1 00:00:02,440 --> 00:00:06,800 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 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amrie Hordern. 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 00:00:22,440 --> 00:00:24,920 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 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:36,879 Speaker 2: Terminal and the Bloomberg Business app Gaza. 10 00:00:36,920 --> 00:00:39,720 Speaker 1: Peace talks underway in the Middle East between Israel and 11 00:00:39,760 --> 00:00:44,280 Speaker 1: international mediators, Axios reporting some progress was made on the 12 00:00:44,280 --> 00:00:47,599 Speaker 1: first day of discussion, citing US officials, This coming as 13 00:00:47,720 --> 00:00:51,239 Speaker 1: Israel braces for a possible attack from Ran. Joining US 14 00:00:51,280 --> 00:00:54,920 Speaker 1: now is Ambassador John Bolton, former US National Security Advisor 15 00:00:54,960 --> 00:00:58,440 Speaker 1: and former Ambassador to the UN. Ambassador Borlton, thank you 16 00:00:58,440 --> 00:01:01,400 Speaker 1: so much for being with us. To start with what 17 00:01:01,520 --> 00:01:04,720 Speaker 1: you think of the recent talks underway and why you 18 00:01:04,760 --> 00:01:07,280 Speaker 1: think Iran has not retaliated yet. 19 00:01:09,240 --> 00:01:13,080 Speaker 3: Well, with respect to the talks, the administration saying making progress. 20 00:01:13,080 --> 00:01:15,400 Speaker 3: You know they've been saying making progress on these talks 21 00:01:15,400 --> 00:01:17,760 Speaker 3: for about four or five months now. They never seem 22 00:01:17,800 --> 00:01:20,120 Speaker 3: to get to the finish line. I think there's still 23 00:01:20,600 --> 00:01:24,480 Speaker 3: enormous gaps between the Israeli position and the Hamas position. 24 00:01:25,080 --> 00:01:27,800 Speaker 3: I'm not saying a miracle couldn't happen. It happens in 25 00:01:27,800 --> 00:01:30,000 Speaker 3: the Middle East from time to time, but I wouldn't 26 00:01:30,000 --> 00:01:35,039 Speaker 3: look forward. I do think Iran has hesitated to retaliate 27 00:01:35,080 --> 00:01:39,160 Speaker 3: for the killing of Ismail Hania, the Hamas leader in Tehran. 28 00:01:40,880 --> 00:01:44,840 Speaker 3: They need to strike back. I think very strongly. They've 29 00:01:44,880 --> 00:01:49,520 Speaker 3: been humiliated by what Israel did, killing this terrorist leader 30 00:01:49,680 --> 00:01:52,880 Speaker 3: in their capital in a secure compound with a bomb 31 00:01:52,920 --> 00:01:56,400 Speaker 3: planted two months before. It shows nobody in Iran is 32 00:01:56,480 --> 00:02:00,240 Speaker 3: safe from Israel, including the Supreme Leader. On the other hand, 33 00:02:01,320 --> 00:02:04,920 Speaker 3: the Iranian leaders are also intimidated by bb Net and 34 00:02:05,000 --> 00:02:08,600 Speaker 3: Yahoo and Israel. I think this time they are worried 35 00:02:08,639 --> 00:02:12,120 Speaker 3: that the US will not be able to pressure Israel 36 00:02:12,200 --> 00:02:16,400 Speaker 3: into a limited response as Israel did after the three 37 00:02:16,520 --> 00:02:19,639 Speaker 3: hundred and twenty drone and missile assault on Israel from 38 00:02:19,639 --> 00:02:23,760 Speaker 3: Iran's territory some months ago. Really, Iran is more intimidated 39 00:02:23,760 --> 00:02:26,520 Speaker 3: by Israel than it is by the Biden administration. So 40 00:02:27,040 --> 00:02:30,000 Speaker 3: they've got a difficult decision how strong a response to 41 00:02:30,000 --> 00:02:34,240 Speaker 3: make to restore their own very damaged credibility versus their 42 00:02:34,320 --> 00:02:36,560 Speaker 3: fear of what Israel would then do to them. 43 00:02:36,800 --> 00:02:39,079 Speaker 4: Well, in April, when those three hundred missiles were flying over, 44 00:02:39,160 --> 00:02:42,920 Speaker 4: it was because of the US defense that Israel's able 45 00:02:42,960 --> 00:02:47,240 Speaker 4: to fend them off. Ambassador, given your level of intel 46 00:02:47,360 --> 00:02:51,280 Speaker 4: regarding Iran, how can they retaliate but also try to 47 00:02:51,320 --> 00:02:55,880 Speaker 4: not strike this cycle of endless retaliations back and forth. 48 00:02:57,880 --> 00:03:02,079 Speaker 3: Well, let's come back to the attack. Wall Street Journal 49 00:03:02,080 --> 00:03:05,960 Speaker 3: and CBS reported that of the one hundred and twenty ballistic 50 00:03:06,040 --> 00:03:09,840 Speaker 3: missiles that Iran fired at Israel, sixty never made it 51 00:03:09,880 --> 00:03:12,240 Speaker 3: within range to be shot down. They either blew up 52 00:03:12,280 --> 00:03:16,000 Speaker 3: on the launch pad or crashed before they got close enough, 53 00:03:16,480 --> 00:03:19,400 Speaker 3: which speaks to the quality of Iran's ballistic missile force. 54 00:03:19,960 --> 00:03:21,880 Speaker 3: But if there had been one hundred and twenty rather 55 00:03:21,960 --> 00:03:25,200 Speaker 3: than sixty ballistic missiles in the skies over Israel, I 56 00:03:25,200 --> 00:03:28,200 Speaker 3: don't think it would have been such a good performance. 57 00:03:28,600 --> 00:03:32,840 Speaker 3: The cycle that's at work here is caused by Iran. Look, 58 00:03:32,880 --> 00:03:36,600 Speaker 3: this is not a war between Palestinians or Gosans in Israel. 59 00:03:36,680 --> 00:03:39,920 Speaker 3: This is a war by Iran against Israel, what they 60 00:03:39,960 --> 00:03:44,640 Speaker 3: themselves call the ring of Fire strategy. And as long 61 00:03:44,720 --> 00:03:48,160 Speaker 3: as the current regime in Tehran is in power, seeking 62 00:03:48,240 --> 00:03:54,400 Speaker 3: nuclear weapons, arming, equipping, training, financing, giving intelligence to multiple 63 00:03:54,480 --> 00:03:57,760 Speaker 3: terrorist groups in the region, threatening not only Israel but 64 00:03:57,840 --> 00:04:02,080 Speaker 3: the Gulf Arab states too, there's going to be conflict. 