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00:00Sitting around the Thanksgiving table. What do you think they say? Thanks for? Well, they're pretty happy. I agree with Guy that no one has really held them to account with regard to two things. One, transitory, which inflation certainly has not been and isn't. And two, that they overextended their expiration date by a factor of, what, about a year? You know, we forget, but just in March of this year, the Fed was wrapping up, its QE was still buying. So certainly they contributed, as Esther George just said, that contributed to a great extent to the inflationary pressures that we're still suffering from. I mean, on Thanksgiving around the dinner table, all going to be talking about how expensive was turkey. Yes, absolutely. Kevin, you did. They should be therefore grateful that nobody is giving them a hard time. I think they should be enormously grateful guy. I think it's top on their list of gratitude for Thanksgiving. The fact that they're really not being they're not. The blame is not being laid to any significant degree at their feet. You know, the president's still talking about Putin and gas prices and supply chain distortions and all of that certainly factors in. But we cannot forget that the Fed increased its balance sheet and overextended its welcome with regard to monetary policy, easing bias, extend a period of time fomenting what we see today, which is a very sticky and overheated labor market. Okay. So if the Fed went too far on easing, the question now becomes, are they going to go too far on the tightening? Ultimately, what do you expect the terminal rate will be? And will it mean that a soft landing is not something that can be achieved in a soft landing? Kelly, it's historically improbable. I like to think of it more as hoping and dreaming, you know. But what I think is kind of comical is now you hear analysts changing the tune and to redefining what a soft landing is. So now it's no longer the avoidance of a recession. It's a mild recession. So people have to be right. But I think a soft landing is historically unlikely with inflation, but five percent unemployment below 5 percent. It's it's not going to happen. So, yes, I think the Fed has to engineer a decrease in demand, which means taking the unemployment rate from near record lows to closer to the neighbor than on accelerate inflation rate of unemployment, which I think is about four point ninety five percent. So if you get an order of magnitude increase in unemployment from three and a half, which were it two months ago, to four point four, which the Fed says or to my forecast, which is 5 percent, then historically it's never been the case where the U.S. economy is not already in recession with that degree of increase in unemployment. Catherine, let's look at this through the through the lens of the markets. The S & P shot to the moon as a result of the extension of QE. You just referenced has enough air come out of it to bring us back down to a correct level as to where we are, as to where we currently expect economic growth to go. Yeah, I'll rephrase the question is how much is priced in. And that's probably what is the most hotly debated question guy. And my suspicion is that we haven't fully price in the throes of recession. So once we are there, I expect equities to drop further. I would even if I had to put a number on it, about 10 percent. That's that's something that I would kind of guesstimate. What I am looking at is fixed income. I think once we've gotten past the narrative guy of inflation, you know, we've reached peak inflation. Unemployment has shot up. We're in recession, consumer spending, retail sales have dropped, then fixed incomes going to look very enticing for now. I like t bills. You know, they're yielding about 4 percent. That's fantastic. Cash, cash equivalents. But going into next year, when the narrative changes from inflation to recession, we're going to want to start looking longer duration of fixed income. But on the subject of narrative changes, I feel like I have been getting just research piece after research piece saying, yeah, first half, it's gonna be rocky, second half's gonna be when things start looking good and then it maybe is time to be all in on risk assets again. Do you agree with that? I don't think anybody really knows how long the recession will be. This seems definitely consensus that it's going to be mild, two quarters and we're going to jump out of it. It depends on on the unemployment rate. So, you know, we can see job shedding in a huge order of magnitude. Unemployment doesn't gradually increase once you start to get that that job shedding. I think that's what it's going to ultimately depends on what I'm looking at. Caylee is jolts. So, you know, the Beringer curve, which we've talked about and you guys have talked about on your program, which has JOLTS, job openings are still enormously positive. So that's going to be a leading indicator as to when we expect jobs to really start to be shed and job openings remain historically high, starting to see claims ticking up. Certainly the data today, a day early, maybe indicating that are just to go makes this issue of of the sequencing of what you're going to do. You are at the moment, it's looking back cash or cash equivalents, then you're talking about maybe moving into duration. How do you as you tiptoe out of cash kind of treasuries, maybe the first port of call then do you go to credit? Do you go to equities? How are you thinking about how you're going to sequence this exit? Yes, you nailed it. I would say we start with fixed income. I do think that treasuries, if I'm right and we do enter into a recession, soft landing is is kind of a pipedream. So if we're in recession next year, the Fed is very likely going to decrease rates by the end of next year. In the past 14 monetary cycles, when we look at the last hike to the first cut, it's not that long. You know, we're talking four and a half months on average. So the Fed can swing quicker than a lot of people think. So this higher for longer narrative, yes, they're going to probably stay higher for longer. Just not hiking anymore is is kind of like easing. So they're going to be very careful with that. But I think that long duration, high grade treasuries and corporate paper will be attractive going into next year. One thing I'll add real quick, guys, that we haven't seen that wave of difficulties with repayments from high yield or emerging markets, from credits, from sovereigns, from names that took advantage of record low interest rates to lever themselves up. And now interest rates have gone up and there's going to be some inevitable difficulty with repayments. And so we're going to feel that across the spectrum of junk bonds. Finally, on the subject of leverage and things getting inflated because of easy and free money. Just your thoughts on crypto. A lot has changed in the last couple of weeks. Lehman moment, perhaps something akin to that. Is it dead? Gosh, I can't say that it's dead, but certainly it is a high beta play which has come crashing down with the market. So all risk assets have come crashing down. Has it been an inflation hedge? Definitively, no. But I think that it's something that caught my attention, that bitcoin has been pretty stable. And I heard one of your analysts talk about this earlier despite the crash and burn of FTSE. So I'm not in the camp that says this is going to completely disappear.

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What's the Fed Thankful For?

What's the Fed Thankful For? That was Wednesday's question of the day posed to Kathryn Rooney Vera, Bulltick Capital Markets Chief Investment Strategist, by Kailey Leinz and Guy Johnson on "Bloomberg Markets: Americas." (Source: Bloomberg)

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