WEBVTT - Stocks Suffer Worst Meltdown Since Covid 0:00:00.080 --> 0:00:10.560 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business 0:00:10.560 --> 0:00:14.720 Weekdaily reporting from the magazine that helps global leaders stay 0:00:14.760 --> 0:00:18.800 ahead with insight on the people, companies, and trends shaping 0:00:18.840 --> 0:00:23.760 today's complex economy. Plus global business, finance and tech news 0:00:23.800 --> 0:00:27.800 as it happens. The Bloomberg Business Week Daily Podcast with 0:00:27.960 --> 0:00:32.120 Carol Masser and Tim Steneveek on Bloomberg Radio. 0:00:32.280 --> 0:00:34.600 After the US election, when Wall Street was all in 0:00:34.720 --> 0:00:37.600 on the prospects of a business friendly President Trump, Peter 0:00:37.680 --> 0:00:39.520 Berezin was sounding the alarm. 0:00:40.000 --> 0:00:40.919 He and his team at the. 0:00:40.920 --> 0:00:45.200 Research shop BCA predicted that broad based, unilateral tariffs were coming, 0:00:45.479 --> 0:00:48.080 and then the new administration's proposals would go well beyond 0:00:48.080 --> 0:00:51.480 what had been implemented in Trump's first term. He was right, 0:00:51.720 --> 0:00:53.320 and now he says we've got a long way to 0:00:53.360 --> 0:00:56.400 go lower before the end of the year. In other words, 0:00:56.440 --> 0:00:59.360 the worst is yet to come. Peter Berezin is chief 0:00:59.400 --> 0:01:01.760 of Global Invents, has been strategists at BCA Research. Their 0:01:01.760 --> 0:01:04.960 client's managed some thirty four trillion dollars. He's featured and 0:01:05.040 --> 0:01:06.920 one of the most read stories on the Bloomberg in 0:01:06.959 --> 0:01:10.160 the last eight hours. He's based in Montreal, Canada. Peter, 0:01:10.240 --> 0:01:13.039 welcome to the program. You've got a forty four fifty 0:01:13.080 --> 0:01:16.279 call on the S and P five hundred. We're at 0:01:16.480 --> 0:01:20.280 about basically fifty one hundred right now, so roughly fifteen 0:01:20.319 --> 0:01:21.680 percent a client from where we are. 0:01:22.240 --> 0:01:24.840 Why are you so bearish? 0:01:24.880 --> 0:01:28.399 I don't think the stock market has yet fully priced 0:01:28.480 --> 0:01:31.559 in recession. I mean keep in mind that up until 0:01:31.560 --> 0:01:33.920 a couple of years, up until a couple of days ago, 0:01:34.880 --> 0:01:37.360 the four hundred and ninety three SMP companies that are 0:01:37.360 --> 0:01:40.920 not the Magnificent seven, we're still actually up slightly for 0:01:41.000 --> 0:01:45.440 the year. And these are generally cyclical companies that one 0:01:45.440 --> 0:01:48.520 would expect to go down in recessionary scenario. So we're 0:01:48.520 --> 0:01:51.200 starting to see that being priced in, but we're not 0:01:51.400 --> 0:01:54.000 there yet. To get down to forty four to fifty, 0:01:54.000 --> 0:01:56.040 which is my target, you don't need to make any 0:01:56.080 --> 0:01:59.360 wild assumptions. All you need to assume is that the 0:01:59.520 --> 0:02:03.040 forward PE multiple drops to eighteen and the earnings estimates 0:02:03.000 --> 0:02:06.240 followed by ten percentage points. That's not crazy at all. 0:02:06.760 --> 0:02:09.680 On average, between twenty fifteen and twenty nineteen, the P 0:02:09.880 --> 0:02:13.360 multiple was sixteen point eight, and I'm talking about eighteen 0:02:13.400 --> 0:02:16.959 in a recessionary scenario. So, if anything, my target, even 0:02:17.000 --> 0:02:21.280 though going into this year it was fifteen hundred points 0:02:21.760 --> 0:02:24.280 below the nearest person, might actually turn out to be 0:02:24.320 --> 0:02:25.560 a little bit too bullish. 