1
00:00:05,120 --> 00:00:09,200
Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along

2
00:00:09,200 --> 00:00:13,039
Speaker 1: with Jonathan Ferrell and Lisa A. Brawnowitz Jaily, we bring

3
00:00:13,119 --> 00:00:17,159
Speaker 1: you insight from the best and economics, finance, investment, and

4
00:00:17,239 --> 00:00:23,320
Speaker 1: international relations. Find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg

5
00:00:23,360 --> 00:00:29,760
Speaker 1: dot Com, and of course on the Bloomberg terminal. Joining

6
00:00:29,800 --> 00:00:32,320
Speaker 1: us now, nobody better to speak about what we saw

7
00:00:32,400 --> 00:00:35,879
Speaker 1: over the United Kingdom as well as the potential agony

8
00:00:36,000 --> 00:00:38,920
Speaker 1: over lag effects how to understand them? John Writing, Chief

9
00:00:38,960 --> 00:00:42,000
Speaker 1: Economic Advisor Breen Capital, former economic advisor to the Bank

10
00:00:42,000 --> 00:00:44,760
Speaker 1: of England. On this Thursday, John, when you take a

11
00:00:44,800 --> 00:00:47,480
Speaker 1: look at some of this data which isn't softening quickly enough,

12
00:00:47,520 --> 00:00:50,479
Speaker 1: and you hear the hardline talk from the Federal Reserve,

13
00:00:50,880 --> 00:00:53,600
Speaker 1: what's your sense about how far behind we are in

14
00:00:53,680 --> 00:00:58,280
Speaker 1: terms of lag effects and when we'll actually see the ramifications. Well, Lisa,

15
00:00:58,360 --> 00:01:01,920
Speaker 1: as you know, we had any discussions last year where

16
00:01:01,960 --> 00:01:04,959
Speaker 1: I said that inflation was not transitory, was going to

17
00:01:05,040 --> 00:01:07,440
Speaker 1: be a real problem, you know, and and it still

18
00:01:07,560 --> 00:01:10,360
Speaker 1: is and I mean interestingly enough in the numbers that

19
00:01:10,360 --> 00:01:13,360
Speaker 1: that micro went over Um, you know, he didn't mention

20
00:01:13,400 --> 00:01:17,200
Speaker 1: the prices paid prices received data by manufacturing firms in

21
00:01:17,240 --> 00:01:19,400
Speaker 1: the Philadelphia region, which like in the New York region,

22
00:01:19,440 --> 00:01:24,399
Speaker 1: went up to thirty four and change from from from

23
00:01:24,400 --> 00:01:29,800
Speaker 1: about thirty one. So we're far from having defeated inflation

24
00:01:29,880 --> 00:01:31,800
Speaker 1: at this point. And I would also take a little

25
00:01:31,800 --> 00:01:33,959
Speaker 1: bit of issue on the rent story for two reasons,

26
00:01:34,480 --> 00:01:37,920
Speaker 1: um one of which his rents in the CPI are

27
00:01:38,080 --> 00:01:41,119
Speaker 1: rising roughly in line with the overall CPI, so they're

28
00:01:41,319 --> 00:01:45,200
Speaker 1: they're neither adding nor subtracting to the overall rate of inflation,

29
00:01:45,240 --> 00:01:48,840
Speaker 1: where people you know, paying for housing, paying for food,

30
00:01:49,080 --> 00:01:53,800
Speaker 1: paying for energy are really important in forming people's inflation expectations.

31
00:01:54,120 --> 00:01:58,360
Speaker 1: So the fact that new rents are declining when people

32
00:01:58,400 --> 00:02:01,440
Speaker 1: are paying the higher level of existing rents, I don't

33
00:02:01,440 --> 00:02:04,400
Speaker 1: think it's inappropriate. But but this idea that we always

34
00:02:04,400 --> 00:02:06,720
Speaker 1: take out the bit sort of pushing up inflation and

35
00:02:06,760 --> 00:02:10,200
Speaker 1: look at inflation excluding that, you know, I I find

36
00:02:10,200 --> 00:02:14,160
Speaker 1: a you know, a bit problematic because it never policymakers

37
00:02:14,160 --> 00:02:16,240
Speaker 1: never do it the other way. Okay, this is really

38
00:02:16,280 --> 00:02:18,320
Speaker 1: important because there are all these people coming out there

39
00:02:18,320 --> 00:02:20,120
Speaker 1: and this is the biggest pushback and the reason why

40
00:02:20,160 --> 00:02:24,000
Speaker 1: we've gotten lifts in markets. People say they're disinflationary elements.

41
00:02:24,080 --> 00:02:25,959
Speaker 1: And you pointed to the rent story, you point to

42
00:02:25,960 --> 00:02:28,440
Speaker 1: the used cars. You push back, and you say that

43
00:02:28,440 --> 00:02:31,680
Speaker 1: those are completely offset and then some by the other indicators.

44
00:02:31,680 --> 00:02:34,280
Speaker 1: Is that right? Well, well, yes, I mean that we've

45
00:02:34,320 --> 00:02:37,840
Speaker 1: had and I actually think FED policymakers are somewhat on

46
00:02:37,919 --> 00:02:41,560
Speaker 1: top of this. We've had three times this year, three

47
00:02:41,600 --> 00:02:43,880
Speaker 1: months of the ten months which I've had CPI data

48
00:02:44,160 --> 00:02:47,240
Speaker 1: were the so called core excluding food and energy only

49
00:02:47,280 --> 00:02:49,560
Speaker 1: went up by three tents of percent, and it was

50
00:02:49,600 --> 00:02:54,079
Speaker 1: then followed by inflation um picking up again. So yes,

51
00:02:54,200 --> 00:02:57,799
Speaker 1: one one report where you got an odd treatment from

52
00:02:57,800 --> 00:03:00,640
Speaker 1: healthcare costs, healthy insurance costs fell four percent on the

53
00:03:00,639 --> 00:03:03,440
Speaker 1: CPI that I'd love to have that health insurance policy.

54
00:03:03,520 --> 00:03:05,560
Speaker 1: And I'm sure most people either would love to have that,

55
00:03:05,560 --> 00:03:08,280
Speaker 1: But I don't think anybody's health insurance costs fell by

56
00:03:08,360 --> 00:03:12,040
Speaker 1: four percent. But but my point is inflation is the

57
00:03:12,160 --> 00:03:15,000
Speaker 1: overall price in X, and you can pick and and

58
00:03:15,080 --> 00:03:17,360
Speaker 1: choose and take this number and and tay that number.

