RUSH TRANSCRIPT Fed Chair ░░░░░░░░ Especially a change in ░░░░░░░░ longer ongoingi that we ░░░░░░░░ seeing words likei may ░░░░░░░░ some u comes to ░░░░░░░░ policy firming Hike The ░░░░░░░░ is replace of pain ░░░░░░░░ was the word Powell ░░░░░░░░ using at Jackson hall ░░░░░░░░ to he talked about ░░░░░░░░ and how the credit ░░░░░░░░ are tightening and how ░░░░░░░░ will be tightening policy ░░░░░░░░ dodged the question onw3 ░░░░░░░░ tightening Since they ve ░░░░░░░░ in place all these ░░░░░░░░ the Fed slpxd balance ░░░░░░░░ is expanding right now ░░░░░░░░ might not want to ░░░░░░░░ itxd quantitative tightening but ░░░░░░░░ liquidity into the system ░░░░░░░░ I think that s ░░░░░░░░ so ijfe1 actually think ░░░░░░░░ woul probably go the ░░░░░░░░ way if I was ░░░░░░░░ to be calling t ░░░░░░░░ I would actually say ░░░░░░░░ credit isxd reallyi pri ░░░░░░░░ know rates are the ░░░░░░░░ curve isf incredibly it ░░░░░░░░ priced still for a ░░░░░░░░ recession it s lower ░░░░░░░░ than it was even ░░░░░░░░ the late 80s and ░░░░░░░░ I think the bond ░░░░░░░░ are really saying the ░░░░░░░░ is still making a ░░░░░░░░ j q it s ░░░░░░░░ r a little bit ░░░░░░░░ the front end since ░░░░░░░░ Silicon Valley bank e1blowup ░░░░░░░░ there s a lot ░░░░░░░░ I think room in ░░░░░░░░ m for credit spread ░░░░░░░░ wideni and more defaults ░░░░░░░░ come in because right ░░░░░░░░ we haven t seen ░░░░░░░░ pickup in the default ░░░░░░░░ That a little more ░░░░░░░░ stay with us Because ░░░░░░░░ re going to bring ░░░░░░░░ house fed whisperer5a jf ░░░░░░░░ room You askedp aboutb ░░░░░░░░ 4k Look Morgan good ░░░░░░░░ What the Fed tried ░░░░░░░░ do here was just ░░░░░░░░ a balance between still ░░░░░░░░ inflation on the han ░░░░░░░░ that threatens the economy ░░░░░░░░ what happened It hiked9 ░░░░░░░░ quarter point for t ░░░░░░░░ straight time signaled somexd ░░░░░░░░ policy firming may be ░░░░░░░░ and that s instead ░░░░░░░░ thex We re looking ░░░░░░░░ what s happening among ░░░░░░░░ banks and f asking ░░░░░░░░ there going to be ░░░░░░░░ tighteningvp in credit conditions ░░░░░░░░ thinking about thatf as ░░░░░░░░ doing the same thing ░░░░░░░░ rate hikes do so ░░░░░░░░ a way that substitutesf ░░░░░░░░ rate hikes so the ░░░░░░░░ is we have to ░░░░░░░░ cp policies got to ░░░░░░░░ tight enough to bring ░░░░░░░░ t h inflation down ░░░░░░░░ 2 over time it ░░░░░░░░ t all have to ░░░░░░░░ from rate hikes f3 ░░░░░░░░ tighter credit conditions u ░░░░░░░░ fed officials did no ░░░░░░░░ q spr tain t ░░░░░░░░ last meeting The key ░░░░░░░░ is for the Fed ░░░░░░░░ monitor how banks react ░░░░░░░░ the pull back lending ░░░░░░░░ and it helps bring ░░░░░░░░ inflation thez 5aqenupfedu 7 ░░░░░░░░ 0 bank in terms ░░░░░░░░ lending the Fed could ░░░░░░░░ to do Morgan I ░░░░░░░░ significantly rule out potential ░░░░░░░░ Yeah the fact that ░░░░░░░░ said some additional or ░░░░░░░░ I should say quote ░░░░░░░░ developments likely to result ░░░░░░░░ tighter credit conditions iq ░░░░░░░░ any sort of sense ░░░░░░░░ when that could possibly ░░░░░░░░ to materialize and the ░░░░░░░░ of data points that ░░░░░░░░ Fed is specifically looking ░░░░░░░░ in terms of that ░░░░░░░░ re going to getxd ░░░░░░░░ dat each week in ░░░░░░░░ Fed s balance sheet ░░░░░░░░ gives us some insight ░░░░░░░░ what is 9 banks ░░░░░░░░ also get the senior ░░░░░░░░ officerxd survey and some ░░░░░░░░ that tell us what ░░░░░░░░ happening and that should ░░░░░░░░ us an idea also ░░░░░░░░ one of the things ░░░░░░░░ happens with credit tightening ░░░░░░░░ rates r actually go ░░░░░░░░ m ne for borrowers ░░░░░░░░ that s anotherxd thing ░░░░░░░░ look at and I ░░░░░░░░ Nancy was talking about ░░░░░░░░ that s another area ░░░░░░░░ where if credit if ░░░░░░░░ step back you could ░░░░░░░░ higher rates when it ░░░░░░░░ to creditf spreads relative ░░░░░░░░ risk free treasuries so ░░░░░░░░ are some ways we ░░░░░░░░ look for and try ░░░░░░░░ find what s really ░░░░░░░░ I the economy I ░░░░░░░░ though Morgan thatlp ultimately ░░░░░░░░ tell is going to ░░░░░░░░ wc 1 iinflation either ░░░░░░░░ comes down or it ░░░░░░░░ t and that if ░░░░░░░░ doesn t theq fed ░░░░░░░░ I more work and ░░░░░░░░ was trying t come ░░░░░░░░ rmorgan withf how to ░░░░░░░░ remember wet went in ░░░░░░░░ two ideas dovish hike ░░░░░░░░ a hawkish pause I ░░░░░░░░ t think it s ░░░░░░░░ I think it s ░░░░░░░░ of like a hike ░░░░░░░░ a maybe or a ░░░░░░░░ andf come see me ░░░░░░░░ a couple months I ░░░░░░░░ that s what it ░░░░░░░░ Steve I wonder how ░░░░░░░░ I Interpret what the ░░░░░░░░ said about credit I ░░░░░░░░ doesxd data dependentq f ░░░░░░░░ Fed now mean credite1 ░░░░░░░░ x dependent on balance ░░░░░░░░ thanf in the past ░░░░░░░░ because I believe Powell ░░░░░░░░ say that it s ░░░░░░░░ hard to read this ░░░░░░░░ of credit tightening in ░░░░░░░░ idata It is it ░░░░░░░░ and that s why ░░░░░░░░ job is so interesting ░░░░░░░░ the data points that ░░░░░░░░ need look at to ░░░░░░░░ policy are going to ░░░░░░░░ and change quite a ░░░░░░░░ I m going to ░░░░░░░░ listening andxd watching David ░░░░░░░░ t v we re ░░░░░░░░ going to have to ░░░░░░░░ know just watch this ░░░░░░░░ carefully inf terms of ░░░░░░░░ isi happening in markets ░░░░░░░░ whether or not any ░░░░░░░░ this ends up having ░░░░░░░░ impact on the economy ░░░░░░░░ general We re going ░░░░░░░░ watch the high I ░░░░░░░░ data Do you see ░░░░░░░░ claims tick up He ░░░░░░░░ know something about flows ░░░░░░░░ banking system though Jonathan ░░░░░░░░ we will not know ░░░░░░░░ I think he s ░░░░░░░░ going to look at ░░░░░░░░ and there will be ░░░░░░░░ ere he might have ░░░░░░░░ that deposits are stillok ░░░░░░░░ out of somet of ░░░░░░░░ and regionali q 9 ░░░░░░░░ wouldf give him concern ░░░░░░░░ r Steve Liesman t ░░░░░░░░ you Mentioned endedt aboute1 ░░░░░░░░ about flat and down ░░░░░░░░ ba hours I don ░░░░░░░░ know what you think ░░░░░░░░ says I mean 9pr ░░░░░░░░ I d be shocked ░░░░░░░░ that is true Yeah ░░░░░░░░ could be wrong but ░░░░░░░░ s what it looks ░░░░░░░░ I was seeing Do ░░░░░░░░ think data dependent ha ░░░░░░░░ to do with