RUSH TRANSCRIPT I won ░░░░░░░░ go there right now ░░░░░░░░ but if you want ░░░░░░░░ I will I can ░░░░░░░░ you a list I ░░░░░░░░ going to note that ░░░░░░░░ p Morgan Goldman and ░░░░░░░░ one Yeah j p ░░░░░░░░ cap one all hitting ░░░░░░░░ time highs today on ░░░░░░░░ note I was going ░░░░░░░░ pivot to interest rates ░░░░░░░░ is a bank story ░░░░░░░░ I was going to ░░░░░░░░ it in the sense ░░░░░░░░ you know the watching ░░░░░░░░ interest rates go as ░░░░░░░░ direct impact on some ░░░░░░░░ those high flying growth ░░░░░░░░ and these ipos may ░░░░░░░░ as well and you ░░░░░░░░ willing to pay up ░░░░░░░░ growth because where else ░░░░░░░░ you going to get ░░░░░░░░ Rates are so low ░░░░░░░░ on that note I ░░░░░░░░ court did mention Jay ░░░░░░░░ the Fed chair He ░░░░░░░░ speaking at the bottom ░░░░░░░░ the hour at Princeton ░░░░░░░░ it s a closely ░░░░░░░░ speech given what s ░░░░░░░░ with interest rates of ░░░░░░░░ there is the 10 ░░░░░░░░ now 110 is where ░░░░░░░░ currently is it s ░░░░░░░░ better than 50 in ░░░░░░░░ three months and on ░░░░░░░░ note we are joined ░░░░░░░░ by Nancy Davis She ░░░░░░░░ managing partner at quadratic ░░░░░░░░ She has a trade ░░░░░░░░ you on what s ░░░░░░░░ with interest rates We ░░░░░░░░ get that in a ░░░░░░░░ senior economics reporter Steve ░░░░░░░░ is joining us Good ░░░░░░░░ see you Nancy welcome ░░░░░░░░ new year Steve I ░░░░░░░░ with you looking ahead ░░░░░░░░ what we ll get ░░░░░░░░ the president elect tonight ░░░░░░░░ you think that the ░░░░░░░░ winning control of the ░░░░░░░░ sort of resets the ░░░░░░░░ now on interest rates ░░░░░░░░ inflation I think potentially ░░░░░░░░ for the market the ░░░░░░░░ by the Democrats in ░░░░░░░░ in the Senate races ░░░░░░░░ change the equation and ░░░░░░░░ possibility of more stimulus ░░░░░░░░ bring things forward more ░░░░░░░░ but I think the ░░░░░░░░ from Powell beginning at ░░░░░░░░ 30 if my guess ░░░░░░░░ right will be one ░░░░░░░░ leaning against any preemptive ░░░░░░░░ we ve had several ░░░░░░░░ speakers come forward and ░░░░░░░░ you know what We ░░░░░░░░ plenty of evidence of ░░░░░░░░ and plenty of evidence ░░░░░░░░ the economy has rebounded ░░░░░░░░ the speakerer was talking ░░░░░░░░ the underlying damage to ░░░░░░░░ economy that s been ░░░░░░░░ Something like 14 million ░░░░░░░░ have either left work ░░░░░░░░ that many fewer jobs ░░░░░░░░ those two numbers suggest ░░░░░░░░ know what Scott along ░░░░░░░░ the millions of people ░░░░░░░░ filed for jobless claims ░░░░░░░░ week there is a ░░░░░░░░ way to go before ░░░░░░░░ economy worries about inflation ░░░░░░░░ could be a long ░░░░░░░░ to go before the ░░░░░░░░ is ready to do ░░░░░░░░ about it That s ░░░░░░░░ as well So in ░░░░░░░░ that note what s ░░░░░░░░ way to look at ░░░░░░░░ as an investor I ░░░░░░░░ going back to Jim ░░░░░░░░ opening comments in every ░░░░░░░░ whether it s a ░░░░░░░░ or interest rates and ░░░░░░░░ you want to buy ░░░░░░░░ and right now the ░░░░░░░░ market does not believe ░░░░░░░░ the Fed will be ░░░░░░░░ in achieving that inflation ░░░░░░░░ and so it s ░░░░░░░░ to buy now because ░░░░░░░░ s really inflation is ░░░░░░░░ priced and inflation expectations ░░░░░░░░ is what Jay Powell ░░░░░░░░ all his speeches over ░░░░░░░░ last several years he ░░░░░░░░ talking about not wanting ░░░░░░░░ raise food prices or ░░░░░░░░ prices or energy prices ░░░░░░░░ he wants to normalize ░░░░░░░░ expectations and I think ░░░░░░░░ s the key