59
00:03:17,600 --> 00:03:22,280
Speaker 1: But the reality is inflation, both here and globally is

60
00:03:22,320 --> 00:03:26,000
Speaker 1: a problem, and central banks have created or at least

61
00:03:26,040 --> 00:03:29,520
Speaker 1: made the problem worse by staying too easy for too

62
00:03:29,560 --> 00:03:33,400
Speaker 1: long after the pandemic, and that liquidity and and that

63
00:03:33,440 --> 00:03:38,560
Speaker 1: does that stimulus has to be soaked up now, just

64
00:03:38,600 --> 00:03:41,120
Speaker 1: for a second time, if I may, There is a

65
00:03:41,120 --> 00:03:45,240
Speaker 1: communication issue going on at the FED, a further change

66
00:03:45,280 --> 00:03:48,880
Speaker 1: in communications. Say, look, there's three things about policy. How

67
00:03:48,920 --> 00:03:50,600
Speaker 1: fast are we're going to raise rates? And it's clearly

68
00:03:50,640 --> 00:03:53,240
Speaker 1: signal they're going to slow the pace of increases, and

69
00:03:53,280 --> 00:03:57,040
Speaker 1: the market's got that story right. Then how high are

70
00:03:57,080 --> 00:03:59,920
Speaker 1: we going to raise rates? Too? And then how long

71
00:04:00,120 --> 00:04:01,360
Speaker 1: we're going to keep in there? And I think the

72
00:04:01,400 --> 00:04:04,520
Speaker 1: market's got the how fast right. It's slowed, but I

73
00:04:04,560 --> 00:04:08,040
Speaker 1: still think we're offside on how high and how long

74
00:04:08,120 --> 00:04:10,640
Speaker 1: rates are going to stay the mark markets are pricing

75
00:04:10,640 --> 00:04:13,600
Speaker 1: and barely reaching five percent on the FED funds right,

76
00:04:13,680 --> 00:04:17,400
Speaker 1: and then the FED quickly cutting rights thereafter. I'm amazed

77
00:04:17,400 --> 00:04:20,680
Speaker 1: by that conversation, absolutely, I totally agree. I'm amazed by

78
00:04:20,680 --> 00:04:22,960
Speaker 1: the certitude that they're going to do a pivot or

79
00:04:23,000 --> 00:04:25,480
Speaker 1: whatever you want to call it. This is an historic day.

80
00:04:25,520 --> 00:04:28,120
Speaker 1: The chance of the Exchecquers stood up and said we

81
00:04:28,200 --> 00:04:34,400
Speaker 1: have austerity. You and I read Paul Johnson The English Disease.

82
00:04:34,920 --> 00:04:38,400
Speaker 1: It was a beautiful essay about the struggles of Clement

83
00:04:38,400 --> 00:04:41,200
Speaker 1: Aale Churchill and the rest coming forward. What is the

84
00:04:41,320 --> 00:04:45,120
Speaker 1: level of crisis in your United Kingdom right now? Is

85
00:04:45,160 --> 00:04:48,200
Speaker 1: it something that's solvable, Is it a two year recession

86
00:04:48,240 --> 00:04:50,719
Speaker 1: as Bailey talks about, or is it in the English

87
00:04:50,760 --> 00:04:54,880
Speaker 1: disease that is larger. I think that's a very um

88
00:04:55,160 --> 00:05:00,280
Speaker 1: difficult question to answer. I think that the fine is

89
00:05:00,320 --> 00:05:03,880
Speaker 1: the economy perspectively going forward are in better shape now

90
00:05:04,320 --> 00:05:09,000
Speaker 1: than they were prospectively with the um budget, the mini

91
00:05:09,000 --> 00:05:12,599
Speaker 1: budget that's put forward in September that helped spark the

92
00:05:12,640 --> 00:05:18,320
Speaker 1: whole crisis in the guilt's market. But uh, the UK

93
00:05:18,440 --> 00:05:23,640
Speaker 1: is still struggling with Brexit and struggling with a lot

94
00:05:23,680 --> 00:05:26,800
Speaker 1: of struggling with inflation issues, and the Bank of England

95
00:05:26,839 --> 00:05:31,080
Speaker 1: I don't think has raised rates quickly enough or early

96
00:05:31,360 --> 00:05:33,600
Speaker 1: enough to to get on top of that. But now

97
00:05:33,640 --> 00:05:35,360
Speaker 1: we're faced with this very interesting question. I think the

98
00:05:35,400 --> 00:05:40,599
Speaker 1: US maybe face can policymakers raise rates enough titan policy

99
00:05:40,880 --> 00:05:48,160
Speaker 1: enough to get inflation under control without sparking a significant

100
00:05:48,440 --> 00:05:51,640
Speaker 1: Philip curs operative right now in the financial stability John

101
00:05:51,680 --> 00:05:55,120
Speaker 1: Williams talked about yesterday, Are these traditional theories operative right

102
00:05:55,120 --> 00:05:57,960
Speaker 1: now why I think that Philip's curve hasn't been operative

103
00:05:58,000 --> 00:06:01,360
Speaker 1: since the late nineties, and I think it is very

104
00:06:01,520 --> 00:06:03,760
Speaker 1: I knew what the writing. It is very interesting that

105
00:06:05,480 --> 00:06:08,160
Speaker 1: very interesting that that the very flat Phillips curve, that

106
00:06:08,200 --> 00:06:11,760
Speaker 1: policy we can keep pushing and employment down without raising

107
00:06:11,800 --> 00:06:16,479
Speaker 1: inflation comes back as something that's going to cure the

108
00:06:16,560 --> 00:06:20,320
Speaker 1: inflation problem. And the main thing about inflation is expectations

109
00:06:20,440 --> 00:06:26,960
Speaker 1: and having people and companies understand that higher inflation isn't

110
00:06:27,000 --> 00:06:28,440
Speaker 1: going to be a lad. And what we have in

111
00:06:28,680 --> 00:06:31,440
Speaker 1: for example, in this Philadelphia Fed report here we saw

112
00:06:31,480 --> 00:06:35,880
Speaker 1: it earlier is company cost increases slowing, but the price

113
00:06:35,920 --> 00:06:39,240
Speaker 1: increases not slowly. Now, yes, the October numbers were a

114
00:06:39,240 --> 00:06:42,440
Speaker 1: little bit encouraging, probably most in the p p I,

115
00:06:43,080 --> 00:06:47,000
Speaker 1: but there's a big difference between information having peakedalse we

116
00:06:47,040 --> 00:06:48,640
Speaker 1: never thought we were going to get to and getting

117
00:06:48,640 --> 00:06:51,920
Speaker 1: back to price stability quickly. John from a Christmas Tree

118
00:06:51,960 --> 00:06:55,520
Speaker 1: farm North says, ask him about England US and the

119
00:06:55,560 --> 00:07:01,000
Speaker 1: World Cup a Nemesis team. We lost nothing to the

120
00:07:01,080 --> 00:07:04,120
Speaker 1: US in nine and the first World Cup England plate

121
00:07:04,240 --> 00:07:07,719
Speaker 1: in uh and then back in two thousand ten we

122
00:07:07,720 --> 00:07:11,680
Speaker 1: we tied one one um day after Thanksgiving. It's gonna

123
00:07:11,760 --> 00:07:14,960
Speaker 1: be a great time, and I'm going with England. Obviously,

124
00:07:15,120 --> 00:07:22,520
Speaker 1: I'm shocked John writing, thank you, Souch, thank you right now.

