WEBVTT - Surveillance: Market Volatility with Schumacher 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along 0:00:09.200 --> 0:00:13.080 with Jonathan Ferrell and Lisa Brawmowitz Jay Lee. We bring 0:00:13.119 --> 0:00:17.159 you insight from the best and economics, finance, investment, and 0:00:17.239 --> 0:00:23.320 international relations. Find Bloomberg Surveillance on Apple Podcast, Uncloud, Bloomberg 0:00:23.360 --> 0:00:29.520 dot Com, and of course on the Bloomberg terminal. Joint 0:00:29.560 --> 0:00:31.760 to us down this bond market, Mike Shoemaker, club head 0:00:31.760 --> 0:00:34.320 of Mac Price Strategy at waust Fargo, might before we 0:00:34.320 --> 0:00:36.760 talk about levels, can we just talk about ranges in today, 0:00:36.800 --> 0:00:39.760 trading ranges on a two year of say twenty basis 0:00:39.800 --> 0:00:42.800 points on any given day without economic data. Mike, what 0:00:42.880 --> 0:00:45.320 do you make of that? It's just incredible, John, the 0:00:45.600 --> 0:00:48.400 day to day of all atilities from mind boggling. Traders 0:00:48.440 --> 0:00:50.120 here are whip lashed, and I think that's true of 0:00:50.200 --> 0:00:52.520 people across the markets. There have been so many cross 0:00:52.560 --> 0:00:55.280 currents it can't sustain in terms of alatility like this, 0:00:55.480 --> 0:00:58.120 but there really has been wild to see and hopefully 0:00:58.200 --> 0:01:00.560 slows down at least a little bit fairly. Since is 0:01:00.600 --> 0:01:03.960 it linear or do you see a convexity where things 0:01:03.960 --> 0:01:06.480 are speeding up like in the tenure real yield. Is 0:01:06.520 --> 0:01:08.760 there a quickening there that you could predict for Q 0:01:09.000 --> 0:01:11.880 four a good point time non linear? I would say 0:01:12.000 --> 0:01:14.360 you think about the tenure real yield in July was 0:01:14.680 --> 0:01:17.320 ballpark positive ten basis points. That rose a hundred and 0:01:17.360 --> 0:01:19.679 fifty basis points and just a bit more than two months. 0:01:19.880 --> 0:01:22.240 So now it seems to us it's up to an 0:01:22.240 --> 0:01:24.720 area that I would call the right zip code. One 0:01:24.800 --> 0:01:28.080 six two percent seems reasonable, certainly in the context of 0:01:28.160 --> 0:01:31.319 prior FED cycles and layering on additional inflation this time 0:01:31.600 --> 0:01:34.200 with respect to the US German reels crossed over to 0:01:34.240 --> 0:01:38.360 positive territory intends to that seems okay. So I suspect 0:01:38.360 --> 0:01:40.679 the speed is about done. It's going to slow down 0:01:40.680 --> 0:01:43.640 a fair bit, but volatility remains super high intense as well. 0:01:43.760 --> 0:01:46.080 Let's talk about the step down, Mike. We talked about 0:01:46.200 --> 0:01:48.880 the pivot and then the pause as John was mentioning, 0:01:48.920 --> 0:01:51.280 and now the step down, which is actually new. I 0:01:51.280 --> 0:01:53.840 hadn't really hurt that until this morning. We already discussed it, 0:01:53.960 --> 0:01:56.080 already discussed it, right, Okay, Now all of a sudden, 0:01:56.080 --> 0:01:58.440 it's back. It's back. It's a thing, right, How does 0:01:58.520 --> 0:02:01.280 the FED communicate that it's going to slow down without 0:02:01.320 --> 0:02:03.160 allowing the markets to move ahead of it. And some 0:02:03.200 --> 0:02:05.920 people argue the reason why there's optimism and markets is 0:02:05.960 --> 0:02:09.040 because they're getting a sniff of the step down. Do 0:02:09.080 --> 0:02:12.040 you buy any of this just a sniff? I think 0:02:12.080 --> 0:02:14.880 that's probably right. It seems sort of obvious the Fed 0:02:14.880 --> 0:02:16.960 eventually would slow down, and yet the markets are all 0:02:17.000 --> 0:02:19.639 excited about this, and you put it in contacts and say, 0:02:19.639 --> 0:02:21.880 all right, so let's say the FED goes seventy five 0:02:21.960 --> 0:02:23.840 next week and follows that up with a fifty at 0:02:23.840 --> 0:02:26.680 the next meeting. Is that really an amazing result for 0:02:26.880 --> 0:02:30.320 risk investors? I would