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the Bloomberg Terminal, and the Bloomberg Business app. This is a joy and you people go to me, why do you celebrate people that get it wrong? And I had a blistering argument once with some people about this. You learn just as much from people who get it wrong as you do from people to get it right. But it's always a joy to have somebody in who absolutely nailed this. And he has an informative note this morning
from the Bank of Montreal Female Capital Markets. With the victory lap of the last eighteen months, Ian Lingen, with a ten year yield below four percent, did you figure we would go price up? Yield? Down in this manner or do you just make the guests? And we got there for a different reason.
I've been reasonably confident that something would break with the terminal rate as high as it was, for as long as it was. It's we're going to end up on four hundred and twenty one days at five point five percent as the upper bound come the eighteenth of September, and that is going to be not a record, but a very significant degree of tightening.
I talked to Matt Lazatti. I didn't get to this. I'm going to get to it right now with Ian Ling. A nice move there, Paula changed the micro around Zucki's you know, a pack could work at the Olympics in Paris on it to get the mic in front of the pole vault. And I didn't get to this with Lyzetti. But the answer is, formulas like the Taylor rule are
wildly distant now from where the FED is. How urgent is it that the FED catch up to what John Taylor at Stanford says, or other people frankly say they should be.
I think that the FED is cognizant of this, and that's why they opened the discussion. They laid the groundwork for rate cuts in December of last year. Recall Powell's pivot. Now that didn't play out, and we all remember what happened between January and March. But by opening that discussion, the FED has allowed the market to do some of
the heavy lifting for it. So that's one of the reasons that equities had been performing as well as they had and real rates, while elevated, were not at concerning levels as we have seen in prior cycles.
So I'm an equity guy. I don't know what this rate market thing is all about. I go to you guys in Ira Jersey. Is fifty basis points baked in for September? Or is there still some debate about September.
I think it's still a very active debate about September. I'm in the twenty five basis point camp, and the logic there is we have three more key data releases before the FED decides. We have two CPI prints and a payrolls number, and frankly, Friday's number, while it was somewhat troubling, was certainly not catastrophic. We have an unemployment
rate that's still below four and a half percent. We have positive payrolls growth, and at the end of the day, the FED wanted to instill a degree of balance into the labor market, and that's precisely what they got.
Monday morning, there was a little bit of panic in the market. It felt like, you know, I hadn't felt that in a while. I hadn't seen that in a while. People were actually talking about an emergency rate cut. Is that something or is that just overblown concern on a Monday morning.
Well, given the price action that would that played out on Monday morning, was going on with the y in what was going on with Japanese equities and global equities more broadly, one would have been remiss not to at least have an emergency cut as a as a potential. But now we've stabilized, and as we've stabilized, the bar has increased for the FED to consider cutting rates before the eighteenth of September.
I came in this morning, and this is the glory days of twenty years ago. I used to It's how I got my job. I used to construct fancy charts. Okay, I did log vix. That's its own story. It's away from me and Lingoen. But I did log inflation adjusted ten year yield the real yield. So I had a higher real yield as far back as July two point zero zero percent two point zero two. We gloriously come in. Then we have Japan, we come in even further. Where's
a normal real yield right now? I think even Global Wall Street doesn't know what to do here at a one point eight zero is that elevated still?
I would say that that's still elevated, and the FED would argue that's still restrictive. But the reality is, we don't need to go back to zero in terms of where we.
Need to go to to get an efficacy for the overall financial system.
I think that our estimates somewhere in the fifty to seventy five basis point range under one percent, under one percent, you got it, We give me.
That's an American if one of their Canadian shock, that's why are you kidding me?
No? I think that that's actually a reasonable level to assume for real rates over the next.
So you're modeling out a six percent nominal GDP. If we get a pop down to point five zero positive ten year inflation is just yield, You're goosen You gotta be goosen out. To six percent nominal unless you get global disinflation.
Right, And what's to assume that we won't find ourselves in a disinflationary environment globally? And I think that that's what we're running up against, and that's what to a large extent, the FED is trying to avoid, and that's why they're being as proactive.
I mentioned this all three times a sweek. Last week's single sentence that mattered way lead black Rock. She's model in China at a three percent run rate, yep, nobody even eating Lincoln. At least some Tao's ready for that, but not even Lincoln.
And when the FED starts cutting rates, let's assume it's September, how do they proceed from there? Is it every twenty five basis points every meeting, every other meeting? Do they keep it open maybe fifty points at some point?
How does that work? Usually?
Well, we're certainly in a typical environment. And so far as the FED is not responding to a crisis, at least not yet, all they're doing is going from restrictive to less restrictive. So they're not easing in the traditional sense, and so that will afford them the opportunity to deliver quarterly rate cuts if they deem necessary. So twenty five
basis points a quarter is our base case scenario. Okay, depending on what the next couple weeks gives us in terms of data, we might actually pencil in another twenty five for November.
