WEBVTT - Bloomberg Surveillance TV: August 16, 2024 0:00:02.440 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.720 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:36.879 Terminal and the Bloomberg Business app Gaza. 0:00:36.920 --> 0:00:39.720 Peace talks underway in the Middle East between Israel and 0:00:39.760 --> 0:00:44.280 international mediators, Axios reporting some progress was made on the 0:00:44.280 --> 0:00:47.599 first day of discussion, citing US officials, This coming as 0:00:47.720 --> 0:00:51.239 Israel braces for a possible attack from Ran. Joining US 0:00:51.280 --> 0:00:54.920 now is Ambassador John Bolton, former US National Security Advisor 0:00:54.960 --> 0:00:58.440 and former Ambassador to the UN. Ambassador Borlton, thank you 0:00:58.440 --> 0:01:01.400 so much for being with us. To start with what 0:01:01.520 --> 0:01:04.720 you think of the recent talks underway and why you 0:01:04.760 --> 0:01:07.280 think Iran has not retaliated yet. 0:01:09.240 --> 0:01:13.080 Well, with respect to the talks, the administration saying making progress. 0:01:13.080 --> 0:01:15.400 You know they've been saying making progress on these talks 0:01:15.400 --> 0:01:17.760 for about four or five months now. They never seem 0:01:17.800 --> 0:01:20.120 to get to the finish line. I think there's still 0:01:20.600 --> 0:01:24.480 enormous gaps between the Israeli position and the Hamas position. 0:01:25.080 --> 0:01:27.800 I'm not saying a miracle couldn't happen. It happens in 0:01:27.800 --> 0:01:30.000 the Middle East from time to time, but I wouldn't 0:01:30.000 --> 0:01:35.039 look forward. I do think Iran has hesitated to retaliate 0:01:35.080 --> 0:01:39.160 for the killing of Ismail Hania, the Hamas leader in Tehran. 0:01:40.880 --> 0:01:44.840 They need to strike back. I think very strongly. They've 0:01:44.880 --> 0:01:49.520 been humiliated by what Israel did, killing this terrorist leader 0:01:49.680 --> 0:01:52.880 in their capital in a secure compound with a bomb 0:01:52.920 --> 0:01:56.400 planted two months before. It shows nobody in Iran is 0:01:56.480 --> 0:02:00.240 safe from Israel, including the Supreme Leader. On the other hand, 0:02:01.320 --> 0:02:04.920 the Iranian leaders are also intimidated by bb Net and 0:02:05.000 --> 0:02:08.600 Yahoo and Israel. I think this time they are worried 0:02:08.639 --> 0:02:12.120 that the US will not be able to pressure Israel 0:02:12.200 --> 0:02:16.400 into a limited response as Israel did after the three 0:02:16.520 --> 0:02:19.639 hundred and twenty drone and missile assault on Israel from 0:02:19.639 --> 0:02:23.760 Iran's territory some months ago. Really, Iran is more intimidated 0:02:23.760 --> 0:02:26.520 by Israel than it is by the Biden administration. So 0:02:27.040 --> 0:02:30.000 they've got a difficult decision how strong a response to 0:02:30.000 --> 0:02:34.240 make to restore their own very damaged credibility versus their 0:02:34.320 --> 0:02:36.560 fear of what Israel would then do to them. 0:02:36.800 --> 0:02:39.079 Well, in April, when those three hundred missiles were flying over, 0:02:39.160 --> 0:02:42.920 it was because of the US defense that Israel's able 0:02:42.960 --> 0:02:47.240 to fend them off. Ambassador, given your level of intel 0:02:47.360 --> 0:02:51.280 regarding Iran, how can they retaliate but also try to 0:02:51.320 --> 0:02:55.880 not strike this cycle of endless retaliations back and forth. 0:02:57.880 --> 0:03:02.079 Well, let's come back to the attack. Wall Street Journal 0:03:02.080 --> 0:03:05.960 and CBS reported that of the one hundred and twenty ballistic 0:03:06.040 --> 0:03:09.840 missiles that Iran fired at Israel, sixty never made it 0:03:09.880 --> 0:03:12.240 within range to be shot down. They either blew up 0:03:12.280 --> 0:03:16.000 on the launch pad or crashed before they got close enough, 0:03:16.480 --> 0:03:19.400 which speaks to the quality of Iran's ballistic missile force. 