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Speaker 3: Let's turn to the Federal Reserve.
Speaker 2: The newest Federal Reserve Governor, Stephen Myron, making the case
Speaker 2: for aggressively luring interest rates to avoid damaging the economy.
Speaker 2: Diverging from some other FMC members, I'm pleased to say
Speaker 2: that joining us this morning live from the Federal Reserve
Speaker 2: is Governor Myron himself. Governor, Welcome to the program, sir.
Speaker 2: We've got tons of time to talk about what's going
Speaker 2: to happen next. Your thoughts on the labor market, the
Speaker 2: balance of risk, the broader economy. I actually wanted to
Speaker 2: lead the conversation with this one Governor. What was your experience,
Speaker 2: like I'm sure this was unexpected twelve months ago. What
Speaker 2: was it like walking into the room and was it
Speaker 2: different to what you expected?
Speaker 4: Good morning, and thanks for having me. It's great to
Speaker 4: see you again. Look, you know, walking into the room,
Speaker 4: you know, I had had a good briefing ahead of
Speaker 4: time about what the meeting would what the meeting would
Speaker 4: be like, and so that was very helpful. But I
Speaker 4: will say that everyone was extremely friendly and welcoming and
Speaker 4: kind and collegial, and I really appreciated that. And you know,
Speaker 4: it's important to understand that the FMC is a body,
Speaker 4: the Federal Open Market Committee is a body that makes
Speaker 4: decisions by arguing on the merits of the economics and
Speaker 4: the economics and the merits of policy.
Speaker 5: And that's how it was.
Speaker 4: And everyone was very collegial and airing their views, and
Speaker 4: I the same, and that's what it will continue to be.
Speaker 4: You know, we make policy, as the chairman said last week,
Speaker 4: by persuasion, and so I will continue to try to
Speaker 4: lay up my views and make the cases best I can.
Speaker 2: The governor, I essentially got the opportunity to articulate your argument.
Speaker 2: Just how much daylight did you sense? Was there was
Speaker 2: between you and everyone else on the committee.
Speaker 5: Well, I mean, you know, it's sort of funny.
Speaker 4: If you look at the dots in the summary of
Speaker 4: economic projections, you know, obviously there's a divergence between my
Speaker 4: projection for appropriate policy for twenty twenty five versus where
Speaker 4: the weight of everyone else's is. But if you look
Speaker 4: at next year in the year after, you know, I'm
Speaker 4: sure I'm still on the low end. But you know,
Speaker 4: there's not really that much daylight between all the rest
Speaker 4: of the dots and myself in the following years. So
Speaker 4: it's really just about the speed with which we come
Speaker 4: down to what's closer to neutral.
Speaker 2: Well, let's get into the neutral argument. I think that's
Speaker 2: what separates you from a lot of people. So you've
Speaker 2: got it in the mid two's, Governor, and you think
Speaker 2: we should get there quickly. Can you just build out
Speaker 2: why you believe that's the case and why we should
Speaker 2: get there so fast?
Speaker 5: Sure?
Speaker 4: So, look, you know I discussed a number of forces
Speaker 4: which have kicked in over the course of this year
Speaker 4: and which are I think can start contrast to where
Speaker 4: they were last year year. So I've argued that neutral
Speaker 4: was higher in the past than it is now and
Speaker 4: that neutral was higher for a variety of reasons. But
Speaker 4: I've highlighted recently fiscal policy, you know, sort of driving
Speaker 4: up net national borrowing, decreasing national savings, as well as
Speaker 4: immigration policy driving what was the biggest positive population growth
Speaker 4: shock in my lifetime and has now turned into the
Speaker 4: biggest negative population growth shock in my lifetime in very
Speaker 4: rapid succession relative to how changes in population growth you
Speaker 4: normally normally occur in the data. And so to me,
Speaker 4: when you have huge swings in net national savings driven
Speaker 4: by fiscal policy and you have huge swings in population
Speaker 4: growth driven by changes to border policy, it would be
Speaker 4: bizarre for me to think that that wouldn't have implications
Speaker 4: for the fundamental structure of the economy that gets reflected
Speaker 4: for Montaria policy.
Speaker 5: In the neutral rate.
Speaker 4: So my view is that neutral was higher last year
Speaker 4: because of these reasons. And so last year policy was
Speaker 4: not as tight as a lot of people believed. And
Speaker 4: now neutral has come down or is in the process
Speaker 4: of coming down, and now neutral and now policy is
Speaker 4: more tight than people believe.
Speaker 5: And this has happened recently.
Speaker 4: You know, these policies didn't change, you know, sort of
Speaker 4: overnight they've been kicking in over the course of the year,
Speaker 4: and that means that policy is becoming tighter every day
Speaker 4: as these policies continue.
Speaker 5: To kick in.
Speaker 4: And my view is not one of enormous economic pessimism.
Speaker 4: You know, I don't think the economy is about to creator.
