Tech, Banks, Markets, and Marijuana (Podcast)

good stuff when John Tucker has done. You're supposed to always say good stuff, Good stuff, John Tucker, good stuff, Justina does it? Oh my gosh, okay um. Moving on from John Tucker, also good stuff. On the Techer Innings front, We're gonna get Netflix later this week. We're gonna get a lot of MidCap names as well. And who better to dive into what to expect and all the jazz around these tech companies right now than our very own Bloomberg Technology senior analysts on Grana and man Deep sing

A lot to digest here ONAG. I want to start with you on the big tech names here, because to have a ainable equity market rally, you have to have your Apples, your Microsoft's, on your side. Why aren't they right now? So the big question is what's going to be guidance for the rest of the year. Um, we all know that things are slowing down in enterprise to expending. Cloud is going to slow down. PC sales are bad. We even expect enterprise you know course software to start decelerating.

But the question is, you know how much of that is already baked into the stock price. So I think guidance is going to be extremely critical when we go onto the next owning season from all these vendors, hang on when are they coming out with earnings? Microsoft's next week, Apples the week after that, and Apple is going to be very different as well because of supply chain you know issues we have seen that they may miss on

the iPhone side. So the question really is how's the buy side going to treat that, because you know, in our view, whatever we lose in this quarter, we're gonna gain back in the next quarter. Mandeep, what are you looking for in the companies you I can never sort out which companies You guys cover what you do social media and like the internet stuff? More consumer tech, say more enterprise tech. So consumer tech is very different enterprise tech.

Is a code word for what's enterprise tech actually means just business to business stuff. Got it. Okay, so you have Alphabet, you have Meta, Uh, Uber, Airbnb? Are they all coming out next week or in the next two weeks? And uh, Look, I think when I say it, and I mentioned this before on your show, that there was a massive pull forward when it comes to a lot of consumer tech companies during COVID times. We had a period where they are resetting the comps. Next year, the

comps are going to be easier. The problem for a company like Alphabet is they're operating profit grew hud so they went from forty billion inter operating profit to eight billion. Now that is the sort of comp I mean, it will take them probably two years to reset that. So they pull forward two years of operating profit growth in one year during that COVID time, and I think that is a challenge for someone like Alphabet to an extent

Meta as well. But when you say pull forward, that means they took it from two and three and put it in one. Is it really the case? I mean, are the the revenue they get from ads? Right? For the most part ad spending. It's not like companies that we're spending a lot in are gonna not spend in three. So you have a confluence of negative factors right now. Notably the Apple I d f A changes. That was a ten billion dollar drag on Meta's revenue for two

same thing. It's not going to dissipate anytime soon. Then AD pricing in general is coming down because we are headed for slower growth or probably a recession. So during times like this, ad pricing compresses. It will bounce back, but it's very cyclical. And then businesses in general, small businesses, which is the bulk of Meta's ads spent, they are pulling back again a slow growth times. And that's what I mean by pull forward because during the COVID phase,

Meadows revenue grew almost average. The reason why that happened is small businesses did very well. It was all online. They were spending a lot of money on ads to acquire customers. Well, you're running into tough comps. Plus, businesses are pulling back because ad spending is the easiest thing to pull back on when times are tough. So UM HONORAG we were talking earlier. There's a story in the Bloomberg about UM executives at Davos. Their expectations are for

horrendous and awful recession. But that's because the survey was done in October and November. Right in December and January, we've turned a lot more positive. Um is that the case for these companies as well. So typically what happens is, you know, take spending is sometimes driven by the sentiment that we see in the NASTAC how the NASTAC performs.

