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This is the Bloomberg Surveillance Podcast. I'm Tom Keene along with Paul Sweeney. Join us each day for insight from the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten am Eastern from our global headquarters in New York City. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen and always I'm Bloomberg Radio,
the Bloomberg Terminal, and the Bloomberg Business App. We could talk of Rebecca Patterson of Bridgewater, and she's a long garden leave right now we hop place to place. Yeah, you know she's out on garden leave now. She's the Bridgewak. She's the bestsemer, trust I know, the managing careful money. But when I first met her she was hurting yen in JP Morgan. She is expert on currency intervention. We are on and just start strong this morning with Mss Patterson. Rebecca,
can you do a unilateral intervention where it works? Every textbook I know? Iss, No, you can't.
The textbooks are right in this case. So Japan is trying to slow the weakening yen trend, but I think they know full well they can't turn the trend just by intervening. They can spend a lot of money to try to slow it down, but that's all they're going to get. To have a real turn in a currency, you need coordinated intervention. So you have to have several countries working together, ideally including the US. That sends a big signal, and you want policy moving in the same
direction as the intervention. So in this case, if they want a stronger yen, they would need to be raising interest rates by a lot more than what's currently expected in the market.
What's so important here is a multi dimensionality. But the simplistic media approaches. What about the FED? Forget about that, they have to worry about the entire Pacific Rim. They're getting a free launch right now with enhanced exports? Are you going there this summer? Everybody else's I know told me about it.
I know a huge You can get a lot of sushi right now.
What the censor is? There's a Pacific Rim impact?
What is it?
Right?
So a lot of these countries compete with each other for the US, for Europe. So Japan going down puts pressure on countries like South Korea, Indonesia, Philippines, Singapore, China to also have weaker currency. So Korea is making a lot of comments now that they're in some pain. Could see intervention in other countries across Asia too, So they're all going to be fighting against this trend, but it's a fight they can't win.
So all right, Just keeping on top of that Japan story, we think about the US exceptionalism from an economic perspective. That's been the discussion over the last six to twelve months here. How unusual is it that you have a US economy growing at the rate it's growing versus China, versus Europe. How unusual is that? And how do you play that?
Well, it's not that unusual to see the US as kind of the main engine of global growth. And when that is the case, it is pretty normal that the US equity market would be outperforming, that the dollar would be strong because foreign capitals coming here to invest in the US. US capital is staying here because it's more attractive. What I think will be interesting as we look ahead
to this summer. You saw the news I'm sure, and you've already reported on China this morning talking about having a policy maker session in July talking about additional stimulus elements probably before that, including rate cuts, et cetera. Can they do enough so it's not one engine of growth, it's multiple engines of growth. I'm skeptical. I don't think they'll be able to pull it off, but they're going to be given us more.
What does your PAS travails mean for American citizens? How does it redound back to our listeners of viewers this morning in America?
Well, again, the weak yen is a reflection of the broadly strong dollar. The dollar is up against almost every currency around the world ear to date, so you do need to think about what does the strong dollar mean. The strong dollar tends to be a pretty big headwind for emerging market equities. So that's an area that already has idiosyncratic risk around China, but now you have this broad macro risk as well. The strong dollar is the Fed's best friend. If the FED is trying to get
inflation back down to two percent. A strong dollar slows down US growth by making our exports more expensive, less competitive overseas. That tends to weigh on manufacturing, slowing growth, disinflationary that helps the FED. So again back to intervention. The FED doesn't want to help Japan here. The FED wants a strong dollar, so it's good for getting inflation down, it's bad for our exporters, and it's bad for anyone looking at emerging markets right now for diversification.
Then what does our feeder reserve do tomorrow? We're going to have Tom Tom and that surveillance team and they'll be you know, full coverage tomorrow afternoon. But what do we expect from our feeder reserve tomorrow.
I definitely think you could have a BINGO card ready with words like more confidence, words like patience. I think obviously they're going to be on hold. They're going to want to see a couple months of inflation coming back down after these three months of sticky numbers. But I do think we'll get more chatter about what they're doing with their balance sheet and slowing down QT and I think that could be at the margin, something that helps take some of the upward pressure off us heels at
the long end. And it also could take a little pressure off some of the regional banks because they tend to get hit harder by what's going on with you?