Speaker 4: I don't think the labor market's about to fall off
Speaker 4: a cliff. However, the neutral rate is drifting down, and
Speaker 4: as a result of that, it's in comment upon policy
Speaker 4: to adjust in response. And the longer that policy stays
Speaker 4: excessively excessively restrictive, the greater the risks to the downside
Speaker 4: for the economy. If policy stays excessively restrictive for too long,
Speaker 4: then you do get to in a situation in which
Speaker 4: you have a meaningful, meaningful increase in an employment rate
Speaker 4: and a failure of the employment mandata.
Speaker 2: So, Governor, that's the tension. I think in your view,
Speaker 2: that's worth exploring just a little bit more. On the
Speaker 2: one hand, you don't think the economies at risks have
Speaker 2: breaking down, but you also think we are sessively tight
Speaker 2: at the moment and getting tighter. There are some people
Speaker 2: who would say, and we've had this conversation around the
Speaker 2: table this morning, if we were as tight as you suggesting,
Speaker 2: why is the market within one percent of record highs?
Speaker 2: Why credit spreads super tight, and why is this economy
Speaker 2: still doing Okay, Yeah.
Speaker 4: So that's a perfectly natural thing to ask. Sorry, and
Speaker 4: let me say, let me say two things. One, I
Speaker 4: don't think that all financial conditions are universally loose like that.
Speaker 4: In particular, if you look at the housing market, I
Speaker 4: think it's in quite a different state than you know,
Speaker 4: sort of some financial markets and you know, sort of
Speaker 4: security markets. So I don't think that that's necessarily a
Speaker 4: holistic look at the world of financial conditions in the economy.
Speaker 4: But even that aside, I think that, you know, people
Speaker 4: in financial markets tend to focus a lot on monetary
Speaker 4: policy because interest rates are you know, sort of huge
Speaker 4: tradable instruments, right, But there's so much more that goes
Speaker 4: into determining economic growth and the state of economy and
Speaker 4: inflation and employment than monetary policy. And I think that
Speaker 4: attributing all changes in financial assets to monetary policy can
Speaker 4: be a mistake. And in particular, that's what I tried
Speaker 4: to do in my speech, you know, was to draw
Speaker 4: out some of these some of these effects from non
Speaker 4: monetary policies that are affecting the economy, and of course
Speaker 4: therefore also financial markets. And so if you have changes
Speaker 4: in tax policy, right like significant incentives for investing that
Speaker 4: lower the effective tax rate on capital, of course that's
Speaker 4: going to get reflected into capital assets. If you have
Speaker 4: significant changes to the regulatory environment where you're removing barriers
Speaker 4: to operations that companies can make more more cheaply, which
Speaker 4: by the way, is disinflationary and pushes at the applicap,
Speaker 4: then of course that's also going to be reflected in
Speaker 4: asset markets. So I think it's a mistake to conflate
Speaker 4: the state of financial conditions with monitary policy. They're connected,
Speaker 4: they're related, they affect each other, but they're not exactly
Speaker 4: the same thing. And in the speech I go line
Speaker 4: by line through these different items. And the reason why
Speaker 4: monetary policy doesn't have to react to the hawkish side
Speaker 4: in response to these back to these policy changes is
Speaker 4: because they push out the supply side of the economy
Speaker 4: at the same time that they push out demand. And
Speaker 4: so if you're increasing supply and demand at the same time,
Speaker 4: there's no change to the apput gap. And of course
Speaker 4: it's monetary's policy job at the end of the day
Speaker 4: to be balancing the apput gap, to be balancing aggregate
Speaker 4: supply and aggregthm indity economy so it doesn't overheat or underheat.
Speaker 6: I think there are a lot of people, Governor Myron,
Speaker 6: who'd agree with you that probably the neutral rate is
Speaker 6: quite a bit below.
Speaker 2: Where we are now.
Speaker 6: You said, even the other Fed governors did seem to
Speaker 6: agree with that.
Speaker 7: But not necessarily the speed.
Speaker 5: And I'm still unclear.
Speaker 6: Why do you think it is so important to get
Speaker 6: rates down by one hundred and twenty five or one
Speaker 6: hundred and fifty one hundred and fifty basis points more
Speaker 6: this year if inflation is still running hot and you're
Speaker 6: not seeing anything alarming in the underlying economy.
Speaker 4: Yeah, so this year is merely a function of where
Speaker 4: the calendar is. So my view is that policy is
Speaker 4: quite restrictive, and so I'd like to adjust quickly to
Speaker 4: get back to a more neutral area.
Speaker 5: Right.
Speaker 4: That just means a series of fifties get until you
Speaker 4: get much closer to zero. The fact that it's this
Speaker 4: year is just just a function, just to function of
Speaker 4: the calendar. But again it comes back to the longer
Speaker 4: that you stay restrictive, the greater the risks. And let
Speaker 4: me put it this way, like it was just a
Speaker 4: few years ago that we were having endless conversations about
Speaker 4: declining population growth rates in the whole world's becoming Japan
Speaker 4: in terms of interest rate profiles. Right, those forces are
Speaker 4: still real, those dynamics are still real.
