1 00:00:00,040 --> 00:00:06,720 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amerie Hordernt. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,840 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:36,959 Speaker 2: Terminal and the Bloomberg Business app. We begin this out 10 00:00:37,000 --> 00:00:39,680 Speaker 2: with stocks at record highs and the dollar at multi 11 00:00:39,760 --> 00:00:42,199 Speaker 2: year lows. Heading into the Fed's meeting, Prayer Misra of 12 00:00:42,240 --> 00:00:44,840 Speaker 2: JP Morgan writing, expect POW to focus on the FEDS 13 00:00:44,920 --> 00:00:48,519 Speaker 2: manday rather than the politics. Despite all the Fed shair drama, 14 00:00:48,760 --> 00:00:51,240 Speaker 2: we have a divided FED with different views on risk 15 00:00:51,320 --> 00:00:54,480 Speaker 2: the manday, and the chair has only one vote. Prayer 16 00:00:54,520 --> 00:00:56,720 Speaker 2: joins us now for more pre good Monarch morning. Is 17 00:00:56,760 --> 00:00:58,760 Speaker 2: this a different FED because that one vote used to 18 00:00:58,800 --> 00:00:59,760 Speaker 2: count for quite a lot. 19 00:01:00,440 --> 00:01:02,400 Speaker 3: I think you know the FED chairs job is to 20 00:01:02,440 --> 00:01:04,760 Speaker 3: sort of build consensus, but look at I mean, what 21 00:01:04,800 --> 00:01:07,640 Speaker 3: you've been talking about there are so many cross currents here. 22 00:01:07,680 --> 00:01:11,679 Speaker 3: You know, with this highly concentrated GDP, the case shape recovery, 23 00:01:11,720 --> 00:01:15,959 Speaker 3: the low higher low fire economy, they risk to the 24 00:01:16,040 --> 00:01:18,240 Speaker 3: mandate are sort of two sided, and that's why we 25 00:01:18,319 --> 00:01:21,600 Speaker 3: have a divided committee. So can any feed chair sort 26 00:01:21,640 --> 00:01:24,280 Speaker 3: of build consensus. I think Chepau did a lot, but 27 00:01:24,400 --> 00:01:27,200 Speaker 3: they've already reached the sort of realm of neutral. So 28 00:01:27,280 --> 00:01:29,080 Speaker 3: I think any feed check coming in is going to 29 00:01:29,120 --> 00:01:31,520 Speaker 3: have to contend with the fact that you're close to neutral. 30 00:01:31,640 --> 00:01:35,559 Speaker 3: It's between three and four. They're right there, so they're 31 00:01:35,560 --> 00:01:36,840 Speaker 3: going to have to wait for the data. 32 00:01:36,920 --> 00:01:38,920 Speaker 4: So, you know, I think, you know. 33 00:01:39,080 --> 00:01:41,959 Speaker 3: The pushback around from the FED, the pushback from the 34 00:01:42,000 --> 00:01:45,320 Speaker 3: market around FED independence. I actually think the fact that 35 00:01:45,360 --> 00:01:48,560 Speaker 3: everybody wants an independent FED, the bond market, the president, 36 00:01:49,040 --> 00:01:51,360 Speaker 3: I think that's actually the FED is pushing back. I 37 00:01:51,360 --> 00:01:53,560 Speaker 3: think this is all good news. The feed chair is 38 00:01:53,600 --> 00:01:55,840 Speaker 3: extremely important. We'll have to listen to the you know, 39 00:01:56,960 --> 00:01:59,200 Speaker 3: we'll have to sort of listen to the entire committee, 40 00:01:59,440 --> 00:02:01,440 Speaker 3: but it is just one vote, and we'll have to 41 00:02:01,480 --> 00:02:04,800 Speaker 3: listen to everybody at the field, all twelve voting members 42 00:02:04,800 --> 00:02:06,080 Speaker 3: and the non voting members. 43 00:02:06,240 --> 00:02:08,000 Speaker 5: Was Champa's last rite cut the last. 44 00:02:07,840 --> 00:02:13,280 Speaker 3: Mate given the data right now, yes, I mean he's 45 00:02:13,440 --> 00:02:15,720 Speaker 3: around till May. There's a lot of data between now 46 00:02:15,720 --> 00:02:18,160 Speaker 3: and May, so can he cut you know, in March. 47 00:02:18,240 --> 00:02:20,720 Speaker 3: So we're going to be watching both inflation and the 48 00:02:20,800 --> 00:02:23,360 Speaker 3: labor market. The labor market does seem to have stabilized. 49 00:02:23,360 --> 00:02:26,239 Speaker 3: We were getting those really high layoff announcements, and then 50 00:02:26,360 --> 00:02:28,320 Speaker 3: you know, initial claims is not showing a pickup. 51 00:02:28,400 --> 00:02:30,400 Speaker 4: So I would say base case this. 52 00:02:30,760 --> 00:02:32,600 Speaker 3: You know, we might have seen the last rate cut, 53 00:02:32,680 --> 00:02:34,960 Speaker 3: but I don't think you're going to get any confirmation 54 00:02:35,040 --> 00:02:37,600 Speaker 3: of that. The inflation data has been weak, but it's. 55 00:02:37,440 --> 00:02:38,840 Speaker 4: So shut down impacted. 56 00:02:39,040 --> 00:02:41,359 Speaker 3: So we're going to have to see between the tax 57 00:02:41,440 --> 00:02:44,480 Speaker 3: refunds on one side, and do we get this shutdown 58 00:02:44,480 --> 00:02:49,320 Speaker 3: impacted data showing inflation some heat in inflation. I think 59 00:02:49,360 --> 00:02:51,560 Speaker 3: for now they might not do anything. The market's not 60 00:02:51,560 --> 00:02:53,680 Speaker 3: pricing in any rate cuts in the first half of THEAY, 61 00:02:53,680 --> 00:02:56,480 Speaker 3: I think rightfully, so, but we're going to watch all 62 00:02:56,639 --> 00:02:59,040 Speaker 3: all of the data. I hope there's no shutdown because 63 00:02:59,080 --> 00:03:01,240 Speaker 3: that's going to you know, we're just getting. 64 00:03:01,000 --> 00:03:02,240 Speaker 4: Somewhat clean data. 65 00:03:02,320 --> 00:03:04,320 Speaker 3: I would really hope that we continue to get that 66 00:03:04,360 --> 00:03:07,679 Speaker 3: clean data. The FED is otherwise likely to stay on hold, 67 00:03:07,720 --> 00:03:09,880 Speaker 3: But I think rate cuts second half of the year 68 00:03:10,120 --> 00:03:12,480 Speaker 3: is our base case. I think, you know, if inflation 69 00:03:12,639 --> 00:03:15,920 Speaker 3: continues in its current downward trajectory, I think there's a 70 00:03:15,919 --> 00:03:17,040 Speaker 3: few more rate cuts this year. 71 00:03:17,200 --> 00:03:19,120 Speaker 1: Isn't there a chance that Jay Powell might be there 72 00:03:19,160 --> 00:03:21,680 Speaker 1: for those rate cuts given the fact that Senator Tillis 73 00:03:21,720 --> 00:03:24,400 Speaker 1: is basically saying, I'm not moving ahead with the peck 74 00:03:24,919 --> 00:03:27,480 Speaker 1: until the DOJA investigation is wrapped up. 75 00:03:27,760 --> 00:03:29,720 Speaker 4: How are you thinking about the politics? 76 00:03:29,720 --> 00:03:32,960 Speaker 1: Do you think it will seep into the monetary policy decisions? 