WEBVTT - Ain’t Nothin’ But a G-20 Thang 0:00:13.360 --> 0:00:16.200 Hello, and welcome to What Goes Up, a Bloomberg Weekly 0:00:16.280 --> 0:00:19.639 Markets podcast. I'm Sarah Ponzac, a market supporter on the 0:00:19.680 --> 0:00:22.360 Cross Asset Team, and I am Mike Reagan, a senior 0:00:22.480 --> 0:00:24.840 editor on the Markets Team. This week on the show, 0:00:25.079 --> 0:00:28.319 the much awaited G twenty meeting is finally here and 0:00:28.360 --> 0:00:30.560 President Trump and she J and Ping are set to 0:00:30.640 --> 0:00:34.000 meet to discuss trade. We'll run through what investors are expecting, 0:00:34.400 --> 0:00:37.640 if the outlook is maybe a bit too optimistic, and 0:00:37.680 --> 0:00:41.240 what market reaction could actually look like. And Sarah, I'm excited. 0:00:41.240 --> 0:00:43.120 I know our producer to Fur gets annoyed when I 0:00:43.159 --> 0:00:45.520 say I'm excited because I'm basically excited every every single 0:00:45.720 --> 0:00:48.280 every single week. But it's podcast day, so I'm excited 0:00:48.320 --> 0:00:52.320 for that. But also because our favorite segment, the Craziest 0:00:52.360 --> 0:00:54.480 Thing I Ever saw in Markets this week, has become 0:00:54.480 --> 0:00:58.120 more interactive. We've gotten some crazy market things via Twitter 0:00:58.640 --> 0:01:00.600 and from some people in how so at the end 0:01:00.640 --> 0:01:02.160 of the show will go through them all. But I'm 0:01:02.160 --> 0:01:05.480 excited about that. Also excited about our two guests here 0:01:05.600 --> 0:01:09.200 joining us UH this week, Mark Hackett, chief of investment 0:01:09.240 --> 0:01:13.600 research at Nationwide Funds Group, Mark Does Peyton Manning come 0:01:13.600 --> 0:01:17.000 around your office, so picture one and around you know, Yeah, 0:01:17.240 --> 0:01:19.240 it's it's it's a pretty Uh. He was at the 0:01:20.080 --> 0:01:23.240 Total Company meeting last year, so he comes once in 0:01:23.240 --> 0:01:24.880 a while. But I'm sure it's a pretty big jack. 0:01:25.000 --> 0:01:26.760 He really does come around. He ever goes. That's a 0:01:26.840 --> 0:01:33.280 first rate has to come with Brad Peasley. Alright, I 0:01:33.280 --> 0:01:36.880 promised no more singing, but fortunately we have an accomplished 0:01:37.000 --> 0:01:41.000 vocalist joining us as well, Ye She of Bloomberg Markets Live, 0:01:41.080 --> 0:01:43.560 who made his singing debut last time on the podcast, 0:01:43.880 --> 0:01:45.840 singing the theme song of the Bond Market. I don't 0:01:45.880 --> 0:01:47.920 know you do you have a song for us this week? Now? 0:01:48.120 --> 0:01:51.160 This week? Um, but I'm hoping to publish an album. 0:01:51.280 --> 0:01:57.040 You know, he's just derived an album, and Sarah, it's 0:01:57.040 --> 0:02:00.200 bittersweet because he's going to be leaving us soon for 0:02:00.240 --> 0:02:03.960 a temporary assignment in Hong Kong. So this last time 0:02:03.960 --> 0:02:05.600 I'll get to talk him for a while, so you 0:02:05.640 --> 0:02:08.239 better make it good. Yeah, happy to have you. Always 0:02:08.240 --> 0:02:11.920 count on you. But Mark, why don't we start with 0:02:12.320 --> 0:02:15.800 what is actually expected this week? Of course, this podcast 0:02:15.840 --> 0:02:18.520 comes out on Friday's. The G twenty meeting is extending 0:02:18.520 --> 0:02:21.600 through the weekend. So anyone feel free to make fun 0:02:21.800 --> 0:02:24.400 of Mike and I if we are very off, but 0:02:24.720 --> 0:02:26.919 we want to get your take what you're actually expecting 0:02:27.040 --> 0:02:29.760 going into this meeting as it relates to trade between 0:02:29.800 --> 0:02:31.760 the U S And China. Well, it's funny because if 0:02:31.760 --> 0:02:33.320 you look at the news, the news seems to be 0:02:33.360 --> 0:02:36.280 suggesting that the expectations are pretty modest. You know, there's 0:02:36.320 --> 0:02:39.080 the meeting is gonna go okay as an outcome of that, 0:02:39.120 --> 0:02:41.919 we're going to be leading towards further discussion. I think 0:02:41.960 --> 0:02:45.240 the expectations that we get any meaningful outcome from