Now I did this correlation many many years ago, but if you look at it just on the spending side of it, last five years have been phenomenal for software spending. You know, the top twenty software companies grew at an average in that time frame. So it's going to be very difficult to come up with that level of performance again this year. Now, our big thesis is that whatever we lose this year, you know, we will recover it the next year or the year after, depending on how

long this slowdown is. And and partially the reason why we think is, you know, we think there are still a lot of very old systems out there that need to be upgraded. I mean point in time, you know, Southwest, the f a A, all those things, I mean legacy, it T spending dominates total I T spending. So all those companies slowly and slowly need to upgrade their systems, which is a bull case for software, but perhaps not in three Well, that's exactly where I want to go.

I think we had me and Deep on Bloomberous Valance radio months ago. I remember you coming up with a stat uh and it was something like in the next ten years. I think it's like, I can't remember, was billions or trillions? It was like four or five billion or trillion, I can't remember. I know those are different numbers UM spending on cloud infrastructure. So I'm wondering. And that's something you're hearing from these bank earnings as well.

That sure, some of these compensation expenses are coming down, but the tech expenses are coming up. How long does that bowl case or that tail when A was just talking about take to actually play out. Well, I would say there are certain things that are secular in nature in this market. Cloud spending is one of them, and that when when these secular trends play out, they play out ten twenty years, It's gonna take years before we

are fully migrated to cloud. And plus there is a lot of new innovation going on a lot of AI. You know, machine learning is being done on cloud. These are I mean very expensive workloades to run Chat GPT's waiting to see would bring that up a one month bill of jack chief. It would be way above then how much a traditional it costs to run. So that's where I think cloud infrastructure is a real secular tail wind. And look, there are certain structural headwinds for a lot

of these companies. And that's where you're gonna pick winners and losers is which ones are exposed to the circular trends and which ones aren't. So let's go near term the man deep in the next few weeks when we get some of these earnings roll out, who's gonna get it right, who's gonna get it wrong? I think you've

seen a lot of negative revisions already. So a name like Snapchat has seen top line come down, estimates come down by about consensus numbers are down a lot, same thing for a lot of other small caps like Roudblocks now with large caps, Google estimates are down ten percent. That doesn't mean they're gonna crush it or the you know, the sentiment will be positive after the report, So that's where you have to really match how far the expectations have come down. They haven't come down, and uh like

for a name like Airbnb. Now, I do think there was a pope forward even with airbnbs growth because of reopening, it lasted two years. Guess what there will be a slowdown period after that, and I think that's where they're exposed. We've been waiting to hear about this a lot in the last six months as while we started this an Apple and Microsoft as well at this slowdown is already here.

To what extent are we going to see more pain in the first quarter or is this is so the way we look at it right now, the estimates look fair. We don't see a bigger downdraft on that, which is why I said guidance going into the next quarter or next this earning is going to be very critical. If the count these companies are income, they come report and able to match the expectations of the buy side on the south side, and then you could see them rivers

you know, the trend of the stock prices going downwards. However, if they come back and say, you know, things are really getting even worse, then you have another leg down. But one of the big things that I've said is, you know, for us, the big you know, I'm not truly concerned about the length of the cloud cycle or the funding behind it that I'm very happy or very comfortable about it. But but I do not know that where the ten year is going to be by the end of the year. If the ten year is around

where it is, then tech stocks should be fine. But if it starts to go up inflation creeps back again, then tech is going to have a horrendous second half. So it's there is a lot that's tied up with the interest rates rather than just the earning side operating business. What are the typical valuations that you see on the enterprise side, So it depends on who you're looking at, and you know, you look at somebody like a Microsoft eighteen nineteen times. You know, a couple of years ago

it was thirty times earnings. But that all the all the you could say, the squeeze and the valuation has to do with the with the ten year climbing up quite a bit. You could say the same thing about Apple apples. Now in eighteen nineteen times it used to be over thirty times for for a while. So if ten year keeps on going up, that number keeps on coming down. I mean that's really where we are at this point. Sorry, men Deep, you what kind of valuations

do you see or does it matter? And the companies you cover because they don't necessarily make profits, well yes that is a factor. But for a name like Alphabet, you know you have to ask yourself when will they grow operating profit? Because that is going to determine the floor in terms of valuation. Right now, the market isn't clear. They aren't believing the consensus numbers that they can grow operating profit even low singles did. If they prove that,