0:02:25.600 --> 0:02:27.720 Could we even go lower than that? 0:02:29.080 --> 0:02:32.799 We certainly could go lower than that. I think it 0:02:32.840 --> 0:02:36.119 would require a deepercession. But we could get a deepercession 0:02:36.600 --> 0:02:39.640 if policy continues to be very unfavorable. And I'm not 0:02:39.720 --> 0:02:44.200 just talking about tariff policy. We also have kind of 0:02:44.240 --> 0:02:47.919 this discussion of the Morrow Logo accord, this idea that 0:02:48.000 --> 0:02:52.720 perhaps holders of treasury bills will be forced to roll 0:02:52.760 --> 0:02:56.400 their money over into low yielding long term bonds. I mean, 0:02:56.440 --> 0:03:00.000 this is crazy, right. The treasury market is the ultimate 0:03:00.480 --> 0:03:04.960 risk free asset. If we undermine the sanctity of the 0:03:05.000 --> 0:03:08.240 treasury market, then we're looking at a worse financial crisis 0:03:08.480 --> 0:03:10.560 than what occurred in two thousand and eight. 0:03:11.280 --> 0:03:12.720 This was supposed to be the year. 0:03:12.919 --> 0:03:19.360 Wait you said we could, Sorry, Tim, Hey go ahead. 0:03:19.440 --> 0:03:21.440 I remember living through two thousand and eight. I know 0:03:21.520 --> 0:03:24.399 you did too, and I just remember you're talking to me. Yeah, 0:03:24.440 --> 0:03:27.240 I'm talking to you. I mean, Peter, we thought the 0:03:27.280 --> 0:03:30.840 financial market system globally was coming down. I remember not 0:03:30.919 --> 0:03:33.960 going to bed because headlines were crossing, and it was 0:03:34.000 --> 0:03:36.560 like which Wall Street firm was being bought by whom 0:03:36.720 --> 0:03:38.240 and which one wasn't going to make it, and so 0:03:38.280 --> 0:03:39.840 on and so forth, and what the government was going 0:03:39.880 --> 0:03:43.720 to do. Say that again so that we understand kind 0:03:43.720 --> 0:03:46.600 of the theft of what you are saying. 0:03:47.840 --> 0:03:51.800 The fact that the dollar is weakening now is very, 0:03:51.960 --> 0:03:56.560 very unnerving because the dollar is supposed to be a 0:03:56.720 --> 0:04:02.280 risk off currency. You buy treasuries when everything is going 0:04:02.360 --> 0:04:05.840 to hell, and that requires more dollars, and that pushes 0:04:05.920 --> 0:04:07.440 up the value of the dollar. The fact that the 0:04:07.480 --> 0:04:11.840 dollar is weakening now is telling you that increasingly investors 0:04:11.920 --> 0:04:16.360 are losing confidence in the US financial markets. And you know, 0:04:16.600 --> 0:04:22.000 President Trump wants a lower trade deficit. The counter the 0:04:22.080 --> 0:04:25.680 mirror image of a trade deficit is a capital count surplus. Yeah, 0:04:25.920 --> 0:04:29.440 foreigners decide that they don't want to hold US assets anymore. 0:04:29.920 --> 0:04:31.839 That's going to drive down the value of the dollar. 0:04:31.920 --> 0:04:35.360 That will make imports more expensive, make exports cheaper. That 0:04:35.440 --> 0:04:38.040 will result in a lower trade deficit. But we're talking 0:04:38.120 --> 0:04:41.640 about something that will also entail a huge decline in 0:04:41.680 --> 0:04:44.240 stock prices and probably a financial crisis. 0:04:44.320 --> 0:04:48.000 So not exactly making America great again, Not quite. 0:04:48.080 --> 0:04:51.600 No, You know, it raises the question about how much 0:04:51.680 --> 0:04:55.440 damage can be done before you believe that Trump will 0:04:55.520 --> 0:04:56.599 reverse his policies. 0:04:56.600 --> 0:04:59.479 If that is something you believe, well, I. 0:04:59.480 --> 0:05:01.760 Think, for one thing, we've already sort of passed the 0:05:01.800 --> 0:05:04.520 event horizon. I think at this point it's going to 0:05:04.560 --> 0:05:07.599 be very difficult to avoid a recession just based on 0:05:07.640 --> 0:05:11.240 everything that's already happened. They kind of wasn't that strong 0:05:11.800 --> 0:05:17.240 going into the latest escalation of the trade war. In February, 0:05:17.520 --> 0:05:21.840 real wage and salary income was only one was only 0:05:21.920 --> 0:05:25.720 up one percent year of a year. The CPI swap 0:05:25.760 --> 0:05:29.159 market is telling us that these tariffs could push inflation 0:05:29.240 --> 0:05:32.159 to well over three percent. We're potentially looking at negative 0:05:32.160 --> 0:05:38.960 income growth that's going to be very difficult to maintain 0:05:39.440 --> 0:05:44.040 without the economy weakening significantly, in spending drying up. So 0:05:44.120 --> 0:05:47.760 I think the outlook is quite worrying at this point, 0:05:47.800 --> 0:05:50.599 and it's probably too late to avoid recession. And I 0:05:50.600 --> 0:05:55.520 don't think that Trump is willing to reverse course anyway. 