 00:11:19,400 --> 00:11:21,679 Speaker 1: being said, I'm not so sure that we're going to 243 00:11:21,760 --> 00:11:25,040 Speaker 1: get a whole lot of tangible new news here. It's 244 00:11:25,080 --> 00:11:28,360 Speaker 1: probably not going to be much of fireworks where frankly, 245 00:11:28,440 --> 00:11:30,439 Speaker 1: we're not going to get an updated dot plot or 246 00:11:30,440 --> 00:11:33,280 Speaker 1: any new forecast at this meeting. So it's going to 247 00:11:33,360 --> 00:11:36,000 Speaker 1: be again more kind of reading between the lines, kind 248 00:11:36,040 --> 00:11:39,320 Speaker 1: of figuring out if we can read anything into any 249 00:11:39,400 --> 00:11:42,079 Speaker 1: kind of signals one way or another. So while we're 250 00:11:42,120 --> 00:11:44,040 Speaker 1: hoping for a little more clarity, I have I have 251 00:11:44,200 --> 00:11:46,960 Speaker 1: a strong suspicion it's going to be a little bit 252 00:11:47,000 --> 00:11:51,200 Speaker 1: more of a vague message from Powell, more noncommittal, certainly 253 00:11:51,360 --> 00:11:53,679 Speaker 1: probably not going to be commenting all that much and 254 00:11:53,760 --> 00:11:57,000 Speaker 1: what kind of size hikes we can expect here going forward, 255 00:11:57,600 --> 00:12:00,640 Speaker 1: probably reiterating that he's going to be it a dependent 256 00:12:01,040 --> 00:12:04,400 Speaker 1: um uh here going forward as well. So certainly key 257 00:12:04,440 --> 00:12:07,240 Speaker 1: focus here, but I think today probably not a lot 258 00:12:07,320 --> 00:12:09,920 Speaker 1: of details and maybe more interesting to hear where some 259 00:12:10,040 --> 00:12:12,839 Speaker 1: of the committee members kind of speak about here in 260 00:12:12,880 --> 00:12:15,319 Speaker 1: the coming days and weeks, well at least there'll be 261 00:12:15,400 --> 00:12:18,320 Speaker 1: an in person press conference there, so perhaps we can 262 00:12:18,320 --> 00:12:21,040 Speaker 1: get a little fireworks going there about the balance sheet 263 00:12:21,160 --> 00:12:22,679 Speaker 1: run off here, This is something that I think the 264 00:12:22,760 --> 00:12:24,679 Speaker 1: market's trying to, you know, just you know, learn a 265 00:12:24,760 --> 00:12:26,400 Speaker 1: little bit more about what do you think we'll here 266 00:12:26,880 --> 00:12:29,439 Speaker 1: fed Sherman j pal about how this Federal Reserve will 267 00:12:29,480 --> 00:12:34,520 Speaker 1: actually you know, affect a balance sheet run off? Yeah, 268 00:12:34,600 --> 00:12:37,679 Speaker 1: that is that is the area that will hopefully get 269 00:12:37,800 --> 00:12:40,160 Speaker 1: a little bit more clarity around and let's go a 270 00:12:40,240 --> 00:12:43,559 Speaker 1: little bit more new news. Um, you know, expectations is 271 00:12:43,720 --> 00:12:45,920 Speaker 1: on our end, and I think the market is that. Um, 272 00:12:46,240 --> 00:12:48,480 Speaker 1: they'll they'll talk about a June kind of kick off. 273 00:12:49,080 --> 00:12:52,600 Speaker 1: They talked about these cap sizes around sixty billion for treasuries, 274 00:12:52,640 --> 00:12:55,920 Speaker 1: thirty five billion for mbs, most likely a three month 275 00:12:56,040 --> 00:12:58,600 Speaker 1: ramp up, So you know, all in all, I would 276 00:12:58,640 --> 00:13:01,720 Speaker 1: call it probably going to be in line with market expectations. 277 00:13:01,880 --> 00:13:05,160 Speaker 1: Maybe a little bit more clarity around that, but I 278 00:13:05,240 --> 00:13:08,120 Speaker 1: think Powell and team have done a pretty good job 279 00:13:08,360 --> 00:13:12,360 Speaker 1: communicating sort of where they're heading, and I'm guessing it's 280 00:13:12,520 --> 00:13:15,920 Speaker 1: mostly going to be radiating what they've been signaling here 281 00:13:15,960 --> 00:13:19,800 Speaker 1: for a bit I have to ask about negative yielding 282 00:13:19,920 --> 00:13:22,839 Speaker 1: debt because we are looking at a tenure yield that 283 00:13:22,920 --> 00:13:26,959 Speaker 1: has bounced off three twice now, once today and once 284 00:13:27,000 --> 00:13:29,280 Speaker 1: I believe a couple of days ago as well. You're 285 00:13:29,280 --> 00:13:32,160 Speaker 1: also looking at a German boond that has crossed one 286 00:13:32,200 --> 00:13:35,760 