1 00:00:00,080 --> 00:00:02,840 Speaker 1: We bring you news and analysis every day on the 2 00:00:02,880 --> 00:00:06,840 Speaker 1: Bloomberg Surveillance Podcast. But now you can get the latest 3 00:00:06,880 --> 00:00:11,639 Speaker 1: news on demand whenever you want. Subscribe to Bloomberg News 4 00:00:11,640 --> 00:00:14,400 Speaker 1: Now to get the latest headlines at the click of 5 00:00:14,440 --> 00:00:18,880 Speaker 1: a button. Get informed on your schedule. You can listen 6 00:00:18,960 --> 00:00:22,720 Speaker 1: and subscribe to Bloomberg News Now on the Bloomberg Business app, 7 00:00:22,760 --> 00:00:27,720 Speaker 1: Bloomberg dot Com plus Apple, Spotify, and anywhere else you 8 00:00:27,800 --> 00:00:37,320 Speaker 1: get your podcasts. Search Bloomberg News Now and subscribe today. 9 00:00:37,720 --> 00:00:41,080 Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along 10 00:00:41,120 --> 00:00:44,920 Speaker 1: with Jonathan Farrow and Lisa Abramowitz. Join us each day 11 00:00:44,960 --> 00:00:49,440 Speaker 1: for insight from the best and economics, geopolitics, finance and investment. 12 00:00:49,880 --> 00:00:54,680 Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 13 00:00:54,880 --> 00:00:59,200 Speaker 1: anywhere you get your podcasts and always on Bloomberg dot Com, 14 00:00:59,240 --> 00:01:02,480 Speaker 1: the Bloomberg Term and All, and the Bloomberg Business opp 15 00:01:03,080 --> 00:01:06,039 Speaker 1: Whether you agree or disagree with John Bolton, read his 16 00:01:06,240 --> 00:01:10,479 Speaker 1: Telegraph article which sets up the region and around as 17 00:01:10,480 --> 00:01:13,720 Speaker 1: we look at a fractured Eastern Mediterranean. He's a former 18 00:01:13,840 --> 00:01:18,160 Speaker 1: United States Ambassador to the United Nations former National Security advisor. 19 00:01:18,480 --> 00:01:22,320 Speaker 1: In a fractious relationship with President Trump. Ambassador Bolton, thank 20 00:01:22,319 --> 00:01:25,280 Speaker 1: you so much for joining Bloomberg today. I am with you. 21 00:01:25,400 --> 00:01:27,480 Speaker 1: I'm going to mince words. John, You go back to 22 00:01:27,520 --> 00:01:30,880 Speaker 1: an internship with a guy named Spiro t Agnew. You 23 00:01:31,000 --> 00:01:35,000 Speaker 1: have seen it all. How is this different from nineteen 24 00:01:35,040 --> 00:01:40,039 Speaker 1: sixty seven, in nineteen seventy three. 25 00:01:39,000 --> 00:01:42,280 Speaker 2: Well, I think in Washington we really are suffering from 26 00:01:42,319 --> 00:01:44,840 Speaker 2: an acute lack of leadership and by a lot of 27 00:01:44,880 --> 00:01:47,080 Speaker 2: people who forget that they were sent here not to 28 00:01:47,160 --> 00:01:50,360 Speaker 2: represent themselves, but to represent the country. You know, you 29 00:01:50,440 --> 00:01:55,120 Speaker 2: remember back in the British Parliament in World War Two 30 00:01:55,200 --> 00:01:57,840 Speaker 2: when the labor leader got up after one of the 31 00:01:57,840 --> 00:02:00,600 Speaker 2: Neville Chamberlain's acts of appeasement and said he was there 32 00:02:00,640 --> 00:02:03,720 Speaker 2: to speak for the labor leader who was not around. 33 00:02:03,720 --> 00:02:06,440 Speaker 2: And Leo Amory, a conservative MP, got up and said, 34 00:02:06,520 --> 00:02:09,919 Speaker 2: speak for England. And what we need people in Washington 35 00:02:09,919 --> 00:02:12,560 Speaker 2: to be doing is speaking for America. And sadly they're 36 00:02:12,600 --> 00:02:13,520 Speaker 2: not to. 37 00:02:13,520 --> 00:02:17,840 Speaker 1: Look back with twenty twenty vision. How did we get 38 00:02:17,880 --> 00:02:21,960 Speaker 1: here within the administration that you served in recently the 39 00:02:22,040 --> 00:02:27,480 Speaker 1: Trump administration? Do we have these evil and difficult events 40 00:02:27,560 --> 00:02:31,000 Speaker 1: because we were off the watch? One in three and 41 00:02:31,120 --> 00:02:31,960 Speaker 1: five years ago. 42 00:02:33,400 --> 00:02:35,760 Speaker 2: Yeah, Look, I think we have failed to see what's 43 00:02:35,760 --> 00:02:39,280 Speaker 2: been happening in the Middle East coherently for close to 44 00:02:39,320 --> 00:02:41,560 Speaker 2: twenty years now, and I think at the root of it, 45 00:02:41,600 --> 00:02:44,320 Speaker 2: the principal threat to peace and security in the Middle 46 00:02:44,320 --> 00:02:47,280 Speaker 2: East today and for some years back, has been Iran. 47 00:02:48,400 --> 00:02:52,239 Speaker 2: In the current circumstance, they're the ones who have armed 48 00:02:52,280 --> 00:02:55,480 Speaker 2: and trained and equipped and financed Hamas. They've done the 49 00:02:55,480 --> 00:02:58,480 Speaker 2: same with Palestine and Islamic Jihad. They've done the same 50 00:02:58,560 --> 00:03:01,720 Speaker 2: with Hesbola, They've done the same with the Syrian military. 51 00:03:02,000 --> 00:03:05,240 Speaker 2: And remember just yesterday demonstrating again they've done it with 52 00:03:05,320 --> 00:03:09,040 Speaker 2: the Huti rebels in Yemen. A US destroyer in the 53 00:03:09,040 --> 00:03:11,840 Speaker 2: Red Sea destroyed several cruise missiles and I think some 54 00:03:12,000 --> 00:03:16,200 Speaker 2: drones heading north in the Red Sea, probably toward Israel. 55 00:03:16,280 --> 00:03:19,120 Speaker 2: So the hoodies wouldn't have two rocks to rub together 56 00:03:19,160 --> 00:03:21,440 Speaker 2: if it weren't for the equipment Iran has given them. 57 00:03:21,440 --> 00:03:25,000 Speaker 2: Iran is the central factor here, and last night the 58 00:03:25,040 --> 00:03:27,519 Speaker 2: President's address, which was fine as far as it went, 59 00:03:27,680 --> 00:03:30,440 Speaker 2: did not address that crucial point. How can you have 60 00:03:30,520 --> 00:03:33,440 Speaker 2: a strategy if you don't know what the main thread is. 61 00:03:33,840 --> 00:03:36,280 Speaker 3: Who's more vulnerable right now Iran or Israel. 62 00:03:37,760 --> 00:03:40,320 Speaker 2: Well, I think at the moment it's Israel. But I 63 00:03:40,320 --> 00:03:43,520 Speaker 2: think Israel's perfectly equipped to deal with this on their own. 64 00:03:43,560 --> 00:03:47,720 Speaker 2: And I hope they haven't lost the spirit they once had, 65 00:03:47,760 --> 00:03:51,120 Speaker 2: which is they will defend themselves. They can do it alone, 66 00:03:51,440 --> 00:03:54,280 Speaker 2: they can use weapons, but they don't expect anybody else 67 00:03:54,320 --> 00:03:57,000 Speaker 2: to come and fight their battles for them, nor do 68 00:03:57,080 --> 00:04:00,320 Speaker 2: they expect to take direction from anybody else either. And 69 00:04:00,360 --> 00:04:02,480 Speaker 2: I do think there's something to the argument that that 70 00:04:03,080 --> 00:04:06,720 Speaker 2: bear hug that President Biden gave bb net Yahoo was 71 00:04:06,760 --> 00:04:10,960 Speaker 2: not just affection but an effort to insert himself into 72 00:04:11,000 --> 00:04:14,360 Speaker 2: Israeli decision making. Frankly, I'd rather have net Yaho make 73 00:04:14,400 --> 00:04:17,440 Speaker 2: the decisions than Biden. If you're faced with a threat 74 00:04:17,880 --> 00:04:20,640 Speaker 2: like we've seen in Hamas and the deeper threat, the 75 00:04:20,680 --> 00:04:23,200 Speaker 2: real threat from Iran, you know you can live with 76 00:04:23,240 --> 00:04:25,440 Speaker 2: it for a long time until you die from it. 77 00:04:26,120 --> 00:04:28,680 Speaker 2: And that's why I think the government of Israel, and 78 00:04:28,720 --> 00:04:31,320 Speaker 2: I think even more than that, perhaps the people of Israel, 79 00:04:31,839 --> 00:04:35,839 Speaker 2: intend to see the Hamas threat eliminated. In the Gaza Strip. 