from 0:02:45.320 --> 0:02:48.240 this weekend's meeting is pretty low. But the market seems 0:02:48.280 --> 0:02:53.040 to be embedding some pretty reasonable, reasonably optimistic expectations. You know, 0:02:53.280 --> 0:02:55.360 when when there's good news, the market goes up a 0:02:55.360 --> 0:02:57.320 little bit, When there's nervousness, the market goes down a 0:02:57.360 --> 0:02:59.360 little bit more So, I think there's a little bit 0:02:59.360 --> 0:03:03.280 of an asymmetri bet with the market on the outcome 0:03:03.320 --> 0:03:06.600 of this meeting. So there's there's perhaps more more risk 0:03:06.639 --> 0:03:08.760 of the downside than there is to the upside. That's 0:03:08.760 --> 0:03:10.880 a great point, you know, I keep asking people how 0:03:10.919 --> 0:03:13.280 would you define success at this meeting? Is it just 0:03:13.360 --> 0:03:16.079 a photo op and a handshake, that sort of thing, 0:03:16.120 --> 0:03:18.679 no angry tweets for for them for eight hours of 0:03:18.720 --> 0:03:20.239 the weekend. I mean, is that is that a fair 0:03:20.240 --> 0:03:22.920 assessment of the best we can hope for? Yeah, I mean, 0:03:22.960 --> 0:03:26.800 the the total breakdown of of discussions and the you know, 0:03:26.919 --> 0:03:29.920 the further threats of tariffs as an outcome of this 0:03:29.960 --> 0:03:32.960 would be a disaster frankly, but I think most people 0:03:33.000 --> 0:03:35.960 are thinking at this point it's gonna be no massive, 0:03:36.160 --> 0:03:39.760 you know, revelations, but also you know, no disaster as well. 0:03:39.800 --> 0:03:43.200 I mean you hear Minutan's discussion earlier this week of 0:03:43.480 --> 0:03:47.040 we're there, Well, we were there, you know, just a 0:03:47.040 --> 0:03:49.280 couple of months ago. So I think those numbers are 0:03:49.320 --> 0:03:52.080 probably a little bit of a of a guestimate at 0:03:52.080 --> 0:03:54.920 this point. So yeah, I think we're probably a little 0:03:54.960 --> 0:03:58.640 bit less towards the finish line than than most people 0:03:58.640 --> 0:04:00.880 probably think. And well, we got the headlines form anution. 0:04:00.920 --> 0:04:02.720 It seemed like there was a little bit of confusion 0:04:02.760 --> 0:04:05.880 in markets because immediately we saw a pop. However, once 0:04:05.880 --> 0:04:08.480 people realized that he had already said this back in May, 0:04:08.840 --> 0:04:10.760 then we saw it start to come off a bit. 0:04:11.040 --> 0:04:12.960 I want to come to you because I've heard a 0:04:13.000 --> 0:04:15.880 lot of people say that, sure, we're probably not going 0:04:15.920 --> 0:04:17.919 to get a deal this week, but it's very possible 0:04:18.000 --> 0:04:22.040 that we get an extension of the next trench of tariffs. Now, 0:04:22.080 --> 0:04:24.400 you wrote a poets this week and it was about 0:04:24.480 --> 0:04:28.839 Chinese state media being less optimistic than market. What is 0:04:28.839 --> 0:04:32.400 the tone actually like over there? So um the notion 0:04:32.480 --> 0:04:35.320 comments he used the past tense when he said like 0:04:35.320 --> 0:04:38.599 a ninetent of deal was down instead of is down. 0:04:38.760 --> 0:04:41.960 So he was talking about before the May breakdown. The 0:04:42.040 --> 0:04:44.760 two sides got very much close. Then the US accused 0:04:44.800 --> 0:04:49.359 the China backsliding on the previously agreed terms. Now the 0:04:49.400 --> 0:04:52.599 state media in China seems to be less optimimistic than 0:04:52.680 --> 0:04:56.719 the official comments from the U s side. Basically China 0:04:56.800 --> 0:05:01.120 seems to digging um say broadcast of the three rail lines? If, 0:05:01.320 --> 0:05:04.120 if you will, um, what makes to make a deal? 0:05:04.160 --> 0:05:07.160 What takes to make a deal for all the tariff 0:05:07.240 --> 0:05:10.160 existing to have have been has to be taken off. 0:05:10.279 --> 0:05:15.239 And secondly, the text of any agreement has to show 0:05:15.279 --> 0:05:20.360 respect and show dignity for both sides, and the demand 0:05:20.400 --> 0:05:23.279 for the Chinese purchase of US goods has to be