Speaker 5: They didn't go away.
Speaker 4: Those channels, you know, those channels by which population growth effects,
Speaker 4: neutral rates didn't disappear.
Speaker 5: I would rather react.
Speaker 4: I would rather act proactively, right and sort of we
Speaker 4: know that we just had the biggest population growth shocks
Speaker 4: in many people's lifetimes, mine included, Right, I would we
Speaker 4: know what the consequences.
Speaker 5: Of those are economically.
Speaker 4: I would rather act proactively and lower rates as a
Speaker 4: result ahead of time, rather than wait for some you know,
Speaker 4: giant catastrophe to occur, because you suddenly wake up and
Speaker 4: find out that you are sort of resuming those dynamics.
Speaker 4: In my mind, if you wait to sort of to
Speaker 4: see the result of that, you have waited too long,
Speaker 4: and there will be there will have been a potentially
Speaker 4: quite material.
Speaker 5: Downside miss to the employment mandate.
Speaker 6: A lot of people on this show have been wondering
Speaker 6: what the reaction mechanism is going to be for a
Speaker 6: federal reserve. This does start to see inflation as transitory.
Speaker 6: Once again, the idea that we have been above two percent,
Speaker 6: the two percent target for the federal reserve for fifty
Speaker 6: three consecutive months, for more than four years. If there
Speaker 6: is an upsurgeon inflation, how long are you willing to
Speaker 6: look through that if you are cutting rates before you say,
Speaker 6: hold on a second, maybe we need to stop.
Speaker 4: Yeah, So I would want to understand why there was
Speaker 4: an obsurgent inflation and what was driving it, and then
Speaker 4: sort of think about whether that shock is likely to
Speaker 4: be persistent or whether the shock is likely to be transitory.
Speaker 4: And it's the nature. It's the nature of the shock.
Speaker 4: It's not just as inflation higher for a certain number
Speaker 4: of months. It's why is it higher or why is
Speaker 4: it lower? And how long are those and how long
Speaker 4: are those shocks likely to persist? And if you have
Speaker 4: a situation in which inflation is much higher because there's
Speaker 4: you know, let's say a very significant expansion in national
Speaker 4: borrowing that drives up demand could be driven by fiscal
Speaker 4: it could be driven by something else. That might be
Speaker 4: the type of thing that you would expect to be
Speaker 4: to be more persistent. In my mind, if you have
Speaker 4: the type of shock that's driven by a you know,
Speaker 4: basically one off change to tax rates, right, whether that's
Speaker 4: a VAT tax or tariffs or anything else, you know, that,
Speaker 4: in my mind is not the type of chalk that
Speaker 4: would lead you to think that inflation is going to
Speaker 4: be sticky for a long period of time. And in fact,
Speaker 4: there's you know, most central banks around the world, I
Speaker 4: think actually all of them would sort of you know,
Speaker 4: encounter this in a much more direct manner through changes
Speaker 4: in value added taxes, and they always look through them,
Speaker 4: you know, they always say, okay, look the VAT went
Speaker 4: up or the BAT went down, and that's going to
Speaker 4: affect the inflation stistics for a period of time. But
Speaker 4: then we all know that this was basically a fiscally
Speaker 4: mandated price change, and monetary policy shouldn't respond necessarily to
Speaker 4: fiscally mandated price changes because that's not indicative of changes
Speaker 4: to the underlying supplied demand balance in the economy, which
Speaker 4: ultimately drives the type of persistent inflation that the central
Speaker 4: bank cares about.
Speaker 8: Governor mar and I love to get your thoughts a
Speaker 8: little bit more deeper on housing this thing. Matt Misk
Speaker 8: and Neil Gotta have talked a lot on this program
Speaker 8: about going into next year. Do you think the housing
Speaker 8: market will weigh on a deceleration of inflation? Is that
Speaker 8: part of your thesis on inflation coming down?
Speaker 4: Yeah, I mean it explicitly is I mean, Look, you know,
Speaker 4: supply and demand dominates all things economically, right, and if
Speaker 4: you're increasing the demand for housing by dramatically increasing population
Speaker 4: growth without a material increase in the supply of housing
Speaker 4: at the same time, of course, you are going to
Speaker 4: get upward pressure on shelter inflation.
Speaker 5: And then vice versa.
Speaker 4: If you start decreasing population growth because of a change
Speaker 4: in border policies without destroying shelter supply, or or shelter
Speaker 4: supply keeps and expanding at a rate that it has
Speaker 4: been in the previous years, then you get a relative
Speaker 4: change in shelter inflation once again. So it's just it's simple,
Speaker 4: you know, it's simple supply and demand. If we have
Speaker 4: a material downward population shock because we have negative migration,
Speaker 4: that's an increase in the supply of shelter. And I
Speaker 4: think that the study that I cited in the speech
Speaker 4: on Monday Work where Albert says found that Needless city
Speaker 4: of one basically that a one percent increase in the
Speaker 4: in the number of immigrant renters leads to a one
Speaker 4: percentage point change in the rents.