65 00:04:02,200 --> 00:04:06,120 Speaker 3: And what's driving Israel and the Golf Arabs closer together 66 00:04:06,640 --> 00:04:10,160 Speaker 3: is that they all see Iran as the main strategic 67 00:04:10,240 --> 00:04:13,240 Speaker 3: threat and they think the United States is feckless. 68 00:04:13,880 --> 00:04:16,400 Speaker 4: As these ceasefire talks continued, do you agree with the 69 00:04:16,440 --> 00:04:19,640 Speaker 4: idea that Iran could potentially use those if they were 70 00:04:19,680 --> 00:04:22,880 Speaker 4: to incadeal use that as an off ramp to not retaliate. 71 00:04:25,320 --> 00:04:27,360 Speaker 3: Well, they may want to use it as an off ramp, 72 00:04:27,440 --> 00:04:29,680 Speaker 3: but I think it would be a big blow to 73 00:04:29,960 --> 00:04:33,279 Speaker 3: Iran's prestige. You know, they're not exactly stepping up here 74 00:04:33,600 --> 00:04:39,880 Speaker 3: to take responsibility for what happened to Hamas after the 75 00:04:39,920 --> 00:04:43,400 Speaker 3: October seven attack, and they've also not been able yet 76 00:04:43,440 --> 00:04:48,599 Speaker 3: to persuade Hezballah to use its unbelievably large arsenal of 77 00:04:48,680 --> 00:04:51,960 Speaker 3: missiles against Israel. So, as I say, I think it's 78 00:04:52,000 --> 00:04:56,800 Speaker 3: the fear of further Israeli retaliation that has the Iranians 79 00:04:56,839 --> 00:04:58,560 Speaker 3: intimidated with. 80 00:04:58,440 --> 00:05:01,520 Speaker 5: That retaliation coming from Israel if Ron does do some 81 00:05:01,560 --> 00:05:04,560 Speaker 5: sort of large attack. Ambassador Bolton, what is the ability 82 00:05:04,640 --> 00:05:08,040 Speaker 5: of the US and its allies to reign in Netanyahu's response? 83 00:05:10,360 --> 00:05:13,680 Speaker 3: Well, I'm sure that the Biden administration will want to 84 00:05:13,680 --> 00:05:17,160 Speaker 3: rein them in. They've been afraid of this issue and 85 00:05:17,240 --> 00:05:20,000 Speaker 3: the war in Ukraine dominating the news in the United 86 00:05:20,040 --> 00:05:23,000 Speaker 3: States because it shows a world and chaos due to 87 00:05:23,320 --> 00:05:27,280 Speaker 3: three and a half years of American weakness. Really, what 88 00:05:27,720 --> 00:05:30,000 Speaker 3: they would like to see is this go away until 89 00:05:30,080 --> 00:05:33,760 Speaker 3: after election day, even though Biden's no longer running himself. 90 00:05:34,200 --> 00:05:36,520 Speaker 3: You know, Frankly, I think the lesson to be learned 91 00:05:36,640 --> 00:05:42,720 Speaker 3: is that the prospect of a really forceful Israeli response 92 00:05:42,760 --> 00:05:46,719 Speaker 3: if Israel comes back at them, shows that a strong 93 00:05:46,880 --> 00:05:50,440 Speaker 3: posture toward these rogue states is the way to go. 94 00:05:50,600 --> 00:05:53,320 Speaker 3: And Iran has a lot to fear from Israel. It 95 00:05:53,360 --> 00:05:55,520 Speaker 3: should have a lot to fear from the United States, 96 00:05:55,560 --> 00:05:56,960 Speaker 3: but at the moment it doesn't. 97 00:05:57,640 --> 00:05:59,480 Speaker 5: And Ambassador, a lot of times when we're talking about 98 00:05:59,480 --> 00:06:02,600 Speaker 5: this retali even if Iran would like to do that 99 00:06:02,720 --> 00:06:05,760 Speaker 5: without provoking a response. The question always comes into the fore, 100 00:06:06,160 --> 00:06:08,560 Speaker 5: what is the likelihood that mistakes are made, mistakes are 101 00:06:08,560 --> 00:06:11,760 Speaker 5: made that escalate things further and that there's been this 102 00:06:11,800 --> 00:06:13,880 Speaker 5: conversation that it won't just be around this time. But 103 00:06:13,960 --> 00:06:17,039 Speaker 5: Hesbala as well. Are the ows for mistakes higher by 104 00:06:17,080 --> 00:06:20,760 Speaker 5: involving proxy forces in the retaliation to the retaliation to 105 00:06:20,760 --> 00:06:21,440 Speaker 5: the retaliation. 106 00:06:24,320 --> 00:06:26,960 Speaker 3: Well, look, I think you have to look at what 107 00:06:27,000 --> 00:06:30,080 Speaker 3: the strategic picture is. There is a regional war in 108 00:06:30,120 --> 00:06:33,279 Speaker 3: the Middle East now of Iran against Israel on five 109 00:06:33,360 --> 00:06:38,479 Speaker 3: fronts Hesbala from Lebanon, Hamas and the Gaza Strip. The 110 00:06:38,520 --> 00:06:43,159 Speaker 3: Hoodies that have closed the Souez Canal Red Sea passage, 111 00:06:43,160 --> 00:06:46,120 Speaker 3: one of the most important commercial shipping channels in the world, 112 00:06:46,200 --> 00:06:51,240 Speaker 3: closed effectively since October. The Shia militia in Iraq and 113 00:06:51,320 --> 00:06:55,320 Speaker 3: Syria that have been attacking American positions and Iran itself, 114 00:06:55,360 --> 00:06:57,920 Speaker 3: and the question is how do they dial up one 115 00:06:58,040 --> 00:07:02,920 Speaker 3: or the other. Israel does Hesbelah's Arsenal, which in public 116 00:07:03,000 --> 00:07:06,680 Speaker 3: estimates this is an extraordinary number, but public estimates are 117 00:07:06,720 --> 00:07:09,720 Speaker 3: that Hezbola has between one hundred and twenty and one 118 00:07:09,800 --> 00:07:13,520 Speaker 3: hundred and fifty thousand missiles, which would obviously be enough 119 00:07:13,560 --> 00:07:17,440 Speaker 3: to overwhelm Israel's air defenses, and leads to the question, 120 00:07:17,520 --> 00:07:20,120 Speaker 3: if they really think it's about to happen, might not 121 00:07:20,280 --> 00:07:24,680 Speaker 3: Israel strike first. It's complicated. It's not mistakes. It's the 122 00:07:24,720 --> 00:07:29,080 Speaker 3: fact that the leadership in Tehran is determined to destroy 123 00:07:29,160 --> 00:07:31,160 Speaker 3: the Little Satan. That's what's at work. 124 00:07:31,000 --> 00:07:32,680 Speaker 6: Here, Ambassador Bolton. 