say not, And ultimately the destination 0:02:30.400 --> 0:02:33.000 matters in terms of terminal rate. But I think then 0:02:33.240 --> 0:02:35.200 the thing people really need to focus on the most 0:02:35.360 --> 0:02:38.200 is how long does the FED keep that that funds 0:02:38.280 --> 0:02:41.000 rate really high? So let's say up to five. We 0:02:41.040 --> 0:02:43.440 think it's going to be a long time, six plus months, 0:02:43.480 --> 0:02:46.520 maybe a year. That's gonna hurt equities, we think, and 0:02:46.560 --> 0:02:48.480 that's going to hurt risk. So that seems to be 0:02:48.520 --> 0:02:50.600 a little bit lost in the shuffle. People are too 0:02:50.600 --> 0:02:52.800 gung home on trying to predict the next couple of meetings, 0:02:53.120 --> 0:02:55.800 not thinking enough about the destination. Mike, what you just 0:02:55.840 --> 0:02:58.440 said is pretty pretty interesting. But you could see five 0:02:58.480 --> 0:03:02.360 percent FED funds rates for a year, possibly more, six 0:03:02.400 --> 0:03:05.040 months a year or even more. What does that do 0:03:05.560 --> 0:03:09.320 to the entire credit cycle that's predicated. I'm pushing out maturities, yes, 0:03:09.560 --> 0:03:11.959 but those maturities start coming up at the end of 0:03:12.040 --> 0:03:14.280 next year. Yeah, it means it's notion that you might 0:03:14.320 --> 0:03:17.320 have easy money come back fairly soon just doesn't really work, 0:03:17.639 --> 0:03:20.880 and credits probably take a hit with respect to defaults 0:03:20.960 --> 0:03:23.400 ramping up also. So it's not a positive in terms 0:03:23.400 --> 0:03:25.919 of credit, not a positive genuine in terms of risk. 0:03:26.280 --> 0:03:28.560 But when you think about the incentives facing the Fed, 0:03:28.800 --> 0:03:32.440 especially j Powell, his number one priority is and will 0:03:32.480 --> 0:03:36.040 remain getting inflation back into a box. I means boosting 0:03:36.040 --> 0:03:38.040 the funds requite a bit, we know that, but also 0:03:38.160 --> 0:03:39.800 keeping it up there for a while. I just want 0:03:39.840 --> 0:03:41.680 to pick up on this move in a guilt market 0:03:41.680 --> 0:03:44.320 as well, at the front end guilt two years down 0:03:44.760 --> 0:03:47.360 five basis points, Mike, if you even got a cold 0:03:47.440 --> 0:03:50.160 on the guilt market, if you thrown the town in, yeah, 0:03:50.280 --> 0:03:52.760 guilt market, John, I think we'll take a pass on 0:03:52.800 --> 0:03:55.000 that one for now, and plays out with the whole 0:03:55.200 --> 0:03:58.680 PM sweepstakes, and then we'll something about discretion and val 0:03:58.760 --> 0:04:01.440 are coming together. I think out at my shame, thank 0:04:01.520 --> 0:04:10.320 you oft Fanca Brandon. Laura Raim joins US chiefs Economist Investments. Laura, 0:04:10.360 --> 0:04:12.480 I go to the c o GO and there is 0:04:12.600 --> 0:04:16.400 a raft, a Seattle slew of economic data coming out 0:04:16.480 --> 0:04:19.719 this week, and I look at it and it mostly 0:04:19.839 --> 0:04:25.960 shows a resilient economy looking back. Are you surprised where 0:04:26.000 --> 0:04:29.760 we are right now? We're thirty forty fifty lines of 0:04:29.839 --> 0:04:34.320 the c O GO data. Not all that bad, No, 0:04:34.839 --> 0:04:39.240 because our economy has so much positive momentum, and this 0:04:39.320 --> 0:04:42.200 is what happens when you're just early in an expansion. 0:04:42.400 --> 0:04:44.280 I think that that's maybe the big question. Are we 0:04:44.320 --> 0:04:48.160 early in interpion an expansion? We're pretty early in an expansion, 0:04:48.320 --> 0:04:51.479 and we had so much fiscal stimulus, so much monetary 0:04:51.480 --> 0:04:54.440 stimulus around right. It's we're a big ship. Tom. It 0:04:54.480 --> 0:04:56.359 takes time to turn in. And you've been a student 0:04:56.400 --> 0:04:58.919 of this for decades, going back way before you you know, 0:04:59.000 --> 0:05:01.360 you showed up on Well Street. And my answer is, 0:05:01.920 --> 0:05:04.880 so we get a five percent ten year yield for 0:05:04.920 --> 0:05:07.920 whatever reason is at the end of the world as 0:05:07.960 --> 0:05:10.200 we know it. We used to live that way, right. 