0:03:19.960 --> 0:03:21.880 But if there had been one hundred and twenty rather 0:03:21.960 --> 0:03:25.200 than sixty ballistic missiles in the skies over Israel, I 0:03:25.200 --> 0:03:28.200 don't think it would have been such a good performance. 0:03:28.600 --> 0:03:32.840 The cycle that's at work here is caused by Iran. Look, 0:03:32.880 --> 0:03:36.600 this is not a war between Palestinians or Gosans in Israel. 0:03:36.680 --> 0:03:39.920 This is a war by Iran against Israel, what they 0:03:39.960 --> 0:03:44.640 themselves call the ring of Fire strategy. And as long 0:03:44.720 --> 0:03:48.160 as the current regime in Tehran is in power, seeking 0:03:48.240 --> 0:03:54.400 nuclear weapons, arming, equipping, training, financing, giving intelligence to multiple 0:03:54.480 --> 0:03:57.760 terrorist groups in the region, threatening not only Israel but 0:03:57.840 --> 0:04:02.080 the Gulf Arab states too, there's going to be conflict. 0:04:02.200 --> 0:04:06.120 And what's driving Israel and the Golf Arabs closer together 0:04:06.640 --> 0:04:10.160 is that they all see Iran as the main strategic 0:04:10.240 --> 0:04:13.240 threat and they think the United States is feckless. 0:04:13.880 --> 0:04:16.400 As these ceasefire talks continued, do you agree with the 0:04:16.440 --> 0:04:19.640 idea that Iran could potentially use those if they were 0:04:19.680 --> 0:04:22.880 to incadeal use that as an off ramp to not retaliate. 0:04:25.320 --> 0:04:27.360 Well, they may want to use it as an off ramp, 0:04:27.440 --> 0:04:29.680 but I think it would be a big blow to 0:04:29.960 --> 0:04:33.279 Iran's prestige. You know, they're not exactly stepping up here 0:04:33.600 --> 0:04:39.880 to take responsibility for what happened to Hamas after the 0:04:39.920 --> 0:04:43.400 October seven attack, and they've also not been able yet 0:04:43.440 --> 0:04:48.599 to persuade Hezballah to use its unbelievably large arsenal of 0:04:48.680 --> 0:04:51.960 missiles against Israel. So, as I say, I think it's 0:04:52.000 --> 0:04:56.800 the fear of further Israeli retaliation that has the Iranians 0:04:56.839 --> 0:04:58.560 intimidated with. 0:04:58.440 --> 0:05:01.520 That retaliation coming from Israel if Ron does do some 0:05:01.560 --> 0:05:04.560 sort of large attack. Ambassador Bolton, what is the ability 0:05:04.640 --> 0:05:08.040 of the US and its allies to reign in Netanyahu's response? 0:05:10.360 --> 0:05:13.680 Well, I'm sure that the Biden administration will want to 0:05:13.680 --> 0:05:17.160 rein them in. They've been afraid of this issue and 0:05:17.240 --> 0:05:20.000 the war in Ukraine dominating the news in the United 0:05:20.040 --> 0:05:23.000 States because it shows a world and chaos due to 0:05:23.320 --> 0:05:27.280 three and a half years of American weakness. Really, what 0:05:27.720 --> 0:05:30.000 they would like to see is this go away until 0:05:30.080 --> 0:05:33.760 after election day, even though Biden's no longer running himself. 0:05:34.200 --> 0:05:36.520 You know, Frankly, I think the lesson to be learned 0:05:36.640 --> 0:05:42.720 is that the prospect of a really forceful Israeli response 0:05:42.760 --> 0:05:46.719 if Israel comes back at them, shows that a strong 0:05:46.880 --> 0:05:50.440 posture toward these rogue states is the way to go. 0:05:50.600 --> 0:05:53.320 And Iran has a lot to fear from Israel. It 0:05:53.360 --> 0:05:55.520 should have a lot to fear from the United States, 0:05:55.560 --> 0:05:56.960 but at the moment it doesn't. 0:05:57.640 --> 0:05:59.480 And Ambassador, a lot of times when we're talking about 0:05:59.480 --> 0:06:02.600 this retali even if Iran would like to do that 0:06:02.720 --> 0:06:05.760 without provoking a response. The question always comes into the fore, 0:06:06.160 --> 0:06:08.560 what is the likelihood that mistakes are made, mistakes are 0:06:08.560 --> 0:06:11.760 made that escalate things further and that there's been this 0:06:11.800 --> 0:06:13.880 conversation that it won't just be around this time. But 0:06:13.960 --> 0:06:17.039 Hesbala as well. Are the ows for mistakes higher by 0:06:17.080 --> 0:06:20.760 involving proxy forces in the retaliation to the retaliation to 0:06:20.760 --> 0:06:21.440 the retaliation. 