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A joy to having the studios right now. Rebecca Patterson with all of her work working with a trust, the Bessemer, and also of course I worked with JP Morgan Ages Ago and with a small shop up in Connecticut called Bridgewater. She came in because it gets too cold, you know, like for like two weeks. Yeah, Connecticut can get like the Dakota have.
Good coffee for the beverages.
We don't all We have a beverage of your choice and we'll give you a Titos and tang give packed when you leave. You wrote any ft about everything you do, just a comeback to the foundation of a dollar is a dollar under threat after the foolishness of the last.
Number of days, I think the important thing about the dollar is time frame and degree. You know, a lot of the media coverage this week with the threats of possible military intervention to acquire Greenland against its will, and then the backing off it. You saw some market reaction, but it was really just a one day sell America and everyone's saying, well, gosh, no one sold treasuries. Everything's fine, it's all hype. I'm like, no, it's not. It's time frame.
What we're seeing is a slow erosion of confidence in dollar based assets. This is something that will play out over years, not a day or a week or a month, but it's happening. We saw news this week that Sweden's largest private pension fund is reducing significantly it's treasury holdings. And yes, Denmark is not a large country, but they're getting rid of their treasuries. There's more to come.
I mean, Paul, can you I just love it having Rebecca and could you just say the poor soul who had three martinis in the city in London goes back to the desk in a major bank calls up when the phony goes celibate exactly.
So how do we I mean, what does that mean for the dollar?
Here?
We had did the dollar sell from early last year, yep, that it could stabilized and actually had decent second half of the year.
Here is that dollars still at risk?
Do you think modest risk this year.
So you know, there are a lot of factors that come together that drive currency markets. Part of it is cross border capital and trade flows. Part of it is expectations for interest rates to the relative yield of a currency. What helped the dollar in part and the second half of last year we didn't see as much hedging action, so foreign or US investors hedging out dollar risk. And then we also saw a reduction in expectations for FED rate cuts i e. Relatively higher rates, and that also
gave us support to the dollar this year. You know, given how strong the US economy is at a high level, and given sticky inflation, which you talked about earlier this morning, it's going to be hard for the Federal Reserve to cut much unless something drastic changes. So that is going to prevent the dollar from weakening a lot. The dollar hedging the diversification, Like I said, this is kind of a slow drip, drip drip. This isn't a sudden flood.
So I wouldn't be shocked to see a stable or maybe slightly lower dollar this year.
Well, given that backdrop, the global geopolitical backdrop, I guess it's no surprise that we've seen gold been ripping, Yes, like crazy, that's still kind of the place.
Yeah, So to me, that's the most obvious reflection of the diversification trade that's taking place. We know some of it is investors, and those could be speculative investors as well. But underlying that, we continue to see central bank demand. Central banks diversifying slowly but surely out of the US looking for other liquid assets. You talk to my good
friend Mark Sobel at omfif the World Gold Council. Both of them do really good surveys of central banks every year, asking them what do you intend to do going forward, and the data shows that they're going to keep buying gold.
I was not expected a meeting of the President of the United States with mister Zelenski of Ukraine clearly off the radar given yesterday's festivities. Mister Zelenski now speaking at the meetings of the World Economic Forum and Davos. Our team there will give you all that coverage. We'll look for the headlines here and bring them to you when we can. I look at your counsel and foreign relations. I mean froman hasn't slept in six days. It's nuts.
Everyone's publishing. I know you're going to publish and give us a head start on that, But I look back to back in the Foreign Affairs magazine Elizabeth Economy on the international relations of the Arctic Ocean, and then you followed up with your senior fellow on China. With all that's going on in the frenzy, it's CFR. What are you focused on most? What does Rebecca Patterson study?