0:05:55.760 --> 0:05:59.360 He's been very very clearly for like thirty years about 0:05:59.360 --> 0:06:03.279 how you want to build this protectionist wall around the US. 0:06:03.480 --> 0:06:07.440 I don't understand where this group think came from where 0:06:07.440 --> 0:06:09.080 people were just saying, Oh, it's going to be a 0:06:09.120 --> 0:06:14.000 negotiating ploy. It's not a negotiating ploy. He wants something 0:06:14.040 --> 0:06:15.440 that resembles autarchy. 0:06:17.040 --> 0:06:18.680 Okay, we're going to pick up on that, but we 0:06:18.720 --> 0:06:19.080 got to do it. 0:06:19.320 --> 0:06:21.240 There's a headline crossing the Bloomberg terminal and I'm going 0:06:21.279 --> 0:06:23.000 to work it into a question here. I Toro has 0:06:23.000 --> 0:06:26.279 said to delay it's IPO roadshow amid market volatility. Put 0:06:26.279 --> 0:06:28.800 that on the list of companies that we've heard from 0:06:28.800 --> 0:06:32.120 today or have been reported on putting their IPOs on hold, 0:06:32.200 --> 0:06:38.560 stub Hub, Klarna, ad Tech Group, n m ntn Ensure, Integrity, 0:06:38.560 --> 0:06:43.720 Specialty Holdings, Chime as well. Are you concerned that we're 0:06:43.760 --> 0:06:48.000 going to see in financial conditions titan too much right now? 0:06:48.040 --> 0:06:50.400 We could start to see some sort of panic or freeze. 0:06:51.800 --> 0:06:56.680 Yeah. We estimate that easing financial conditions last year mainly 0:06:56.720 --> 0:07:00.920 because of rising stock prices, added around a percentage point 0:07:01.000 --> 0:07:05.880 to growth. The fact that financial conditions have tightened mainly 0:07:05.880 --> 0:07:09.400 because stock prices have fallen. Credit spreads of widen is 0:07:09.760 --> 0:07:12.200 based on kind of a very back of the envelope 0:07:12.200 --> 0:07:15.360 and back of the envelope calculation. Will shave around half 0:07:15.360 --> 0:07:18.320 a percentage points from growth, and that's not huge, but 0:07:18.400 --> 0:07:20.160 the risk is that you get kind of in this 0:07:20.640 --> 0:07:25.200 feedback loop situation where stocks go down that means people 0:07:25.240 --> 0:07:28.680 feel less wealthy, that means they spend less, so there's 0:07:28.760 --> 0:07:32.400 less sales, less profits, and even lower stock prices. That's 0:07:32.440 --> 0:07:34.840 what we often see during recessions, and I think that's 0:07:34.880 --> 0:07:36.080 what we're starting to see now. 0:07:36.600 --> 0:07:38.920 You know, I'm looking at something I think you either 0:07:38.960 --> 0:07:43.160 said or shared with MarketWatch, and this was around late March, 0:07:43.280 --> 0:07:46.920 March twenty first, and that even though you had this 0:07:47.280 --> 0:07:49.280 outlook for the S and P five hundred this year, 0:07:49.400 --> 0:07:52.000 forty four fifty by the end of the year, and 0:07:52.080 --> 0:07:53.800 I think when you compared it to anybody else, it 0:07:53.840 --> 0:07:55.680 was the lowest on the street. You did have five 0:07:55.720 --> 0:07:58.880 scenarios that could boost stocks this year, and you talk 0:07:58.960 --> 0:08:01.680 about the scident, you know, walking back much of his 0:08:01.760 --> 0:08:05.000 tariff agenda, kind of caving to pressure from the. 0:08:05.000 --> 0:08:06.800 Market, and a few other things. 0:08:07.280 --> 0:08:10.400 Do you still believe that there are scenarios where the 0:08:10.440 --> 0:08:12.560 market could actually rally. 