Elk, So let me ask you a best of your question, and that we're in a bull market. Some would say it's a second leg ofable market. What is your wisdom for people that have missed the boat leaving the duck you got to get back on? Do you load the boat on Amazon this afternoon? How do you don't tell me you're going to dollar cost average in none on the patients for that? I'm wave on.
If someone handed me a big check today and I had to figure out what do I do with it? Do I stay on the sidelines? Do I invest? Because equity markets go up eight years out of ten on average, if the economy is growing, if there's earnings coming through, equities tend to benefit from that. It's pretty common sense. So I would be getting into the equity market even here,
even at these valuations. I would not just be loading up on the magnificent whatever number you want to use, six seven four, But I would probably look for diversified exposure to the US market, overweight the US, maybe some exposure to Japan as well. I think they can keep riding this a while longer and then interesting with fixed income you know US bond yields are rising, it's hurting those returns. You can buy a nine month treasury right
now for almost five percent. You hold it through maturity, so you know you're going to get that, You're not going to lose value, and it gets you through the election.
So if we have any.
Wonky little happenings around the election, you know you're going to get that return to me. That would be some diversification. I also think gold is a good thing to have here for diversification, even at these levels.
We're out of time. Can you come back and go Gator a on us?
I would love to go.
She live Gator, but as a child she was all Gator. Her father major Gator. Oh okay, you know so we'll Rebecca Patterson, thank you so much. Thank you for joining us today, particularly careful discussion of again, you have to get up out of that chair because John Tucker's he says, I know, Michael Barr and I got to come in, so think Rebecca, thank you, good to see you. George Kankalvas joins right now. We're on Apple car Play, on YouTube,
search Bloomberg Podcasts out there. There's a live chat. It's sort of people are waking up Whitefish, Montana.
Oh do you think they fish out there? I'm guessing they fish.
Whitefish, Montana. Life is tough. Good morning in Whitefish, Montana. Good morning. Is George conkalvas As well, head of macro strategy at MUFG. That's a Japanese firm, and I think it would be more than inappropriate to talk to mister Gounkalas about yen that is between the major banks and the Bank of Japan and the Ministry of Finance. George, the challenge is that companies are having. Is it just because after inflation the real yield is two point two
one percent? Does that just make it harder to do business?
Good morning, Tom, Good morning everyone. Good to be honest with your listeners. I do think that there's a number of things working. Yes, real rates do matter. In general, rates matter. Overall, we're starting to feel the full brunt of these higher debt servicing costs, especially for the more smaller mid sized businesses, but even for the large corporates that really uh, those that had pricing powers. Some still do. But as you've been reporting all morning long, Coca Cola, Yeah,
even if yeah, if you have pricing power. You can kind of pass it through, but everyone else isn't to realize that you can't just pass it through. So you're losing your earnings momentum that we have for the last three years. So inflation helped in many ways kind of to mask that, lifted all boats in a very odd way for earnings. And now the real costs with the FED raising rates as much as they did, real rates matter and they start to bite now.
So George here, we're probably roughly halfway through earnings here for the S and P five hundred this cycle. Any takeaways here, because again, like as Thomas calling a for Coca Cola, some companies still have a lot of pricing power out there.
Yeah, and look, the same sort of repeat story around tech. We get misses here and there, but by and large it texts another area that's lot of pricing power and low overall kind of service costs. So yeah, I feel like we haven't seen a real new trend forming, but it's building upon the idea that we're we're on the on the other side of almost going back to the pre twenty twenties, if I can kind of say that, I mean back to the way things used to be where it's gonna be.
Those with power and now, folks, we descend the cone of silence, just like Get Smart years ago. Because there's a FED meeting tomorrow, George can gov us. What is Powell not going to say at the FED meeting?
Well, we think that he will avoid saying that hikes are on the table, that there there anything goes, or that policy can be adjusted both up and down. We think he'll try to avoid doing that, although I wouldn't be surprised if the Press Corps tries to ask him.