I always look at the intersection of geopolitics, the economy, and financial markets because they all influence each other. One of the things I'm looking at now ahead of the Supreme Court decision about US tariffs is if we reduce the tariffs, take them off, shift them around, how does that translate into the affordability narrative in the United States? If tariffs are removed, do we actually see any price change that benefits you as consumers? How does that play
out in the midterm election. So again, as looking at all these connections, So that is a piece of work I'm working on right now because I think we should get the Supreme Court decision fairly shortly. So that's one I think. The other one I'm trying to spend time on is the Federal Reserve. So we know we're going to get an announcement probably in the next week or so with the next nominee. But I never, none of us ever had to think about the legal intricacies of
the FED before. Now I'm trying to understand things like, could you see not only two hundred billion buying of mortgage backed securities? Could you see a trillion mortgage?
Paul's got eight questions? Let me be rooting in a rum once more a bestmer trust ages ago. Yep, you don't go to cash? I mean, with all the cacophony you just mentioned, how do you handle this news at CFR and where else? How do you do it and not go to cash?
Well, I think the big takeaway for me is that while treasuries US government bonds still act as a diversifier in a portfolio, you can't expect them to work as effectively as they have for the last several decades. So when you diversify a portfolio, you have to think about it differently. That is part of the support for gold prices, which is extraordinary. It's part of why we see people going into alternatives more different types of alternative assets, and
I think it's part of why again. So far this year we're seeing foreign markets out performing the US, So it's asset diversification, geographic diversification. But you're right, Tom, getting out of the markets given that risk assets outperform diverse fine assets eight years out of ten, because the economy is growing eight years out of ten. So to get out to react to the geopolitical headlines, you're doing yourself a disservice in balls.
You know, you got to get back in. I mean I was in cash, but I took the leverage away and I went further to cash two or three days ago. Fine, No, I'm hammered I missed this.
No, I mean even professional investors, the smartest ones in the world, timing when to get in and out is a fool's errand that's why you stay in the market. You just make tactical shifts on the margin.
All the news this week, coming out of Davos, coming out of Greenland, we kind of forgot about. Japan had a little bit of a problem in their bond market earlier this week. That's spook people big time earlier in the week. Yes, that's just a technical thing. Should we not worry about it?
Is there any contangent issue there, yes, yes, yes, so yes you should worry about it. Yes, there is contagion. I'm talking about US treasuries and are we going to have enough buyers to meet the amount of supply we have to issue to pay for our deficits. But it's important to remember over the last twenty or so years,
global bond markets have gotten much more integrated. People own global bonds, not just their own countries bonds today, and that means something that happens in Japan or France or the UK can and will affect the US treasury market also. So we do need to care about Japan, what the Bank of Japan does at its next meeting, which I believe is tonight, right. And then of course Prime Minister Takeichi when she has this snap election, do we see
additional stimulus after that? How does that make people think about the fiscal dynamics.
So again I come back to I have to buy US treasuries, buy treasuries in gold.
No no, no, no, no no.
Look, I'm not saying dump all your treasuries by any stretch, but you want to think more diversified. It's been fascinating to me to see that you are seeing institutional investors looking at more fiscally sound bond markets today, So countries that don't have those big debt difficulties looking at.
Hell the boat in Germany. Is that what I'm hearing here?
I mean some of the some of the European bond markets are attractive. Canada, Australia relatively better, Norway, Singapore. The problem is these markets don't have as much liquidity, so that's only so far it can take you. But you do want to have a global basket of bonds and emerging markets. EM is the new DM, So emerging market fiscal dynamics today are much better than they've been in general. I'm not talking about every country for a long time.
Should we steal that phrase? EM is the new DM, or DM is the new You got to go nerd on your back to foreign exchange with JP Morgan here, I mean, I'm sorry, the Japanese mess, when it goes to me, is wildly nonlinear. Discuss the jump condition we could see in Japan. I fit on ravels well.
The JGB market, the Japanese government bond market is not the most liquid bond market, to say the least. So to your point, Tom, the risk of a jump right of a big move, and we saw a bit of that on Tuesday, another one of those happening. You will have contagion to the Japanese stock market, and a lot of investors have added Japanese exposure over the last fifteen eighteen months, so there's contagion risk there that could come back and affect global markets.