80 00:04:36,000 --> 00:04:37,760 Speaker 4: A lot of people are saying that one of the 81 00:04:37,760 --> 00:04:41,919 Speaker 4: big sticking points for the US going more aggressively after 82 00:04:42,040 --> 00:04:44,839 Speaker 4: Iran right now is A. It would cause an even 83 00:04:44,880 --> 00:04:47,719 Speaker 4: bigger conflagration and putting that Gendi back in the bottle 84 00:04:47,760 --> 00:04:48,680 Speaker 4: is very difficult. B. 85 00:04:49,040 --> 00:04:49,600 Speaker 5: You have a. 86 00:04:49,560 --> 00:04:52,840 Speaker 4: Population in Iran that actually supports the United States and 87 00:04:53,000 --> 00:04:55,359 Speaker 4: Israel to a large degree and doesn't necessarily agree with 88 00:04:55,400 --> 00:04:59,920 Speaker 4: the government positions. And number three, oil prices would surge 89 00:05:00,040 --> 00:05:02,200 Speaker 4: and that would be a problem for the global economy. 90 00:05:02,240 --> 00:05:05,240 Speaker 4: How important is that third factor to take into consideration. 91 00:05:06,320 --> 00:05:08,680 Speaker 2: Look, I think the concern the White House has for 92 00:05:09,720 --> 00:05:12,520 Speaker 2: rising oil prices is in the United States, they're worried 93 00:05:12,520 --> 00:05:14,880 Speaker 2: about November of next year. That's why they signed this 94 00:05:16,560 --> 00:05:21,479 Speaker 2: atrocious agreement with Maduro in Venezuela to pretend that he's 95 00:05:21,520 --> 00:05:25,919 Speaker 2: going to have free elections and to allow US sanctions 96 00:05:25,960 --> 00:05:28,919 Speaker 2: on the export of Venezuela and oil to disappear. I 97 00:05:28,920 --> 00:05:32,240 Speaker 2: think they're desperate not to have oil prices go up. 98 00:05:32,279 --> 00:05:34,120 Speaker 2: The easy way, of course, would be to allow more 99 00:05:34,160 --> 00:05:36,520 Speaker 2: oil production in the United States, but they don't want 100 00:05:36,560 --> 00:05:39,760 Speaker 2: to do that because if the oil industry here got stronger, 101 00:05:39,800 --> 00:05:42,680 Speaker 2: it would be harder to dismantle for their green agenda. 102 00:05:43,440 --> 00:05:47,200 Speaker 2: The real question is do you want to deal with 103 00:05:47,240 --> 00:05:49,719 Speaker 2: the threat from Iran, or do you want to pretend 104 00:05:49,839 --> 00:05:53,479 Speaker 2: that it doesn't exist. The administration has gone out of 105 00:05:53,520 --> 00:05:57,240 Speaker 2: its way to pretend that it doesn't exist, including its 106 00:05:57,320 --> 00:06:01,680 Speaker 2: chief Iran negotiator, Rob Mallley, being having his security clearance 107 00:06:02,160 --> 00:06:06,680 Speaker 2: suspended in April by the State Department's Diplomatic Security Bureau. 108 00:06:06,720 --> 00:06:11,560 Speaker 2: That the chief negotiator under security investigation. It's just unbelievable. 109 00:06:11,800 --> 00:06:14,839 Speaker 1: John. My book of the year is Robert D. Kaplan's 110 00:06:14,839 --> 00:06:17,520 Speaker 1: The Loom of Time, which stretches from Morocco all the 111 00:06:17,520 --> 00:06:21,520 Speaker 1: way over to Persia. And the answer here, Ambassador Bolton, 112 00:06:22,240 --> 00:06:26,440 Speaker 1: is we have to carve out a relationship with friends 113 00:06:26,640 --> 00:06:30,719 Speaker 1: within the Middle East. How do we prosecute a new strategy. 114 00:06:31,320 --> 00:06:36,200 Speaker 1: Was Sunni Saudi Arabia versus Shia Iran which you consider 115 00:06:36,240 --> 00:06:37,800 Speaker 1: to be our major threat? 116 00:06:38,800 --> 00:06:40,880 Speaker 2: Well, I think the threat is the regime in Iran. 117 00:06:41,040 --> 00:06:43,440 Speaker 2: I don't have any quarrel with the Iranian people. We've 118 00:06:43,440 --> 00:06:45,840 Speaker 2: had good relations with them before. And I think one 119 00:06:45,920 --> 00:06:50,960 Speaker 2: reason that Iran took this opportunity now and coincidentally the 120 00:06:51,000 --> 00:06:53,960 Speaker 2: fiftieth anniversary of the Yamkapor War, is they were very 121 00:06:54,000 --> 00:06:58,000 Speaker 2: worried that the strategic closeness between the Gulf Arab states 122 00:06:58,000 --> 00:07:01,520 Speaker 2: in particular, and Israel might be reaching a point where 123 00:07:01,520 --> 00:07:04,080 Speaker 2: they could no longer affect it, so that this for them, 124 00:07:04,440 --> 00:07:07,600 Speaker 2: for Iran, for the Malas in Tehran was a critical 125 00:07:07,600 --> 00:07:09,880 Speaker 2: moment to act. I think things were moving in the 126 00:07:09,960 --> 00:07:12,440 Speaker 2: right direction. In fact, I think if you ask the 127 00:07:12,480 --> 00:07:16,679 Speaker 2: Gulf Arabs, they have greater faith in Israel's strategic vision 128 00:07:16,760 --> 00:07:18,880 Speaker 2: of the region than they do with the United States. 129 00:07:19,080 --> 00:07:23,160 Speaker 1: John Bolton one final question, what is the new isolationism 130 00:07:23,360 --> 00:07:25,720 Speaker 1: of America? We want to run from this to a 131 00:07:25,760 --> 00:07:30,000 Speaker 1: great extent. That's what the polling says. There's certain domestic tensions. 132 00:07:30,360 --> 00:07:33,280 Speaker 1: Are we isolationists as we all wait for this war? 133 00:07:34,400 --> 00:07:36,720 Speaker 2: Not yet, But there are two factors causing it. One 134 00:07:36,800 --> 00:07:40,120 Speaker 2: is Donald Trump, and I think he's had a pervasive effect, 135 00:07:40,240 --> 00:07:42,480 Speaker 2: sad to say, in the Republican Party. The second is, 136 00:07:42,720 --> 00:07:46,280 Speaker 2: for many years, our politicians have not treated our citizens 137 00:07:46,320 --> 00:07:48,520 Speaker 2: like adults and told them what the threats are that 138 00:07:48,560 --> 00:07:50,400 Speaker 2: we face in the world. I think if you talk 139 00:07:50,480 --> 00:07:54,559 Speaker 2: to citizens like they are adults, they'll understand the threat. 140 00:07:54,600 --> 00:07:57,040 Speaker 2: They'll do what we've always done as Americans and find 141 00:07:57,080 --> 00:07:59,280 Speaker 2: ways to defend ourselves. If you act like the rest 142 00:07:59,320 --> 00:08:02,240 Speaker 2: of the world does matter. When suddenly find that it does, 143 00:08:02,280 --> 00:08:04,760 Speaker 2: it's no wonder people are surprised if their leaders have 144 00:08:04,840 --> 00:08:05,520 Speaker 2: been negligent. 145 00:08:05,800 --> 00:08:08,600 Speaker 1: John Bolton, thank you for joining Bloomberg Surveillance this morning. 146 00:08:08,640 --> 00:08:12,280 Speaker 1: Ambassador bilt In, a former National security advise it. 147 00:08:16,040 --> 00:08:19,000 Speaker 4: You know, maripandit over at JP Morgan Asset Management has 148 00:08:19,040 --> 00:08:21,120 Speaker 4: been covering this, has been discussing this, has been trying 149 00:08:21,160 --> 00:08:24,480 Speaker 4: to understand the relationship, the new relationship between bonds and stocks. 150 00:08:24,760 --> 00:08:28,120 Speaker 4: What do you make of the relative resilience in equities 151 00:08:28,120 --> 00:08:30,280 Speaker 4: this week, the moves that we're seeing in bond yields 152 00:08:30,880 --> 00:08:33,000 Speaker 4: and the weakening that we're seeing along around the margins, 153 00:08:33,000 --> 00:08:34,599 Speaker 4: as Harmon was just talking about. 154 00:08:34,800 --> 00:08:37,480 Speaker 6: Clearly five percent yields are a bit of a ceiling 155 00:08:37,600 --> 00:08:39,680 Speaker 6: for the equity market. We've been waiting to find exactly 156 00:08:39,760 --> 00:08:41,679 Speaker 6: what that sealing seems to be. And I think that's 157 00:08:41,720 --> 00:08:44,400 Speaker 6: where we are with five percent rates. But the challenge 158 00:08:44,440 --> 00:08:47,840 Speaker 6: is not necessarily where yields are, because growth is still 159 00:08:47,880 --> 00:08:50,439 Speaker 6: so strong. I mean eighteen months ago, two years ago. 160 00:08:50,520 --> 00:08:52,600 Speaker 6: If I told you in the fall of twenty twenty three, 161 00:08:53,080 --> 00:08:56,240 Speaker 6: policy rates will be above five percent, but economic growth 162 00:08:56,240 --> 00:08:57,840 Speaker 6: will be tracking above five percent, we. 163 00:08:57,840 --> 00:08:59,000 Speaker 7: Wouldn't know what to make of it. 164 00:08:59,200 --> 00:09:02,160 Speaker 6: And so if you link that stronger economic activity with 165 00:09:02,280 --> 00:09:05,240 Speaker 6: earnings and earnings being well supported by that, then what 166 00:09:05,240 --> 00:09:08,240 Speaker 6: you're seeing is some well supported equity markets for now. 167 00:09:08,559 --> 00:09:10,839 Speaker 6: The challenge is as we look forward to next year, 168 00:09:10,880 --> 00:09:14,360 Speaker 6: with twelve percent earnings growth expected, that's pretty lofty. 