125
00:07:22,640 --> 00:07:24,760
Speaker 1: We are thrilled and honored to bring you for Global

126
00:07:24,800 --> 00:07:27,400
Speaker 1: Wall Street. Ian Lincoln, he's out of US rate strategy

127
00:07:27,800 --> 00:07:30,520
Speaker 1: at BEMO Capital Markets. I caught up Jersey and I said,

128
00:07:30,640 --> 00:07:32,840
Speaker 1: I'm only talking to people today that have read Fred

129
00:07:32,960 --> 00:07:36,360
Speaker 1: Frank Fobozi cover to cover in the bond world, folks

130
00:07:36,880 --> 00:07:41,040
Speaker 1: like Lincoln's world. You have a Frank Frank Fabozi textbook

131
00:07:41,520 --> 00:07:45,640
Speaker 1: of some nine hundred pages that prices are hardcovered at

132
00:07:45,720 --> 00:07:48,440
Speaker 1: two dollars, and only Lincoln has read the thing cover

133
00:07:48,520 --> 00:07:51,840
Speaker 1: to cover? Is well, is this curbing version in Frank

134
00:07:51,920 --> 00:07:56,280
Speaker 1: Farbozi's classic text. Frank Farbosi was not looking for a

135
00:07:56,360 --> 00:07:59,320
Speaker 1: curve in version of this depth. I think more importantly

136
00:07:59,720 --> 00:08:02,360
Speaker 1: what Frank would have said is that this is a

137
00:08:02,400 --> 00:08:06,160
Speaker 1: mispricing that needs to be rectified. In the short order.

138
00:08:06,520 --> 00:08:08,560
Speaker 1: We are taking the other side of that trade. We

139
00:08:08,640 --> 00:08:11,240
Speaker 1: think that there's more inversion to be realized. And the

140
00:08:11,280 --> 00:08:16,360
Speaker 1: most important inversion inverted curve is fed funds versus ten

141
00:08:16,440 --> 00:08:19,120
Speaker 1: year yields, not just twos versus ten. So if you're

142
00:08:19,160 --> 00:08:21,840
Speaker 1: doing from the vanilla spread of two year tenure out

143
00:08:21,840 --> 00:08:23,760
Speaker 1: of the many different spreads you look at, and you're

144
00:08:23,800 --> 00:08:27,320
Speaker 1: going from very short term out to ten the dynamic

145
00:08:27,480 --> 00:08:31,200
Speaker 1: of two different yields moving around, which pros are encyclopedic,

146
00:08:31,200 --> 00:08:34,240
Speaker 1: gun and frankly, our audience is like, say, what is

147
00:08:34,240 --> 00:08:37,520
Speaker 1: it about focusing on the ten year dynamic or the

148
00:08:37,640 --> 00:08:40,160
Speaker 1: two year or the Fed funds dynamic? Which is more

149
00:08:40,200 --> 00:08:44,560
Speaker 1: important at this stage? I would say that the two

150
00:08:44,640 --> 00:08:48,680
Speaker 1: year yield reflects monetary policy expectations in the very short term,

151
00:08:49,080 --> 00:08:51,559
Speaker 1: but the ten in thirty year rates, that's the market

152
00:08:51,640 --> 00:08:54,559
Speaker 1: simply moving on to what's next. And what's next is

153
00:08:54,559 --> 00:08:57,800
Speaker 1: going to be a pretty significant economic slowdown. So the

154
00:08:57,840 --> 00:09:00,560
Speaker 1: inversion is simply a tale of two different curves. More

155
00:09:00,600 --> 00:09:03,280
Speaker 1: than anything else, the yield curve contraction right now presents

156
00:09:03,280 --> 00:09:05,840
Speaker 1: a huge challenge for the Federal Reserve, massive because what

157
00:09:05,840 --> 00:09:08,440
Speaker 1: you're seeing is the more they lean into hawkish talk,

158
00:09:08,600 --> 00:09:12,920
Speaker 1: the more people buy longer term treasuries, which ease financial conditions.

159
00:09:13,000 --> 00:09:16,160
Speaker 1: It is this really difficult situation, a paradox for the

160
00:09:16,160 --> 00:09:18,840
Speaker 1: Federal Reserve. At what point do they break something? At

161
00:09:18,880 --> 00:09:20,880
Speaker 1: what point do they have to break something with rate

162
00:09:20,960 --> 00:09:23,240
Speaker 1: hikes in order to get the market to say, even

163
00:09:23,280 --> 00:09:25,120
Speaker 1: if you have lower rates, it is not good for

164
00:09:25,240 --> 00:09:28,760
Speaker 1: risk assets. I think that ultimately what ends up happening

165
00:09:29,040 --> 00:09:32,440
Speaker 1: is the FEDS watching real rates as much as anything else.

166
00:09:32,559 --> 00:09:35,960
Speaker 1: Real rates remain elevated by the standard of the last

167
00:09:36,240 --> 00:09:39,320
Speaker 1: decade or so, and eventually we're going to see a

168
00:09:39,400 --> 00:09:43,120
Speaker 1: more significant pullback in risk assets and equities. I've personally

169
00:09:43,120 --> 00:09:46,720
Speaker 1: been surprised that the SMP of five roughly off of

170
00:09:46,720 --> 00:09:50,520
Speaker 1: the lows. That also contributes to easier financial conditions. So

171
00:09:50,559 --> 00:09:53,480
Speaker 1: the more quickly the market is willing to price in

172
00:09:53,520 --> 00:09:56,320
Speaker 1: a pivot, the more the Fed will ultimately need to do.