Speaker 8: Right, but immigration is short term? Right, this is a
Speaker 8: short term story. Would you be willing to revise up
Speaker 8: neutral if immigration is.
Speaker 7: Not much of a drag?
Speaker 4: Well, I mean, you know, I have good reason for
Speaker 4: expecting that the immigration story is going to persist at
Speaker 4: least for another three and a half years, and I
Speaker 4: think quite likely potentially after that. Also, So I'm not
Speaker 4: convinced that immigration is really a short term story.
Speaker 2: He Governor, just before you go, because I know you've
Speaker 2: got a run. Have you got a taste for this?
Speaker 2: Is this a position you'd like to keep beyond the
Speaker 2: end of this year?
Speaker 4: Look, you know, I love this country and I'm happy
Speaker 4: to serve this country in any way that I'm asked
Speaker 4: to do so. But personal decisions are not decisions that
Speaker 4: I make.
Speaker 2: Stay with us more Bloomberg Surveilance can coming up after this.
Speaker 3: I's turn to the Federal Reserve.
Speaker 2: Chris Heisi of ME and Bank of America Private Bank
Speaker 2: writing loosening conditions including further FED rate cuts support risk
Speaker 2: assets further.
Speaker 3: Chris joins us now for more Chris and Mornic, Good morning.
Speaker 2: Top decent numbers like that labor market dates. So what
Speaker 2: you make of that claims data?
Speaker 9: I make of it what I always do, which is
Speaker 9: week to week is data points are pretty noisy. It
Speaker 9: doesn't necessarily mean it's a trend, but it is something
Speaker 9: that I think will likely see which is right around
Speaker 9: those numbers for the foreseeable future. There's a little bit
Speaker 9: of a supply and demand balance in the job market overall.
Speaker 9: Some many companies are still in the weight and see
Speaker 9: mode as it relates to how you democratize artificial intelligence.
Speaker 7: So claims numbers are pretty much in line.
Speaker 9: With what our belief is, which is a reacceleration coming
Speaker 9: not just in real growth but nominal growth and ultimately
Speaker 9: profit growth.
Speaker 2: Are you seeing any signs event already beyond that job
Speaker 2: as claims number? Why are you seeing signs of a reacceleration?
Speaker 2: Where are things firm enough?
Speaker 9: You know it comes down at the beginning of the year,
Speaker 9: before the tariffs were put in place, there was this
Speaker 9: notion that you'd have double digit profit growth for this
Speaker 9: year and then next year. Then it was ratcheted back
Speaker 9: by pretty much everybody across Wall Street. Now we're back
Speaker 9: to the numbers again where they were at the beginning
Speaker 9: of the year. So it's a reacceleration. We're seeing it
Speaker 9: already in profit revisions, not just for third and fourth quarter,
Speaker 9: but already for twenty six.
Speaker 6: Do CEOs and CFOs believe it? Do they believe it
Speaker 6: enough to actually take big steps and engage in some
Speaker 6: of the m and a engage in some of the
Speaker 6: hiring plans that they were talking about maybe late last
Speaker 6: year early.
Speaker 9: This really depends on the actual sector obviously, but in
Speaker 9: terms of the general broader community, you're starting to see
Speaker 9: sentiment the soft data start to change for the better.
Speaker 9: Remember when we were all talking about soft data being
Speaker 9: weak and then it was going to filter into the
Speaker 9: hard data.
Speaker 7: Never did.
Speaker 9: Now soft data is coming back. You're seeing in the
Speaker 9: small business segment a little bit because of the rates
Speaker 9: coming down, but a little bit better economy, perhaps an
Speaker 9: adjustment to the neutral rate coming down a little bit.
Speaker 9: As Governor Myron just said, all of that coalesces around
Speaker 9: better optimism. From the corporate side, I would say this though,
Speaker 9: margins are held in there, and that's the key. The
Speaker 9: bottom line is being used on an efficient basis. Some
Speaker 9: productivity is increasing, but when you get a little bit
Speaker 9: above average inflation, that feeds directly to the revenue line
Speaker 9: and you don't have to produce as much to get
Speaker 9: that higher revenue number. So that's why margins have actually
Speaker 9: stayed in there in some cases actually widened out.
Speaker 6: This sounds like a perfect scenario. It sounds like just
Speaker 6: Nirvana investing Nirvana. It's priced as though it's investing Nirvana too.
Speaker 6: Though at what point if we priced all of that
Speaker 6: in a then sum, that leaves it kind of vulnerable
Speaker 6: to anything that doesn't look like what we just got
Speaker 6: from Jovis claims.
Speaker 7: Yeah, at least that's a great point.