169 00:09:14,480 --> 00:09:15,319 Speaker 7: Maybe we'll see. 170 00:09:15,120 --> 00:09:18,040 Speaker 6: Something closer to six or seven percent. But if the 171 00:09:18,120 --> 00:09:20,720 Speaker 6: US economy slows, if some of these headwinds that are 172 00:09:20,800 --> 00:09:24,600 Speaker 6: challenging consumers continue to materialize, that's going to challenge some 173 00:09:24,640 --> 00:09:27,160 Speaker 6: of those expectations for profits, and that in and of 174 00:09:27,200 --> 00:09:29,440 Speaker 6: itself could be a bigger challenge for the equity markets 175 00:09:29,440 --> 00:09:30,040 Speaker 6: going forward. 176 00:09:30,200 --> 00:09:32,240 Speaker 4: Are you getting any clarity from the companies that are 177 00:09:32,240 --> 00:09:34,400 Speaker 4: reporting earnings so you're getting the sense that they have 178 00:09:34,480 --> 00:09:35,280 Speaker 4: a vision. 179 00:09:35,080 --> 00:09:37,440 Speaker 3: Forward of what their corporate outlooks are going to be 180 00:09:37,640 --> 00:09:38,080 Speaker 3: next year. 181 00:09:38,440 --> 00:09:39,240 Speaker 7: It's mixed. 182 00:09:39,280 --> 00:09:42,080 Speaker 6: On the one hand, it's been great to forecast a 183 00:09:42,120 --> 00:09:44,840 Speaker 6: recession for eighteen months because it means that companies have 184 00:09:44,880 --> 00:09:47,800 Speaker 6: had eighteen months to prepare from an expense from a 185 00:09:47,840 --> 00:09:51,000 Speaker 6: headcount standpoint, to really bolster where they're getting their revenue 186 00:09:51,040 --> 00:09:55,000 Speaker 6: and really assess their consumer segments on the other hand, look, 187 00:09:55,040 --> 00:09:57,000 Speaker 6: we don't know necessarily how next year is going to 188 00:09:57,000 --> 00:09:59,200 Speaker 6: play out, and I think the bank earnings were very telling. 189 00:09:59,559 --> 00:10:02,280 Speaker 6: Usually what you'll hear from financial companies is here's how 190 00:10:02,280 --> 00:10:03,600 Speaker 6: we're thinking about recession risk. 191 00:10:03,800 --> 00:10:05,760 Speaker 7: But instead what we really heard was here's. 192 00:10:05,559 --> 00:10:08,920 Speaker 6: How we're thinking about the big media existential macro risks 193 00:10:09,160 --> 00:10:13,160 Speaker 6: from geopolitics to federal finances. So it was very interesting 194 00:10:13,200 --> 00:10:15,240 Speaker 6: to hear them a little bit less focused on what 195 00:10:15,280 --> 00:10:17,640 Speaker 6: does twenty twenty four do as opposed to what is 196 00:10:17,679 --> 00:10:19,200 Speaker 6: the era that we are entering? 197 00:10:19,720 --> 00:10:23,880 Speaker 1: What are your clients, pigh net worth institutions, people with 198 00:10:24,000 --> 00:10:27,440 Speaker 1: a pot of gold, How are they responding to these 199 00:10:27,480 --> 00:10:30,959 Speaker 1: bond losses? Are they going to cash? Are they running? 200 00:10:31,679 --> 00:10:34,120 Speaker 1: What were they buying to blooms? What are they doing? 201 00:10:34,720 --> 00:10:37,680 Speaker 6: It's been really challenging to have multiple down years for 202 00:10:37,720 --> 00:10:40,280 Speaker 6: the bond market and rears down plus. 203 00:10:40,160 --> 00:10:41,880 Speaker 1: Is on the Bloomberg Total Return. 204 00:10:41,640 --> 00:10:44,200 Speaker 6: Index, absolutely, and I think that people need to reconsider 205 00:10:44,240 --> 00:10:44,960 Speaker 6: their fixeding goil. 206 00:10:45,160 --> 00:10:47,160 Speaker 1: What are they doing? I want to know on a 207 00:10:47,240 --> 00:10:51,200 Speaker 1: Friday morning, are they you know, the calls you're having, 208 00:10:51,240 --> 00:10:54,160 Speaker 1: they're swearing at Bob Michael, et cetera, et cetera. What 209 00:10:54,240 --> 00:10:58,160 Speaker 1: are they actually doing with these bond losses, writing them. 210 00:10:58,000 --> 00:10:59,960 Speaker 7: Out essentially some of them. 211 00:11:00,240 --> 00:11:01,600 Speaker 6: But I think that a lot of our clients were 212 00:11:01,600 --> 00:11:04,520 Speaker 6: not positioned heavily in long duration yet. I think a 213 00:11:04,559 --> 00:11:07,280 Speaker 6: lot of people were waiting for the entry point, deploying selectively. 214 00:11:07,320 --> 00:11:10,240 Speaker 6: So there's still very much a barbell within fixed income 215 00:11:10,280 --> 00:11:12,400 Speaker 6: allocations where you still see a lot of short duration. 216 00:11:12,760 --> 00:11:15,280 Speaker 6: I think people feel okay about the equity market, given 217 00:11:15,320 --> 00:11:17,880 Speaker 6: how well it's done, but in terms of diversification, you're 218 00:11:17,920 --> 00:11:21,079 Speaker 6: definitely seeing people asking a lot more questions about alternatives 219 00:11:21,120 --> 00:11:23,400 Speaker 6: and where to supplement some of these long. 220 00:11:23,240 --> 00:11:25,640 Speaker 1: Duration I mean, you say short duration, I have no 221 00:11:25,720 --> 00:11:27,840 Speaker 1: idea what is that five year? Seven? Is that the 222 00:11:27,880 --> 00:11:30,720 Speaker 1: belly of the curve? I mean, where where is short 223 00:11:30,800 --> 00:11:32,880 Speaker 1: duration besides live or three months? 224 00:11:33,240 --> 00:11:35,600 Speaker 6: I think people have been thinking more around the two year, 225 00:11:35,800 --> 00:11:38,959 Speaker 6: maybe two three years, and intermediate is really five to seven. 226 00:11:39,160 --> 00:11:42,000 Speaker 6: People have not really been thinking much about beyond that 227 00:11:42,080 --> 00:11:42,600 Speaker 6: for the time. 228 00:11:42,960 --> 00:11:45,559 Speaker 1: We love, We're guilty, you and you're the worst. I'm 229 00:11:45,600 --> 00:11:47,480 Speaker 1: off we're guilty of this because we're calling a thirty 230 00:11:47,520 --> 00:11:49,599 Speaker 1: year bond, were all and nobody. 231 00:11:49,360 --> 00:11:52,600 Speaker 4: Is buying exactly. It's just like quoting the one hundred 232 00:11:52,640 --> 00:11:55,280 Speaker 4: year Austria piece. You know, you raise a right point 233 00:11:55,280 --> 00:11:57,520 Speaker 4: where you said it's telling that some of these corporate 234 00:11:57,520 --> 00:12:00,280 Speaker 4: executives are coming on they're talking about macro risks rather 235 00:12:00,320 --> 00:12:02,040 Speaker 4: than we're a little concerned that we might see a 236 00:12:02,080 --> 00:12:04,080 Speaker 4: bit of a softer demand in this particular sector of 237 00:12:04,080 --> 00:12:06,240 Speaker 4: our business, which raises the question to they just see 238 00:12:06,480 --> 00:12:08,280 Speaker 4: dynamism as far as the eye can see if they 239 00:12:08,280 --> 00:12:09,640 Speaker 4: don't necessarily. 240 00:12:09,120 --> 00:12:10,840 Speaker 3: Want to get ahead of their skis. 241 00:12:10,920 --> 00:12:13,520 Speaker 4: Is there kind of a binary outcome where you get 242 00:12:13,559 --> 00:12:17,280 Speaker 4: bonds underperforming and stocks outperforming. You either have that or 243 00:12:17,320 --> 00:12:20,719 Speaker 4: you have stocks underperforming and bonds outperforming, and it's one 244 00:12:20,760 --> 00:12:21,120 Speaker 4: or the other. 