125 00:07:32,760 --> 00:07:35,080 Speaker 4: Yesterday we heard from Foreign President Donald Trump, who. 126 00:07:35,040 --> 00:07:35,560 Speaker 6: You worked for. 127 00:07:36,240 --> 00:07:38,000 Speaker 4: He said, I'm not looking to be bad to Iran. 128 00:07:38,040 --> 00:07:40,480 Speaker 4: We're going to be friendly. I hope with Iran, maybe 129 00:07:40,480 --> 00:07:42,600 Speaker 4: but maybe not. But we're going to be friendly. I 130 00:07:42,640 --> 00:07:45,240 Speaker 4: hope we're going to be friendly. Do you know what 131 00:07:45,280 --> 00:07:50,000 Speaker 4: trump two point zeros policy towards Iran potentially will look like. 132 00:07:52,400 --> 00:07:54,840 Speaker 3: Look, he has no idea what it will look like. 133 00:07:55,120 --> 00:07:57,760 Speaker 3: People who look at what happened in the first term 134 00:07:57,920 --> 00:08:01,160 Speaker 3: and believe that it'll be the same in the second term, 135 00:08:01,840 --> 00:08:07,600 Speaker 3: I think are mistaken. It's always possible. But remember he 136 00:08:08,000 --> 00:08:11,680 Speaker 3: Trump almost met with Iran's then foreign minister job At 137 00:08:11,760 --> 00:08:15,480 Speaker 3: Zarief at the ba ritz G seventh Summit in August 138 00:08:15,480 --> 00:08:18,880 Speaker 3: of twenty nineteen. Emmanuel mccrown, the President of France, had 139 00:08:18,960 --> 00:08:23,239 Speaker 3: Zerief in a villa in bea ritz almost persuaded Trump 140 00:08:23,280 --> 00:08:26,800 Speaker 3: to do it. The attraction to Donald Trump of making 141 00:08:26,800 --> 00:08:31,160 Speaker 3: a deal with anybody is hard to quantify. It really 142 00:08:31,200 --> 00:08:34,880 Speaker 3: goes off the charts, and it could be the same 143 00:08:34,880 --> 00:08:37,080 Speaker 3: way in a second term. And that's why I think 144 00:08:37,120 --> 00:08:40,400 Speaker 3: there's a certain amount of pressure on the Israelis if 145 00:08:40,440 --> 00:08:43,400 Speaker 3: they're going to do something, to do it now rather 146 00:08:43,480 --> 00:08:46,360 Speaker 3: than to wait for the uncertainty of the American election. 147 00:08:46,880 --> 00:08:48,920 Speaker 1: Ambassador job Bolton, thank you so much for taking the 148 00:08:49,000 --> 00:09:01,640 Speaker 1: time with us. To begin with the top story, The 149 00:09:01,640 --> 00:09:05,000 Speaker 1: Goldilock scenario is back on the table and fully embraced, 150 00:09:05,040 --> 00:09:08,440 Speaker 1: stocks rallying on strong US retail and labor data indicating 151 00:09:08,480 --> 00:09:12,439 Speaker 1: continued economic strength. Daryl Krok of Wells Frago remaining cautious, 152 00:09:12,640 --> 00:09:15,600 Speaker 1: saying this the US economy is slowing and the Fed 153 00:09:15,640 --> 00:09:16,960 Speaker 1: should be cutting interest rates. 154 00:09:17,120 --> 00:09:18,760 Speaker 6: They probably should have already cut in July. 155 00:09:18,880 --> 00:09:21,160 Speaker 1: The burden of proof has now switched over in the 156 00:09:21,200 --> 00:09:24,520 Speaker 1: market's eyes and is on the soft landing to prove itself. 157 00:09:24,559 --> 00:09:27,840 Speaker 1: Daryl joins us, Now, Darryl, did you write this before 158 00:09:27,920 --> 00:09:29,000 Speaker 1: last this past. 159 00:09:28,720 --> 00:09:35,520 Speaker 7: Week's I did not actually wrote it yesterday morning. Look, 160 00:09:35,559 --> 00:09:39,959 Speaker 7: I think outside of market's kind of vicious reaction last 161 00:09:39,960 --> 00:09:42,600 Speaker 7: week and this if you kind of double click below 162 00:09:42,640 --> 00:09:46,040 Speaker 7: the surface, there is disconnects here, right, they'll curve is disconnected. 163 00:09:46,360 --> 00:09:48,680 Speaker 7: I think some of the consumer data is disconnected. We 164 00:09:48,720 --> 00:09:53,840 Speaker 7: read retail sales yesterday up one percent. That was almost extensive. 165 00:09:53,880 --> 00:09:56,319 Speaker 7: It was autos, right. The rest of it was food beverage, 166 00:09:56,360 --> 00:09:58,680 Speaker 7: which is stuff we all have to consume every day. 167 00:09:58,720 --> 00:10:01,400 Speaker 7: So it wasn't like discretionaries, right, It wasn't some big, 168 00:10:01,720 --> 00:10:05,559 Speaker 7: you know, element that showed that the consumers out there 169 00:10:05,600 --> 00:10:09,320 Speaker 7: spending crazily right on this, And I think there's disconnect 170 00:10:09,360 --> 00:10:11,480 Speaker 7: in the manufacturing data and the housing data. We got 171 00:10:11,480 --> 00:10:14,280 Speaker 7: the National Association of home Builders yesterday. Think about it 172 00:10:14,280 --> 00:10:17,000 Speaker 7: this way. That came in a thirty nine right. Anything 173 00:10:17,000 --> 00:10:19,840 Speaker 7: below fifties, you know, means that their outlook is poor 174 00:10:19,840 --> 00:10:23,000 Speaker 7: for homebuilders. Yet homebuilder stocks are going crazy, right, I 175 00:10:23,040 --> 00:10:25,800 Speaker 7: mean they're upsetting new basically all time highs. So you've 176 00:10:25,840 --> 00:10:28,240 Speaker 7: got all these disconnects that I think markets have to 177 00:10:28,280 --> 00:10:29,360 Speaker 7: reconcile themselves with. 178 00:10:29,520 --> 00:10:32,280 Speaker 1: Let's talk about one particular disconnect in the bond market, 179 00:10:32,520 --> 00:10:35,040 Speaker 1: where you have parts of the bond market talking about 180 00:10:35,080 --> 00:10:36,800 Speaker 1: an economy that is in need of a lot of 181 00:10:36,800 --> 00:10:38,480 Speaker 1: FED support, and then you have other parts of the 182 00:10:38,480 --> 00:10:41,319 Speaker 1: bond market that are suggesting that this is an economy 183 00:10:41,520 --> 00:10:45,280 Speaker 1: that's quite robust. How do you understand and reconcile some 184 00:10:45,320 --> 00:10:46,920 Speaker 1: of these discrepancies. 