WEBVTT - Big Tech Earnings and the Fed's Higher-For-Longer Policy

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

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<v Speaker 1>with Jonathan Farrow and Lisa Abramowitz. Join us each day

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<v Speaker 1>the Bloomberg Terminal and the Bloomberg Business app. Man Deep

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<v Speaker 1>Singh is a smart guy senior technolical analysts and Bloomberg Intelligence.

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<v Speaker 1>What you learn from mister Nadella yesterday this was the

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<v Speaker 1>mother of all home run reports.

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<v Speaker 2>Yeah, I mean the Azure acceleration. I think they sort

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<v Speaker 2>of sandbag expectations because last quarter it was like one

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<v Speaker 2>percent contribution from AI related stuff. This quarter was three percent,

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<v Speaker 2>and the expectation is it's going to keep growing. But

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<v Speaker 2>everyone knows that they are looking to deploy their large

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<v Speaker 2>anglage models, trained their l and look, this is a

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<v Speaker 2>secular trendo.

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<v Speaker 3>I mean, Tyler Radkey, it's sad.

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<v Speaker 1>Your published I believe was this morning, maybe late last night,

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<v Speaker 1>and you just basically said, you know, this is like

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<v Speaker 1>a complete report to find what co.

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<v Speaker 3>Pilot is yeah.

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<v Speaker 2>So right now they have a GitHub co pilot which

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<v Speaker 2>basically allows developers to be more productive because it's right

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<v Speaker 2>for a fee for a fee, and they're charging ten

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<v Speaker 2>dollars and they have about ten million, uh you know

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<v Speaker 2>people signed up, so it's it's already a pretty sizable revenue.

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<v Speaker 3>It's like your newsletter about that. Wow, you've got ten

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<v Speaker 3>million people.

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<v Speaker 4>It all right, so they can you know, you can

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<v Speaker 4>hire a chat GPT to fill a seat, which I

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<v Speaker 4>think will be a beautiful thing one day. But this

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<v Speaker 4>raises this question and I'm going to steal some of

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<v Speaker 4>Katie Sunder because she had a really good point earlier.

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<v Speaker 4>This idea of have we overplayed AI and not emphasized

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<v Speaker 4>the cloud enough? Was the real surprise for Microsoft really

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<v Speaker 4>just purely the cloud and the AI discussion not really

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<v Speaker 4>there and the same story except the verse kind of

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<v Speaker 4>sentiment for Google.

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<v Speaker 2>I mean, look at how much these companies are investing

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<v Speaker 2>in capex to build their infrastructure. So clearly there is

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<v Speaker 2>a huge upfront investment. And in terms of the monetization,

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<v Speaker 2>copilot is one form, then renting your cloud infrastructure is

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<v Speaker 2>the second big form, and they are launching a big

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<v Speaker 2>three sixty five copilot starting November first, so that could

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<v Speaker 2>add to the revenue in addition to what we heard

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<v Speaker 2>about GitHub. And look, at the end of the day,

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<v Speaker 2>cloud training is where the money is because that's where

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<v Speaker 2>the GPUs lie. I mean, everyone knows NBDIA had a

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<v Speaker 2>big lift because of the GPU demand. Well guess what

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<v Speaker 2>who are buying these GPUs? It's so hyperscalers and then

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<v Speaker 2>they are renting it out.

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<v Speaker 4>The big fear right now is that Google's gap, its

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<v Speaker 4>lag behind the cloud competitors, is only growing.

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<v Speaker 3>Do you see this as evidence of that?

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<v Speaker 2>I think Google again is more niche in the sense

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<v Speaker 2>that they don't have a legacy in enterprise business as

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<v Speaker 2>Microsoft does. So clearly they have to build it from

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<v Speaker 2>scratch and they're focusing more on the AI side of things,

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<v Speaker 2>rightfully so, and in this case, some of the deals

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<v Speaker 2>are lumpy. So I won't make a lot out of

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<v Speaker 2>the miss last night. I know everyone focused on their

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<v Speaker 2>two percentage point miss, but look, they are building this

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<v Speaker 2>from scratch and it's at a very healthy thirty two

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<v Speaker 2>billion dollar run rate growing at over twenty twenty five percent,

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<v Speaker 2>and to my mind, it's going to accelerate because they

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<v Speaker 2>are one of the biggest buyers of GPUs as well,

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<v Speaker 2>So where would you rent the GPU capacity? Besides Microsoft

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<v Speaker 2>and Amazon, it's Google.

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<v Speaker 5>And deip I also want to talk a little bit

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<v Speaker 5>about search because this line from Microsoft's earnings caught my

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<v Speaker 5>eyes that you take a look at being search and

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<v Speaker 5>news advertising sales increasing ten percent in the quarter. So

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<v Speaker 5>it seems a little bit like advertising spent has stabilized.

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<v Speaker 5>But when it comes to being versus Google, does bing

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<v Speaker 5>have any hope of taking serious market share from Google?

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<v Speaker 2>I think satan Adella walked back his comments you know,

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<v Speaker 2>during the testimony that he was aiming for share, but

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<v Speaker 2>he conceded it's very hard to take share from Google,

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<v Speaker 2>and Google's results last night showed that at one hundred

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<v Speaker 2>and eighty billion dollars round rate, if you're growing double digits.

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<v Speaker 2>That just goes to show how much power you have.

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<v Speaker 2>Where Snapchat group five percent, it's much smaller, and I

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<v Speaker 2>think you get to see where the ad pricing power lies.

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<v Speaker 3>In the ex did Greifeld get the memo that we're

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<v Speaker 3>being free, we don't talk about we don't talk about

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<v Speaker 3>being here you big all the time?

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<v Speaker 5>Well, I lost it almost an hour.

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<v Speaker 3>If you could do better.

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<v Speaker 5>Let's see, are we allowed to talk about Snapchat? I

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<v Speaker 5>don't know, but let's talk about snap.

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<v Speaker 1>They make great tools, are out of Ohio, and I

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<v Speaker 1>love their socket wrench.

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<v Speaker 5>Can you take my AI? Okay, let's talk about Snapchat.

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<v Speaker 5>Because they came out with earnings. The share spiked fifteen

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<v Speaker 5>percent after hours. Now you take a look at shares,

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<v Speaker 5>they're actually, I don't know, down slightly. What were we

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<v Speaker 5>so psyched about at around four pm yesterday that we're

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<v Speaker 5>not excited about it? What's six fifty three in the morning.

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<v Speaker 2>I mean, clearly, the top line print was better than expected.

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<v Speaker 2>But when it comes to the guidance, that EBITDN number

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<v Speaker 2>is the key for a company like Snapchat because they

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<v Speaker 2>keep losing money. So because they had a positive EBITDT quarter,

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<v Speaker 2>everyone thought it's going to continue. But in their guide

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<v Speaker 2>they were quite wage about where the leverage is going

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<v Speaker 2>to come from, and it was just too uncertain to

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<v Speaker 2>figure out whether this is sustainable or not.

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<v Speaker 4>But it goes to this question, this larger question of

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<v Speaker 4>how the market is measuring the performance the response and

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<v Speaker 4>you talked about how you actually disagree with the response

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<v Speaker 4>to the Google to the Google earnings that you think

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<v Speaker 4>people are overplaying the slight miss and they're underplaying the

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<v Speaker 4>potential for AI. Does that mean that right now, just

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<v Speaker 4>from a market perspective, any results that show you the

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<v Speaker 4>money are the ones that are going to be rewarded,

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<v Speaker 4>not the ones that show you hope, which is what

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<v Speaker 4>some people were really trading on with the AI promises

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<v Speaker 4>of your.

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<v Speaker 2>Yeah, I mean results matter. And in Google's case, there

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<v Speaker 2>was an operating income as well, but they are investing

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<v Speaker 2>and is with Google I see, you know, YouTube being

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<v Speaker 2>a very big business. In fact, YouTube subscription growth has

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<v Speaker 2>accelerated past all the streaming players, so that live NFL

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<v Speaker 2>content is working. Cloud is another driver's search remains robot.

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<v Speaker 2>So the durability of earnings is there with a.

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<v Speaker 3>Name like Google.

