RUSH TRANSCRIPT But winners ░░░░░░░░ I am Jon Fortt ░░░░░░░░ Morgan breaking down the ░░░░░░░░ decision and the impact ░░░░░░░░ forward on your money ░░░░░░░░ up we ll get ░░░░░░░░ from I former economic ░░░░░░░░ who say there is ░░░░░░░░ key I messa Chairman ░░░░░░░░ conveyed inxd hi news ░░░░░░░░ Plus Roger Altman will ░░░░░░░░ us hisxd fw2 t ░░░░░░░░ Let s get straight ░░░░░░░░ o 1 panel stocks ░░░░░░░░ an air pocket in ░░░░░░░░ final moments joining us ░░░░░░░░ Davis and David zrvos ░░░░░░░░ jefferies e1 the close ░░░░░░░░ think and I guess ░░░░░░░░ on that what do ░░░░░░░░ sell when the Fed ░░░░░░░░ the economy is slowing ░░░░░░░░ that it doesn t ░░░░░░░░ to keep hi ng ░░░░░░░░ credit is going to ░░░░░░░░ harder to come by ░░░░░░░░ know I think this ░░░░░░░░ all this two weeks ░░░░░░░░ introduced a lot of ░░░░░░░░ to the Fed to ░░░░░░░░ markets to everybody involved ░░░░░░░░ to how much of ░░░░░░░░ pullback there will b ░░░░░░░░ the credit provisionf proces ░░░░░░░░ the small I toe1 ░░░░░░░░ size businesses which are ░░░░░░░░ bit of lifeblood to ░░░░░░░░ economy or are they ░░░░░░░░ we rew3q flying more ░░░░░░░░ b That suss take ░░░░░░░░ premiums and seeing that ░░░░░░░░ equities LP I m ░░░░░░░░ sure how to explain ░░░░░░░░ plus one down 1 ░░░░░░░░ down 1 1 2 ░░░░░░░░ s a lot oflp ░░░░░░░░ n doubt in there ░░░░░░░░ I don t kn ░░░░░░░░ we want to get ░░░░░░░░ it but this brings ░░░░░░░░ a lot more uncertainty ░░░░░░░░ where we were before ░░░░░░░░ that sym why the ░░░░░░░░ market is priced the ░░░░░░░░ it is People go ░░░░░░░░ that forsafety and see ░░░░░░░░ probabilities g 1 accidents ░░░░░░░░ ths hedge for accidents ░░░░░░░░ you will I and ░░░░░░░░ s really going been ░░░░░░░░ fundamental change e1 axd ░░░░░░░░ hasn t changed in ░░░░░░░░ level S P largely ░░░░░░░░ High yields unchanged The ░░░░░░░░ change is a two ░░░░░░░░ note level yield is ░░░░░░░░ significantly lower and the ░░░░░░░░ prospect for lower rates ░░░░░░░░ don t thinke1 you ░░░░░░░░ me what you sell ░░░░░░░░ this environment or these ░░░░░░░░ though that was the ░░░░░░░░ of my we ve ░░░░░░░░ saying which is you ░░░░░░░░ away from the ris ░░░░░░░░ u part of the ░░░░░░░░ structure in the United ░░░░░░░░ economy which is equities ░░░░░░░░ you focus on the ░░░░░░░░ secured part of the ░░░░░░░░ structure that has really ░░░░░░░░ highxd yields in debt ░░░░░░░░ today qw uq impressed ░░░░░░░░ the e1f h is ░░░░░░░░ at least five secon ░░░░░░░░ when I looked up ░░░░░░░░ the day with the ░░░░░░░░ P downlp 60 points ░░░░░░░░ for me I think ░░░░░░░░ fixed income markets are ░░░░░░░░ the place to hide ░░░░░░░░ credit markets are still ░░░░░░░░ place to m hide ░░░░░░░░ the equiti just doesn ░░░░░░░░ give you the risk ░░░░░░░░ profile you need given ░░░░░░░░ we this fed I ░░░░░░░░ I want to get ░░░░░░░░ thoughts on what we ░░░░░░░░ from fed Chair Powell ░░░░░░░░ a change in key ░░░░░░░░ ongoingi that we are ░░░░░░░░ words likei may and ░░░░░░░░ u comes to additional ░░░░░░░░ firming Hike The bumpy ░░░░░░░░ replace of pain pain ░░░░░░░░ the word Powell kept ░░░░░░░░ at Jackson hall and ░░░░░░░░ he talked about bumpy ░░░░░░░░ how the credit markets ░░░░░░░░ tightening and how thatq ░░░░░░░░ be tightening policy and ░░░░░░░░ the question onw3 quantitative ░░░░░░░░ Since they ve put ░░░░░░░░ place all these facilities ░░░░░░░░ Fed slpxd balance sheet ░░░░░░░░ expanding right now They ░░░░░░░░ not want to call ░░░░░░░░ quantitative tightening but pumping ░░░░░░░░ into the system and ░░░░░░░░ think that s dovish ░░░░░░░░ ijfe1 actually think I ░░░░░░░░ probably go the opposite ░░░░░░░░ if I was going ░░░░░░░░ be calling t market ░░░░░░░░ would actually say credit ░░░░░░░░ isxd reallyi pri you ░░░░░░░░ rates are the yield ░░░░░░░░ isf incredibly it s ░░░░░░░░ still for a massive ░░░░░░░░ it s lower now ░░░░░░░░ it was even in ░░░░░░░░ late 80s and so ░░░░░░░░ think the bond markets ░░░░░░░░ really saying the Fed ░░░░░░░░ still making a policy ░░░░░░░░ q it s normalizedf ░░░░░░░░ a little bit with ░░░░░░░░ front end since the ░░░░░░░░ Valley bank e1blowup bu ░░░░░░░░ s a lot more ░░░░░░░░ think room in the ░░░░░░░░ for credit spread to ░░░░░░░░ and more defaults to ░░░░░░░░ in because right now ░░░░░░░░ haven t seen any ░░░░░░░░ in the default cycle ░░░░░░░░ a little more but ░░░░░░░░ with us Because we ░░░░░░░░ going to bring in ░░░░░░░░ fed whisperer5a jf into ░░░░░░░░ You askedp aboutb firming ░░░░░░░░ Look Morgan good afternoon ░░░░░░░░ the Fed tried to ░░░░░░░░ here was just strike ░░░░░░░░ balance between still high ░░░░░░░░ on the han turmoil ░░░░░░░░ threatens the economy So ░░░░░░░░ happened It hiked9 a ░░░░░░░░ point for t ninth ░░░░░░░░ time signaled somexd additional ░░░░░░░░ firming may be appropriateq ░░░░░░░░ that s instead of ░░░░░░░░ We re looking atxd ░░░░░░░░ s happening among the ░░░░░░░░ and f asking is ░░░░░░░░ going to be some ░░░░░░░░ in credit conditions and ░░░░░░░░ about thatf as effectively ░░░░░░░░ the same thing that ░░░░░░░░ hikes do so hl ░░░░░░░░ way that substitutesf for ░░░░░░░░ hikes so the key ░░░░░░░░ we have to have ░░░░░░░░ policies got to be ░░░░░░░░ enough to bring vtr ░░░░░░░░ h inflation down to ░░░░░░░░ over time it doesn ░░░░░░░░ all have to come ░░░░░░░░ rate hikes f3 su ░░░░░░░░ credit conditions u Your ░░░░░░░░ officials did no hike ░░░░░░░░ spr tain t the ░░░░░░░░ meeting The key now ░░░░░░░░ for the Fed to ░░░░░░░░ how banks react if ░░░░░░░░ pull back lending sharply ░░░░░░░░ it helps bring down ░░░░░░░░ thez 5aqenupfedu 7 r ░░░░░░░░ bank in terms of ░░░░░░░░ the Fed could workjf ░░░░░░░░ do Morgan I think ░░░░░░░░ rule out potential cuts ░░░░░░░░ the fact that hef ░░░░░░░░ some additional or actually ░░░░░░░░ should say quote recent ░░░░░░░░ likely to result in ░░░░░░░░ credit conditions iq mean ░░░░░░░░ sort of sense on ░░░░░░░░ that could possibly begin ░░░░░░░░ materialize and the type ░░░░░░░░ data points that the ░░░░░░░░ is specifically looking at ░░░░░░░░ terms of that We ░░░░░░░░ going to getxd some ░░░░░░░░ each week in the ░░░░░░░░ s balance sheet that ░░░░░░░░ us some insight into ░░░░░░░░ is 9 banks and ░░░░░░░░ get the senior loan ░░░░░░░░ survey and some others ░░░░░░░░ tell us what is ░░░░░░░░ and that should give ░░░░░░░░ an idea also rates ░░░░░░░░ of the things that ░░░░░░░░ with credit tightening is ░░░░░░░░ r actually go upe1 ░░░░░░░░ ne for borrowers so ░░░░░░░░ s anotherxd thing to ░░░░░░░░ at and I think ░░░░░░░░ was talking about spreads ░░░░░░░░ s another area I ░░░░░░░░ if credit if swcreditorse1 ░░░░░░░░ back you could have ░░░░░░░░ rates when it comes ░░░░░░░░ creditf spreads relative to ░░░░░░░░ free treasuries so those ░░░░░░░░ some ways we ll ░░░░░░░░ for and try to ░░░░░░░░ what s really happeningxd ░░░░░░░░ the economy I think ░░░░░░░░ Morgan thatlp ultimately the ░░░░░░░░ is going to be ░░░░░░░░ 1 iinflation either infla ░░░░░░░░ down or it doesn ░░░░░░░░ and that if itu ░░░░░░░░ t theq fed wi ░░░░░░░░ more work and I ░░░░░░░░ trying t come up ░░░░░░░░ withf how to y ░░░░░░░░ wet went in with ░░░░░░░░ ideas dovish hike or ░░░░░░░░ hawkish pause I don ░░░░░░░░ think it s either ░░░░░░░░ think it s kind ░░░░░░░░ like a hike and ░░░░░░░░ maybe or a hike ░░░░░░░░ come see me in ░░░░░░░░ couple months I think ░░░░░░░░ s what it is ░░░░░░░░ I wonder how yout ░░░░░░░░ Interpret what the Fed ░░░░░░░░ about credit I meanq ░░░░░░░░ data dependentq f the ░░░░░░░░ now mean credite1 availabilityxd ░░░░░░░░ dependent on balance more ░░░░░░░░ in the past inflation ░░░░░░░░ I believe Powell did ░░░░░░░░ that it s real ░░░░░░░░ to read this kind ░░░░░░░░ credit tightening in the ░░░░░░░░ It is it is ░░░░░░░░ that s why my ░░░░░░░░ is so interesting becaus ░░░░░░░░ data points that you ░░░░░░░░ look at to determineq ░░░░░░░░ are going to change ░░░░░░░░ change quite a bit ░░░░░░░░ m going to be ░░░░░░░░ andxd watching David xdzervos ░░░░░░░░ v we re also ░░░░░░░░ to have to you ░░░░░░░░ just watch this very ░░░░░░░░ inf terms of what ░░░░░░░░ happening in markets and ░░░░░░░░ or not any of ░░░░░░░░ ends up having an ░░░░░░░░ on the economy in ░░░░░░░░ We re going to ░░░░░░░░ the high I frequently ░░░░░░░░ Do you see jobless ░░░░░░░░ tick up He will ░░░░░░░░ something about flows inq ░░░░░░░░ system though Jonathan that ░░░░░░░░ will not know so ░░░░░░░░ think he s also ░░░░░░░░ to look at that ░░░░░░░░ there will be areas ░░░░░░░░ he might have concern ░░░░░░░░ deposits are stillok flowing ░░░░░░░░ of somet of small ░░░░░░░░ regionali q 9 m ░░░░░░░░ give him concern about ░░░░░░░░ Steve Liesman t hk ░░░░░░░░ Mentioned endedt aboute1 closed ░░░░░░░░ flat and down 4 ░░░░░░░░ hours I don t ░░░░░░░░ what you think that ░░░░░░░░ I mean 9pr 4 ░░░░░░░░ d be shocked if ░░░░░░░░ is true Yeah I ░░░░░░░░ be wrong but that ░░░░░░░░ what it looks like ░░░░░░░░ was seeing Do you ░░░░░░░░ data dependent ha more ░░░░░░░░ do with credit availability ░░░░░░░░ same question I posed ░░░░░░░░ liesman Look I think ░░░░░░░░ credit availability story is ░░░░░░░░ and Steve kind of ░░░░░░░░ it on the nail ░░░░░░░░ the nail on the ░░░░░░░░ when he said we ░░░░░░░░ look at a lot ░░░░░░░░ new pieces of data ░░░░░░░░ that Thursday balance sheet ░░░░░░░░ to become mission critical ░░░░░░░░ said it in the ░░░░░░░░ hour maybe report zm3aq ░░░░░░░░ the banks are I ░░░░░░░░ itxd icurjjutw3 people arexd ░░░░░░░░ to stressed out That ░░░░░░░░ I would turn it ░░░░░░░░ its head and say ░░░░░░░░ fedxdxd d 300 billion ░░░░░░░░ reserves back into the ░░░░░░░░ It didw3 quantity tative ░░░░░░░░ every measure of what ░░░░░░░░ is or balance sheet ░░░░░░░░ You can parse it ░░░░░░░░ 9ie1 and say was ░░░░░░░░ ixd traditional purchasi of ░░░░░░░░ and the like but ░░░░░░░░ bottom line is the ░░░░░░░░ wereq added and securities ░░░░░░░░ taken out and that ░░░░░░░░ a big deal anr ░░░░░░░░ d 9 that s ░░░░░░░░ anothery1xd 200 or 3 ░░░░░░░░ t easing and it ░░░░░░░░ a lot of the ░░░░░░░░ tightening that we re ░░░░░░░░ about that comes from ░░░░░░░░ banking stress in the ░░░░░░░░ And the volume is ░░░░░░░░ it was down but ░░░░░░░░ it s flat again ░░░░░░░░ r f yeah I ░░░░░░░░ have bought that all ░░░░░░░░ if it was down ░░░░░░░░ LP For a second ░░░░░░░░ okwas F I want ░░░░░░░░ keep tugging on this ░░░░░░░░ and get your which ░░░░░░░░ brought up before we ░░░░░░░░ to Steve That is ░░░░░░░░ fact that you know ░░░░░░░░ kwan quantity tightening and ░░░░░░░░ does it mean 1jj ░░░░░░░░ the that continue to ░░░░░░░░ guess manifest and materialize ░░░░░░░░ p9 Well I think ░░░░░░░░ opportunity for linked securities ░░░░░░░░ their portfolio because the ░░░░░░░░ sheet whether they want ░░░░░░░░ call it qe or ░░░░░░░░ it isq expanding the ░░░░░░░░ has eased the path ░░░░░░░░ rate hikes and I ░░░░░░░░ I priced in the ░░░░░░░░ wayxv1 thet 6 last ░░░░░░░░ r print just five ░░░░░░░░ inflation expectations was right ░░░░░░░░ I jf2 2 so ░░░░░░░░ it s time to ░░░░░░░░ on th soap box ░░░░░░░░ say e1look we hop ░░░░░░░░ Fed s got this ░░░░░░░░ I didn have a ░░░░░░░░ of confidt in fed ░░░░░░░░ Powell said that he ░░░░░░░░ surprised to hear about ░░░░░░░░ Valley bank and how ░░░░░░░░ that happen Myself what ░░░░░░░░ he talking about You ░░░░░░░░ it s mortgages It ░░░░░░░░ always what blows up ░░░░░░░░ it s always short ░░░░░░░░ It s always the ░░░░░░░░ It s just in ░░░░░░░░ bond market And realize ░░░░░░░░ agg has re1 no ░░░░░░░░ and third is short ░░░░░░░░ Beok diversified Don t ░░░░░░░░ by name only and ░░░░░░░░ great opportunity to buyjf ░░░░░░░░ inflation expectations because they ░░░░░░░░ right around the Fed ░░░░░░░░ 2 target Yeah you ░░░░░░░░ saying Nancy to add ░░░░░░░░ linked assets here What ░░░░░░░░ youq have in mind ░░░░░░░░ you saylp that Well ░░░░░░░░ I we own portfolio ░░░░░░░░ forf the0 n quadratic ░░░░░░░░ and c80m is a ░░░░░░░░ treasur treasury inflation q ░░░░░░░░ uq securities and we ░░░░░░░░ interest rate options to ░░░░░░░░ issues that exist with ░░░░░░░░ I p s which ░░░░░░░░ Mainly what Powell talked ░░░░░░░░ a third of CPI ░░░░░░░░ linked to rent indicator ░░░░░░░░ we u add I ░░░░░░░░ ex urjju outside of ░░░░░░░░ to the p rvfolio ░░░░░░░░ I think it s ░░░░░░░░ really great timee1 for ░░░░░░░░ to be looki at ░░░░░░░░ assets like I th ░░░░░░░░ inf in the future ░░░░░░░░ trading at a huge ░░░░░░░░ to where realized are ░░░░░░░░ David we also saw ░░░░░░░░ fed lower growtht forecastxd ░░░░░░░░ 20 2024 Can youi ░░░░░░░░ that Powell just raised ░░░░░░░░ odds we could go ░░░░░░░░ Theq forecasts are pretty ░░░░░░░░ Even 4t i1 2 ░░░░░░░░ rat the end of ░░░░░░░░ year and the last ░░░░░░░░ Folks werei reit erating ░░░░░░░░ s a big move ░░░░░░░░ a lot of jobs ░░░░░░░░ lost in r theu ░░░░░░░░ of the year so ░░░░░░░░ Fed sees I coming ░░░░░░░░ would love a soft ░░░░░░░░ and want lation heading ░░░░░░░░ to 2 which you ░░░░░░░░ for me Morgan is ░░░░░░░░ yet an upherlp reason ░░░░░░░░ say why do want ░░░░░░░░ be in the riskiest ░░░░░░░░ of thejf capital markets ░░░░░░░░ do want to be ░░░░░░░░ the lost piece ofe ░░░░░░░░ business which is the ░░░░░░░░ piece when ilp can ░░░░░░░░ in piece and still ░░░░░░░░ pretty big juicy yields ░░░░░░░░ I keep coming back ░░░░░░░░ that at the end ░░░░░░░░ this cycle If you ░░░░░░░░ probl m in credit ░░░░░░░░ s going to be ░░░░░░░░ lot more problems in ░░░░░░░░ because the xdr are ░░░░░░░░ in the first line ░░░░░░░░ fire I don t ░░░░░░░░ the view it willxd ░░░░░░░░ should be stepping back ░░░░░░░░ large amounts e1t fixedxdlp ░░░░░░░░ gotpe1xd q iwr rhvrq ░░░░░░░░ was at 4 xdxd ░░░░░░░░ less crazy crazy low ░░░░░░░░ and now you ve ░░░░░░░░ plenty of names out ░░░░░░░░ wherew3 yot can find ░░░░░░░░ to and low double ░░░░░░░░ if you want to ░░░░░░░░ deep That s where ░░░░░░░░ get paid in this ░░░░░░░░ and if nothing happens ░░░░░░░░ collect the I coupon ░░░░░░░░ happens in equities you ░░░░░░░░ paid nothing and took ░░░░░░░░ lot of risk to ░░░░░░░░ nothing I q Nancy ░░░░░░░░ word here are paying ░░░░░░░░ much attention to the ░░░░░░░░ not enough to the ░░░░░░░░ and the Fed seems ░░░░░░░░ be looking at what ░░░░░░░░ slowdown in creditf availability ░░░░░░░░ going tot do Is ░░░░░░░░ possiblet he stock market ░░░░░░░░ notfsh pricing in that ░░░░░░░░ and the effect on ░░░░░░░░ Absolutely I think the ░░░░░░░░ 5a market we had ░░░░░░░░ of the most inverted ░░░░░░░░ curves in the history ░░░░░░░░ the financial markets The ░░░░░░░░ market has been n ░░░░░░░░ for a long time ░░░░░░░░ equities and their corporate ░░░░░░░░ 7w know it s ░░░░░░░░ same kind of data ░░░░░░░░ you have high yield ░░░░░░░░ and equities you have ░░░░░░░░ different part of thelp ░░░░░░░░ capitalu struct and I ░░░░░░░░ not sure that the ░░░░░░░░ holders are actually safer ░░░░░░░░ as we look at ░░░░░░░░ recent blowup with credit ░░░░░░░░ e1jgky holders got something ░░░░░░░░ holders got zip zero ░░░░░░░░ so you I know ░░░░░░░░ s Not senior bond ░░░░░░░░ holders Those are I ░░░░░░░░ special bond There s ░░░░░░░░ lot of mutual funds