185 00:10:47,360 --> 00:10:49,679 Speaker 7: Well, I think you put it well earlier, right, think 186 00:10:49,679 --> 00:10:52,600 Speaker 7: about it this way. I wake up in the morning, 187 00:10:52,640 --> 00:10:53,760 Speaker 7: and the first thing I look at is the two 188 00:10:53,840 --> 00:10:57,120 Speaker 7: year treasury right quickly generally now last couple weeks, followed 189 00:10:57,120 --> 00:10:57,959 Speaker 7: by the Japanese yen. 190 00:10:58,040 --> 00:10:59,000 Speaker 8: Right, those are the two. 191 00:10:58,800 --> 00:11:02,000 Speaker 7: Eyes on em The two year treasury at four to 192 00:11:02,000 --> 00:11:06,640 Speaker 7: four and a quarter does not sync with nine interest 193 00:11:06,760 --> 00:11:08,360 Speaker 7: rate cuts between now and next year. 194 00:11:08,840 --> 00:11:09,040 Speaker 8: Right. 195 00:11:09,080 --> 00:11:10,920 Speaker 7: The math just doesn't work. I mean, the FED funds 196 00:11:10,960 --> 00:11:12,679 Speaker 7: is a five and a quarter. You bring it down 197 00:11:12,679 --> 00:11:14,320 Speaker 7: to let's say four, that's one hundred and twenty five 198 00:11:14,360 --> 00:11:16,720 Speaker 7: basis points cuts. We have one hundred priced in for 199 00:11:17,240 --> 00:11:19,400 Speaker 7: this year alone, much less what we're going to do 200 00:11:19,440 --> 00:11:21,400 Speaker 7: in twenty twenty five according to FED. So we're right 201 00:11:21,440 --> 00:11:23,199 Speaker 7: back into this camp of who's right. 202 00:11:23,240 --> 00:11:23,760 Speaker 8: Who's wrong? 203 00:11:23,880 --> 00:11:25,680 Speaker 7: Is the YO curve right and the two year treasury 204 00:11:25,840 --> 00:11:28,360 Speaker 7: right at four to four and a quarter and maybe 205 00:11:28,440 --> 00:11:31,800 Speaker 7: grinding higher or you know, are we going to get 206 00:11:32,040 --> 00:11:34,640 Speaker 7: nine big interest rate cuts. You know, we've seen this 207 00:11:34,720 --> 00:11:37,200 Speaker 7: movie before. We didn't believe it at the beginning of 208 00:11:37,240 --> 00:11:39,520 Speaker 7: this year on the six interest rate cuts, right, we 209 00:11:39,559 --> 00:11:41,839 Speaker 7: said that would get walked back. We didn't believe it 210 00:11:41,840 --> 00:11:43,640 Speaker 7: at the beginning of twenty twenty three. When the FED 211 00:11:43,640 --> 00:11:46,679 Speaker 7: funds future is priced in three interest rate cuts for 212 00:11:46,720 --> 00:11:49,199 Speaker 7: the back half of twenty twenty three. You know, third 213 00:11:49,280 --> 00:11:51,199 Speaker 7: times a charm, But there's no doubt the Fed will 214 00:11:51,200 --> 00:11:54,240 Speaker 7: go in September. I just don't believe the seven to nine. 215 00:11:54,320 --> 00:11:56,439 Speaker 7: And if you get seven to nine, it's a problem 216 00:11:56,520 --> 00:11:59,880 Speaker 7: for the economy. That's the reason we're cutting that aggressively, right. 217 00:12:00,120 --> 00:12:03,160 Speaker 7: It's not because we're soft landing this thing and we 218 00:12:03,200 --> 00:12:05,640 Speaker 7: need nine interest rate cuts to get back to our start. 219 00:12:06,440 --> 00:12:09,000 Speaker 5: I wonder what you make of duration and the level 220 00:12:09,000 --> 00:12:11,080 Speaker 5: of the tenure right now. We were having this discussion 221 00:12:11,120 --> 00:12:14,040 Speaker 5: earlier with Stay Street, this idea that you're living in 222 00:12:14,120 --> 00:12:17,040 Speaker 5: a time where the soft landing seems probable, at least 223 00:12:17,040 --> 00:12:18,599 Speaker 5: for now, we're not pulling off a cliff at the 224 00:12:18,679 --> 00:12:19,319 Speaker 5: very this week. 225 00:12:19,600 --> 00:12:21,280 Speaker 6: This week. We'll talk again next week. 226 00:12:21,360 --> 00:12:21,600 Speaker 8: Yes. 227 00:12:21,880 --> 00:12:24,280 Speaker 5: And in the meantime, you have these policy proposals coming 228 00:12:24,280 --> 00:12:26,480 Speaker 5: from candidates that seem to indicate a lot of spending, 229 00:12:26,640 --> 00:12:28,840 Speaker 5: and you have fears about auctions and auctions that have tailed. 230 00:12:28,920 --> 00:12:31,120 Speaker 5: Yet it is a tenure that is still below four percent. 231 00:12:31,800 --> 00:12:32,720 Speaker 6: Does not make sense. 232 00:12:33,640 --> 00:12:34,880 Speaker 8: I don't think it makes sense. 233 00:12:35,200 --> 00:12:38,040 Speaker 7: I do think the long term kind of neutral rate 234 00:12:38,080 --> 00:12:39,880 Speaker 7: of the tenure is around three seventy five to three 235 00:12:39,920 --> 00:12:42,560 Speaker 7: eighty not very different from today. But just last week 236 00:12:42,600 --> 00:12:45,679 Speaker 7: on the volatility, we had been like most people, kind 237 00:12:45,679 --> 00:12:47,480 Speaker 7: of crowded on the short side of the curve in 238 00:12:47,520 --> 00:12:52,280 Speaker 7: our exposure and positioning. We basically took that positioning and 239 00:12:52,320 --> 00:12:55,240 Speaker 7: we bulleted it right not Barbell, So in other words, 240 00:12:55,480 --> 00:12:58,480 Speaker 7: we took money out alongside, took money on the short side, 241 00:12:58,520 --> 00:12:59,679 Speaker 7: and went right to the belly of the curve. 242 00:13:00,040 --> 00:13:01,720 Speaker 8: Think we think you're getting good value there. 243 00:13:01,920 --> 00:13:04,440 Speaker 7: You do have to start biting in duration and take 244 00:13:04,480 --> 00:13:07,480 Speaker 7: some some uh exposure there. If the FED is gonna 245 00:13:07,520 --> 00:13:09,920 Speaker 7: cut interest rates, which we believe they will, we just 246 00:13:10,160 --> 00:13:12,040 Speaker 7: maybe fade this idea that they're gonna be able to 247 00:13:12,120 --> 00:13:14,760 Speaker 7: cut as aggressively as what everybody else does. So you 248 00:13:14,800 --> 00:13:16,720 Speaker 7: do have to go after some duration here. You can't 249 00:13:16,760 --> 00:13:18,280 Speaker 7: just live on the short side of the curve or 250 00:13:18,320 --> 00:13:20,640 Speaker 7: you're gonna get you're gonna get killed with reinvestment risk 251 00:13:20,679 --> 00:13:21,959 Speaker 7: over the next twelve to eighteen months. 