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<v Speaker 2>Yes, they may have a bad you know, a slight

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<v Speaker 2>miss when it comes to operating margin, but it doesn't

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<v Speaker 2>change the fact that they've got all these large businesses

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<v Speaker 2>with a long runway, and I think that's the thing

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<v Speaker 2>to focus.

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<v Speaker 1>Can you extrapolate out to Apple here? I believe it's

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<v Speaker 1>November two, whatever day. That is, if we saw a

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<v Speaker 1>Microsoft do what they do, are we going to give

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<v Speaker 1>the same joy, the same completeness, as Tyler Redken talks about,

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<v Speaker 1>Are we going to get that from Apple?

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<v Speaker 2>Very unlikely given the what's going on with China and

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<v Speaker 2>their focus on moving the supply chain. And look, they're

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<v Speaker 2>a hardware company, so we know PC and smartphone markets

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<v Speaker 2>are still bottoming out, so they will not have big quarter.

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<v Speaker 2>And the one risk factor for Alphabet going back to

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<v Speaker 2>that is if Apple decides to do their own large

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<v Speaker 2>anglid model on the phone and take out the distribution

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<v Speaker 2>they have for Google, which has come under scrutiny. That's

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<v Speaker 2>a big risk for Google Search. I mean, other than that,

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<v Speaker 2>I don't see any risks for the business. But if

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<v Speaker 2>Apple decides to do their search and maps and everything

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<v Speaker 2>large anglid model, that's a big risk.

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<v Speaker 1>Mande, thank you so much, I got I gave more questions.

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<v Speaker 1>Mandy's singing with us. We'll have them on here. Over

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<v Speaker 1>this arc of these tech earnings, we start strong with

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<v Speaker 1>Marvin Lowe, senior global macro strategists at Stage Street. Here

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<v Speaker 1>in this time of confusion and cacophony, I guess I

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<v Speaker 1>have to rebalance, I have to reallocate. Is the rebalanced

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<v Speaker 1>formula changed because of this yield move.

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<v Speaker 6>I mean, for sure, everyone's thinking about, you know, whether

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<v Speaker 6>sixty forty is appropriate. What we're seeing in terms of

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<v Speaker 6>the institual investor is that they're so underweight fixed income

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<v Speaker 6>at this point because the losses have been so great

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<v Speaker 6>that they're still trying to catch up. If you're a

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<v Speaker 6>bond bull, it's encouraging because they're still engaged with the

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<v Speaker 6>asset class. But do they settle below that forty percent

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<v Speaker 6>once we get there?

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<v Speaker 1>I thought of you, they said, marvinlow is going to

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<v Speaker 1>open the show, and I thought of you. In a

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<v Speaker 1>cold of winter, Peter Lynch used to walk around the

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<v Speaker 1>streets of Boston without a coda. He looked like Jim Geordan,

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<v Speaker 1>except it was ten below zero and he'd have his

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<v Speaker 1>value lines and he's walking to meetings with Will and

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<v Speaker 1>the rest of Betina and the rest of them. Okay, great,

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<v Speaker 1>that's all fine and well. But to me, the securities

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<v Speaker 1>analysis now is just out the window. It's about survival.

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<v Speaker 1>How do you survive in an allocated portfolio?

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<v Speaker 6>I mean, for sure, you are reevaluating duration in terms

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<v Speaker 6>of a story, and you have to remember that duration

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<v Speaker 6>is much more than just your fixed income holdings. The

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<v Speaker 6>US equity market is very heavy, So you've got to

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<v Speaker 6>be really conscious of where those long yields are affecting

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<v Speaker 6>your portfolio. Keeping powder dry right now is not a crime,

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<v Speaker 6>absolutely not, particularly given the shape of the curve, particularly

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<v Speaker 6>given that the fed's going to be you know, higher

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<v Speaker 6>for longer, probably for a lot longer than people think.

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<v Speaker 6>In my mind, you know, keep that powder dry because

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<v Speaker 6>things are still going to be rough going into next year.

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<v Speaker 4>What does that mean powder dry? Because it doesn't just

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<v Speaker 4>mean that you take cash and you put it in

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<v Speaker 4>a mattress. Do you put it into t bills? Do

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<v Speaker 4>you just keep it into your treasuries?

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<v Speaker 6>I love bills. Two years feel pretty good to me

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<v Speaker 6>at this point. Also, you know, if you wanted to

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<v Speaker 6>extend from your bill uh structure in your portfolio, I

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<v Speaker 6>think you know, you could add that kind of duration.

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<v Speaker 6>You can nibble on the tenure for sure, you know,

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<v Speaker 6>if you like that income. But yeah, you know, I'm

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<v Speaker 6>looking at the short end out to two years.

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<v Speaker 4>Does this mean that you're concerned about risk equity valuations

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<v Speaker 4>and other parts of the market that maybe haven't fully

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<v Speaker 4>comprehended the level and have ignored it because volatility that's

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<v Speaker 4>gotten so much more significant than what we're seeing in

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<v Speaker 4>equity volatility.

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<v Speaker 6>You know, for sure, if we look at you know,

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<v Speaker 6>even since the since the Milies conflict, it's been rates

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<v Speaker 6>that have moved. Everyone else has been kind of frozen,

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<v Speaker 6>if you will. The dollar hasn't really moved, effects hasn't moved,

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<v Speaker 6>and equities are trading, you know, fairly well in a

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<v Speaker 6>wider range. They're not reflecting the volatility that rates are showing.

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<v Speaker 6>And you know, ultimately, I say to a lot of folks,

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<v Speaker 6>the most important number out there is that ten year yield.

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<v Speaker 6>And that ten year yield is unanchored right now.

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<v Speaker 5>And that's what I want to talk about, saying in

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<v Speaker 5>the fixed income market for rate now, I mean, the

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<v Speaker 5>most important question, it feels like, is why are rates rising?

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<v Speaker 5>And I'm looking through your notes and you right that

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<v Speaker 5>you would push back against the buyer strike thesis. Why

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<v Speaker 5>is that?

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<v Speaker 6>First off? You know, like I said, the institutional investor

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<v Speaker 6>is still buying. They're still trying to get back to

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<v Speaker 6>their benchmarks. We actually are able to also look across

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<v Speaker 6>border flows at that institutional level and they're still buying.

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<v Speaker 6>So they're buying it on hedge. There's various stories around

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<v Speaker 6>the dollar that you could infer from that. But mof

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<v Speaker 6>data around Japanese buyers, they're still engaged. China kind of

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<v Speaker 6>looking at tics data, tick data. They're not buying as much,

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<v Speaker 6>but they're buying based on what their reserves let them buy.

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<v Speaker 6>So we really haven't seen that kind of buyer strike.

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<v Speaker 6>That seems to be one of the themes.

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<v Speaker 3>That are out there.

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<v Speaker 6>Certainly, all of the issuance is an overhang, and so

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<v Speaker 6>I agree with you, Lisa, it's like these auctions become

0:11:27.400 --> 0:11:29.680
<v Speaker 6>more and more important, particularly as we go into November

0:11:29.880 --> 0:11:32.760
<v Speaker 6>and understand how the next phase of all this deficit

0:11:32.840 --> 0:11:35.840
<v Speaker 6>funding is going to look like. But the buyers are engaged.

0:11:35.880 --> 0:11:37.559
<v Speaker 6>There's just a lot of paper right now, and the

0:11:37.640 --> 0:11:39.360
<v Speaker 6>knife is pretty big and falling.

0:11:39.080 --> 0:11:41.600
<v Speaker 5>Still well to that point, Okay, maybe there's not a

0:11:41.600 --> 0:11:44.040
<v Speaker 5>buyer strike, but there is a lot of supply here,

0:11:44.040 --> 0:11:46.439
<v Speaker 5>and with that in mind, you look forward to next week,

0:11:46.480 --> 0:11:47.920
<v Speaker 5>which is going to be very fun because we have

0:11:47.960 --> 0:11:51.680
<v Speaker 5>the refunding announcement in addition to the actual FED decision

0:11:51.960 --> 0:11:54.120
<v Speaker 5>for the direction of this market from here, Which do

0:11:54.120 --> 0:11:56.400
<v Speaker 5>you think is more important?

0:11:56.880 --> 0:11:59.079
<v Speaker 6>You know what, I think the supply is more important.

0:11:59.480 --> 0:12:02.160
<v Speaker 6>The FEDS message is pretty well crafted at this point.