realistic, 0:05:23.800 --> 0:05:27.280 not asking too much. So the Chinese attitude seems to 0:05:27.360 --> 0:05:29.840 be if there's a deal, they're happy to take it. 0:05:29.920 --> 0:05:32.320 If not, they're happy to fight it all the way down. 0:05:32.760 --> 0:05:36.400 You know, Mark, you're the head of research at Nationwide Funds, 0:05:36.440 --> 0:05:39.280 and I'm picturing you, you know, scrambling a couple of 0:05:39.279 --> 0:05:42.760 weeks ago to get something put something together on Mexican tariffs, say, 0:05:42.839 --> 0:05:44.600 and then ripping it up the next day. I mean, 0:05:44.640 --> 0:05:49.599 how do you approach this sort of very mercurial, fluid situation, uh? 0:05:50.200 --> 0:05:52.160 In some ways do you just step back and let 0:05:52.160 --> 0:05:53.840 it play out? Or or are you trying to chase 0:05:54.200 --> 0:05:56.960 every twist and turn of this drama. Well, Sarah and 0:05:57.000 --> 0:05:58.560 I have talked about this a couple of times, and 0:05:59.240 --> 0:06:02.200 we're in a different paradigm under Trump. I mean, the 0:06:02.200 --> 0:06:06.960 the algorithmic traders or the headline driven traders have been confused, 0:06:07.120 --> 0:06:10.360 you know, since even before he was elected. So at 0:06:10.400 --> 0:06:13.440 this point, I think the incremental tweets that we're getting 0:06:13.480 --> 0:06:15.400 are perhaps having a little bit less of an impact 0:06:15.400 --> 0:06:17.240 on the market than they used to. We try and 0:06:17.279 --> 0:06:20.360 look through any of the noise, obviously have to have 0:06:20.520 --> 0:06:22.080 some sort of an opinion on what you thing is 0:06:22.080 --> 0:06:24.520 gonna happen with trade, considering it other than the FED, 0:06:24.640 --> 0:06:27.200 is is the the big sign post for what's going 0:06:27.240 --> 0:06:28.840 to happen in the markets for the rest of the year. 0:06:29.440 --> 0:06:31.320 But at the same time, we can't be trading based 0:06:31.360 --> 0:06:34.760 on you know, a comment by Minuchin or a tweet 0:06:34.800 --> 0:06:38.680 by Trump or even Chinese state media headlines. We've had 0:06:38.760 --> 0:06:42.239 so many you know, gives and takes over the last 0:06:42.279 --> 0:06:45.080 twelve months almost at this point in this this world, 0:06:45.240 --> 0:06:48.279 it would be foolish to try and trade based on it. 0:06:48.520 --> 0:06:50.120 I want to get your take. I was at a 0:06:50.120 --> 0:06:53.200 dinner this past week put together by Markets Live, and 0:06:53.640 --> 0:06:56.080 they had a lot of readers of the blog, and 0:06:56.480 --> 0:06:58.800 I found it very interesting when we asked how many 0:06:58.800 --> 0:07:02.240 people actually expect did an increase in terrorists and an 0:07:02.400 --> 0:07:05.920 escalation going forwards? The majority of people rose their hands 0:07:06.000 --> 0:07:09.200 and said that they did. And yes, many said that 0:07:09.200 --> 0:07:12.160 we'd probably get a resolution before the election. But say 0:07:12.200 --> 0:07:17.160 we do get tariffs on billion dollars more worth of goods, 0:07:17.440 --> 0:07:20.280 what does that mean for the economy and what does 0:07:20.320 --> 0:07:23.760 that also mean for your investment outlook. It's been a 0:07:23.840 --> 0:07:27.280 bit difficult to to really see how it's come through 0:07:27.280 --> 0:07:29.520 the system, you know, We've already had a fair amount 0:07:29.520 --> 0:07:32.000 of them already through and we haven't seen much inflation 0:07:32.040 --> 0:07:34.240 at all. So at this point it seems like the 0:07:34.320 --> 0:07:37.560 supply chain is absorbing most of it. Can they forever? 