245 00:12:21,640 --> 00:12:22,240 Speaker 3: Based on the. 246 00:12:22,200 --> 00:12:24,400 Speaker 4: Idea that the only thing that could drive bond yals 247 00:12:24,440 --> 00:12:27,000 Speaker 4: lower is a true full blown recession that nobody is 248 00:12:27,000 --> 00:12:29,280 Speaker 4: looking for right now. Yeah, I mean it does seem 249 00:12:29,280 --> 00:12:31,400 Speaker 4: like a very much a binary outcome at this point, 250 00:12:31,440 --> 00:12:33,640 Speaker 4: which from an investor standpoint is helpful from how we 251 00:12:33,679 --> 00:12:37,280 Speaker 4: construct portfolios thinking about being diversified between stocks and bonds 252 00:12:37,280 --> 00:12:39,040 Speaker 4: and sort of that yin and yang in terms of 253 00:12:39,080 --> 00:12:41,160 Speaker 4: how they typically operate. So as much as people are 254 00:12:41,160 --> 00:12:44,400 Speaker 4: saying diversification is falling apart, I do think the bigger 255 00:12:44,480 --> 00:12:45,120 Speaker 4: driver of that. 256 00:12:45,120 --> 00:12:47,320 Speaker 6: Was we had an inflation spike, We had all of 257 00:12:47,320 --> 00:12:49,480 Speaker 6: these FED hikes. As the FED is very much moving 258 00:12:49,480 --> 00:12:52,160 Speaker 6: from power to finesse on the rate hiking cycle and 259 00:12:52,240 --> 00:12:55,040 Speaker 6: really getting towards the finish line, that dynamic is going 260 00:12:55,080 --> 00:12:57,000 Speaker 6: to be less prevalent in the new year, but it 261 00:12:57,280 --> 00:12:58,439 Speaker 6: will be a bit of a tug of war. And 262 00:12:58,480 --> 00:13:01,040 Speaker 6: that's what we're seeing now challenging the bond markets success 263 00:13:01,040 --> 00:13:03,160 Speaker 6: in that in the equity market relatively. 264 00:13:02,920 --> 00:13:04,840 Speaker 3: How much is a new hedge oil? 265 00:13:05,320 --> 00:13:07,559 Speaker 4: And I ask this at a time of great geopolitical 266 00:13:07,600 --> 00:13:12,600 Speaker 4: and certainty and conflict, there is this feeling that whatever happens, 267 00:13:12,800 --> 00:13:15,480 Speaker 4: oil prices and oil equities seem to be the big 268 00:13:15,520 --> 00:13:16,520 Speaker 4: winner of this year. 269 00:13:17,080 --> 00:13:18,240 Speaker 3: Are you leaning into that? 270 00:13:18,760 --> 00:13:21,400 Speaker 7: We are leaning into the energy side of that trade. 271 00:13:21,440 --> 00:13:23,600 Speaker 6: Certainly, what we're seeing from a profit standpoint is that 272 00:13:23,720 --> 00:13:26,720 Speaker 6: is helping energy companies. And ultimately there are some structural 273 00:13:26,760 --> 00:13:29,760 Speaker 6: underpinnings of this in terms of underinvestment, in terms of 274 00:13:29,760 --> 00:13:33,120 Speaker 6: some of the cappex and the supply factors that we're 275 00:13:33,120 --> 00:13:36,000 Speaker 6: seeing within the energy space within the US and globally. 276 00:13:36,440 --> 00:13:38,400 Speaker 6: And I think if we look more broadly as well, 277 00:13:38,559 --> 00:13:41,120 Speaker 6: I point to what one thing Chair Powell mentioned yesterday, 278 00:13:41,320 --> 00:13:43,480 Speaker 6: which was are we headed for an era of more 279 00:13:43,559 --> 00:13:46,199 Speaker 6: supply shocks? Is this kind of the pandemic aftershock that 280 00:13:46,240 --> 00:13:48,720 Speaker 6: we're getting over, or is this a new structural era 281 00:13:48,800 --> 00:13:50,920 Speaker 6: where supply shocks plan more than demand. 282 00:13:50,960 --> 00:13:54,160 Speaker 1: Interesting. I love in your note. You have a single sentence. 283 00:13:54,360 --> 00:13:57,400 Speaker 1: It's about companies. You're going right back. There's a book 284 00:13:57,440 --> 00:14:00,520 Speaker 1: none of you read. Graham, Dot and Caudal folks sold 285 00:14:00,520 --> 00:14:03,760 Speaker 1: a few copies. We're going right back to securities analysis, 286 00:14:03,840 --> 00:14:05,640 Speaker 1: aren't we like pick a stock? 287 00:14:05,960 --> 00:14:07,600 Speaker 7: Absolutely? I mean, look at earnings so far. 288 00:14:07,640 --> 00:14:10,400 Speaker 6: You've had a small number of banks report, a small 289 00:14:10,480 --> 00:14:13,720 Speaker 6: number of tech companies report, and some pretty divergent outcomes there, 290 00:14:13,720 --> 00:14:17,160 Speaker 6: and it's very much what are companies doing specifically to manage? 291 00:14:17,520 --> 00:14:20,080 Speaker 1: Has she finessed that? Do you see how she just 292 00:14:20,160 --> 00:14:24,200 Speaker 1: finessed the divergent outcome of banks? You know, being at 293 00:14:24,360 --> 00:14:26,800 Speaker 1: Fortress Diamond, she just finessed that perfectly. 294 00:14:27,080 --> 00:14:28,520 Speaker 4: You're going to try to put her on the spot 295 00:14:28,520 --> 00:14:30,600 Speaker 4: and make her uncomfortable, Mara, thank you so much. I'm 296 00:14:30,640 --> 00:14:32,640 Speaker 4: not going to let you have that sort of fall. 297 00:14:32,920 --> 00:14:36,840 Speaker 4: Mira Panda I really like and so I don't want 298 00:14:36,880 --> 00:14:38,480 Speaker 4: you to go there and put her on the spot 299 00:14:38,480 --> 00:14:40,120 Speaker 4: with something so you can't answer or speak to you. 300 00:14:50,720 --> 00:14:53,640 Speaker 1: Right now. Always tense is Greg Valier are chief US 301 00:14:53,640 --> 00:14:57,960 Speaker 1: policy strategists at AGF Investments. His note in the mornings 302 00:14:58,000 --> 00:15:01,480 Speaker 1: early is a must read. Gregg. It's not a layup 303 00:15:01,640 --> 00:15:04,280 Speaker 1: in a fractured Congress. We just heard the gentleman from 304 00:15:04,280 --> 00:15:08,680 Speaker 1: Ohio speak moments ago. We heard some of the tensions 305 00:15:08,680 --> 00:15:12,160 Speaker 1: there from the Democrat Stevens of Michigan as well. What 306 00:15:12,200 --> 00:15:15,960 Speaker 1: will be the process to deliver one hundred billion to 307 00:15:16,080 --> 00:15:17,800 Speaker 1: three or four projects? 308 00:15:19,080 --> 00:15:21,200 Speaker 8: It could take a while time. I mean, I think 309 00:15:21,240 --> 00:15:26,200 Speaker 8: the case for aid to Israel and Ukraine is self evident, 310 00:15:26,720 --> 00:15:29,280 Speaker 8: but apparently that's not of you shared by a lot 311 00:15:29,280 --> 00:15:32,120 Speaker 8: of people on Capitol Hill. The problem is things are 312 00:15:32,240 --> 00:15:35,960 Speaker 8: so dysfunctional in the House. Without a House speaker, it 313 00:15:36,000 --> 00:15:40,240 Speaker 8: could take weeks before Israel and Ukraine get more assistance. 314 00:15:40,480 --> 00:15:43,280 Speaker 8: And I think the signal that will be sending to 315 00:15:43,360 --> 00:15:47,000 Speaker 8: our allies and our adversaries is not a very good one. 316 00:15:47,200 --> 00:15:50,400 Speaker 1: Howard Baker could get together with Tip O'Neil just as 317 00:15:50,440 --> 00:15:53,880 Speaker 1: one example. Is there any ability to get the center 318 00:15:54,000 --> 00:15:56,080 Speaker 1: tendency to meet in the Middle Aisle. 319 00:15:57,560 --> 00:16:01,360 Speaker 8: I think Eventually that will happen. The Center will hold. 320 00:16:02,080 --> 00:16:04,680 Speaker 8: Mitch McConnell will play a role in this. There are 321 00:16:04,720 --> 00:16:07,920 Speaker 8: plenty of people in both parties who feel strongly we've 322 00:16:07,920 --> 00:16:11,400 Speaker 8: got to spend more money on both of these horrible conflicts, 323 00:16:11,720 --> 00:16:14,640 Speaker 8: but it's going to get dragged out. The next deadline 324 00:16:14,680 --> 00:16:17,280 Speaker 8: that I look at is November seventeenth. That's when we 325 00:16:17,400 --> 00:16:19,600 Speaker 8: got to get a budget, and if they don't get 326 00:16:19,600 --> 00:16:21,800 Speaker 8: a budget, they're going to have to do another extension, 327 00:16:22,120 --> 00:16:25,560 Speaker 8: probably past Christmas into late winter. If we have to 328 00:16:25,600 --> 00:16:29,680 Speaker 8: wait that long for aid to Israel, that's very troubling 329 00:16:29,720 --> 00:16:30,800 Speaker 8: in my opinion. 