252 00:13:22,040 --> 00:13:24,400 Speaker 4: Back to the fiscal policy outlook, though, is the bond 253 00:13:24,400 --> 00:13:27,320 Speaker 4: market just ignoring all these policy proposals. 254 00:13:27,040 --> 00:13:29,800 Speaker 7: For the time, Yes, I mean I if you win. 255 00:13:30,320 --> 00:13:32,200 Speaker 7: So so if you take my neutral rate on the 256 00:13:32,200 --> 00:13:35,480 Speaker 7: ten ure, it's three eighty, and then you regardless of 257 00:13:35,520 --> 00:13:38,280 Speaker 7: the candidate. Right, the two things that I think are 258 00:13:38,480 --> 00:13:43,040 Speaker 7: certainties post November are you know, bigger federal budgets and 259 00:13:43,080 --> 00:13:46,480 Speaker 7: fiscal spending and more uh tariffs. 260 00:13:46,800 --> 00:13:48,120 Speaker 8: Right, those are the two things you. 261 00:13:48,080 --> 00:13:50,360 Speaker 7: Can bank on regardless of whether you get you know, 262 00:13:50,440 --> 00:13:54,640 Speaker 7: Harris or Trump, and both of those put an upward 263 00:13:54,679 --> 00:13:57,559 Speaker 7: bias into interest rates, all else equal, Right, So I 264 00:13:57,600 --> 00:14:00,959 Speaker 7: think you're gonna see this continued, you know, fight these 265 00:14:01,040 --> 00:14:03,760 Speaker 7: kind of two sigma moves and yields on a daily 266 00:14:03,800 --> 00:14:08,480 Speaker 7: basis that we haven't seen in maybe careers of a 267 00:14:08,480 --> 00:14:11,080 Speaker 7: lot of bond traders and people. 268 00:14:10,880 --> 00:14:13,400 Speaker 8: Who manage money. But it may be the new norm. 269 00:14:13,440 --> 00:14:17,120 Speaker 7: The volatility may now exist fully in the fixed income 270 00:14:17,120 --> 00:14:19,160 Speaker 7: markets and not as much in the equity markets as 271 00:14:19,200 --> 00:14:21,360 Speaker 7: we just keep you know, keep the carry trade in 272 00:14:21,400 --> 00:14:23,400 Speaker 7: the short ball, and we just drive the vix down 273 00:14:23,440 --> 00:14:26,440 Speaker 7: into from sixty five to fifteen, and we push the 274 00:14:26,640 --> 00:14:29,240 Speaker 7: end back weaker again. Right, It's just we're carrying on 275 00:14:29,560 --> 00:14:29,960 Speaker 7: right now. 276 00:14:30,080 --> 00:14:31,720 Speaker 5: It sure feels like we're seeing a lot of once 277 00:14:31,800 --> 00:14:34,320 Speaker 5: in a career events just in the past two weeks, 278 00:14:34,640 --> 00:14:35,560 Speaker 5: one of them being the yen. 279 00:14:35,520 --> 00:14:37,240 Speaker 6: Which you said you wake up in the morning in check. 280 00:14:37,320 --> 00:14:39,480 Speaker 5: What does it tell you when you wake up on 281 00:14:39,520 --> 00:14:42,160 Speaker 5: a day like yesterday after the US data and you 282 00:14:42,200 --> 00:14:44,880 Speaker 5: see dollar yen up one in a third percent after 283 00:14:45,040 --> 00:14:47,960 Speaker 5: just again two weeks ago, a week ago rather about 284 00:14:47,960 --> 00:14:50,040 Speaker 5: a week and a half, we saw this huge appreciation 285 00:14:50,080 --> 00:14:51,840 Speaker 5: in the end that we can get that firepower back 286 00:14:51,840 --> 00:14:52,480 Speaker 5: with dollar yen. 287 00:14:53,040 --> 00:14:55,200 Speaker 7: Yeah, I think it's you know, last week was all 288 00:14:55,240 --> 00:14:58,440 Speaker 7: about kind of vicious unwines of the gen Carrie and 289 00:14:58,800 --> 00:15:00,800 Speaker 7: the short ball level bridge to trade. 290 00:15:00,880 --> 00:15:01,040 Speaker 8: Right. 291 00:15:01,480 --> 00:15:04,040 Speaker 7: They're putting it right back on this week, right, I mean, 292 00:15:04,120 --> 00:15:06,680 Speaker 7: and putting it on with a vengeance. And it's coming 293 00:15:06,720 --> 00:15:09,560 Speaker 7: from the buyers. You know, they're shorting the end and 294 00:15:09,600 --> 00:15:13,400 Speaker 7: they're shorting the ball or vix using that capital to 295 00:15:13,400 --> 00:15:15,960 Speaker 7: go out and buy risk on assets, right. And it's 296 00:15:16,000 --> 00:15:18,480 Speaker 7: coming from all sources. It's coming from the hedge fund community, 297 00:15:18,480 --> 00:15:21,000 Speaker 7: it's coming from institutions, it's coming from retail, it's coming 298 00:15:21,000 --> 00:15:24,000 Speaker 7: from buyback programs. Then now that we're getting to the 299 00:15:24,040 --> 00:15:26,840 Speaker 7: end of Q two, companies are using any weakness to 300 00:15:26,880 --> 00:15:29,200 Speaker 7: aggressively step in with their buyback programs. 301 00:15:29,640 --> 00:15:31,640 Speaker 8: So it's coming from all corners. 302 00:15:31,680 --> 00:15:34,080 Speaker 7: And until you change that and you couple it with 303 00:15:34,160 --> 00:15:37,400 Speaker 7: kind of August seasonal low liquidity, and it creates these 304 00:15:37,440 --> 00:15:38,280 Speaker 7: outsized moves. 305 00:15:38,560 --> 00:15:40,000 Speaker 6: Let's just take a step back for a second. 306 00:15:40,080 --> 00:15:42,600 Speaker 1: You say, the volatility now exist fully in the bond market, 307 00:15:42,640 --> 00:15:44,440 Speaker 1: almost more so than in the stock market. 308 00:15:44,840 --> 00:15:45,560 Speaker 6: Has it affected the. 309 00:15:45,560 --> 00:15:47,640 Speaker 1: Way that you position, where suddenly stocks become more of 310 00:15:47,640 --> 00:15:50,080 Speaker 1: the have in trade and bonds become more of a 311 00:15:50,120 --> 00:15:53,040 Speaker 1: trading game, sort of the sort of daily grind that 312 00:15:53,120 --> 00:15:56,080 Speaker 1: you think of with day trading of stocks, not traditionally bonds. 