How about the political aspect to it? I mean year that. How does the Fed?
Are you talking Canada or US? He was, okay.
I think that the presidential election has made it a bit more difficult for the Fed to do either a fifty or an inter meeting cut because there's the political aspect of it. But twenty five has been well telegraphed and is baked into market.
I've got to make some news here. You've been the genius. I can't say enough, folks, how Lincoln's led the charge? David Roseberg? What is it about Canada? I don't know, Montreal, Wan Rosenberg up in Toronto. It's the air of the water. Maybe it's the La bats all. Excuse me, Molson. I'm sorry, banker Montreal, but I lingen help me here. If I get a point five zero ten year real yield, where does that put nominal tenure in the Lincoln universe?
Well, we will be pushing back below three percent. Now that's not going to be this year, but that is certainly on the horizon for let's call it the next twenty four months.
You are modeling sub three ten year two point ninety five percent.
Now by the end of two thousand and twenty six. Very doable.
All right, I'm gonna refinance the mortgage. There now we're talking eat Lincoln.
Thank you so much at BEMO Capital Markets. I can't say enough about it, folks. It's the most valuable fixed income note. Good morning, Ira, Jersey on the street. Go to Bemo Capital Markets to see what Lincoln's thinking about. It's a three hour conversation with the most important effects person on the planet. Audrey Child Freeman joins us now with Bloomberg Intelligence, London. I just got to digress here, Audrey, pret time is precious. Your thoughts on the success of
France delivering the best Olympics ever? What's it like?
It feels good. It's not finished yet, but so far Stuth and needed feedback has been amazing. And what we hear from Paris is the atmosphere is excellent, and so it's a big success after early uncertainties.
Under the headlines, and folks, I can't say enough how Audrey dives deeper. Audrey, I'm looking at the Japanese ten year real yield and basically the experiment they've done for the last three, four or five years has a long way to go. Do you agree that we're only partly through the young clearing experiment?
I agree with that view. I agree with the view that the unwind of the carry trade is not completed yet. I am very cautious in trying to quantify how much we've seen and how much is left. But you know, if you look at some of the indicators, such as the CFTC numbers for instance, which gives you a little bit of a flavor as to where we are, it would appear that, you know, the market is still underweight the end. So yes, the answer is we're probably not
done yet. And to go back to the early point you were making about the BOJ, I also feel that, yes, the BOJ had a big part to play in that move last week and in the past few weeks. But for me, it's been very much, you know, fed driven, and I also feel that the second or the next leg, I don't know if you can call it second, but the next leg lower in yen will also be mainly fed driven.
Do you have a target on it that's support? And if we get through one fifty, where does audrichild Freeman feel weak and can go?
So I think at the moment it's it's very difficult to agree to give you a level right now, just you know the direction is If you get the direction right, you're a hero. But I think the level what I will wait to see is where the new ranges establish themselves. You know, we're still not sure that you know, we're not going to see, you know, another big wave of
moves in the in the next few sessions. You know, we've one we've gone to one forty two inch a day on Monday, we're back at one forty seven today just on the boj rape mentioned this morning. Yesterday we were one forty five. So what I need to see first is is the new kind of range that we base ourselves from one forty five to one fifty and that's where I kind of expected to be. And if so, what do we do? And what I do is I wait for, you know, the next trigger to move lower.
And I kind of feel that that next trigger may come from the US but it won't be as extreme as what we've seen in the past few sessions and weeks. Do.
I think a lot of folks are trying to get a handle on, you know, we get the yen from one sixty to one forty, now we're back at you know, kind of one forty seven. What's moving the Is it the Bank of Japan? Is it the market? I mean, is this normal? What's kind of moving this market so dramatically?
So it's certainly not normal. I just feel that it was very much a combination of factors together. So we talked about the weakness in the US employment report on last Friday, and I should say softness. You know, it wasn't dramatically weak. It was just softer than what would become used to for the US employment reports. As well as you know, the bog coming up more hawkish and
expected last week. And this was happening at a time when positioning was had become extreme earlier in the in the summer, certainly when we were trading around sixty two. And the final point I would add, you know, the kind of icing on the take last week was It's still difficult to sets what trader was, but certainly the risk of market sentiment that we had via other asset classes, the equity market downside, that exacerbated the on wide on
some of the crosses and EMFX and em instance. That's another reason.
Quickly, I got only one minute. How do you use real yield analysis right now? How do you use inflation adjusted yields in your study?
Well, what we think is that the US and the FED, this inflation story should allow the FED to cut interest rates. And remember that the narrative on the FED has moved so much in the course of the year. And that's you know, from talking rate hike a few months ago to no hike at all, to maybe a precautionary red cut. Sorry, and now we're talking about a series of rate cuts for this year. We're talking about one hundred bits rate cuts.