330 00:16:30,680 --> 00:16:33,440 Speaker 3: Greg, we're talking about a new level of dysfunction. 331 00:16:33,520 --> 00:16:36,040 Speaker 4: As some people have pointed out, Amory was talking about 332 00:16:36,080 --> 00:16:39,040 Speaker 4: some of the threats that have gotten actually violent to 333 00:16:39,200 --> 00:16:43,040 Speaker 4: some of the center tendency Republicans who are not voting 334 00:16:43,320 --> 00:16:44,120 Speaker 4: for Jim Jordan. 335 00:16:44,360 --> 00:16:46,400 Speaker 3: Is there a precedent for this type of thing. 336 00:16:47,640 --> 00:16:51,400 Speaker 8: Well, during the Civil War. They've been very emotional periods 337 00:16:51,600 --> 00:16:55,360 Speaker 8: in their country's history Vietnam War. But this is an embarrassment. 338 00:16:55,800 --> 00:16:59,440 Speaker 8: What's going on in the House is a cringe inducing 339 00:16:59,680 --> 00:17:03,600 Speaker 8: to see this kind of dysfunction. And I think that again, 340 00:17:04,119 --> 00:17:07,600 Speaker 8: our foreign allies and adversaries have to be looking at 341 00:17:07,600 --> 00:17:11,360 Speaker 8: the US thinking that we're starting to go off the rails. 342 00:17:11,880 --> 00:17:14,000 Speaker 4: How much do you think that this is actually one 343 00:17:14,119 --> 00:17:17,200 Speaker 4: of the drum beats that has led up to multiple 344 00:17:17,240 --> 00:17:20,399 Speaker 4: nodes of conflict that are permeating in many places around 345 00:17:20,400 --> 00:17:23,520 Speaker 4: the world, This idea that there is increasing. 346 00:17:23,119 --> 00:17:24,600 Speaker 3: Fracture around the governments. 347 00:17:24,600 --> 00:17:26,680 Speaker 4: And I'm thinking in the US, I'm thinking in Israel 348 00:17:27,240 --> 00:17:31,160 Speaker 4: with the Prime minister being incredibly controversial, I'm thinking about 349 00:17:31,160 --> 00:17:32,280 Speaker 4: in other places as well. 350 00:17:34,160 --> 00:17:36,840 Speaker 8: Yeah, I think that it makes a lot of countries 351 00:17:36,880 --> 00:17:41,679 Speaker 8: around the world less inclined to wholeheartedly support US, thinking 352 00:17:41,760 --> 00:17:44,800 Speaker 8: how dependable is the US? Is what we're seeing in 353 00:17:44,840 --> 00:17:48,960 Speaker 8: the house going to be standard behavior? Again? I think 354 00:17:49,000 --> 00:17:52,000 Speaker 8: we're going down a very risky path right now. 355 00:17:52,000 --> 00:17:55,120 Speaker 4: We're actually anticipating something from a meeting between the European 356 00:17:55,440 --> 00:17:59,400 Speaker 4: Commission and the European Union presidents as well as President 357 00:17:59,440 --> 00:18:03,200 Speaker 4: Biden today. How closely are you watching that to understand 358 00:18:03,760 --> 00:18:05,920 Speaker 4: just how close this connection is, even with some of 359 00:18:05,920 --> 00:18:08,119 Speaker 4: the disagreements over trade and steal. 360 00:18:09,320 --> 00:18:12,040 Speaker 8: I think they'll say all the expected things. I think 361 00:18:12,040 --> 00:18:15,360 Speaker 8: they'll try to paper over their differences, but I think 362 00:18:15,720 --> 00:18:19,439 Speaker 8: privately there's going to be a real candor saying the 363 00:18:19,560 --> 00:18:22,040 Speaker 8: US has to be concerned about the way that we're 364 00:18:22,160 --> 00:18:23,360 Speaker 8: for seed right now. 365 00:18:24,080 --> 00:18:27,560 Speaker 1: Greg Villier. We have John Bolton coming up, always controversial, 366 00:18:27,640 --> 00:18:30,720 Speaker 1: he's been a magnet for debate and controversy in America, 367 00:18:31,320 --> 00:18:34,360 Speaker 1: and in an essay here he really centers away from 368 00:18:34,400 --> 00:18:38,359 Speaker 1: the trauma of Gaza, the immediacy of Gaza, towards a 369 00:18:38,400 --> 00:18:41,960 Speaker 1: triangulation of Gaza West Bank in the northern border of 370 00:18:42,119 --> 00:18:47,119 Speaker 1: Israel and alludes to Iran's ring of fire. Now, what 371 00:18:47,320 --> 00:18:51,760 Speaker 1: is the debate in Washington over what to do about Iran? 372 00:18:52,000 --> 00:18:54,639 Speaker 1: I don't observe one. 373 00:18:54,840 --> 00:18:58,359 Speaker 8: I think it started last weekend. The Wall Street Journal's 374 00:18:58,400 --> 00:19:02,000 Speaker 8: weekend publication, which is great, it's a must read, talked 375 00:19:02,000 --> 00:19:06,199 Speaker 8: about the need for regime change in Iran. You're starting 376 00:19:06,200 --> 00:19:09,199 Speaker 8: to hear people talk about that that's very risky. But 377 00:19:09,440 --> 00:19:12,800 Speaker 8: I think there's a growing feeling that the Iranians of 378 00:19:12,840 --> 00:19:17,440 Speaker 8: the provocateurs to a certain extent, for Hasblah and for Hamas. 379 00:19:18,200 --> 00:19:22,440 Speaker 1: Greg, that didn't work out in a Baghdad a few 380 00:19:22,480 --> 00:19:24,840 Speaker 1: decades ago. I mean, it seems like yesterday for you 381 00:19:24,920 --> 00:19:29,000 Speaker 1: and me. But we don't prosecute regime change very well? 382 00:19:29,040 --> 00:19:29,400 Speaker 5: Do we. 383 00:19:30,840 --> 00:19:34,520 Speaker 8: No, But it's perhaps a lesson not learn. In fact, 384 00:19:34,560 --> 00:19:37,840 Speaker 8: I would guarantee you Tom that in your interview with Bolton, 385 00:19:38,000 --> 00:19:41,320 Speaker 8: if you ask him about the possibility or the need 386 00:19:41,440 --> 00:19:43,760 Speaker 8: for regime change, he will advocate it. 387 00:19:44,119 --> 00:19:47,000 Speaker 1: I mean, Lisa, to me, this is just absolutely extraordinary 388 00:19:47,080 --> 00:19:50,600 Speaker 1: and it's what Ambassador Bolton is doing, whatever anyone's politics is, 389 00:19:50,680 --> 00:19:53,320 Speaker 1: is trying to get beyond the shock of the immediacy 390 00:19:53,400 --> 00:19:56,959 Speaker 1: of Gaza. And that is what do we reformulate with Iran? 391 00:19:57,640 --> 00:20:00,800 Speaker 1: Three months from now, six months from now, five years 392 00:20:00,840 --> 00:20:01,200 Speaker 1: from now. 393 00:20:01,800 --> 00:20:05,200 Speaker 4: Regime change is a bit dramatic at a time when 394 00:20:05,240 --> 00:20:07,960 Speaker 4: a lot of people are wondering just where the actual 395 00:20:08,000 --> 00:20:10,199 Speaker 4: people stand. A lot of people have been protesting the 396 00:20:10,240 --> 00:20:13,520 Speaker 4: Iradiate administration. I am curious, though, Greg, from your vantage point, 397 00:20:13,520 --> 00:20:15,879 Speaker 4: how much oil plays into this and the unwillingness of 398 00:20:15,880 --> 00:20:18,440 Speaker 4: the US to really go after Eran. We were speaking 399 00:20:18,440 --> 00:20:20,600 Speaker 4: with Dan Tannebaum earlier this morning. 400 00:20:20,280 --> 00:20:21,439 Speaker 3: And he said that's a key measure. 401 00:20:21,600 --> 00:20:24,399 Speaker 4: It's a key reason why the US hasn't taken a 402 00:20:24,440 --> 00:20:25,320 Speaker 4: harder line. 403 00:20:25,600 --> 00:20:27,359 Speaker 3: Is that your view as well? 404 00:20:27,760 --> 00:20:29,879 Speaker 8: I think that's a factor. I think another big factor 405 00:20:29,840 --> 00:20:34,000 Speaker 8: for Lisa is how fragile support is if the US 406 00:20:34,080 --> 00:20:39,240 Speaker 8: got even more involved with naval cruisers and a lot 407 00:20:39,280 --> 00:20:43,040 Speaker 8: more weapons for Israel. I think a lot of US voters, 408 00:20:43,160 --> 00:20:47,760 Speaker 8: especially young people, are lukewarm at best toward getting involved 409 00:20:47,760 --> 00:20:47,960 Speaker 8: in this. 410 00:20:48,440 --> 00:20:51,439 Speaker 4: So how much did President Biden's speech last night hearken 411 00:20:51,720 --> 00:20:54,520 Speaker 4: to a different time and speak to a different audience 412 00:20:54,960 --> 00:20:57,919 Speaker 4: than the mainstream that will be voting in the upcoming election. 