313 00:15:56,800 --> 00:15:57,040 Speaker 8: Yeah. 314 00:15:57,560 --> 00:16:00,680 Speaker 7: Look, I mean, you know, some of the worst performing 315 00:16:00,760 --> 00:16:02,600 Speaker 7: returns at the asset class level, we're on the fixed 316 00:16:02,600 --> 00:16:05,160 Speaker 7: income markets this year, right maybe up until about the 317 00:16:05,200 --> 00:16:08,080 Speaker 7: last week. But the Barclays Egg, you know, which is 318 00:16:08,080 --> 00:16:11,240 Speaker 7: your common domestic indicy, is one of the few indices 319 00:16:11,280 --> 00:16:14,080 Speaker 7: that still hasn't set a new all time high. Everything 320 00:16:14,080 --> 00:16:17,040 Speaker 7: else is pushing, you know, all time highs across the 321 00:16:17,080 --> 00:16:19,920 Speaker 7: board and the Barclays egg has not given you much 322 00:16:20,360 --> 00:16:23,240 Speaker 7: return over the last few years. People get they get 323 00:16:23,440 --> 00:16:25,320 Speaker 7: enamored with the idea of I can now get four 324 00:16:25,360 --> 00:16:27,320 Speaker 7: or five six percent, you know, on the short side 325 00:16:27,320 --> 00:16:29,160 Speaker 7: of curve. But when you actually get to a total return, 326 00:16:30,040 --> 00:16:33,320 Speaker 7: it's pretty anemic and it's pretty bad. So it's pushed 327 00:16:33,360 --> 00:16:35,560 Speaker 7: people to equities as kind of the there is no 328 00:16:35,600 --> 00:16:38,920 Speaker 7: other alternative, right the Tina trade, and they just keep 329 00:16:39,440 --> 00:16:42,479 Speaker 7: going back to that as a way to get exposure 330 00:16:42,600 --> 00:16:45,560 Speaker 7: until you can't or don't right until volatility spikes. 331 00:16:45,640 --> 00:16:46,800 Speaker 6: Is that how you're arranging things? 332 00:16:46,880 --> 00:16:48,800 Speaker 1: Are you buying it to the tina and staying away 333 00:16:48,800 --> 00:16:49,760 Speaker 1: from big. 334 00:16:49,640 --> 00:16:50,360 Speaker 6: Risk in bonds. 335 00:16:51,960 --> 00:16:53,560 Speaker 8: No, I would say we're a little more balanced. 336 00:16:53,560 --> 00:16:56,400 Speaker 7: So we used last week's weakness that we bought into 337 00:16:56,400 --> 00:16:58,240 Speaker 7: small caps right when the Rustle two came all the 338 00:16:58,240 --> 00:16:59,760 Speaker 7: way down to two thousand and had a ten percent 339 00:16:59,800 --> 00:17:03,680 Speaker 7: full correction. We bought into high yield because we thought, 340 00:17:04,119 --> 00:17:06,639 Speaker 7: you know, at three eighty three eighty five on highyield spreads, 341 00:17:06,680 --> 00:17:09,359 Speaker 7: that was the highest or widest spreads of the year, right, 342 00:17:09,520 --> 00:17:11,119 Speaker 7: we finally got a chance to take a bite at 343 00:17:11,160 --> 00:17:13,640 Speaker 7: some high yield in that environment and then we moved 344 00:17:13,640 --> 00:17:17,080 Speaker 7: out duration on the fixed income market. But overall, I 345 00:17:17,119 --> 00:17:20,119 Speaker 7: think from equities to fixed income were slightly overweight equities, 346 00:17:20,359 --> 00:17:24,200 Speaker 7: but nothing where you've pushed risk budgets or positioning out 347 00:17:24,200 --> 00:17:25,920 Speaker 7: to extremes at this point, and I think that'd be 348 00:17:25,960 --> 00:17:27,600 Speaker 7: a mistake to be honest at this point. 349 00:17:27,720 --> 00:17:29,440 Speaker 1: Well, we can get into why in a bit. Daryl 350 00:17:29,480 --> 00:17:31,240 Speaker 1: Kronk always wonderful to speak with you. Thank you so 351 00:17:31,320 --> 00:17:33,240 Speaker 1: much for being with us. Daryl Kronk of Wills for 352 00:17:33,359 --> 00:17:33,720 Speaker 1: a Global. 353 00:17:43,119 --> 00:17:43,840 Speaker 6: Here's the latest. 354 00:17:43,880 --> 00:17:46,640 Speaker 1: Kamala Harris set to pitch her economic agenda in North 355 00:17:46,680 --> 00:17:48,280 Speaker 1: Carolina this afternoon. 356 00:17:48,000 --> 00:17:49,400 Speaker 6: Ahead of the DNC next week. 357 00:17:49,440 --> 00:17:52,560 Speaker 1: Harris and Donald Trump both looking to put the economy 358 00:17:52,600 --> 00:17:55,840 Speaker 1: front and center. Noel Dixon of State Street Global Markets 359 00:17:55,960 --> 00:17:58,600 Speaker 1: warning quote, this could turn out to be a race 360 00:17:58,680 --> 00:18:01,920 Speaker 1: to the bottom as it relates to fiscal irresponsibility. I 361 00:18:01,960 --> 00:18:03,840 Speaker 1: think it's difficult to see how there is not a 362 00:18:03,920 --> 00:18:06,560 Speaker 1: floor under the long end of the US curve, regardless 363 00:18:06,840 --> 00:18:10,120 Speaker 1: of who wins. Make bond auctions great again, Noel joins 364 00:18:10,200 --> 00:18:12,600 Speaker 1: us again. Now, Noel, thank you so much for being 365 00:18:12,640 --> 00:18:13,000 Speaker 1: with us. 366 00:18:13,440 --> 00:18:14,320 Speaker 6: I want to start there. 367 00:18:14,600 --> 00:18:16,920 Speaker 1: Yeah, it seems like people have forgotten about this storyline, 368 00:18:16,920 --> 00:18:18,879 Speaker 1: and it seems like it only gets reprised where there 369 00:18:18,920 --> 00:18:20,040 Speaker 1: is a lot of other. 370 00:18:19,960 --> 00:18:23,000 Speaker 6: Types of drama in the market. Why is it not just. 371 00:18:23,040 --> 00:18:25,560 Speaker 1: A convenient boogeyman to pull out when people don't seem 372 00:18:25,560 --> 00:18:26,439 Speaker 1: to have that many worries. 