77 00:03:33,280 --> 00:03:35,840 Speaker 3: No, I don't think politics will drive and I think 78 00:03:35,840 --> 00:03:38,680 Speaker 3: the Fed does what they've always done. They look at 79 00:03:38,680 --> 00:03:41,880 Speaker 3: the data, they assess risk to the outlook, and then 80 00:03:41,920 --> 00:03:45,120 Speaker 3: they take an action. I think it's actually excellent that 81 00:03:45,240 --> 00:03:48,040 Speaker 3: Jair Powell pushed back as strongly as he did, and 82 00:03:48,120 --> 00:03:51,120 Speaker 3: that I think provided cover to Senator Tillis and others 83 00:03:51,360 --> 00:03:53,880 Speaker 3: to push back as well. Where the politics can come 84 00:03:53,920 --> 00:03:56,320 Speaker 3: in is the doj will need to wrap up pretty quickly, 85 00:03:56,440 --> 00:03:59,040 Speaker 3: otherwise we're not getting another FED chair. I think the 86 00:03:59,240 --> 00:04:01,920 Speaker 3: likelihood to your point, maybe Chefowell is more likely to 87 00:04:01,960 --> 00:04:04,680 Speaker 3: stay on as a governor, so you know it remains 88 00:04:04,840 --> 00:04:08,000 Speaker 3: just one additional vote that or you know, one person 89 00:04:08,080 --> 00:04:11,040 Speaker 3: that potentially could be political. So I think that's where 90 00:04:11,080 --> 00:04:13,440 Speaker 3: it can come in the makeup of the FED. But 91 00:04:14,040 --> 00:04:16,040 Speaker 3: I think the FED is still going to say, let's 92 00:04:16,040 --> 00:04:16,920 Speaker 3: look at the data. 93 00:04:17,120 --> 00:04:17,880 Speaker 4: There are very. 94 00:04:17,760 --> 00:04:20,720 Speaker 3: Vocal hawks out there who are concerned about the inflation risks. 95 00:04:21,240 --> 00:04:23,359 Speaker 4: When it comes to the body. 96 00:04:23,440 --> 00:04:25,760 Speaker 1: What you're talking about, if he stays on as a governorship, 97 00:04:26,440 --> 00:04:29,279 Speaker 1: it's a deliberative body. So isn't this working against what 98 00:04:29,320 --> 00:04:30,279 Speaker 1: the president wants? 99 00:04:30,800 --> 00:04:31,880 Speaker 4: If FED Chair J. 100 00:04:32,040 --> 00:04:34,120 Speaker 1: Powell is only going to stay on now because he 101 00:04:34,200 --> 00:04:36,159 Speaker 1: feels like the institution's under threat. 102 00:04:37,000 --> 00:04:39,440 Speaker 3: But you know, but I would say Chepoul is extremely credible. 103 00:04:39,720 --> 00:04:43,159 Speaker 3: I think the administration wants rate cuts, but in a 104 00:04:43,200 --> 00:04:46,599 Speaker 3: credible fashion because we've seen if the market gets nervous 105 00:04:46,600 --> 00:04:50,400 Speaker 3: that the FED is losing its grip on inflation, you know, 106 00:04:50,440 --> 00:04:53,080 Speaker 3: long term inflation expectations, the long end is going to 107 00:04:53,120 --> 00:04:53,920 Speaker 3: get unanchored. 108 00:04:54,240 --> 00:04:56,479 Speaker 4: The President's focus on the tenure. 109 00:04:56,279 --> 00:04:59,479 Speaker 3: The bond every time the bond market speaks becomes yippie. 110 00:05:00,080 --> 00:05:02,479 Speaker 4: We see some reaction from the administration. 111 00:05:02,760 --> 00:05:04,880 Speaker 3: So I don't think the President or the administration would 112 00:05:04,920 --> 00:05:08,080 Speaker 3: want to put somebody who's not credible. Jep Owl is 113 00:05:08,120 --> 00:05:11,920 Speaker 3: extremely credible, and he's gone out on a limb, I think, 114 00:05:12,040 --> 00:05:15,039 Speaker 3: very deliberately to say that he cares about FED independence. 115 00:05:15,160 --> 00:05:17,200 Speaker 3: I think that's actually good for the institution. It's good 116 00:05:17,200 --> 00:05:19,240 Speaker 3: for the bond market, and I think that's why the 117 00:05:19,279 --> 00:05:21,599 Speaker 3: bond market. I mean, doesn't this feel like the longest 118 00:05:21,600 --> 00:05:23,640 Speaker 3: month of the gate has just begun? But we've had 119 00:05:23,680 --> 00:05:27,200 Speaker 3: a decade, right, We've had so much thrown at the market. 120 00:05:27,440 --> 00:05:29,360 Speaker 3: The ten years At four and a quarter, I think 121 00:05:29,360 --> 00:05:32,160 Speaker 3: that tells you the market is saying, let's put everything together. 122 00:05:32,400 --> 00:05:33,520 Speaker 4: We have a credible fad. 123 00:05:33,600 --> 00:05:36,120 Speaker 3: We have a lot of cross currents, but we're instill 124 00:05:36,120 --> 00:05:38,880 Speaker 3: in a soft landing and inflation's heading lower, so those 125 00:05:38,920 --> 00:05:40,640 Speaker 3: rate cuts can happen just maybe. 126 00:05:40,520 --> 00:05:40,960 Speaker 4: A little bit. 127 00:05:40,960 --> 00:05:42,599 Speaker 2: I think I saw a headline yesterday, or rather a 128 00:05:42,640 --> 00:05:45,240 Speaker 2: picture on social Maydia that said something like it's January 129 00:05:45,240 --> 00:05:47,800 Speaker 2: twenty seven hundred and seventy second. Yeah, I saw that, 130 00:05:48,000 --> 00:05:50,320 Speaker 2: which is which is what it feels like, right. I 131 00:05:50,320 --> 00:05:52,800 Speaker 2: think there's a disconnected divide between the way the financial 132 00:05:52,800 --> 00:05:55,279 Speaker 2: media is talking about what's happnigan markets and what's actually 133 00:05:55,320 --> 00:05:57,800 Speaker 2: happening in markets. There's a headline that I keep seeing 134 00:05:57,800 --> 00:05:59,719 Speaker 2: every time we have a Dante for the US doma 135 00:06:00,120 --> 00:06:02,039 Speaker 2: just sell America. And then I look at the bond 136 00:06:02,080 --> 00:06:05,640 Speaker 2: market and it's at twenty four for twenty three, for 137 00:06:05,839 --> 00:06:08,680 Speaker 2: twenty something. And then I hear headlines and people talking 138 00:06:08,720 --> 00:06:11,680 Speaker 2: about stories that consider a debasement trade and this is 139 00:06:11,680 --> 00:06:14,680 Speaker 2: why everyone's parting into gold. And then market based expectations 140 00:06:14,720 --> 00:06:18,400 Speaker 2: for inflation are still really, really subdued. I was looking 141 00:06:18,400 --> 00:06:20,240 Speaker 2: at the data for foreign holdings of treasuries at the 142 00:06:20,279 --> 00:06:23,640 Speaker 2: back end of last year, record highs never been higher. 143 00:06:24,120 --> 00:06:26,240 Speaker 2: Is there a divide between the stories you're seeing, the 144 00:06:26,279 --> 00:06:28,920 Speaker 2: headlines you read, and what's actually happening in markets at 145 00:06:28,920 --> 00:06:29,279 Speaker 2: the moment. 146 00:06:29,800 --> 00:06:33,479 Speaker 3: So you know that famous and saying never let the 147 00:06:33,640 --> 00:06:35,240 Speaker 3: facts get in the way for good story. 148 00:06:35,279 --> 00:06:36,840 Speaker 4: I think there's a little bit of that. There is 149 00:06:36,880 --> 00:06:39,200 Speaker 4: a good story. Sell America. You know, there's so. 150 00:06:39,240 --> 00:06:42,560 Speaker 3: Much chaos, political chaos. You should sell America. Let's look 151 00:06:42,560 --> 00:06:45,480 Speaker 3: at the facts. You know, we have auctions every other week. 152 00:06:45,640 --> 00:06:48,520 Speaker 3: Auctions have been going fine. Foreign demand is strong, and 153 00:06:48,560 --> 00:06:51,520 Speaker 3: I would look at, you know, not just holdings of treasures, 154 00:06:51,560 --> 00:06:54,159 Speaker 3: look at holdings of corporate bonds. We've had a record 155 00:06:54,200 --> 00:06:58,520 Speaker 3: corporate issuance month this year, you know or you know 156 00:06:58,600 --> 00:07:02,280 Speaker 3: this month, we've had signals freaking influence from foreigners. So 157 00:07:02,680 --> 00:07:05,239 Speaker 3: why are credit spreads where they are. We're seeing the demand, 158 00:07:05,400 --> 00:07:09,000 Speaker 3: so the technicals for fixed income, technicals for equities remain strong. 