0:08:13.800 --> 0:08:17.160 There's certainly scenarios, and you know, I wouldn't be surprised 0:08:17.200 --> 0:08:20.160 if over the weekend there's some comforting words from the 0:08:20.160 --> 0:08:25.480 Trump administration, but that's not my base case. I think 0:08:25.520 --> 0:08:29.400 that probably the trade war gets worse rather than better, 0:08:29.680 --> 0:08:32.840 because Donald Trump had kind of had this i'd almost say, 0:08:32.880 --> 0:08:35.520 like naive idea in his mind that he's going to 0:08:35.559 --> 0:08:39.560 raise tariffs and that's going to force other countries to 0:08:39.640 --> 0:08:43.800 reduce their tariffs. Well, there's two flaws without argument. The 0:08:43.840 --> 0:08:47.080 first flaw is that most rich countries don't actually have 0:08:47.640 --> 0:08:49.880 very large tariffs against the US, and don't really have 0:08:50.200 --> 0:08:53.080 very large non tariff barriers against the US. I mean, 0:08:53.120 --> 0:08:56.080 they have regulations. All countries have regulations, but they're not 0:08:56.080 --> 0:08:59.360 specifically targeted at US companies. For the most part. There's 0:08:59.360 --> 0:09:01.280 going to be exceptions, of course, so there's not a 0:09:01.320 --> 0:09:04.200 lot that other countries can do anyway. And the second thing, 0:09:04.240 --> 0:09:07.520 which is more politically relevant. We've seen this is certainly 0:09:07.520 --> 0:09:12.560 true here in Canada, that retaliation is politically popular. Donald 0:09:12.600 --> 0:09:17.240 Trump has single handedly resurrected the Liberal Party, which was 0:09:17.280 --> 0:09:21.440 heading for a huge defeat in the elections, and so 0:09:21.520 --> 0:09:23.440 people are saying, well, wait a second, if we can 0:09:23.480 --> 0:09:26.480 get more votes by retaliating, we'll retaliate. And so we're 0:09:26.520 --> 0:09:29.840 not going to get countries acquiescing to Donald Trump's demands, 0:09:29.960 --> 0:09:32.520 We're going to get retaliation and that could very well 0:09:32.559 --> 0:09:34.960 spark another round of tariffs. 0:09:36.040 --> 0:09:36.240 You know. 0:09:36.280 --> 0:09:41.440 One of the things I also wonder is that is 0:09:41.480 --> 0:09:43.720 it possible that. 0:09:45.000 --> 0:09:45.360 You know this? 0:09:45.920 --> 0:09:47.560 I guess what I'm thinking about is what you said 0:09:47.600 --> 0:09:51.080 before autarchy, and that is the idea that right the 0:09:51.280 --> 0:09:53.920 US produces everything. 0:09:53.600 --> 0:09:54.880 That we need within our borders. 0:09:55.679 --> 0:09:57.840 Is that really you think the goal a present jump, 0:09:57.840 --> 0:09:59.040 because I think that's one of the things that we've 0:09:59.040 --> 0:10:01.560 tried to figure out with the R is that what's 0:10:01.600 --> 0:10:04.000 really his endgame, what's really his mission here? 0:10:05.000 --> 0:10:06.000 But do you believe that his. 0:10:06.000 --> 0:10:08.360 Mission is to that the US is kind of self 0:10:08.400 --> 0:10:11.840 sufficient in providing everything it needs for its citizens within 0:10:11.880 --> 0:10:14.920 its borders and then cut down trade. 0:10:17.080 --> 0:10:20.199 I think Donald Trump sees trade as a zero sum game, 0:10:20.640 --> 0:10:24.160 meaning that if one country is running a trade surplus 0:10:24.240 --> 0:10:27.840 with the US and somehow that country is exploiting the US, 0:10:27.960 --> 0:10:30.480 ripping the US off, as he likes to say, he 0:10:30.520 --> 0:10:34.560 doesn't see trade as something that can lift all boats, 0:10:34.559 --> 0:10:37.440 which is the way most economists see trade. 0:10:37.720 --> 0:10:38.680 Nor does he kind. 0:10:38.520 --> 0:10:42.000 Of realize that the reason the US has this trade 0:10:42.040 --> 0:10:45.040 deficit is because the US has been a very good 0:10:45.040 --> 0:10:48.280 place in which to invest. Rather than buying US goods, 0:10:48.559 --> 0:10:52.640 foreigners have been buying Nvidia stock or treasuries. That has 0:10:53.120 --> 0:10:56.800 been a vote of confidence in the financial system. And yeah, 0:10:57.080 --> 0:11:00.679 if you force people to not buy you US assets, 0:11:00.800 --> 0:11:02.760 you leve a week or dollar to lower trade deficit. 