173
00:09:56,400 --> 00:09:58,680
Speaker 1: At least you see that in the Bloomberg Financials conditions

174
00:09:58,679 --> 00:10:01,160
Speaker 1: in next, which was one stay the deviation now and

175
00:10:01,200 --> 00:10:04,920
Speaker 1: has rallied back more accommodative to negative point eight two

176
00:10:05,040 --> 00:10:08,200
Speaker 1: standard deviation. So this really raises an issue, especially as

177
00:10:08,200 --> 00:10:10,360
Speaker 1: you hear John Williams basically saying if we break something,

178
00:10:10,400 --> 00:10:12,079
Speaker 1: we're going to keep rates where they are. We're not

179
00:10:12,120 --> 00:10:15,120
Speaker 1: going to lower rates, and then people in the market say,

180
00:10:15,160 --> 00:10:17,280
Speaker 1: are you. We don't really believe it, So how do

181
00:10:17,320 --> 00:10:20,520
Speaker 1: you view this? Right in terms of if something breaks,

182
00:10:20,520 --> 00:10:22,760
Speaker 1: what does that even mean for the FED to get

183
00:10:22,800 --> 00:10:26,200
Speaker 1: some sort of response? Is the market right? So I

184
00:10:26,240 --> 00:10:29,240
Speaker 1: think that there's an argument that the FED is going

185
00:10:29,280 --> 00:10:31,680
Speaker 1: to break something and allow it to be broken for

186
00:10:31,800 --> 00:10:34,720
Speaker 1: longer than it has in prior cycles. So is that

187
00:10:34,760 --> 00:10:39,880
Speaker 1: the SMP five down from here? Maybe it's not down fifty.

188
00:10:39,920 --> 00:10:42,280
Speaker 1: If stocks are off, the FED is going to need

189
00:10:42,320 --> 00:10:45,320
Speaker 1: to respond in one way, shape or form. What I

190
00:10:45,440 --> 00:10:47,959
Speaker 1: think is more interesting when we look at what's being

191
00:10:48,000 --> 00:10:50,600
Speaker 1: priced in in the market. There there's an argument there's

192
00:10:50,600 --> 00:10:52,960
Speaker 1: fifty basis points of rate cuts priced in for two

193
00:10:52,960 --> 00:10:55,559
Speaker 1: thousand and twenty three. Essentially, that's what we're looking at

194
00:10:55,920 --> 00:11:01,839
Speaker 1: that it's either a confidence of fifty or confidence of two.

195
00:11:02,320 --> 00:11:04,160
Speaker 1: But what does it mean for something to break? What

196
00:11:04,240 --> 00:11:06,320
Speaker 1: are you looking for to break that would even cause

197
00:11:06,360 --> 00:11:10,040
Speaker 1: a FED response? So a stronger dollar leads to emerging

198
00:11:10,080 --> 00:11:13,280
Speaker 1: markets understrain defending their currencies. That could be a contagious

199
00:11:13,280 --> 00:11:16,120
Speaker 1: issue that's very much top of mind. But this cycle,

200
00:11:16,200 --> 00:11:18,520
Speaker 1: I expect that what will ultimately break is going to

201
00:11:18,559 --> 00:11:19,920
Speaker 1: be in the real economy. It will be on the

202
00:11:19,920 --> 00:11:21,960
Speaker 1: household level, and it will be spending, and we'll be

203
00:11:22,000 --> 00:11:25,640
Speaker 1: faced with a traditional economic slowdown that the FED is

204
00:11:25,800 --> 00:11:29,160
Speaker 1: content to allow play out for a while. Fourteen questions.

205
00:11:29,240 --> 00:11:31,040
Speaker 1: Let me go to the Chance of the Exchequer, who

206
00:11:31,040 --> 00:11:33,559
Speaker 1: opened his autumn statement today saying so much was the

207
00:11:33,600 --> 00:11:39,520
Speaker 1: international ramifications upon his beleaguered United Kingdom? Is our curve

208
00:11:39,559 --> 00:11:43,160
Speaker 1: and version a symbol of a FED misguided that is

209
00:11:43,280 --> 00:11:48,240
Speaker 1: redounding upon other nations, including Britain. I think that the

210
00:11:48,280 --> 00:11:52,400
Speaker 1: issues facing external markets are in part a function of

211
00:11:52,400 --> 00:11:56,040
Speaker 1: the fact that the FED has pushed back against becoming

212
00:11:56,040 --> 00:11:58,280
Speaker 1: the de facto central bank to the world and has

213
00:11:58,320 --> 00:12:02,079
Speaker 1: been focused primarily in the US, and that has come

214
00:12:02,120 --> 00:12:04,439
Speaker 1: at the expense of other economies. What does this inversion

215
00:12:04,520 --> 00:12:08,040
Speaker 1: mean for our banks and the financial stability? John Williams

216
00:12:08,040 --> 00:12:11,360
Speaker 1: wanted to ignore yesterday. What's it mean for JP Morgan,

217
00:12:11,400 --> 00:12:15,080
Speaker 1: Bank of America, the super regionals and smaller banks out

218
00:12:15,120 --> 00:12:19,280
Speaker 1: there doing business with business? So traditionally an inverted yield

219
00:12:19,280 --> 00:12:23,080
Speaker 1: curve is bad for the financial sector because a steep

220
00:12:23,080 --> 00:12:26,920
Speaker 1: curve imp implies the ability to create money via carry.

221
00:12:27,000 --> 00:12:30,560
Speaker 1: The reality is that higher rates are generally better for

222
00:12:30,840 --> 00:12:32,800
Speaker 1: banks than lower rates, and so if we are generally

223
00:12:32,800 --> 00:12:34,960
Speaker 1: in a higher rate environment, I think that we'll find

224
00:12:34,960 --> 00:12:37,800
Speaker 1: the financial sector not responding the way it typically has

225
00:12:37,840 --> 00:12:39,640
Speaker 1: to an inverted yield cre what do you what are

226
00:12:39,640 --> 00:12:41,720
Speaker 1: you gonna do here? What's this change in strategy for

227
00:12:41,760 --> 00:12:44,760
Speaker 1: the next week or so? I think that the market

228
00:12:44,920 --> 00:12:48,320
Speaker 1: is getting poised for a breakout even more inverted. From here.

229
00:12:48,480 --> 00:12:54,640
Speaker 1: We're looking to types of negative seventy five basis points

230
00:12:54,640 --> 00:12:56,559
Speaker 1: in two stands path at least resist. So we're on

231
00:12:56,600 --> 00:13:00,640
Speaker 1: the edge of vocre inversion, run of edge of seventy universion.

232
00:13:01,160 --> 00:13:02,960
Speaker 1: I would say we could get as deep as a

233
00:13:03,080 --> 00:13:04,959
Speaker 1: negative hundred basis points by the end of the year.