0:07:38.240 --> 0:07:40.640 We don't know. But all the math that people through 0:07:40.640 --> 0:07:43.280 out there, which is you know that the consumer is 0:07:43.320 --> 0:07:45.640 going to have this much of a quote unquote tax 0:07:45.680 --> 0:07:48.120 because of the terrorists, we really haven't seen him. We're 0:07:48.240 --> 0:07:51.640 still sitting at sub two percent inflation, so it's difficult 0:07:51.680 --> 0:07:54.640 to make the argument that that we've had a massive 0:07:55.000 --> 0:07:57.400 you know, pain borne by the U. S consumer from 0:07:57.440 --> 0:08:00.880 the tariffs. So I would really be guessing if I said, 0:08:00.960 --> 0:08:03.640 if they're enacted, the consumer is gonna bear this much 0:08:03.640 --> 0:08:05.480 of it at this point, because so far we really 0:08:05.520 --> 0:08:07.840 haven't seen much at all. And that reminds me. There's 0:08:07.920 --> 0:08:11.040 an interesting market call out on Thursday from one of 0:08:11.080 --> 0:08:15.960 the retail analysts at Goldman, Alexandra Wallvice UM, and she 0:08:16.040 --> 0:08:19.440 basically don't she denigraded UH north Stream to sell UH 0:08:19.520 --> 0:08:21.480 maybe a little late on that that stocks down about 0:08:22.640 --> 0:08:25.480 it's November also ross stores. But what she said is 0:08:25.720 --> 0:08:30.320 she spoke directly about the trade tension and saying for 0:08:30.320 --> 0:08:33.080 for most of the universe of stock she covers, and 0:08:33.120 --> 0:08:34.439 I would add that I think this is true of 0:08:34.480 --> 0:08:37.560 the entire market. The forecast from the companies imply quote 0:08:37.559 --> 0:08:40.679 and inflecting earnings growth in the second half of the 0:08:40.760 --> 0:08:44.080 year a common thing where you know, you dial down 0:08:44.120 --> 0:08:45.600 the forecast at the beginning of the year, and then 0:08:45.600 --> 0:08:47.600 you ratchet them up for late in the year and 0:08:47.600 --> 0:08:49.960 and hoping, you know, uh, things catch up in the 0:08:50.000 --> 0:08:54.400 second half. But she's saying this uncertain trade backdrop could 0:08:54.440 --> 0:08:57.000 weigh on companies that don't have pricing power to your point, 0:08:57.000 --> 0:08:59.600 maybe not pass on to the consumer, but really squeezed 0:08:59.600 --> 0:09:02.439 the margin of companies, uh, that are in a hyper 0:09:02.480 --> 0:09:06.720 competitive field like that. I mean, looking out at the 0:09:06.720 --> 0:09:10.560 earnings expectations for the second quarter, are estimates make it 0:09:10.600 --> 0:09:12.760 look like a little bit of a drop, which traditionally 0:09:12.800 --> 0:09:15.160 would probably be flat to maybe a little bit of growth. 0:09:15.480 --> 0:09:18.520 It's considering the way companies beat earnings. But you look 0:09:18.559 --> 0:09:21.600 further out to the third quarter, fourth quarter, it's a 0:09:21.679 --> 0:09:24.719 very optimistic scenario with with a big rebounding growth. I mean, 0:09:24.720 --> 0:09:27.319 it's not a big risk in your opinion, that we're 0:09:27.320 --> 0:09:30.040 gonna be ratching down those expectations. For later in the year. Yeah, 0:09:30.080 --> 0:09:32.320 there were good The good news has been we've seen 0:09:32.320 --> 0:09:35.680 a leveling off of those that those you know, estimate 0:09:35.720 --> 0:09:38.320 revisions in the last couple of months. I mean, the 0:09:38.360 --> 0:09:40.720 third quarter is the one we're starting to see tickdown. 0:09:40.800 --> 0:09:43.280 So the second quarter was already kind of in this world. 0:09:43.520 --> 0:09:45.920 Fourth quarter is a big jump back, but we're also 0:09:45.960 --> 0:09:49.360 seeing you know, double digits for next year. All of 0:09:49.360 --> 0:09:52.880 those seemed to had been pretty optimistic assumptions, you know, 0:09:53.040 --> 0:09:55.840 I think that we're sitting here with the marketing general 0:09:55.920 --> 0:09:59.120 pricing in very high expectations that we get a deal 0:09:59.160 --> 0:10:02.560 with China and we get three FED rate cuts. The 0:10:02.600 --> 0:10:06.760 likelihood that both of those things happen together seems pretty optimistic. 