And Mike McKee would ask him, is it a possibility, as Lindsey Piggs, as Stephel says, as you really should raise rates, that's not gonna happen.
Joy which that's not gonna happen. I mean, if I'd rather stay on hold for longer then end up let's say that we do get a slow down in the economy the next six months to a year, they will end up owning it for hiking last minute. So they'd rather just do nothing to stay on hole for longer.
Tomorrow, Pharaoh Bramo in myself the FED deicides we return. This is part of my eighty hundred page agreement of course, most of it's on the food court. But with the FED decides tomorrow, we look forward to that. You will see that out on YouTube Live Bloomberg Podcast, that's a good place to see this is on YouTube tomorrow. The FED deicides at one thirty Paul.
So, George, what do you what are you thinking about here? Because we're gonna have the FED either holding rates or at some point later in near cutting rates. We have the European banks probably cutting rates. Here Where do we go here? I mean, are you kind of leaning more towards you know, equities fixed income? Where do you think the opportunities are for the next six to twelve months.
I think buying the dips, buying the dips and have to be significant dips in fixed income, and we're starting to get there. I mean, look, the dollar can be the wrecking ball if you get the ECB going one way and the FED going the other way, and Bank of Japan is reluctant to raise rates. I mean, we really have like a dollar is the only game in town. And and when the dollar strengthens it causes issues around the world for both corporates that translate back earnings and
a number of other things. In terms of dollar liquidity. So I'm really focusing on the dollar and the ten year treasury. Those are the two most important indicators. I mean oil as a kind of third, distant third, but but it's a dollar in the ten year. If the tenure makes a run above four seventy five and doesn't slow down, that's going to hurt equities and might be buying opportunity for bonds.
Tomorrow with the Fed, is a two year of value to watch? We have the sweeny five percent level right now four point ninety seven percent. Is it valid to use the two year, George Congalvas? Is it FED barometer?
You could always use a two year, But I think that they've now like almost what they did last year around August September October when we last spoke about these things. The bear steep in her and the long term rates will matter more because we've had rates under the FED funds from all this period, So the thing year won't matter as much. It's going to be if the ten years's moving more.
Okay, George, thank you so much. Georg Kankovas with his MUFG greatly greatly appreciate that we do economics, finance, investment in international relations. We do politics. We've tried to stay away from some of the Washington story. Everyone just covering it, covering it, covering it, including an encyclopedic. Now it's Laura Davison. She spoiled the short straw right now, and we have to ask her about this breaking news of the former president of the United States, Donald Trump. And let me
quote exactly Donald Trump. This is our Patricia Hurtado, who's incredibly experienced. Donald Trump was found in contempt to court and find nine thousand after New York judge overseeing his criminal hush money case ruled. The former president repeatedly blasted key trial witnesses and social media and violation of a gag order. Laurie, I know you're unprepared for this and not writ in, but at the same time you followed it tick by tick. What are the political ramifications to
the former president? Does this help him or hinder him? To have this contempt of court?
This really shows that the judge is, you know, not afraid to kind of follow up on what she said. The punishment might be so this, you know, Trump, whenever he is punished in some way, whether it's an indictment, this case, he's able to fundraise off of it and bring in some money. However, politically, whether this you know, helps him more broadly, you know, a kind of an
electoral sense that still remains to be seen. You know, we could start to see indications here that the judge is not going to rule in Trump's favor, and we know that if Trump is convicted, a majority of swing state voters say they won't vote for him.
The exhausting news flow that's out there, are people like you within the Beltway. Are they transfixed by these trials or are they separate from other major political issues.
I think that right now the trial is the is the main political issue for Trump. You know, it's basically how he's campaigning. He's in court most days. He's you know, making this part of a key part of his campaign strategy. All these appearances he's done around New York. You know, we'll see him on the campaign trail out in the battleground states tomorrow for the first time in several weeks.
So he's going to Michigan and Wisconsin. But even there he's talking a lot about these trials, right you know, calling him the witch hunt, that sort of thing, and Paul I.