that ░░░░░░░░ need to focus on ░░░░░░░░ how do they get ░░░░░░░░ expectations not measured by ░░░░░░░░ consumer price index into ░░░░░░░░ portfolios right now when ░░░░░░░░ s cheap to buy ░░░░░░░░ right at the moment ░░░░░░░░ know Steve charlie evans ░░░░░░░░ the other day and ░░░░░░░░ know this was much ░░░░░░░░ about certainly by you ░░░░░░░░ others that he d ░░░░░░░░ willing to let inflation ░░░░░░░░ a little hot right ░░░░░░░░ then we had a ░░░░░░░░ with gundlach the other ░░░░░░░░ about sort of what ░░░░░░░░ Fed would be willing ░░░░░░░░ accept if you want ░░░░░░░░ accept that word Yeah ░░░░░░░░ was on the edge ░░░░░░░░ my seat Scott with ░░░░░░░░ popcorn and the gatorade ░░░░░░░░ gundlach was speaking Let ░░░░░░░░ refresh your memory better ░░░░░░░░ get your reaction on ░░░░░░░░ other side here s ░░░░░░░░ I think the Fed ░░░░░░░░ let the 10 year ░░░░░░░░ higher than 1 1 ░░░░░░░░ I don t know ░░░░░░░░ the number is It ░░░░░░░░ be two but again ░░░░░░░░ would go back to ░░░░░░░░ steam that the inflation ░░░░░░░░ and the headline CPI ░░░░░░░░ going to go above ░░░░░░░░ 1 2 in the ░░░░░░░░ few months and I ░░░░░░░░ as long as the ░░░░░░░░ of CPI is higher ░░░░░░░░ the rate on the ░░░░░░░░ year that the Fed ░░░░░░░░ let things be I ░░░░░░░░ that FTC 10 year ░░░░░░░░ above the headline CPI ░░░░░░░░ the core CPI or ░░░░░░░░ that might be the ░░░░░░░░ that the Fed comes ░░░░░░░░ and does the yield ░░░░░░░░ control There s also ░░░░░░░░ suggestion Steve that the ░░░░░░░░ s hands are kind ░░░░░░░░ tied and they ll ░░░░░░░░ back and watch inflation ░░░░░░░░ what it does and ░░░░░░░░ it go because what ░░░░░░░░ said at the very ░░░░░░░░ You did a million ░░░░░░░░ jobless claims or just ░░░░░░░░ that today So there ░░░░░░░░ real weakness across the ░░░░░░░░ at the same time ░░░░░░░░ you have rates potentially ░░░░░░░░ and inflation going up ░░░░░░░░ remember also Scott that ░░░░░░░░ Fed is doing an ░░░░░░░░ inflation targeting regime right ░░░░░░░░ and it really is ░░░░░░░░ aiming for inflation above ░░░░░░░░ 2 target So that ░░░░░░░░ t be an accidental ░░░░░░░░ if they re able ░░░░░░░░ achieve it it will ░░░░░░░░ the actual goal of ░░░░░░░░ I think Jeff has ░░░░░░░░ smart way of thinking ░░░░░░░░ it which is what ░░░░░░░░ the Fed want here ░░░░░░░░ kind of interest rate ░░░░░░░░ potentially be restrictive to ░░░░░░░░ economy and really it ░░░░░░░░ a positive real rate ░░░░░░░░ if you follow closely ░░░░░░░░ Jeff was saying right ░░░░░░░░ he s doing a ░░░░░░░░ in the back of ░░░░░░░░ head there well inflation ░░░░░░░░ x and the 10 ░░░░░░░░ yield is is yielding ░░░░░░░░ it might depress the ░░░░░░░░ of the long end ░░░░░░░░ m not so sure ░░░░░░░░ that s it but ░░░░░░░░ s a good way ░░░░░░░░ think about what may ░░░░░░░░ the Fed in and ░░░░░░░░ rates are negative and ░░░░░░░░ think the Fed is ░░░░░░░░ to let things ride ░░░░░░░░ bottom line for you ░░░░░░░░ in terms of how ░░░░░░░░ play it is that ░░░░░░░░ want to hedge inflation ░░░░░░░░ play interest rate volatility ░░░░░░░░ the same time Yeah ░░░░░░░░ mean John knows so ░░░░░░░░ that interest rate volatility ░░░░░░░░ the cost of owning ░░░░░░░░ hedge or that protection ░░░░░░░░ trading near lifetime history ░░░░░░░░ financial market lows So ░░░░░░░░ I think if you ░░░░░░░░ a home or you ░░░░░░░░ an apartment or a ░░░░░░░░ and you have homeowner ░░░░░░░░ insurance and your house ░░░░░░░░ t burn down are ░░░░░░░░ disappointed