0:11:02.880 --> 0:11:04.040 But is not really what you want. 0:11:05.200 --> 0:11:08.240 Hey, you know you mentioned politics a little earlier, at 0:11:08.280 --> 0:11:11.600 least from the Canadian perspective. Here in the United States, 0:11:12.280 --> 0:11:15.320 I'm wondering the sort of guardrails that you see on 0:11:15.400 --> 0:11:18.480 this president and his policies, because we're getting news now 0:11:18.520 --> 0:11:21.320 that Senator Ted Cruz, who's usually a staunch supporter of 0:11:21.320 --> 0:11:24.520 President Trump, sounded the alarm on the administration's move to 0:11:24.600 --> 0:11:27.760 ramp up tariff saying they pose quote enormous risks to 0:11:27.800 --> 0:11:30.520 the US economy and make Republicans vulnerable to a quote 0:11:30.520 --> 0:11:34.840 bloodbath in next year's mid term elections. He said this 0:11:34.880 --> 0:11:38.160 stuff on his podcast, which was released today. This from 0:11:38.160 --> 0:11:41.240 our team at Bloomberg News. How do you see the 0:11:41.280 --> 0:11:43.160 guardrails around this president here? 0:11:44.920 --> 0:11:47.600 So I think that's going to be what happens next. 0:11:47.640 --> 0:11:51.240 You're going to see more and more Republicans abandoned Trump 0:11:51.280 --> 0:11:56.480 and we're going to have real discord within the Republican Party. 0:11:57.480 --> 0:12:00.920 But unfortunately, the way the system works is that Trump 0:12:00.960 --> 0:12:05.160 does have a lot of discretion over tariffs. And unless 0:12:05.200 --> 0:12:09.160 his popularity plunges and I would say, like it's come down, 0:12:09.200 --> 0:12:14.120 but it hasn't plunged, he's not going to change direction. 0:12:14.200 --> 0:12:17.440 I mean, realistically, if you spend like a month talking 0:12:17.440 --> 0:12:20.240 about a liberation day and then say, oh, wait a second, 0:12:20.480 --> 0:12:24.280 the stocks stocks have gone down, just kidding, he can't 0:12:24.320 --> 0:12:26.720 do that without looking really foolish. And so he's not 0:12:26.720 --> 0:12:29.160 going to do that unless there's a lot more pressure. 0:12:29.200 --> 0:12:30.200 We're just not there yet. 0:12:30.640 --> 0:12:32.319 Hey, one thing I want to ask you, all right, 0:12:32.440 --> 0:12:35.720 So if we buy what you're saying about forty four 0:12:35.760 --> 0:12:38.360 to fifty by the end, and it looks, you know, 0:12:38.559 --> 0:12:41.319 certainly possible, considering. 0:12:40.800 --> 0:12:42.439 What we're going through right now. 0:12:42.520 --> 0:12:47.080 Where are you investing or suggesting investors suggest this money? 0:12:47.160 --> 0:12:50.920 You guys advise a ton of advisors, share your research. 0:12:52.080 --> 0:12:54.719 Where would you be putting money in this environment? Or 0:12:54.760 --> 0:12:56.520 is it too late to move anything around right now? 0:12:58.040 --> 0:13:00.920 I think it still makes sense to have a defensive 0:13:01.120 --> 0:13:06.600 bias in one's portfolio. That means holding more cash than 0:13:06.800 --> 0:13:10.439 one otherwise would hold it means holding more bonds, although 0:13:10.440 --> 0:13:14.440 there's of course risk around bonds given a large fiscal 0:13:14.480 --> 0:13:18.560 deficit and a whole moral logochord discussion. But nevertheless, the 0:13:18.559 --> 0:13:21.240 Fed probably will be forced to cut rates quite aggressively, 0:13:21.320 --> 0:13:23.880 more than what the market is pricing in. So you 0:13:23.960 --> 0:13:28.719 want to have more fixed income, less equity within equities, 0:13:28.840 --> 0:13:33.440 You want to own more staples, healthcare, these defensive sectors, 0:13:33.440 --> 0:13:35.840 and you probably also want to own a bit of gold. 0:13:36.000 --> 0:13:39.760 Now I think that's a true safe haven asset. 0:13:40.600 --> 0:13:42.400 What would you say to folks out there who attempted 0:13:42.400 --> 0:13:43.240 to buy this death. 0:13:45.080 --> 0:13:45.360 Listen? 0:13:45.400 --> 0:13:48.040 I mean, if you're nimble, you can, of course do it. 0:13:48.920 --> 0:13:53.200 But I wouldn't bide with the expectation that stocks have bottomed. 