Speaker 1: percent several times as well. But negative yielding debt is 287 00:13:35,800 --> 00:13:42,240 Speaker 1: kind of almost going into extinction. What would reverse that trend? Yeah, No, 288 00:13:42,760 --> 00:13:45,439 Speaker 1: I think it's it's certainly it's I would call it, 289 00:13:45,520 --> 00:13:48,320 Speaker 1: first of all healthy to see these changes and things 290 00:13:48,360 --> 00:13:51,240 Speaker 1: from moving into a more normal kind of state all 291 00:13:51,320 --> 00:13:54,079 Speaker 1: in all, because I think we can all agree that 292 00:13:54,160 --> 00:13:56,800 Speaker 1: negative yielding debt is not you know, sort of what 293 00:13:56,960 --> 00:13:59,280 Speaker 1: we would like to see in a in a fully 294 00:13:59,320 --> 00:14:01,920 Speaker 1: functioning econ mean what have you. So I would say, 295 00:14:02,040 --> 00:14:05,400 Speaker 1: we're you know, setting a new range here, and we 296 00:14:05,520 --> 00:14:08,480 Speaker 1: would expect more of a range bound both from the 297 00:14:08,559 --> 00:14:11,480 Speaker 1: treasury side and from the boons and more broadly in Europe. 298 00:14:11,559 --> 00:14:14,679 Speaker 1: So I think, um, you know, if if if we 299 00:14:14,840 --> 00:14:18,880 Speaker 1: were to turn over, um, perhaps if if there is 300 00:14:18,920 --> 00:14:23,120 Speaker 1: a central bank policy era or FED era going forward 301 00:14:23,320 --> 00:14:26,680 Speaker 1: where you know they go to aggressively and in fighting 302 00:14:26,720 --> 00:14:30,000 Speaker 1: the inflation, uh, and we end up you know, kind 303 00:14:30,000 --> 00:14:34,000 Speaker 1: of dipping into a recession most likely next year either 304 00:14:34,080 --> 00:14:36,280 Speaker 1: here in the US, so maybe more likely in Europe. 305 00:14:36,920 --> 00:14:40,840 Speaker 1: Then you know, we we have to assume that those 306 00:14:40,960 --> 00:14:43,360 Speaker 1: deals will come down again. It could be slipping down 307 00:14:43,440 --> 00:14:46,880 Speaker 1: into the negative territory again. We're hoping that's not to 308 00:14:46,960 --> 00:14:50,600 Speaker 1: get base case certainly. Um, it seems like we're making 309 00:14:50,640 --> 00:14:53,560 Speaker 1: the right steps here going forward, but at the end 310 00:14:53,560 --> 00:14:55,440 Speaker 1: of the day, we have to, you know, take a 311 00:14:55,480 --> 00:14:58,520 Speaker 1: step back and acknowledge that there's still a lot of 312 00:14:58,640 --> 00:15:02,640 Speaker 1: uncertainties out there in terms of deal, political kind of 313 00:15:02,680 --> 00:15:07,240 Speaker 1: top situation, the Chinese lockdowns, some of these cross currents 314 00:15:07,320 --> 00:15:11,600 Speaker 1: around economic economic growth and inflation, and and the soft 315 00:15:11,720 --> 00:15:15,400 Speaker 1: lending kind of type approach to all central banks are 316 00:15:15,600 --> 00:15:17,920 Speaker 1: are trying to achieve. It's not going to be easy, 317 00:15:18,040 --> 00:15:20,920 Speaker 1: so I wouldn't rule it out. Um, we're hoping for 318 00:15:21,000 --> 00:15:23,120 Speaker 1: the best here, but but that's not a base case 319 00:15:23,160 --> 00:15:25,200 Speaker 1: at this point, and there's a lot of folks are 320 00:15:25,280 --> 00:15:28,760 Speaker 1: really looking to this for the reserve too bring down inflation. 321 00:15:29,920 --> 00:15:31,560 Speaker 1: I don't even think they caused inflation. I kind of 322 00:15:31,560 --> 00:15:34,320 Speaker 1: feel like it was a byproduct of a reopening global economy, 323 00:15:34,400 --> 00:15:38,240 Speaker 1: supply chain issues. Uh, that those types of things that 324 00:15:38,360 --> 00:15:41,160 Speaker 1: and that's just gonna take time to play out. How 325 00:15:41,200 --> 00:15:43,480 Speaker 1: do you envision or how do you think about this 326 00:15:43,600 --> 00:15:49,240 Speaker 1: Federal Reserve in its ability to fight inflation? Yeah, I mean, 327 00:15:49,320 --> 00:15:52,800 Speaker 1: certainly it is unprecedented times, and I think we have 328 00:15:52,920 --> 00:15:57,280 Speaker 1: to again remind ourselves that we're dealing with with something 329 00:15:57,360 --> 00:16:00,040 Speaker 1: that we really don't have a playbook around, given of 330 00:16:00,120 --> 00:16:04,120 Speaker 1: the COVID shutdown and supply chain related issues as you mentioned. 