373 00:18:26,600 --> 00:18:30,000 Speaker 9: Yeah, I just I feel like, you know, you know, 374 00:18:30,080 --> 00:18:36,440 Speaker 9: right now the market is certainly focused on different elements 375 00:18:36,480 --> 00:18:38,480 Speaker 9: that it's a lot coming at once, and I think 376 00:18:38,560 --> 00:18:42,280 Speaker 9: right now the main focus is, or the concern is, 377 00:18:43,320 --> 00:18:46,360 Speaker 9: you know, both candidates seem to be wanting to embrace 378 00:18:47,280 --> 00:18:51,040 Speaker 9: or add to the fiscal spending tab and that is 379 00:18:51,119 --> 00:18:53,280 Speaker 9: what I think most people are going to be focused 380 00:18:53,280 --> 00:18:56,400 Speaker 9: on and keeping an eye out on, and it gives 381 00:18:56,400 --> 00:18:59,800 Speaker 9: them trepidation about going fully in into the bond market, 382 00:19:00,040 --> 00:19:03,720 Speaker 9: especially into the long end. So from what we experience, 383 00:19:03,760 --> 00:19:06,480 Speaker 9: it seems people are more focused on more the belly 384 00:19:06,520 --> 00:19:09,159 Speaker 9: of the curve, staying on the short end of things 385 00:19:09,800 --> 00:19:12,120 Speaker 9: because there's just a lot of uncertainty and we're certainly 386 00:19:12,160 --> 00:19:14,399 Speaker 9: going to get I think a risk premium baked in 387 00:19:14,840 --> 00:19:17,399 Speaker 9: as we get into or approach the election. 388 00:19:17,800 --> 00:19:19,920 Speaker 4: NOLL when it comes to some of this rhetoric that's 389 00:19:19,960 --> 00:19:21,959 Speaker 4: being thrown around Kamala Harris today is going to talk 390 00:19:22,000 --> 00:19:24,280 Speaker 4: about twenty five thousand dollars. If you're a new home buyer, 391 00:19:24,280 --> 00:19:26,800 Speaker 4: of course you need Congress. So it feels like rhetoric. 392 00:19:26,840 --> 00:19:29,960 Speaker 4: But Trump tart tax cuts are back in play. He's 393 00:19:30,000 --> 00:19:33,000 Speaker 4: talking about a lower his words, lower class, middle class, 394 00:19:33,040 --> 00:19:36,440 Speaker 4: upper class tax cut across the board. Is anyone in 395 00:19:36,520 --> 00:19:40,400 Speaker 4: these parties serious about ratcheting back fiscal spending? 396 00:19:40,760 --> 00:19:43,399 Speaker 9: I don't think so. I think right now, you know, 397 00:19:44,480 --> 00:19:47,919 Speaker 9: you know, we've been able to sustain these high levels 398 00:19:47,920 --> 00:19:50,440 Speaker 9: of debt, and they think, you know, the music will 399 00:19:50,440 --> 00:19:53,800 Speaker 9: continue to play. But I think, you know, we're at 400 00:19:53,840 --> 00:19:56,520 Speaker 9: a very different starting point. And this is what I 401 00:19:56,520 --> 00:19:59,560 Speaker 9: think markets and investors are starting to get concerned about. 402 00:20:00,280 --> 00:20:03,199 Speaker 9: We see it with some of the activity, and like 403 00:20:03,240 --> 00:20:05,320 Speaker 9: I mentioned before, I think a lot of this risk 404 00:20:05,440 --> 00:20:08,200 Speaker 9: is going to start to get baked in post Labor Day, 405 00:20:08,320 --> 00:20:10,320 Speaker 9: and I think we could expect some volatility. 406 00:20:10,880 --> 00:20:14,520 Speaker 4: To borrow a phrase from Lisa, are you expecting potentially 407 00:20:15,119 --> 00:20:17,359 Speaker 4: a Liz Trust moment? Is that what it would take 408 00:20:17,520 --> 00:20:20,040 Speaker 4: the market to push back on the US federal government. 409 00:20:20,280 --> 00:20:22,520 Speaker 9: I think I would say that's what it would take. 410 00:20:23,119 --> 00:20:25,119 Speaker 9: I don't think we'll get to that extense just to 411 00:20:25,160 --> 00:20:27,240 Speaker 9: be fair. I think, you know, we are still the 412 00:20:27,280 --> 00:20:30,800 Speaker 9: reserve currency of the world. I think we still have 413 00:20:31,320 --> 00:20:35,879 Speaker 9: very deep capital markets. However, you know, I do think 414 00:20:36,240 --> 00:20:37,879 Speaker 9: we have to expect that we're going to get some 415 00:20:37,960 --> 00:20:40,120 Speaker 9: volatility leading into November. 416 00:20:40,200 --> 00:20:42,200 Speaker 5: I mean, it is pretty remarkable that we have everything 417 00:20:42,240 --> 00:20:42,640 Speaker 5: you're saying. 418 00:20:42,640 --> 00:20:45,600 Speaker 6: We've seen some bond options tail. The deficit's going to 419 00:20:45,640 --> 00:20:46,080 Speaker 6: get worse. 420 00:20:46,119 --> 00:20:48,679 Speaker 5: The economy isn't falling off a cliff, but ten year 421 00:20:48,720 --> 00:20:50,199 Speaker 5: yields are still below four percent. 422 00:20:50,440 --> 00:20:50,960 Speaker 8: That's right. 423 00:20:51,119 --> 00:20:54,159 Speaker 5: What is fair value to incorporate the fear of rising 424 00:20:54,200 --> 00:20:55,120 Speaker 5: deficits in the US? 425 00:20:55,240 --> 00:20:57,600 Speaker 9: Yeah, I think to me, I think fear value is 426 00:20:57,640 --> 00:21:02,639 Speaker 9: definitely higher than four percent right now. I think you 427 00:21:02,760 --> 00:21:06,920 Speaker 9: have to juxtapose the fiscal concerns with with what's going 428 00:21:06,960 --> 00:21:10,240 Speaker 9: on with central banks. And there was up until I 429 00:21:10,240 --> 00:21:13,080 Speaker 9: would say yesterday, until we got retail sales, there was 430 00:21:13,119 --> 00:21:16,800 Speaker 9: this concern that, you know, the US economy was starting 431 00:21:16,840 --> 00:21:19,399 Speaker 9: to roll over. But as we see, you know, the 432 00:21:19,480 --> 00:21:22,480 Speaker 9: labor market is still tight, the US economy is still 433 00:21:22,480 --> 00:21:26,680 Speaker 9: relatively strong. So you have that environment. You augment that 434 00:21:26,760 --> 00:21:30,520 Speaker 9: with some fiscal spending, and I think that's where you 435 00:21:30,560 --> 00:21:32,359 Speaker 9: get above four percent and stay there. 436 00:21:32,480 --> 00:21:33,200 Speaker 6: Well, people have. 437 00:21:33,200 --> 00:21:35,200 Speaker 5: Pointed to this idea that there's going to be less 438 00:21:35,280 --> 00:21:37,159 Speaker 5: fiscal support than there was in the era of the 439 00:21:37,240 --> 00:21:39,760 Speaker 5: Chips Act, the Inflation Reduction Act. Bank of America puts 440 00:21:39,800 --> 00:21:42,560 Speaker 5: it at about a five percent drop in US government 441 00:21:42,560 --> 00:21:45,159 Speaker 5: spending year over year. How are you thinking about the 442 00:21:45,280 --> 00:21:46,760 Speaker 5: US fiscal impulse at this moment. 443 00:21:47,119 --> 00:21:49,200 Speaker 9: So the fiscal impulse, I think you have to keep 444 00:21:49,240 --> 00:21:52,320 Speaker 9: in mind the CBO projections right now factor in the 445 00:21:52,400 --> 00:21:55,879 Speaker 9: lapse of the Trump tax cuts. So both parties are 446 00:21:55,920 --> 00:21:58,080 Speaker 9: going to keep you know, Trump obviously wants to keep 447 00:21:58,119 --> 00:22:01,480 Speaker 9: it full stop, but you know the Democrats, you know, 448 00:22:01,560 --> 00:22:05,720 Speaker 9: they're saying, you know, four hundred thousand or or below, 449 00:22:05,720 --> 00:22:07,840 Speaker 9: are going to keep the tax cuts. You add on 450 00:22:07,880 --> 00:22:10,040 Speaker 9: to that, you know, they both seem to be on 451 00:22:10,119 --> 00:22:14,679 Speaker 9: consensus in terms of no taxes on tips. That's another tab. 452 00:22:15,480 --> 00:22:17,639 Speaker 9: So you can start to see it start to add up. 453 00:22:17,760 --> 00:22:21,080 Speaker 9: Like she mentioned before, Kamala Harris is talking about twenty 454 00:22:21,119 --> 00:22:24,600 Speaker 9: five thousand dollars tax credit. I know she wants to 455 00:22:24,640 --> 00:22:27,440 Speaker 9: probably extend some of the tax credits that they had 456 00:22:27,480 --> 00:22:30,800 Speaker 9: during the you know, the Biden's tenure. So all of 457 00:22:30,840 --> 00:22:33,120 Speaker 9: that's adding up, and I think it's going to definitely, 458 00:22:33,280 --> 00:22:34,800 Speaker 9: like I said, cost some volatility. 459 00:22:35,040 --> 00:22:36,800 Speaker 1: Just to sort of underscore this whole point, are you 460 00:22:36,800 --> 00:22:39,160 Speaker 1: basically recommending to State Street clients not to go into 461 00:22:39,160 --> 00:22:39,720 Speaker 1: long bonds? 462 00:22:40,720 --> 00:22:44,199 Speaker 9: I think I think I would be definitely skeptical to 463 00:22:44,240 --> 00:22:45,960 Speaker 9: go into the longside right now. 464 00:22:46,200 --> 00:22:46,720 Speaker 8: Of the curve. 465 00:22:46,800 --> 00:22:49,760 Speaker 9: I think it's I think it's more secure to probably 466 00:22:50,040 --> 00:22:52,480 Speaker 9: stay on the short end. And you know, if you 467 00:22:52,560 --> 00:22:55,760 Speaker 9: have the FED may cut rates. However, you know, given 468 00:22:55,800 --> 00:22:59,000 Speaker 9: how the like I mentioned before, the economy is pretty strong, 469 00:22:59,320 --> 00:23:02,159 Speaker 9: I think you know, the Feds, they only could go 470 00:23:02,280 --> 00:23:02,720 Speaker 9: so far. 471 00:23:03,080 --> 00:23:03,919 Speaker 6: Well, how far. 472 00:23:03,840 --> 00:23:06,000 Speaker 1: Would long end yields have to back up for you 473 00:23:06,040 --> 00:23:07,360 Speaker 1: to recommend them against clients. 474 00:23:07,560 --> 00:23:09,280 Speaker 9: I think they would have to get to five percent 475 00:23:09,480 --> 00:23:13,399 Speaker 9: for me to feel comfortable recommended long end at the stage. 476 00:23:13,480 --> 00:23:14,359 Speaker 8: And that's the tenure. 477 00:23:14,600 --> 00:23:17,639 Speaker 1: And this is entirely because of political concerns, not because 478 00:23:17,760 --> 00:23:21,160 Speaker 1: of what you're seeing with respect to potentially preemptive FED 479 00:23:21,200 --> 00:23:23,439 Speaker 1: cuts and just where inflation might be long term. This 480 00:23:23,480 --> 00:23:25,040 Speaker 1: is having to do specifically with the deficit. 481 00:23:25,080 --> 00:23:25,920 Speaker 8: Correct it does. 482 00:23:26,000 --> 00:23:30,000 Speaker 9: Yeah, I think it's completely the fiscal situation that we 483 00:23:30,080 --> 00:23:32,159 Speaker 9: find ourselves in, and I think it's just going to 484 00:23:32,200 --> 00:23:34,320 Speaker 9: get exacerbated regardless of who wins. 485 00:23:34,560 --> 00:23:36,320 Speaker 6: How much futback are you getting from clients? 486 00:23:37,560 --> 00:23:39,880 Speaker 9: I would say it's kind of mixed. I would say 487 00:23:39,920 --> 00:23:43,359 Speaker 9: it's maxed. Some clients are you know, all in because 488 00:23:43,400 --> 00:23:46,480 Speaker 9: you know their perspective is, you know, you know, global 489 00:23:46,480 --> 00:23:49,760 Speaker 9: central banks of cutting rates, good environment to go into 490 00:23:50,119 --> 00:23:54,719 Speaker 9: into bonds. But some are starting to get concerned about 491 00:23:54,760 --> 00:23:57,840 Speaker 9: some of the proposals that are getting floated around. I 492 00:23:57,880 --> 00:24:00,560 Speaker 9: think they were caught off guard a little bit when 493 00:24:00,640 --> 00:24:05,360 Speaker 9: Carmala embraced this, you know, no tax taxes on tips, 494 00:24:05,560 --> 00:24:08,840 Speaker 9: because that was something new. Now now the thinking is, okay, 495 00:24:08,840 --> 00:24:10,760 Speaker 9: what else could come to the fore? What else can 496 00:24:10,800 --> 00:24:13,719 Speaker 9: be reintroduced here? So I think that'll you know, what 497 00:24:13,800 --> 00:24:16,800 Speaker 9: she lays out later on today, what she kind of 498 00:24:16,840 --> 00:24:18,920 Speaker 9: emphasizes during the DNC will be critical. 499 00:24:19,160 --> 00:24:21,480 Speaker 1: Nor Dickson, thank you so much for being with us. 500 00:24:21,520 --> 00:24:23,520 Speaker 6: Really interesting, Nold Dickson that on State Street. 501 00:24:24,400 --> 00:24:27,960 Speaker 2: This is the Bloomberg Sevenants podcast, bringing you the best 502 00:24:27,960 --> 00:24:31,280 Speaker 2: in markets, economics, angio politics. You can watch the show 503 00:24:31,359 --> 00:24:34,280 Speaker 2: live on Bloomberg TV weekday mornings from six am to 504 00:24:34,440 --> 00:24:38,200 Speaker 2: nine am Eastern. 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