credit ░░░░░░░░ now same question I ░░░░░░░░ to liesman Look I ░░░░░░░░ the credit availability story ░░░░░░░░ keyq and Steve kind ░░░░░░░░ hit it on the ░░░░░░░░ hit the nail on ░░░░░░░░ head when he said ░░░░░░░░ ll look at a ░░░░░░░░ of new pieces of ░░░░░░░░ 5a that Thursday balance ░░░░░░░░ d8r to become mission ░░░░░░░░ Someone said it in ░░░░░░░░ earli hour maybe report ░░░░░░░░ Ujut the banks are ░░░░░░░░ using itxd icurjjutw3 people ░░░░░░░░ going to stressed out ░░░░░░░░ said I would turn ░░░░░░░░ on its head and ░░░░░░░░ thexd fedxdxd d 300 ░░░░░░░░ of reserves back into ░░░░░░░░ system It didw3 quantity ░░░░░░░░ easin every measure of ░░░░░░░░ that is or balance ░░░░░░░░ expansion You can parse ░░░░░░░░ up 9ie1 and say ░░░░░░░░ not ixd traditional purchasi ░░░░░░░░ securities and the like ░░░░░░░░ the bottom line is ░░░░░░░░ reserves wereq added and ░░░░░░░░ were taken out and ░░░░░░░░ is a big deal ░░░░░░░░ big d 9 that ░░░░░░░░ upt anothery1xd 200 or ░░░░░░░░ b t easing and ░░░░░░░░ offsets a lot of ░░░░░░░░ credit tightening that we ░░░░░░░░ worried about that comes ░░░░░░░░ the banking stress in ░░░░░░░░ regionals And the volume ░░░░░░░░ low it was down ░░░░░░░░ now it s flat ░░░░░░░░ 1 r f yeah ░░░░░░░░ would have bought that ░░░░░░░░ day if it was ░░░░░░░░ 4 LP For a ░░░░░░░░ it okwas F I ░░░░░░░░ to keep tugging on ░░░░░░░░ thread and get your ░░░░░░░░ you brought up before ░░░░░░░░ went to Steve That ░░░░░░░░ the fact that you ░░░░░░░░ quantity kwan quantity tightening ░░░░░░░░ what does it mean ░░░░░░░░ 9 the that continue ░░░░░░░░ I guess manifest and ░░░░░░░░ there p9 Well I ░░░░░░░░ tremendous opportunity for linked ░░░░░░░░ to their portfolio because ░░░░░░░░ balance sheet whether they ░░░░░░░░ to call it qe ░░░░░░░░ not it isq expanding ░░░░░░░░ Fed has eased the ░░░░░░░░ of rate hikes and ░░░░░░░░ inflation I priced in ░░░░░░░░ future wayxv1 thet 6 ░░░░░░░░ CPI r print just ░░░░░░░░ year inflation expectations was ░░░░░░░░ around I jf2 2 ░░░░░░░░ think it s time ░░░░░░░░ stand on th soap ░░░░░░░░ and say e1look we ░░░░░░░░ the Fed s got ░░░░░░░░ bute1 I didn have ░░░░░░░░ lot of confidt in ░░░░░░░░ when Powell said that ░░░░░░░░ was surprised to hear ░░░░░░░░ Silicon Valley bank and ░░░░░░░░ did that happen Myself ░░░░░░░░ is he talking about ░░░░░░░░ know it s mortgages ░░░░░░░░ s always what blows ░░░░░░░░ every it s always ░░░░░░░░ volatility It s always ░░░░░░░░ same It s just ░░░░░░░░ the bond market And ░░░░░░░░ thef agg has re1 ░░░░░░░░ protection and third is ░░░░░░░░ p Beok diversified Don ░░░░░░░░ go by name only ░░░░░░░░ a great opportunity to ░░░░░░░░ futur inflation expectations because ░░░░░░░░ re right around the ░░░░░░░░ s 2 target Yeah ░░░░░░░░ re saying Nancy to ░░░░░░░░ inflation linked assets here ░░░░░░░░ do youq have in ░░░░░░░░ when you saylp that ░░░░░░░░ sou I we own ░░░░░░░░ managerf forf the0 n ░░░░░░░░ fund and c80m is ░░░░░░░░ u treasur treasury inflation ░░░░░░░░ ut uq securities and ░░░░░░░░ addxd interest rate