234
00:13:05,040 --> 00:13:07,920
Speaker 1: What does that do to our listeners and viewers? This is, folks,

235
00:13:08,600 --> 00:13:11,680
Speaker 1: five years I've never heard this. What does it do

236
00:13:11,840 --> 00:13:15,720
Speaker 1: to us? I think that it really leaves us in

237
00:13:16,000 --> 00:13:19,640
Speaker 1: a anxious position where we don't know how far the

238
00:13:19,640 --> 00:13:21,720
Speaker 1: FED is ultimately going to need to push things because

239
00:13:21,720 --> 00:13:24,839
Speaker 1: it will be coming out with even more hawkish rhetoric, because,

240
00:13:24,840 --> 00:13:27,560
Speaker 1: as Lisa points out, the word that will lead to

241
00:13:27,840 --> 00:13:31,800
Speaker 1: a lessoning of financially or using the financial conditions. Did

242
00:13:31,840 --> 00:13:34,280
Speaker 1: he just say there's going to be extra special more

243
00:13:34,559 --> 00:13:37,199
Speaker 1: FED speak. The FED reality show and this is what

244
00:13:37,320 --> 00:13:39,640
Speaker 1: people are watching and we all cling to every word

245
00:13:39,679 --> 00:13:41,720
Speaker 1: as much as we want to say, does it really

246
00:13:41,720 --> 00:13:44,440
Speaker 1: matter if they keep talking? Well, yeah, actually markets move

247
00:13:44,520 --> 00:13:46,760
Speaker 1: up every time they do. Our esteem team that puts

248
00:13:46,760 --> 00:13:49,280
Speaker 1: a show together every day called up being Lingen today

249
00:13:49,360 --> 00:13:51,920
Speaker 1: and begged thank you so much for coming in, thanks

250
00:13:51,920 --> 00:14:05,120
Speaker 1: for having thank you. Nick Bennenburg joins us right now.

251
00:14:05,800 --> 00:14:08,680
Speaker 1: His international economists at Wells Fargo and maybe more than

252
00:14:08,760 --> 00:14:13,520
Speaker 1: anybody I know, nails foreign exchange more on a longer

253
00:14:13,720 --> 00:14:16,520
Speaker 1: term basis as well. Let's dovetail your work over the

254
00:14:16,640 --> 00:14:22,440
Speaker 1: years with foreign exchange into international economics. Is the study

255
00:14:22,480 --> 00:14:26,160
Speaker 1: of the dollar, is a study of foreign exchange valuable

256
00:14:26,760 --> 00:14:33,160
Speaker 1: in gaming out international economics? Right now? Well? Yes, you know,

257
00:14:33,240 --> 00:14:35,680
Speaker 1: I actually think maybe the study of international economics is

258
00:14:35,800 --> 00:14:38,480
Speaker 1: more helpful in terms of the dollar, because we're definitely

259
00:14:38,480 --> 00:14:42,040
Speaker 1: seeing differences in growth. Europe's already immversation the United Kingdom.

260
00:14:42,160 --> 00:14:44,400
Speaker 1: The Eurozone is very very close to being there, whereas

261
00:14:44,400 --> 00:14:47,040
Speaker 1: the US is holding on you know pretty well, I

262
00:14:47,200 --> 00:14:49,280
Speaker 1: think that's going to be sort of more influential, and

263
00:14:49,360 --> 00:14:52,440
Speaker 1: just the relative growth trends helping the dollarphin now but

264
00:14:52,560 --> 00:14:55,480
Speaker 1: seeing the dollar depreciate later. So the study and forget

265
00:14:55,520 --> 00:14:57,520
Speaker 1: about Q four, we're almost through it. The study in

266
00:14:57,600 --> 00:15:00,720
Speaker 1: the next year is a study of what the US

267
00:15:00,800 --> 00:15:03,680
Speaker 1: will do, or is it more centric on what Europe

268
00:15:03,680 --> 00:15:06,360
Speaker 1: will do, Japan will do, a beliegue or United Kingdom

269
00:15:06,360 --> 00:15:08,040
Speaker 1: will do. Which side of that trade is the one

270
00:15:08,280 --> 00:15:10,080
Speaker 1: we should focus on. You know, I think there's always

271
00:15:10,120 --> 00:15:11,880
Speaker 1: a focus on the United States, and you know, perhaps

272
00:15:12,040 --> 00:15:14,480
Speaker 1: quite quite rightly so, the largest financial market, the largest

273
00:15:14,520 --> 00:15:17,560
Speaker 1: economy in the world. And as you earlier noted, you know,

274
00:15:17,920 --> 00:15:20,479
Speaker 1: a comment here or there from the Federal Zoo of policymakers,

275
00:15:20,520 --> 00:15:22,560
Speaker 1: and we've seen, you know, yields higher and the dollar

276
00:15:22,640 --> 00:15:24,480
Speaker 1: higher as well. So I think that's where the surprise

277
00:15:24,640 --> 00:15:26,840
Speaker 1: is going to be. Um. We believe that the Federal

278
00:15:26,880 --> 00:15:28,400
Speaker 1: Rezoo of funds rate is going to go above five

279
00:15:28,840 --> 00:15:30,560
Speaker 1: up to five and a quarter. And so I still

280
00:15:30,600 --> 00:15:33,800
Speaker 1: think it's Federal Zoo monetary policy for now that's going

281
00:15:33,840 --> 00:15:35,600
Speaker 1: to drive the dollar a little bit higher and keep

282
00:15:35,600 --> 00:15:38,360
Speaker 1: those foreign currencies probably on the defensive. Let's talk about

283
00:15:38,360 --> 00:15:40,840
Speaker 1: some of that monetary policy. Jim Bullard and comments talking

284
00:15:40,840 --> 00:15:44,160
Speaker 1: about how are not yet restrictive, also saying this he

285
00:15:44,280 --> 00:15:48,280
Speaker 1: states policy rules suggesting rates between five percent and seven percent.

286
00:15:48,440 --> 00:15:51,400
Speaker 1: This is Jim Bullard of the St. Louis fed moments

287
00:15:51,480 --> 00:15:53,800
Speaker 1: ago or about half an hour or twenty minutes ago.

288
00:15:54,160 --> 00:15:56,680
Speaker 1: How much are we looking at something that is going

289
00:15:56,760 --> 00:15:59,360
Speaker 1: to cause the dollar to search two levels that people

290
00:15:59,360 --> 00:16:01,720
Speaker 1: are not expe acting and cause some sort of fissure

291
00:16:01,800 --> 00:16:04,880
Speaker 1: here that that needs a response. Well, I mean those

292
00:16:05,160 --> 00:16:07,600
Speaker 1: rules or those targets are you know, probably a moving point.