Speaker 9: And I think a lot of that is priced in
Speaker 9: in the here too now, but much of it it's
Speaker 9: still not priced in for next year. There's a little
Speaker 9: bit of discounting of what the story I just laid
Speaker 9: out already. Given where the SMP is twenty two twenty
Speaker 9: three times forward, I would say that in this asset
Speaker 9: light world that is driven the index, higher multiples are
Speaker 9: higher because they're still driving higher revenue growth, And if
Speaker 9: you look at the contribution of the tech sector, it's
Speaker 9: about forty four percent or so of the market cap
Speaker 9: of the SMP, but its earnings contribution is in the thirties.
Speaker 7: It's very different than ninety.
Speaker 9: Nine and two thousand, when the earnings contribution was almost
Speaker 9: one half of that peak.
Speaker 6: The investors you speak with, are they more worried about
Speaker 6: some sort of downturn in the economy or are they
Speaker 6: more worried about missing out in the next leg higher.
Speaker 9: You know, they're still worried about the downside scenario. There
Speaker 9: still have that frame of mind of the credit crisis,
Speaker 9: little frame of mind of what happened in August through
Speaker 9: December of twenty eighteen when the Federal Reserve is raising
Speaker 9: rates when inflation was below their target.
Speaker 7: At that point, and then fast forward.
Speaker 9: Into twenty two with the inverted yield curve, and then
Speaker 9: the tariff situation in April. So they still have all
Speaker 9: of this in their mind and they're comfortable still getting
Speaker 9: a decent yield on their cash.
Speaker 7: On the flip side.
Speaker 9: There are some that are very worried about missing the
Speaker 9: next move, particularly as it relates to the infrastructure build
Speaker 9: out of artificial intelligence.
Speaker 7: We believe there's some room to go there.
Speaker 9: We would caution, though, the signs of artificial intelligence and
Speaker 9: infrastructure build out peaking are all about the margin, all
Speaker 9: about the price side of the equation.
Speaker 7: We're not seeing that yet, but we.
Speaker 9: Need to watch that closely to understand what the demand
Speaker 9: for that will be once all of this is built.
Speaker 8: Clients that are concerned about the downside is it because
Speaker 8: they think we're in a bubble.
Speaker 7: They always talk about bubble.
Speaker 9: Number one question I get right now is are we
Speaker 9: in a bubble? Are we four different meetings yesterday?
Speaker 7: Number one question?
Speaker 9: In some cases, in areas that are low quality, that
Speaker 9: don't have any revenues, that are built to sky high valuations,
Speaker 9: you can argue yes.
Speaker 7: In other areas where.
Speaker 9: They're still kicking off very good free cash flow. The
Speaker 9: answers now, so what's your advice. The advice is diversified portfolio.
Speaker 9: I know that sounds like, okay, that's easy, Chris, right,
Speaker 9: we talked, But diversification works when you need it the
Speaker 9: most and you can still participate. So for us, it's
Speaker 9: about having a little bit more non us than you
Speaker 9: would traditionally. Have we heard before about potential weeker dollar
Speaker 9: week of dollars, probably a fading dollar story, not necessarily
Speaker 9: a week or dollar story, given where growth is for
Speaker 9: US relative to the rest of the world and their
Speaker 9: deficits relative to ours. Small caps benefiting from a little
Speaker 9: bit of lower rates on the short end and potentially
Speaker 9: reaccelerating economy mid caps for whatever m and A cycle
Speaker 9: is around the corner. And then on the large cap side,
Speaker 9: I think it's two stories. It's the rest that we
Speaker 9: always talk about that are starting to rotate a little bit,
Speaker 9: you know, a little bit on the value side, those
Speaker 9: areas that were starved for capital, like materials.
Speaker 7: And energy and others.
Speaker 9: We're still overweight financials, We're still overweight industrials, consumer discretionary,
Speaker 9: and utilities. We're trying to make sure that we stay.
Speaker 7: Balanced where we can but participate in the AI growth story.
Speaker 3: This balance main a little bit ago as well.
Speaker 7: Well. It's fortune.
Speaker 9: We don't actually have it in our acid allocation schema overall,
Speaker 9: but yes, gold is showing some incredibly different signs than
Speaker 9: it normally would. Has a negative correlation with treasuries right now,
Speaker 9: which a lot of people aren't talking about.
Speaker 3: And a positive correlation with risk anssets for the ES.
Speaker 7: That's right, and also defensive assets. It's throwing off signs. Again,
Speaker 7: it's not perfect.
Speaker 9: But when you get one of the largest central banks
Speaker 9: in the world recycling their own foreign reserves and Euro
Speaker 9: reserves are not going up, but gold is, that's an
Speaker 9: interesting story.
Speaker 3: Which you think is behind of that is redominant driver
Speaker 3: or just multiple pillars.
Speaker 9: I think it's this regional economic trade zone developments from
Speaker 9: this ultra competitive global world we were in for so
Speaker 9: long as the world look to the US to fund
Speaker 9: their growth. Now with all of that switching, I think
Speaker 9: you're going to have to see some of these central
Speaker 9: banks diversify their reserve.
Speaker 3: Stay with US.
Speaker 2: Multiple IMPEG Savanna's coming up after this, Let's turn to tech.