331 00:16:04,640 --> 00:16:07,360 Speaker 1: That being said, I think our view is that inflation 332 00:16:07,600 --> 00:16:11,000 Speaker 1: likely did peak, most likely in the last month or so. 333 00:16:12,080 --> 00:16:15,360 Speaker 1: When we look at some of the core durable goods numbers, 334 00:16:15,520 --> 00:16:17,680 Speaker 1: for instance, you know, new cars have been kind of 335 00:16:17,760 --> 00:16:21,520 Speaker 1: rolling over. We're seeing energy prices moderating at this point. 336 00:16:21,640 --> 00:16:25,680 Speaker 1: We are seeing the signs that inflation at least is moving, 337 00:16:26,000 --> 00:16:28,080 Speaker 1: you know, lower and in the right direction. We're we're 338 00:16:28,120 --> 00:16:30,800 Speaker 1: expecting core inflation kind of at four and a half 339 00:16:30,840 --> 00:16:33,760 Speaker 1: percent at here and uh and and continue to go 340 00:16:33,920 --> 00:16:37,240 Speaker 1: lower next year. But um, to your point, I mean, 341 00:16:37,560 --> 00:16:40,640 Speaker 1: the FEDS job now is to to really kind of 342 00:16:40,720 --> 00:16:46,240 Speaker 1: tighten financial conditions. So we see that psychology shifting from 343 00:16:46,280 --> 00:16:49,280 Speaker 1: consumers from companies and what have you, so we can 344 00:16:49,320 --> 00:16:51,960 Speaker 1: see that trend continuing here in the coming months. So 345 00:16:52,680 --> 00:16:54,640 Speaker 1: I think they're on the right path. My you know, 346 00:16:54,760 --> 00:16:56,880 Speaker 1: the concern I guess we'll have is that they're going 347 00:16:56,920 --> 00:16:58,720 Speaker 1: to be a little bit too slow in their actions. 348 00:16:58,960 --> 00:17:00,720 Speaker 1: All right, And this person, thank you so much for 349 00:17:00,800 --> 00:17:03,880 Speaker 1: joining us. Really appreciate it. Ander's person, chief Investment Officer 350 00:17:04,320 --> 00:17:07,840 Speaker 1: of Global Fixing, come for Nouvene giving us his thoughts 351 00:17:07,840 --> 00:17:09,399 Speaker 1: on kind of how he thinks his Phoederal Reserve is 352 00:17:09,440 --> 00:17:13,280 Speaker 1: gonna navigate this high level of inflation that we're all 353 00:17:13,280 --> 00:17:19,560 Speaker 1: experiencing right now. All right, it has been a rocky 354 00:17:19,720 --> 00:17:21,960 Speaker 1: tech earning season, I would say here for the first quarter. 355 00:17:22,280 --> 00:17:26,480 Speaker 1: Some positive surprises, but probably more negative surprises. Cap off 356 00:17:26,640 --> 00:17:28,919 Speaker 1: just recently, most recently with the lift and Uber lifts down, 357 00:17:30,200 --> 00:17:33,480 Speaker 1: Uber off ten percent here, So some real challenges for 358 00:17:33,520 --> 00:17:36,080 Speaker 1: some of these tech investors. So we talked tech. We 359 00:17:36,200 --> 00:17:38,560 Speaker 1: talked to Dan Ives. He is one of our leading 360 00:17:38,680 --> 00:17:41,879 Speaker 1: voices on all things technologies. He's an equity research and 361 00:17:41,920 --> 00:17:45,520 Speaker 1: also would Bush Securities and managing director over there. Um, Dan, 362 00:17:45,600 --> 00:17:48,040 Speaker 1: thanks so much for joining us here. Let's start with boy. 363 00:17:48,520 --> 00:17:50,840 Speaker 1: I go back to last Friday, we had Amazon. What 364 00:17:51,000 --> 00:17:53,000 Speaker 1: happened there in a big sell off in that stock 365 00:17:53,040 --> 00:17:55,640 Speaker 1: and then we had lifted Uber. Today as you step 366 00:17:55,680 --> 00:17:57,520 Speaker 1: back down, I know you have this lens and think 367 00:17:57,560 --> 00:18:00,879 Speaker 1: about tech. What's the market telling us here? Well, I 368 00:18:00,960 --> 00:18:03,320 Speaker 1: think it's to have and have not in tech. I 369 00:18:03,359 --> 00:18:08,600 Speaker 1: mean you look at a m D, Microsoft, cyber Security, Apple, 370 00:18:08,680 --> 00:18:12,879 Speaker 1: outside the supply chain Strong, you look at some of 371 00:18:12,920 --> 00:18:16,200 Speaker 1: the e commerce work from home beneficiaries that's been a disaster. 