159 00:07:09,080 --> 00:07:11,400 Speaker 3: So it's hard for me to say sell America when 160 00:07:11,400 --> 00:07:12,960 Speaker 3: they are still when the rest of the world is 161 00:07:13,000 --> 00:07:16,600 Speaker 3: still buying American assets. The US is still growing significantly, 162 00:07:16,680 --> 00:07:17,760 Speaker 3: out performing. 163 00:07:17,360 --> 00:07:18,160 Speaker 4: The rest of the world. 164 00:07:18,280 --> 00:07:22,040 Speaker 3: We still have the most diversified liquid deep markets. 165 00:07:22,280 --> 00:07:22,880 Speaker 4: So I think the. 166 00:07:22,960 --> 00:07:25,480 Speaker 3: Dollar is a separate issue. Maybe it's a little overvalued. 167 00:07:25,560 --> 00:07:27,920 Speaker 3: Our models still suggests the dollars a little overvalued. 168 00:07:28,200 --> 00:07:29,680 Speaker 4: You have this whole yen intervention. 169 00:07:29,800 --> 00:07:32,040 Speaker 3: I don't know if the intervene or its with verbal intervention, 170 00:07:32,440 --> 00:07:35,120 Speaker 3: the President saying he's okay with a lower dollar. I 171 00:07:35,120 --> 00:07:38,680 Speaker 3: think there's a little bit of a valuation with maybe 172 00:07:38,840 --> 00:07:41,200 Speaker 3: you know, the dollar can weaken. I think it might 173 00:07:41,320 --> 00:07:44,600 Speaker 3: be a hedge dollar risk rather than sell America. We're 174 00:07:44,600 --> 00:07:47,679 Speaker 3: not seeing any evidence of a sell America across asset class, 175 00:07:47,680 --> 00:07:49,560 Speaker 3: so I would say it's not really sell America. 176 00:07:49,760 --> 00:07:52,280 Speaker 2: It was interesting last week just listening and reading the 177 00:07:52,280 --> 00:07:54,400 Speaker 2: way that people were talking of writing about what was 178 00:07:54,440 --> 00:07:57,160 Speaker 2: developing in financial markets last week. The bigger move was 179 00:07:57,200 --> 00:07:59,480 Speaker 2: in Japan. Yet we woke up to stories about sell 180 00:07:59,520 --> 00:08:02,240 Speaker 2: America and I was actually so impressed by how wow 181 00:08:02,320 --> 00:08:04,840 Speaker 2: the treasury market actually stood up to the convulsion in 182 00:08:04,880 --> 00:08:07,680 Speaker 2: the JGB market. The fact that we saw moves of 183 00:08:07,720 --> 00:08:09,480 Speaker 2: twenty to thirty basis points at the long end of 184 00:08:09,520 --> 00:08:11,800 Speaker 2: the Japanese curve and we were up by one mid 185 00:08:11,840 --> 00:08:14,840 Speaker 2: single digits here in the treasury market. I'll take that 186 00:08:14,880 --> 00:08:16,760 Speaker 2: any day of the week, wouldn't you, given the move 187 00:08:16,800 --> 00:08:17,840 Speaker 2: we saw in Japan, And. 188 00:08:17,800 --> 00:08:19,600 Speaker 3: Which is why most of us are not sleeping a 189 00:08:19,640 --> 00:08:21,840 Speaker 3: whole lot, because we're watching, you know, the forty year 190 00:08:21,880 --> 00:08:25,160 Speaker 3: auction last night in Japan was actually okay. You know, 191 00:08:25,200 --> 00:08:29,520 Speaker 3: I think the Japanese and we're watching the election next 192 00:08:29,560 --> 00:08:32,360 Speaker 3: week or the week after, so I think, yes, the 193 00:08:32,679 --> 00:08:35,840 Speaker 3: Japanese long end is what I'm watching. Because you know 194 00:08:35,880 --> 00:08:38,839 Speaker 3: that global term premiums are highly correlated. So you can 195 00:08:38,880 --> 00:08:41,280 Speaker 3: have no sell America, but you can have a global 196 00:08:41,360 --> 00:08:44,480 Speaker 3: term premiums have to be high and therefore all long 197 00:08:44,600 --> 00:08:48,000 Speaker 3: end sell off. So let's watch what do the Japanese 198 00:08:48,040 --> 00:08:48,720 Speaker 3: do around their. 199 00:08:48,600 --> 00:08:51,280 Speaker 4: Fiscal side, their fiscal situation. 200 00:08:51,000 --> 00:08:53,400 Speaker 3: Is not that bad actually so, but do they cut some. 201 00:08:53,400 --> 00:08:55,600 Speaker 4: Of that long end supply? What do we do in 202 00:08:55,600 --> 00:08:56,160 Speaker 4: the US. 203 00:08:56,240 --> 00:08:59,320 Speaker 3: You know, Secretary Besine can cut some long end supply, 204 00:08:59,440 --> 00:09:02,920 Speaker 3: I would say, market participant, there isn't that much demand 205 00:09:02,960 --> 00:09:05,600 Speaker 3: for the very long end, so maybe cut the twenty 206 00:09:05,760 --> 00:09:08,079 Speaker 3: got the thirty year. We have the treasury refunding next week, 207 00:09:08,280 --> 00:09:10,720 Speaker 3: which we'll be watching for any hints of that. So 208 00:09:11,080 --> 00:09:14,520 Speaker 3: is there a supply demand mismatch globally in the long 209 00:09:14,600 --> 00:09:17,640 Speaker 3: in perhaps? And that's where I think you know, there 210 00:09:17,640 --> 00:09:20,160 Speaker 3: could be some issuance shifts. But you're right, And so 211 00:09:20,200 --> 00:09:22,960 Speaker 3: this was a japange. It was a cell GGBIS rather 212 00:09:23,040 --> 00:09:23,880 Speaker 3: than a celiment. 213 00:09:24,000 --> 00:09:25,880 Speaker 5: I should clarify. I don't think you should be ignorant 214 00:09:25,880 --> 00:09:26,320 Speaker 5: of the risk. 215 00:09:26,400 --> 00:09:28,760 Speaker 2: I'm just sort of highlighting it's an observation, not a 216 00:09:28,840 --> 00:09:31,080 Speaker 2: judgment about where we go, just an observation of last week, 217 00:09:31,120 --> 00:09:33,880 Speaker 2: just how well the treasury market withstood some of this. 218 00:09:34,280 --> 00:09:36,040 Speaker 2: I do think there's a warning coming out of Japan 219 00:09:36,360 --> 00:09:39,200 Speaker 2: that ultimately, at some point, regardless of how big your 220 00:09:39,240 --> 00:09:41,480 Speaker 2: central bank, how big that role is in your market, 221 00:09:41,520 --> 00:09:44,640 Speaker 2: at some point the market will push back against the 222 00:09:44,640 --> 00:09:47,000 Speaker 2: government going too far, and I think that's something you've 223 00:09:47,000 --> 00:09:48,440 Speaker 2: got to keep on your radar for this year at 224 00:09:48,440 --> 00:09:49,880 Speaker 2: a time when we go into the midterms. So we've 225 00:09:49,880 --> 00:09:51,960 Speaker 2: heard all kinds of suggestions about how we boost this 226 00:09:51,960 --> 00:09:54,560 Speaker 2: economy in the US. My question, prayer would be, in fact, 227 00:09:54,559 --> 00:09:57,040 Speaker 2: my number one question would be why is the treasury 228 00:09:57,040 --> 00:09:59,560 Speaker 2: market so resilient in the face of all these risks? 229 00:09:59,559 --> 00:10:01,800 Speaker 2: Why is it standing up so wow? Why did it 230 00:10:01,840 --> 00:10:04,440 Speaker 2: perform so well relative to Japan last week? 231 00:10:04,800 --> 00:10:06,199 Speaker 4: I think it's the inflation story. 