Bank CEO Hearings Put Spotlight On Forced Arbitration

So Max, well, look, I have to say, these executives look confident, they look unrattled. I don't know a few folks are watching, but it opened. The hearing is opened with Maxine Waters trying to sort of like rabbit tat tat, go through a lightning round, a lightning round. That's right, it was a lightning round. She was um interrupting them. They were sort of interrupting each other, she was plowing

through questions. I mean it was fascinating and as a viewer and a live blogger here for the Bloomber Terminal, I mean, honestly, it was exciting. But there has not been um and there have not been any bombshells there. There hasn't been anything scandalous and exciting. There hasn't even been a moment as um shocking as when Manuchin told Maxine Waters just in the last forty eight hours, you know that she had to bang her gabble as as

the Treasury Secretary told her um not long ago. You know, the reality is it's been um relatively predictable, nothing crazy. So Max, what would be a successful day here for these CEOs sitting in front of the Congress people, Well,

remember what this hearing is. It's it's about accountability, and if they can leave today giving Congress a sense that you know, these banks are manageable, they're relatively ethical, and you know that what they're trying to do is help the country and helps the economy rather than trying to hurt the country and hurt the economy, which was I think it's fair to say, is a picture that that critics had in their mind, you know, not long ago, in the wake of the fine into crisis, that that

counts as his success. But you know, it's also possible that Congress members will get in somebody blows over things like investments in guns or forced arbitration, or by the way, a lack of diversity. What we're seeing is, you know, seven white men standing in a row, just like in the tobacco hearings in the nineties. I'm wondering if that's going to come up later today. It's interesting Lloyd Blank find the former chief executive of Goldman Sachs just tweeting out, boy,

I really missed my old job. Exclamation point, exclamation point, exclamation point, and he was he was quoting a tweet from the New York Post of lawmakers grilling Wall Street big wigs over risks to the U S economy. It does sort of highlight how being the CEO of a major Wall Street bank is increasingly political, and it is a political role. And it is interesting to note this at a time when Wells Fargo is looking for another head and you know, what is that role at this point?

I mean, can you talk a little bit about that. Well the reason that Wells Fargo is looking for a new chief executive officer is because the last one did a pretty infamous job when he was hauled before Congress not too long ago. Politics are a part of of of Wall Street and Wall Street is a part of politics.

One thing that we've been tracking on the live blog is that, um, even Democrats like Caroline Maloney and and especially Republicans, some of their top donors, in some cases, their literal top donors over their political careers are banks

or a bank lobbying group. You know, politics and finance are really intertwined in the United States, and I think the starkest reminder of that is that some of these ceo s, you know, some some of the banks that they worked for, would not be functioning companies if it hadn't been for the bailout. Um, and now it's now, oh my gosh, it's eleven years ago, it's more than decade ago. So politics are it's just a crucial part

of of of what happens on Wall Street. But so far, it feels like that, um, these executives have the upper hand. They they sort of um, they just seem relatively calm and comfortable. So Max, let's let's take a look at Jamie Diamond. It seems like a lot of the questions are going to him. He's taking in some cases the lead here. How do you think his performance has been so far? Well, First of all, you also have to

give a shout out to Maxine Waters performance. She opened this by saying, I've read that you all you executives are going to try to rely on Jamie Diamond taking the microphone, and I'm not going to allow that. So she she preempted Diamond was feeling the spotlight for too long, which you know, I just have to say I thought was fascinating. Diamond is such an important influential character on