0:12:03.120 --> 0:12:05.640
<v Speaker 6>It shows that they don't really have a handle on

0:12:05.679 --> 0:12:07.320
<v Speaker 6>how this is going to evolve, and I think that's

0:12:07.360 --> 0:12:12.079
<v Speaker 6>part of the volatility out there. But given that they've

0:12:12.120 --> 0:12:15.160
<v Speaker 6>pulled back and turned more you know, less hawkish, if

0:12:15.160 --> 0:12:17.760
<v Speaker 6>you will, with the volatility in the market, they're not

0:12:17.760 --> 0:12:20.040
<v Speaker 6>looking to introduce much more into it at this point.

0:12:20.040 --> 0:12:22.280
<v Speaker 6>We have nothing christ in for November. That's correct. I

0:12:22.360 --> 0:12:25.120
<v Speaker 6>think they're ultimately done. The question really winds up being

0:12:25.200 --> 0:12:27.640
<v Speaker 6>how much longer we stay at these what they believe

0:12:27.679 --> 0:12:28.559
<v Speaker 6>is restricted levels.

0:12:28.600 --> 0:12:32.400
<v Speaker 4>It sounds really gloomy, sounds pretty rough, sounds concerning a

0:12:32.480 --> 0:12:36.160
<v Speaker 4>zure of Microsoft posted a twenty nine percent sales gain

0:12:36.600 --> 0:12:39.600
<v Speaker 4>in their cloud services business. At a certain point, you

0:12:39.640 --> 0:12:41.440
<v Speaker 4>take a look at the gloom of the doom, and

0:12:41.480 --> 0:12:43.400
<v Speaker 4>you take a look at some of the cash producers,

0:12:43.960 --> 0:12:46.440
<v Speaker 4>and they're minting money. So at a certain point, why

0:12:46.440 --> 0:12:47.720
<v Speaker 4>are they not the havens?

0:12:48.559 --> 0:12:51.720
<v Speaker 6>You know, I believe I believe they still are. You know,

0:12:51.760 --> 0:12:56.000
<v Speaker 6>we do like those big motes that are ultimately quite defendable.

0:12:56.320 --> 0:12:58.800
<v Speaker 6>And if you're looking at the return that you get

0:12:58.800 --> 0:13:01.120
<v Speaker 6>from cash, and you got these companies that can generate

0:13:01.160 --> 0:13:04.319
<v Speaker 6>the cash and actually return it back however they decide

0:13:04.480 --> 0:13:05.840
<v Speaker 6>it's an advantage.

0:13:05.840 --> 0:13:06.959
<v Speaker 3>So evaluation key thing.

0:13:07.920 --> 0:13:10.319
<v Speaker 1>I get what you're saying, but in this earning season

0:13:10.360 --> 0:13:11.640
<v Speaker 1>we're proving it once again.

0:13:12.320 --> 0:13:13.480
<v Speaker 3>Then do you less.

0:13:13.280 --> 0:13:17.479
<v Speaker 1>Diversify and do you shift from index to more active management?

0:13:18.000 --> 0:13:19.959
<v Speaker 6>You know, I think that active managers are going to

0:13:20.000 --> 0:13:22.360
<v Speaker 6>have their day in the sun. It's been a while.

0:13:22.360 --> 0:13:23.199
<v Speaker 3>I want to quote you on that.

0:13:23.360 --> 0:13:26.840
<v Speaker 1>Robert Armstrong was brilliant in the ft yesterday. Looking at

0:13:26.840 --> 0:13:29.319
<v Speaker 1>the recent track record of active management, and you're saying

0:13:29.360 --> 0:13:31.360
<v Speaker 1>this is the time for active managers.

0:13:31.360 --> 0:13:35.600
<v Speaker 6>Correctly, it matters, and these duration discussions that we're talking about,

0:13:35.679 --> 0:13:38.200
<v Speaker 6>rather than just nearly willy going into it based on

0:13:38.400 --> 0:13:41.240
<v Speaker 6>kind of what an overall market capitalization is allowing you

0:13:41.280 --> 0:13:42.880
<v Speaker 6>to do, becomes important.

0:13:42.600 --> 0:13:43.080
<v Speaker 3>To my mind.

0:13:43.360 --> 0:13:46.120
<v Speaker 1>It's going to be interesting. Marvin Low, thank you so much, greatly, greatly.

0:13:46.520 --> 0:13:49.120
<v Speaker 1>I appreciate it. I love the phrase keeping your powder dry.

0:13:49.200 --> 0:13:53.400
<v Speaker 1>Assistance here. Editor in chief cbe emails in from London

0:13:54.440 --> 0:13:56.959
<v Speaker 1>and he says, keep your powder dry, Tom, come on

0:13:57.120 --> 0:14:01.480
<v Speaker 1>know your Cromwell English Civil War sixteen forty two, Oliver Cromwell,

0:14:01.840 --> 0:14:07.520
<v Speaker 1>keep your powder dry, your English history for this morning

0:14:07.880 --> 0:14:09.400
<v Speaker 1>to do. The other in chief said I have to

0:14:09.440 --> 0:14:13.120
<v Speaker 1>do that. You know, when British history comes into what we're.

0:14:12.960 --> 0:14:16.760
<v Speaker 4>Talking about, you have to talk Oliver Cromwell, gunpowder, Well's

0:14:16.800 --> 0:14:19.080
<v Speaker 4>the other Civil War. All I can say is your

0:14:19.160 --> 0:14:22.280
<v Speaker 4>nailing the keeping your powder dry. How's the triple evertail cash,

0:14:22.400 --> 0:14:23.640
<v Speaker 4>triple levers dot cash is.

0:14:23.640 --> 0:14:26.080
<v Speaker 1>Doing fine here, But this is really important and Lisa,

0:14:26.120 --> 0:14:28.440
<v Speaker 1>this goes to the technical construction of the market. Now

0:14:28.440 --> 0:14:30.680
<v Speaker 1>we've got to pull back a price up yield down,

0:14:31.200 --> 0:14:35.640
<v Speaker 1>but on a technical basis, there's like zero veracity to it.

0:14:35.720 --> 0:14:38.760
<v Speaker 1>We need a lot of constructive work here to begin

0:14:38.800 --> 0:14:40.160
<v Speaker 1>to demonstrate lower yields.

0:14:40.240 --> 0:14:43.040
<v Speaker 4>On a technical basis, it's still a ping pong. I mean, basically,

0:14:43.120 --> 0:14:45.680
<v Speaker 4>what you're seeing the redow every day is another ping

0:14:45.760 --> 0:14:47.680
<v Speaker 4>pong and you're not sure where it's going to bounce

0:14:47.680 --> 0:14:49.000
<v Speaker 4>and if it's going to hit a weird corner on

0:14:49.000 --> 0:14:50.920
<v Speaker 4>the ping pong table. And that's sort of where we are,

0:14:51.160 --> 0:14:53.640
<v Speaker 4>which goes to Marvin's point. We are sort of getting

0:14:53.960 --> 0:14:56.920
<v Speaker 4>unanchored in terms of where that yield is, whether it

0:14:57.000 --> 0:14:59.640
<v Speaker 4>is fundamental or whether to your point, Katie, it's something

0:14:59.680 --> 0:15:00.880
<v Speaker 4>about the refinancing.

0:15:01.400 --> 0:15:04.400
<v Speaker 3>People disagree with the ECB media coming up.

0:15:04.400 --> 0:15:07.840
<v Speaker 1>I guess quickly to Marvin Lowe, here is the ECB unanchored.

0:15:09.240 --> 0:15:12.920
<v Speaker 6>No, and it's because their transmission mechanism is clearer than

0:15:12.960 --> 0:15:16.480
<v Speaker 6>what we're dealing with here. We're seeing these higher yields

0:15:16.600 --> 0:15:20.000
<v Speaker 6>make their way into their economy right now. In terms

0:15:20.080 --> 0:15:22.960
<v Speaker 6>of Powell said it last week, based on the evidence,

0:15:23.120 --> 0:15:25.600
<v Speaker 6>we might not be restrictive, even though they've been saying

0:15:25.600 --> 0:15:27.960
<v Speaker 6>that they're restricted for the well they're gettings are restricted

0:15:28.000 --> 0:15:29.880
<v Speaker 6>for the last three to six months.