232 00:10:06,240 --> 00:10:09,720 Speaker 3: I mean, I maybe look at fundamentals in the inflation 233 00:10:09,960 --> 00:10:13,760 Speaker 3: trends broadly speaking are all heading lower, and that's going 234 00:10:13,800 --> 00:10:15,920 Speaker 3: to allow the Fed to cut. It's going to allow 235 00:10:16,040 --> 00:10:18,559 Speaker 3: the market to price in these rate cuts. And then 236 00:10:18,600 --> 00:10:20,480 Speaker 3: we look at further out the curve, you look at 237 00:10:20,559 --> 00:10:25,079 Speaker 3: term premium. It's actually risen significantly. We're getting paid up 238 00:10:25,640 --> 00:10:28,520 Speaker 3: much more today than over the last fifteen years to 239 00:10:28,640 --> 00:10:31,760 Speaker 3: extend out in duration. So investors like us will say, Okay, 240 00:10:31,760 --> 00:10:35,239 Speaker 3: we've broken out of the range. Maybe duration risk is attractive, 241 00:10:35,240 --> 00:10:37,960 Speaker 3: and maybe we should be buying some longer end treasuries, 242 00:10:38,640 --> 00:10:41,880 Speaker 3: you know, apart from you know, just buying credit. So 243 00:10:41,920 --> 00:10:44,240 Speaker 3: it's been a credit story at some point it's going 244 00:10:44,280 --> 00:10:46,200 Speaker 3: to be a duration story. So we saw it as 245 00:10:46,200 --> 00:10:49,040 Speaker 3: an opportunity to extend out the curve. I think that's 246 00:10:49,040 --> 00:10:51,000 Speaker 3: why that long end has been contained. 247 00:10:51,040 --> 00:10:51,640 Speaker 4: That's one. 248 00:10:52,040 --> 00:10:54,200 Speaker 3: The other one I would say that the president cares 249 00:10:54,240 --> 00:10:57,040 Speaker 3: about the long end. I mean, if housing affordability is 250 00:10:57,160 --> 00:10:58,240 Speaker 3: all about the tenure. 251 00:10:58,559 --> 00:11:00,040 Speaker 4: We've heard him last year talk. 252 00:11:00,040 --> 00:11:03,319 Speaker 3: But the yippie bond market Secretary Vestine was out there, 253 00:11:03,640 --> 00:11:06,559 Speaker 3: you know, talking to the Japanese officials the yen intervention, 254 00:11:07,080 --> 00:11:08,760 Speaker 3: you know. I think that tells you that there is 255 00:11:08,880 --> 00:11:12,400 Speaker 3: focus from the administration. When the bond market speaks, every 256 00:11:12,440 --> 00:11:14,720 Speaker 3: other market and the administration listen. 257 00:11:14,840 --> 00:11:16,200 Speaker 2: This is why I think so many people are so 258 00:11:16,240 --> 00:11:18,560 Speaker 2: much more comfortable with the dollar trade and pushing it 259 00:11:18,600 --> 00:11:21,160 Speaker 2: to be weaker. Because if you had total control of 260 00:11:21,200 --> 00:11:23,600 Speaker 2: the feder Reserve, there's one thing you can control, and 261 00:11:23,640 --> 00:11:26,680 Speaker 2: that's yields. You can just buy it. You can anchor yields. 262 00:11:26,720 --> 00:11:28,760 Speaker 2: Japan did that. They've shown us the playbook, and if 263 00:11:28,760 --> 00:11:31,040 Speaker 2: you're really worried about mortgage rates, you could pin the 264 00:11:31,040 --> 00:11:33,319 Speaker 2: long end of the curve down. What you can't control 265 00:11:33,400 --> 00:11:35,160 Speaker 2: is how the effects market would respond to that, and 266 00:11:35,160 --> 00:11:37,040 Speaker 2: we know how it would you'd be pushing a much 267 00:11:37,080 --> 00:11:39,000 Speaker 2: much weaker dollar, and that would be the release valve. 268 00:11:39,120 --> 00:11:41,040 Speaker 2: And I wonder if that's where the markets come around things. 269 00:11:41,080 --> 00:11:43,120 Speaker 2: Just thinking about the range of risks and a balance 270 00:11:43,120 --> 00:11:44,960 Speaker 2: of risk over the next twelve months, that that's the 271 00:11:45,040 --> 00:11:47,680 Speaker 2: easier trade to make here, just push through foreign exchange 272 00:11:47,960 --> 00:11:49,400 Speaker 2: compared to other asset classes. 273 00:11:49,840 --> 00:11:52,200 Speaker 3: I think relative to what the administration wants. I will 274 00:11:52,240 --> 00:11:54,080 Speaker 3: push back that the Fed is not going to buy 275 00:11:54,120 --> 00:11:56,320 Speaker 3: the longen just I'm selling off. 276 00:11:56,360 --> 00:11:59,000 Speaker 4: But really there's a supply issue. Maybe the treasure you 277 00:11:59,000 --> 00:11:59,760 Speaker 4: can issue. 278 00:11:59,559 --> 00:12:02,240 Speaker 3: Less, or people like us would say at some point, 279 00:12:02,320 --> 00:12:04,400 Speaker 3: I'm getting paid up. The curve is steep enough that 280 00:12:04,480 --> 00:12:06,319 Speaker 3: I'm going to move out the curve. It's a positive 281 00:12:06,360 --> 00:12:09,559 Speaker 3: carry trade now to be long duration as a hedge. 282 00:12:09,600 --> 00:12:10,439 Speaker 4: And that's the other thing. 283 00:12:10,480 --> 00:12:13,840 Speaker 3: Right with valuations where they are, I might want a 284 00:12:13,880 --> 00:12:16,640 Speaker 3: hedge here and the front end was extremely attractive and 285 00:12:16,679 --> 00:12:19,000 Speaker 3: you were getting five five and a half percent. Now, 286 00:12:19,120 --> 00:12:21,200 Speaker 3: well that front end is much lower. The Fed's cut 287 00:12:21,200 --> 00:12:25,400 Speaker 3: traits the tenure is a much better hedge to risk assets. 288 00:12:25,400 --> 00:12:27,760 Speaker 3: And I think that's why investors like us who are 289 00:12:27,760 --> 00:12:30,439 Speaker 3: buying credit, who think we're in a soft Landing will 290 00:12:30,480 --> 00:12:32,240 Speaker 3: say let's just hedge and buy a. 291 00:12:32,280 --> 00:12:34,800 Speaker 4: Little bit further out the curve. And even though it's 292 00:12:34,840 --> 00:12:35,120 Speaker 4: not the. 293 00:12:35,080 --> 00:12:37,920 Speaker 3: FED that's pinning, I think that demand starts to pin 294 00:12:37,960 --> 00:12:38,199 Speaker 3: that way. 295 00:12:38,280 --> 00:12:38,480 Speaker 5: Yeah. 296 00:12:38,480 --> 00:12:40,480 Speaker 2: No, my base case, we'll get yield curve control. I'll 297 00:12:40,480 --> 00:12:42,360 Speaker 2: throw that out there. I'm just saying from a market 298 00:12:42,400 --> 00:12:45,560 Speaker 2: participants perspective, I think right now they feel like there's 299 00:12:45,600 --> 00:12:48,080 Speaker 2: less resistance in foreign exchange than the resins, say the 300 00:12:48,080 --> 00:12:49,720 Speaker 2: bomb market trying to push you olds higher. 301 00:12:49,880 --> 00:12:51,080 Speaker 5: Just one way of thinking about things. 302 00:12:51,480 --> 00:12:54,960 Speaker 2: Stay with us. More Bloomberg Surveillance coming up after this. 303 00:13:04,160 --> 00:13:07,439 Speaker 2: Coming up tonight, programming note on Bloomberg TV nine pm 304 00:13:07,480 --> 00:13:10,960 Speaker 2: Eastern Time, the latest episode of The David Rubinstein Show 305 00:13:11,000 --> 00:13:14,120 Speaker 2: Peer to Peer Conversations. David joined us now for more. 306 00:13:14,160 --> 00:13:16,040 Speaker 2: Looking forward to this one with any David. Good to 307 00:13:16,040 --> 00:13:19,360 Speaker 2: see you, sir. The infamous dinner last week we bumped 308 00:13:19,400 --> 00:13:21,880 Speaker 2: into you at the World Economic Forum in Davos, Switzerland. 