372 00:18:16,359 --> 00:18:19,280 Speaker 1: And when we look at with I mean they're spending 373 00:18:19,520 --> 00:18:24,480 Speaker 1: money like rock stars, and ultimately that's something in this environment, 374 00:18:25,119 --> 00:18:28,480 Speaker 1: even though for good in terms of a demand rebound 375 00:18:28,600 --> 00:18:31,840 Speaker 1: to get drivers back on street, any sort of issue, 376 00:18:31,920 --> 00:18:34,760 Speaker 1: the stocks will get crushed. So I think what we're seeing, Paul, 377 00:18:34,880 --> 00:18:40,760 Speaker 1: is it's a bifurcation within tech, enterprise, Cloud, cyber semis, Strong, 378 00:18:41,280 --> 00:18:45,080 Speaker 1: everything else. You know, we're seeing weakness, but I think 379 00:18:45,200 --> 00:18:48,320 Speaker 1: the there is kind of an extremity, almost to the 380 00:18:48,440 --> 00:18:50,840 Speaker 1: extent that some of these stocks are getting punished. I mean, 381 00:18:51,119 --> 00:18:55,520 Speaker 1: off Amazon earningclin right off the bat. That isn't a 382 00:18:55,640 --> 00:18:59,400 Speaker 1: normal move, even off of an earnings disappointment. A similar 383 00:18:59,440 --> 00:19:01,359 Speaker 1: story when you're looking Lift, for example, we're looking at 384 00:19:01,359 --> 00:19:05,359 Speaker 1: those shares down thirty almost Uber down eight point eight 385 00:19:05,400 --> 00:19:08,600 Speaker 1: percent as well. These are really extreme moves, and I 386 00:19:08,680 --> 00:19:11,879 Speaker 1: don't necessarily think you can blame the rates picture. So 387 00:19:12,080 --> 00:19:17,080 Speaker 1: why these particular stocks, Why such an outsize move. Look, 388 00:19:17,160 --> 00:19:20,719 Speaker 1: I think it is as nervous of an environment. I mean, 389 00:19:20,880 --> 00:19:24,600 Speaker 1: forget Mark two twenty, but it's just nervous as I've 390 00:19:24,640 --> 00:19:29,560 Speaker 1: seen talking attach investors institutionally, I'd seen eight nine years 391 00:19:30,040 --> 00:19:34,960 Speaker 1: because of the Rubik's cube macro fed raising rates and 392 00:19:35,080 --> 00:19:39,480 Speaker 1: what we're seeing on valuations, and I think any crack 393 00:19:39,560 --> 00:19:42,480 Speaker 1: in the armor, any softness you're seeing what I've use 394 00:19:42,800 --> 00:19:45,879 Speaker 1: overreaction and a lot of these tech prints, and I 395 00:19:45,960 --> 00:19:48,399 Speaker 1: think it just speaks to what I view is an 396 00:19:48,440 --> 00:19:51,760 Speaker 1: over souled tech tape in a complex macro. But I 397 00:19:51,920 --> 00:19:56,040 Speaker 1: believe it sets up for what over the next quote 398 00:19:56,160 --> 00:19:58,879 Speaker 1: three six nine months is going to be a significant 399 00:19:58,920 --> 00:20:02,640 Speaker 1: rebound tech for the high quality tech games and obviously 400 00:20:02,800 --> 00:20:06,040 Speaker 1: just this massive white knucle panics. I feel like it 401 00:20:06,119 --> 00:20:08,560 Speaker 1: also matters who's doing the selling right. I love to 402 00:20:08,640 --> 00:20:10,639 Speaker 1: quote Vanda Trakh, who has really made a name for 403 00:20:10,680 --> 00:20:13,440 Speaker 1: themselves in terms of retail flows, and they said, every 404 00:20:13,520 --> 00:20:16,639 Speaker 1: time they're selling, the selling is coming from institutional players. 405 00:20:16,680 --> 00:20:19,520 Speaker 1: The buying is coming from retail players. What does that 406 00:20:19,720 --> 00:20:24,000 Speaker 1: tell you about the significance of tech and portfolios right now? Well, 407 00:20:24,040 --> 00:20:26,520 Speaker 1: I think it just shows it's a massive risk off 408 00:20:26,600 --> 00:20:29,960 Speaker 1: at the same time. So we could say everyone owned 409 00:20:30,000 --> 00:20:32,960 Speaker 1: the same names from an institutional perspective, and all of 410 00:20:33,040 --> 00:20:35,320 Speaker 1: a sudden you head for the elevator at the same time. 411 00:20:35,560 --> 00:20:38,600 Speaker 1: And it's just from a volume perspective. That's why we're 412 00:20:38,600 --> 00:20:41,280 Speaker 1: seeing some of these moves, whether it's Netflix, Amazon or 413 00:20:41,400 --> 00:20:44,920 Speaker 1: Lift today. But again during this you know, twenty two years, 414 00:20:45,000 --> 00:20:48,880 Speaker 1: like I've seen the cycle before, and that's what happens, 415 00:20:49,080 --> 00:20:53,040 Speaker 1: just in a panic macro where everyone kind of becomes 416 00:20:53,080 --> 00:20:55,200 Speaker 1: an