0:06:24.320 --> 0:06:26.960 Well, look, I think you have to look at what 0:06:27.000 --> 0:06:30.080 the strategic picture is. There is a regional war in 0:06:30.120 --> 0:06:33.279 the Middle East now of Iran against Israel on five 0:06:33.360 --> 0:06:38.479 fronts Hesbala from Lebanon, Hamas and the Gaza Strip. The 0:06:38.520 --> 0:06:43.159 Hoodies that have closed the Souez Canal Red Sea passage, 0:06:43.160 --> 0:06:46.120 one of the most important commercial shipping channels in the world, 0:06:46.200 --> 0:06:51.240 closed effectively since October. The Shia militia in Iraq and 0:06:51.320 --> 0:06:55.320 Syria that have been attacking American positions and Iran itself, 0:06:55.360 --> 0:06:57.920 and the question is how do they dial up one 0:06:58.040 --> 0:07:02.920 or the other. Israel does Hesbelah's Arsenal, which in public 0:07:03.000 --> 0:07:06.680 estimates this is an extraordinary number, but public estimates are 0:07:06.720 --> 0:07:09.720 that Hezbola has between one hundred and twenty and one 0:07:09.800 --> 0:07:13.520 hundred and fifty thousand missiles, which would obviously be enough 0:07:13.560 --> 0:07:17.440 to overwhelm Israel's air defenses, and leads to the question, 0:07:17.520 --> 0:07:20.120 if they really think it's about to happen, might not 0:07:20.280 --> 0:07:24.680 Israel strike first. It's complicated. It's not mistakes. It's the 0:07:24.720 --> 0:07:29.080 fact that the leadership in Tehran is determined to destroy 0:07:29.160 --> 0:07:31.160 the Little Satan. That's what's at work. 0:07:31.000 --> 0:07:32.680 Here, Ambassador Bolton. 0:07:32.760 --> 0:07:35.080 Yesterday we heard from Foreign President Donald Trump, who. 0:07:35.040 --> 0:07:35.560 You worked for. 0:07:36.240 --> 0:07:38.000 He said, I'm not looking to be bad to Iran. 0:07:38.040 --> 0:07:40.480 We're going to be friendly. I hope with Iran, maybe 0:07:40.480 --> 0:07:42.600 but maybe not. But we're going to be friendly. I 0:07:42.640 --> 0:07:45.240 hope we're going to be friendly. Do you know what 0:07:45.280 --> 0:07:50.000 trump two point zeros policy towards Iran potentially will look like. 0:07:52.400 --> 0:07:54.840 Look, he has no idea what it will look like. 0:07:55.120 --> 0:07:57.760 People who look at what happened in the first term 0:07:57.920 --> 0:08:01.160 and believe that it'll be the same in the second term, 0:08:01.840 --> 0:08:07.600 I think are mistaken. It's always possible. But remember he 0:08:08.000 --> 0:08:11.680 Trump almost met with Iran's then foreign minister job At 0:08:11.760 --> 0:08:15.480 Zarief at the ba ritz G seventh Summit in August 0:08:15.480 --> 0:08:18.880 of twenty nineteen. Emmanuel mccrown, the President of France, had 0:08:18.960 --> 0:08:23.239 Zerief in a villa in bea ritz almost persuaded Trump 0:08:23.280 --> 0:08:26.800 to do it. The attraction to Donald Trump of making 0:08:26.800 --> 0:08:31.160 a deal with anybody is hard to quantify. It really 0:08:31.200 --> 0:08:34.880 goes off the charts, and it could be the same 0:08:34.880 --> 0:08:37.080 way in a second term. And that's why I think 0:08:37.120 --> 0:08:40.400 there's a certain amount of pressure on the Israelis if 0:08:40.440 --> 0:08:43.400 they're going to do something, to do it now rather 0:08:43.480 --> 0:08:46.360 than to wait for the uncertainty of the American election. 