413 00:20:58,640 --> 00:21:00,600 Speaker 8: You know, Lisa, I just kept thinking making one thing 414 00:21:00,720 --> 00:21:04,439 Speaker 8: Lyndon Johnson back in the late sixties, who made a 415 00:21:04,520 --> 00:21:09,280 Speaker 8: case to confront Vietnam North Vietnam. It didn't succeed, He 416 00:21:09,359 --> 00:21:13,399 Speaker 8: failed politically. And we've got another big primary only about 417 00:21:13,400 --> 00:21:17,280 Speaker 8: a year away, maybe fourteen months away, up in New Hampshire. 418 00:21:17,640 --> 00:21:21,800 Speaker 8: I think if Robert Kennedy does well, if Joe Biden 419 00:21:21,920 --> 00:21:25,040 Speaker 8: doesn't do well, there's going to be speculation that the 420 00:21:25,080 --> 00:21:28,520 Speaker 8: war is in albatross for the Democrats and might warrant 421 00:21:28,880 --> 00:21:31,200 Speaker 8: a look at whether Biden should stay on the ticket. 422 00:21:31,480 --> 00:21:34,119 Speaker 1: Grig Villie, thank you so much for the AGF Investments. 423 00:21:38,160 --> 00:21:40,879 Speaker 5: Alex Brazer joined US now deputy head of the Blackrock 424 00:21:41,000 --> 00:21:43,520 Speaker 5: Investment Institute. Alex grats to catch up with you Sarah. 425 00:21:43,520 --> 00:21:45,560 Speaker 5: As always, let's start here because I know you and 426 00:21:45,560 --> 00:21:46,840 Speaker 5: the team. We've put out a note in the last 427 00:21:46,880 --> 00:21:49,560 Speaker 5: few days about the tectonic shifts that we've witnessed in 428 00:21:49,640 --> 00:21:52,640 Speaker 5: the global economy and in markets as well. Alex, this regime, 429 00:21:53,080 --> 00:21:55,639 Speaker 5: how different is this regime going to be two years 430 00:21:55,640 --> 00:21:56,480 Speaker 5: decades gone by? 431 00:21:58,160 --> 00:21:58,360 Speaker 2: Very? 432 00:21:58,520 --> 00:22:01,000 Speaker 9: I think is the short term you were debating earlier, 433 00:22:01,240 --> 00:22:03,600 Speaker 9: the end of the Great Moderation. We're pretty clear we 434 00:22:03,680 --> 00:22:06,679 Speaker 9: have seen the end of the Great Moderation, and that 435 00:22:06,760 --> 00:22:10,960 Speaker 9: reflects a different geopolitical environment, a different macro environment. The 436 00:22:11,040 --> 00:22:13,080 Speaker 9: markets are beginning to catch up with some of that, 437 00:22:13,280 --> 00:22:15,360 Speaker 9: but they're not really catching up with the fact that, 438 00:22:15,640 --> 00:22:20,040 Speaker 9: for example, the geopolitical environment has changed absolutely fundamentally. And 439 00:22:20,080 --> 00:22:24,080 Speaker 9: even if we can't spot the triggers ahead for geopolitical events, 440 00:22:24,880 --> 00:22:28,600 Speaker 9: including around the Middle East, now we know that over 441 00:22:28,640 --> 00:22:31,800 Speaker 9: the next ten years, the average supply shock facing the 442 00:22:31,800 --> 00:22:34,159 Speaker 9: global economy as a result of that is going to 443 00:22:34,160 --> 00:22:36,160 Speaker 9: be negative in the same way that for the last 444 00:22:36,200 --> 00:22:38,320 Speaker 9: twenty years it was positive. So central banks are going 445 00:22:38,359 --> 00:22:42,240 Speaker 9: to find themselves fighting inflation much more often. Even as 446 00:22:42,240 --> 00:22:43,840 Speaker 9: we get out of this episode. 447 00:22:43,600 --> 00:22:45,439 Speaker 1: Alex, she did a tour duty at the Bank of 448 00:22:45,440 --> 00:22:49,480 Speaker 1: England and financial stability. It's not appropriate for you to 449 00:22:49,560 --> 00:22:53,760 Speaker 1: discuss the executive dynamics and the performance dynamics of black Rock, 450 00:22:54,119 --> 00:22:58,560 Speaker 1: but you can advise on a band route that every 451 00:22:58,640 --> 00:23:01,960 Speaker 1: portfolio of black Rock, every portfolio Rick reader in company 452 00:23:02,040 --> 00:23:06,560 Speaker 1: has there are self. How do you advise your team 453 00:23:06,720 --> 00:23:12,600 Speaker 1: this weekend on the instability or stability of the bond system. 454 00:23:12,920 --> 00:23:15,480 Speaker 9: Well, we've actually been underweight for many years the long 455 00:23:15,560 --> 00:23:18,679 Speaker 9: end of the US cove. We saw two things needing 456 00:23:18,680 --> 00:23:21,400 Speaker 9: to happen. One was a repricing of the average level 457 00:23:21,400 --> 00:23:24,359 Speaker 9: of policy rates as we go into this regime where 458 00:23:24,440 --> 00:23:27,080 Speaker 9: central banks are going to be fighting inflation more often, 459 00:23:27,520 --> 00:23:29,760 Speaker 9: and the other was a repricing of the term premium, 460 00:23:29,760 --> 00:23:33,000 Speaker 9: which is now taking center stage in the market debate. 461 00:23:33,200 --> 00:23:35,760 Speaker 9: Those things are now beginning to happen, and we've reached 462 00:23:35,760 --> 00:23:38,320 Speaker 9: a level we think where we've become a bit more 463 00:23:38,320 --> 00:23:40,320 Speaker 9: neutral in the short term. We see risks now in 464 00:23:40,320 --> 00:23:44,760 Speaker 9: both directions, but still over strategic horizons. We remain underweight 465 00:23:44,880 --> 00:23:47,760 Speaker 9: the long end because there's still not that much term premium, 466 00:23:47,800 --> 00:23:50,960 Speaker 9: and this is an environment where you've got weaker trend growth, 467 00:23:51,359 --> 00:23:54,160 Speaker 9: higher level of policy rates, the fiscal dynamics are very 468 00:23:54,160 --> 00:23:57,040 Speaker 9: difficult as a result, and that's an environment that demands 469 00:23:57,040 --> 00:23:57,840 Speaker 9: a term premium. 470 00:23:57,880 --> 00:23:58,200 Speaker 3: Alex. 471 00:23:58,280 --> 00:24:00,760 Speaker 4: Earlier to this year, we were talking to a number 472 00:24:00,840 --> 00:24:02,760 Speaker 4: of bond strategists who said two and a half percent 473 00:24:02,760 --> 00:24:05,240 Speaker 4: on the real yield was basically the tipping point where 474 00:24:05,280 --> 00:24:07,600 Speaker 4: stocks would sell off, and that it would be this reinforcing cycle. 475 00:24:07,640 --> 00:24:09,920 Speaker 4: Are you saying that that's not true, that we could 476 00:24:09,920 --> 00:24:11,480 Speaker 4: get to a three percent, We can get to a 477 00:24:11,520 --> 00:24:14,000 Speaker 4: three and a half percent and be a more accurate 478 00:24:14,119 --> 00:24:16,440 Speaker 4: term structure for the economy as you see. 479 00:24:16,240 --> 00:24:19,359 Speaker 9: It well over the longer terms. Certainly we could go 480 00:24:19,440 --> 00:24:21,960 Speaker 9: higher from here as the term premium gets re established. 481 00:24:22,119 --> 00:24:23,919 Speaker 9: But I think it's important to note that as the 482 00:24:24,040 --> 00:24:27,520 Speaker 9: term premium gets re established, that's not necessarily bad news 483 00:24:27,520 --> 00:24:30,520 Speaker 9: for equities. What's strange up to this point is that 484 00:24:30,640 --> 00:24:33,440 Speaker 9: policy rates have been of future expectations of policy rates 485 00:24:33,480 --> 00:24:35,800 Speaker 9: have been repriced, and yet we haven't seen the equity 486 00:24:35,800 --> 00:24:39,000 Speaker 9: market really respond very decisively to that in aggregate. 487 00:24:39,760 --> 00:24:42,360 Speaker 4: So does that mean to you, Alex, that returns going 488 00:24:42,400 --> 00:24:45,040 Speaker 4: forward aren't necessarily going to be reduced, but the stocks 489 00:24:45,040 --> 00:24:46,800 Speaker 4: are just going to have higher multiples that they're going 490 00:24:46,840 --> 00:24:49,720 Speaker 4: to be a better engine of growth and reliable counterweight 491 00:24:50,040 --> 00:24:53,080 Speaker 4: to inflation, and a higher term premium type of structure 492 00:24:53,080 --> 00:24:53,520 Speaker 4: for bonds. 