0:05:11.200 --> 0:05:12.840 It's not the end of the world as we know it. 0:05:12.839 --> 0:05:15.120 It's just a continuation of what we've seen. I mean, 0:05:15.400 --> 0:05:19.000 the volatility and the treasury market is so extreme. We 0:05:19.080 --> 0:05:22.159 could be there in the next ten days. Um. I 0:05:22.200 --> 0:05:24.919 think at the end of the day, what the what 0:05:25.040 --> 0:05:28.040 we're now looking at, you know, is the FED moves 0:05:28.120 --> 0:05:31.440 later this year, the Fed moves beginning next year. Markets 0:05:31.480 --> 0:05:35.599 are so tripping over themselves to try to look around 0:05:35.720 --> 0:05:40.039 the corner, and it's causing these wild swings and expectations 0:05:40.360 --> 0:05:43.200 and we're just stuck in this higher volatility world that is, 0:05:43.440 --> 0:05:47.640 with the economic uncertainty. It's crushing all these traditional asset classes. Laura, 0:05:47.680 --> 0:05:49.560 you mentioned that it takes a long time to turn 0:05:49.600 --> 0:05:52.479 around this economy, and this is the concern of some people, 0:05:52.560 --> 0:05:55.960 the lag effects of the policies that are being implemented today. 0:05:56.279 --> 0:05:59.640 Do you have a sense of the difference between when 0:06:00.080 --> 0:06:03.719 the interest rate rises will affect the inflation side of 0:06:03.760 --> 0:06:06.880 things and when it will affect the economic momentum side 0:06:06.880 --> 0:06:10.640 of things. You know, this is to me one of 0:06:10.640 --> 0:06:13.640 the critical questions when I get asked, it's what should 0:06:13.720 --> 0:06:16.080 the Fed what do I think the FED should do 0:06:16.320 --> 0:06:19.279 versus what are they actually doing? And I think the 0:06:19.360 --> 0:06:23.279 time has come for them to take a slower pace 0:06:23.360 --> 0:06:26.000 of rate hikes and wait and see what kind of 0:06:26.040 --> 0:06:29.000 shape the economy is in. But the reality is, with 0:06:29.160 --> 0:06:32.360 housing and other interest rate sensitive sectors fueling so much 0:06:32.400 --> 0:06:35.440 growth over the last year and a half, they have 0:06:35.720 --> 0:06:40.080 really heavily impacted that. The question on the inflation side 0:06:40.120 --> 0:06:42.520 is how much of this is really still driven by supply? 0:06:43.160 --> 0:06:47.440 And I'm not talking about supply chain disruptions, those have ebbed. 0:06:47.800 --> 0:06:50.599 What I'm talking about is labor supply. At this point, 0:06:51.040 --> 0:06:55.720 higher services costs, higher services inflation is really driven by 0:06:55.800 --> 0:06:59.400 higher wages. My concern is that the FED is using 0:06:59.480 --> 0:07:03.000 model They love their Phillips curve models, and they're using 0:07:03.040 --> 0:07:05.400 these models built in the nineties when labor dynamics were 0:07:05.400 --> 0:07:08.640 completely different. So what does that mean in terms of 0:07:08.839 --> 0:07:11.240 what NEHRU is, What does that mean in terms of 0:07:11.600 --> 0:07:14.360 what they should be doing or should be looking for 0:07:14.440 --> 0:07:16.920 in terms of employment and what that will mean for 0:07:17.080 --> 0:07:20.600 when wages will start to moderate. It means that they 0:07:20.680 --> 0:07:24.440 may have to raise a lot more to get businesses 0:07:24.960 --> 0:07:28.640 to let go of workers. It means that the risk 0:07:28.680 --> 0:07:32.080 of a policy overshoot is higher. Their estimate of NEHRU 0:07:32.160 --> 0:07:36.160 has always been a moving target, but today it may 0:07:36.160 --> 0:07:40.200 be lower given that people can work remotely, geographies are 0:07:40.240 --> 0:07:44.480 more fluid, and the fact that we're just have this 0:07:44.640 --> 0:07:48.120 more constraint participation rate. Lord. Chapter twenty three of any 0:07:48.120 --> 0:07:50.800 Good econ one oh one book is about the markets. 