Wall Street. I mean, first of all, all of the executives here are essentially, you know, pups compared to Jamie Diamond. We have you know, Solomon who took his job you know, months ago. We have Charlie Sharf up on up on sitting sitting a couple of seats away. Sharf was basically Diamond's protege at JP Morgan um and then he lost his job and and and ended up an executive elsewhere

at Wells Fargo. By the way, um My, my excellent colleague Hannah did did a rundown of all the people who might take over the CEO spot it Wells Fargo, and a couple of them are people who now work or have worked for Jamie Diamond. So he's just such a powerful, such an influential figure. You know, he's also just in a superficial sense, he's just also a really

magnetic guy. You know, he captures the attention of the room, which is why I want to listeners that, well, why is a complicated question, but I want to warrant folks that, um, Michelle Davis and I wrote about a really interesting sort of ecosystem of protesters who've been following Jamie Diamond around. You know, he's magnetic not only in the sense that he attracts um you know, fans, he's magnetic in the

sense that he also attracts critics. And we we wrote about critics who have been falling around the United States, which is why I think it's fair to say that later this afternoon, it's totally possible we're going to hear from from Chase critics. Um in in hearing itself. All right, So let's switch gears a little bit, because this all comes ahead of bank earnings, and that'll get kicked off

talking about Jamie Diamond, JP Morgan. It will be among the first to report alongside Walls Fargo, and I'm just wondering how that backdrop complicates these hearings, the fact that banks are expected to report uh subdued numbers at best, especially due to a lack of volumes in fixed income trading and just in general feeling of malaise in markets during the first quarter. How does that affect these hearings?

You know, I think that you can't take your eye off the ball of of the big picture, which is that the banks um are still so remarkably profitable. You know, over the last um a few years, they've gotten, they've gotten bigger, they've they've they've quite literally made more money

than they've ever made before. And I think that it will be hard for Wall Street to plead um tough times or to focus on fear um when just I think that it would be easy for ban critics just to point out just just a simple scale of how big they've gotten and and how and how lucrative their businesses have been, even if the short term outlook might

might look starker than I'd like. So, Max, where do you think, and you've mentioned that this morning session was relatively a tame where do you think, uh, some of these banks CEOs could be exposed here in front of the committee. Well, you know, one change we've seen recently, after after Michelle Davis and I wrote wrote that story that I mentioned about the ecosystem of skers, is that UM JP Morgan came out and they said, you know, actually we're no longer going to do business. We're no

longer going to fund private prisons. UM. And you know, I have to say, as a journalist who had written about the subject only a few months earlier, I was really surprised. It was sort of amazing to see UM the powerful kind of change their ways thanks to the actions of of of relatively powerless critics that JP Morgan made a decision that they were going to change. It would be fascinating if private prisons come up again. It'll be fascinating to see how much UM attention climate change

Cole uh Guns get. We saw David Solomon talk about not funding I believe, you know, bum bumber stock. You know, any of these things could become big, big, big attention grabbing headlines, even even a relatively boring subject that's close to my heart because I've been reporting on it here at Bloomberg News. Arbitration force arbitration that came up once. You know, it's totally possible that that will get some more oxygen. Again, I think the question is, though you

know how how long the oxygen lasts? Just real quick here, can you tell us the sort of nuts and bolts of what's at stake with the arbitration issue. Yeah, honestly, I'm strilled that you would ask so force arbutration was basically a subject that no one really cared about only a few years ago. Even though arbitration, which if if listeners don't know, it's basically kind of like a parallel

shadow system. You know, it's separate from courts, it's a privatized justice system, and it essentially was just kind of tiny only a few decades ago, but it's it's now gigantic.

You know, if you're listening to this and you have a job, the chances are you have also signed an arbitration agreement that means you can't see your boss, and certainly if you're a customer of these banks, there's also a good chance you've also signed an arbitration agreement, which which would mean that you won't be able to sue these firms. And that caused a great amount of consternation

among critics um who care about both employees and consumers. Now, the banks will say, or employers will say, arbitration is, you know, affair system. It's cheaper. It's kind of less embarrassing, you know, because if someone has a has a claim, you know, it doesn't have to go into court. You can sort of keep it, keep it relatively quiet. The rub there is it in the ME two era. Arbitration

helps explain why you haven't seen as many harassment claims. Um, you don't fall under the spotlight because as you might otherwise, because they get trapped in the arbitration system. That's the kind of thing I'll be looking forward to seeing. We'll be looking forward to reading. Max Abelson. We're gonna have to stop it there. Thank you so much for joining us on short notice. We appreciate it. Max Abelson from