0:08:46.880 --> 0:08:48.920 Ambassador job Bolton, thank you so much for taking the 0:08:49.000 --> 0:09:01.640 time with us. To begin with the top story, The 0:09:01.640 --> 0:09:05.000 Goldilock scenario is back on the table and fully embraced, 0:09:05.040 --> 0:09:08.440 stocks rallying on strong US retail and labor data indicating 0:09:08.480 --> 0:09:12.439 continued economic strength. Daryl Krok of Wells Frago remaining cautious, 0:09:12.640 --> 0:09:15.600 saying this the US economy is slowing and the Fed 0:09:15.640 --> 0:09:16.960 should be cutting interest rates. 0:09:17.120 --> 0:09:18.760 They probably should have already cut in July. 0:09:18.880 --> 0:09:21.160 The burden of proof has now switched over in the 0:09:21.200 --> 0:09:24.520 market's eyes and is on the soft landing to prove itself. 0:09:24.559 --> 0:09:27.840 Daryl joins us, Now, Darryl, did you write this before 0:09:27.920 --> 0:09:29.000 last this past. 0:09:28.720 --> 0:09:35.520 Week's I did not actually wrote it yesterday morning. Look, 0:09:35.559 --> 0:09:39.959 I think outside of market's kind of vicious reaction last 0:09:39.960 --> 0:09:42.600 week and this if you kind of double click below 0:09:42.640 --> 0:09:46.040 the surface, there is disconnects here, right, they'll curve is disconnected. 0:09:46.360 --> 0:09:48.680 I think some of the consumer data is disconnected. We 0:09:48.720 --> 0:09:53.840 read retail sales yesterday up one percent. That was almost extensive. 0:09:53.880 --> 0:09:56.319 It was autos, right. The rest of it was food beverage, 0:09:56.360 --> 0:09:58.680 which is stuff we all have to consume every day. 0:09:58.720 --> 0:10:01.400 So it wasn't like discretionaries, right, It wasn't some big, 0:10:01.720 --> 0:10:05.559 you know, element that showed that the consumers out there 0:10:05.600 --> 0:10:09.320 spending crazily right on this, And I think there's disconnect 0:10:09.360 --> 0:10:11.480 in the manufacturing data and the housing data. We got 0:10:11.480 --> 0:10:14.280 the National Association of home Builders yesterday. Think about it 0:10:14.280 --> 0:10:17.000 this way. That came in a thirty nine right. Anything 0:10:17.000 --> 0:10:19.840 below fifties, you know, means that their outlook is poor 0:10:19.840 --> 0:10:23.000 for homebuilders. Yet homebuilder stocks are going crazy, right, I 0:10:23.040 --> 0:10:25.800 mean they're upsetting new basically all time highs. So you've 0:10:25.840 --> 0:10:28.240 got all these disconnects that I think markets have to 0:10:28.280 --> 0:10:29.360 reconcile themselves with. 0:10:29.520 --> 0:10:32.280 Let's talk about one particular disconnect in the bond market, 0:10:32.520 --> 0:10:35.040 where you have parts of the bond market talking about 0:10:35.080 --> 0:10:36.800 an economy that is in need of a lot of 0:10:36.800 --> 0:10:38.480 FED support, and then you have other parts of the 0:10:38.480 --> 0:10:41.319 bond market that are suggesting that this is an economy 0:10:41.520 --> 0:10:45.280 that's quite robust. How do you understand and reconcile some 0:10:45.320 --> 0:10:46.920 of these discrepancies. 0:10:47.360 --> 0:10:49.679 Well, I think you put it well earlier, right, think 0:10:49.679 --> 0:10:52.600 about it this way. I wake up in the morning, 0:10:52.640 --> 0:10:53.760 and the first thing I look at is the two 0:10:53.840 --> 0:10:57.120 year treasury right quickly generally now last couple weeks, followed 0:10:57.120 --> 0:10:57.959 by the Japanese yen. 0:10:58.040 --> 0:10:59.000 Right, those are the two. 0:10:58.800 --> 0:11:02.000 Eyes on em The two year treasury at four to 0:11:02.000 --> 0:11:06.640 four and a quarter does not sync with nine interest 0:11:06.760 --> 0:11:08.360 rate cuts between now and next year. 0:11:08.840 --> 0:11:09.040 Right. 