2 Burst results for "Mister Kaplan"
Bloomberg Radio New York
"mister kaplan" Discussed on Bloomberg Radio New York
"I do not support stopping rate hikes unless we get clear evidence that inflation is moving down towards our 2% objective. But whether we should hike or skip at the Jew meeting, will depend on how the data come in over the next three weeks. Stefan governor, Chris Waller, stressing the need for the fed to parse the data before making a decision on whether or not to press pause. Next month is meeting. Let's bring in Rafael bertone is the head of capital markets at the gulf investment corporation. Rafael, what matters more today? Is it the fed or is it the ongoing set of negotiations to break the impasse when it comes to the debt ceiling? I believe that is for sure the debt ceiling as you said before is not a very high probability of default, but there is a risk of an accident during this process. And on this regard, the probability the defeat and announcement, yesterday, we put some pressure on the political side in order to find a solution as soon as possible. So do I build my strategy for three or 4% future inflation or do I just act on what inflation is today and sort of expect that to hold steady? Because if you're expecting it to come down versus it not coming down, those are entirely two different propositions from a debt capital market perspective, isn't it? Absolutely. In our assessment inflation is going down is going down slowly, especially in the Europe and the U.S. because at the moment that there are several very commodity fiscal policy that's what mister Kaplan pointed out during your interview. So it's clearly going down. There are signs that the economy is lowering down. And therefore, the fed pose very soon, we expect that they would pick already in June. And therefore, but we will continue to have an inflation rate, which is above the fed target below what we have at the moment, but still above the fed target. I was looking through a note by UBS, and they were talking about credit spreads widening for high yield later this year. I mean, that's not an outrageous call in itself, but the thing is that they're expecting markets to go into credit tightening rather than an outright credit crunch. They're also looking potentially at investment grade bonds over high yield and leverage loans. Is that you think? I totally agree with their view. We clearly have some signs of credit tightening in the market. That is not positive, especially for lower rated corporate bonds and in particular yield. Standard poor is expected at the default rate is will pick up last year was around 1.7%. They expect 4% by the end of 2023. And obviously, spreads at the moment are close to their long-term average. So they are not offering any particular value. And compensation to investors, therefore we continue to prefer investment grade corporate bonds and we wait for better evaluations to reenter in the aid market. Rafael and you've been doing this for a very long time. I don't want to lean on your experience because this is a rare moment that we're having sort of a bigger debate about the sanctity of U.S. debt and that even some of the ratings agencies are beginning to speak once again. To what extent is this a reset for the rest of the world and could that ripple through to a broader reassessment? I agree with you. It's a crucial moment. We don't need to forget that total debt around the world in the global economy has doubled almost doubled since the big financial crisis. And obviously with an aging population that would become an issue going forward. So we need a serious attitude from several governments in order to at least try to reduce this access amount of debt in the economy. The economy has become a particularly sensitive to interest rates. Everything was fine when interest rates were artificially close to zero even negative, but going forward the environment is going to be quite different. One of the most read stories Rafael and the terminal is about a potential linkage between anxiety around what's going to happen with these debt ceiling negotiations and the strength in the greenback. Do you expect that to hold that resilience of the U.S. dollar? Fundamentally, the dollars should be weaker from this level. But that's not happening. That's not happening. It is not happening for several reasons. The most important one at the moment is the uncertainty that you were mentioning. And the dollar is tends to overperform when there are periods of volatility in the market or uncertainty in the economy. So for the moment that we see in the short term still upside for the dollar, medium term probably we should waiter dollars. Rafael fantastic to see you hope to see you in the studio in person next time. That's a Rafael Bernie. He's the head of capital markets, the gulf investment corporation. What's more stuff to come on daybreak at least this is Bloomberg.