493 00:24:54,320 --> 00:24:56,399 Speaker 9: Well, I think you see two features favoring equities in 494 00:24:56,440 --> 00:24:58,639 Speaker 9: the long term. You've listed both of them there. But 495 00:24:58,880 --> 00:25:01,040 Speaker 9: I also would note that even if it's a challenging 496 00:25:01,119 --> 00:25:03,359 Speaker 9: environment the end of the Great Moderation, it's a challenging 497 00:25:03,440 --> 00:25:08,000 Speaker 9: environment for broad risk asset exposures. Actually the drivers of 498 00:25:08,040 --> 00:25:11,480 Speaker 9: the end of the Great Moderation, whether that's geopolitics or 499 00:25:11,880 --> 00:25:16,240 Speaker 9: energy transition or demographic change, they're all big mega forces 500 00:25:16,600 --> 00:25:18,560 Speaker 9: changing the way our economy works, and we're much more 501 00:25:18,560 --> 00:25:21,600 Speaker 9: interested in those now as sources of return in portfolios. 502 00:25:21,800 --> 00:25:25,120 Speaker 1: Alex, I'm absolutely fascinated on a broader view, and again 503 00:25:25,160 --> 00:25:28,040 Speaker 1: with your tour duty at the Bank of England, if 504 00:25:28,119 --> 00:25:31,760 Speaker 1: with the Great Moderation over is you stated, are we 505 00:25:31,840 --> 00:25:36,000 Speaker 1: going to have an ectuarial reset of our generation or 506 00:25:36,040 --> 00:25:40,119 Speaker 1: frankly multiple generations? Do we need to start thinking about 507 00:25:40,280 --> 00:25:46,399 Speaker 1: a bond reset to a higher required return for pension investments. 508 00:25:47,480 --> 00:25:49,399 Speaker 9: I don't know whether it's a higher required return, but 509 00:25:49,440 --> 00:25:54,120 Speaker 9: we're definitely having a reset to a higher actual return environment. 510 00:25:54,160 --> 00:25:56,000 Speaker 9: And this, by the way, is why it's Strangely, equity 511 00:25:56,040 --> 00:25:58,960 Speaker 9: multiples in aggregate haven't yet adjusted to what's happened in 512 00:25:58,960 --> 00:26:02,439 Speaker 9: the bond market. We see yields remaining at close to 513 00:26:02,520 --> 00:26:05,879 Speaker 9: these levels over the long term, maybe higher as the 514 00:26:05,960 --> 00:26:08,439 Speaker 9: term premium gets re established, because we're going into an 515 00:26:08,520 --> 00:26:12,119 Speaker 9: environment now where the fared other developed market central banks 516 00:26:12,119 --> 00:26:15,080 Speaker 9: are going to be leaning against looser fiscal policy than 517 00:26:15,080 --> 00:26:16,720 Speaker 9: they were in the past, and they're going to be 518 00:26:16,800 --> 00:26:20,680 Speaker 9: fighting on average these negative supply shocks, whether that's energy prices, 519 00:26:21,080 --> 00:26:25,560 Speaker 9: other geopolitical shocks, or demographic related labor supply shocks. So 520 00:26:26,119 --> 00:26:28,440 Speaker 9: returns are going to be higher once we get through 521 00:26:28,480 --> 00:26:30,840 Speaker 9: this adjustment. We're seeing that now in the bond market. 522 00:26:31,080 --> 00:26:33,119 Speaker 9: We're going to need to see higher returns in the 523 00:26:33,160 --> 00:26:35,400 Speaker 9: equity market and a range of other markets as well 524 00:26:35,440 --> 00:26:36,000 Speaker 9: in the future. 525 00:26:36,040 --> 00:26:37,760 Speaker 5: Alex just quickly, when you're in the team, use that 526 00:26:37,760 --> 00:26:40,280 Speaker 5: phrase long term. How many years is that? What are 527 00:26:40,280 --> 00:26:41,240 Speaker 5: you thinking about? 528 00:26:41,600 --> 00:26:44,320 Speaker 9: Well, in a strategic portfolio, we're looking five years and out. 529 00:26:44,760 --> 00:26:47,200 Speaker 9: In a tactical portfolio, we're looking over the next twelve months, 530 00:26:47,240 --> 00:26:49,160 Speaker 9: and we see over the next twelve months the risks 531 00:26:49,160 --> 00:26:51,560 Speaker 9: in the long end more balanced. But beyond that twelve 532 00:26:51,640 --> 00:26:54,399 Speaker 9: months we still see the term premium grinding higher. 533 00:26:54,480 --> 00:26:57,120 Speaker 5: So when you say high for longer, you're actually thinking 534 00:26:57,119 --> 00:26:59,440 Speaker 5: about high for maybe over the next five years. 535 00:27:00,359 --> 00:27:02,680 Speaker 9: Absolutely, And I think that what's interesting in the way 536 00:27:02,720 --> 00:27:05,520 Speaker 9: the FED debate has gone is as people have focused 537 00:27:05,560 --> 00:27:08,040 Speaker 9: on reaching the peak, the market has then begun to 538 00:27:08,040 --> 00:27:10,359 Speaker 9: shift its attention to, well, what does the future look like? 539 00:27:10,400 --> 00:27:12,920 Speaker 9: Where do we go back to as inflation comes down? 540 00:27:13,400 --> 00:27:15,199 Speaker 9: And actually that we think that's a lot higher than 541 00:27:15,240 --> 00:27:17,680 Speaker 9: we were pre pandemic, partly because of the fiscal position, 542 00:27:18,040 --> 00:27:21,760 Speaker 9: partly because of the energy transition which is driving higher investment, 543 00:27:22,080 --> 00:27:24,119 Speaker 9: and partly because, as I say, central banks are going 544 00:27:24,160 --> 00:27:27,600 Speaker 9: to be on average facing supply shocks where they're constantly 545 00:27:27,640 --> 00:27:30,640 Speaker 9: needing to push down on inflation, which means holding rates 546 00:27:30,680 --> 00:27:31,720 Speaker 9: on average tight. 547 00:27:32,160 --> 00:27:35,359 Speaker 5: Fascinating, Alex, Thank you, Alex Brighter there of black Crop. 548 00:27:45,720 --> 00:27:47,800 Speaker 1: We are going to give you a terrific brief as 549 00:27:47,840 --> 00:27:51,439 Speaker 1: we did before on this bandbaccle. She has lived at. 550 00:27:51,440 --> 00:27:56,199 Speaker 1: Debor Cunningham joins this global Liquidity Market CIO. It a 551 00:27:56,480 --> 00:28:00,000 Speaker 1: massive band house federated Ames with all of their experience 552 00:28:00,200 --> 00:28:03,400 Speaker 1: money market funds. Deborah, I'm not going to mince words. 553 00:28:03,760 --> 00:28:07,720 Speaker 1: All my radars up, and my lesson on radar is 554 00:28:07,760 --> 00:28:11,680 Speaker 1: to go to trust in liquidity into the weekend. Is 555 00:28:11,720 --> 00:28:16,120 Speaker 1: their trust in the system? Is their liquidity within the system? 556 00:28:16,600 --> 00:28:19,199 Speaker 10: There are both At this point, Tom, I think you know, 557 00:28:19,720 --> 00:28:23,560 Speaker 10: as Lisa was mentioning, this economy has a huge mosaic 558 00:28:23,760 --> 00:28:28,240 Speaker 10: of factors that are inputs to what's happening in the 559 00:28:28,359 --> 00:28:31,080 Speaker 10: overall market. You know what the strength and the economy is, 560 00:28:31,160 --> 00:28:35,320 Speaker 10: what the yield curves are doing, currencies, all of those things, 561 00:28:35,480 --> 00:28:39,800 Speaker 10: and ultimately the liquidity markets and liquidity in the broader 562 00:28:39,840 --> 00:28:44,480 Speaker 10: markets seems to still be resilient and have strength going 563 00:28:44,520 --> 00:28:45,240 Speaker 10: into the weekend. 564 00:28:45,600 --> 00:28:47,440 Speaker 4: Debraah, we were talking earlier in the show, at what 565 00:28:47,480 --> 00:28:49,760 Speaker 4: point do we reach a tipping point where all of 566 00:28:49,800 --> 00:28:53,120 Speaker 4: the investors who have just hoarded cash in five percent 567 00:28:53,200 --> 00:28:56,040 Speaker 4: yielding funds start to say, you know what, we actually 568 00:28:56,080 --> 00:28:59,280 Speaker 4: are worried about locking in some of the re pricing 569 00:28:59,360 --> 00:28:59,760 Speaker 4: risk on the. 570 00:28:59,720 --> 00:29:02,240 Speaker 3: Long end of the curve. Have you started to see 571 00:29:02,280 --> 00:29:03,320 Speaker 3: that on the margins? 572 00:29:04,480 --> 00:29:07,840 Speaker 10: You know, Lisa, We challenge ourselves with that every single day. 573 00:29:07,920 --> 00:29:10,560 Speaker 10: Should we get longer, should we go into other products? 