0:07:50.960 --> 0:07:54.120 Do you suggest that this Central Bank of FED is 0:07:54.240 --> 0:07:56.600 looking at the markets? When I look at bonds, I 0:07:56.880 --> 0:07:59.760 took a US bond e t F. It's down twenty 0:07:59.760 --> 0:08:03.080 two percent from its high two years ago, and that's 0:08:03.120 --> 0:08:06.160 better than a lot of others. To be blunt, I'm 0:08:06.200 --> 0:08:09.600 just fascinated if this FED, you know, the phrases blink, 0:08:09.880 --> 0:08:12.560 not that they'll blink, but they become aware that a 0:08:12.640 --> 0:08:14.640 four oh one case become a two oh one. K 0:08:16.320 --> 0:08:19.400 I think that the FED is highly aware of what 0:08:19.440 --> 0:08:22.160 they've done to financial markets, and in fact, they've mentioned 0:08:22.200 --> 0:08:25.920 that over and over again. This is another key concern, 0:08:26.480 --> 0:08:32.400 which is that recently Vice chair Brainerd commented on corporate margins, 0:08:32.440 --> 0:08:37.040 which actually remain relatively healthy, and if they FED is 0:08:37.080 --> 0:08:39.559 looking to slow the economy down and looking to spread 0:08:40.000 --> 0:08:42.360 some of the pain of that slowing to the labor market. 0:08:42.720 --> 0:08:46.160 I think increasingly they're looking to to spread some of 0:08:46.160 --> 0:08:50.559 that pain to corporate margins. It's not a good supportive 0:08:50.559 --> 0:08:54.200 outlook for equities into the beginning of next year. So 0:08:54.520 --> 0:08:56.560 I think the other question I get asked so often is, 0:08:56.960 --> 0:08:59.800 you know, have the markets seen their bottom? We're all 0:09:00.000 --> 0:09:02.720 talking about the risk of recession, but markets still to 0:09:02.840 --> 0:09:06.600 me don't have it priced in well. And look at 0:09:06.280 --> 0:09:09.360 the priced in part. What do we do after the 0:09:09.480 --> 0:09:12.800 November two meeting? I mean, I want to get onto December, 0:09:12.840 --> 0:09:15.800 and frankly onto the meeting I believe it's February one 0:09:15.840 --> 0:09:19.480 of next year. At some point they have to respond 0:09:19.520 --> 0:09:22.960 to the markets. Yeah, I think they would say they're 0:09:22.960 --> 0:09:25.959 not responding to markets. They would heavily argue that they're 0:09:26.040 --> 0:09:29.800 responding to the structural lags and their policy going to 0:09:29.840 --> 0:09:33.120 the economy. But Tomato, Tomato, I hear you. I think 0:09:33.160 --> 0:09:36.080 the point really is that they're going to have to 0:09:36.360 --> 0:09:40.120 They're gonna have a big challenge messaging that right, because 0:09:40.160 --> 0:09:43.120 every time they talk about holding or talk about backing 0:09:43.160 --> 0:09:47.560 off their aggressive pace, markets start pricing in rape cuts. 0:09:48.160 --> 0:09:50.280 And you know, earlier you were talking about how kind 0:09:50.280 --> 0:09:53.320 of the fedest trained markets over the last fifteen years 0:09:53.840 --> 0:09:57.280 to expect a rally at any time, and I think 0:09:57.320 --> 0:09:59.640 this is what they're having to really beat markets up 0:09:59.679 --> 0:10:03.720 about right now. They're having to couldn't place a permanently 0:10:03.960 --> 0:10:07.880 higher trajectory, or at least, you know, a multi year 0:10:08.120 --> 0:10:11.680 higher trajectory, because inflation is not going to fit neatly 0:10:11.720 --> 0:10:14.840 back into their two percent package. Yeah, may come down 0:10:14.840 --> 0:10:17.959 from here, but it's gonna stay really elevated. This is 0:10:18.000 --> 0:10:19.880 the fine line the feed is having to walk, and 0:10:19.880 --> 0:10:24.600 it's causing them confusion when they're communicating, it's causing it's 0:10:24.640 --> 0:10:27.840 adding to bond market volatility, and all of this is 0:10:27.880 --> 0:10:30.800 just weighing on sentiment. We were speaking of the Bloomberg's 0:10:30.840 --> 0:10:33.080 Damien says how or earlier, and he was talking about 0:10:33.080 --> 0:10:35.000 how all of this is leading to the strong dollar 0:10:35.080 --> 0:10:38.400 that's really torpedoing a lot of emerging economies. Do you 0:10:38.440 --> 0:10:40.400 think that it's important for the FETE to step in 0:10:40.440 --> 0:10:42.720 on the dollar side of things to offset some of 0:10:42.760 --> 0:10:47.120 that pain as they combat inflation. I don't know how 0:10:47.160 --> 0:10:50.160 they can, Lisa. I think that you know, for now, 0:10:50.320 --> 0:10:54.440 the stronger dollar reinforces the monetary policy trajectory that the 0:10:54.480 --> 0:10:57.200 FET is taking. And I think there's this other issue. 0:10:57.280 --> 0:11:03.280 The FED knows that unilateral intervention isn't particularly effective. You know, 0:11:03.400 --> 0:11:05.680 this is a big this If they wanted to weaken 0:11:05.720 --> 0:11:08.080 a dollar at all, it would be a huge change 0:11:08.720 --> 0:11:13.120 from these sort of unspoken stronger dollar policy that we've 0:11:13.120 --> 0:11:16.280 maintained for all this time. At the end of the day, 0:11:16.760 --> 0:11:19.400 I think they're more focused on what they can control, 0:11:19.440 --> 0:11:22.000 and they don't feel like the dollar is easily fits 0:11:22.040 --> 0:11:24.920 easily within that sphere, so to the extent that their 0:11:25.000 --> 0:11:29.360 blunt instrument can control financial conditions. I think they see 0:11:29.400 --> 0:11:32.080 what the damage they've done in markets, and they feel 0:11:32.080 --> 0:11:35.040 like it's part of their move into restrictive territory to 0:11:35.120 --> 0:11:39.199 hit inflation the objective, not the unintended consequence. Laura, thank you, 0:11:39.480 --> 0:11:52.680 Laura of FS Investments. Can I give a shout out 0:11:52.720 --> 0:11:54.880 to our next guest, tomp He came on the program 0:11:54.880 --> 0:11:58.360 back in February one fifteen dollar yen, he said, one 0:11:58.440 --> 0:12:01.040 fifty and I almost found much. And I'll think and 0:12:01.200 --> 0:12:02.920 here we are, say, k here we are, and Christopher 0:12:02.960 --> 0:12:07.080 an smarter than the average bear on that macro strategy 0:12:07.120 --> 0:12:11.079 strategistic strategius is is a bared uh Company. All I 0:12:11.120 --> 0:12:13.440 can say, John is showing me any literature of the 0:12:13.440 --> 0:12:17.839 show's unilateral intervention works. It's not out there, christopheroon what 0:12:18.160 --> 0:12:22.040 is out there is a desire for catharsis a vix 0:12:22.080 --> 0:12:25.360 of forty and the eight other shades of it is Well, 0:12:25.480 --> 0:12:28.600 it's not out there. But what element of the market 0:12:28.679 --> 0:12:33.400 last week gave you a sense of catharsis? Well, what 0:12:33.480 --> 0:12:36.160 I thought was most interesting about last week, You know, 0:12:36.200 --> 0:12:38.160 it was a good week for stocks, but what led 0:12:38.280 --> 0:12:42.480 what's the only sector to do relative high? First the 0:12:42.600 --> 0:12:46.319 SMP was energy. Energy still leads, And this is what's 0:12:46.360 --> 0:12:50.320 really interesting on both down weeks and up weeks. Your 0:12:50.400 --> 0:12:54.320 leadership really hasn't moved much. So I think, you know, 0:12:54.360 --> 0:12:56.200 if you look at where the positioning still is, and 0:12:56.200 --> 0:12:58.560 I would contend there's still a lot of positioning at 0:12:58.640 --> 0:13:01.600 quote the top of the market, the Apples and the 0:13:01.679 --> 0:13:06.440 Teslas and the Microsoft's energy outperforming doesn't help that group. 0:13:06.679 --> 0:13:10.080 So I'm not sure a lot changed from a leadership perspective, 0:13:10.120 --> 0:13:11.959 which is more important to us whether the next two 0:13:12.480 --> 0:13:15.360 points is up or down if the leadership doesn't change, 0:13:15.440 --> 0:13:19.079 And you know, with technical analysis, does quality matter whether 0:13:19.080 --> 0:13:24.079 it's quality small quality, large cap profitable companies showing down 0:13:24.120 --> 0:13:27.760 down the income statement. Does that matter right now? Well, 0:13:27.800 --> 0:13:30.160 I think that was the other message from the market 0:13:30.240 --> 0:13:32.480 last week when you look at really what didn't move 0:13:32.679 --> 0:13:35.800 or didn't rally, what I would still call the garbage 0:13:36.000 --> 0:13:40.280 basically didn't bounce. I mean things like Carvana or Roku 0:13:40.520 --> 0:13:45.520 or names that have basically um were the speculative darlings 0:13:45.559 --> 0:13:48.199 of the cycle which were thrown out. Those didn't move 0:13:48.280 --> 0:13:50.920 last week. So I think the market continues to make 0:13:51.000 --> 0:13:54.080 this very clear distinction between what is quality and what 0:13:54.200 --> 0:13:57.040 is not quality. And I think ultimately, you know what, 0:13:57.040 --> 0:13:59.040 what would be bullish from here? I think the market 0:13:59.120 --> 0:14:04.120 disassociated eating itself from things like Bitcoin or Arc or 0:14:04.480 --> 0:14:06.320 the I p o s that I think would be 0:14:06.320 --> 0:14:09.000 a bolsh development that how to happen in two thousand two, 0:14:09.040 --> 0:14:10.560 if you remember, as we kind of came out of 0:14:10.600 --> 0:14:14.000 dot com, the market how to disassociate itself with a 0:14:14.040 --> 0:14:16.560 lot of the garbage from the briar cycle. I gotta say, Chris, 0:14:16.640 --> 0:14:19.480 right now, the headline is that Roku and Carbon are garbage, 0:14:19.480 --> 0:14:21.960 according to Christopherone of Strategus. I don't know that that's 0:14:21.960 --> 0:14:25.800 necessarily the headline that you necessarily one, or maybe it is, 0:14:25.840 --> 0:14:27.560 but there is this issue that right now there are 0:14:27.560 --> 0:14:29.840 a lot of people who think that there's so much pessimism. 0:14:30.080 --> 0:14:32.960 We hear all the Barrish talk on this program elsewhere 0:14:33.040 --> 0:14:34.960 and are sick of it. And you're seeing that come 0:14:34.960 --> 0:14:38.200 into the commentary. You're seeing that in the options market, 0:14:38.200 --> 0:14:41.320 where you're seeing actually people putting on much less protection 0:14:41.640 --> 0:14:43.880 against the market dropping another ten percent. What do you 0:14:43.920 --> 0:14:48.800 make of that? You know, it's a great question, Lisa, 0:14:48.880 --> 0:14:52.040 and I'm struck by a couple of things. Number One, 0:14:52.080 --> 0:14:56.480 I think back to late two thousand into two thousand nine. 0:14:57.120 --> 0:14:59.840 I think that feeling of capitulation was very different than this. 0:14:59.880 --> 0:15:01.920 I I mean, I can remember not wanting to turn 0:15:01.920 --> 0:15:04.440 the screens on in the morning. I don't think we're 0:15:04.520 --> 0:15:07.360 quite there yet today. The second thing I would just 0:15:07.400 --> 0:15:11.600 notice be careful that or at least distinguished between what 0:15:11.640 --> 0:15:13.360 people say they're doing with their money and what they're 0:15:13.400 --> 0:15:15.840 actually doing with their money. And I still think the 0:15:15.880 --> 0:15:19.280 gap between those two things is quite uh is quite 0:15:19.640 --> 0:15:23.680 wide here. The flows, for example, are still pretty aggressive 0:15:23.760 --> 0:15:27.080 into both equities and bonds. I'm not sure that describes 0:15:27.120 --> 0:15:30.640 that cathartic or capitulative momentum. We do have good seasonal 0:15:30.720 --> 0:15:33.240 support here for the next call at ninety days, I 0:15:33.280 --> 0:15:36.760 want to be mindful of that we essentially oscillated between 0:15:36.800 --> 0:15:39.160 thirty and thirty eight hundred for the better part of 0:15:39.200 --> 0:15:42.280 the last six weeks. I could get you to let's 0:15:42.280 --> 0:15:45.960 call it thousand on SMP, but then we have to 0:15:46.000 --> 0:15:48.000 deal with the very inconvenient fact that this is still 0:15:48.000 --> 0:15:51.400 a downtrend. And I think stocks rallying into down trends 0:15:51.440 --> 0:15:54.160 are ultimately things that you want to fade uh down 0:15:54.160 --> 0:15:56.360 the road. So there's a breaking point at some point 0:15:56.400 --> 0:15:59.400 that a lot of people foresee yourself, Mike Wilson, and 0:15:59.440 --> 0:16:02.720 you did correctly call the en going or weakening to 0:16:02.800 --> 0:16:05.720 one fifty per dollar? How much is that going to 0:16:05.760 --> 0:16:09.600 be a potential catalyst? This question of what John called 0:16:09.720 --> 0:16:14.400 bonfire of central bank for an exchange reserves, how much 0:16:14.520 --> 0:16:18.320 is that going to be really the trigger? Well, the 0:16:18.400 --> 0:16:21.520 layers that we've used this is very simply the market 0:16:21.680 --> 0:16:23.520 is back in charge here, and I think we saw 0:16:23.560 --> 0:16:25.720 that in the UK over the last several weeks. I 0:16:25.760 --> 0:16:28.600 suspect we're gonna learn that here in Japan over the 0:16:28.640 --> 0:16:32.320 next number of months. I mean, the story is what 0:16:32.440 --> 0:16:34.480 thirty billion dollars of intervention? I think that's what the 0:16:34.520 --> 0:16:38.240 FT reports on Friday. So that's a fifty increase from 0:16:38.240 --> 0:16:40.960 the twenty billion dollars of intervention that we saw I 0:16:41.000 --> 0:16:44.960 think on September two. After the September intervention, it took 0:16:45.040 --> 0:16:47.440 fourteen trading days for yen to make a new load. 0:16:47.520 --> 0:16:50.120 So that's kind of our our benchmark here. Let's see 0:16:50.120 --> 0:16:52.000 where we stand in two weeks. Are we talking about 0:16:52.040 --> 0:16:54.720 one two yen again? Are we talking about I think 0:16:54.760 --> 0:16:57.120 that's going to be how we judge whether or not 0:16:57.200 --> 0:17:00.000 this is successful. Because when I see German tenure yields 0:17:00.120 --> 0:17:03.720 at two fifty and US turns at four twenty, and 0:17:03.760 --> 0:17:07.080 I see Japanese turns at twenty six basis point business points, 0:17:07.080 --> 0:17:08.800 so there's a clear outlier here, and I think that's 0:17:08.800 --> 0:17:12.399 an unsustainable path for the b o J to remain on. 0:17:12.560 --> 0:17:15.120 You see the gamp blower on that chart, Ramo, there's 0:17:15.119 --> 0:17:16.960 just smoke coming off the bottom of it. What is 0:17:16.960 --> 0:17:19.560 it about forty billion dollars worth? Now? Article at this 0:17:19.680 --> 0:17:23.040 point men just ridiculous. I want to look at sterling 0:17:23.080 --> 0:17:26.160 as well. One thirteen eighteen. Latest reporting from the team 0:17:26.160 --> 0:17:28.040 in the UK term that Richie soon Act. The former 0:17:28.119 --> 0:17:31.760 chancellor's getting the public endorsements and we've been tracking them 0:17:31.800 --> 0:17:34.840 here at Bloomberg News. We've verified public statements from one 0:17:34.880 --> 0:17:37.239 hundred and seventy nine Tory MP so that's more than 0:17:37.320 --> 0:17:40.520 half of the Tory MP's out time the nine this 0:17:40.560 --> 0:17:43.080 morning our time. What happens at nine a m JOm 0:17:43.119 --> 0:17:46.199 Perhaps we get a prime minister in the annoying the 0:17:46.240 --> 0:17:48.720 Queen chi soon Auld. Maybe we've got to change the 0:17:48.760 --> 0:17:52.920 language that we've got the King as wealth. Sure, big changes, Chris. 0:17:52.920 --> 0:17:54.320 I don't want to linger on it too long. I 0:17:54.320 --> 0:17:56.480 think this market wants to move on and move on quickly. 0:17:56.800 --> 0:17:59.440 You mentioned that maybe we've had one scalpe and list trust. 0:17:59.560 --> 0:18:01.439 What is the next one come from? Chris? Can you 0:18:01.440 --> 0:18:03.679 elaborate that on that a little bit more? Is that 0:18:03.720 --> 0:18:06.160 a change in leadership at the b J that's set 0:18:06.200 --> 0:18:10.680 to take place anyway? What is it? Well? I think 0:18:10.680 --> 0:18:13.159 that's a good place to start. We wrote something to 0:18:13.160 --> 0:18:16.840 the effect in I think February or March that the 0:18:16.880 --> 0:18:19.879 b o J was going to have its b Oe 0:18:20.160 --> 0:18:23.160 type event, and I didn't also think that the Boe 0:18:23.240 --> 0:18:25.600 would have another Bowe nine YouTube type event, But of 0:18:25.600 --> 0:18:27.399 course that's that's kind of what happened here over the 0:18:27.480 --> 0:18:30.119 last several weeks. So I do think ultimately this is 0:18:30.119 --> 0:18:33.479 heading towards some crescendo, and I think Japan is kind 0:18:33.520 --> 0:18:35.600 of ground zero for that now. Also, keeping my time, 0:18:35.880 --> 0:18:39.240 CNH this morning is at seven thirty thirty one, right, 0:18:39.280 --> 0:18:41.680 so the stresses that we've seen in the Chinese currency 0:18:41.760 --> 0:18:44.479 haven't abated here either. So I still have yen at 0:18:44.520 --> 0:18:48.320 one fifty and I have Chinese uh at seven thirty. 0:18:48.440 --> 0:18:51.520 I'm not sure that's the greatest environment for macro risk. 0:18:51.880 --> 0:18:55.080 What are the technicals of the tenure real yield? Now 0:18:55.119 --> 0:18:58.160 we splot it out to one, I'd call that catharsis 0:18:58.320 --> 0:19:01.920 you come back, but we sets Arron above that one 0:19:02.040 --> 0:19:06.240 sixty level. What's that chart looked like? Well, this is 0:19:06.240 --> 0:19:08.960 a little bit of a pet peeve that this idea 0:19:09.040 --> 0:19:12.640 that that that real yields are actually positive. I guess 0:19:12.680 --> 0:19:16.119 theoretically they are positive. You're if you're taking right, you 0:19:16.720 --> 0:19:18.840 take your break evens right. But if we look at 0:19:18.880 --> 0:19:21.280 like the actual policy, right, I mean, what the Fed 0:19:21.320 --> 0:19:23.960 funds rate is three and a quarter and inflations eight. 0:19:24.080 --> 0:19:27.159 So I think for all intensive purposes, for for real people, 0:19:27.359 --> 0:19:30.640 the real legis rate is actually still quite negative. So 0:19:30.840 --> 0:19:32.760 I think there's more work to do here before the 0:19:32.840 --> 0:19:38.920 FED really believes that short rates are offering a positive 0:19:38.960 --> 0:19:42.040 Really year, it was Chrispherun our Fed speaker today. He's 0:19:42.040 --> 0:19:46.480 a Fed whisper, He's a whispers It was heartily Chris, 0:19:46.480 --> 0:19:49.840 thank you, great cold buddy. You know, just Chris to 0:19:49.880 --> 0:19:56.520 run that a fatigue. We're gonna swing back to China 0:19:56.600 --> 0:19:59.760 right now. Peter Twotz with his professor of international relations 0:19:59.760 --> 0:20:02.960 at the London School of Economics. Peter, the advantage we 0:20:03.040 --> 0:20:06.320 have here is your work at LBJ in Texas. What 0:20:06.520 --> 0:20:09.320 is the symbolism that this is the only issue the 0:20:09.400 --> 0:20:15.720 Republican and Democrat parties share in common in Washington? Frame 0:20:15.880 --> 0:20:20.440 what we observe this weekend for a unified Washington as 0:20:20.480 --> 0:20:26.440 they confront a third term. G Morning, Tom Well. I 0:20:26.480 --> 0:20:32.040 would say that for Washington, UH, for Republicans and Democrats, 0:20:32.600 --> 0:20:36.080 where they saw on display um in Beijing over the 0:20:36.080 --> 0:20:42.080 weekend will only reinforce the view that that that China 0:20:42.600 --> 0:20:46.560 is um is a force to be that the US 0:20:46.600 --> 0:20:48.560 are going to have to contend with going forward. I mean, 0:20:48.560 --> 0:20:54.280 it was a very impressive, carefully choreograph display of she's 0:20:54.359 --> 0:20:57.640 power at the twentie Party Congress, but I think it's 0:20:57.680 --> 0:21:03.480 more likely to fuel um, you know, insecurity security competition 0:21:04.320 --> 0:21:08.360 in the region. One reason is that national security replaced 0:21:08.480 --> 0:21:12.080 the economy is the dominant theme in the run up 0:21:12.119 --> 0:21:15.160 to this weekend, and she's report to party members who 0:21:15.160 --> 0:21:19.000 were gathered in Beijing, and it's no accident. I think 0:21:19.000 --> 0:21:23.760 that she held back today's latest report on China's lackluster 0:21:23.960 --> 0:21:28.879 third quarter economic performance, the data until the Party Congress 0:21:28.920 --> 0:21:32.280 wrapped up, and so what they saw on display was 0:21:32.359 --> 0:21:36.600 she consolidating his hold on power. And the belief is 0:21:36.600 --> 0:21:40.160 is that she is that the kind of underlying premise 0:21:40.760 --> 0:21:45.879 is that she is interested in pushing China's ambitions in 0:21:45.960 --> 0:21:52.159 the region and and expanding power, if only to compensate 0:21:52.280 --> 0:21:56.520 for the erosion, um, you know, the slowdown in economic 0:21:56.600 --> 0:22:01.880