0:15:29.960 --> 0:15:31.560
<v Speaker 3>Marvin, thank you so much.

0:15:36.080 --> 0:15:39.560
<v Speaker 1>Gregory Vllier of AGF Investments Rights every morning, he says

0:15:39.600 --> 0:15:43.840
<v Speaker 1>geopolitics could be quote the trickiest issue in next year

0:15:43.880 --> 0:15:48.400
<v Speaker 1>twenty twenty fours. Public opinion, especially among young voters, seems

0:15:48.440 --> 0:15:52.760
<v Speaker 1>to be shifting towards isolationism. The idea of spending another

0:15:53.360 --> 0:15:58.479
<v Speaker 1>one hundred billion in Ukraine and Israel, it's increasingly unpopular. Nevertheless,

0:15:58.520 --> 0:16:02.080
<v Speaker 1>Biden has a police pical opportunity to become an effective

0:16:02.120 --> 0:16:06.320
<v Speaker 1>wartime president. This with decent support in Congress, that from

0:16:06.360 --> 0:16:09.000
<v Speaker 1>Greg Valier and Lisa. This is something I've brought up.

0:16:09.040 --> 0:16:12.320
<v Speaker 1>You've heard me like a broken record talk about America's

0:16:12.760 --> 0:16:19.160
<v Speaker 1>history of isolationism and is now a demographic isolationism.

0:16:18.200 --> 0:16:20.080
<v Speaker 4>And how much is that going to really play out,

0:16:20.240 --> 0:16:24.160
<v Speaker 4>especially into the next contours of two front conflict. Right

0:16:24.160 --> 0:16:26.560
<v Speaker 4>it's both in Israel and Ukraine, and Greg Valier are

0:16:26.640 --> 0:16:29.080
<v Speaker 4>joining us right now. I want to start there is

0:16:29.120 --> 0:16:33.800
<v Speaker 4>there the political support to support Israel in addition to

0:16:34.000 --> 0:16:37.320
<v Speaker 4>Ukraine going forward through not just the next month, not

0:16:37.400 --> 0:16:39.960
<v Speaker 4>just the next two months, but six months to a year.

0:16:41.320 --> 0:16:43.240
<v Speaker 7>Well that's the key question, isn't it. And I do

0:16:43.560 --> 0:16:47.360
<v Speaker 7>since over the last few weeks a waning of support.

0:16:47.960 --> 0:16:51.360
<v Speaker 7>I think that Biden has enough backing in the Senate.

0:16:51.440 --> 0:16:54.360
<v Speaker 7>I think he's got Mitch McConnell and Lindsey Graham and

0:16:54.400 --> 0:16:58.320
<v Speaker 7>many others who are very hawkish. But I say young

0:16:58.360 --> 0:17:02.560
<v Speaker 7>people are not in enthusiastic. A lot of Americans don't

0:17:02.560 --> 0:17:07.240
<v Speaker 7>want to spend one hundred billion dollars more so it's soft.

0:17:07.359 --> 0:17:10.439
<v Speaker 7>But I still think that Biden has enough support to

0:17:10.480 --> 0:17:13.159
<v Speaker 7>get an aid package, probably not until the middle of

0:17:13.160 --> 0:17:13.560
<v Speaker 7>the winter.

0:17:14.080 --> 0:17:15.800
<v Speaker 4>Craig, what do you make of the fact that you're

0:17:15.880 --> 0:17:21.440
<v Speaker 4>essentially getting a Democratic party that doesn't seem to back

0:17:21.720 --> 0:17:24.240
<v Speaker 4>Israel and is actually moving away from it, and a

0:17:24.320 --> 0:17:27.040
<v Speaker 4>president that's trying to lead the charge in that effect.

0:17:28.160 --> 0:17:31.960
<v Speaker 7>Well, it's quite a dichotomy. It's really almost shocking to

0:17:32.000 --> 0:17:35.919
<v Speaker 7>see the Democrats, the party that supported Israel so aggressively

0:17:36.000 --> 0:17:40.119
<v Speaker 7>for decades and decades, now looking a little bit softer.

0:17:40.720 --> 0:17:43.240
<v Speaker 7>I do think though, that we will get a deal done.

0:17:43.760 --> 0:17:46.440
<v Speaker 7>My issue is the timing. I think we're still many

0:17:46.520 --> 0:17:53.120
<v Speaker 7>weeks away from anything new for Ukraine, Israel, Taiwan, US

0:17:53.119 --> 0:17:57.600
<v Speaker 7>border with Mexico. That's still a ways off in terms

0:17:57.640 --> 0:17:59.280
<v Speaker 7>of getting it enacted.

0:18:00.080 --> 0:18:02.520
<v Speaker 5>Well, Greg, walk us through the ramifications of that. If

0:18:02.520 --> 0:18:05.480
<v Speaker 5>we don't get an aid package approved until mid December,

0:18:05.800 --> 0:18:08.800
<v Speaker 5>as you outlined, what would that mean for this war.

0:18:10.040 --> 0:18:13.040
<v Speaker 7>I think it sends a very bad signal to our allies,

0:18:13.240 --> 0:18:16.160
<v Speaker 7>at the least ambiguous, but I would argue it sends

0:18:16.280 --> 0:18:19.080
<v Speaker 7>a signal that the US is losing a bit of

0:18:19.160 --> 0:18:22.200
<v Speaker 7>its resolved. You know, we all recall in the last

0:18:22.280 --> 0:18:23.960
<v Speaker 7>year a year and a half that was the big

0:18:24.000 --> 0:18:27.840
<v Speaker 7>issue that we would lose our resolve on Ukraine. If

0:18:27.880 --> 0:18:32.919
<v Speaker 7>we lose our resolve on Ukraine and Israel, that to

0:18:33.000 --> 0:18:35.760
<v Speaker 7>me sends a really negative signal.

0:18:36.200 --> 0:18:38.640
<v Speaker 5>And let's tie this into what we're seeing play out

0:18:38.720 --> 0:18:41.600
<v Speaker 5>in the House right now and the efforts to elect

0:18:41.640 --> 0:18:44.280
<v Speaker 5>a speaker there because a week two weeks ago, I

0:18:44.280 --> 0:18:47.320
<v Speaker 5>would have asked if the Israel Hamas war would have

0:18:47.359 --> 0:18:51.160
<v Speaker 5>put more urgency behind this process. But that doesn't seem

0:18:51.160 --> 0:18:53.359
<v Speaker 5>to necessarily have materialized, Greg.

0:18:54.880 --> 0:18:57.480
<v Speaker 7>No, it doesn't. I think this deadline of November seventeenth

0:18:57.520 --> 0:18:59.359
<v Speaker 7>is going to come and go. I can't see them

0:18:59.400 --> 0:19:02.360
<v Speaker 7>getting a budget done by the seventeenth. So the new

0:19:02.400 --> 0:19:05.040
<v Speaker 7>speaker if we get one. Because nobody's ever heard of

0:19:05.040 --> 0:19:09.080
<v Speaker 7>this guy, but he has a pretty good reputation. He

0:19:09.119 --> 0:19:12.439
<v Speaker 7>also is a denier that Biden was elected president. That

0:19:12.800 --> 0:19:15.479
<v Speaker 7>is not my cup of tea, but he has denied

0:19:15.560 --> 0:19:19.080
<v Speaker 7>frequently that this is a fake election result. He's going

0:19:19.160 --> 0:19:21.560
<v Speaker 7>to have to answer for that. But I think we're

0:19:21.560 --> 0:19:24.320
<v Speaker 7>going to go well past the seventeenth of November to

0:19:24.359 --> 0:19:25.200
<v Speaker 7>get a deal done.

0:19:25.840 --> 0:19:28.439
<v Speaker 4>How much? Greg? Is former President Trump driving the bus here?

0:19:28.480 --> 0:19:31.840
<v Speaker 4>We heard from him this morning congratulating all of the

0:19:31.960 --> 0:19:35.520
<v Speaker 4>congressman and saying that Mike Johnson is the strong suggestion

0:19:35.600 --> 0:19:36.639
<v Speaker 4>from him.

0:19:37.359 --> 0:19:39.840
<v Speaker 7>Well, it looks like Trump has veto power, doesn't it.