Speaker 2: Following weeks of massive investment announcements, there are growing rumplings
Speaker 2: of an AI bubble. Ozan Taman of Deutsche Bank struck
Speaker 2: En off concerns, saying those crying the loudest are the
Speaker 2: ones who missed the triade. Osan, join morning and welcome
Speaker 2: to New York.
Speaker 10: Wonderful to be here.
Speaker 3: So is a bubble when you're not in it? Is that?
Speaker 3: The takeaway on this one.
Speaker 10: Definitely there is a little bit of bitterness defensiveness. But
Speaker 10: that being said, maybe for this show. Right the night
Speaker 10: before I held this big Macro dinner, almost thirty c lines, trends,
Speaker 10: somwealth funds, h funds, real money, the question round session,
Speaker 10: questioning the bubble, questioning that close circle, AI to Nimidia
Speaker 10: to Oracle, questioning where we are in the labor cycle.
Speaker 10: But then trade idea session, GOLDMP Gold semple longly so
Speaker 10: even for me as somebody you know, we exchange messages.
Speaker 10: You guys know, it's like being in in the family.
Speaker 10: I do believe in the disparity has been a great
Speaker 10: call since the April nine fear, but to music to
Speaker 10: this has ears a bit. This is a bit too much.
Speaker 10: I sense a bit of a fly.
Speaker 5: In the soup.
Speaker 10: Even today, like they talked up, they talked about how
Speaker 10: do we start again? Read nothing major but red These
Speaker 10: memes flying around on Gold on AI. Don't get me wrong.
Speaker 10: I think when I come back either from London or
Speaker 10: here in December, I think we'll still be talking possibly
Speaker 10: about Gold, about AI, about naz Dak. But fear of
Speaker 10: missing out is turning into a bit of orange seng.
Speaker 2: Can I just put on this a little bit the
Speaker 2: relationship between risk and God, what the traditional relationship typically
Speaker 2: is and why is developed into something else. Why is
Speaker 2: this the long call on both gold and the nasdag
Speaker 2: what's the relationship between the two?
Speaker 4: Now?
Speaker 10: Very good question. It's working on risk on and risk
Speaker 10: of John. So obviously orthodogs at this moment it should
Speaker 10: work because finally they're not exactly going seven mins way,
Speaker 10: but they are cut, so that's going to help cold.
Speaker 10: But before that, because of everything going on in geopolitics Russia, Ukraine,
Speaker 10: center banks feeling much better when they hold their reserves
Speaker 10: in gold, and it got a big trigger besides that,
Speaker 10: as you know, FX at the end of the day
Speaker 10: is storytelling. You need the dollars, but you need the
Speaker 10: other side of the story as well. Even though i'm
Speaker 10: dotsche Bank, I share some of your anxiety on what's
Speaker 10: going on in Europe. On engine of Germany. We can
Speaker 10: go into our deer Island, UK, Japan, China, laggers. So
Speaker 10: where do you go? You don't like the dollars for
Speaker 10: very understandable reasons. Soft dollar is working, but you need somebody,
Speaker 10: some horse that keeps running, and that's gold.
Speaker 6: Well, this sort of goes to the question of what
Speaker 6: can possibly disrupt these trades, and right now the feeling
Speaker 6: is that the only thing that could really disrupt some
Speaker 6: of the long tech trade would be earnings that didn't
Speaker 6: come in more positively. Do you see it the other way?
Speaker 6: The isnt that actually more negativity in the economic growth
Speaker 6: picture has the bigger potential to be that disruptive factor
Speaker 6: to cause three percent to climb?
Speaker 10: I do actually because November nineteen, even if Nvidia is
Speaker 10: so called missus, we can find another good story in
Speaker 10: another earnings. But all of us, you know how these
Speaker 10: markets are narrative, markets are storytelling. Three more days like this,
Speaker 10: Jenatan will start opening or will open the show a
Speaker 10: little bit differently.
Speaker 6: So please tell us how he's going to open the show.
Speaker 10: No, he's going You're going to talk about these Orangstein's
Speaker 10: more and more. Also, one thing that I want to
Speaker 10: keep in the radar because Macro, we need to talk
Speaker 10: about races as well. Spreme Court, these terrors talking about
Speaker 10: narratives all the way from January to April. Terrace was
Speaker 10: the bad guy or you know he's going to do
Speaker 10: this that lightizer nineteen thirties, and because of that, Ty
Speaker 10: was going to go to five percent, Euros going to
Speaker 10: zero point ninety five all of a sudden, Now terrors
Speaker 10: are the good guys. Maybe he was right on certain
Speaker 10: things reveny, big revenue generation. On Twitter, my dear friend
Speaker 10: towardson Slow talking about might research is talking about it.
Speaker 10: So if Supreme Court blocks, that's off the left field.
Speaker 10: I know, and Mary will say maybe three oh one,
Speaker 10: they have their plan bis et cetera. But that's going
Speaker 10: to take four to five months, and that can finally
Speaker 10: move the long end.