I think that may be very well. All right, Man Deep Sing Senior Analysts Technology at Bloomberg Intelligence. Honoragu Raga, also at Tech Analysts, Bloomberg Intelligence, Thanks very much, always great your round table. Speaking of four twenty, we are going to talk about weed right now. Chris Violas, the CEO of Blaze, joins us to talk about technology platform that they that they operate um or or at least get to businesses to operate in order to sell uh

marijuana products. And I think it's such a fascinating story. We cover this a lot in this program because it's like we're watching the beginning of an industry, you know, the end of prohibition, and we can see the kind of revenue that this generates, not just for the businesses, but also for states. We recently covered this right the very well, the first the first one in New York. UM and I believe they use Blaze technology. Chris, let's

get over Chris right now, Chris Viola's CEO Blaze. Tell us about your product, what what what do you offer that's helping this budding industry. Man. Well, thank you, Creety, thanks for having me on. I'm really excited to be here. But to get to the point, Blaze is a retail point of soap platform really empowering about sixteen percent of

North America dispensaries today. So anything from inventory control to checking out and actually facilitating that transaction to the compliance that goes on behind it, that's all Blaze powering these beautiful retailers that are doing such work, including Housing Works. Yeah.

Housing Works is of course the charity that opened the first marijuana dispensary, recreational dispensary in New York, and there are I think twenty three other states where marijuana is legal, um, but it's not federally and that presents a problem for these retailers in terms of taking credit cards, in terms of you know, the payment point systems, how does how does that work? How do you kind of get around the federal law. Yeah, it's obviously there's a conflict there.

So when it comes to these payment types, really there's only a few options we have. UM. As with anything we do, we want to be as open and transparent and complying as possible. So credit cards are off the table. We don't touch that except for in Canada where it is federally legal. But when we're talking about the US, we really only have two options at this point. Obviously we can take cash. I guess three options. That's one.

The second would be a c H So you know, this is really likened too when you go on to then though, when you connect your bank account um and start to send money either directly to a person or directly to another business. We can certainly facilitate that today.

That's a direct to direct type of transaction. And then the second is our Blaze pay program, which is the pin debit based solution where the user, the consumer go ahead and insert their card with a chip, entering their pin number, and then from there we can directly transact against that specific bank account. So how does that work?

More specifically, I noticed that at Empire, at the Empire Cannabis Club, if you ring up a hundred thirty five dollars, right, they'll debit you for one forty and then actually give you the five dollars and change. I don't know what's going on there, So that's a that's a different solution than what we like to to use here at Blaze.

That is called cashless a t M. And essentially what they're doing with that specific solution is are actually turning that debit terminal into what we call an a a t M. And there's your round up, right, each time you withdraw from an ATM machine, it's got to be specific denominations. In this case, you know by by five, so by one forty you'll get five dollars back on that transaction. That being said, um, why that solution is functional, it's not our what we consider to be the most

optimal solution requires that to spend. Sure, you carry more cash on hand to facilitate the cash back. UM, but it is relatively straightforward the same concept of a direct withdrawal from that bank, So it is an option there. So then when you're looking at the long term for you for your own company, what kind of timeline are you looking at where you don't have to have these workarounds when it comes to payments. A pretty great question.

I wish I had that magic ball, m But at the end of the day, we feel that with such explosive growth in this industry, we're all trying to be compliant, both the operators and the service providers that that obviously service them. So my hope is in the next you know, three or four years, UM, we we see some movement. Obviously there's a talks from the Safe Banking Act obviously not going through this last quarter, but in general we

are hopeful. Um. We really feel like Canada's also, you know, set the stage in terms of normalizing that the payment systems. So we're hopeful. Um. That being said, we still have a long way to go, and I wouldn't say we have a direct line of site just yet. But does it annoy you that we haven't gotten safe banking or is it actually better for your business? Because hear me out well, or maybe you know this is clear to you.