309 00:13:22,000 --> 00:13:22,600 Speaker 5: You're in the room. 310 00:13:23,000 --> 00:13:25,640 Speaker 2: I believe when COMMAS Secretary Howard Latnik delivered that speech, 311 00:13:25,640 --> 00:13:26,719 Speaker 2: how controversial was it? 312 00:13:27,640 --> 00:13:31,520 Speaker 6: Well, it was controversial, ixpect, but he didn't think it 313 00:13:31,520 --> 00:13:32,280 Speaker 6: was controversial. 314 00:13:32,400 --> 00:13:34,800 Speaker 7: It was a dinner. It was the welcoming dinner from. 315 00:13:34,640 --> 00:13:38,000 Speaker 6: The host of the or the chair of the word 316 00:13:38,000 --> 00:13:41,160 Speaker 6: Economic Forum, which is now co shared for at least 317 00:13:41,160 --> 00:13:44,040 Speaker 6: an interim period of time by two people, Larry Fink 318 00:13:44,080 --> 00:13:48,920 Speaker 6: and Andre's Hoffman from halfmandlll Roach family. And they had 319 00:13:48,920 --> 00:13:52,720 Speaker 6: about five speakers who spoke, and Howard Lutnik was the 320 00:13:52,800 --> 00:13:56,480 Speaker 6: last speaker who spoke, and it was something that got 321 00:13:56,520 --> 00:13:57,960 Speaker 6: people's attention, I'll put it that way. 322 00:13:58,200 --> 00:14:00,679 Speaker 1: Is it curious that he was the launch deliver this message? 323 00:14:00,720 --> 00:14:03,800 Speaker 4: The first time I ever met Howard Lutnik was at 324 00:14:03,880 --> 00:14:05,040 Speaker 4: Davos years. 325 00:14:04,800 --> 00:14:07,680 Speaker 1: Ago before he's a Treasury secretary's talking about the global elite. Well, 326 00:14:07,920 --> 00:14:10,880 Speaker 1: no offense, mister commerce secretary. But isn't he Wasn't he 327 00:14:10,960 --> 00:14:12,640 Speaker 1: part of one that now he now is saying he. 328 00:14:12,640 --> 00:14:13,439 Speaker 4: Just owns. 329 00:14:14,920 --> 00:14:18,480 Speaker 6: He is a unique figure, and I think he's gotten 330 00:14:18,520 --> 00:14:21,240 Speaker 6: a lot of leeway by the President that negotiate a 331 00:14:21,240 --> 00:14:23,480 Speaker 6: lot of these deals, and I think he's very much 332 00:14:23,600 --> 00:14:27,360 Speaker 6: enjoying the job. Being my impression, I co hosted a 333 00:14:27,440 --> 00:14:30,440 Speaker 6: lunch with Dina Pale later in the weekend. He came 334 00:14:30,480 --> 00:14:33,680 Speaker 6: to that lunch and spoke as well, and his message 335 00:14:33,720 --> 00:14:36,280 Speaker 6: is pretty consistent. So I think he's not got to change, 336 00:14:36,280 --> 00:14:38,240 Speaker 6: and you know, he's pretty happy in the job, and 337 00:14:38,240 --> 00:14:39,400 Speaker 6: I think the President seems. 338 00:14:39,120 --> 00:14:40,680 Speaker 1: To be happy with him, So that is a very 339 00:14:40,680 --> 00:14:42,480 Speaker 1: diplomatic answer overall. 340 00:14:42,520 --> 00:14:45,720 Speaker 4: What did you make of this year's Davos, Well, it was. 341 00:14:45,720 --> 00:14:49,160 Speaker 6: A transition because Klaus Schwab, who built it more than 342 00:14:49,160 --> 00:14:51,240 Speaker 6: fifty years ago, it was no longer the chair. He 343 00:14:51,320 --> 00:14:55,280 Speaker 6: wasn't there, and so they had new leadership. I think 344 00:14:55,520 --> 00:14:57,800 Speaker 6: there were more CEOs than they've ever had before, they 345 00:14:57,840 --> 00:15:00,400 Speaker 6: had more foreign leaders. Virtually every European leader showed up. 346 00:15:00,440 --> 00:15:02,760 Speaker 6: And clearly when the president United State shows up, it 347 00:15:02,840 --> 00:15:05,480 Speaker 6: tends to dominate the news. And a lot of people 348 00:15:05,680 --> 00:15:08,600 Speaker 6: stood just watching President Trump's speech for an hour or 349 00:15:08,640 --> 00:15:11,200 Speaker 6: so and everybody was waiting for the punchline. And the 350 00:15:11,200 --> 00:15:14,400 Speaker 6: punchline that people were expecting didn't show up, which was 351 00:15:14,400 --> 00:15:16,680 Speaker 6: that he was going to use military force. That didn't 352 00:15:16,680 --> 00:15:18,720 Speaker 6: show up. So that was the big news, and I 353 00:15:18,720 --> 00:15:20,480 Speaker 6: think people were relieved about that. 354 00:15:20,520 --> 00:15:20,920 Speaker 7: Generally. 355 00:15:21,080 --> 00:15:23,080 Speaker 2: I welcomed some of the developments in the last week. 356 00:15:23,080 --> 00:15:25,560 Speaker 2: It just felt like corporate America's shifted away from virtue, 357 00:15:25,560 --> 00:15:28,080 Speaker 2: say they think, and we're just focused on business now. 358 00:15:28,280 --> 00:15:30,080 Speaker 2: Is that your sense of a shift as well. Did 359 00:15:30,120 --> 00:15:31,280 Speaker 2: you witness that last week? 360 00:15:31,920 --> 00:15:36,120 Speaker 6: Well after the Greenland thing kind of went away a bit, 361 00:15:36,480 --> 00:15:39,600 Speaker 6: people are focused on the FED, and though as you 362 00:15:39,680 --> 00:15:41,720 Speaker 6: pointed out already, the Fed's decision is pretty much as 363 00:15:41,720 --> 00:15:44,640 Speaker 6: well known for today. And then people are looking at 364 00:15:44,680 --> 00:15:47,600 Speaker 6: earnings and people are wondering where the deficit is going 365 00:15:47,800 --> 00:15:49,880 Speaker 6: debt the US and also whether there's going to be 366 00:15:49,920 --> 00:15:53,000 Speaker 6: a government shutdown. And I think I think both sides 367 00:15:53,040 --> 00:15:55,400 Speaker 6: and the Republicans Democrats do not want to shut down. 368 00:15:55,760 --> 00:15:58,560 Speaker 6: They are really trying hard to avoid a shutdown. I 369 00:15:58,600 --> 00:15:59,680 Speaker 6: suspect they will avoid it. 370 00:15:59,720 --> 00:16:01,600 Speaker 5: Some we don't want to shut down. 371 00:16:01,680 --> 00:16:05,640 Speaker 2: We've seen all the headlines about South America in financial markets, 372 00:16:05,880 --> 00:16:08,880 Speaker 2: but then I listen to the CEOs in America and 373 00:16:08,960 --> 00:16:12,200 Speaker 2: the global CEOs as well, who are investing in America. 374 00:16:12,320 --> 00:16:14,600 Speaker 2: Do you sense a disconnect between the headlines and where 375 00:16:14,640 --> 00:16:15,720 Speaker 2: the money's going at the moment. 376 00:16:16,960 --> 00:16:18,920 Speaker 6: Well, there's no doubt that people are a little more 377 00:16:18,960 --> 00:16:22,920 Speaker 6: nervous about investing in America than maybe people would like 378 00:16:23,000 --> 00:16:24,760 Speaker 6: who are trying to get them to invest in America 379 00:16:24,800 --> 00:16:27,080 Speaker 6: because there is some concern about the dollar going down. 380 00:16:28,160 --> 00:16:29,600 Speaker 6: You know, if you invest in the United States and 381 00:16:29,640 --> 00:16:31,640 Speaker 6: the dollar goes down, the value of your investment. 382 00:16:31,360 --> 00:16:32,800 Speaker 7: Obviously is not as good as you thought. 