0:13:53.240 --> 0:13:57.160 I think we could get a rally that lasts for 0:13:57.200 --> 0:14:01.560 a few days, perhaps even a few weeks. Ultimately, if 0:14:01.559 --> 0:14:03.439 we end up in recession, and I think that's where 0:14:03.480 --> 0:14:06.520 we're heading, earnings estimates are going to come way down, 0:14:07.040 --> 0:14:11.000 and that whole dragstocks down with them. So I think 0:14:11.040 --> 0:14:16.800 it's too early to move to an overweight stance on stocks. 0:14:17.320 --> 0:14:19.600 Well, it's like we like to remind everybody, markets don't 0:14:19.640 --> 0:14:21.200 just go up they don't go in one direction. 0:14:22.280 --> 0:14:24.240 They go up and they go down. Hey, Peter, thank 0:14:24.280 --> 0:14:25.360 you so much. Double duty. 0:14:25.640 --> 0:14:27.560 We know you spend some time with our TV colleagues 0:14:27.560 --> 0:14:29.400 as well. Glad you could also spend some time with 0:14:29.760 --> 0:14:31.880 us as well. As we said, this story by our 0:14:32.000 --> 0:14:34.440 Vildana Hirich, it is one of the most right stories 0:14:34.440 --> 0:14:37.200 on the Bloomberg Peter Bears and his chief global investment 0:14:37.200 --> 0:14:40.160 strategist at BCA Research joining us from Montreal, Canada. 0:14:40.160 --> 0:14:41.240 Peter, thank you so much. 0:14:43.400 --> 0:14:47.160 This is the Bloomberg Business Week Podcast. Listen live each 0:14:47.160 --> 0:14:50.160 weekday starting at two pm Eastern up on applecar Play 0:14:50.280 --> 0:14:52.920 and the Android Auto with the Bloomberg Business App. You 0:14:52.960 --> 0:14:56.120 can also listen live on Amazon Alexa from our flagship 0:14:56.200 --> 0:15:00.120 New York station, Just say Alexa Play Bloomberg eleven thirty. 0:15:02.760 --> 0:15:06.040 Liz McCormick is Chief corresponding for Global Macro Markets, joining 0:15:06.080 --> 0:15:09.560 us from New Jersey. Liz, You've had so much reporting 0:15:09.640 --> 0:15:11.280 out there. I'm trying to figure out where we want 0:15:11.320 --> 0:15:13.960 to start, because you know what was interesting is I 0:15:14.000 --> 0:15:16.440 thought what Alex mentioned about what we saw in the 0:15:16.480 --> 0:15:18.920 bond market this week versus what we saw in the 0:15:18.960 --> 0:15:23.200 equity markets. It doesn't match up much more a negative 0:15:23.240 --> 0:15:26.720 tone in the equity trade. What is the treasury trade 0:15:27.240 --> 0:15:30.320 telling you today after the week that was? 0:15:31.800 --> 0:15:33.960 Yeah, and I was listening to you guys talk and 0:15:33.960 --> 0:15:36.800 I heard Alex's points. So I think in some ways, 0:15:36.840 --> 0:15:39.760 like if we look back, remember some days inter days, 0:15:39.840 --> 0:15:43.240 it was like across the board, each each tenor and 0:15:43.320 --> 0:15:46.680 treasuries was down over ten basis points. So we had 0:15:46.720 --> 0:15:49.840 some decent moves. We've kind of come back today. I'll 0:15:49.880 --> 0:15:51.760 talk a little bit about that later, but I think 0:15:51.920 --> 0:15:53.280 I was going to say a bigger picture if we 0:15:53.320 --> 0:15:56.320 step back, remember how far we've come that. You know, 0:15:56.400 --> 0:15:59.120 the two year note yield us down almost a percentage 0:15:59.120 --> 0:16:02.200 point from the high earlier this year. Ten year note 0:16:02.240 --> 0:16:04.600 it seemed like couldn't crack four percent, and it did. 0:16:04.680 --> 0:16:07.520 Now it's just trading quite, you know, hovering near there. 