0:10:06.800 --> 0:10:09.080 You know. If you get rate cuts, maybe we don't 0:10:09.400 --> 0:10:11.680 have this much as much urgency to get a FED 0:10:12.160 --> 0:10:13.599 trying to deal done. If we get a trying to 0:10:13.679 --> 0:10:16.199 deal done, the urgency for the FED to cut becomes 0:10:16.200 --> 0:10:19.360 a little bit less. So the perfect storm, I guess, 0:10:19.760 --> 0:10:22.360 you know, perhaps what Trump's trying to orchestrate is we 0:10:22.440 --> 0:10:25.599 get some cuts earlier, you know, in the process, we 0:10:25.679 --> 0:10:28.280 get a China trade deal through later in the year. 0:10:28.800 --> 0:10:31.960 That leads to a pretty strong acceleration in both earnings 0:10:32.000 --> 0:10:35.120 and economic growth the beginning part of next year, leading 0:10:35.120 --> 0:10:37.080 into the election. You know, that's kind of the but 0:10:37.120 --> 0:10:39.400 there's a lot of things that have to work in 0:10:39.559 --> 0:10:42.600 unison for that that to happen. I think you're probably 0:10:42.679 --> 0:10:47.000 right where we'll start. We'll see continued modest estimate revisions downward, 0:10:47.360 --> 0:10:49.520 particularly for that fourth quarter number. That seems a little 0:10:49.520 --> 0:10:52.080 bit optimistic at this point. So if I'm an investor 0:10:52.120 --> 0:10:55.320 in nationwide funds, I'm listening and I'm thinking, well, Mark, 0:10:55.360 --> 0:10:57.160 what am I supposed to do here? Am I? Should 0:10:57.160 --> 0:10:59.520 I move into bonds? Should I move into money markets? Even? 0:10:59.559 --> 0:11:02.600 I mean where where should we be? Sort of skewing 0:11:02.600 --> 0:11:04.880 our allocations too? Well? We think over the medium in 0:11:04.880 --> 0:11:06.560 the long term, we're still pretty good shape for the 0:11:06.559 --> 0:11:08.640 for equity markets, I mean, the economies. We don't we 0:11:08.640 --> 0:11:10.760 don't see a recession in the near term, and we 0:11:10.840 --> 0:11:14.320 see earnings being okay. There's perhaps downward you know, in 0:11:14.360 --> 0:11:17.320 the near term, but we think we'll see some volatility 0:11:17.400 --> 0:11:20.280 certainly between now and the at the end of the summer. 0:11:20.720 --> 0:11:24.480 There's a lot of positive expectations embedded in the current number. 0:11:25.040 --> 0:11:29.000 The technical look seems awfully fishy with you know, we're 0:11:29.040 --> 0:11:31.040 having a very hard time getting through the current level. 0:11:31.760 --> 0:11:34.760 So there's there's there's perhaps some caution in the near term. 0:11:34.800 --> 0:11:38.440 But I mean, we've seen massive inflows into bonds throughout 0:11:38.480 --> 0:11:41.640 the entire cycle. More so even during this year, we've 0:11:41.679 --> 0:11:44.000 seen outflows from equities in the large part. It's crazy. 0:11:44.120 --> 0:11:47.080 You couldn't paint a more negative sentiment picture. I feel 0:11:47.080 --> 0:11:49.600 like towards equities and here we are near record highs, 0:11:49.720 --> 0:11:51.520 and we're you know, we're we're at record highs, and 0:11:51.559 --> 0:11:55.120 that the AII Bull Bears survey shows more bears than bulls. 0:11:55.320 --> 0:11:58.560 We have the that Merylynch Bank American Merylynch survey of 0:11:58.600 --> 0:12:03.120 fund managers last week that shows that cash levels jumped 0:12:03.160 --> 0:12:05.240 by the most in two thousand eleven in any month, 0:12:05.679 --> 0:12:09.040 and the allocations of equities versus bonds for institutions, you know, 0:12:09.080 --> 0:12:11.640 which you would think would be less emotional, is at 0:12:11.679 --> 0:12:16.360 the lowest level since the financial crisis. So literally, the 0:12:16.360 --> 0:12:19.760 only incremental buyer of equities out there right now is 0:12:19.960 --> 0:12:22.760 company buybacks, and that we don't see ending anytime. So 0:12:22.880 --> 0:12:25.679 we also got the Conference Board data earlier this week, 0:12:25.720 --> 0:12:28.480 which I thought was really interesting because consumer confidence dropped 0:12:28.480 --> 0:12:31.480 to the lowest in September, and we also saw the 0:12:31.520 --> 0:12:34.600 fastest rate of change from bulls to bears, one of 0:12:34.600 --> 0:12:37.800 the fastest ones during this entire bull market. And yeah, 0:12:37.840 --> 0:12:40.440 I want to come to you because it's very interesting 0:12:40.480 --> 0:12:42.920 that the setup we have seen. We have seen a 0:12:43.040 --> 0:12:46.400 risk rally in stocks. You have stocks still near record highs, 0:12:46.440 --> 0:12:49.880 but you also see a bond rally. We still see 0:12:49.880 --> 0:12:52.560 