at the end ░░░░░░░░ the year that you ░░░░░░░░ that protection I think ░░░░░░░░ s what investors need ░░░░░░░░ be thinking about is ░░░░░░░░ that inflation protection outside ░░░░░░░░ the CPI basket now ░░░░░░░░ it s easy to ░░░░░░░░ low and you can ░░░░░░░░ it in case the ░░░░░░░░ is successful I think ░░░░░░░░ s one of those ░░░░░░░░ t fight the Fed ░░░░░░░░ and there are very ░░░░░░░░ things in financial markets ░░░░░░░░ it s stocks or ░░░░░░░░ or fixed income that ░░░░░░░░ trading near its 10 ░░░░░░░░ 20 year 30 year ░░░░░░░░ year lows and it ░░░░░░░░ interest rate volatility and ░░░░░░░░ expectations that are cheap ░░░░░░░░ now in my opinion ░░░░░░░░ is not so different ░░░░░░░░ the way we look ░░░░░░░░ the vix right The ░░░░░░░░ gets really low What ░░░░░░░░ the harm in taking ░░░░░░░░ some insurance in case ░░░░░░░░ get a little nutty ░░░░░░░░ right Exactly Scott you ░░░░░░░░ asking me 15 minutes ░░░░░░░░ about well jon you ░░░░░░░░ pared back equity positions ░░░░░░░░ gone back into derivatives ░░░░░░░░ aren t at those ░░░░░░░░ lows but they are ░░░░░░░░ than a month ago ░░░░░░░░ about the 80 levels ░░░░░░░░ the vix in 2020 ░░░░░░░░ just the high 20s ░░░░░░░░ the mid 30s we ░░░░░░░░ way down below that ░░░░░░░░ to Nancy s point ░░░░░░░░ able to buy some ░░░░░░░░ protection if you will ░░░░░░░░ your portfolio at these ░░░░░░░░ low levels for that ░░░░░░░░ those fixed income portfolios ░░░░░░░░ not It makes all ░░░░░░░░ sense in the world ░░░░░░░░ s a trade I ░░░░░░░░ be putting on I ░░░░░░░░ with nance You have ░░░░░░░░ bounce in a second ░░░░░░░░ you have to get ░░░░░░░░ to listen to what ░░░░░░░░ will say in less ░░░░░░░░ five minutes but to ░░░░░░░░ put a button on ░░░░░░░░ way the market views ░░░░░░░░ of this and maybe ░░░░░░░░ it will view the ░░░░░░░░ from Mr Powell as ░░░░░░░░ Jim lebenthal suggested that ░░░░░░░░ level on the 10 ░░░░░░░░ to make the Fed ░░░░░░░░ uneasy is 1 3 ░░░░░░░░ 1 5 and maybe ░░░░░░░░ s low and if ░░░░░░░░ have moments up above ░░░░░░░░ what do you think ░░░░░░░░ that thought I think ░░░░░░░░ depends on how and ░░░░░░░░ we get there I ░░░░░░░░ the Fed is not ░░░░░░░░ to lean against a ░░░░░░░░ year that goes up ░░░░░░░░ of belief in greater ░░░░░░░░ growth down the road ░░░░░░░░ think if it feels ░░░░░░░░ the market is dislocated ░░░░░░░░ will come in If ░░░░░░░░ Fed thinks it will ░░░░░░░░ good and if it ░░░░░░░░ not see the prospects ░░░░░░░░ better growth and if ░░░░░░░░ 10 year is getting ░░░░░░░░ the way of that ░░░░░░░░ think it might come ░░░░░░░░ and I like the ░░░░░░░░ of the higher end ░░░░░░░░ the higher range that ░░░░░░░░ s talking about Steve ░░░░░░░░ it Go listen to ░░░░░░░░ and we ll hear ░░░░░░░░ you for certain Nancy ░░░░░░░░ you give me a ░░░░░░░░ word in 30 seconds ░░░░░░░░ less Scott I do ░░░░░░░░ it s really a ░░░░░░░░ for investors to be ░░░░░░░░ about inflation protection and ░░░░░░░░ about ways and I ░░░░░░░░ the big important point ░░░░░░░░ there are lots of ░░░░░░░░ types of volatility and ░░░░░░░░ vix is just equity ░░░░░░░░ and most regular investors ░░░░░░░░ short volatility in their ░░░░░░░░ income portfolio with mortgages ░░░░░░░░ is time to be ░░░░░░░░ about diversification and thinking ░░░░░░░░ buying fixed income which ░░░░░░░░ outside the vix we ░░░░░░░░ excited about 2021 and ░░░░░░░░ do think the Fed ░░░░░░░░ let it run hot ░░░░░░░░ with the fiscal stimulus ░░░░░░░░ always make us think.