Arlo, FED, Arlo Guthrie discussed on Bloomberg Markets


And Matt Miller Arlo Guthrie on Thanksgiving Wait is Arlo Guthrie is Arlo's son father His dad Dad okay so woody and then Arlo and then Arlo has a kid who's also like famous right I don't know I don't know about that Or I'm thinking of like loud and Wainwright the third Loud and wing right there I don't know skunk in the middle of the road I don't know why I group them together but we'll get to that somewhere Great Jared thank you so much We appreciate that Of course You're all about Elton John You went to Elton John yesterday Awesome Was it good Awesome How old is that guy 72 73 or something like that Band was great He was great Sold out at the garden The garden was rocking last night So it was a lot of fun He's got a big tweezer and it tri state area for a long time Anyway Steve Kane co CIO and generals portfolio manager at TC W investment management He went to University of Chicago got his MBA there Matt which means he understands the booth The booth school of vaccine I'm an equity guy Steve So I don't really I didn't pay too much attention to that business school But you're a fixed income portfolio manager What do you do here in a rising interest rate environment Well hopefully you had your duration short going back a year or so which we were fortunate to do But I would say that things are getting a little bit more interesting in the fixed income world from a value perspective And I think along the rate environment we think the front end of the curve is starting to look interesting A one 62 year that discounts 8 fed tightenings over the next 15 months or so It looks reasonable Now when you look out the curve we're not as excited 2% ten year and 30 year just beyond just not getting much term premium or really getting paid for the risk out the curve So in general what we tell investors is keep your duration Sure keep your focus on the front end of the curve So if we get 8 rate hikes or more would that surprise you then No not at all I mean the fed is I mean of course it depends on what happens with inflation and with the economy and all that But our view is inflation is going to run hot Certainly for the balance of this year and maybe well into next year given what we're seeing in the labor market and with wages certainly energy prices feeding into that as well Yes no the fed is almost regardless of what happens with Russia and Ukraine or even the stock market The fed's locked into a tightening path here Given the high level of inflation and the fact that they really need to begin to get to work to address that Steve what does history have to tell us about the ability of the fed to fight inflation I kind of feel like inflation is just because there's a bunch of ships off the port of Long Beach in the portrait clogged and there's nobody to move this stuff and there's no truckers and what can the fed really do there The fit can do nothing Lined up lined up outside of ports There's absolutely nothing they can do The fed can really just monetary policy affect financial conditions and the demand side of the economy through interest rate sensitive sectors of the economy which means they have a very blunt instrument as we all know in terms of dealing with inflation and inflation works with the lag So the sort of unfortunate thing from an inflation forecasting standpoint is even though they are going to be hiking the impact of those hikes is going to affect the economy with the lag and then inflation with even a further lag So it's not going to really have an immediate effect on the supply side of the economy at all How important is it to get the rest of the FOMC confirmed I don't think it really matters all that much I mean you have your big three in place Powell brainerd and Williams the president of the New York fed And I don't think you need a full slate of fed governors and presidents to necessarily make decisions So I think yes it would be nice but I don't think it's an effect in any way their policy making decisions Steve you know when the fed made this pivot to a more hawkish stance I think the market was talking about three rate increases Now potentially as many as 7 how do you feel about that discussion point of is the fed behind the market Are they trying to play catch up How do you think about that Yeah I think they are And I think what happened is they went with the transitory supply bottleneck view for a while and I think what changed is they began to see tightness in the labor market And unemployment at 4% and wages rising very quickly and sort of forward looking indicators like the quits rate at historical highs people leaving their jobs voluntarily All suggest that this is more than a temporary phenomenon that affected the labor market I think the fed is behind the curve In fact and because wages in the employment market do not react quickly to changes in interest rates So again it's going to be some period of time and some amount of fed tightening and slowing in the economy before you see an impact on the labor market All right Steve thanks so much for joining us to really appreciate it Always love talking to the folks at TC W get this $225 billion in fixed income assets I mean that is a meeting When you go to LA to see clients you've got to lock down that PCW meeting first and foremost capital group as well Steve Kane co CIO and generalist p.m. at TCD I wonder why all the fixed income the big fixed income shops are out on the West Coast I know It's a good point It's a smart timco you know Especially after being at the booth school of business Steve must have been pumped to go I mean he was at pimco too so he was he's a California Fixed income guy Yeah And he went to Berkeley undergrad so smart dude but when I think about Chicago business school it's still GSB to me graduate school of business But then mister booth donated a gajillion dollars so he gets to put his name on it All right right.

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