With a cold coming. I mean Rebecca and I live in the same neighborhood. I mean Rebecca, Saturday eleven above zero on the east side of Central Park, I mean ten degrees on Tuesday. It's even worse next week. How much wind do you need to take an uber the three blocks you need to walk? Gee? Is it like two miles an hour? Or do you need to see ten or fist?
I'm just toting not to go outside at all. God bless Zoom and teams in the delivery Ectly. I'm going to be making a lot of soup, I think Saturday morning I'm going to be stocking up.
With it's a favorite soup.
My favorite is butternut squash. But I a good homemade tomato cream of tomato soup, and I'm going to play with some lentils. I think this weekend.
There you go. See it's at nine o'clock hour a lexus where you just go into the food.
Said, but you know what yesterday I made ago lemono. It's a Greek and lemon soup. I'll give you the restaurant.
You know, the Greek restaurant on York Avenue. It starts with a why it's.
Phenomenal, yesie, yes, yes, yes, I think that's it. I have to look out. I know what I can picture. I get that soup fantastic. I call it super lexus.
It's great. So you can you bring in like lemon Greek potatoes.
I can do that.
Are they delicious? I tried to cook them like eight times and I'm going.
To get dried out, and yeah, I'm a failure.
See this is one of the many reasons I love Bloomberg. I have great conversations with you all. I never know where it's going. And when I'm done, you have this amazing food and coffee spread upstairs.
It is a little treat. Well, mister Bloomberg's. People stopped by today said is it true Rebecca Patterson's and I said yes, I said, They said, well, the cheese it's outson thank you so much. The counts on foreign relations or a recent essay in the Financial Times and the challenges, including important quotes there from the pension system of Denmark as well. Stay with us. More from Bloomberg Surveillance coming up after this.
You're listening to the Bloomberg Surveillance podcast. Catch us live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
We are privileged now, whatever your politics, after what we saw yesterday, here to pick up the pieces. Wendy Shiller, Professor of Chaos, Brown University. Wendy, is there a permanent change in the diplomacy of the United States after Trump? Is this the way it's going to be? Well, I don't know.
You know, we have to say permanent when we talk about American politics. But the president is simultaneously projecting power, but not in the way that I think europe is used to, which is through treaty diplomacy, sort of a whole coordinated effort balancing countries off each other, consultation.
That's not happening. But the president is still really extending.
A very long arm a very long reach of American power, and he's trying to leverage i think economic power over military power. He's had success in terms of NATO, NATO, you know, Europe kicking in more money for their own defense and basically telling Europe, you know, will be your partner when it's in our interests, but we're not going to be on call for you anymore. And I think that's a significant shift for Europe to deal with.
Wendy.
What have we seen from Europe this week at Davos and then just in the last twelve months of this second Trump administration about.
Show them some solidarity here?
It just doesn't feel like it's even there even this week in terms of trying to craft a response to President Trump's discussions about Greenland, it just doesn't seem like Europe's that unified yet.
Right, So, Paul, that's an excellent point.
I Mean, the stunning thing is how President Trump sets the world's agenda. You know, this is really something I mean we saw Reagan.
But Reagan had a.
Sort of a consistent platform and a solid enemy quote unquote in the Soviet Union, so it was sort of easy to sort of dominate that conversation.
Now the world is such a very different place.
But President Trump still dominates international politics this way, and Europe seems to be scrambling. They have their own problems internally. I think issues like the economy, transitional economy, tech, and you know, emigration have really royaled Europe.
So I think.
Europe's trying to each individoal contr's trying to get their own footing, particularly since Grexit.
I think losing the Great Britain as a real.
Partner in the EU, I think has really created more turmoil there than we would have expected.