Speaker 6: I love how we don't even have to ask the question,
Speaker 6: so I.
Speaker 3: Already knows exactly which I love.
Speaker 1: It's fantastic, champion, Okay, fantastic.
Speaker 6: I will just say though, that this is one reason
Speaker 6: why people keep buying big tech, and even though they're
Speaker 6: worried about valuations, that's the one area of growth that's
Speaker 6: kind of empowered really the US economy out of potentially
Speaker 6: what could have been a recession otherwise. Isn't that the
Speaker 6: only clean trade right now? Given all the hair on
Speaker 6: the narratives that you're talking about.
Speaker 10: Agreed with gold Aside. Gold as well works on risk,
Speaker 10: on risk golf. That's why I even look. I'm a
Speaker 10: macro guy even if we have a and I pull
Speaker 10: people and they all go for higher the lower end
Speaker 10: of that was three percent. If we get for this
Speaker 10: or that isn't three percent quaration on SMP, my Binkie
Speaker 10: will probably come out on the show and say buy
Speaker 10: the dip. As important as Binky retail who want this
Speaker 10: day or another beat the professionals since April nine, that
Speaker 10: big panic day on buying those dips, will continue to
Speaker 10: believe so that even my scenario Supreme Court stopping the tariffs, etcetera,
Speaker 10: we need something else. We need more deep sick moments.
Speaker 10: We need to question all this closed circle between open
Speaker 10: eyes and oracles and naividia. I'm not sure we're there.
Speaker 10: Maybe two three percent correction, but doomsday I don't see.
Speaker 8: But the Supreme Court stopping the terriffs, won't there be
Speaker 8: bolish for equities.
Speaker 5: I hear you.
Speaker 10: At the end of the day, they will say, look,
Speaker 10: then they'll have to do more physically, even more fiscal loosening.
Speaker 10: The equities may find a way to see that as
Speaker 10: glass helpful as well. That risk would be the bigger
Speaker 10: trigger for the long ends. We came into summer end
Speaker 10: of summer waiting for these famous transforments everywhere, UK fans, Japan,
Speaker 10: of course US, big beautiful bill. It happened for four
Speaker 10: hours on September two, led by my eye. And then
Speaker 10: look what the long ends are doing now? So steep
Speaker 10: in their crowds. Do you hear them now? Much more
Speaker 10: quiet on these studios, on the macrod in the roundtables.
Speaker 10: Maybe they're waiting for something new and that can be
Speaker 10: that can be their catalysts in US.
Speaker 8: When you have these dinners and you're talking to investors,
Speaker 8: as you say, real money, are they concerned about what
Speaker 8: we're seeing out of the US government and taking stakes?
Speaker 8: And then basically companies may be wanting to have a
Speaker 8: better reputation with this administration considering even investing in those
Speaker 8: companies the US government cares about.
Speaker 10: Very good question I can be to hear you Intel
Speaker 10: Apple right, they do so because of that, maybe we
Speaker 10: have a world in which Namedia's keep rising, but though
Speaker 10: it also keeps eroding a litive its so in that sense,
Speaker 10: it's not exactly attached Reagan world, is it? So? For
Speaker 10: many different reasons, this institutional decay difference approach to us
Speaker 10: seeing more how do I put it? Hung Turkey, Argentina,
Speaker 10: like developments in Tragity Center Bank working to get together in.
Speaker 7: Our USA as well.
Speaker 10: That makes people hedge more. The important age Issios my
Speaker 10: partner and success George Rados, I think a very important piece.
Speaker 10: Everybody was questioning, Okay Ozan, you guys are saying sell
Speaker 10: the dollar, but you know, if Nimidia, Microsoft Meta keeps
Speaker 10: going higher, that has to help the King Kong dollars. Well, no,
Speaker 10: if they are hedging. What if they're heging when they
Speaker 10: buy their NI media, Maybe we can have this equivalrium
Speaker 10: in which dollar remains soft and ny Media continues to
Speaker 10: go higher.
Speaker 2: As and just to find a question, what's the difference
Speaker 2: between appatcient to take risks right now? Comparing the investors
Speaker 2: you've dined with this week in New York to what
Speaker 2: you've experienced on a weekly basis in London.
Speaker 10: Beautiful question much more US centered doesn't care that much
Speaker 10: about you know, France, very is Germany when that stimulus coming,
Speaker 10: et cetera. I would say it's still almost sucked into
Speaker 10: the equity and credit trade. Look at Oracle yesterday, three
Speaker 10: three basis one conversation.
Speaker 7: That's it.
Speaker 10: So whether they like it or not, they almost get
Speaker 10: sucked into the whether I give it Udan signs or not,
Speaker 10: into equity and credits much more quiet many on the
Speaker 10: rates and FAX. Unfortunately I'm macro guy. I need to
Speaker 10: talk about woltilty. But the three at the moment is
Speaker 10: Waltioty is on its is on its needes and they
Speaker 10: need we need some supplace. Otherwise FX and rate three
Speaker 10: that's contune to sell those cells.