0:11:09.080 --> 0:11:10.920 The math just doesn't work. I mean, the FED funds 0:11:10.960 --> 0:11:12.679 is a five and a quarter. You bring it down 0:11:12.679 --> 0:11:14.320 to let's say four, that's one hundred and twenty five 0:11:14.360 --> 0:11:16.720 basis points cuts. We have one hundred priced in for 0:11:17.240 --> 0:11:19.400 this year alone, much less what we're going to do 0:11:19.440 --> 0:11:21.400 in twenty twenty five according to FED. So we're right 0:11:21.440 --> 0:11:23.199 back into this camp of who's right. 0:11:23.240 --> 0:11:23.760 Who's wrong? 0:11:23.880 --> 0:11:25.680 Is the YO curve right and the two year treasury 0:11:25.840 --> 0:11:28.360 right at four to four and a quarter and maybe 0:11:28.440 --> 0:11:31.800 grinding higher or you know, are we going to get 0:11:32.040 --> 0:11:34.640 nine big interest rate cuts. You know, we've seen this 0:11:34.720 --> 0:11:37.200 movie before. We didn't believe it at the beginning of 0:11:37.240 --> 0:11:39.520 this year on the six interest rate cuts, right, we 0:11:39.559 --> 0:11:41.839 said that would get walked back. We didn't believe it 0:11:41.840 --> 0:11:43.640 at the beginning of twenty twenty three. When the FED 0:11:43.640 --> 0:11:46.679 funds future is priced in three interest rate cuts for 0:11:46.720 --> 0:11:49.199 the back half of twenty twenty three. You know, third 0:11:49.280 --> 0:11:51.199 times a charm, But there's no doubt the Fed will 0:11:51.200 --> 0:11:54.240 go in September. I just don't believe the seven to nine. 0:11:54.320 --> 0:11:56.439 And if you get seven to nine, it's a problem 0:11:56.520 --> 0:11:59.880 for the economy. That's the reason we're cutting that aggressively, right. 0:12:00.120 --> 0:12:03.160 It's not because we're soft landing this thing and we 0:12:03.200 --> 0:12:05.640 need nine interest rate cuts to get back to our start. 0:12:06.440 --> 0:12:09.000 I wonder what you make of duration and the level 0:12:09.000 --> 0:12:11.080 of the tenure right now. We were having this discussion 0:12:11.120 --> 0:12:14.040 earlier with Stay Street, this idea that you're living in 0:12:14.120 --> 0:12:17.040 a time where the soft landing seems probable, at least 0:12:17.040 --> 0:12:18.599 for now, we're not pulling off a cliff at the 0:12:18.679 --> 0:12:19.319 very this week. 0:12:19.600 --> 0:12:21.280 This week. We'll talk again next week. 0:12:21.360 --> 0:12:21.600 Yes. 0:12:21.880 --> 0:12:24.280 And in the meantime, you have these policy proposals coming 0:12:24.280 --> 0:12:26.480 from candidates that seem to indicate a lot of spending, 0:12:26.640 --> 0:12:28.840 and you have fears about auctions and auctions that have tailed. 0:12:28.920 --> 0:12:31.120 Yet it is a tenure that is still below four percent. 0:12:31.800 --> 0:12:32.720 Does not make sense. 0:12:33.640 --> 0:12:34.880 I don't think it makes sense. 0:12:35.200 --> 0:12:38.040 I do think the long term kind of neutral rate 0:12:38.080 --> 0:12:39.880 of the tenure is around three seventy five to three 0:12:39.920 --> 0:12:42.560 eighty not very different from today. But just last week 0:12:42.600 --> 0:12:45.679 on the volatility, we had been like most people, kind 0:12:45.679 --> 0:12:47.480 of crowded on the short side of the curve in 0:12:47.520 --> 0:12:52.280 our exposure and positioning. We basically took that positioning and 0:12:52.320 --> 0:12:55.240 we bulleted it right not Barbell, So in other words, 0:12:55.480 --> 0:12:58.480 we took money out alongside, took money on the short side, 0:12:58.520 --> 0:12:59.679 and went right to the belly of the curve. 0:13:00.040 --> 0:13:01.720 Think we think you're getting good value there. 