0:16:07.680 --> 0:16:09.560 So I think the treasure market has done it. I mean, 0:16:09.600 --> 0:16:12.280 if you look at the Ian page for US our indices, 0:16:12.960 --> 0:16:15.520 the US Treasury index is up about I think the 0:16:15.560 --> 0:16:18.160 last I looked at yesterday about three percent for the year. 0:16:18.240 --> 0:16:20.280 So it's kind of been doing his job. You have 0:16:20.400 --> 0:16:23.400 seen that flight to haven. It's just the superlatives like 0:16:23.440 --> 0:16:26.240 you say, in these other markets from stocks to what 0:16:26.320 --> 0:16:29.520 worries me, even though my main area is sovereign, what 0:16:29.600 --> 0:16:32.320 I really watch is credit risk, right, and like you mentioned, 0:16:32.320 --> 0:16:36.440 we have these CDs widening, junk bronze spread widening, all 0:16:36.440 --> 0:16:40.400 these other things. People pulling deals. That's where I worry that. 0:16:40.720 --> 0:16:43.840 Like you're saying, it depends if President Trump really ends 0:16:43.920 --> 0:16:46.520 up negotiating. But some things you can't put the genie 0:16:46.520 --> 0:16:49.560 back in the bottle, right, If credit risk keeps going, 0:16:50.200 --> 0:16:52.680 and then we get this hidden leverage, which is always 0:16:52.680 --> 0:16:55.560 like something that's lurking. If people start, you know, losing 0:16:55.600 --> 0:17:00.600 on positions and leverage, things start cracking, you can't fix it, right, 0:17:00.680 --> 0:17:02.000 So that's what I worry about. 0:17:02.120 --> 0:17:04.440 Yeah, I am looking at the Iron page. US aggregate 0:17:04.520 --> 0:17:06.680 up three point six percent? Is that what you're talking about? 0:17:06.800 --> 0:17:09.800 Yeah, I mean, yeah, exactly, Yeah, yeah, Wait, say the 0:17:09.840 --> 0:17:12.160 page one more time for the Glomberg. Oh I love 0:17:12.200 --> 0:17:15.040 that page. Iron go easy in Right, it's all our 0:17:15.080 --> 0:17:18.040 indices and we can look at all the fixed income indicies, 0:17:18.119 --> 0:17:21.080 and so that's at least good that. You know, if 0:17:21.080 --> 0:17:24.679 you're in a portfolio, you're talking about your retirement sixty 0:17:24.760 --> 0:17:27.320 forty at least the bomb side has worked for you, 0:17:27.400 --> 0:17:29.800 so you have some gains where you're getting crushed in 0:17:29.840 --> 0:17:32.600 your stocks. But yeah, I think you know today let's 0:17:32.600 --> 0:17:34.240 talk a little bit and maybe you have a lot. 0:17:34.280 --> 0:17:37.560 But about Chairman palell like, he was very calm and 0:17:37.600 --> 0:17:41.200 I feel like lead with inflation right, Yes, the tariffs 0:17:41.200 --> 0:17:43.200 are bigger than we thought. Of course you mentioned it 0:17:43.240 --> 0:17:46.400 would hurt growth, but he seemed very clear that they 0:17:46.400 --> 0:17:50.760 don't want inflation expectations. Public inflation fears to kind of 0:17:50.920 --> 0:17:53.720 take off. So he was like very like, we have 0:17:53.800 --> 0:17:54.440 time to wait. 0:17:54.560 --> 0:17:57.199 So he seemed very calm. I mean J Powell was 0:17:57.200 --> 0:18:00.840 a very measured, mild mannered person. I don't know him personally, 0:18:00.920 --> 0:18:02.400 but it seems. 0:18:02.119 --> 0:18:04.520 Like, oh, come on, you can share. I know that 0:18:04.680 --> 0:18:05.800 dead concert he went too. 0:18:06.160 --> 0:18:08.000 I actually want to go for a bike ride with him, 0:18:08.000 --> 0:18:10.000 but that's neither here nor there. I think that would 0:18:10.040 --> 0:18:14.520 be a fun thing to do. But it does make 0:18:14.560 --> 0:18:16.719 me ask you, is, given his comments earlier today, did 0:18:16.760 --> 0:18:18.600 you seem like it. Did it seem to you that 0:18:18.680 --> 0:18:22.520 he was really calm about saying, hey, we've got time here. 0:18:23.720 --> 0:18:26.359 Yeah. I want to say that I had a feeling 0:18:26.400 --> 0:18:28.760 of people I think thought I was crazy that, like 0:18:29.080 --> 0:18:31.600 even though the market, the let's say the swaps market 0:18:31.600 --> 0:18:33.760 pricing and FED cuts was really kind of getting over 0:18:33.800 --> 0:18:37.040 at skis pricing in almost five cuts this year. I said, 0:18:37.440 --> 0:18:40.120 let's be weary the chairman Pal, because that's his job. 0:18:40.160 --> 0:18:42.480 He has a dual mandate, right, and like you're talking 0:18:42.480 --> 0:18:45.560 about everyone's cutting their inflation, I mean their growth forecasts. 