options ░░░░░░░░ fix issues that exist ░░░░░░░░ T I p s ░░░░░░░░ isi Mainly what Powell ░░░░░░░░ about a third of ░░░░░░░░ is linked to rent ░░░░░░░░ So we u add ░░░░░░░░ inflationxd ex urjju outside ░░░░░░░░ CPI to the p ░░░░░░░░ and I think it ░░░░░░░░ a really great timee1 ░░░░░░░░ investors to be looki ░░░░░░░░ diversifying assets like I ░░░░░░░░ m inf in the ░░░░░░░░ are trading at a ░░░░░░░░ spread to where realized ░░░░░░░░ t David we also ░░░░░░░░ thelp fed lower growtht ░░░░░░░░ for 20 2024 Can ░░░░░░░░ argue that Powell just ░░░░░░░░ the odds we could ░░░░░░░░ into Theq forecasts are ░░░░░░░░ aggressive Even 4t i1 ░░░░░░░░ unemployment rat the end ░░░░░░░░ the year and the ░░░░░░░░ seg Folks werei reit ░░░░░░░░ That s a big ░░░░░░░░ and a lot of ░░░░░░░░ get lost in r ░░░░░░░░ second of the year ░░░░░░░░ the Fed sees I ░░░░░░░░ and would love a ░░░░░░░░ landing and want lation ░░░░░░░░ back to 2 which ░░░░░░░░ know for me Morgan ░░░░░░░░ just yet an upherlp ░░░░░░░░ to say why do ░░░░░░░░ to be in the ░░░░░░░░ part of thejf capital ░░░░░░░░ why do want to ░░░░░░░░ in the lost piece ░░░░░░░░ every business which is ░░░░░░░░ equity piece when ilp ░░░░░░░░ be in piece and ░░░░░░░░ get pretty big juicy ░░░░░░░░ so I keep coming ░░░░░░░░ to that at the ░░░░░░░░ of this cycle If ░░░░░░░░ think probl m in ░░░░░░░░ there s going to ░░░░░░░░ a lot more problems ░░░░░░░░ equity because the xdr ░░░░░░░░ not in the first ░░░░░░░░ of fire I don ░░░░░░░░ have the view it ░░░░░░░░ you should be stepping ░░░░░░░░ from large amounts e1t ░░░░░░░░ income gotpe1xd q iwr ░░░░░░░░ d was at 4 ░░░░░░░░ or less crazy crazy ░░░░░░░░ yields and now you ░░░░░░░░ got plenty of names ░░░░░░░░ there wherew3 yot can ░░░░░░░░ 8 to and low ░░░░░░░░ digits if you want ░░░░░░░░ dig deep That s ░░░░░░░░ you get paid in ░░░░░░░░ cycle and if nothing ░░░░░░░░ ou collect the I ░░░░░░░░ Nothing happens in equities ░░░░░░░░ 2 paid nothing and ░░░░░░░░ a lot of risk ░░░░░░░░ get nothing I q ░░░░░░░░ last word here are ░░░░░░░░ too much attention to ░░░░░░░░ Fed not enough to ░░░░░░░░ economy and the Fed ░░░░░░░░ to be looking at ░░░░░░░░ the slowdown in creditf ░░░░░░░░ is going tot do ░░░░░░░░ it possiblet he stock ░░░░░░░░ s notfsh pricing in ░░░░░░░░ slowdown and the effect ░░░░░░░░ earnings Absolutely I think ░░░░░░░░ rates 5a market we ░░░░░░░░ one of the most ░░░░░░░░ yield curves in the ░░░░░░░░ of the financial markets ░░░░░░░░ rates market has been ░░░░░░░░ mistakes for a long ░░░░░░░░ whereas equities and their ░░░░░░░░ credit 7w know it ░░░░░░░░ the same kind of ░░░░░░░░ If you have high ░░░░░░░░ bonds and equities you ░░░░░░░░ a different part of ░░░░░░░░ r capitalu struct and ░░░░░░░░ m not sure that ░░░░░░░░ bond holders are actually ░░░░░░░░ because as we look ░░░░░░░░ the recent blowup with ░░░░░░░░ suisse e1jgky holders got ░░░░░░░░ it holders got zip ░░░░░░░░ q so you I ░░░░░░░░ it s Not senior ░░░░░░░░ r holders Those are ░░░░░░░░ very special bond There ░░░░░░░░ a lot of mutual funds