0:13:01.920 --> 0:13:04.440 You do have to start biting in duration and take 0:13:04.480 --> 0:13:07.480 some some uh exposure there. If the FED is gonna 0:13:07.520 --> 0:13:09.920 cut interest rates, which we believe they will, we just 0:13:10.160 --> 0:13:12.040 maybe fade this idea that they're gonna be able to 0:13:12.120 --> 0:13:14.760 cut as aggressively as what everybody else does. So you 0:13:14.800 --> 0:13:16.720 do have to go after some duration here. You can't 0:13:16.760 --> 0:13:18.280 just live on the short side of the curve or 0:13:18.320 --> 0:13:20.640 you're gonna get you're gonna get killed with reinvestment risk 0:13:20.679 --> 0:13:21.959 over the next twelve to eighteen months. 0:13:22.040 --> 0:13:24.400 Back to the fiscal policy outlook, though, is the bond 0:13:24.400 --> 0:13:27.320 market just ignoring all these policy proposals. 0:13:27.040 --> 0:13:29.800 For the time, Yes, I mean I if you win. 0:13:30.320 --> 0:13:32.200 So so if you take my neutral rate on the 0:13:32.200 --> 0:13:35.480 ten ure, it's three eighty, and then you regardless of 0:13:35.520 --> 0:13:38.280 the candidate. Right, the two things that I think are 0:13:38.480 --> 0:13:43.040 certainties post November are you know, bigger federal budgets and 0:13:43.080 --> 0:13:46.480 fiscal spending and more uh tariffs. 0:13:46.800 --> 0:13:48.120 Right, those are the two things you. 0:13:48.080 --> 0:13:50.360 Can bank on regardless of whether you get you know, 0:13:50.440 --> 0:13:54.640 Harris or Trump, and both of those put an upward 0:13:54.679 --> 0:13:57.559 bias into interest rates, all else equal, Right, So I 0:13:57.600 --> 0:14:00.959 think you're gonna see this continued, you know, fight these 0:14:01.040 --> 0:14:03.760 kind of two sigma moves and yields on a daily 0:14:03.800 --> 0:14:08.480 basis that we haven't seen in maybe careers of a 0:14:08.480 --> 0:14:11.080 lot of bond traders and people. 0:14:10.880 --> 0:14:13.400 Who manage money. But it may be the new norm. 0:14:13.440 --> 0:14:17.120 The volatility may now exist fully in the fixed income 0:14:17.120 --> 0:14:19.160 markets and not as much in the equity markets as 0:14:19.200 --> 0:14:21.360 we just keep you know, keep the carry trade in 0:14:21.400 --> 0:14:23.400 the short ball, and we just drive the vix down 0:14:23.440 --> 0:14:26.440 into from sixty five to fifteen, and we push the 0:14:26.640 --> 0:14:29.240 end back weaker again. Right, It's just we're carrying on 0:14:29.560 --> 0:14:29.960 right now. 0:14:30.080 --> 0:14:31.720 It sure feels like we're seeing a lot of once 0:14:31.800 --> 0:14:34.320 in a career events just in the past two weeks, 0:14:34.640 --> 0:14:35.560 one of them being the yen. 0:14:35.520 --> 0:14:37.240 Which you said you wake up in the morning in check. 0:14:37.320 --> 0:14:39.480 What does it tell you when you wake up on 0:14:39.520 --> 0:14:42.160 a day like yesterday after the US data and you 0:14:42.200 --> 0:14:44.880 see dollar yen up one in a third percent after 0:14:45.040 --> 0:14:47.960 just again two weeks ago, a week ago rather about 0:14:47.960 --> 0:14:50.040 a week and a half, we saw this huge appreciation 0:14:50.080 --> 0:14:51.840 in the end that we can get that firepower back 0:14:51.840 --> 0:14:52.480 with dollar yen. 0:14:53.040 --> 0:14:55.200 Yeah, I think it's you know, last week was all 0:14:55.240 --> 0:14:58.440 about kind of vicious unwines of the gen Carrie and 0:14:58.800 --> 0:15:00.800 the short ball level bridge to trade. 0:15:00.880 --> 0:15:01.040 Right. 0:15:01.480 --> 0:15:04.040 They're putting it right back on this week, right, I mean, 0:15:04.120 --> 0:15:06.680 and putting it on with a vengeance. And it's coming 0:15:06.720 --> 0:15:09.560 from the buyers. You know, they're shorting the end and 0:15:09.600 --> 0:15:13.400 they're shorting the ball or vix using that capital to 0:15:13.400 --> 0:15:15.960 go out and buy risk on assets, right. And it's 0:15:16.000 --> 0:15:18.480 coming from all sources. It's coming from the hedge fund community, 0:15:18.480 --> 0:15:21.000 it's coming from institutions, it's coming from retail, it's coming 0:15:21.000 --> 0:15:24.000 from buyback programs. Then now that we're getting to the 0:15:24.040 --> 0:15:26.840 end of Q two, companies are using any weakness to 0:15:26.880 --> 0:15:29.200 aggressively step in with their buyback programs. 