it ten year near two per set. At the same 0:12:52.600 --> 0:12:55.360 time we're seeing gold get a bid as well. Is 0:12:55.400 --> 0:12:59.040 it possible for all these different asset classes, which the 0:12:59.160 --> 0:13:02.559 narrative can be taken to seem very different, are all 0:13:02.559 --> 0:13:06.520 correct at the same time. Actually, Mark mentioned earlier that 0:13:06.600 --> 0:13:09.640 the market is essentially a betting that the Fed is 0:13:09.679 --> 0:13:13.559 going to take action quickly and decisively, and that like 0:13:13.800 --> 0:13:16.720 three or four custs is probably enough to gather us 0:13:16.720 --> 0:13:19.760 through all these soft patch and start a rebound probably 0:13:19.840 --> 0:13:22.640 next year. This is the only way you can reconcile 0:13:22.679 --> 0:13:25.559 all these conflicting signals, because if you look at the 0:13:25.600 --> 0:13:28.520 boundary of curve, three year and the ten years inverted, 0:13:28.600 --> 0:13:31.839 which is a classic recession scenario, but two years of 0:13:31.960 --> 0:13:36.199 ten years is actually positive because people are expecting the 0:13:36.280 --> 0:13:38.160 short term ray cuts is going to lead to some 0:13:38.240 --> 0:13:41.360 sort of recovery down the road. So that's one way 0:13:41.440 --> 0:13:45.679 you can actually um see two to reconcile these different signals. 0:13:45.800 --> 0:13:48.320 But everything has to be in the right place. So 0:13:48.360 --> 0:13:50.440 the focus on the Yelk curve among investors in the 0:13:50.440 --> 0:13:52.720 press has been really interesting over the last couple of months. 0:13:52.760 --> 0:13:55.760 You know, we hear about the inversion consistently, but it's 0:13:55.880 --> 0:13:57.960 it has been a very good predictor of recessions in 0:13:58.000 --> 0:14:00.000 the past, but this one seems a little bit differ 0:14:00.320 --> 0:14:03.280 and that it's much more technical than fundamental. We're not 0:14:03.600 --> 0:14:06.600 it's not the traditional, you know way we got to 0:14:06.640 --> 0:14:08.960 be inverted. As you said, the two and tent isn't 0:14:08.960 --> 0:14:12.640 even inverted. But the fact that there's just an insatiable 0:14:12.679 --> 0:14:17.160 demand for bond yield of investors both domestically and internationally 0:14:17.240 --> 0:14:20.640 flooding into long treasuries that's pushed rates down to a 0:14:20.720 --> 0:14:24.320 somewhat artificial level. Uh. That isn't an outcome of the 0:14:24.400 --> 0:14:27.920 views of the economy. It's really more supply and demand driven, 0:14:28.160 --> 0:14:31.440 which could give a false signal about the future and 0:14:31.680 --> 0:14:36.160 recessionary possibilities. Even with this massive supply of treasuries coming online. 0:14:36.160 --> 0:14:38.840 That demand is overwhelming, I guess. And it's interesting that 0:14:38.880 --> 0:14:40.880 the Treasury continues to issue in the kind of six 0:14:40.920 --> 0:14:43.440 months a two year range even though the Yolker is 0:14:43.440 --> 0:14:46.720 flat inverted. You think they'd be extending duration at this point. 0:14:47.200 --> 0:14:49.440 So maybe they know something we don't know about. What's 0:14:49.560 --> 0:14:51.800 what they outlook for rates are over the next two 0:14:51.800 --> 0:15:10.920 to five years? Are you getting back to the China situation? 0:15:10.920 --> 0:15:12.440 And Mark waydd on this too, if you if you 0:15:12.440 --> 0:15:14.760 have any thoughts, uh, you know. President Trump this week 0:15:14.800 --> 0:15:18.360 gave a very long interview with Fox Business Boy. He 0:15:18.720 --> 0:15:20.800 got a lot of words and on that that one 0:15:21.760 --> 0:15:24.080 one thing that I'm not sure everyone picked up on 0:15:24.360 --> 0:15:27.920 that I found interesting is he said, well, maybe the 0:15:27.920 --> 0:15:30.680 tart the next batch of tariffs on Chinese gids will 0:15:30.680 --> 0:15:34.120 be ten percent rather than that. Seems to me like 0:15:34.440 --> 0:15:38.080 subtle de escalation of the tensions. I mean, do you 0:15:38.120 --> 0:15:39.840 think do you agree with that? Do you think China 0:15:39.880 --> 0:15:42.400 could have picked up on that? Um? I do think 0:15:42.520 --> 0:15:46.640 there's a sort of a subbody change here because the 0:15:46.720 --> 0:15:50.160 next round, next round of tariffs, all the goods affect 0:15:50.720 --> 0:15:56.160 essentially consumer goods, closing smartphones, toys. Well, the previous round 0:15:56.200 --> 0:16:00.760 of tariffs affecting the goods only intermedia goods, so the 0:16:00.880 --> 0:16:04.160 consumer will be directly impact by the next batch of 0:16:04.240 --> 0:16:07.560 the tariffs more so than the previous one. That's why 0:16:07.600 --> 0:16:09.400 I think one of the reason you want to take 0:16:09.560 --> 0:16:13.080 more like an a step by step approach instead of 0:16:13.120 --> 0:16:16.400 all the maximum, all the tariffs all the way at 0:16:16.480 --> 0:16:19.520 once or at once. So I do think that, um, 0:16:19.560 --> 0:16:22.240 this shows some sort of like cautiousness from the U. 0:16:22.320 --> 0:16:25.120 S side. Mark. We heard from some other politicians this week, 0:16:25.160 --> 0:16:27.640 to other than President Trump, and that is all the 0:16:27.680 --> 0:16:31.680 Democratic presidential candidates with the debates, and as we start 0:16:31.760 --> 0:16:35.360 getting closer and closer to presidential election, it feels like 0:16:35.400 --> 0:16:39.960 it's all starting. How do you actually think about the 0:16:40.000 --> 0:16:44.400 presidential election and anything that any of these candidates may 0:16:44.600 --> 0:16:47.960 say or may have said already in debates when thinking 0:16:48.000 --> 0:16:51.040 about how to position going forwards. This is very similar 0:16:51.080 --> 0:16:53.480 to the thought process on the tweeting, which is you 0:16:53.520 --> 0:16:55.840 have to pay attention to what's said, but you can't 0:16:55.840 --> 0:16:59.400 necessarily react to it. I mean, reacting to on emotion 0:17:00.000 --> 0:17:03.200 and investing is almost always a bad idea, right. Reacting 0:17:03.200 --> 0:17:06.800 on political emotion is even worse than that. Frankly, I mean, 0:17:06.840 --> 0:17:11.520 we saw a massive decline in consumer confidence among Democrats 0:17:11.560 --> 0:17:15.119 between August and December of two thousands and sixteen, so 0:17:15.240 --> 0:17:19.000 a massive rise in consumer confidence for Republicans at the 0:17:19.040 --> 0:17:22.440 same time frame. Neither us right, you know, So we've 0:17:22.480 --> 0:17:24.760 become you know, all the studies show that we were 0:17:24.800 --> 0:17:27.639 becoming increasingly partisan in the way that we view the world. 0:17:28.200 --> 0:17:30.440 That's probably gonna lead to some volatility. You know, we're 0:17:30.440 --> 0:17:33.680 going to see your healthcare names, for example, trading violently 0:17:33.720 --> 0:17:36.800 based on the expectation that they think Elizabeth Warren would 0:17:36.880 --> 0:17:40.000 would would win the presidency for example. I think two 0:17:40.040 --> 0:17:41.760 thousand and sixteen should have taught us a lesson that 0:17:43.280 --> 0:17:45.919 betting ahead of time is probably not that great an idea, 0:17:46.040 --> 0:17:51.119 and over waiting the impact of the president has also 0:17:51.240 --> 0:17:53.760 been a pretty bad way to invest historically. So would 0:17:53.760 --> 0:17:56.720 you say it's hard to invest based on what you 0:17:56.760 --> 0:17:58.800 think is going to happen, even if you truly do 0:17:58.960 --> 0:18:01.760 believe that maybe a Democratic candidate is going to win 0:18:01.800 --> 0:18:04.359 the president action and that's going to completely shake up 0:18:04.400 --> 0:18:08.080 the health care industry, or say one candidate is running 0:18:08.440 --> 0:18:11.639 saying that they may take down defense spending for aerospace 0:18:11.680 --> 0:18:15.560 and defense. I mean, can you truly ignore these statements 0:18:15.760 --> 0:18:18.760 if it is something that's possible that will eventually affect 0:18:18.760 --> 0:18:22.399 how companies are operating going forwards, The overwhelming likelihood is 0:18:22.400 --> 0:18:24.919 we end up with display Congress anyway. If