Where are the senators? I mean, you know, I can pull out any number from the past. Let's go with the Richard Lueger, who is you know, wonderful Republican senator? Are there? Richard Luger is out there monitoring this, discussing this, being senatorial tom.
I just think there isn't as much capital or political value to senators and focusing on international affairs, particularly in the Republican Party. I think the Democratic Party and the Republican Party have traded places there. But right now, you know,
Americans are concerned about what's going on in America. I think that's what twenty twenty four told us, and I think that the polls continue to tell us, you know, affordability, housing, healthcare, these are domestic issues, and I think that's where there's no real political gain for reminding America that being a partner to Europe is a safer place to be than not being a partner of Europe.
And it's the smartest single thing I've heard Paul in all this thirty hour extravaganza with the president. I mean Richard Lueger and on the Wikipedia page, Sam Nunn Evan by Victoria Neuland I mean, Paul, we are in a habit, a method of how we do this, and it shattered.
Yeah, he certainly upended the political spectrum. So Wendy, again, it is election year here. To what extent do we think President Trump, when he does get back to the States maybe does refocus a little bit more on the domestic agenda? Hack, How important do you think he's going to be in these midterm elections?
Well, I mean, that's sens I'm not sure he focuses on the policy agenda, but it does look like he's refocusing his attention on Republican primaries and using that power among the really loyal Republican primary voter base, which tends to be the most ideological, the most conservative, and the most in love with Trump to affect things like Bill Cassidy's racing Louisiana Senator Cassidy to get Cassidy to vote.
For things that Trump wants. But right now, the President hasn't articulated.
What he wants from Congress going forward this year. So it's one thing to hold the sort of down, cleaves their heads, but what are you asking for? And I've been surprised that he hasn't wanted to resolve the issue of a longcare premium subsidies.
You know that's going to continue to.
Ripple and filter and affect people and affect his Brewer writings.
So how come he's not leaning on Congress to get that done?
Well? Can we go inside Brown University now?
Sure?
Professor Scholler William Rhodes ninety one years old, all that he's done for Brown University at City Group, folks, he codified the idea central banker to the world. Bill Rhodes with an essay in the Ft walking through how all this is shattered? And he says, you know what all King Charles has to do is step up and see the Royalty of Denmark, and that would change the dialogue. I mean it was literally Bill Rhodes thrown back to
the nineteenth century. Can the royal family actually get in the middle of this Greenland issue and change the dialogue of President Trump?
No, but I mean a phone call to President Trump probably wouldn't hurt.
He likes the royal family, he likes the.
Pomp and circumstance, so I don't think it's a terrible idea. And we do have the Road Center at the Boston Institute, and it's a terrific political economy center, so we are grateful for that kind of support. But I think here we saw the President recognizing that he had maybe gone just a little too far.
I mean, it's a trunk way of doing things.
Right, go too far, blow things up, but then back off very quickly when you realize that you can, and no other president has done this recently, negotiate for favorable terms on access to minerals or access shipping lanes. But he backed off pretty quickly, and that was something we're not quite used to with this person.
So in the fourteenth edition of your Classics Civics book, is there going to be a chapter twenty three Trump and Taco. Is that what we have to look forward to, Wendy.
I'm literally negotiating how many changes I can make to the existing chapter on the President as we go forward with.
Our next edition. So I will tell you that in a couple of months.
Okay, Wendy Sheller, thank you, thank you, thank you at Bill Rhodes Brown University today. Really really appreciate it. Stay with us. More from Bloomberg Surveillance coming up after this.
You're listening to the Bloomberg Surveillance podcast. Catch US Live weekday afternoons from seven to ten am Eastern. Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch US live on YouTube.
Jane fully with us now with Rabobank. They have a very interesting relationship, folks. They do all sorts of commercial activities. So Jane has really got the pulse of trade and commerce within what she's doing with foreign exchange strategy. Jane, right now, I'm looking at the cross rates. You look at the majors dollar yen e're a yen da da da da da Okay, fine, but I look at the nuances and I'm unsure what they're signaling, like I see
euro yen finally signaling euro strength versus yen. How does Japan get to their Monday morning our Sunday afternoon in New York.