383 00:16:33,120 --> 00:16:35,920 Speaker 6: But it's not been the major cause of concern for 384 00:16:35,920 --> 00:16:38,400 Speaker 6: foreign investors. They're just worried about where the US government 385 00:16:38,480 --> 00:16:42,120 Speaker 6: is going. It's very hard to predict where the US 386 00:16:42,200 --> 00:16:44,480 Speaker 6: government is going. For a lot of foreign investors. People 387 00:16:44,560 --> 00:16:47,800 Speaker 6: want usit. People predictability. Tell me what the rules are, 388 00:16:47,960 --> 00:16:50,480 Speaker 6: and I will follow the rules, and sometimes the rules 389 00:16:50,520 --> 00:16:53,200 Speaker 6: are unpredictable or they change a lot. So to the 390 00:16:53,200 --> 00:16:56,160 Speaker 6: extent that there's consistency, I think more and more people 391 00:16:56,160 --> 00:16:59,120 Speaker 6: will invest in the US, But the extent that there's inconsistency, 392 00:16:59,280 --> 00:17:01,000 Speaker 6: people will pull back back a bit. And particularly the 393 00:17:01,000 --> 00:17:02,160 Speaker 6: dollar is an issue as well. 394 00:17:02,240 --> 00:17:05,760 Speaker 1: But that's that's Trump and a nutshell, uncertainty is a 395 00:17:05,800 --> 00:17:08,800 Speaker 1: feature of him. That is what he does. And now 396 00:17:08,800 --> 00:17:12,160 Speaker 1: it's an election year. So what kind of unpredictability can 397 00:17:12,200 --> 00:17:13,760 Speaker 1: we see this year alone? 398 00:17:14,240 --> 00:17:18,359 Speaker 6: Well, I can't predict the unpredictability of the leadership of 399 00:17:18,400 --> 00:17:20,199 Speaker 6: the government, but I would say there are a lot 400 00:17:20,240 --> 00:17:23,080 Speaker 6: of issues that people are worried about. And right now, 401 00:17:23,119 --> 00:17:25,200 Speaker 6: I would say the US economy seems to be doing 402 00:17:25,320 --> 00:17:27,800 Speaker 6: pretty well. I think growth is pretty good. Inflation's pretty 403 00:17:27,840 --> 00:17:29,840 Speaker 6: much under control relatively speak. It's not going to be 404 00:17:29,840 --> 00:17:33,280 Speaker 6: a two percent, and unemployment is at a tolerable level. 405 00:17:33,320 --> 00:17:35,000 Speaker 7: It's not as low as we might. 406 00:17:34,920 --> 00:17:37,840 Speaker 6: Want, but generally the economy is in pretty good shape. 407 00:17:37,880 --> 00:17:40,040 Speaker 6: And whatever people might say about Jay Pow, and I'm 408 00:17:40,040 --> 00:17:42,879 Speaker 6: a big supporter of his, we haven't had a recession 409 00:17:43,280 --> 00:17:46,359 Speaker 6: under j Poal's leadership. Normally, fed shares get often get 410 00:17:46,359 --> 00:17:49,200 Speaker 6: blamed for recessions. Other people get blamed too, But he's 411 00:17:49,240 --> 00:17:51,320 Speaker 6: had to increase interest rates a deal with high inflation, 412 00:17:51,400 --> 00:17:53,840 Speaker 6: and he's had to lower them when when inflation came back. 413 00:17:53,920 --> 00:17:56,400 Speaker 6: And normally when you increase and you decrease, you get 414 00:17:56,640 --> 00:17:58,600 Speaker 6: some kind of recession along the way. We haven't had 415 00:17:58,600 --> 00:18:01,919 Speaker 6: a recession. So he's done a pretty good job neving. 416 00:18:01,720 --> 00:18:02,360 Speaker 4: Known the man. 417 00:18:02,480 --> 00:18:05,200 Speaker 1: Do you think he's going to entertain any questions stay 418 00:18:05,240 --> 00:18:08,800 Speaker 1: regarding will he stay on after his chairmanship or the 419 00:18:08,840 --> 00:18:12,359 Speaker 1: more sort of stance he's taken against the White House. 420 00:18:12,880 --> 00:18:14,679 Speaker 6: I don't want to pretend to speak for him, but 421 00:18:14,720 --> 00:18:16,920 Speaker 6: I would be surprised if he said anything other than 422 00:18:16,960 --> 00:18:19,520 Speaker 6: here's what we did today. 423 00:18:19,560 --> 00:18:20,000 Speaker 4: Boring. 424 00:18:20,920 --> 00:18:24,040 Speaker 6: But it's actually interesting because when you had previous fed shares. 425 00:18:24,280 --> 00:18:25,879 Speaker 6: They didn't tell you what they were going to do 426 00:18:25,920 --> 00:18:28,400 Speaker 6: in advance, and they didn't explain it thirty minutes later. 427 00:18:28,600 --> 00:18:30,200 Speaker 7: He doesn't. In English, you can. 428 00:18:30,160 --> 00:18:33,520 Speaker 6: Understand, So I think to his credit, he actually explains 429 00:18:33,520 --> 00:18:35,880 Speaker 6: what he's doing and people can understand it. Many times, 430 00:18:35,920 --> 00:18:38,200 Speaker 6: the Fed never actually had press conferences before, so I 431 00:18:38,200 --> 00:18:41,600 Speaker 6: think he's done a pretty good job, and I suspect 432 00:18:41,600 --> 00:18:45,520 Speaker 6: in the end he will announce at the appropriate time 433 00:18:45,560 --> 00:18:46,159 Speaker 6: what he's going to do. 434 00:18:46,440 --> 00:18:48,119 Speaker 2: He has no green span, that's for sure. It's a 435 00:18:48,160 --> 00:18:50,200 Speaker 2: very different communications now, without a doubt. 436 00:18:50,240 --> 00:18:53,159 Speaker 6: It's different than Alan green Spanner or Paul Bolker. They 437 00:18:53,200 --> 00:18:56,000 Speaker 6: were more, I would say, difficult to understand. 438 00:18:56,200 --> 00:18:58,679 Speaker 2: David tons of vult acidity around this institution. I've been 439 00:18:58,720 --> 00:19:01,640 Speaker 2: surprised by how it hasn't really been consequential at two 440 00:19:01,880 --> 00:19:05,160 Speaker 2: in financial markets. I struggled to find a read through 441 00:19:05,200 --> 00:19:08,200 Speaker 2: from the volatility around the institution and how it's rippling 442 00:19:08,240 --> 00:19:10,479 Speaker 2: through financial markets. In fact, the treasury market has been 443 00:19:10,560 --> 00:19:12,720 Speaker 2: very resilient in the face of a lot of risk. 444 00:19:13,040 --> 00:19:16,119 Speaker 2: As a market participant like yourself, what's your conclusion as 445 00:19:16,160 --> 00:19:17,040 Speaker 2: you see that play out? 446 00:19:17,840 --> 00:19:21,920 Speaker 6: Well, I think people are unclear where the government policy 447 00:19:22,000 --> 00:19:25,040 Speaker 6: is in some areas, and therefore they are hesitant about 448 00:19:25,040 --> 00:19:27,960 Speaker 6: making some long term commitments. But on the whole, the 449 00:19:27,960 --> 00:19:30,280 Speaker 6: business community is more or less supportive of what the 450 00:19:30,280 --> 00:19:32,600 Speaker 6: federal government is doing. I mean, most of the CEOs 451 00:19:32,840 --> 00:19:34,680 Speaker 6: are more or less in line. I mean they don't 452 00:19:34,680 --> 00:19:37,800 Speaker 6: agree with everything the administration is doing, but they recognize 453 00:19:37,800 --> 00:19:40,960 Speaker 6: that there's less regulation than there was before. It's easier 454 00:19:40,960 --> 00:19:43,760 Speaker 6: to get a decision about mergers or acquisitions than it 455 00:19:43,840 --> 00:19:46,280 Speaker 6: might have been before. So I think some business people 456 00:19:46,440 --> 00:19:48,880 Speaker 6: are pleased with it. But some business people are basically 457 00:19:48,960 --> 00:19:50,959 Speaker 6: doing what they need to do to help their company, 458 00:19:50,960 --> 00:19:52,960 Speaker 6: but they may not personally believe in everything that the 459 00:19:52,960 --> 00:19:53,720 Speaker 6: president is doing. 