The longer it doesn't pass, the more these dispensaries need you and you get to kind of dig your heels in in terms of market share. Yeah, look, it's a great question. Obviously we're balancing both the business ablaze as well supporting our retailers. At the end of the day, though this business was started by myself and then a few other founders were formal operators, so you know, our ethos series really to enable those retailers and make sure

that as successful as possible. So I do hope you can reduce the cash I do hope we can uh reduce some of the work around. So yes, while that may not might not help our margins directly, I think it's the right thing for the industry and the right thing to really move this forward. Um you see anywhere outside of cannabis, folks being able to use Apple Pay and some of these really cool techniques to transact and

obviously reduce that friction at checkout. That is really our main goal here is to help enable retailers to sell more and part of that's reducing the friction wherever the consumer wants to check out and whatever they want to check out with. So what kind of opposition are are you facing right now? I mean on your day to day how much pushback are you really getting UM with regards to the payment solutions or just competit the payments socritions. Yeah,

not not much. I mean, look, these operators understand that they're in a difficult situation. It's really about finding that local banking provider that first off, go ahead and have a depository account with you and be able to to just facilitating well day to day banking needs, but at the same time UM being able to supply not just the payment side, but we also Ablaze Capital, which is an aventory finance and solutions. So we understand there's a

lot of barriers for these for these retailers. So wherever we can use our economies of scale and you know, our FI plus dispensaries to help benefit and bring a solution forward, we obviously want to do that. So I would say between us and the and the retailers is not much friction. UM. They're looking for help and so whatever we can do to provide them with some assistance, I mean, they're usually pretty open to it. Any plans for an IPO what's the capital structure look like. Yeah,

I know we're private today. UM have raised this in or nineteen million across the board, all through um VC type of funding. UM. But you know, as with everybody in this economy, we're really focused on profitability, and so we do a blinding site this year to profitability and we want to control our future. And so when the markets do turn, UM, do you turn around and look upward for and I on the positive, you know, it's

definitely something that we're not going to rule out. But at this point, you know, I'd say it's been a benefit for us to stay private. Thank you to you next to you on our plan? All right, Chris, thanks so much for joining us. Fascinating stuff. Chris violis there, CEO of Blaze. They help cannabis dispensaries sell more WED Let's bring in our guests right now to talk about what's going on in these markets, a lot of it dictated by bank earnings. We've just seen the final of

the Big six UM report. Brent Shooty joins US chief investment strategists from Northwestern Mutual UH chief investment officer, sorry from Northwestern Mutual, as well as Alice and Williams, Senior Global Banks and Asset Managers analysts from Bloomberg Intelligence. Brent, let me first ask you your take on the bank earnings UM Goldman Sachs falling by the most since well in a year, I guess today after missing UM revenue estimates. How do you see this batch of bank earnings changing

your strategy or informing your strategy. Yeah, I don't think it's changing it too much. I mean, to me, the macro so what's happening in the global economy matters much much more than earnings, not to say that they're not important. They do kind of represent who's gonna win and who's going to lose from a relative perspective, But overall, the most important thing right now is where is the economy headed? In three where's inflation headed? And what is the FED

going to do? And I think that the better tone that you've had to the start of the year is because you are seeing inflation come down and certainly expectations of FED future tightening is coming down against the backdrop of an economy that hasn't yet fallen into recession. I think that's where you're seeing optimism. Alison hop On in here because as Matt pointed out, the what feels like the driving story at least for the TAO is going

to be those bank earnings. How much of what we've gotten from them is a sector specific story as opposed to a macroeconomic store and both. I mean they're going in completely different directions, right, Morgan Stanley is up seven. Yeah, I think the news today is a little bit more company specific UM. And to your point, Matt, it is interesting the economy and performance, and that is because Goldman Sachs reporting a comprey show which is UH the highest