Bloomberg Radio New York
"mister kaplan" Discussed on Bloomberg Radio New York
"With us Before we get into your proposed solution to the problem describe the problem How did we get here Yeah I mean it's been a really rough ride for the fed's credibility over the past I'd say probably about 6 7 weeks First news surface that Robert caplan the Dallas fed president traded a lot of stocks last year pretty much And then we had Eric Rosen grant of the Boston fed also trading a lot of real estate investment trust REITs And then just even more recently Richard Clare the vice chair was disclosed to have switched a lot of money from bond funds into stock funds just a few days before the fed really started aggressively easing monetary policy to combat the COVID crisis So a lot of moving parts and Eric Rosenberg resigned last week and tomorrow will be Dallas Dallas fed chair rubber cap once last day And just to be clear first of all neither I think mister Kaplan nor mister Rosen said the reason they were resigning was because of this problem And as far as I know there's no specific allegation of wrongdoing on any of these parts For example when you talk about Richard clarity it said this was a normal rebalancing that was sort of automatic He might not even know what's going on The question I guess Brian is not so much did they do something wrong Is it look fishy Yeah I mean I think it's pretty clear that it's not a good look at all And Richard caplan basically said that my financial disclosure has become a distraction as the reason why he was stepping down but it's all just very strange because I actually Robert caplan the one who has been trading all these stocks was actually among the most vocal critics of the fed policy and saying we should tighten that financial financial markets have gotten too frothy And similarly Eric Rosenberg who was trading REITs was saying that the real estate market was too hot So it was very strange But yeah no wrongdoing really at least based on the fed's current ethics codes But there's reason to suspect that that's going to change They're definitely going through they're going through it now and probably coming up with some recommendations to make it stronger So again just before we get your solution on teasing this now so I really want to know what it is Before we get to that what are the current rules about conflicts of interest in trading Yeah I mean it's a voluntary guide in some ways that should be above reproach that there are some rules around how many actually how much in U.S. securities you should own So U.S. government securities because obviously the fed does have a direct impact on the US Treasury market And there's also rules around the blackout periods surrounding actual decisions in which they can't trade They also have to hold securities for 30 days Pretty standard stuff but at the same time this is the Federal Reserve we're talking about And at the highest levels they're influencing the economy as much as any single body in the world Okay we've waited long enough a drum roll please The answer is I don't think there's exciting as you made it but qualified blind trust is what myself and Alexis Leon came up with It's a tool that's used sometimes in Washington It would basically require fed officials to hand over their assets to a third party that's not a spouse or a friend A legitimate third party who would then go about divesting their assets and then buying a new securities with that Okay so what's the difference with qualified blind testers to blind trust Yeah my understanding is that blind trust can still be subject to you might have a friend or you might have someone who you work with kind of take over the trust and it's blind in that sense But this would be the way that we understand it is it would be a true third party someone who really is a lot more removed from the actual person It's sometimes called there's also things called double blind trust which is where you don't even know who's managing your money But those are pretty rare So this is kind of just to make sure that it is a qualified third party So it's not someone that the fed officials could influence So if there is an argument against this what is the argument As I understand the way this would happen it doesn't mean that whoever is managing the qualified branch would have to trade securities have to sell everything and buy something else right They would just manage it the way you would if you could still manage it Well the issue there is that if you give them all your assets and you have $10 million in Tesla that's not really blind because you know you just hand it over $10 million with Tesla right So they would have to sell substantially all of that And then that's a great example because there might be a small tax bill to attach to that with Tesla given the bases Right exactly So this would just basically be a way to not necessarily discourage people who might be affluent might have had financial success in their life from becoming a fed official but it would prevent them from the temptation of having been in the markets before thinking they know what's coming and then trading on it Because you don't want to have we were joking that you don't want monks to be running the fed right You want people who have substantially knowledge of the economy and of the financial system And so you don't want certain net worth to be prohibitive but you also don't want that to be seen as a conflict of interest What about monks running the Congress or the executive branch Should something similar to be imposed for members of Congress and for senior executives at the executive branch Yeah that's a lot of the commentary that I've gotten back on my column so far today is yes that's a great idea about doing blind trust for the fed Now let's do Congress There is a lot of concern that people come into Congress and pet all their influence And as a result they accrue more money So I do think that there is especially with Congress there's definitely need to improve capital of interests there too because they influence sectors even more than the fed does I wrote that even as the P 500 could be seen as the conflict of interest for the fed and that's true But when you really drill down there are certain sectors big tech for instance that I mean Congress could really really lay into big tech if they wanted to And you could possibly trade ahead of that Well the S&P 500 today if you look at what Mitch McConnell and Chuck Schumer did they really drove the S&P 500 with their budget deal right Right If you find out that everyone's buying S&P 500 calls a couple of days ago that would be a problem.