Speaker 3: Stay with us. More Bloomberg surveillance coming up after this.
Speaker 2: The Treasury Secretary scale best and reaffirming America's commitments supporting
Speaker 2: Argentine President Javi A. Melee, praising his tireless efforts to
Speaker 2: make urgency in a great again at a gala in
Speaker 2: New York. Joining us now to extend the conversation, Haidi
Speaker 2: creeper Redica of the Council on Formulations, highly welcome back
Speaker 2: to the program. Just want to build on some of
Speaker 2: the thoughts of scorn Bess and the Treasury Secretary who
Speaker 2: talked about supporting the economic reforms of Argentina. Can we
Speaker 2: talk about the regional politics why the reforms of Argentina
Speaker 2: is so important to this White House.
Speaker 1: So I think that Malay has really made some tremendous
Speaker 1: progress with an economy that has been a chronic defaulter
Speaker 1: and has had had suffered with huge problems over many decades.
Speaker 1: So he's brought inflation down beyond where anybody really could
Speaker 1: have expected and stabilized the currency. So I think everybody
Speaker 1: was really hoping that the reforms would actually take but
Speaker 1: Malay lost lost support in a regional election recently, and
Speaker 1: there's an upcoming election on the twenty sixth of October
Speaker 1: where if Malay loses support in this nationwide midterm, then
Speaker 1: you'll have a very difficult time pushing his reforms forward.
Speaker 1: And the markets know that, and so he's faced a
Speaker 1: lot of instability in the past. In the past several
Speaker 1: days last week they ran through about a billion plus
Speaker 1: of their reserves just defending the currency. And so I
Speaker 1: think really the ambition is for this White House to
Speaker 1: step in between now and October twenty sixth, give the
Speaker 1: markets short term stability whatever it takes moment and put
Speaker 1: the devil is really in the details with the use
Speaker 1: of the Exchange Stabilization Fund, because that's actually tricky. It's
Speaker 1: tricky in any circumstance, but Argentina is a very unique circumstance.
Speaker 8: Well, Also, I sat down with the Treasury Secretary in
Speaker 8: Argentina in April when he was there to meet Mille,
Speaker 8: and this wasn't on the table then. And when the
Speaker 8: treasure Secretary talks about it being negotiated, the Treasury can't
Speaker 8: give a swap line on the federal reserve could And
Speaker 8: if it is going to be alone, then Argentina's Congress
Speaker 8: needs to vote on it.
Speaker 1: So what exactly is the US willing to do so,
Speaker 1: I mean that's the big question. And as you rightly
Speaker 1: point out, the FED gives swap lines, the Treasury does not,
Speaker 1: in it does not use the Exchange Stabilization Fund for
Speaker 1: that purpose. There are conversations if you do use that
Speaker 1: twenty billion ish of liquid assets that are that are
Speaker 1: within the ESF, then you know, the US government has
Speaker 1: a process to basically price the risk of the use
Speaker 1: of those funds.
Speaker 7: And that's a conversation.
Speaker 1: This is a little in the weeds, but that's a
Speaker 1: conversation with omb how do you price this risk? And
Speaker 1: are we going to put this on the table for
Speaker 1: Argentina And how are we actually going to do that?
Speaker 7: Are we going to make the same bed?
Speaker 1: I mean, this echoes you know, what Trump Trump one
Speaker 1: did in supporting a massive IMF program for Argentina back
Speaker 1: in twenty eighteen and the imflint fifty billion to Argentina
Speaker 1: and took a big political risk and sort of lost
Speaker 1: that risk. And so the question is if we do this,
Speaker 1: how do we structure to protect taxpayers? How do we
Speaker 1: do it in a way that is useful for Argentina
Speaker 1: without putting taxpayer taxpayer funds on the line that it
Speaker 1: might lose, and you know, and and and really at
Speaker 1: the end of the day, how can we do this?
Speaker 1: The swap line, I think is just terminology to make
Speaker 1: it simple for the you know, for the headline, but
Speaker 1: this is actually a very complicated financial engineering exercise that's
Speaker 1: going on.
Speaker 8: Well, China has a swap line with Argentina. Is this
Speaker 8: also the US maybe countering China in South America?
Speaker 7: Absolutely?
Speaker 1: I mean that's part of it. Not only is this
Speaker 1: relationship that I think is is real and substantial between
Speaker 1: the Trump administration and Malay, but China has an eighteen
Speaker 1: billion R and B swap line and it's and it
Speaker 1: could be you know, this, this could be wound down.
Speaker 1: I don't think that they that China. I think that
Speaker 1: the US would really like to see itself be the
Speaker 1: dominant player in providing any kind of of support that
Speaker 1: Argentina needs. Argentina also is very resource rich, and I
Speaker 1: think you know this would be this would be a
Speaker 1: strategic play as well for the US in a very
Speaker 1: strategic part of the world, Latin America, where it was
Speaker 1: pointed out we don't have a lot of great relationships.
Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best
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