Well, you know, we know that the market's very skeptical of the yen, and it has been for months now. We still have I think a lot of the speculative community really still seeing the yenna as the basis or the funding currency of a Carrie Traven And I think the onus has got to be on the Bank of Japan as well as maybe the Ministry of Finance to
really shake and rattle that view. So we do have a Bank of Japan policy meeting tomorrow, and I think we need a significantly more hawkish Uwada, that's the governor, to to really change that few. Now, he was pretty hawkish at the start of the year, but you know, most people were still on holiday right then, and of course you know, we have had these reassurances from the Ministry of Finance on the fiscal position too, but it
yea and that market's just not convinced. So the yen really still very much on the back foot.
Jane, as we look at the dollar trading against major currencies around the world. We had a big soft any US dollar in the first half of twenty twenty five. Then it's kind of stabilized kind of around these levels. How do you think about it in twenty twenty six years, This is this kind of the new normal level for the dollar versus some of these major currencies.
Yeah, you know, that's certainly what we think. I mean, you know, the market consensus is that the dollar will continue to weaken. But if you look at the performance of the green back through the second half of last year, well in the second half it's ended, you know, that period something like the second or maybe the third best
performing G ten currency. So you know, it's still the worst performing currency last year, but that's because of its falls at the start of the year, and that of course has spooked an awful lot of people, because you know, in recent months, I've had conversations at numerous times about you know, g dollarization, about even debasement, those sorts of things. But I do think the one phrase that most people
would agree upon is diversification. And I think relative to say the buy America trades, which really sort of dominated from say the global financial crisis into the end of twenty twenty four, there is more appetite to diversify now, and that I think is probably going to keep the dollar, not necessarily in a week footing, because I think the US still offers great investment opportunities, you know, for a
lot of investors. I think we're going to be more choppy, and I think choppy ranges is how we see the dollar, you know, against some of the majors going into twenty twenty six.
And I think Jene along those lines, I mean, I think what we're we've heard so far from Davos is business folks bullish.
On the US.
Jonathan Ferrer from Bloomberg Television setting a study by PwC saying, you know, you go pull a lot of these corporate CEOs around the world, they're still investing heavily in the US market, that maybe that bodes well for the dollar.
Yeah, I would agree that, you know, and if you look at the surveys, say from equity houses, you know, they're relatively bullish in terms of the potential performance of the US equity market in twenty twenty six, and that's not what you see in the foreign exchange surveys. With the economists thinking oh, you know, the dollar is going to carry on falling. So you know, that's why we're not really one of the reasons we're not as bearish as the market consensus on the view for the dollar.
I mean, if you look, you know at the US stock market, well, you know, the US houses almost all of the top ten tech companies in the world, are large part of the top one hundred. If you're going to get companies gaining from productivity gains because of AI, well the US is really well positioned. On top of that. Of course, the dollar now is cheap and making those companies look even cheaper than they were, So from that point of view, you know, we don't really see the
dollar as as really on this downturn. What we sort of see last year was a big position adjustment and chopping train rege traded is what we expect.
On a question not to turn into history or Patrick O'Brien from the eighteenth century, let's go there. Robal Bank owns the Netherlands and up north to the Baltic Sea. From where you sit, Jane, with all of your years of experience, how coordinated attached are the Scandinavian states from Denmark into Saint Petersburg. Is everybody on the same page. Sweden, Norway, the Baltic States, is everybody on the same page.
Well, you know, it is notable that you had Sweden and Finland moving into NATO really very recently, and I think that really gives us a pretty strong message as to who's aligned with whom. You know, Denmark is that side of you know, the Eurozone, but it is very much part of Europe and I think we again we've seen that in some of the reactions from the European
politicians this week. So yeah, you know, Europe is very much a different you know, from a federal position, that nationalism within the different countries is very strong and that can add to significant barriers and getting things done. But you know we've seen this week were still able, you know, to come together and pull together with a single message.