0:15:29.640 --> 0:15:31.640 So it's coming from all corners. 0:15:31.680 --> 0:15:34.080 And until you change that and you couple it with 0:15:34.160 --> 0:15:37.400 kind of August seasonal low liquidity, and it creates these 0:15:37.440 --> 0:15:38.280 outsized moves. 0:15:38.560 --> 0:15:40.000 Let's just take a step back for a second. 0:15:40.080 --> 0:15:42.600 You say, the volatility now exist fully in the bond market, 0:15:42.640 --> 0:15:44.440 almost more so than in the stock market. 0:15:44.840 --> 0:15:45.560 Has it affected the. 0:15:45.560 --> 0:15:47.640 Way that you position, where suddenly stocks become more of 0:15:47.640 --> 0:15:50.080 the have in trade and bonds become more of a 0:15:50.120 --> 0:15:53.040 trading game, sort of the sort of daily grind that 0:15:53.120 --> 0:15:56.080 you think of with day trading of stocks, not traditionally bonds. 0:15:56.800 --> 0:15:57.040 Yeah. 0:15:57.560 --> 0:16:00.680 Look, I mean, you know, some of the worst performing 0:16:00.760 --> 0:16:02.600 returns at the asset class level, we're on the fixed 0:16:02.600 --> 0:16:05.160 income markets this year, right maybe up until about the 0:16:05.200 --> 0:16:08.080 last week. But the Barclays Egg, you know, which is 0:16:08.080 --> 0:16:11.240 your common domestic indicy, is one of the few indices 0:16:11.280 --> 0:16:14.080 that still hasn't set a new all time high. Everything 0:16:14.080 --> 0:16:17.040 else is pushing, you know, all time highs across the 0:16:17.080 --> 0:16:19.920 board and the Barclays egg has not given you much 0:16:20.360 --> 0:16:23.240 return over the last few years. People get they get 0:16:23.440 --> 0:16:25.320 enamored with the idea of I can now get four 0:16:25.360 --> 0:16:27.320 or five six percent, you know, on the short side 0:16:27.320 --> 0:16:29.160 of curve. But when you actually get to a total return, 0:16:30.040 --> 0:16:33.320 it's pretty anemic and it's pretty bad. So it's pushed 0:16:33.360 --> 0:16:35.560 people to equities as kind of the there is no 0:16:35.600 --> 0:16:38.920 other alternative, right the Tina trade, and they just keep 0:16:39.440 --> 0:16:42.479 going back to that as a way to get exposure 0:16:42.600 --> 0:16:45.560 until you can't or don't right until volatility spikes. 0:16:45.640 --> 0:16:46.800 Is that how you're arranging things? 0:16:46.880 --> 0:16:48.800 Are you buying it to the tina and staying away 0:16:48.800 --> 0:16:49.760 from big. 0:16:49.640 --> 0:16:50.360 Risk in bonds. 0:16:51.960 --> 0:16:53.560 No, I would say we're a little more balanced. 0:16:53.560 --> 0:16:56.400 So we used last week's weakness that we bought into 0:16:56.400 --> 0:16:58.240 small caps right when the Rustle two came all the 0:16:58.240 --> 0:16:59.760 way down to two thousand and had a ten percent 0:16:59.800 --> 0:17:03.680 full correction. We bought into high yield because we thought, 0:17:04.119 --> 0:17:06.639 you know, at three eighty three eighty five on highyield spreads, 0:17:06.680 --> 0:17:09.359 that was the highest or widest spreads of the year, right, 0:17:09.520 --> 0:17:11.119 we finally got a chance to take a bite at 0:17:11.160 --> 0:17:13.640 some high yield in that environment and then we moved 0:17:13.640 --> 0:17:17.080 out duration on the fixed income market. But overall, I 0:17:17.119 --> 0:17:20.119 think from equities to fixed income were slightly overweight equities, 0:17:20.359 --> 0:17:24.200 but nothing where you've pushed risk budgets or positioning out 0:17:24.200 --> 0:17:25.920 to extremes at this point, and I think that'd be 0:17:25.960 --> 0:17:27.600 a mistake to be honest at this point. 