0:19:40.240 --> 0:19:44.520
<v Speaker 7>The guy from Minnesota lasted for like eight hours before Trump,

0:19:44.600 --> 0:19:48.000
<v Speaker 7>and then Trump boasted that I killed the nomination. So

0:19:48.160 --> 0:19:51.600
<v Speaker 7>Trump is taking a very overt role in the House,

0:19:51.640 --> 0:19:53.280
<v Speaker 7>and I've got to think there are a lot of

0:19:53.320 --> 0:19:54.760
<v Speaker 7>House members who resent it.

0:19:55.119 --> 0:19:57.040
<v Speaker 4>How much is there still discussion about some sort of

0:19:57.040 --> 0:19:59.240
<v Speaker 4>bipartisan answer. We heard that for a hot second, and

0:19:59.280 --> 0:20:01.359
<v Speaker 4>then it was dropped because it was politically not viable

0:20:01.359 --> 0:20:02.280
<v Speaker 4>on either side.

0:20:03.320 --> 0:20:05.879
<v Speaker 7>I wouldn't put the chances at much more than twenty percent.

0:20:06.280 --> 0:20:09.159
<v Speaker 7>If that, I think it's unlikely that we could get it.

0:20:09.240 --> 0:20:11.880
<v Speaker 7>If this thing totally breaks down and we get into

0:20:11.920 --> 0:20:14.320
<v Speaker 7>the winter without anything, well then all bets are off,

0:20:14.359 --> 0:20:17.240
<v Speaker 7>and I think Hakeem Jeffries might have to intervene, but

0:20:17.440 --> 0:20:18.840
<v Speaker 7>it's not coming yet.

0:20:19.119 --> 0:20:22.119
<v Speaker 5>And Greg, this drama, this disarray that we're seeing in

0:20:22.200 --> 0:20:24.840
<v Speaker 5>the House among the Republicans. Have we seen the Democrats

0:20:25.040 --> 0:20:26.240
<v Speaker 5>try to capitalize off of that?

0:20:27.640 --> 0:20:30.320
<v Speaker 7>Not as much as I would have expected. I think

0:20:30.359 --> 0:20:33.200
<v Speaker 7>they're sitting back. What's the old saying, if your opponent

0:20:33.280 --> 0:20:36.320
<v Speaker 7>is self destructing, don't get in the way. So I

0:20:36.320 --> 0:20:39.919
<v Speaker 7>think the Democrats will stay pretty muted, but at some

0:20:40.080 --> 0:20:43.400
<v Speaker 7>point they may have to be called to enter this fight.

0:20:44.119 --> 0:20:46.000
<v Speaker 1>Riik Viliah, I want to go back to a comment

0:20:46.119 --> 0:20:48.080
<v Speaker 1>you said, because I really think we need to paint

0:20:48.119 --> 0:20:52.119
<v Speaker 1>this picture the New York Times reporting Mark Santorio of

0:20:52.160 --> 0:20:54.800
<v Speaker 1>the war east of Kerson. This is done by the

0:20:54.800 --> 0:20:58.920
<v Speaker 1>Black Sea folks. This is east of Odessa, east of Romania,

0:20:59.119 --> 0:21:03.200
<v Speaker 1>and the Ukrainian forces are surprising by moving east along

0:21:03.240 --> 0:21:05.800
<v Speaker 1>the shores of the Black Sea again east of Kirsan.

0:21:06.680 --> 0:21:09.280
<v Speaker 1>What do they need from us that's going to wait

0:21:09.680 --> 0:21:14.520
<v Speaker 1>for the winter financing by America? Do they literally run

0:21:14.520 --> 0:21:17.000
<v Speaker 1>out of artillery, run out of ammunition?

0:21:18.320 --> 0:21:21.160
<v Speaker 7>Well, timing is everything, Tom, and I think that they've

0:21:21.160 --> 0:21:24.000
<v Speaker 7>only got another few weeks before it's the mud season,

0:21:24.280 --> 0:21:26.919
<v Speaker 7>and we have four months of mud and ice, and

0:21:27.440 --> 0:21:31.480
<v Speaker 7>you know, basically a stalemate. They will get more arms,

0:21:31.480 --> 0:21:35.560
<v Speaker 7>I think from Western Europe, but I again looking at Washington,

0:21:35.840 --> 0:21:38.200
<v Speaker 7>I think it's going to come later rather than sooner.

0:21:38.560 --> 0:21:41.360
<v Speaker 4>All wars have always been marked by propaganda efforts. We've

0:21:41.400 --> 0:21:45.080
<v Speaker 4>always seen that through history. It's something very notable. This

0:21:45.200 --> 0:21:48.240
<v Speaker 4>time feels different, though, whether it's Ukraine or whether it's Israel.

0:21:48.280 --> 0:21:50.119
<v Speaker 4>And some of the images that are coming out in

0:21:50.119 --> 0:21:51.920
<v Speaker 4>social media, some of the battles that are coming out

0:21:51.920 --> 0:21:55.840
<v Speaker 4>in social media, how do you view this information war

0:21:56.119 --> 0:21:59.840
<v Speaker 4>as having a materially different nature than previous ones.

0:22:00.840 --> 0:22:02.840
<v Speaker 7>Well, the first casualty of war is we all know

0:22:03.000 --> 0:22:05.480
<v Speaker 7>is the truth. And I think it's going to continue

0:22:05.480 --> 0:22:10.240
<v Speaker 7>to be very difficult to ascertain who's winning who's losing.

0:22:11.080 --> 0:22:12.920
<v Speaker 7>I don't think that's going to change.

0:22:13.600 --> 0:22:15.480
<v Speaker 3>Greg Villiers, thank you so much.

0:22:15.520 --> 0:22:19.879
<v Speaker 1>With AGF investments, always an important morning note.

0:22:19.880 --> 0:22:31.320
<v Speaker 3>Pier, we get rebrief here. He's been on the show

0:22:31.359 --> 0:22:31.960
<v Speaker 3>way too much.

0:22:32.040 --> 0:22:34.439
<v Speaker 1>It's a it's a folks part of our team, but

0:22:34.560 --> 0:22:37.400
<v Speaker 1>actually huge value at Stephen Rashuda joins us down chief

0:22:37.520 --> 0:22:42.320
<v Speaker 1>US economist in Missoo's securities. We all get the consumer boom.

0:22:42.520 --> 0:22:45.040
<v Speaker 1>We all get that we were wrong. We're in the

0:22:45.119 --> 0:22:45.840
<v Speaker 1>vicinity of.

0:22:45.800 --> 0:22:48.960
<v Speaker 3>Five percent Q three GDP okay.

0:22:48.640 --> 0:22:51.199
<v Speaker 1>Great, but I got an I, I got a G

0:22:51.880 --> 0:22:52.960
<v Speaker 1>and I got an NX.

0:22:53.000 --> 0:22:55.040
<v Speaker 3>On the back end. Are they going to help out

0:22:55.040 --> 0:22:56.040
<v Speaker 3>the booming consumer?

0:22:56.600 --> 0:22:59.200
<v Speaker 8>That's the real question, you know. I think you could

0:22:59.200 --> 0:23:01.760
<v Speaker 8>look maybe for a little bit from trade. The real

0:23:01.880 --> 0:23:04.600
<v Speaker 8>key question is the government component, because to be honest

0:23:04.600 --> 0:23:07.640
<v Speaker 8>with you, we don't have any good priori data when

0:23:07.680 --> 0:23:10.000
<v Speaker 8>it comes to government spending. We do have the monthly

0:23:10.000 --> 0:23:12.399
<v Speaker 8>Treasury statement of receipts in outlays and we can look

0:23:12.440 --> 0:23:15.480
<v Speaker 8>at that, but those don't translate well into the GDP accounts,

0:23:15.600 --> 0:23:18.840
<v Speaker 8>they don't translate as clearly as other components do. So

0:23:19.000 --> 0:23:20.840
<v Speaker 8>we're looking at most of the other components and saying

0:23:20.840 --> 0:23:22.879
<v Speaker 8>nothing else is contributing. So you down to maybe a

0:23:22.920 --> 0:23:25.040
<v Speaker 8>little from trade and how much we get from government.

0:23:25.119 --> 0:23:25.600
<v Speaker 3>Is there a.

0:23:25.520 --> 0:23:31.480
<v Speaker 1>Separation in the eye of big business, ginormous business, successful, profitable,

0:23:31.600 --> 0:23:35.960
<v Speaker 1>Microsoft like business investment and everybody else flat on their back.

0:23:36.320 --> 0:23:38.840
<v Speaker 8>Well, there clearly is. And when you look at the

0:23:39.080 --> 0:23:42.680
<v Speaker 8>shipments of non defense, non aircraft capital goods, which is

0:23:42.720 --> 0:23:46.040
<v Speaker 8>the key driver of the equipment investment components that you're

0:23:46.080 --> 0:23:49.360
<v Speaker 8>looking at, they're really showing you that on a real basis,

0:23:49.440 --> 0:23:52.399
<v Speaker 8>we're doing nothing in terms on average in terms of

0:23:52.400 --> 0:23:54.840
<v Speaker 8>investing in this economy. But in an environment where you

0:23:54.920 --> 0:23:58.520
<v Speaker 8>still have sort of an excess supply globally of tradable goods,

0:23:58.520 --> 0:24:00.280
<v Speaker 8>it's not surprising that we're seeing that.

0:24:00.680 --> 0:24:02.000
<v Speaker 5>And I want to talk a little bit about a

0:24:02.040 --> 0:24:04.240
<v Speaker 5>story that ran on the terminal yesterday that if you

0:24:04.280 --> 0:24:07.000
<v Speaker 5>take a look at the deficit. The US government ran

0:24:07.080 --> 0:24:11.760
<v Speaker 5>a two trillion dollar deficit in the fiscal year through September,

0:24:11.800 --> 0:24:14.160
<v Speaker 5>and then you think about what's happening in the bond market,

0:24:14.160 --> 0:24:17.320
<v Speaker 5>you think about a ten year at five percent. Does

0:24:17.320 --> 0:24:19.399
<v Speaker 5>that level make more sense when you think about the

0:24:19.440 --> 0:24:20.560
<v Speaker 5>deficits that we're running.

0:24:20.640 --> 0:24:22.480
<v Speaker 8>Well, it certainly makes more sense when you think about

0:24:22.480 --> 0:24:24.479
<v Speaker 8>the deficits worrying, but it also makes more sense when

0:24:24.520 --> 0:24:27.640
<v Speaker 8>you ask yourself the question what level of inflation does this.

0:24:27.520 --> 0:24:28.520
<v Speaker 3>Federal Reserve want?

0:24:29.000 --> 0:24:31.560
<v Speaker 8>You know, they seem to give lip service to the

0:24:31.560 --> 0:24:34.080
<v Speaker 8>two percent numbers, but they seem to also be paying

0:24:34.080 --> 0:24:36.840
<v Speaker 8>a lot of attention to the employment aspects. So they've

0:24:36.920 --> 0:24:39.679
<v Speaker 8>kind of shifted the dual mandate. What used to be

0:24:39.720 --> 0:24:43.240
<v Speaker 8>inflation first, then employment comes along as a result. Now

0:24:43.240 --> 0:24:45.480
<v Speaker 8>it's almost like, well, we want to get employment first

0:24:45.520 --> 0:24:47.919
<v Speaker 8>and see what happens with inflation later, and you know,

0:24:48.000 --> 0:24:50.520
<v Speaker 8>maybe we'll tolerate three. So the upward movement in the

0:24:50.560 --> 0:24:53.199
<v Speaker 8>tenure note is reflecting a new fair value, which I

0:24:53.200 --> 0:24:55.240
<v Speaker 8>don't think markets have fully discounted yet.

0:24:55.400 --> 0:24:57.440
<v Speaker 5>So does that tell you that they still see that

0:24:58.200 --> 0:25:01.600
<v Speaker 5>link between the unemployment rate and what's happening in inflation

0:25:01.720 --> 0:25:04.280
<v Speaker 5>that to get inflation back to two percent you do

0:25:04.359 --> 0:25:06.280
<v Speaker 5>need to get unemployment of I.

0:25:06.200 --> 0:25:09.359
<v Speaker 8>Think most investors see that. Unfortunately, I don't think this

0:25:09.400 --> 0:25:11.399
<v Speaker 8>Federal Reserve does. And if you were at the New

0:25:11.480 --> 0:25:14.719
<v Speaker 8>York Economics Club lunch the other day with Jerome Powell.

0:25:14.960 --> 0:25:17.320
<v Speaker 8>You really got a sense. You really got a sense

0:25:17.320 --> 0:25:19.880
<v Speaker 8>that these people are he in particular as well, are

0:25:19.920 --> 0:25:22.960
<v Speaker 8>looking at the things like the jilt S data, which,

0:25:23.000 --> 0:25:24.920
<v Speaker 8>to be honest with you, there isn't that much history

0:25:25.000 --> 0:25:27.399
<v Speaker 8>behind the jailt stata number one and number two. The

0:25:27.480 --> 0:25:30.400
<v Speaker 8>history we have is only available for what we call

0:25:30.480 --> 0:25:33.679
<v Speaker 8>credit recessions, recessions that were driven by a credit crunch.

0:25:34.160 --> 0:25:36.199
<v Speaker 8>This is not a recession that would be driven by

0:25:36.200 --> 0:25:40.119
<v Speaker 8>a credit crunch. This is an inflation monetary policy, and

0:25:40.160 --> 0:25:43.240
<v Speaker 8>that's a different story, and therefore the reaction it function

0:25:43.359 --> 0:25:43.959
<v Speaker 8>is very different.

0:25:44.000 --> 0:25:47.080
<v Speaker 3>Did you feed David Weston's questions? They were so vicious

0:25:47.119 --> 0:25:49.199
<v Speaker 3>and so mean spirit. I'm like, we shootos given him

0:25:49.200 --> 0:25:49.960
<v Speaker 3>those questions.

0:25:50.680 --> 0:25:52.560
<v Speaker 8>I thought he could have gotten even harder if he did.

0:25:52.760 --> 0:25:55.200
<v Speaker 1>Yeah, well, you know, there'd be like a pharaoh was there.

0:25:55.240 --> 0:25:57.639
<v Speaker 1>Can you imagine John Farrow doing the Economic Club in

0:25:57.640 --> 0:25:58.000
<v Speaker 1>New York.

0:25:58.119 --> 0:26:00.080
<v Speaker 5>It would have been good television.

0:26:00.440 --> 0:26:05.080
<v Speaker 1>That would be good entertainment, it'd be sport. Powell, I

0:26:05.080 --> 0:26:07.359
<v Speaker 1>don't think it was game changing. I think he's just

0:26:07.480 --> 0:26:10.080
<v Speaker 1>trying to get from event to event. Waiting for the

0:26:10.160 --> 0:26:10.720
<v Speaker 1>data Kating.

0:26:10.960 --> 0:26:13.560
<v Speaker 5>I will say that the thing that stuck with me

0:26:13.720 --> 0:26:17.360
<v Speaker 5>from that appearance was the focus on financial conditions. I mean,

0:26:17.359 --> 0:26:20.639
<v Speaker 5>I think he said financial conditions at least fifteen times.

0:26:20.720 --> 0:26:23.119
<v Speaker 5>When you look at financial conditions, you think about the

0:26:23.200 --> 0:26:26.879
<v Speaker 5>lag of monetary policy. Have we finally started to see that?

0:26:27.280 --> 0:26:29.919
<v Speaker 8>Well, see, I don't follow the financial conditions in disease

0:26:30.000 --> 0:26:32.680
<v Speaker 8>that are on the street, particularly because they're reflecting long

0:26:32.760 --> 0:26:34.680
<v Speaker 8>term interest rates, which, to be honestly, should be driven

0:26:34.720 --> 0:26:38.720
<v Speaker 8>by inflation, not by real rates. That's number one. Number two,

0:26:38.880 --> 0:26:41.440
<v Speaker 8>I don't look at it because they're looking at currency,

0:26:41.760 --> 0:26:44.320
<v Speaker 8>and the currency is really not part of the financial conditions.

0:26:44.320 --> 0:26:45.119
<v Speaker 3>In the marketplace.

0:26:45.480 --> 0:26:48.040
<v Speaker 8>I look at the availability of companies to bring paper

0:26:48.040 --> 0:26:50.480
<v Speaker 8>to market and get that paper sold, and I look

0:26:50.480 --> 0:26:53.119
<v Speaker 8>at the Treasury's ability to bring a ridiculous amount of

0:26:53.119 --> 0:26:55.920
<v Speaker 8>paper to market and get it sold, and all these

0:26:55.960 --> 0:26:58.840
<v Speaker 8>markets are functioning beautifully. So I sit there and say,

0:26:58.840 --> 0:27:01.600
<v Speaker 8>you know what there really is and illiquidity in the system.

0:27:01.760 --> 0:27:05.040
<v Speaker 8>Financial conditions aren't tightening in the sense that really matters

0:27:05.080 --> 0:27:07.400
<v Speaker 8>to the economy. It's tightening in the sense that we're

0:27:07.440 --> 0:27:10.679
<v Speaker 8>trying to measure what would cause a credit crunch, But

0:27:10.720 --> 0:27:13.679
<v Speaker 8>there is no preconditions for a credit crunch. There's no

0:27:13.720 --> 0:27:17.760
<v Speaker 8>asset liability mismatch, and there's no valuation problem to be triggered,

0:27:17.880 --> 0:27:21.160
<v Speaker 8>and therefore these things are looking for the wrong indicator.

0:27:21.320 --> 0:27:23.960
<v Speaker 3>Halloween, I'm going as Gamma this year. That's my Greek

0:27:24.040 --> 0:27:27.359
<v Speaker 3>letter this year. But after Halloween, we've got a FED

0:27:27.400 --> 0:27:28.120
<v Speaker 3>meeting and.

0:27:28.040 --> 0:27:31.080
<v Speaker 1>We have a jobs report, the first jobs report questioned

0:27:31.080 --> 0:27:34.320
<v Speaker 1>for October folks with mister Rashudo of Bazoo.

0:27:35.040 --> 0:27:38.359
<v Speaker 3>Is it finally going to slow down? I don't think so.

0:27:38.720 --> 0:27:41.320
<v Speaker 8>No, because you're in an environment still where the initial

0:27:41.359 --> 0:27:43.520
<v Speaker 8>n employment claims are telling you that we still have

0:27:43.560 --> 0:27:45.920
<v Speaker 8>a very very tight labor market to continuing claims numbers

0:27:45.920 --> 0:27:47.520
<v Speaker 8>are telling you we still have a very very tight

0:27:47.600 --> 0:27:49.960
<v Speaker 8>labor market. So the people that are getting laid off

0:27:49.960 --> 0:27:52.560
<v Speaker 8>are getting hired fairly quickly. So I don't think it

0:27:52.560 --> 0:27:54.399
<v Speaker 8>will show up. And will there be some potential for

0:27:54.400 --> 0:27:56.240
<v Speaker 8>a little bit of weakness in the payroll employment number

0:27:56.240 --> 0:27:58.200
<v Speaker 8>in the headline number month over a month, a little

0:27:58.200 --> 0:28:00.560
<v Speaker 8>bit of a change, sure, but we're not saying substance

0:28:00.600 --> 0:28:03.119
<v Speaker 8>of change in the underlying dynamics of the labor mark.

0:28:03.040 --> 0:28:03.960
<v Speaker 3>Stee thank you so much.

0:28:04.040 --> 0:28:06.280
<v Speaker 1>We've took it for the frequent visits as well, really

0:28:06.320 --> 0:28:13.000
<v Speaker 1>really valuable. Stephen Rashudo with this with Missoo's securities today.

0:28:14.400 --> 0:28:15.360
<v Speaker 3>This is right.

0:28:15.160 --> 0:28:17.680
<v Speaker 1>Now for Global Wall Street, the Interview of the day.

0:28:17.760 --> 0:28:22.200
<v Speaker 1>Everybody's fundamental based. Katie Kaminski is weaned on the technician

0:28:22.400 --> 0:28:26.720
<v Speaker 1>technical analysis of trend, going back to the giant Wells

0:28:26.760 --> 0:28:28.440
<v Speaker 1>Wilder of nineteen seventy eight.

0:28:28.480 --> 0:28:29.879
<v Speaker 3>She's with alpha simplex.

0:28:30.160 --> 0:28:34.200
<v Speaker 1>Katie an opening question, what's a trend right now in equities?

0:28:35.359 --> 0:28:37.879
<v Speaker 9>So equities right now, we finally see some of our

0:28:38.000 --> 0:28:41.960
<v Speaker 9>signals tick short net, which kind of is surprising to me.

0:28:42.440 --> 0:28:44.920
<v Speaker 9>And second of all, the biggest trade and biggest thing

0:28:44.960 --> 0:28:48.160
<v Speaker 9>to fall in. This goes with what Lisa's saying divergence.

0:28:48.600 --> 0:28:52.360
<v Speaker 9>We've seen long signals in big tech megacap and we're

0:28:52.360 --> 0:28:55.640
<v Speaker 9>seeing short signals in the small cap. That tells the

0:28:55.680 --> 0:29:00.720
<v Speaker 9>consumer the average stock is in trouble. Your big high

0:29:00.800 --> 0:29:04.280
<v Speaker 9>names they are doing well, but your average stock is

0:29:04.320 --> 0:29:05.719
<v Speaker 9>worried about higher rates.

0:29:06.080 --> 0:29:09.840
<v Speaker 1>Katie Kimisky and I studied Tishushande on beta. I'm not

0:29:09.880 --> 0:29:11.719
<v Speaker 1>a big believer in beta. For those of you from

0:29:11.760 --> 0:29:15.400
<v Speaker 1>Global Wall Street, Katie in this world, do you have

0:29:15.480 --> 0:29:19.040
<v Speaker 1>to do beta as a sector study or index study

0:29:19.480 --> 0:29:22.360
<v Speaker 1>or can you actually have the conceit and confidence to

0:29:22.440 --> 0:29:25.040
<v Speaker 1>do beta on individual securities.

0:29:26.280 --> 0:29:29.160
<v Speaker 9>So we tend to think about looking at sectors because

0:29:29.160 --> 0:29:31.239
<v Speaker 9>we're trading more in the futures markets, but we do

0:29:31.440 --> 0:29:34.360
<v Speaker 9>also look at some of cash equity strategies as well,

0:29:34.640 --> 0:29:37.680
<v Speaker 9>and we're definitely seeing tilts right now. You're seeing people

0:29:37.760 --> 0:29:41.160
<v Speaker 9>talking a lot more about tilts to defensive tilts towards

0:29:41.240 --> 0:29:45.560
<v Speaker 9>oil companies. So right now, I think this divergence trade

0:29:45.640 --> 0:29:48.880
<v Speaker 9>is about finding certain areas of the market that are

0:29:48.880 --> 0:29:52.280
<v Speaker 9>going to do better or worse in a higher rate environment.

0:29:52.880 --> 0:29:56.240
<v Speaker 9>But it is tricky because it's uncharted water. We haven't

0:29:56.320 --> 0:29:59.040
<v Speaker 9>really figured out what's going to happen next. That's pretty

0:29:59.080 --> 0:30:01.800
<v Speaker 9>much the theme worse thinking and seeing is that we

0:30:01.920 --> 0:30:03.160
<v Speaker 9>got to the higher rates.

0:30:03.600 --> 0:30:04.320
<v Speaker 3>What's next?

0:30:04.640 --> 0:30:07.320
<v Speaker 9>Which stocks are going to succeed, which are going to

0:30:07.360 --> 0:30:10.240
<v Speaker 9>be able to refinance, which are going to waivers through

0:30:10.480 --> 0:30:11.480
<v Speaker 9>this new environment?

0:30:11.640 --> 0:30:13.320
<v Speaker 4>Katie, I was so excited to speak with you today

0:30:13.360 --> 0:30:15.800
<v Speaker 4>because you follow trends and I'm looking for a trend

0:30:15.920 --> 0:30:17.600
<v Speaker 4>in the ten year yield and yet it's up. But

0:30:17.640 --> 0:30:19.560
<v Speaker 4>it's also you know, we've we're talking about a ping

0:30:19.600 --> 0:30:23.880
<v Speaker 4>pong ball. Pick your metaphor. How can you find a

0:30:23.960 --> 0:30:25.640
<v Speaker 4>trend in a market that's unanchored?