460 00:19:54,119 --> 00:19:57,600 Speaker 2: Stay with us more Bloomberg surveillance coming up after this. 461 00:20:07,000 --> 00:20:09,439 Speaker 2: So if you're sitting here thinking the president could announce 462 00:20:09,440 --> 00:20:12,080 Speaker 2: this morning, and let's say he did, when you start 463 00:20:12,080 --> 00:20:15,680 Speaker 2: thinking about the confirmation process, the senator from North Carolina 464 00:20:15,800 --> 00:20:17,919 Speaker 2: is telling you he's not going to get up and 465 00:20:17,920 --> 00:20:19,840 Speaker 2: open the door and let people through anytime soon. 466 00:20:19,920 --> 00:20:21,399 Speaker 1: No, which is why if you're the president of the 467 00:20:21,440 --> 00:20:24,600 Speaker 1: United States and you heard our interview with Senator Tom Tillis, 468 00:20:24,720 --> 00:20:26,879 Speaker 1: you're thinking, why would I make an announcement? 469 00:20:26,960 --> 00:20:27,480 Speaker 4: So soon. 470 00:20:27,960 --> 00:20:30,040 Speaker 1: You want to potentially wait till you know the DOJ 471 00:20:30,200 --> 00:20:32,600 Speaker 1: investigation to Powell is going to be wrapped up, because 472 00:20:32,640 --> 00:20:34,679 Speaker 1: Tillis is not moving until that moment. 473 00:20:34,920 --> 00:20:37,199 Speaker 2: Tober Marcus of Wolf Research has this to say, Rick 474 00:20:37,280 --> 00:20:40,160 Speaker 2: Reader is now viewed as the odds on fed chair favorite. 475 00:20:40,280 --> 00:20:44,040 Speaker 2: We're unconvinced. We think both Kevins are still strong possibilities. 476 00:20:44,080 --> 00:20:46,399 Speaker 2: Topin joins us Now for more, Tobin, I want your 477 00:20:46,480 --> 00:20:49,080 Speaker 2: view on what is just holding things up here? Why 478 00:20:49,160 --> 00:20:50,919 Speaker 2: is the President dragging his feet when he's told us 479 00:20:50,920 --> 00:20:52,479 Speaker 2: for quite a while he knows who it is. 480 00:20:53,920 --> 00:20:56,840 Speaker 8: Well, you know, I think he's still trying to find 481 00:20:56,960 --> 00:20:59,480 Speaker 8: the best option among a set of options, none of 482 00:20:59,480 --> 00:21:04,640 Speaker 8: whom off exactly what he wants. Reader, the current perceived favorite, 483 00:21:04,800 --> 00:21:07,080 Speaker 8: has a lot to recommend him, but he certainly is 484 00:21:07,080 --> 00:21:10,119 Speaker 8: not a Trump loyalized by any stretch. As Tyler was 485 00:21:10,200 --> 00:21:13,800 Speaker 8: just discussing, there's this issue about his political donations. With 486 00:21:13,920 --> 00:21:16,040 Speaker 8: him now sort of in the spotlight for the first time, 487 00:21:16,119 --> 00:21:18,280 Speaker 8: I think you're going to see knives come out for 488 00:21:18,359 --> 00:21:21,320 Speaker 8: him a little bit. Larry Cobo yesterday published an op 489 00:21:21,440 --> 00:21:24,000 Speaker 8: ed essentially saying don't pick him. Pick one of the Kevins, 490 00:21:25,240 --> 00:21:26,760 Speaker 8: And you know, I think in a similar way to 491 00:21:26,800 --> 00:21:29,639 Speaker 8: how when Hassett was the perceived front runner, that's when 492 00:21:29,640 --> 00:21:31,960 Speaker 8: the White House started to get pushed back about the 493 00:21:32,000 --> 00:21:34,919 Speaker 8: potential bond market concerns. You could see there, So you know, 494 00:21:35,080 --> 00:21:37,080 Speaker 8: I think he's cycling through his options and doesn't see 495 00:21:37,119 --> 00:21:38,639 Speaker 8: anything that he's completely compelled by. 496 00:21:38,960 --> 00:21:42,119 Speaker 1: I loved your note readering the tea leaves when it 497 00:21:42,119 --> 00:21:44,960 Speaker 1: comes to the tea leaves. So the discussion Jonathan and 498 00:21:45,000 --> 00:21:48,080 Speaker 1: I just had about Senator Tom tillis, do you think 499 00:21:48,119 --> 00:21:50,360 Speaker 1: that is why this administration doesn't feel. 500 00:21:50,160 --> 00:21:52,560 Speaker 4: Any urgency right now to have their pick. 501 00:21:53,960 --> 00:21:56,120 Speaker 8: I think Trump is mostly I think the biggest hold 502 00:21:56,160 --> 00:21:58,639 Speaker 8: up is the decision making process itself. And I do 503 00:21:58,680 --> 00:22:01,520 Speaker 8: think that Trump is still trying to and you know, 504 00:22:01,640 --> 00:22:05,919 Speaker 8: the best person, with none of them being perfect. You 505 00:22:05,960 --> 00:22:08,440 Speaker 8: know that being said, I till us completely at face 506 00:22:08,560 --> 00:22:11,800 Speaker 8: value that the pro by DCUs Attorney Puro is going 507 00:22:11,840 --> 00:22:14,600 Speaker 8: to need to be wrapped up and resolved definitively before 508 00:22:14,640 --> 00:22:15,919 Speaker 8: he's going to be willing to let any of these 509 00:22:15,920 --> 00:22:16,480 Speaker 8: people through. 510 00:22:16,880 --> 00:22:17,640 Speaker 7: I think the view that. 511 00:22:17,600 --> 00:22:21,080 Speaker 8: Reader has some confirmation edge is basically wrong. I think 512 00:22:21,119 --> 00:22:24,359 Speaker 8: once you get tillissatisfied about that probe, and to Powell, 513 00:22:24,600 --> 00:22:26,640 Speaker 8: none of these individuals are going to have any trouble 514 00:22:26,680 --> 00:22:29,520 Speaker 8: getting through the Senate Republican caucus. Hasset's the person that 515 00:22:29,680 --> 00:22:32,280 Speaker 8: markets have is concerned about. But he's been working in 516 00:22:32,280 --> 00:22:35,520 Speaker 8: Republican politics for decades. He has very strong positive relationships 517 00:22:35,560 --> 00:22:38,119 Speaker 8: across the Senate Republican Caucus. So, you know, the notion 518 00:22:38,200 --> 00:22:41,080 Speaker 8: that you could get reader through but not some alternative 519 00:22:41,119 --> 00:22:42,480 Speaker 8: I think is fairly wrongheaded. 520 00:22:42,680 --> 00:22:45,320 Speaker 1: You're pointing to something I read this morning the Wall 521 00:22:45,320 --> 00:22:47,439 Speaker 1: Street Journal about the fact the president is looking for 522 00:22:47,480 --> 00:22:49,720 Speaker 1: something maybe he won't ever find. You're talking about this 523 00:22:49,720 --> 00:22:53,240 Speaker 1: perfect candidate, this unicorn. What does that entail? Can you 524 00:22:53,280 --> 00:22:55,280 Speaker 1: define for us who that would be in front of 525 00:22:55,280 --> 00:22:56,240 Speaker 1: this president's eyes? 526 00:22:57,280 --> 00:22:57,480 Speaker 5: Yeah? 527 00:22:57,520 --> 00:23:00,000 Speaker 8: I mean he just last week at Davos was very 528 00:23:00,040 --> 00:23:04,480 Speaker 8: very forward and very explicit about wanting loyalty. He specifically 529 00:23:04,480 --> 00:23:07,320 Speaker 8: complained about disloyalty in those words. He talked about, all 530 00:23:07,320 --> 00:23:09,800 Speaker 8: these people seem great until you nominate them, and then 531 00:23:09,800 --> 00:23:12,200 Speaker 8: they start making decisions that you don't like. They start cut, 532 00:23:12,280 --> 00:23:15,120 Speaker 8: you know, hiking rinks when he thinks it's inappropriate. That's 533 00:23:15,160 --> 00:23:17,720 Speaker 8: the exact criticism He's leveled at Powell, who also came 534 00:23:17,760 --> 00:23:20,639 Speaker 8: in with sort of recommendations from Trump's economic staff, but 535 00:23:20,720 --> 00:23:23,879 Speaker 8: without that personal personal relationship, and he of course has 536 00:23:23,920 --> 00:23:25,960 Speaker 8: regretted that decision. So I think you want someone who 537 00:23:25,960 --> 00:23:27,840 Speaker 8: you can rely on in that way and who's going 538 00:23:27,880 --> 00:23:30,640 Speaker 8: to listen to his views as he continues to articulate them, 539 00:23:30,760 --> 00:23:33,879 Speaker 8: but also someone who brings, you know, bond marketr credibility 540 00:23:33,920 --> 00:23:37,280 Speaker 8: and doesn't raise acute concerns about FED independence and those 541 00:23:37,440 --> 00:23:38,639 Speaker 8: the there's a deep tension. 