in several years. UH. Solomon had warned that the coast to compete was not coming in UM as much as would be expected UM, but perhaps the results were even more dramatic than we expected in terms of the increase in comp comp was down for the year, but only something like while revenue is down, and so I think comp and head count that's that's really the story of Goldman. Provision for credit costs, which is a broad MACO macro economic indicator, was a bit worse. I'll come back to

that in one second. For Morgan Stanley, it was really the wealth business, which is the crown jewel for that company out performing if you will, um and and sort of negative expectations coming into the quarter. Net interest income for which we heard about last week. I don't know if I would call that macro. I mean, it is tied to monetary policy, but not interesting come coming in softer for most of the biggest lenders, and that's really

just due to the costs of their deposits rising. Think of that, as their costs of good sold rates are going up. They've gotten the benefit. Now they have to start passing some of that onto customers. Morgan Stanley's not interest income did hold up a little bit better. That feels pretty macro. I mean the broader theme we've been

talking about with banks CEOs for years. I was stationed in Germany for the past six years, and they really complained about the lack of net interest income and low rates. I mean, zerp or Nerve was really problematic for these banks. Sprent. You know, it's a point that I think is really interesting. We can get kind of back to business as usual now that we get away from extraordinary monetary policy. Does

that mean something to you? Absolutely? I mean, I mean to me, I still think we're going to have a recession. This year, and so you know, I do think that the fet is you know, intently focused on the labor market and not going to stop until they actually see the labor market crack, which I guess, I don't know if it's good or bad. I think it's probably closer than further away. But certainly, the the large rate hikes are a thing of the past, and I think they're

gonna start coming down. Uh. And if you think about the last couple of years, I mean, we had maximum policy to the upside, and then I think last year was maximum policy to the downside. I think this is a bit of a transition year where we slow the hikes and hopefully stop the hikes when that labor market

does crack. Um. But certainly I think I think from a volatility standpoint, that will bring down volatility, especially towards the end of the year, when we finally see that, yes, we are likely to have a recession, but it will be short, mild, and uneven. So you mentioned macro back and forth. Some sectors will win, some sectors will lose. Uh. And I think the other side of this is better

days ahead. But certainly, until we get to that point, I think you're gonna see a back and forth volatility perspective, but not as much as it was last year when the FED was at certainly on the elevator up on the rate hike cycle. Provisions. Alison, you said, you get back to I think this is well for me. I'm watching very closely to see how barish these banks are in terms of their recession forecast. Can you read that?

Can you read that into big low and lost provisions? Generally, the provisions that we've seen a lot of the grow, A lot of the provisions has been due to loan growth because card is the seasonally strongest in the fourth quarter, we saw balances. It's also the highest charge of rates, so that generally portends to have somewhat higher provisions we have seen. I would say that the banks in general have signaled some weakening of an economic outlook, but nothing dramatic.

City Group saying on Friday that they were reserving to sort of a five to five point one percent unemployment rate, so um some positioning there in terms of UH and giving you some detail around around their outlook. Imagine a five and a half percent unemployment rate, well five to five point one percent, five but still um and Uh, so I think that, and and JP Morgan has said, you know that five to six percent unemployment would be

five to six billion of reserve building for them. They did reserve build reserves by about one point four billion this quarter. About one billion was that was consumer. That relates to some of the growth that I mentioned. Um, but they said that part of the other part of that is marking to market towards those you know, other expectations, just as we're seeing some weakening. So not calling for

that yet, but just reserving towards that. So let's let's fold in what what Brent was just talking about when it comes to what the sector as a whole is trading off of. Is it really taking its que I mean naturally from the brown market, but is it taking its que from something like uh the two stents bread for example, and then compressed margins in that direction, or is it taking its cue from say cap yields as