Bloomberg News covering all things financials. Our next guest has a very interesting theory how we can be come better investors. We could become better investors not by playing the cards were dealt any harder, but by playing the other players at the table a lot smarter. Ben Hunt, co founder, chief investment officer of Second Foundation Partners, joins us. He's also creator an author of Epsilon theory joins us from

reading Connecticut. Ben, thanks so much for joining us. Start off by just giving us your theory about how we can become better investors. You bet, Paul great, great to be on with you and Lisa. You know what I mean when I say that we need to play the

players rather than just play the cards. Is I think it's really important again, whether you're playing poker or you're playing the markets, to step back and and understand what what are the stories that at the poker table people are telling you with their bets and their bluffs, and in markets? What are the stories that we are reading in the financial media? What what? What are the what

are the drums that Wall Street is beating? And I think if you step back and you try to look at that, you can give you a real edge up and understanding where markets are going and how you can play a better game. So give us a sense of what that means today. I mean, what is the drum

that Wall Street is beating right now? It's the narrative? Sure, sure, well, let me start with the drums that aren't beating, because last year this time last year, we had strong drum beating, a strong narrative that inflation was back and rearing its head,

that there were concerns about that that coming back. And then at the end of the spring, going into the summer and certainly last fall, you had the the trade war narrative that uh, you know, we're on the verge of of of a real global economic slow down, if not collapse, and leading to the sharp decline you saw in risk assets last fall and then culminating in December.

But what you saw in December was a resurgence of our old friend, the narrative that central banks are large and in charge, the narrative that central banks have got your back. And so far this year in tooth I was in nineteen, that has absolutely been that dominant narrative that whatever happens in the world right, whatever happens around Brexit, or whatever happens with China, or whatever happens anywhere, that the Fed, the ECB, the central banks of the world,

that they've got your back. So, Ben, what as you take a look at the other players at the table right now, what are you learning? What are you thinking about? Where you I think opportunities lie? Yeah, Well, what's interesting is that is that while the you know, the central bank narrative. The this this this idea that that the FED and foremost of all of them, has got your back.

You know, this isn't new, right, We've been we've been We've seeing the promotion this narrative and the reality of it, frankly, but but it is a lot of the narrative here, the belief that the FED is there to to support markets. You know, we've been seeing this for the better part

of the decade. Now. What's what's interesting to me is is not that that narrative shows any sign of weakening, because it's it's not, if anything, when you look at what the White House is saying and in you know, in terms of really trying to push the FED to do more to stimulate right, to do more easing rather than tightening. You know, I don't think that this, this drum beating, whether it's from the White House or from the Wall Street, is going to go away at all.

But I'll tell you this, I do see it changing. And then the way I see it evolving is away from all central banks linking arms and doing this together. And more and more you're seeing stories in the narrative about a competition, particularly around currencies, particularly between the US and Europe. So practically, what does this mean in terms of it Practically, it means that that that both the ECB and the FED are going to take steps to

weaken their currencies. As an investor, like what should investor to do well? For investors, it depends way what aspect you're you're thinking about investing. So if you're looking the fixed income market, I think you've got a real chance here that, uh, the the inflation narrative will start to pick up again because the U s economy is frankly strong, and the FED is going to do more to weaken,

not to tighten. So that's if you're if you're looking at anything that's going to be inflation sensitive, and if you're looking at stuff that's right sensitive, especially on the long end, you know that's that's a that's a negative thing to happen. But if you're looking for stocks, look, I mean both in the Europe and and and here in the States, both central banks are going to do more of what they've been doing, which is very supportive

for equity markets. So Ben just kind of going back to your theory a little bit, is it, And I'm just kind of reading through a little bit is this kind of a a new way to kind of look at money flows. You know, I want to go, I want to hit more. They ain't kind of thing. Well, it's it's it's an old idea, really, I mean the it's it's the old idea that and this goes back to, you know, how people played the game of markets back in the thirties and the forties and the fifties and

the sixties. It's really looking at where is the money going? Who are the other players on Wall Street? Including who are the players like at the FED and the White House and the like. And frankly, it's not looking less at fundamentals, but realizing that in this sort of world, the fundamentals mean less and these money flows mean a lot more. So how do you factor in the algos, the quantitative funds that are doing ostensibly a lot of the trading and equities and frankly increasingly even in the

bond markets. I just have to wonder, you know, people when there's price action that doesn't make sense or seems you know, overly need jerk, people just said, you know, say, oh, it's the algals. How do you how do you work with them? Playing poker? Against you. Well, yeah, that's right. Well I'll say two things. So, so, most most of the algos that are out there are not what i'll

call fast twitch investors. They're they're they're barges, right, so they can rebalance monthly, they rebalance slowly, and so there they really are like a barge and they follow along. I'm trying to say is that at the margins, it actually makes the importance of discretionary investors, people who listen to this radio show and do something, people who are

you know, managing a discretionary fund. When you when you're when you're when you're in the river with a lot of barges, it actually provides a lot more room for the the speedboats to to to make an impact. Right. So it's it's it's interesting that you're right that that more of the dollar volume, more of the money flows in terms of absolute amounts, is handled with these i'll call them kind of barge like algorithms, but they follow along.

And so it really is is it's interesting to me, is that the human money, I think, can actually make more of a difference. And so what I'm trying to look at is is what is the human money doing and what is the behavior of investors. That's where I think you need to go in terms of playing the player.

So Ben, you know, one of the things that's interesting for active investors over the last several years the impact of social media as a way to kind of track investors sentiment, who's paying attention to what stocks, to what stories? And Bloomberg has a lot of functionality on the terminal to help terminal users kind of track that is that kind of a twenty one century way or an analogy to kind of money flows or reading the tape from days of viewer. It's similar. But I'll but I'll tell

you this when you're looking at social media. You know, we talked about influencers a lot, right, and and that that corollary for markets is it's not how many people are talking about something, whether we're you know, whether it's social media or or it's uh, you know, television or newspaper, it's who is talking about it. So it's it's it's really I think much more important to follow the influencers because, as the name implies, they really do have an influence.

We really are hardwired to respond to this stuff. And that's true if you're you know, a Twitter follower, or on or on Instagram and you're following an influencer, or if you're listening to this show or two to end the financial media, and you know J Powell decides to come out and say something. So I'll say this, when we're looking at media and we're looking at these signals that come out of the narrative, it's less important to see how many people are saying something, and much more

important to say who is saying something. Ben Hunt, thank you so much for being with us. Ben Hunt, co founder and chief investment officer of Second Foundation Partners. Well, the right hailing business is going to get even more crowded in the US public apprigity markets. First we had Lift going public, and now news is coming out that Uber is right behind like a a file in the next day or two. But as I look at Lift here, the stock is down six point two percent today to

sixty three dollars to share. Notable that it is well below it's seventy two I p O price. So at least the first right sharing investors are not feeling the love. Let's talk about the space in general. It's a lot going on. We welcome Man Deep sing Man Deep is a senior tech industry annalys for Bloomberg Intelligence. He ran literally ran to see us here in a Bloomberg Interactive broker studio. He did take a car. Okay, sorry, I'll be all week. So man, Deep, let's start with what

we'll get to Uber. But let's start with Lift. It's not the I p O they were looking for, right what do what do you think is going on here? I think and I compare Lift to Uber. Uber is definitely the iconic brand, you know, with scale that's probably more brand value than you know, anybody else out there in the right sharing space. So it really reflects the pressure you know, as an investor, as a right sharing investor,

which one would you pick? And my guess is, you know, given of Uber is much more diversified, it has got a lot more value generation potential than Lift. Now, the difference between Lift and Uber is, you know, when you look at take rates or average revenue provider, Lift is probably going to be better because of its niche focus. But that's not what investors are going to focus on because this space is not profitable at all. So it doesn't matter, you know, even if Lift, it just doesn't

matter money you're baking it? Who cares? I love this image of Lift coming out and putting their I p O on the market, getting their thing, and then Uber coming in with you know, two big guns, like shooting at the sky, being like here we come. I'm wondering. So the estimate is that they're going to get about ten billion dollars in the year's biggest ip O. Do you think it's gonna be over under? Do you think

it seems like it's being fairly valued? How do we even assess the value of a company that makes no money and has so in this case, from what we have learned so far, Uber is about five times bigger than Lift in terms of bookings, in terms of revenue. So the fact that they're trying to raise ten billion makes sense because Lift phrases raised for two billion dollars close to billion dollars in the ip So from that perspective,

it makes sense. And my guesses they would have probably eleven of their float as well, so it will be you know, oversubscribed, that would be my best guess, and it would kind of have a similar first day trading uh like Lift. But it remains to be seen how it will trade. You know, a month or two down the line. Given all the focus on profitability and cash burn, alright, let's let's go to those fundamental things like profitability and

cash burn. Um so lay after people? Why. I guess what Lisa and I've heard from fund managers that we've talked to on the show, is there really is a concern about that path the profitability. It's maybe more so and they we we thought about when Facebook and Google were coming public. What's different about these companies and makes it difficult to really envision that path of profitability. I think the biggest problem with right sharing business in general

is the economies of scale are missing. So when I look at the cost structure, there is no fixed cost structure for right sharing. The cost grow as you're scaling the business, which is unheard off. And you look at you know, any other businesses with scale and fixed cost structure, you get operating leverage. That's not happening in case off Lift, that's not happening in case of Uber, which is five times bigger than Lift. So when will they see the

economies of scale? When will the cost structure be stabilized so that you see operating leverage? And yeah, who knows right and Deep thing. We're speaking with senior tech industry analysts for Bloomberg Intelligence. Ben Deep, I'm wondering, Uh, you know, you say that maybe investors will start to care about cash burn and making money a month or two after the I p O. Why don't they care about it

before buying into the I p O? I mean, I know this is crazy, but why are they gonna wait, you know, a month to care the euphoria around an iconic brand? I mean think of Were as a global brand. This is like as big as Amazon investors here with actual money, right, I mean euphoria, I get it, But I mean why would they care later? Am I crazy? This?

This is what having been in an I p O banker, what happens is you get the scarcity value of surrounding initial public offering and you're you're afraid to miss out. So it's you know, I really want to own X number shares, so I'm gonna go put an indication interest of ten x and then I then oh boy, I got two shares and now what do I do with them? So there's some of those issues, But I mean, I

guess it's interesting for LIFT. They did go first before Uber, I guess most people thought it was an advantage, but maybe not in hindsight. Well, I mean it was an advantage because they owned the narrative for the time and they were able to raise the IPO pricing. Remember Lift raise the ip of pricing. They were priced at the high end, and the stock had a good pop the first day. The problem is this is happening too close.

You know, right after a lift, Uber is announcing it's as one within two weeks of that, and so there's already been a lot of focus in terms of the path to profitability. So it begs the question, how quickly can they get there? Okay, I want to ask the Flip question, which is didn't hurt Uber to come second in the sense that lifts I p O is down, you know, and you are seeing a rocky kind of

start to the whole share share registration. So I'm just wondering, you know, for Uber's sake, could people say, you know, I kind of was burned on Lift. I'm not gonna I'm not gonna feel as euphoric. I think it Uber the brand value ements. It's just the I think people are going to invest in Uber for for its brand or its value generation potential, and they're going to view it the same way as an Amazon or Facebook or one of these you know, big companies. So let's talk

about evaluation a little bit. Where where did Lift come public? Give us kind of a metric, and then maybe where do you think Uber is going to come in above that? Below that? Yeah? So Lift traded initially at about ten times strilling twelve months sales. That now, that was at the very high end. I think in case of Uber, it's reasonable to expect that they will trade at the ten time sales metric as well. So that should take them above the hundred billion dollar market cap. And uh yeah,

that's that's a reasonable expectation. So I want to go to something. You just said that Uber is going to be in the same camp as Amazon. Is that right? I mean, in other words, what is the barrier to entry with ridesharing company other than recognition and the downloads of the app on on people's smartphones. It seems like the barrier to entry is bigger with Amazon. That is

for Uber. Well, right, sharing is a consolidated space, so you may hear about new companies coming up, you know, trying to cater to a knit segment, but right now, right sharing, the way I look at it, globally, there are four to five players. Soft Bank is an investor in almost all of them, and it's a very consolidated market, which, to be very honest, helps should help them with the

profitability aspect. And a new entrant can have, you know, create the same kind of scale, and they don't have the same data as Uber and Lift have around the drivers, around riders, around city, so that's a competitive advantage. I think about the one of the pushbacks that we heard, not just for Lift and Uber but the other tech um companies in generalists is the super voting stock and the control that puts into the founders. Is that something that you think is a real investor concern or most

people just pretty sanguente about it. So I think that should play out favorably for the Uber i p O. The fact that they don't have special voting rights, the fact that you know, everybody is an equal investor or will be an equal investor in Uber, I think should be favorable for the Uber i p O. But I think with Lift, given its niche focus, having control with the founders isn't such a bad thing. I think they can steer where they're going with monetization and expansion, and

that may not be a bad thing. What about the regulatory risks here the idea that you have a lot of cities pushing back, especially because of cab drivers that are getting put out of business. Do you see that as being a material threat that is incalculable and concerning

for investors that are overcome by their euphoria. Evidently absolutely, Yeah, Yeah, it is a big threat and something where Uber has seen a lot of lawsuits and so far as the settlements they have had have been for smaller amounts, So I don't think it's that big offer risks, but you never know if if a big city like New York or San Francisco comes up with a verdict that goes against them, this is a huge threat. Okay, So it's not just Uber. We've got some other tech IPOs coming

up in the next quarter or two. What else are you and the b I tech team looking at? So, pinterest is obviously a big one. You know there there is a food delivery company, Postmates, that's likely to go public, and we just published some research around you know, right sharing companies likely to acquire food delivery because the top line growth for right sharing is so much better. They have such a long runway compared to food delivery, which is much smaller, and they don't have the scale. So

we think right sharing will be the consolidators. The Ubers and Lift will eventually end up buying a lot of food delivery companies and consolidated this space even further. And those are seamless and and things like that. Those are the ones, and they're going to become uh, they're gonna fall under Uber and Lift. That's a really interesting thesis and that actually makes a whole lot of sense. Those smart people and Bloomberg Intelligence do the right that smart

research you can find on the Bloomberg terminal. B I go all right, man Dave Saying, senior tech industry analyzed FORRE you go joining us here and active progress. Guys Welleen has been a risk on environment, no doubt about that. Stocks and bonds of both staging strong raunies after that

very week. And to to get a sense of where there are values in interest rates and in the currency markets, we welcome to our next guest, ed Al Husseini, senior interest rate and currency analysts for Columbia, thread Needle Investments. He joins us from hopefully sunny in warm Minneapolis, Minnesota, But somehow I doubt it. Um so, ed, just give us a sense from your perspectives, you step back and look at the global landscape for interest rates where I'm

sorry for currencies. Where are you seeing value now across the various currencies? Sure, yeah, so we've had um you know, the headroom has shrunk a little bit in terms of you know, currency valuation. I would say the broad pressed and this has been our position for some time now, is that the dollar continues to be quite attractive. First, it's a it's a largely positive carry trade versus most

of the developed market piers. And second, when we look at growth differentials, you know, despite the fact that we've had a slowdown here in the US, growth outside the US it looks looks particularly weak, you know, particularly in Europe and Asia. So that differential continues to skew in favor of the dollar. So being long dollar versus versus

the Euro looks attractive. And then if you look at the smaller open economies within the developed market space that are starting to ease to accommodate for that slowdown and global growth. You're looking at Sweden, You're looking at Canada, you're looking at Australia. Those currencies continue to look quite

vulnerable as well. Let's just set the record straight. Minneapolis and spring is absolutely beauty, full and ed. Please support Minneapolis because I lived near there not so long ago, and it is absolutely a beautiful, beautiful city except for

in the winter when it's thirty. But I want, I want to take the other side of this, the Euro side of this, and talk about positioning, because you're right that it does make sense that that Europe is weakening more than the US, so on a relative basis, the dollar seems like it should uh strengthen versus the euro. And yet the short euro positioning is so crowded right now. How do you sort of reconcile that or are you concerned about that? It's a stretch trade. There's there's no

way around that. I think I think it's absolutely correct to be concerned. Um I think at this point you don't want to front run the data to aggressively in the sense that if you do expect there to be some some global reflation coming back onto the table in the second half of the year, it does make sense to start getting along the door at least cut cut

your daughter alongs UM. But you don't want to run front to run that too aggressively in an environment where the ECB is still very much firmly focused on on easing policy while the feed is essentially sitting on its head. Interesting, So as we think about Sterling, um sitting here one let's go to the dark side. If we have a hard Brexit, where do you think that goes? I mean the correct answers, I have no clue. Um, It's honest, it's an exceptionally difficult UM, you know, set up for

for the Sterling. At the moment um. You know, we have had some some some more positive you know, noise in in the political set up. In the course of the past a couple of weeks, the probability of that of that hard exit, at least in the short term, seems to have diminished. Um. Whether you're able to trade on it, uh is very difficult, and it is a currency where people a position both ways. But those trading

ranges are exceptionally tight right now. UH, you know, whether you look at the spot space or or or the option space. So it's UM, it's a very difficult trade to set up. So I want to scarce a little bit too interest rates. Because every analyst and economists who we speak to, or not everyone, but the vast majority say that the bond market is priced in too much pessimism in the United States, given how much the U S economy is growing, and yet bond yields continue to fall.

So who is right and is it true? Do you agree with the idea that there is too much pessimism baked into where treasure yields are today? I don't think so, And I think we're right about fair. I think versus where we were, you know, say three to six months ago, there's definitely a lot less value in the longer end of the curve, so being exposed to treasury duration is

less attractive at this stage. Um, And I think the value is shifted to being long in in the front's end, so that the cash to the two year segment of the curve. Uh. That's the way I would set it up in terms of you know, the long und trading around two fifty right now, it's sort of the medium term range has been to thirty five to fifty five. Uh, that's very much fair given the rampdown and growth and inflation that we've seen, and I think the inflation picture

to me is much more troubling. Core inflation, you know, continues to weaken. Momentum broke somewhere in the middle of last year, and and and as continued to weaken since then, despite the fact that the economy is is relatively healthy um and the Fed's ability to get inflation up beyond two percent is quite limited. In other words, the risk that inflation moves to the upside are quite limited. This has brought down the ceiling on rates across the curve

um in our minds. You know, when we look at sort of the fair value trading range for the tenure or twelve months out somewhere between two fifty and two seventy five. So uh, you know, there's not a ton of value, but I think it's it's very close to fair. Very good. Ed al Husay any senior interest rates and currency and I'll from Columbia, Thread Needle Investments from Lovely Springtime, Minneapolis, Minnesota. At thanks so much for joining us. Thanks for listening

to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa A. Bram Woyds. I'm on Twitter at Lisa A. Bram Woyits one before the podcast. You can always catch us worldwide. I'm Bloomberg Radio