So this is how in the context of this inflation in the US, and that's probably enough to take your dollar narrative lower.
This has been helpful, Audrey Child Freeman, thank you so much. Publishing at Bloomberg Intelligence can't say enough about their value add on the Bloomberg terminal. We pride ourselves on a different set of guests. Brian Weezer from day one has been different. We're thrilled that he could join us this morning. Just lots going on there with Madison and while Brian out broken, Brian Weezer is Disney.
I don't think it's broken. I think that they, like a lot of media companies, have been struggling to figure out what to do and how to organize themselves for the future. I think that they had strategic clarity in October. They're about the twenty eighteen when they launched Disney Plus. I think they lost a lot of strategic clarity certainly going into the return of Bob Iger and in the subsequent periods they're still trying to figure a lot of
things out. You know, they really had the right strategy trying to focus on global for lack of better word, domination in the streaming work, going head ahead with Netflix and Amazon on the streaming video often that's.
The heart of the matter.
Yeah, I think so.
I mean, the bottom line is they're going up against giants.
They are.
They're going up against giants, but they're a giant themselves. Brian. They did actually show some profitability in the streaming business here today. What do you and Arresta Wall Street think about the future of that business From a profitability perspective.
Well, I think most of Wall Street is really focused on profitability to your point now where I sit, which is well Madison wall We we think that they really need to focus on focusing on ongoing scale, which might mean profitability is a later thing, because if you want to build up to compete better globally with Netflix and Amazon, I think profits is something you've got to focus on
later on. They've got parks fund profits. I think if you want to build a streamin is you have to continue to invest in content, programming and distribution.
So, Brian, they thought it's actually a pretty good quarter from the box office the studio. Have they gotten their mojo back there with all the Disney studio product?
Yeah, it definitely seems like I haven't focused on the studio results right now. I mean, obviously everyone's aware of just how well I think it set out Deadpool done. But I think that one could say, yeah, it feels like they maybe they never really lost it. It was just a couple of bad movies, Brian.
The music businesses having an existential crisis over what copyrights are worth. Is it the same with the catalogs of the studios is Pinocchio or Dumbo or you know something new Mandalorian. Are those copyrights maybe just simply not worth the goodwill or bad will on the balance sheet?
Yeah, you know.
Well, here's the thing. When it comes to streaming services, you come for the new original content and you stay for the library. Disney has this massive and amazing skill library and no one else will likely ever have anything like that, but not for a very long time. So they need both, right as long as they continue to have more and better programming, and Hulu I think has been crushing it from that front. Disney plus arguably needs a lot more. Then there's something for people to come
for initially and then stick around for. So I think you do need both, and Disney there'll be better positions they invest again more in programming and content for originals to support what they already have in this great library.
We can we have a moment of silence for Brian Weezer quickly here Paul asked him a question on this. Brian Weezer nailed NBC in the Olympics. Yeah, nailed it five years ago exactly.
So hey, Brian, just to go down that path, I mean, I'm having fun with the Olympics. What does it mean for comcasts and NBC Universal? Is this gonna be a win for them?
Well, I mean, here's the thing. It's probably they're better off having it than not, I guess is a better way to put it. It's a really expensive proposition obviously to run the Olympics, and I'm sure they'll say, you know, they'll make a profit on the Olympics and that's good for them. But you could also argue, well, couldn't they also invest in other programming and be just as well off profit wise. Probably, So, I don't think we want to overstate it as somehow you know, uniquely positive as
a way to build a business. It's definitely a way to build a business. But I don't think we want to overstate it either.
Brian on short notes, thank you so much for the huge announcment from Disney spiking up early and by public acclaim, I mean your daily look at the front pages of Lisa Minna Tello our Lisa way too long?
What do you have you missed it? Okay, have you been to the movies lately?
This is the problem. See that's the problem. Okay, a lot of people not going to the movies. So theaters are offering different perks, they're trying different things. There have been some summer hits, you know, Deadpool, Wolverine, I'll probably see it this weekend, Inside Out two, Despicable Me for those were big things this summer. But ticket sales still lagging behind last year. I mean, the summer is the big part for theaters. It's forty percent of their domestic
ticket sales. Fewer wider releases. A lot of people watching from home too, They're going to streaming. They're more comfortable at home. So what theaters are doing, they're offering perks like special popcorn buckets is one.
Thing in theater playgrounds. You'll like this one.
Cocktail bars inside the theaters, Okay, order ahead concessions.
I know my family loves this.
You do it online on your app and then you get there, you don't have to wait in the line and the popcorns just waiting for you. So those are some of the things they're doing that. A lot of them like the IMAX.
Better I know for that, yeah you know, but you pay for that.
But you pay extra for yeah, So they're kind of banking on that too.
So a lot of changes going on.
And afterthought is glued to the computer watching movies. She watched Chicago the other night. I'm trying to get her to watch Lost in translation. It's not the same theme laptop. Our kids are being cheated. It is the way I'd look at it.
Yeah, there is used to even watching it on their phone.
But I'm watching. I mean my parents. My parents will tell me they would go to the movies theaters two or three times a week.
Oha, that was it.
And then you and they had all the movie shorts and all this. So that experience is different from what we grew up with, which I still think was a good theater experience. Now to today, the case you say technology.
My father aged Lawrence of Arabia, was two dollars seventy five cents. It's they got old. Next, what do you go?
Taylor Swift fans, they're celebrating Kamala Harris's running mate, Tim Waltz.
Okay, there's some reason.
And Swift he is a swifty Okay, they're calling him the Swifty VP.
A couple of things he's done.
Remember back in November twenty two, right rafter that Ticketmaster disaster with the Swift tickets. So he posted a picture of his cat on X and said that you know, it was online all day and now it's not getting.
Taylor Swift tickets. Then he went further.
He signed this so called Taylor Swift Bill that was in Minnesota into law. I kind of guarantees that protection for people buying tickets online. And then he proclaimed two Taylor Swift Days in Minnesota of June because the tour came to Minneapolis.
So wow.
He complained that he claimed those days and a lot of Swift fans are jumping on. They're making friendship bracelets with his name on it. So it was attracting that younger.
It's friendship brace But I do know it is a thing. It is a big thing, right, So maybe he's getting the Swifty vote. That's got to help.
On the margin that younger.
Sure they're looking for that because they don't need friendship. Maybe it's because no friends.
That could be I'll make you one next Olympics fever, right, that's all we're talking about.
Olympics. Olympics.
I love the vault lesson.
That just amazes me. That sport in itself.
Did you know they have breakdancing too, By the way, that's another story. But the problem is that, you know, it fades out after three years. You know, you have this whole hype and then it fades out. So Netflix wants to change that. They're partnering with the International Olympic Committee. They're filming documentaries right.
Now about the auto racing thing.
It's the same people, the Box of Box Films that did the auto racing thing. Okay, so they're there, that production company and they're filming all those different sports. And what they're gonna do is they're going to take that footage and they're going to put it into different seasons. They have the Netflix documentary Sprint, so they're doing another season of that, you know, in the off season when the Olympics aren't running. They're doing another season of some
Moanbiles Rising because that was a hit on Netflix. So they're figuring film again now and then we'll you know, air it later, so that will.
You know, help keep the interest. But they want to track younger fans too, and.
Correct me, it's in Los Angeles.
Next yes, correct, yes, yeah, it'll be big.
You know, it's it's dazzling. In fact, Mayor Hidago out today just screaming the politics of France has just been pushed aside by the joy of this full disclosure. A Greyfeld sighting at the rock Star seats. She knows like Sleen I think, I think she's like best buzzs of Selene Greyfeld sighting. She is in Paris. David Gerr is our intermediary here and we believe we may have a scheduled Griefeld conversation. Catherine Greifeld, surveillance Paris reporter. We're looking for that Friday.
We're working on it right without the horse, without speaking of Paris. This kind of brings me into the next one. We had.
Open water swimmers have done it. They have dived into the Sin River. Paris organizers they said it was safe. They had a two hour training session, they came out everything was fine. But I mean the women they kick off that ten kilometer race to starting to one day, so tomorrow the men's is Friday. The water correctly so correct correct, But they say the weather is going to be great for it, so they shouldn't have any problems
with the water and the bacteria levels. But a lot of swimmers are telling the Associated Press, you know what, we're still kind of worried.
I don't want to get sick.
Well, I believe a Belgian swimmer was sick, but again I'm not sure if it.
Was the water correct correct.
Well, I mean, I mean it's going to be pretty cool that they do it, because I mean the scenery around that thing went through the capital is pretty awesome.
I mean, I got the Wilburtin swimsuit. I mean, I got the fancy, over priced French swims nice and I can get. I got, I got float I got and I got float floaties France gating. You know, goem But would you, Paul.
I mean they think.
I mean, if they have to do, you got to test out the current, right, because there's a stronger current.
It's a real current, right, I would.
I would guess it's an amateur It's not like the Thames. The London current is you sit on London Bridge after the third martini and the water's going underneath.
It's like whoa, yep, anyway, good stuff.
But yeah, so they did it, so we see there is a backup plan in place in case they do not test it.
Right.
The backup plan is that it's a stadium that was the side of the rowing and the canoeing events.
So that's there, you know, on the ready, just in case the levels don't work out very well.
Okay, Lisa ma Tello, thank you so much our newspapers this morning. 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
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