0:30:26.960 --> 0:30:30.560
<v Speaker 9>Good question. I've been asking this myself as well. Because

0:30:30.920 --> 0:30:35.280
<v Speaker 9>we have seen consistent short trends for months, I have

0:30:35.440 --> 0:30:39.840
<v Speaker 9>still yet to see a steepener in the relative positioning

0:30:39.960 --> 0:30:42.840
<v Speaker 9>and trend signals. That's something that I've been kind of

0:30:42.880 --> 0:30:46.040
<v Speaker 9>looking for to understand when we might have an inflection point.

0:30:46.400 --> 0:30:48.680
<v Speaker 9>There was a little bit more pressure on the long

0:30:48.800 --> 0:30:51.600
<v Speaker 9>end this month, which is something that kind of brought

0:30:51.600 --> 0:30:54.440
<v Speaker 9>my attention to the fact that we might be eventually

0:30:54.480 --> 0:30:57.720
<v Speaker 9>at a buying point. It does feel right now in

0:30:57.800 --> 0:31:00.520
<v Speaker 9>terms of how we're seeing the market's trade, that we're

0:31:00.560 --> 0:31:04.560
<v Speaker 9>at a point where there's some interest to buy because

0:31:04.640 --> 0:31:07.760
<v Speaker 9>we've come so far in this disinversion in the yield curve,

0:31:08.520 --> 0:31:10.400
<v Speaker 9>and so I think the next step is going to

0:31:10.440 --> 0:31:13.600
<v Speaker 9>be what's the next phase of this bond trade. Is

0:31:13.640 --> 0:31:16.000
<v Speaker 9>it wait and see and see if we see something

0:31:16.000 --> 0:31:17.680
<v Speaker 9>that could push us to a new shape of the

0:31:17.760 --> 0:31:20.440
<v Speaker 9>yield curve, or do we go to a state where

0:31:20.440 --> 0:31:23.880
<v Speaker 9>we have worse financial conditions and we have to actually

0:31:23.960 --> 0:31:27.840
<v Speaker 9>tighten stop tightening and thus see you know, the shorter

0:31:27.960 --> 0:31:29.840
<v Speaker 9>end has to release some of the pressure.

0:31:30.120 --> 0:31:31.280
<v Speaker 4>Are you still short bonds?

0:31:32.280 --> 0:31:32.800
<v Speaker 5>Yes?

0:31:33.000 --> 0:31:35.680
<v Speaker 4>Okay, So are you basically seeing this as a sign

0:31:35.920 --> 0:31:39.280
<v Speaker 4>that there could still be more yield increases to come,

0:31:39.560 --> 0:31:42.840
<v Speaker 4>even though you are seeing a bid to buy come

0:31:42.840 --> 0:31:44.440
<v Speaker 4>in around the margins.

0:31:44.920 --> 0:31:47.960
<v Speaker 9>Yes, Lisa. And what's amazing to me is that signals

0:31:48.000 --> 0:31:50.480
<v Speaker 9>in the technical space have been short and fixed income

0:31:50.560 --> 0:31:55.760
<v Speaker 9>for two years almost consistently. That hasn't happened in many decades,

0:31:56.280 --> 0:31:58.280
<v Speaker 9>And I think what we need to start to see

0:31:58.520 --> 0:32:02.040
<v Speaker 9>is to see some consolidate and see some actual view

0:32:02.120 --> 0:32:04.920
<v Speaker 9>that that trade might turn around. But so far I

0:32:05.000 --> 0:32:07.560
<v Speaker 9>keep looking for it, and I haven't seen the end

0:32:07.560 --> 0:32:10.840
<v Speaker 9>of this trade yet. So that suggests that we haven't

0:32:10.880 --> 0:32:13.200
<v Speaker 9>seen the bottom of perhaps the long end of the

0:32:13.440 --> 0:32:16.280
<v Speaker 9>bond market as of yet. I think we might see

0:32:16.280 --> 0:32:18.400
<v Speaker 9>it in the next three to six months.

0:32:18.120 --> 0:32:20.560
<v Speaker 5>So maybe yields have more room to climb here. But

0:32:20.600 --> 0:32:23.080
<v Speaker 5>can we talk about the importance of five percent, because

0:32:23.080 --> 0:32:25.080
<v Speaker 5>I think it was very telling that you had the

0:32:25.120 --> 0:32:28.640
<v Speaker 5>ten year treasure yield just kiss five percent earlier this

0:32:28.680 --> 0:32:32.560
<v Speaker 5>week and then immediately drop in the path to higher yields.

0:32:32.840 --> 0:32:34.880
<v Speaker 5>How much of a hurdle will five percent be.

0:32:36.400 --> 0:32:40.080
<v Speaker 9>Well, five percent was a pretty important philosophical boundary for

0:32:40.200 --> 0:32:43.840
<v Speaker 9>many investors, and maybe it also represents a buying point

0:32:43.880 --> 0:32:47.360
<v Speaker 9>if you think about it from the investor perspective. As

0:32:47.440 --> 0:32:49.560
<v Speaker 9>yields go up, there starts to be more and more

0:32:49.560 --> 0:32:52.960
<v Speaker 9>of a trade off between at what point do you

0:32:53.040 --> 0:32:56.040
<v Speaker 9>not worry about the entry point of that particular investment,

0:32:56.080 --> 0:32:58.440
<v Speaker 9>and you start saying, it's actually pretty good to lock

0:32:58.520 --> 0:33:01.720
<v Speaker 9>in five percent over these horizons, and there is some

0:33:01.840 --> 0:33:05.560
<v Speaker 9>risk that we might have deteriorating financial conditions, so purchasing

0:33:05.600 --> 0:33:08.880
<v Speaker 9>those bonds might actually seem like a good idea. And

0:33:08.920 --> 0:33:11.560
<v Speaker 9>that's what I'm hearing from investors as well. We're starting

0:33:11.560 --> 0:33:14.760
<v Speaker 9>to see more discussions about the trade off for the

0:33:14.920 --> 0:33:18.880
<v Speaker 9>risk of investing in risky assets versus the return of

0:33:18.960 --> 0:33:23.000
<v Speaker 9>fixed income. That has become so much more more interesting

0:33:23.040 --> 0:33:24.640
<v Speaker 9>than it was a few years ago.

0:33:25.120 --> 0:33:26.880
<v Speaker 5>Well, we're talking about the level here. Let's talk about

0:33:26.960 --> 0:33:28.600
<v Speaker 5>rate of change a little bit, because the rate of

0:33:28.680 --> 0:33:31.560
<v Speaker 5>change has been shocking over the past few months. You

0:33:31.600 --> 0:33:34.520
<v Speaker 5>look over through the next few months, are things going

0:33:34.560 --> 0:33:35.200
<v Speaker 5>to calm down?

0:33:36.560 --> 0:33:39.800
<v Speaker 9>Well, I think these things come in spurts and in runs,

0:33:39.920 --> 0:33:42.400
<v Speaker 9>and I think we've gone through a pretty strong run

0:33:42.440 --> 0:33:44.520
<v Speaker 9>in terms of trends. And one thing that we note

0:33:44.560 --> 0:33:47.440
<v Speaker 9>in the trend falling space is that fixed income is

0:33:47.520 --> 0:33:51.239
<v Speaker 9>not linear. It tends to accelerate very quickly when it

0:33:51.280 --> 0:33:53.720
<v Speaker 9>wants to, and then it can be very smooth for

0:33:53.800 --> 0:33:56.520
<v Speaker 9>some period of time. It feels like we've gone through

0:33:56.560 --> 0:33:59.120
<v Speaker 9>one of those phases and now there's going to be

0:33:59.360 --> 0:34:03.360
<v Speaker 9>some consolid until we see something that has the ability

0:34:03.440 --> 0:34:07.880
<v Speaker 9>to move that curve again. So far, we need to

0:34:07.920 --> 0:34:10.799
<v Speaker 9>have something a little bit more extreme, perhaps some deteriorating

0:34:10.840 --> 0:34:15.200
<v Speaker 9>financial conditions or just an excess supply of treasuries that

0:34:15.320 --> 0:34:18.600
<v Speaker 9>just has difficulty, you know, kind of consolidating.

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<v Speaker 3>Thanks for listening. I'm Tom Keen, and this is Bloomberg