Was struck this week, and I believe it was to see him meeting with Governor DeSantis down in Florida. I mean, think about it. The guy's working three or four days up here. We see it with midtown traffic, frike tower locked up where he's living, I assume, and then he you know, he's working the weekend down in Florida. It's remarkable.
Yeah, absolutely so, Lauren, let's talk about what's happening in the Middle East.
Here.
We have Second Harry Blincoln, I guess, back in the Middle East trying to broker some type of negotiation here. What's the feeling with they need administration as to the role it can play and how this might play out over the coming days and weeks.
So the administration is hopeful that a deal is coming together. You know, they've been, you know, sort of pushing for this. You know, we heard yesterday you know, blink and talk about how you know, it's really just up to Hamas
to accept this deal. You know. The idea here is that there would be a long ceasefire, you know, a hostage deal, and it would really turn down the temperature on what is both you know, a been a major problem for the administration, and both have broad as well as domestically, as the protest on college campuses have really rammed up and become both a with a political problem for them as well as you know, kind of a crisis on some of these campuses as they're dealing with
you know, how to go about, you know, handling the protest and you know, how to discipline students.
So, have we heard anything from the administration about some of these protests on the college campuses. I mean, it's it's obviously a very fluid situation and strong feelings on both sides, But if we heard anything from the administration and is there any sense that maybe impacting their strategy.
The administration has been quite quiet about this. You know, we've heard you know, Biden say that you know that that you know, anti Semitism as bad and students, you know, should you know, be refraining from that sort of rhetoric and pushing back on some of these things. However, the campaign has kind of, you know privately been saying, look, you know, this isn't really going to affect our you know,
electoral chances. People put on the economy, not on board policy, and they're not saying this is a big drag on them, comfort ball.
Laura.
One find of question. We know you got to go to Breaking News. What how did the president do with the White House Correspondence dinner. What was the grade score that you and others would give him of this inside Washington event.
You know, this was really uh, you know, a sort of his next big speech, you know, kind of after you at least kind of for the general audience, after the State Union. And you know, he started out, you know, you know, cracking jokes, making of a Trump, of Colin Jose, of the press, but then pivoting into this more serious message about democracy and you know that perceived dangerous that
that Trump poses. You know, for him, it was a good night, less so for Colin Jos who was more roasted and criticized for his performance.
Laura, Well, let's you go to Breaking News, Lord Davidson in Washington with our team here and again to get to that news. Let me get it up here exactly, Paul, I'm remiss not to have it up. The former president of the United States, Donald Trump, finned nine thousand dollars for violating gag order in a hush money trial.
That from Patricia Hurtado.
On the front pages today. It's an active front pages because Lisa is back. What do we approve yesterday? Lisa John Tucker is no Lisa Matayo.
What do you got?
We got a lot in store for you.
First of all, Comcast NBC Universal, they really want to get into NBA games. They're willing to offer big Bucks two and a half billion dollars a year to air a package of NBA games, So they really want to get into this playoff, regular season games. They'd appear in NBC as well as their peacock streaming service.
Warner brother Discovery. They're really fighting to keep those rights. They want to keep them.
Your real house.
Warner Brothers Discovery TNT has had the NBA for decades. I mean, so they haven't really built up a nice, nice franchise here, but it's gonna and I think they're gonna have right of first refusal here. But Comcast Universal is making a big bid to kind of get into the NBA because my my questions. I can't wait to see what the w NBA rights go for now to Kaylan Clark and all that kind of stuff. Now they're under a longer term contract, but I think the WNBA may try to come back and renegotiate.
Why are they doing ity bitty moves. Why don't they just come in and say, we have ka jillions of dollars we want to do in Comcast streamers.
Streamers. Yeah, yeah, they haven't had You're exactly right, Tom, they haven't really jumped in full force yet into programming. But you know, most expectations that are in the NFL, which has the big, big price tags, a lot of that is going to go streaming over the next five plus years.
Next.
All right, we just heard McDonald's results, right, reported this this morning. Now we're learning the Wall Street journals reporting that they want to expand in China more than ten thousand by the end of twenty twenty eight. And this is after spending one point eight billion to buy back a bigger slice of the business in China. So a couple challenges though. There's a rival tasty and that's there. They offer locals that local move with, you.