542 00:23:38,359 --> 00:23:40,200 Speaker 2: Between this toom Saba, and we've got to keep around 543 00:23:40,240 --> 00:23:42,600 Speaker 2: the geopolitics as well. This from the President just moments 544 00:23:42,640 --> 00:23:45,320 Speaker 2: ago on social media or statement from him, A massive 545 00:23:45,359 --> 00:23:47,800 Speaker 2: armado is heading to Iran. It is moving quickly with 546 00:23:47,840 --> 00:23:51,160 Speaker 2: great power, enthusiasm, and purpose. It is a larger fleet 547 00:23:51,200 --> 00:23:54,359 Speaker 2: headed by the great aircraft carrier Abraham Lincoln. Then that 548 00:23:54,480 --> 00:23:57,560 Speaker 2: sense of Venezuela. Like with Venezuela, it is ready willing 549 00:23:57,640 --> 00:24:00,439 Speaker 2: and able to rapidly fulfill its mission and with speed 550 00:24:00,880 --> 00:24:03,720 Speaker 2: and violence if necessary. Hopefully Iron will quickly come to 551 00:24:03,720 --> 00:24:06,840 Speaker 2: the table and negotiate a fair and equitable deal, no 552 00:24:07,000 --> 00:24:09,560 Speaker 2: nickel weapons, one that is good for all parties. 553 00:24:09,640 --> 00:24:12,560 Speaker 5: Time it's running down. It is truly of the essence. 554 00:24:12,600 --> 00:24:14,560 Speaker 1: So the President is saying he wants Iron to make 555 00:24:14,600 --> 00:24:17,520 Speaker 1: a deal. He then also continues to talk about the 556 00:24:17,560 --> 00:24:19,440 Speaker 1: fact that they didn't make a deal and there was 557 00:24:19,520 --> 00:24:23,919 Speaker 1: quote Operation Midnight Hammer, which we saw last year. The 558 00:24:23,920 --> 00:24:27,080 Speaker 1: President right now is setting almost a red line, come 559 00:24:27,119 --> 00:24:29,959 Speaker 1: to the table or I am prepared and I have 560 00:24:30,080 --> 00:24:32,240 Speaker 1: my toys out there in the sea ready to go, 561 00:24:32,520 --> 00:24:34,920 Speaker 1: and I am prepared to strike if Tehran does not 562 00:24:35,560 --> 00:24:36,680 Speaker 1: feel willing to engage. 563 00:24:36,720 --> 00:24:37,160 Speaker 5: It's open. 564 00:24:37,240 --> 00:24:39,640 Speaker 2: How likely is it that we take on another kind 565 00:24:39,680 --> 00:24:41,479 Speaker 2: of military front in Iran? 566 00:24:43,840 --> 00:24:44,920 Speaker 5: I think fairly likely. 567 00:24:45,400 --> 00:24:47,680 Speaker 8: The President sure seemed like he was leaning towards intervening 568 00:24:47,720 --> 00:24:49,480 Speaker 8: when the protests were at their apex a couple of 569 00:24:49,520 --> 00:24:50,040 Speaker 8: weeks ago. 570 00:24:50,480 --> 00:24:51,520 Speaker 5: At the time, I think the. 571 00:24:51,520 --> 00:24:53,560 Speaker 8: Lack of military assets in the region was one of 572 00:24:53,560 --> 00:24:55,800 Speaker 8: the obstacles to doing that, along with some concerns from 573 00:24:55,840 --> 00:24:58,840 Speaker 8: regional allies, along with I think some real questions about 574 00:24:58,840 --> 00:25:02,200 Speaker 8: what efficacious targets look like. Unlike in Midnight Hammer, where 575 00:25:02,200 --> 00:25:04,480 Speaker 8: it was very obviously we were targeting the nuclear facilities, 576 00:25:04,640 --> 00:25:06,960 Speaker 8: if you're trying to degrade their abilities to oppress the 577 00:25:07,280 --> 00:25:11,280 Speaker 8: domestic political opposition, what are you strike police barracks, Like, 578 00:25:11,280 --> 00:25:13,720 Speaker 8: I don't think anyone really believes that it's a capitation 579 00:25:13,800 --> 00:25:16,600 Speaker 8: strike against Comanity if they can even find him, would 580 00:25:16,680 --> 00:25:19,000 Speaker 8: result in regime change. I think ultimately is what the 581 00:25:19,000 --> 00:25:22,879 Speaker 8: president wants here. So you know, he sure seems to 582 00:25:22,920 --> 00:25:25,720 Speaker 8: be wanting to strike. I think at a minimum, he's 583 00:25:25,840 --> 00:25:28,760 Speaker 8: very focused on creating that optionality and leverage to be 584 00:25:28,800 --> 00:25:31,360 Speaker 8: able to pursue a range of options. That it does 585 00:25:31,600 --> 00:25:33,600 Speaker 8: seem like some kind of strikes eventually. 586 00:25:33,440 --> 00:25:34,920 Speaker 4: Or likely tobn to that point. 587 00:25:35,119 --> 00:25:38,040 Speaker 1: Even if the United States were to get rid of Hamoni, 588 00:25:38,560 --> 00:25:40,520 Speaker 1: doesn't the regime still continue? 589 00:25:41,920 --> 00:25:42,160 Speaker 4: Yeah. 590 00:25:42,320 --> 00:25:44,800 Speaker 8: I think the only way that you see actual regime 591 00:25:44,880 --> 00:25:48,280 Speaker 8: change it's kind of cascading defections among the security elite, 592 00:25:48,320 --> 00:25:50,800 Speaker 8: and we've seen no sign of that whatsoever. Generally, that 593 00:25:50,880 --> 00:25:54,680 Speaker 8: happens when they're asked to fire on protesters, like if 594 00:25:54,680 --> 00:25:56,520 Speaker 8: they refuse to do so, that's when you can start 595 00:25:56,520 --> 00:25:59,040 Speaker 8: to see elite defections. And of course they just massacred 596 00:25:59,240 --> 00:26:01,680 Speaker 8: thousands of civilians who were protesting in the street. So 597 00:26:01,680 --> 00:26:03,000 Speaker 8: I think if we were going to see it, we 598 00:26:03,040 --> 00:26:05,600 Speaker 8: would have seen it. Replacing one person at the head 599 00:26:05,600 --> 00:26:08,359 Speaker 8: of the regime. I just don't think there's any plausible 600 00:26:08,720 --> 00:26:10,639 Speaker 8: scenario by which that would result in the entire regime 601 00:26:10,680 --> 00:26:11,120 Speaker 8: turning over. 602 00:26:12,040 --> 00:26:15,560 Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best 603 00:26:15,640 --> 00:26:18,960 Speaker 2: in markets, economics, and geopolitics. You can watch the show 604 00:26:19,000 --> 00:26:21,960 Speaker 2: live on Bloomberg TV weekday mornings from six am to 605 00:26:22,080 --> 00:26:25,840 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify, 606 00:26:26,000 --> 00:26:28,200 Speaker 2: or anywhere else you listen, and as always, on the 607 00:26:28,240 --> 00:26:30,680 Speaker 2: Bloomberg Terminal and the Bloomberg Business app.