293
00:16:07,640 --> 00:16:09,720
Speaker 1: And you know, I think a five percent level and

294
00:16:10,160 --> 00:16:12,040
Speaker 1: seven percents a long way, but I think a five

295
00:16:12,080 --> 00:16:15,080
Speaker 1: percent level is reasonable when you've got these inflation numbers

296
00:16:15,080 --> 00:16:16,880
Speaker 1: that's seven or eight percent now. I think longer term,

297
00:16:17,000 --> 00:16:18,360
Speaker 1: you know, maybe in the region of two and a

298
00:16:18,400 --> 00:16:21,360
Speaker 1: half to three is kind of more reasonable. Um, but

299
00:16:22,000 --> 00:16:24,000
Speaker 1: I think in the current context, these very high rates

300
00:16:24,040 --> 00:16:27,480
Speaker 1: are more than you know, more than appropriate. I think

301
00:16:27,600 --> 00:16:29,680
Speaker 1: you know from your perspective or the other question part

302
00:16:29,680 --> 00:16:31,400
Speaker 1: of your question was will we see the dollar sturge

303
00:16:31,400 --> 00:16:34,280
Speaker 1: two levels that that we haven't seen before. I don't.

304
00:16:34,360 --> 00:16:36,840
Speaker 1: I think we'll get back to recent peaks and maybe

305
00:16:36,880 --> 00:16:40,720
Speaker 1: slightly above. But for now the dollars moving higher. But

306
00:16:40,960 --> 00:16:43,800
Speaker 1: the end of the inflation problem is probably incite, and

307
00:16:43,880 --> 00:16:45,440
Speaker 1: so we'll probably get back to recent high's not go

308
00:16:45,520 --> 00:16:48,480
Speaker 1: above them. What would interest rate a federal funds rate

309
00:16:48,680 --> 00:16:51,640
Speaker 1: of seven percent due to an economy with this much debt.

310
00:16:51,760 --> 00:16:57,080
Speaker 1: That's the I'm sorry, you know she does well, we're

311
00:16:57,160 --> 00:16:58,960
Speaker 1: probably we we we already think there's going to be

312
00:16:59,000 --> 00:17:02,240
Speaker 1: a recession with the high inflation weighing on purchasing pal

313
00:17:02,440 --> 00:17:04,480
Speaker 1: these you know, housing market being affected by these high

314
00:17:04,520 --> 00:17:07,600
Speaker 1: interest rates. So unfortunately would be a deeper recission than

315
00:17:07,680 --> 00:17:10,960
Speaker 1: what we would expect. But but again not the pandemic

316
00:17:11,000 --> 00:17:13,920
Speaker 1: and not the global financial do you say that's what

317
00:17:14,080 --> 00:17:16,720
Speaker 1: he That's what Jim Bullard of the Federal Reserve of St.

318
00:17:16,800 --> 00:17:20,120
Speaker 1: Louis said that it could get up to that policy

319
00:17:20,119 --> 00:17:25,040
Speaker 1: will suggest rates between five. He might be an agreement

320
00:17:25,080 --> 00:17:26,960
Speaker 1: because he was someone who got out front. But my

321
00:17:27,119 --> 00:17:30,960
Speaker 1: question is the the issue has been this market has

322
00:17:31,000 --> 00:17:34,240
Speaker 1: been able to tolerate interest rates well beyond what anybody

323
00:17:34,320 --> 00:17:37,760
Speaker 1: thought previously. We're expected, so now we're suddenly readjusting to

324
00:17:37,840 --> 00:17:41,160
Speaker 1: a new normal. Nick, you just you've done so well

325
00:17:41,280 --> 00:17:44,239
Speaker 1: over the decades and gaming the markets, and particularly your

326
00:17:44,320 --> 00:17:48,280
Speaker 1: expertise in foreign exchange. I'm absolutely fascinated by if you

327
00:17:48,480 --> 00:17:52,280
Speaker 1: think all these fancy people are overcome by events, and

328
00:17:52,400 --> 00:17:55,440
Speaker 1: then if you get five percent or six percent or

329
00:17:55,520 --> 00:17:58,919
Speaker 1: seven percent whatever the nation is, that they're overcome by

330
00:17:58,960 --> 00:18:01,000
Speaker 1: the politics of it, and thoughting what we saw in

331
00:18:01,080 --> 00:18:04,440
Speaker 1: the United Kingdom this morning. Uh, well, I don't know

332
00:18:04,440 --> 00:18:07,040
Speaker 1: if they're overcome by it, but you know, again, I

333
00:18:07,119 --> 00:18:09,480
Speaker 1: think that we're going back to the littles that we

334
00:18:09,480 --> 00:18:11,720
Speaker 1: haven't seen in a couple of decades. We've got inflation

335
00:18:11,800 --> 00:18:13,800
Speaker 1: that we haven't seen in a couple of decades. Uh,

336
00:18:13,960 --> 00:18:15,760
Speaker 1: it's all a moving target and no one really knows

337
00:18:15,800 --> 00:18:17,760
Speaker 1: where the peak is. What I would say, though, and again,

338
00:18:17,800 --> 00:18:19,680
Speaker 1: why we think interest rates don't go to seven, maybe

339
00:18:19,720 --> 00:18:21,520
Speaker 1: they get to five. Why we think the dollar get

340
00:18:21,560 --> 00:18:24,560
Speaker 1: back to its previous peak is we're starting to see

341
00:18:24,560 --> 00:18:27,119
Speaker 1: the first encouraging signs on the inflation front. Though supply

342
00:18:27,280 --> 00:18:29,720
Speaker 1: delivery times are down a lot, the commodity prices are down,

343
00:18:30,080 --> 00:18:32,680
Speaker 1: some of the shipping costs are down, so you know,

344
00:18:32,960 --> 00:18:35,119
Speaker 1: we think there's still some further dollar strength to go.

345
00:18:35,240 --> 00:18:38,000
Speaker 1: There's still some interest rate increase, but we're pretty heavily

346
00:18:38,040 --> 00:18:40,200
Speaker 1: focused on sort of the first quarter second quarter of

347
00:18:40,280 --> 00:18:42,160
Speaker 1: next year as being the peak and hopefully things will

348
00:18:42,160 --> 00:18:44,400
Speaker 1: improve from there. Next Thank you so much. Stick betterbrook

349
00:18:44,480 --> 00:18:50,479
Speaker 1: with us with whilst far ago what we're seeing right

350
00:18:50,520 --> 00:18:52,680
Speaker 1: now is a market that continually is surprised by the

351
00:18:52,760 --> 00:18:55,000
Speaker 1: same message being sent by the FED over and over again.

352
00:18:55,160 --> 00:18:57,680
Speaker 1: Why is the market really surprised? I don't understand. Let's

353
00:18:57,680 --> 00:18:59,560
Speaker 1: speak to the market. Piatko is going to represent the

354
00:18:59,560 --> 00:19:02,480
Speaker 1: market to co out of investment strategies at Bernstein Private Wealth.

355
00:19:02,640 --> 00:19:05,200
Speaker 1: I'm curious from your perspective, why is the market surprised

356
00:19:05,280 --> 00:19:07,240
Speaker 1: that the FED keeps getting more and more hawkish in

357
00:19:07,240 --> 00:19:10,000
Speaker 1: the rhetoric. I'm not sure that the market is surprised.

358
00:19:10,000 --> 00:19:11,840
Speaker 1: I think the market is trying to find its footing

359
00:19:11,880 --> 00:19:13,879
Speaker 1: the same things that you've been quoting this morning. All

360
00:19:13,920 --> 00:19:17,639
Speaker 1: investors are struggling with. It is a mackerel lead market.

361
00:19:17,720 --> 00:19:21,160
Speaker 1: We're focused on earnings and differentiation and companies, but there's

362
00:19:21,200 --> 00:19:24,040
Speaker 1: no doubt about it that inflation. Inflation. Inflation, like you

363
00:19:24,160 --> 00:19:28,040
Speaker 1: said earlier, is the key to market direction. What's the

364
00:19:28,080 --> 00:19:30,000
Speaker 1: sense of consumer spending? And I say this because at

365
00:19:30,000 --> 00:19:32,200
Speaker 1: the same time that you have FED officials saying we're

366
00:19:32,240 --> 00:19:34,399
Speaker 1: not seeing signs of slowing. It's not trickling and as

367
00:19:34,480 --> 00:19:36,440
Speaker 1: quickly as we would like, we see the likes of

368
00:19:36,520 --> 00:19:39,320
Speaker 1: coals having a really hard time. We see the likes

369
00:19:39,920 --> 00:19:43,560
Speaker 1: yesterday from some others having a really hard time target

370
00:19:43,720 --> 00:19:46,080
Speaker 1: not doing well. How do you parse out the winners

371
00:19:46,119 --> 00:19:48,560
Speaker 1: from the losers with some sort of narrative that really

372
00:19:48,600 --> 00:19:50,600
Speaker 1: gives you a sense of where things are heading. Well,

373
00:19:50,640 --> 00:19:53,040
Speaker 1: there's two different narratives that you can start to interpret

374
00:19:53,080 --> 00:19:55,360
Speaker 1: from the retail sales data as well as the earnings

375
00:19:55,440 --> 00:19:57,480
Speaker 1: from these companies. First of all, you look at the

376
00:19:57,520 --> 00:19:59,520
Speaker 1: macro picture and say, what does that mean about what

377
00:19:59,600 --> 00:20:02,680
Speaker 1: the con has left to spend and where in the

378
00:20:02,760 --> 00:20:06,480
Speaker 1: consumer's spending bucket who's getting most affected? And there's no

379
00:20:06,640 --> 00:20:09,840
Speaker 1: doubt about it that the low and consumer is squeezed more.

380
00:20:10,240 --> 00:20:12,879
Speaker 1: That's not surprising. That's what we've historically seen. When you

381
00:20:12,920 --> 00:20:15,720
Speaker 1: see food and gas prices up over time, that's what's

382
00:20:15,760 --> 00:20:20,159
Speaker 1: happening Walmart. We know that they noted over one hundred

383
00:20:20,200 --> 00:20:24,520
Speaker 1: thousand consumers are spending more on groceries at Walmart. Right.

384
00:20:24,600 --> 00:20:27,320
Speaker 1: But then you start to differentiate between these retailers and

385
00:20:27,400 --> 00:20:31,600
Speaker 1: you look at a franchise like Costco, membership based huge loyalty,

386
00:20:31,760 --> 00:20:34,119
Speaker 1: done an excellent job not just on supply chain but

387
00:20:34,240 --> 00:20:36,399
Speaker 1: on labor, and it makes a big difference. So I

388
00:20:36,480 --> 00:20:39,200
Speaker 1: think when it comes to the micro. The time now

389
00:20:39,440 --> 00:20:43,280
Speaker 1: is for stock selection and company differentiation. Companies are different

390
00:20:43,359 --> 00:20:45,440
Speaker 1: and how they're able to manage the chain and the

391
00:20:45,560 --> 00:20:48,359
Speaker 1: labor as well. Talking book. But what I love in

392
00:20:48,440 --> 00:20:50,359
Speaker 1: your research note and you get down to something that

393
00:20:50,440 --> 00:20:54,920
Speaker 1: was gospel in my house. Sp X mid terms up six,

394
00:20:55,920 --> 00:20:58,960
Speaker 1: Presidential year eight. You've got to be kidding me. The

395
00:20:59,080 --> 00:21:01,760
Speaker 1: history of these mid terms we just had inflicted upon

396
00:21:01,920 --> 00:21:05,760
Speaker 1: us is double digit SPX return. Well, we have to

397
00:21:05,800 --> 00:21:11,359
Speaker 1: be careful saying history always repeat. It would be awesome

398
00:21:11,400 --> 00:21:14,919
Speaker 1: to see at sixt recovery posts the midterms. That isn't history,

399
00:21:15,000 --> 00:21:18,239
Speaker 1: said Tom, And that is what we've published. But you've

400
00:21:18,280 --> 00:21:20,520
Speaker 1: got to get back to fundamentals and stay balanced. I mean,

401
00:21:20,520 --> 00:21:23,440
Speaker 1: at least this point earlier about surprise. You don't want

402
00:21:23,440 --> 00:21:25,639
Speaker 1: to be playing the game of trying to switch acid

403
00:21:25,680 --> 00:21:28,200
Speaker 1: classes and sectors in a in a fast way here

404
00:21:28,240 --> 00:21:30,680
Speaker 1: because there is so much surprise that's possible in the market,

405
00:21:30,720 --> 00:21:32,760
Speaker 1: and I think the mid terms there some element of

406
00:21:32,800 --> 00:21:35,399
Speaker 1: surprise as well, obviously, So I think you have to

407
00:21:35,440 --> 00:21:37,600
Speaker 1: be humble and you have to be balanced. Okay, you

408
00:21:37,680 --> 00:21:39,479
Speaker 1: gotta be balanced, but to you buy quality, I mean

409
00:21:39,920 --> 00:21:44,160
Speaker 1: by small small capt quality MidCap quality, big stuff, Apple, whatever,

410
00:21:44,600 --> 00:21:48,119
Speaker 1: give us a differentiation of those sectors that create the

411
00:21:48,280 --> 00:21:51,280
Speaker 1: active alpha you're predicting. Yep, you must have read our

412
00:21:51,359 --> 00:21:54,760
Speaker 1: note quality growth area by people read the note. I

413
00:21:54,760 --> 00:21:57,320
Speaker 1: don't read the notes. Quality growth is an area that

414
00:21:57,440 --> 00:21:59,200
Speaker 1: we like, and I think we like it most in

415
00:21:59,240 --> 00:22:02,840
Speaker 1: the large caps base um small caps are interesting as well,

416
00:22:03,000 --> 00:22:05,840
Speaker 1: but obviously we feel we could be entering recessionary period,

417
00:22:05,960 --> 00:22:08,720
Speaker 1: and even if that recession is mild, small caps could

418
00:22:08,720 --> 00:22:11,360
Speaker 1: be more vulnerable up in here. But this is critical.