Jane, Thank you so much. Jane Foley a rabble bank, just can't say enough about the continental perspective she brings. Stay with us. More from Bloomberg Surveillance coming up after this.
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Let's get to the Alexis Is going Why am I doing this? Let's do the newspapers Alexis Goos office.
Hey, good morning guys. So I saw this one on the Wall Street Journal. I immediately thought of mister Paul Swainey because it's Duke Right. Just had their first first outright ACC championship more than half a century, thanks in large part to who their quarterback, of course, Darian Menza. Well guess what he was bolting for the exit. He wanted a bigger payday, so we went into the portal, tried to change schools thanks to you know, I'm talking nil
right name image likeness. So Duke filed a lawsuit against Max.
Here's the deal.
They have a two year contract with him, and he completed his first year and he was going to bolt before his second year. So that's an issue. The second issue is he told the school and the world in December, I'm coming back for my second year. And so therefore Duke did not pursue a quarterback in the portal. Now they're left hind dry because he went into the portal literally an hour before it closed, and Duke's a little miffed.
So you got a temporary restraining order on the guy so he can't enroll in Miami.
Can you warn me next time when you're doing this, I'll just go sandwich.
I got this.
You need a Tito and tang.
Well, what I would have said to you, young man, I'm sure you've got very good lawyers. Has more lawyers, so be carefully buddy.
Leave him.
Thank you.
Second, I do have a second one, unfortunately not a Duke one. But this comes from the New York Times. So federal regulators now looking at late night TV, right, So the FCC wants to enforce these old, they're largely unenforced media rules. Remember public interest standards when you had to give a politician the same amount of time if they're buying for a position.
It kind of has gone by the wayside.
So under the new guidance, the FCC wants these talk shows that are carried on local TV stations to offer candidates vying for the same office equal airtime. So who does this going to affect Jimmy Kimmel ABC, Stephen Colbert CBS, who we already know is going away in June, right, Seth Myers on NBC. Also daytime talk shows like The View, which we know President Trump is not a fan of. So you know, conservatives have complained for years at these late night shows tilt far to the left. They have
more Democrats on than Republicans. So we'll see if this public interest standard.
Ye, because it take. It's a real thing.
It's been out there since nineteen thirty four.
But you do feel like you see less and less of it. There's not a lot of the balanced approach.
To comment that. I think. I'm like, are you lots of people aren't staying up to watch this stuff anymore?
Right, because you can watch it the next day on YouTube.
Yeah, I mean I don't. I don't the whole eleven eleven thirty midnight thing. I think it's sort of dripped it away.
Yeah, even SNL I don't watch it. I rarely watch it in real time. Well with these hours, we're really watching anything in real time late at night.
All right, listen wonderfully one this story.
I like, Yeah, did you guys have Lincoln logs growing up?
Oh? Yeah, of course I love it? Right, it was our legos?
All right, Well, I'm glad you're both sitting down because the factory that makes Lincoln logs, it's in Maine shutting down.
Yep. Yeah, this national crisis is Trump should address this shit.
I mean this is big. Yes, So now they're trying to scramble and find someplace in China or somewhere else that can make these things.
Yeah, of course, I mean, so here's I guess the good news is Lincoln logs isn't going away. It's just factory that made them. So the Pride Manufacturing is now scrambling or Basic Fund is scrambling. That's the name of the Basic Fund, scrambling to find a new factory to manufactory these there are sexually you.
Can't make Lincoln logs in Vietnam, I think.
And then tariff, so the guys are saying, hey, we're gonna have to make them outside the US. With the tariff, they're gonna be more EPENSI we're gonna have to.
Better when the dog shoe, the green roofs your father goes, they're gonna die from them.
Were you stepped on a Lincoln log in the middle of the night.
You may have to go buy some Lincoln logs.
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