a result of FED cuts priced into the market. What what does the stock trade off of the stocks tend to trade off of tues tends that's not really the yield curve that impacts that's that most meaningful to their earnings, but that tends to be the biggest UM indicator for the stocks. I think in general, when they've been reacting to earnings, it has been the initial reaction has been to the net interest income. We talked a little bit

about some of the reactions UM today. I do think that in the months ahead, really the focus is on unemployment and credit costs. Even though these banks will argue and part of the reason why they talk about how their reserves is just show look we have, like are the pre tax pre provision profits so profit before these losses is so strong, it's well covered. UM capital is very strong. They've built that up. UM, it's still uncertain, and it's hard for bank stocks to outperform as you're

sort of going into things. They need to sort of see the other side or see things getting better. Brent, how does the China reopening or the better than expect to numbers out of Europe influence your your position? I mean, have you gotten less bearish in the last few months because it seems like others have have shifted. Yeah. I mean I've been optimistic because inflation is coming down a certainly trying to reopening to put up our pressure on commodities.

But I think in general the US, you are seeing inflation pull back, and I don't know if people have made enough of this, but if you look at all in CP I uh less shelter, So the part that's lagging the it's actually negative over the last six months, and so you're starting to see that inflation come down, which to me is still the most important variable that's

out there. I think it accelerates, but as I mentioned before, I do think you're going to kind of shift to recession worries because I do think you're going to start seeing the labor market crack just a bit. But tying it into what was just said, I think the other side of this is nearer rather than further away, because I think inflation will fall quite a bit, which will allow the Federal Reserve to potentially pivot if they need to, to keep any such recession short and mild, which I

think is the most important variable for anybody's outlook. How How deep do you think the recession is, how long do you think it lasts? And I don't stilln't think it's either deep or long, which informs kind of a positive outlook towards the back half of the year, which unfortunately I think is consensus, but certainly I think still likely given that I think inflation is starting to create her. But to be cleared, you don't expect the FED to cut rates this year, do you. This is where I'm

not I'm not for sure. I mean this is where I think it's more important that I think they'll be able to pause and then if they need to to keep any recessions from being deeper, they will be able to cut rates because inflation expectations are actually right where they want them. I find it ironic that we came

into this time pere. I think people forget that the FED was trying to get inflation expectations up and the five to ten year universe missions at three percent, that is exactly where it was when times are more normal, not the past five or six years. We're worried about deflation. So this is where I think that that needs to cut our stop. All right, Brent Shooty from Northwestern Mutual. Alice Williams from Blue Word Intelligence, thanks very much for

joining us. This is Bloomberg. Let's bring in Ira Jersey right now, Bloomberg Chief rates correspondent for Bloomberg Intelligence. Ira, Uh, what do you make of the change in. UM, I guess perception we've gone from we just heard Dennis Gartman say bearish to at least mildly bullish, and we've changed our expectations a bit for the FED as well. We've even had FED speakers come out and say, you know what, twenty is cool in February. Yeah, we've I was expecting

a downshift in after the December meeting. Actually, you know, the FED and FED speakers have been talking about the fact that they need to kind of calibrate where ultimately the FED FUNDRAI is going to end up. And I think we are nearing that point. You know, then markets certainly pricing for you know, two maybe three more um, three more hikes of twenty five bases points. So so so it's not a big surprise. I think that they're

going to go twenty five in at the February meeting. UM. You know, today's price action is interesting in and of itself because initially we were, um, we were initially bear stepening, and now we're bull stepening. So so two year yields, you know, have rallied quite a lot in in over the last couple of hours, and UH, in particular after that Empire survey. It's like the lack of news is just pushing the market around quite a lot. That's exactly what I want to ask you about that Empire survey.