economist and they're trying to win up each other 417 00:20:55,280 --> 00:20:58,840 Speaker 1: on rate hikes. All right, Dan, I am a Peloton user, 418 00:20:58,960 --> 00:21:00,680 Speaker 1: not as much as I should, but a big Gen 419 00:21:00,800 --> 00:21:04,520 Speaker 1: Sherman fan over here. Is there any future or what 420 00:21:04,800 --> 00:21:08,399 Speaker 1: is the future for some of those classic pandemic stocks 421 00:21:08,520 --> 00:21:13,040 Speaker 1: like Zoom, like Pelican, Pelton, like Docu signed. How do 422 00:21:13,080 --> 00:21:14,600 Speaker 1: you think about those? You just have to wait till 423 00:21:14,600 --> 00:21:20,840 Speaker 1: they wash out. Yeah, Imhamman Corp. But I will go 424 00:21:22,200 --> 00:21:26,480 Speaker 1: every every vot, like every stock has a price, it 425 00:21:26,600 --> 00:21:28,479 Speaker 1: goes know that anyone that's sold the house I mean, 426 00:21:28,480 --> 00:21:30,520 Speaker 1: if you are about five percent one, that will about 427 00:21:30,560 --> 00:21:34,240 Speaker 1: twenty you're gonna have. So I do believe it's getting 428 00:21:34,320 --> 00:21:36,680 Speaker 1: washed out. In terms of what we're seeing. You will 429 00:21:36,800 --> 00:21:39,879 Speaker 1: have M and A and ultimately, some of these business 430 00:21:39,960 --> 00:21:42,560 Speaker 1: models are not going away. They're just going to go 431 00:21:42,720 --> 00:21:45,840 Speaker 1: through a massive transformation. You're seeing a wash out in 432 00:21:46,000 --> 00:21:48,080 Speaker 1: terms of the stock. You know, there's names like a 433 00:21:48,200 --> 00:21:50,680 Speaker 1: Doctus Time, which we downgrade this week. I think that's 434 00:21:50,720 --> 00:21:53,880 Speaker 1: one that's a work from home poster child evaluation still 435 00:21:54,000 --> 00:21:55,680 Speaker 1: rich in our opinion, What's why we went to a 436 00:21:55,800 --> 00:21:59,280 Speaker 1: cell So you're you're still gonna have price discovery here. 437 00:21:59,640 --> 00:22:01,560 Speaker 1: But that's what you're seeing right now is that a 438 00:22:01,720 --> 00:22:05,440 Speaker 1: lot of these names of basically just become institutional. Even 439 00:22:05,520 --> 00:22:08,320 Speaker 1: some retail investors won't touch him. And that's why they've 440 00:22:08,359 --> 00:22:12,320 Speaker 1: gone from the Golden child to ultimately ones that you know, 441 00:22:12,520 --> 00:22:14,960 Speaker 1: no one will touch with a ten foot pole. But ultimately, 442 00:22:15,160 --> 00:22:18,520 Speaker 1: as that price discovery takes effect, you'll see M and 443 00:22:18,600 --> 00:22:20,879 Speaker 1: A and ultimately I think you'll see some of the 444 00:22:20,880 --> 00:22:25,040 Speaker 1: evaluations get over extended on the sell off. All right, Dan, 445 00:22:25,160 --> 00:22:27,600 Speaker 1: good stuff as always again kind of kind of kind 446 00:22:27,600 --> 00:22:29,159 Speaker 1: of a little bit of a recap there on some 447 00:22:29,320 --> 00:22:31,639 Speaker 1: of the big moves we've seen from these tech companies 448 00:22:31,640 --> 00:22:33,120 Speaker 1: that we always like to check in with. Dan Eyes. 449 00:22:33,119 --> 00:22:35,439 Speaker 1: He can give us the thirty foot few as well 450 00:22:35,480 --> 00:22:38,480 Speaker 1: as deep dig, dive down deep into some of the numbers. 451 00:22:38,600 --> 00:22:41,199 Speaker 1: Dan ives he's an equity research channel's managing director at 452 00:22:41,240 --> 00:22:47,840 Speaker 1: web Bush Securities. All Right, it is FED day, um 453 00:22:48,080 --> 00:22:50,520 Speaker 1: Bloomberg will have full coverage beginning at one pm Wall 454 00:22:50,560 --> 00:22:53,639 Speaker 1: Street time. Tom Keen surveillance team will take you through it. 455 00:22:54,080 --> 00:22:56,840 Speaker 1: Our next guest here as it relates to the FED, says, 456 00:22:56,920 --> 00:22:59,640 Speaker 1: a good scenario for the FED is beginning to look 457 00:22:59,680 --> 00:23:02,560 Speaker 1: as for called as bringing a jet liner down safely 458 00:23:02,640 --> 00:23:06,080 Speaker 1: on the Hudson River. John Arthur's senior editor for Bloomberg Opinion, 459 00:23:08,000 --> 00:23:11,720 Speaker 1: sullid got it done? Can our FED sherman get it done? 460 00:23:12,040 --> 00:23:14,000 Speaker 1: I mean if he does, then he deserves to be 461 00:23:14,080 --> 00:23:18,000 Speaker 1: played by Tom hankson uh And it could happen, but 462 00:23:18,200 --> 00:23:21,840 Speaker 1: it is not very easy. I don't play you in 463 00:23:21,880 --> 00:23:23,879 Speaker 1: the movie. John Arthur's sorry, who's going to play you 464 00:23:24,000 --> 00:23:29,000 Speaker 1: in the movie? That would be that? That would be that, 465 00:23:29,119 --> 00:23:32,280 Speaker 1: that would be Abert Robert Redford or or or Dustin 466 00:23:32,320 --> 00:23:34,960 Speaker 1: Hoffman who at this age look a bit more like 467 00:23:35,119 --> 00:23:36,240 Speaker 1: me than they did when they were in All the 468 00:23:36,280 --> 00:23:42,520 Speaker 1: President's men anyway, I think them a soft landing is 469 00:23:42,560 --> 00:23:48,679 Speaker 1: getting harder to achieve because inflation has lasted longer than expected, 470 00:23:49,119 --> 00:23:53,320 Speaker 1: and because um, the labor market, as we saw from 471 00:23:53,320 --> 00:23:57,280 Speaker 1: the Jolts numbers yesterday, really is very tight, and because 472 00:23:58,200 --> 00:24:01,840 Speaker 1: the first quarter GDP numbers of very strange. But if 473 00:24:01,920 --> 00:24:05,000 Speaker 1: the economy is already slowing down and the Fed still 474 00:24:05,080 --> 00:24:07,800 Speaker 1: has to do a lot to bring in inflation, that 475 00:24:08,080 --> 00:24:11,760 Speaker 1: doesn't all go well for engineering a soft landing. There 476 00:24:11,800 --> 00:24:14,920 Speaker 1: hasn't been one, if you define a soft landing as 477 00:24:15,000 --> 00:24:18,040 Speaker 1: being one with the FED gets through an entire hiking 478 00:24:18,119 --> 00:24:21,520 Speaker 1: campaign without prompting a recession. Hasn't been one since ninety four, 479 00:24:21,720 --> 00:24:24,399 Speaker 1: and that was the Avon Green spent hiking campaign that 480 00:24:24,760 --> 00:24:28,480 Speaker 1: triggered the entire emerging market crisis the nineties. So you know, 481 00:24:28,600 --> 00:24:33,200 Speaker 1: it's difficult. But you could say from inflation, I'm equity, guys, 482 00:24:33,200 --> 00:24:36,119 Speaker 1: I'm always glass hair, for we've kind of peeked already 483 00:24:36,160 --> 00:24:38,639 Speaker 1: from an inflation perspective, maybe last month. There's arguing in 484 00:24:38,680 --> 00:24:40,800 Speaker 1: Maiden there when you look at use cars or whatever 485 00:24:40,800 --> 00:24:44,760 Speaker 1: you want to look at there's there's certainly a very 486 00:24:44,800 --> 00:24:48,080 Speaker 1: good argument that last month may well turn out to 487 00:24:48,240 --> 00:24:53,720 Speaker 1: be the highest year on year headline number. UM. The 488 00:24:53,840 --> 00:24:56,960 Speaker 1: mere fact that oil didn't continue to go up in 489 00:24:57,040 --> 00:25:01,159 Speaker 1: the exponential, perfect straight line up it's last month compared 490 00:25:01,200 --> 00:25:04,200 Speaker 1: to the month before improves the chance to that. The 491 00:25:04,280 --> 00:25:06,800 Speaker 1: fact that April, May and June of last year were 492 00:25:07,080 --> 00:25:10,160 Speaker 1: pretty bad months for inflation and those months drop off 493 00:25:10,200 --> 00:25:14,119 Speaker 1: the base. Yes, it's it's reasonable to hope that the 494 00:25:14,160 --> 00:25:17,600 Speaker 1: peak is in. That said, it's not a slam dunk. 495 00:25:17,800 --> 00:25:21,520 Speaker 1: And if the if the numbers are slightly higher when 496 00:25:21,560 --> 00:25:25,239 Speaker 1: they come out for for for April than they were 497 00:25:25,280 --> 00:25:27,719 Speaker 1: for March, that's not going to be good. That's going 498 00:25:27,760 --> 00:25:33,000 Speaker 1: to freak people out. More importantly, UM, at this point 499 00:25:33,240 --> 00:25:37,399 Speaker 1: the peak is less important than this gets back to 500 00:25:37,440 --> 00:25:42,680 Speaker 1: the landing analogy than the glide path down. Um. How 501 00:25:43,400 --> 00:25:47,360 Speaker 1: quickly can inflation be brought down to a reasonable level. 502 00:25:48,200 --> 00:25:50,280 Speaker 1: If it's three at the end of this year or 503 00:25:50,359 --> 00:25:53,520 Speaker 1: three and a half, then befit has done a fantastic job, 504 00:25:53,600 --> 00:25:58,239 Speaker 1: providing there hasn't been some awful crisis and things are 505 00:25:58,280 --> 00:26:01,520 Speaker 1: on course even if this guilty high. If it's five 506 00:26:01,600 --> 00:26:03,400 Speaker 1: and a half percent at the end of this year, 507 00:26:03,680 --> 00:26:07,480 Speaker 1: we really have a problem. They're going to have to 508 00:26:07,720 --> 00:26:11,920 Speaker 1: keep hiking to to to squelch inflation, and a recession 509 00:26:11,960 --> 00:26:15,680 Speaker 1: at that point would be a certainty in the pothectical 510 00:26:15,760 --> 00:26:17,359 Speaker 1: case that inflation is still five and a half for 511 00:26:17,400 --> 00:26:19,639 Speaker 1: the end of this year. Well, inflation is one issue. 512 00:26:19,920 --> 00:26:22,720 Speaker 1: Growth is the other. And we hear this all about 513 00:26:22,920 --> 00:26:25,840 Speaker 1: all the time when it comes to the China context. 514 00:26:25,960 --> 00:26:31,280 Speaker 1: But I'm curious about what reverses the Federal Reserve into easy. 515 00:26:31,440 --> 00:26:33,040 Speaker 1: I mean, I know we're talking about an aggressive rate 516 00:26:33,119 --> 00:26:35,680 Speaker 1: high crigion here. We're talking about first fifty basis point 517 00:26:35,760 --> 00:26:41,760 Speaker 1: hikes six or basic team two thousand if my date right. Um, 518 00:26:42,480 --> 00:26:45,399 Speaker 1: But but they will also have calls of a cut 519 00:26:45,600 --> 00:26:49,919 Speaker 1: as soon as three How quickly will the Federal Reserve 520 00:26:50,119 --> 00:26:52,560 Speaker 1: have to reverse course in light of these growth cons 521 00:26:52,920 --> 00:26:56,840 Speaker 1: I can imagine the model here might be that you 522 00:26:56,920 --> 00:26:59,720 Speaker 1: could get calls for cut in a matter of months. 523 00:27:00,080 --> 00:27:02,800 Speaker 1: Radio audience. By the way, you know, I used to 524 00:27:02,840 --> 00:27:06,399 Speaker 1: sit next to John Arthur's in the office and he 525 00:27:06,560 --> 00:27:08,920 Speaker 1: taught me you have to look at historical precedents, which 526 00:27:08,960 --> 00:27:12,600 Speaker 1: is why he's bringing up a historical precedent yes, from 527 00:27:12,680 --> 00:27:16,639 Speaker 1: when Greety wasn't as old as as I am, I was, Yes, 528 00:27:16,760 --> 00:27:20,800 Speaker 1: So so the long term capital management crisis. The fed's 529 00:27:20,880 --> 00:27:24,920 Speaker 1: most recent move had been up. It wasn't in rates, 530 00:27:24,920 --> 00:27:27,960 Speaker 1: it hadn't been in an aggressive hiking cycle, but it 531 00:27:28,119 --> 00:27:33,720 Speaker 1: certainly didn't intend to cut. The long term capital managements debacle, 532 00:27:34,000 --> 00:27:36,919 Speaker 1: in which the corporate credit market more or less frozen, 533 00:27:36,960 --> 00:27:41,320 Speaker 1: completely prompted it into making a series of cuts, with 534 00:27:42,119 --> 00:27:44,960 Speaker 1: all the consequences, I would argue is still living with today, 535 00:27:45,040 --> 00:27:49,040 Speaker 1: that the Nastak went from a really hot bullmarket into 536 00:27:49,080 --> 00:27:52,440 Speaker 1: a total historic bubble, largely as a result of of 537 00:27:52,520 --> 00:27:56,119 Speaker 1: what happened then, and all of the monetary policy that 538 00:27:56,600 --> 00:27:59,159 Speaker 1: led to two thousand and eight probably wouldn't have happened 539 00:27:59,200 --> 00:28:03,240 Speaker 1: without that. So I can imagine pressure for cuts earlier 540 00:28:03,280 --> 00:28:06,600 Speaker 1: than you know. When we started this whole pivot thing 541 00:28:06,840 --> 00:28:11,240 Speaker 1: to our more hawkers FED, I think the market was saying, alright, 542 00:28:11,320 --> 00:28:14,879 Speaker 1: three rate hikes probably in two. Now. I look at 543 00:28:14,920 --> 00:28:18,000 Speaker 1: my w I r P function world interest rate probability, 544 00:28:18,440 --> 00:28:21,080 Speaker 1: it's got eleven in the world called to work. It 545 00:28:21,800 --> 00:28:24,520 Speaker 1: not only that, but that's the one we've already had 546 00:28:24,600 --> 00:28:27,439 Speaker 1: that adds on to that the one that's already covered 547 00:28:28,119 --> 00:28:32,119 Speaker 1: UH inflation. First of all, you did get some alarmingly 548 00:28:32,200 --> 00:28:35,120 Speaker 1: hot inflation numbers at the end of last year, after 549 00:28:35,240 --> 00:28:37,239 Speaker 1: during the summer it appeared that things had cooled off 550 00:28:37,240 --> 00:28:43,680 Speaker 1: a bit. Then you had the FED minutes for December. 