Know, burgers made of duck and tofu and things like that.
They just go in with their regular McDonald's menu.
They'll be fine, yes, yes, But then then you have Young China though, who operates KFC Pizza Hud though they're they're in China and they're big too, so that's another competition. And then Starbucks two has big China plans.
So there may be a technology cold war between China and the West, But when it comes to food, When it comes to food.
No, they have this double chicken burger. It's a popular menna featuring chicken patties, a let us sushwan sauce on a briosh bun. They have regional dishes kanji red bean, boba te after thought, would love that spicy mcwings, a Chris cut fries in bizarre bizarre como meal. There we go, that's what it says.
But you're right, Paul, though, China the fifth largest market by sales global for burger fast food restaurants, growing six percent a year, which is faster than the US.
Yeah, they're like everybody. Everybody say, everybody wants a good the.
China Optimists, Elizabeth Economy, and the Foreign Affairs. I'm reading it right now, just you know. It's her first swarry back from working with the Romando e commerce and she says, I'm sorry, it's China, Get over it. It's ginormous. Yeah, that's one of the basic things. Next.
Now, I mean, while Subway, you know the sandwich Chaine that was exploding all over the place, it's starting to shrink its chains in by four hundred and forty three stores in the US. That was what it's strunk twenty twenty three subways eight straight year of shrinking at store.
Now, this is from analysts telling.
The New York Post that it's going to even worse because of California's minimum wage law, so they could shrink their subway chains even more. I'm a Jersey Mike's girl, so yeah, got.
That, arou.
But they're more. I mean, when you think about the fast food locations around the country, subways number one, like more than McDonald's. I didn't know that until just recently. Correct correct subways everywhere.
Okay, I've only been in a few times, and every time you order something, I'm still hungry. I don't know what that.
Means because they don't pack their sandwiches with enough meat. Just my personal opinion.
I'm asking, I don't know, I'm just you know, you.
Know, here's about the minimum wage in California. After learning in the fall that the minimum wage was increasing, Subway locations started raising prices, with some hiking them as much as seven to ten percent.
One of the Chipotle items is salad that everybody orders is thirty six dollars in California.
In California, Yeah.
Because of the there was a you know, lead article in one of the million.
I'm still shocked at my fourteen dollars Miller life at a dive Jersey shore bar this weekend. I'm still shocked square card exactly.
All right.
A warning out there for young folks in college or getting ready to graduate who are looking for a job. There are some scams out there. They're targeting these young college graduates. They're using information to impersonate their school dean or professor that the kid knows, and they're telling them
that they've recommended for them for this job. So they're hacking into professors emails or they're creating these fake emails, but the goal is to get the student to apply for the job and then steal their identity bank information. They're asking these kids to put up money for home office equipment. There was one student who dished out money for a laptop and software almost two thousand dollars. So
it's just a warning. They're putting out there. The FTC actually posted that warning on its website too, So it's tough. These kids are looking for a job, you know, they get something and they're like excited about it, and then it turned out to be a scams live chat.
Someboy is twelve dollars now is five dollars foot long five years ago. I remember it's a twelve dollars foot.
Line that's inflation, which you can use the college thing.
I mean, I'm getting bombarded by this. I can't imagine what the kids and others are the whole Your email, folks, be careful out there.
Yeah, and text as well. They're they're going through your text as well.
They even get through that. We have a very sophisticated system at Bloomberg, thank you, mister, and it gets through that. I even rarely at Bloomberg, I even get.
Yeah, yeah, I just told my kids on the phone. If you don't know exactly, if it's not in your library and your book, don't answer it. Don't respond if you don't know. I'm shocked that people I'll hear them on the train and or on the phone say hello hello. So you actually answer a phone call from somebody you don't know who does that anymore.
I know, but I get the geek squad, the FedEx emails, like all those, and try to click.
On the link.
This is a Bloomberg Surveillance podcast, bringing you the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten am Eastern from our global headquarters in New York City. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app.