419
00:22:11,560 --> 00:22:13,520
Speaker 1: Are there you going to see record use of cash

420
00:22:13,760 --> 00:22:16,680
Speaker 1: by those big cap quality names? I think we could.

421
00:22:16,760 --> 00:22:18,840
Speaker 1: I think they've got more strength than their balance sheets.

422
00:22:18,840 --> 00:22:22,800
Speaker 1: They've got more ability to maintain quality just on labor

423
00:22:23,040 --> 00:22:26,080
Speaker 1: as well. Obviously you're seeing cuts and ad spending and

424
00:22:26,160 --> 00:22:29,520
Speaker 1: in tech, but there's still quality names like Microsoft, like

425
00:22:29,720 --> 00:22:31,800
Speaker 1: Visa that we find to try. I know this is

426
00:22:31,840 --> 00:22:38,560
Speaker 1: what your zombie thesis is exactly where your head, but

427
00:22:38,720 --> 00:22:40,880
Speaker 1: I do wonder Vianna just to build on that, because

428
00:22:40,920 --> 00:22:44,080
Speaker 1: it is an important that it's an important point. This

429
00:22:44,200 --> 00:22:46,399
Speaker 1: sort of question of what's going to lead to the

430
00:22:46,440 --> 00:22:49,680
Speaker 1: catharsis where you get capitulation by companies to be purchased

431
00:22:49,720 --> 00:22:52,320
Speaker 1: at a discount from other companies. At what point you

432
00:22:52,359 --> 00:22:54,879
Speaker 1: get some sort of wash out? What are you looking

433
00:22:55,000 --> 00:22:58,359
Speaker 1: for to signal? And I understand company specific, but on

434
00:22:58,440 --> 00:23:00,960
Speaker 1: a broad level, are we there yet? How do you

435
00:23:01,000 --> 00:23:04,440
Speaker 1: know in terms of company risk taking to stock valuations

436
00:23:04,480 --> 00:23:06,879
Speaker 1: in terms of the Coppen type of investors. Yeah, I

437
00:23:06,920 --> 00:23:09,360
Speaker 1: don't think we're at total capitulation. I mean we think

438
00:23:09,400 --> 00:23:11,440
Speaker 1: we may have seen the bottom. We feel like we're

439
00:23:11,440 --> 00:23:13,720
Speaker 1: in a range bound market somewhere in the thirty six

440
00:23:13,800 --> 00:23:16,320
Speaker 1: hundred to four thousand in the next six to twelve months.

441
00:23:16,359 --> 00:23:19,400
Speaker 1: In the SMP, our base case is for an earnings

442
00:23:19,440 --> 00:23:22,879
Speaker 1: decline that we have not yet seen factored into the market.

443
00:23:23,280 --> 00:23:26,280
Speaker 1: Those bottom up earnings forecasts are just starting to come down.

444
00:23:26,320 --> 00:23:28,440
Speaker 1: You're starting to see twenty two come down, four Q

445
00:23:28,680 --> 00:23:31,880
Speaker 1: come down. Twenty three hasn't yet been touched, and that's

446
00:23:31,880 --> 00:23:34,800
Speaker 1: because that visibility is so murky. Everybody's struggling with the

447
00:23:34,920 --> 00:23:38,840
Speaker 1: ultimate fed question. But you're seeing companies starting to respond

448
00:23:38,960 --> 00:23:42,040
Speaker 1: on cost management. That's going to play out on margins,

449
00:23:42,280 --> 00:23:45,880
Speaker 1: and that bad news for people is unfortunately good news

450
00:23:46,000 --> 00:23:48,840
Speaker 1: ultimately for the market and for earnings. So fundamental here

451
00:23:48,920 --> 00:23:51,040
Speaker 1: is we now have a risk free rate. We now

452
00:23:51,200 --> 00:23:54,040
Speaker 1: have financed somewhat back to what we are weaned one

453
00:23:54,520 --> 00:23:57,480
Speaker 1: and my great theme is the zombies of all flavors

454
00:23:57,560 --> 00:23:59,920
Speaker 1: are going to be rolled up in two thousand twenty three.

455
00:24:00,359 --> 00:24:04,920
Speaker 1: Bernstein's Heritage, the Black Books of Bernstein's Heritage, is studying that.

456
00:24:05,320 --> 00:24:10,159
Speaker 1: Do you see combinations and transactions on fire next year? UM,

457
00:24:10,240 --> 00:24:11,960
Speaker 1: I don't think we've put out a forecast for M

458
00:24:12,040 --> 00:24:17,240
Speaker 1: and A volume forecast. Nobody's watching. Come on, yeah, we're

459
00:24:17,240 --> 00:24:19,639
Speaker 1: continuing to see M and A volume B Robust. I

460
00:24:19,720 --> 00:24:22,560
Speaker 1: think what you're seeing here is financial conditions and risk

461
00:24:22,640 --> 00:24:25,720
Speaker 1: taking obviously have gone up recently, and I don't see

462
00:24:26,160 --> 00:24:28,480
Speaker 1: a real change to that. I think companies are continuing

463
00:24:28,520 --> 00:24:31,080
Speaker 1: to innovate and invest for the future, and if they

464
00:24:31,160 --> 00:24:34,600
Speaker 1: can do that with roll ups and um mergers, then

465
00:24:34,680 --> 00:24:36,560
Speaker 1: why not, right, But I think they're going to be

466
00:24:36,600 --> 00:24:39,399
Speaker 1: opportunist to our Thank you so much, greatly appreciated with

467
00:24:39,520 --> 00:24:44,200
Speaker 1: Bernstein Private Wealth Management today. This is the Bloomberg Surveillance Podcast.

468
00:24:44,480 --> 00:24:47,840
Speaker 1: Thanks for listening. Join us live weekdays from seven to

469
00:24:47,960 --> 00:24:51,960
Speaker 1: ten am Eastern on Bloomberg Radio and on Bloomberg Television

470
00:24:52,359 --> 00:24:56,359
Speaker 1: each day from six to nine am for insight from

471
00:24:56,400 --> 00:25:00,400
Speaker 1: the best in economics, finance, investment, and international relay Asians

472
00:25:00,880 --> 00:25:05,480
Speaker 1: and subscribe to the Surveillance podcast on Apple podcast, SoundCloud,

473
00:25:05,680 --> 00:25:09,240
Speaker 1: Bloomberg dot com and of course on the terminal. I'm

474
00:25:09,320 --> 00:25:11,960
Speaker 1: Tom Keene, and this is Bloomberg.