0:17:27.720 --> 0:17:29.440 Well, we can get into why in a bit. Daryl 0:17:29.480 --> 0:17:31.240 Kronk always wonderful to speak with you. Thank you so 0:17:31.320 --> 0:17:33.240 much for being with us. Daryl Kronk of Wills for 0:17:33.359 --> 0:17:33.720 a Global. 0:17:43.119 --> 0:17:43.840 Here's the latest. 0:17:43.880 --> 0:17:46.640 Kamala Harris set to pitch her economic agenda in North 0:17:46.680 --> 0:17:48.280 Carolina this afternoon. 0:17:48.000 --> 0:17:49.400 Ahead of the DNC next week. 0:17:49.440 --> 0:17:52.560 Harris and Donald Trump both looking to put the economy 0:17:52.600 --> 0:17:55.840 front and center. Noel Dixon of State Street Global Markets 0:17:55.960 --> 0:17:58.600 warning quote, this could turn out to be a race 0:17:58.680 --> 0:18:01.920 to the bottom as it relates to fiscal irresponsibility. I 0:18:01.960 --> 0:18:03.840 think it's difficult to see how there is not a 0:18:03.920 --> 0:18:06.560 floor under the long end of the US curve, regardless 0:18:06.840 --> 0:18:10.120 of who wins. Make bond auctions great again, Noel joins 0:18:10.200 --> 0:18:12.600 us again. Now, Noel, thank you so much for being 0:18:12.640 --> 0:18:13.000 with us. 0:18:13.440 --> 0:18:14.320 I want to start there. 0:18:14.600 --> 0:18:16.920 Yeah, it seems like people have forgotten about this storyline, 0:18:16.920 --> 0:18:18.879 and it seems like it only gets reprised where there 0:18:18.920 --> 0:18:20.040 is a lot of other. 0:18:19.960 --> 0:18:23.000 Types of drama in the market. Why is it not just. 0:18:23.040 --> 0:18:25.560 A convenient boogeyman to pull out when people don't seem 0:18:25.560 --> 0:18:26.439 to have that many worries. 0:18:26.600 --> 0:18:30.000 Yeah, I just I feel like, you know, you know, 0:18:30.080 --> 0:18:36.440 right now the market is certainly focused on different elements 0:18:36.480 --> 0:18:38.480 that it's a lot coming at once, and I think 0:18:38.560 --> 0:18:42.280 right now the main focus is, or the concern is, 0:18:43.320 --> 0:18:46.360 you know, both candidates seem to be wanting to embrace 0:18:47.280 --> 0:18:51.040 or add to the fiscal spending tab and that is 0:18:51.119 --> 0:18:53.280 what I think most people are going to be focused 0:18:53.280 --> 0:18:56.400 on and keeping an eye out on, and it gives 0:18:56.400 --> 0:18:59.800 them trepidation about going fully in into the bond market, 0:19:00.040 --> 0:19:03.720 especially into the long end. So from what we experience, 0:19:03.760 --> 0:19:06.480 it seems people are more focused on more the belly 0:19:06.520 --> 0:19:09.159 of the curve, staying on the short end of things 0:19:09.800 --> 0:19:12.120 because there's just a lot of uncertainty and we're certainly 0:19:12.160 --> 0:19:14.399 going to get I think a risk premium baked in 0:19:14.840 --> 0:19:17.399 as we get into or approach the election. 0:19:17.800 --> 0:19:19.920 NOLL when it comes to some of this rhetoric that's 0:19:19.960 --> 0:19:21.959 being thrown around Kamala Harris today is going to talk 0:19:22.000 --> 0:19:24.280 about twenty five thousand dollars. If you're a new home buyer, 0:19:24.280 --> 0:19:26.800 of course you need Congress. So it feels like rhetoric. 0:19:26.840 --> 0:19:29.960 But Trump tart tax cuts are back in play. He's 0:19:30.000 --> 0:19:33.000 talking about a lower his words, lower class, middle class, 0:19:33.040 --> 0:19:36.440 upper class tax cut across the board. Is anyone in 0:19:36.520 --> 0:19:40.400 these parties serious about ratcheting back fiscal spending? 0:19:40.760 --> 0:19:43.399 I don't think so. I think right now, you know, 0:19:44.480 --> 0:19:47.919 you know, we've been able to sustain these high levels 0:19:47.920 --> 0:19:50.440 of debt, and they think, you know, the music will 0:19:50.440 --> 0:19:53.800 continue to play. But I think, you know, we're at 0:19:53.840 --> 0:19:56.520 a very different starting point. And this is what I 0:19:56.520 --> 0:19:59.560