0:18:45.560 --> 0:18:49.040 Simultaneously they're lifting their PCE forecast, right, So this is, 0:18:49.359 --> 0:18:52.359 to use that word, this is a stagflationary thing. So 0:18:52.840 --> 0:18:55.000 in the FED kind of never got I don't want 0:18:55.000 --> 0:18:57.520 to fold them, but inflation hasn't like sustainably got to 0:18:57.560 --> 0:19:00.359 their two percent target after the pandemic. They did a 0:19:00.359 --> 0:19:03.240 lot of great stuff, and it's down. So I think 0:19:03.280 --> 0:19:06.000 he's very weary because he knows if you let that 0:19:06.119 --> 0:19:10.240 inflation genie out of the bottle, that's the worst problem 0:19:10.320 --> 0:19:12.480 for them. So I think that's why he was very 0:19:12.520 --> 0:19:16.400 measured and calm. And we will see, Like we've had 0:19:16.440 --> 0:19:20.000 some yesterday, we had some economists saying no cuts, some 0:19:20.160 --> 0:19:22.320 saying five cuts. It's like all over the place, so 0:19:22.359 --> 0:19:24.920 I think they're waiting to see. But Pal was very calm. 0:19:25.280 --> 0:19:27.040 Well, one thing I want to ask you too, is 0:19:27.119 --> 0:19:29.760 you always check in with all the trading desks, the 0:19:29.760 --> 0:19:34.159 global you know, fixed income bond trading desks around the world. 0:19:34.680 --> 0:19:38.600 Were people kind of freaking out? Were people saying, yeah, 0:19:38.640 --> 0:19:41.920 we've got a global recession coming. I mean, it's all interconnected, right, 0:19:42.000 --> 0:19:44.560 It's not just even if we are pulling back on 0:19:44.600 --> 0:19:47.040 global trade. I mean, what happens here is going to 0:19:47.119 --> 0:19:50.880 matter what happens in other countries. I mean, it's it's important. 0:19:50.920 --> 0:19:52.919 So I'm just curious. What was the tone, Liz that 0:19:52.960 --> 0:19:53.639 you were hearing. 0:19:54.840 --> 0:19:58.080 Yeah, I would say, like overall for investors, I mean, again, 0:19:58.119 --> 0:20:00.760 it's a bunch of superlatives. But this, even though we 0:20:00.840 --> 0:20:03.560 had the stories about Mary Lago and we thought, you know, 0:20:03.800 --> 0:20:07.200 think Trump will go out of the box. I do think, Carol, 0:20:07.400 --> 0:20:11.680 many investors feel like this on trade is a seismic change, right, 0:20:12.000 --> 0:20:16.639 He's trying to re order everything, right, and and he 0:20:16.760 --> 0:20:18.880 said Trump has said he's willing to take some pain. 0:20:18.920 --> 0:20:21.080 But they didn't realize. I think everyone keeps saying to me, list, 0:20:21.119 --> 0:20:24.479 we knew there would be quote unquote reciprocal, but not 0:20:24.600 --> 0:20:26.800 by this math that they pulled off, right, you know, 0:20:26.880 --> 0:20:29.000 that was much higher than they thought. So I think 0:20:29.160 --> 0:20:31.560 that's what everyone said. It's worse than I thought. I 0:20:31.560 --> 0:20:34.240 will say, Dan Ivison and Pimpco was kind enough to 0:20:34.280 --> 0:20:36.320 talk to me today and he's, you know, they've been 0:20:36.359 --> 0:20:38.920 warning for a while that hey, this tariff is a 0:20:39.040 --> 0:20:43.040 risk and just to be cautious. But he said even 0:20:43.080 --> 0:20:46.240 he said that what President Trump rolled out was a 0:20:46.240 --> 0:20:48.760 little more hawkish than they even expected. So I think 0:20:48.880 --> 0:20:51.640 everyone was taken by surprise at how kind of stringent 0:20:51.680 --> 0:20:52.400 the terrorifts were. 0:20:53.320 --> 0:20:55.719 All right, so there is that is there also an 0:20:55.720 --> 0:20:56.680 expectation list? 0:20:56.680 --> 0:20:58.479 I mean, this is a lot of this came up 0:20:58.480 --> 0:21:00.359 in a lot of our conversations today, is that the 0:21:00.400 --> 0:21:03.439 expectation is just like we're seeing with Vietnam already, right, 0:21:03.560 --> 0:21:07.640 Lulu Lemon rallied, Nike rallied, There were names that rallied 0:21:07.960 --> 0:21:10.680 because there is that expectation that these countries are going. 0:21:10.600 --> 0:21:11.920