574 00:29:10,680 --> 00:29:13,800 Speaker 10: Should our advice to clients be going into and locking 575 00:29:13,880 --> 00:29:16,320 Speaker 10: in some of these longer yields, and we think the 576 00:29:16,320 --> 00:29:19,720 Speaker 10: beginning of that process has started to occur. Certainly we've 577 00:29:19,760 --> 00:29:23,760 Speaker 10: started to see some pick up from a bond flow perspective, 578 00:29:24,480 --> 00:29:27,320 Speaker 10: but not in mass yet. And I think that's because 579 00:29:27,800 --> 00:29:30,400 Speaker 10: we finally have a bond market, and you know, we 580 00:29:30,440 --> 00:29:33,760 Speaker 10: saw the statistics that are our ten year, thirty year, 581 00:29:33,880 --> 00:29:37,520 Speaker 10: two year types of yields that are above or approaching 582 00:29:37,560 --> 00:29:40,640 Speaker 10: five percent. We finally have a bond market that is 583 00:29:40,760 --> 00:29:43,920 Speaker 10: reconciled with the fact that the FED speak out there 584 00:29:43,960 --> 00:29:47,760 Speaker 10: for the last year, higher for longer is truthful, It's 585 00:29:47,840 --> 00:29:50,240 Speaker 10: what's happening. Don't expect something different. 586 00:29:50,440 --> 00:29:52,520 Speaker 4: But Deborah, what do you make of the fact that 587 00:29:52,560 --> 00:29:55,760 Speaker 4: we're not seeing some sort of race toward tenure thirty 588 00:29:55,840 --> 00:29:58,800 Speaker 4: year bonds at five percent yields at a time of 589 00:29:58,880 --> 00:30:02,040 Speaker 4: great geopolitical at a time where people are looking for 590 00:30:02,120 --> 00:30:06,600 Speaker 4: haven trades to protect against possible unrest. Does that send 591 00:30:06,640 --> 00:30:08,720 Speaker 4: a pretty powerful and deeper signal to you. 592 00:30:09,920 --> 00:30:13,440 Speaker 10: I think it's it sends the signal that we're still 593 00:30:13,480 --> 00:30:17,280 Speaker 10: not sure if inflation is rained in to the point 594 00:30:17,280 --> 00:30:22,240 Speaker 10: where the FED is comfortable in maintaining a yield that 595 00:30:22,440 --> 00:30:26,800 Speaker 10: you know is for an extended period of time without 596 00:30:26,880 --> 00:30:30,080 Speaker 10: going higher. Certainly Chair Pow and other FED speak is 597 00:30:30,160 --> 00:30:33,920 Speaker 10: leaning in that direction, but we don't see. I don't 598 00:30:33,960 --> 00:30:37,280 Speaker 10: think that what we're seeing from an inflationary perspective is 599 00:30:37,440 --> 00:30:39,960 Speaker 10: one hundred percent confirming of that. I mean, you were 600 00:30:39,960 --> 00:30:43,720 Speaker 10: mentioning that the auto strikes that can be you know, 601 00:30:43,760 --> 00:30:46,640 Speaker 10: a negative from an inflationary perspective, both from a wage 602 00:30:46,640 --> 00:30:50,320 Speaker 10: inflation as well as from a vehicle inflation. We don't 603 00:30:50,360 --> 00:30:53,400 Speaker 10: know how that is going to impact us. You have 604 00:30:53,600 --> 00:30:56,280 Speaker 10: issues from you know, the conflict in the Middle East. 605 00:30:56,320 --> 00:30:58,560 Speaker 10: What does that do from an oil inflationary and an 606 00:30:58,680 --> 00:31:01,720 Speaker 10: energy perspective. There are so many unknowns out there from 607 00:31:01,720 --> 00:31:05,240 Speaker 10: an inflationary standpoint that I think people will continue to 608 00:31:05,360 --> 00:31:09,120 Speaker 10: be tentative until some of the you know, the fog 609 00:31:09,200 --> 00:31:10,680 Speaker 10: in that picture starts to clear. 610 00:31:11,280 --> 00:31:14,840 Speaker 1: Deborah Friday, as you well know in Federated Land, means 611 00:31:14,880 --> 00:31:17,880 Speaker 1: do Frank FOBOSEI, the giant of teaching us about fixed 612 00:31:17,960 --> 00:31:21,920 Speaker 1: income dynamics, Let's do it right now. The conceit into 613 00:31:21,960 --> 00:31:24,720 Speaker 1: the end of the year is marked to market. We're 614 00:31:24,760 --> 00:31:27,200 Speaker 1: not marked to market, and we'll just hold it out 615 00:31:27,200 --> 00:31:32,960 Speaker 1: to maturity. Blooney, It's just bloony. If I've got a 616 00:31:33,080 --> 00:31:36,440 Speaker 1: ten year piece, how far out is my break point 617 00:31:36,480 --> 00:31:39,880 Speaker 1: where things fall apart, where the idea, the conceit of 618 00:31:39,920 --> 00:31:42,480 Speaker 1: holding it forever falls to pieces. 619 00:31:43,520 --> 00:31:46,160 Speaker 10: Well, it really depends on you know, what the coupon 620 00:31:46,360 --> 00:31:48,400 Speaker 10: is on that ten year piece. You know, if it's 621 00:31:48,400 --> 00:31:51,000 Speaker 10: a five percent coupon that you just bought recently or 622 00:31:51,080 --> 00:31:54,640 Speaker 10: four and a half, it's it's probably not that lengthy 623 00:31:54,800 --> 00:31:57,720 Speaker 10: of a holding period. If it's something you bought a 624 00:31:57,800 --> 00:32:00,320 Speaker 10: year or two ago and has you know, you olds 625 00:32:00,520 --> 00:32:04,520 Speaker 10: that are several hundred basis points below that you're not 626 00:32:04,800 --> 00:32:08,200 Speaker 10: You're not breaking even at any point in the near term, 627 00:32:08,280 --> 00:32:12,640 Speaker 10: you know. I think from a bond investor perspective, it's 628 00:32:12,760 --> 00:32:16,120 Speaker 10: hard to get off yield. Yield has been what has 629 00:32:16,360 --> 00:32:20,080 Speaker 10: ruled the ruled the roost in bond land forever, but 630 00:32:20,200 --> 00:32:23,360 Speaker 10: total return is very, very impactful and needs to be 631 00:32:23,520 --> 00:32:24,520 Speaker 10: considered as well. 632 00:32:24,520 --> 00:32:27,080 Speaker 1: Thank you, This is incredibly important. So let's go again 633 00:32:27,120 --> 00:32:30,120 Speaker 1: to Frank Fobosei and the idea that we are switching 634 00:32:30,160 --> 00:32:34,960 Speaker 1: from a yield mindset to a price mindset. How will 635 00:32:35,000 --> 00:32:38,840 Speaker 1: that affect institutional bond byside. 636 00:32:39,680 --> 00:32:43,000 Speaker 10: I think what you're going to see is resistance to that. 637 00:32:44,240 --> 00:32:49,840 Speaker 10: But as the resistance starts to fade, you'll you'll you'll peep, 638 00:32:49,920 --> 00:32:54,840 Speaker 10: You'll see people lumping back in to the bond market 639 00:32:55,160 --> 00:32:59,400 Speaker 10: because what the downside risk is with yields above five 640 00:32:59,440 --> 00:33:04,960 Speaker 10: percent is much less than the downside risks when wields 641 00:33:05,000 --> 00:33:08,880 Speaker 10: were at three percent. So coopon clipping from that part 642 00:33:08,920 --> 00:33:13,600 Speaker 10: of the total return should help get you through some 643 00:33:13,720 --> 00:33:16,400 Speaker 10: of the price risks that you still may experience. All 644 00:33:16,440 --> 00:33:18,400 Speaker 10: in all, though, you have to have a timeframe that's 645 00:33:18,480 --> 00:33:20,440 Speaker 10: longer than three to six months. You need to be 646 00:33:20,520 --> 00:33:24,400 Speaker 10: thinking about something that's more in years for that type 647 00:33:24,400 --> 00:33:25,360 Speaker 10: of thought process. 648 00:33:25,600 --> 00:33:28,560 Speaker 5: Deborah, Thank you, Deborah Cunningham, federated to MS. 649 00:33:29,000 --> 00:33:32,840 Speaker 1: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, and 650 00:33:33,000 --> 00:33:37,120 Speaker 1: anywhere else you get your podcasts. Listen live every weekday 651 00:33:37,480 --> 00:33:42,360 Speaker 1: starting at seven am Eastern Bloomberg dot Com, the iHeartRadio app, 652 00:33:42,760 --> 00:33:46,240 Speaker 1: tune In, and the Bloomberg Business app. You can watch 653 00:33:46,480 --> 00:33:50,760 Speaker 1: us live on Bloomberg Television and always. I'm the Bloomberg Terminal. 654 00:33:51,200 --> 00:33:55,360 Speaker 1: Thanks for listening. I'm Tom Keen, and this is Bloomberg