551 00:28:44,600 --> 00:28:46,160 Speaker 1: At this point, if you if you look at a 552 00:28:46,280 --> 00:28:50,040 Speaker 1: chart one of the you you are trying to explain 553 00:28:50,160 --> 00:28:53,480 Speaker 1: why do things move like this? The FED minutes from 554 00:28:53,720 --> 00:28:56,320 Speaker 1: the incredibly boring thing that comes out in a Wednesday 555 00:28:56,360 --> 00:28:59,880 Speaker 1: afternoon in a miserable week in early January was probably 556 00:28:59,920 --> 00:29:03,880 Speaker 1: the single most important one, because at that point nobody 557 00:29:03,960 --> 00:29:08,480 Speaker 1: thought QT was in play really this year. And the 558 00:29:08,600 --> 00:29:11,040 Speaker 1: fact that it announced that they were discussing when it 559 00:29:11,040 --> 00:29:13,240 Speaker 1: would be relevant to start QUT and said that in 560 00:29:13,320 --> 00:29:15,880 Speaker 1: as many words in the in the minutes, and that 561 00:29:16,000 --> 00:29:17,920 Speaker 1: this has been a sort of little land mine that 562 00:29:18,040 --> 00:29:21,640 Speaker 1: they laid earlier they wanted people to be hit with 563 00:29:21,800 --> 00:29:25,200 Speaker 1: this in January, that that had an immense effect on 564 00:29:26,120 --> 00:29:29,959 Speaker 1: on sentiment correctly, and then we've had heaven knows how 565 00:29:30,040 --> 00:29:33,680 Speaker 1: many hot inflation numbers and hot employment numbers to increase that, 566 00:29:33,800 --> 00:29:37,560 Speaker 1: to increase that, John, we have about thirty seconds. I'm 567 00:29:37,560 --> 00:29:39,880 Speaker 1: gonna put you on the spot here negative yielding debt. 568 00:29:39,920 --> 00:29:42,440 Speaker 1: There are only a hundred bonds left that have a 569 00:29:42,520 --> 00:29:44,480 Speaker 1: negative yield, a lot of that coming out of Europe. 570 00:29:45,360 --> 00:29:47,120 Speaker 1: A lot of this is also a result of the 571 00:29:47,160 --> 00:29:51,840 Speaker 1: inflationary policy. Thirty seconds does that continue? Do those negative 572 00:29:51,880 --> 00:29:57,040 Speaker 1: yielding bonds go extinct? I think they probably do fairly soon, 573 00:29:57,200 --> 00:29:59,640 Speaker 1: and if they don't, we have a problem. If you're 574 00:29:59,640 --> 00:30:03,200 Speaker 1: looking Europe. In many ways, that has been much more 575 00:30:03,320 --> 00:30:06,120 Speaker 1: dramatic and much much further out of left field than 576 00:30:06,200 --> 00:30:09,240 Speaker 1: what we've had in there in the US. German in 577 00:30:10,320 --> 00:30:13,560 Speaker 1: expected inflation, inflation, brisk heavens from the bondmarket down now 578 00:30:13,880 --> 00:30:16,600 Speaker 1: actually higher than they were than they are here in 579 00:30:16,680 --> 00:30:18,960 Speaker 1: the States, the first time that's been true and well 580 00:30:19,040 --> 00:30:22,680 Speaker 1: over a decade um. So that's where most of the 581 00:30:22,760 --> 00:30:24,920 Speaker 1: negative yielding debties and I don't see how it can 582 00:30:25,080 --> 00:30:27,960 Speaker 1: stay negative yielding must longer, all right, John Author's good 583 00:30:28,000 --> 00:30:31,760 Speaker 1: stuff as always, John Author, Senior Editor, Bloomberg Opinion Racing, 584 00:30:31,840 --> 00:30:34,800 Speaker 1: and I mean literally running into this Bloomberg Interactor Broker 585 00:30:34,880 --> 00:30:36,560 Speaker 1: studio to get here to give us his thoughts. We 586 00:30:36,560 --> 00:30:41,720 Speaker 1: always appreciate that. Thanks for listening to the Bloomberg Markets Podcast. 587 00:30:42,160 --> 00:30:45,280 Speaker 1: You can subscribe and listen to interviews with Apple Podcasts 588 00:30:45,480 --> 00:30:49,360 Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm 589 00:30:49,440 --> 00:30:53,479 Speaker 1: on Twitter at Matt Miller three. Put on bos Sweeney 590 00:30:53,480 --> 00:30:56,080 Speaker 1: I'm on Twitter at pt sweeney Before the podcast. You 591 00:30:56,120 --> 00:30:58,520 Speaker 1: can always catch us worldwide at Bloomberg Radio