that happens, 0:18:24.960 --> 0:18:27.600 the likelihood of transformational change on any of those things 0:18:27.600 --> 0:18:30.000 are pretty limited, So I would take the under in 0:18:30.119 --> 0:18:34.760 terms of impact from presidential politics. We obviously saw Obamacare 0:18:34.880 --> 0:18:37.760 through that was you know, pretty disruptive at least for 0:18:37.800 --> 0:18:39.040 you know, some of the names is very good for 0:18:39.080 --> 0:18:41.040 some of the other health care names. The health care 0:18:41.080 --> 0:18:43.200 area in the defense area would be would be areas 0:18:43.200 --> 0:18:46.760 to obviously pay the most attention to. But again we're 0:18:46.800 --> 0:18:50.200 way too early to make any definitive conclusions about what's 0:18:50.200 --> 0:18:53.000 going to happen in November two. Thowyah. I think it 0:18:53.040 --> 0:18:55.240 was interesting in the debate they asked, well, who on 0:18:55.280 --> 0:18:59.160 the stage wants to see medicare for all? And only 0:18:59.200 --> 0:19:01.840 two hands? When might think what was it? It was, uh, 0:19:02.080 --> 0:19:06.120 Elizabeth Warren and Blasio. So that kind of signals that 0:19:06.440 --> 0:19:09.879 she has a very ambitious platform. I mean, when we 0:19:09.920 --> 0:19:12.080 could s break up the fangs, break up the banks, 0:19:12.640 --> 0:19:16.120 get rid of private student loan debt, student loan debt. Yeah. So, 0:19:16.440 --> 0:19:18.880 I mean, I guess you have to sort of handicap 0:19:18.920 --> 0:19:20.800 the fact that she's not gonna get all that if 0:19:20.840 --> 0:19:23.480 she gets any of it, if she wins. Right, I think. 0:19:23.600 --> 0:19:26.199 I think we have a very long history Republican and 0:19:26.240 --> 0:19:30.399 Democrat of you know, prob well, perhaps running on a 0:19:30.400 --> 0:19:34.760 certain campaign and then enacting because you know, the reality 0:19:34.880 --> 0:19:36.320 is you're not going to get everything you want done, 0:19:36.359 --> 0:19:39.160 particularly if you have a Republican Senate. So, like I said, 0:19:39.160 --> 0:19:41.879 I would, I would, I would weigh on this side 0:19:41.880 --> 0:19:44.840 of not overreacting at least between now and let's say 0:19:45.040 --> 0:19:52.119 next fall. I like Mark. He's nice and calm. He 0:19:52.160 --> 0:19:57.680 should talk to my wife. All right, Well, I think 0:19:57.760 --> 0:20:00.920 it's time for the our every part of the week. Mark. 0:20:00.960 --> 0:20:02.640 I don't know if they warned you about this. Uh, 0:20:02.680 --> 0:20:05.159 this little gimmick of ours. The craziest thing I ever 0:20:05.320 --> 0:20:08.720 saw in markets this week? Ye she I want to 0:20:08.720 --> 0:20:11.360 start with you. You see anything crazy this week? How 0:20:11.359 --> 0:20:16.720 about bitcoin? That's crazy? O? What great Tracy Alloy, she's 0:20:16.800 --> 0:20:21.560 our exactive editor. She found a small way to predict 0:20:21.600 --> 0:20:25.480 the crypto currency moves. She found out that the bigcoin 0:20:25.600 --> 0:20:30.720 has highly coorated with avocado prices in Mexico. Both has 0:20:30.720 --> 0:20:33.919 more than double the since April. Um. I know she 0:20:34.000 --> 0:20:37.280 meant this as a joke. Definitely a real correlation, but 0:20:37.480 --> 0:20:41.280 for anything like as volatile as bitcoin, it's good indicator 0:20:41.280 --> 0:20:46.280 as anyone. That's right, the fable of spurious correlations on this, Sara, 0:20:46.320 --> 0:20:49.639 how about you you got anything the top Bitcoin avocado correlations. 0:20:49.680 --> 0:20:51.399 That's a tough one. You read my mind. I was 0:20:51.400 --> 0:20:54.199 actually going to take the avocado side of it. I mean, 0:20:54.240 --> 0:20:58.280 avocado prices are this week, and I've got to say, 0:20:58.440 --> 0:21:01.159 for those of us who are are large consumers of 0:21:01.200 --> 0:21:04.760 guacamole and avocado toast or whatever you might say, it's 0:21:04.800 --> 0:21:08.080 really worrisome. What is it with you millennials market? It's 0:21:08.119 --> 0:21:09.800 like they passed a law that they all have to 0:21:09.840 --> 0:21:13.800