It was like the worst since May, the worst data going back to I think the global financial crisis as well, that coming from a camera Cris on our Markets Live blog as well. But do we really need to take stock in that data set? Yeah, I'm I'm not sure. I think that a lot of the volatility we're seeing as position based, and you just have people who don't want to take big positions one way or the other, so you wind up seeing outside moves even when you get you know, data that is kind of second tier.

I mean, i'd say that the Empire Survey typically doesn't move the treasury market more than a basis point or two um after its release. But but I do think, yes, it was very weak. You saw the inflation components, so the price is paid and the prices receives component um falls significantly. But but as someone noted to me earlier today, um, we had this this head fake in uh the Empire Survey last September as well, and and things just bounced

right back. So so I don't know if we can take a lot out of this one number, but that seems to be one of the big drivers of the market at least today, so Irah. Matt Miller, in addition to buying one ticket for himself and one ticket for his motorcycle in Europe, also says, you know, look, the Federal Reserve is going to be the bigger meeting um next to the e c B in about two weeks time. But Ira, can I take the flip side on that? Is it fair to say that maybe the e c

B is kind of the bigger spotlight right now? Well, I think I think they're almost equally as important, and certainly from a market follow hilogy standpoint, I think that the pick you can't pick your favorite child. Come on, well, I mean, the Fed's my favorite child. I mean us right strategists. But um, but but I think the ECB is is a little bit more doubtful. I think at this point, Um, it's mostly baked in the cards that

that the Fed's gonna go five. And you look at the market pricing right now and it's it's more or less twenty five with a small chance of fifty um. Whereas the e c b people just aren't sure not only you know, how quickly they're going to go, but how high they're actually going to ultimately hike. And and I think the um there's a lot of uncertainty around around Europe because their economy is much weaker than the US economy, but their inflation continues to run much higher

than the U S and than U S inflation. So so I think there's just a lot more doubt around what's going on in Europe, and that's going to generate more volatility, um you know, not only in things like German bombs and the periphery, but also in also in global developed market rates. So here and even Japan and Japan is an interesting interesting well, I mean they got to be the most interesting, um you know, if not the most biggest mover. Yeah, so huge, huge mover relative right, Matt.

Because one of the things that remember that the job the Bank of Japan had been doing is buying ten year Japanese government bonds at ten basis points, right, So, so they didn't let it float, and then they let it float a little bit more up to basis points. Now it's fifty basis points and right now, as of overnight um ten year Japanese government bonds actually are trading above half percent, above fifty basis points, and that means that that the Bank of Japan is going to have

to intervene and come in and buy more bonds. But there's a lot of talk they're going to get rid of that buying program altogether, and that could even generate even more about what happens then, I because you know, the rate spen above fifty basis points for three of the last four trading sessions, not including today, and so I guess four out of five now, and they've bought more than a hundred billion dollars worth of jgbs in the last four sessions. So what happens if they just

let go? Yeah? So I think that you wind up seeing, you know, maybe something not that similar to what happened in UH in the guilt market UH last year, where you wind up seeing maybe a fourty or fifty basis points sell off in a hurry in ten year tenure

Japanese notes. But but interestingly, I think, and and look, I'm not an expert on the Japanese government bond market, but what I what I do know and what I have seen, is that thirty year Japanese government bond yields have gone up significantly because that's not what the Bank of Japan was targeting, and they haven't been buying that sector. So anyone who needed to hedge long term interest rate

risk was selling thirty years. So I think you could have this weird dynamic where thirty year Japanese yields might actually rally a little bit as people start selling more ten years, and you can actually see the ten year thirty year curve actually actually flattened quite a lot, with the ten year sector really underperforming on that curve, and and that will generate volatility globally. Now I think ultimately in the US it might be worth ten or fifteen

basis points in the tenure. But we'll but but but that will stabilize and we'll focus on domestic issues here. Ira Jersey, our chief US rate Strategies for Bluebery Intelligence. Thanks very much for joining us. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller. Yet

on Fall Sweeney, I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio