Bloomberg Surveillance: 'Enormous' Bond Market Volatility

Mohamed El-Erian, Bloomberg Opinion Columnist, guests hosts the show and says the 'enormous volatility' in the bond market needs to be corrected in order to restore the Fed's credibility . Stephanie Kelton, Stony Brook University Professor of Public Policy & Economics, says the Fed has effectively put fiscal policy on autopilot. Steve Chiavarone, Federated Hermes Head of Multi-Asset Solutions, describes the Fed's policy trajectory as headed for a "rocky landing." Stephen Schork, The Schork Group Principal, says traders have become skeptical about supply levels of oil and jet fuel heading into a major travel season . Jeannette Lowe, Strategas Managing Director of Policy Research, says the meeting between President Biden and Xi Jinping won't change the dynamic between the two countries in a major way. Get the Bloomberg Surveillance newsletter, delivered every weekday. Sign up now: https://www.bloomberg.com/account/newsletters/surveillance Full transcript: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along with Jonathan Farrell and Lisa Abramowitz. Join us each day for insight from the best an economics, geopolitics, finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and anywhere you get your podcasts, and always on Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business App. Why don't we move on to what doctor Olrium cares Mohammed, We've got to sit on crude, the idea that crude has essentially collapsed into a bear market, down more than twenty percent from the September highs. We spent this week talking about soft lending, hopes and dreams. Do we have to start thinking about an economic downturn in the not too distant future, well some of them. Some people are talking about this. I mean to see oil prices down more than twenty percent from the highs at the time that there's a conflict going on in the Middle East. It's quite quite and that's feeding into the soft landing. And we're going to talk a lot about this. But the market has now fully embraced not just that the fat has finished this hiking cycle, which I think is correct, but that we're going to see deeper and deeper cuts next year without a recession, and that's the critical assumption that's now built in across markets. I want to get the money question out of the way right away. As CEO of a major two million employee company in America called Walmart, yesterday brought up a d word deflation seared into the fabric of Cambridge, Oxford in the London School of Economics as a study a British deflation of the thirties and forties. America has never faced that have they They haven't, and we've had Japan recently. And the problem with deflation is it discourages people from buying today. However, I want to stress the US is deflation in certain products, food being the primary example, and that's why Walmart we decited it. We don't have general deflation, and I doubt we're going to have general deflation. I mean, I look at the an inflation question and it is a vector of disinflation in place. Clearly we see that. What is your optimism of getting back to John Williams two point zero percent? Richard claired is two point x percent. I think Richard is more likely to be right than John. I think we're going to get stuck in the high twos, and the FED is going to have to make a very difficult decision. Does it live with inflation higher than target because the target itself is too low, or alternatively, does it acknowledge that two percent is the right target and then crushes the economy. I think that's the choice the FED is going to have to make. What's your best guess right now? I think it's going to go for the format. I think the FED will understand that pressing two percent inflation in a world where there's insufficient structural supply is not the right thing to do. So where do you think it leaves this bond market? Let's go through this course right now. We've got a two year at the moment at about four eighty, a ten year at about four forty. Think about where we've been in the last month of Summerhammet had a two year pushing five twenty five high set of cycle, ten year through five percent high set of cycle. How are you thinking about what we come back down to, bearing in mind what we're pricing for right cuts next year. I think we've come down too far to tell your truth. I understand why some people think that we're going further, but if you look at the inflation dynamics, that's harder to get unless we go into recession. If we go into a recession, then the stock market is mispriced, so you can't have both at the same time. Has something changed? I think this is what it goes back to. Has something changed post pandemic? That means we don't go back to the pre pandemic world. That debate, I think is still on going. Mohammed, where'd you come down on it? I think the pre pandemic world was exceptional. It was a world of qui. It was a world of insufficient aggregate demand. And when you have insufficient aggregate demand, you can push into the economy as much liquidity as you want because you won't get inflation. That world is gone. We're in a world now of efficient, inflexible supply, and that's a very different world. Sometimes talk about over the two hours with doctor Olian is growth economics. I've been telling a lot of people to remind themselves of a guy named Solo at MIT in nineteen fifty six and the near religious experience of trusting and growth. Can you state that we have a new American growth economics of what some people are indicating is improved productivity, improved efficiency. So you know, I listened carefully to our friend Mike Spence, the Nobel Prize winner, because he spent so much of his career studying studying with John Hicks, I mean correct majesty of that alone, and he is incredible and his insights are really valuable. And his bottom line is that most countries have to evolve to a new growth model. The US is the most advanced in that evolution. I think the three important piece of legislation that the administration passed last year were critical in that perspective. So if you look around the world, whether it is the US, Europe, or China, all three have the challenge of evolving the growth model, and only the US is doing it seriosly right now, too gloomy? We no, Lisa isn't here, so we're not too blooming. No. I think we recognize that the world is evolving. This is a different global economy, this is a different domestic economy, and policies have to evolve accordingly. What worries me and I think the concern of a lot of people listening to this conversation on going at home is you just have to go about forty eight hours and we're talking about disinflation, soft landing, hopes and dreams, and then twenty four hours, forty eight hours later, you look to Burberry a collapse in luxury. You look to Walmart a warning about the US consumer. You look to Crew entering a bear market, and all of a sudden, we're talking about a slowdown and maybe even recession. Mohammed. The bond market is stuck between all of this. We're seeing double digit moves day after day in either direction. You've written about this extensively in the last few months, about a bond market that's lost its anchors. Is an economic slowdown sufficient to regain some stability in fixed incoming treasury specifically? No, I mean I was really struck yesterday. I was watching you when you said, guess what, we had the same level of the tenure as we were a week ago, and my reaction is, how could that be? So I looked it up and you were right. Now. Most people feel that this week is very different from last week because of the inflation print that we've had. We still lack one of the three anchors. You either need an economic anchor, or a policy anchor, or a technical anchor to the bond market, and we've lost all three. So these moves are going to continue. The thing that has really impressed me is that nothing has broken. If you had told me a year ago we're going to see this incredible volatility and the most important market in the world is the benchmark for so much else, and yet nothing will break, I would have said that's impossible. So the resilience of the functioning of the market has really impressed me. The financial system, and of course we had the shock and the United Kingdom off a derivative structure in the pension plans, but to lead to this and measured in standard deviations, which is how fancy people like Alarian think. We had a six seven eighth standard deviation and thereat moderation. There's a hope in prayer we get back to that trend line that's in years. How many years are do you think we heal this great bond tobacco. I think it's going to take time. Remember we've had ten exceptional years where the bond market was distorted, so I must say back to vulgar We've had, you know, thirty exceptional years. But the shift to an artificially low interest rate and ample and predictable injections of liquidity fundamentally changed the bond market and that is going to take time to recover from. Did you and Bill Gross get a free ride because you were within the Great Moderation? Was that such a structural like a free life? But the PIMCO when you build it, you invented it with Bill? Was it? Was it easier because you had the Great Moderation? Or just just think of investor. Investors care about three things, returns, volatility, and correlations. And we went through a period that because liquidity was being injected into the economy over and over again, we got high returns, we got virtually no volatility, and the correlations broke down. But in your favor, you made money on your risky assets and you made money on your risk free acids. At the same time, there was a great time. We took it to be normal, but it was truly exceptional. And we're going back to a world that I think is more like what we had before the Global financial crisis. It's going to be so hard to shake this, Mohammed, because we've got a whole generation, in fact, a couple of generations conditioned by two major shocks, the financial crisis and the pandemic. And we know how the FED response to major shocks. What we've all forgotten is how it responds to just normal economic downturns and upside pressure on inflation. How do we start to get into that all over again? Yeah, And this is where FED credibility and better communication is better. John, It's really striking that the market is willing to take on the FED on a price that the FED controls. The FED totally controls the policy rate, and yet the market does not believe what the FED is is telling us. And it is really striking because we have got to restore FED credibility otherwise we're going to continue with this enormous volatility. Your thoughts on what's percolating into the end of the year in the Q one twenty twenty four. Are there shadows in private equity? Are there shadows in the new non traditional finance? Yeah? So, one thing that I don't think is pricing enough is that when you move from the banking system to the non banks, you change the lags in the system. So you see this with commercial real estate. Everybody recognizes that the re financing of a trillion plus of assets is going to be tricky, but because it's over time, we don't worry about it. Everybody recognizes it as a maturity wall in the corporates out there, but because it's over time, we don't worry about it. If it were all within the banking system, we would have worried about it really quickly. So the move from the banks to the non banks has extended this Michael Spencer's shore. The regulatory lag here is tangible. This is the uncomfortable calm note as well, just to borrow that phrase from a long time ago from the Bank of International Settlements, This maturity wall is out there in twenty twenty five, and it's just this feeling mohammed that we don't have to think about it. But at some point we have to start thinking about it, don't we, right? But you know what, you enjoyed the journey before you get to a destination. Oh, here we go, and you want to give us some good news bad news, bradmos out here, No, no, I totally understand, you know, because momentum is really important, and you want to be exposed to this market. And I think most people have much more of a tactical mindset than they do of a strategic or structural mindset, and investment has become very tactical. Mohammed's set in the Town's great to have you with us, by the way, it is without questions, through the pandemic and literally over the last five years she has had a greater influence on the debate of our American economics and anyone out there. Out of Sacramento, Cambridge and a tour of duty at the very liberal New School of Social Research, Stephanie Kelton joins us now from Stonybrook University. The book is a deficit myth. In the three letters, are MMT professor honored to have you on Bloomberg's surveillance? Are we unraveled? Stephanie? The worry here of the annual interest expense the return of a real interest rate? Are we unraveling as we roll into twenty twenty four? No, I mean we are. The Fed is effectively in a sense, putting fiscal policy, a big part of the federal government's budget on autopilot. And it's really tantamount to running, you know, a pretty regressive fiscal stimulus. That's what the rate hikes are actually doing. If we don't like it, Tom, there's a pretty easy way out of it, which is to say, if the rate high are pushing up the amount of money the federal government is spending to service the debt, interest expenditure up by hundreds of billions and trillions of dollars over time, remittances from the Fed to the treasury have collapsed. All of this is adding to the deficit, which triggers more issuance of treasuries, which puts you in what is essentially just a cycle now of higher rates, higher deficits, higher debt, and it will continue for as long as the Federal Reserve holds in this position with a deficit. The debt and the deficit is from the new school Heilbrunner and Bernstein classically talked about years ago. But the arch MMT criticism is, you're handing monetary decision making from the acuity and date driven data dependency of a FED over to the legislative branch. Can we trust the legislative branch to prosecute MMT given where we are right now? Well, okay, I'm glad you mentioned hal Brunner. He was a professor of mine when I was there in a really terrifically bright person Tom. MMT is a description of the monetary system that we have today. It is a floating exchange rate fiat currency. Love it or hate it, it's what we have. MMT describes the monetary system that we have and the mechanics of government finance. It's not a policy proposal. It doesn't propose changing anything. It's describing how things already work. So think about what Congress did with the onset of the pandemic, drafting first the Cares Act that two point two trillion and then the big Omnibus Bill, a nine hundred billion dollar package, and then the Democrats came in and did their one point nine trillion dollar American Rescue Plan Act. All of that was deficit spending. We didn't give Congress any new permission to do anything. We just described how it all works. And it helps to unders stand why Congress was able to muster that kind of fiscal firepower when so many economists had previously said that when the next crisis came, we would be unable to act. People like Larry Summers said because of the Republican tax cuts in twenty seventeen, that we would be living on a shoe string for decades to come. Those were his words. That we wouldn't have the ability to spend money because of the deficits, because of the debt. That was wrong. Congress has the power of the purse. MMT recognizes that, and MMT says, listen, this is an extraordinary power they have. They need to use it responsibly, and that means thinking before you move forward with bold spending programs about the inflation risk that's associated with those spending proposals. And that's the piece that was missing. The one thing you didn't mention in you know, my tour of going through my education and so forth, was the time I spent in the US Senate as the chief economist for the Demomocrats. And I'll just say very quickly and i'll stop that. When I was in the Senate, my great frustration was being surrounded by members of the Senate on both the Republican and the Democratic side, who were drafting bills trillion dollars of infrastructure, talking about medicare for all and all these other things without ever mentioning inflation risk, I couldn't believe it. So MMT would have us do things very differently when it comes to the way we approach the federal budgeting process. It's inflation that you have to watch for, Stephanie, it's Mike McKee. If wishes were horses, then beggars would ride. The idea that Congress is going to think about anything before these start passing bills is probably not going to happen. So I'm wondering, after all this is there a limit in the sense that at some point we aren't going to be able to respond fiscally, for one reason or another, to some sort of crisis because all the money is going into debt payment instead of instead of going into additional spending, and the way we're set up now, we got to pay those bills. Okay, So two things I'll say. One, I've been hearing this my entire life. You'll remember that Chairman Volker had into straights up pretty high. And meanwhile, you know Ronald Reagan did two massive tax cuts and massively built up the military. So again, if Congress has the will to pass legislation, the votes are there, the money is there, and I'll just say I don't think it's right to say, actually that we can't trust Congress to rein it in. Remember, the so called Inflation Reduction Act was Congress's effort to say, listen, we don't want to continue passing legislation given the inflationary environment. So we want to get revenues up, we want to control costs. We're going to negotiate prescription drug prices. That was all Congress taking, you know, careful steps. I think are you would you suggest, Stephanie, whether it's a Republican or Democratic, to houses that we can have budget responsibility. Do you see displayed budget responsibility in the modern Congress and Senate? Well, Tom, what I'm saying is that if we were doing things the way I'd like to see them done, instead of handing proposed spending bills to let's say, the Congressional Budget Office and saying, give me feedback on this legislation I have drafted. Tell me if it's going to increase the deficit, tell me whether it adds to the debt. I don't think that is the most important feedback. I think it would be much better to have CBO and or other agencies evaluate proposed legislation on the basis of inflation risk. But we don't do it that way, right, So I think that that would put us much closer to having a Congress that operates with fiscal responsibility, i e. Inflation risk at the heart of what it is. Okay, can you and say a critic of yours, John Cochrane, the great conservative economists, Can you and John Cochrane get on the same page and say we need a Simpson Bulls reducts where in the initiation of that panel we actually demand that we get something done. No? Uh, sorry, sorry, but no is the answer to the question. You would have to first convince me that there is some sort of looming crisis that necessitates the formulation of a fiscal commission. And I don't believe that we are facing that kind of crisis. Inflation is coming down. So if you approach things the way I do, which is to say, you know, are we at risk? Is the budget posing and inflation problem, then let's get at it and let's figure out what adjustments need to be made to ensure that we aren't putting ourselves at risk of trenched inflation well above the Fed's target. I don't think that's the future facing fascinating and controversial Professor Calton. Thank you so much, Stephanie Calton. I can't say enough about how refreshing to any and all her book. The deficit myth is she is at Stonybrook and you know her from the phrase MMT right now with us and Mohammedalarian with us is a great thrill today. He is at Queen's College in Cambridge and he's interested in the asset allocation of their endowment. That's the campus that Steve chiveron had a multi Asset Solutions that federated him as Steve. This is a lonely bull market. How do you reallocate into the end of the year. Well, you had to get ahead of it a little bit. We were adding over the course of the summer when it was uncomfortable on the idea that markets like FED pauses and they price in soft landings even if a soft landing doesn't materialize, because when the FED pauses, invariably it's on suspicion they've gone too far, not on confirmation. And so the data that's available to you is a FED that's no longer hiking and an unemployment rate that's still low, and that's been the case throughout history and it's the case today. And so finally, with the bond market having broken, we're getting that FED pause rally and that can be powerful, Tom. You know, historically those are nine month events, and you can see the equity market up fifteen twenty percent. And interestingly enough, and this is something that's been on our mind, the equity market has hit an all time high each of the last five times that the FED has paused. Now four of those ended in tiers, but it still happened either way, and we think this rally has legs. I think the jury on whether or not, you know, how soft this landing is next year, is still very much out or for the time being, we think this rally continues. Steve, what are you looking at to determine this whole macro question of has the FED not just paused, but it's going to stop cutting and kind to do so within a soft What are the key variables you look at. We're calling them the five Games of Chicken, and it's that corporate refinancing wall. You're going to have about sixty percent of corporate debt come due between twenty four and twenty eight, So what percentage of that is going to face materially higher rates, and what does that do to company earnings? That's number one. Number two for small businesses, they've already seen their debt repriced because it's variable rate bank debt. So how many quarters of high rates can they survive? On the consumer negative or I'm sorry, real income growth is finally turned positive, But how positive does it get? And does it allow a consumer to de lever again, rebuild savings and continue to spend eight hundred and seventy seven billion dollars of bank deposit outflow? What does that do to restrict lending? And then what percentage of the federal debt, a third of which becomes due this year reprices to a significantly higher rate. Those five things we think, if they were to all go perfectly, you'd get this immaculate soft landing. I think that's unlike we think what's more likely is a kind of rocky landing where inflation stays stuck at three rates, stay hi, there's some slow down, and it's a kind of malaise. It's a single digit equity environment with a real risk that something breaks and you get into a classic recession. So it's really between that rocky landing and then a kind of a classic recession break that we think is most likely to happen. We're in the rocky landing camp at least for now. And what do you say to those who say, of your five factors, it's one in five. It's all about supply. It's all about who's going to buy all the supply. I think that's big. But where I would focus more acutely is on the nexus between banks and small businesses. The banks. Again, if there's eight hundred and seventy billion dollars less of deposits, that's eight hundred and seventy seven billion less of loans that can be made. And small businesses are reliant on that, and they're not facing a maturity wall. They've already seen it, and so if something's going to break, we would look there. So we're spending a lot of time focused there. It also has a bias towards larger cap companies within our asset allocation. Steve, let's get to the quote that shook up this market in the last twenty four hours. TK talked about it at the start of the program. It came from the Walmart CEO. We may be managing through a period of deflation in the months to come. Steve, when you heard those words yesterday, what was your response. I think the word deflation is probably a little strong, But I do think that there could be a lot more disinflation than what we've what we're expecting. If you look at the areas of the economy where you've seen disinflation so far, it's goods prices, it's food prices, its energy prices, It's a lot of stuff that quite frankly, can be explained by COVID normalization. Big interest rate sensitive purchases have not really seen the big deflation that you'd expect r. I mean, home prices are still relatively buoyant. Go and try to buy a car. It's not exactly a value exercise these days. And so I think as the rate heights filter through the economy, there is more disinflation in the pipeline, and I think you could see a at some point in twenty four go very quickly from worrying primarily about inflation to worrying very much about growth and the employment markets. And that could switch on a dime. And it's something that keeps us in a kind of humble position. Well states is the same true for investors just to jump in. You mentioned that as a federal reserve can make that switch. I just wonder how quickly investor start to make that switch, and whether we can get some divergence between what's happening with bonds and what's happening with stocks. I think what you do is you pull up some charts and you look at them. Historically, you know, unemployment takes stares down and elevators up. The equity market takes stairs up and elevators down. Particularly if you are headed towards a recession. You don't gradually shift your view in the late part of a cycle. It happens very, very swiftly, and that's why as an investor you have to prepare for that. You start to lengthen duration, you start to upgrade the quality of your equities. We like companies right now that have strong balance sheets, strong cash flow generation, low external financing, and you move in that direction so that if it does move on a dime, which historically it does, you know you're you're not left out in the coal stave. What if I get you thoughts, it's going to catch up. Have a good weekend, my stave Chevron the Federated terms, Stephen Schory, So principle of the short group saves us. Now, oil disinflation, Stephen, how does New York Harbor adjust to oil deflation? All the little idy busy things jet fuel, diesel, distillate, how do they adjust as collapse in oil. Yeah, it's a really interesting question, Tom. We're trying to figure it out as we speak right now. When you look at the spread action between gasoline on the flub with curb and inventories, seemingly there is enough oil power, enough gasoline in your harbor. The neok Carver just want to point out is important because that is the delivery hub for the mercantiles, diesel and gasoline contracts. Now, when we look at overall supplies relative to demand, we're looking at about twenty four days worth of supply of gasoline. Now. That is normal, That is spot on to the five year average, and it's slightly above a year ago. The problem now is that traders are skeptical. They are pricing in a premium on the front end of the curve, which is a clear signal that someone out there is concerned about these supplies, regardless of the fact that we do have all of this space worth to supply? The other big issue here is jet fuel. Right now, we don't have enough jet fuel stocks are extremely low and as we look forward to next week, we expect this or I should say Triple A expects us to be one of the busiest travel seasons for Thanksgiving of the past twenty odd years. So when we look at the rising demand, when we look at the spread action, something here is afoot. It doesn't line up that the spreads are saying one thing, ie, there's not enough supply, regardless of what we're actually seeing in a weekly inventory reports from the EIA. So Stephen, the SANDI is a frustrated with the price section, as you can imagine. I just wonder if they're frustrated enough to change policy again, do you think they are? It's really interesting and it is really conundrum that, to be honest, I am perplexed that the market never really priced in any sort of risk premium with regard to what is happening now in the Middle East. And let's be clear on this. This is a war not between Israel and Hamas, but it is effectively a war between Israel and Iran. Given that we're fighting that is to say, Israel's fighting Amas has Blah and the Huti's all backed by Iran. Now that is a pretty scary proposition with Iran's ability to halt the flow of oil coming out of the Persian go free straight her moves. So yes, there clearly is a head scratcher here that we have this huge risk on supply, but the market refuses the price that in regardless, we're focusing now on the demand picture. And yes, if you're Sali Radio, if hey, if you're a Texas and you are trying to produce and you're looking at this price action, yeah you are frustrated at this point. But I want to say here, based on our modeling, we're likely at the bottom of the market right now, given this situation around the globe and the inbalance now between supply and demand. So, Stephen, do you think that the Saudis will weight this out or do you think the Saudis will be on the phone to the Russians and any other ORPAC plus member that's willing to participate in another cut in production. Yeah, I do think that there is a concern that we'll see further cuts Already the Saudis, Russia, have extended their cuts of volunteer cuts to the end of the year. We've seen now in oil prices, unlike the product prices, we've seen an absolute collapse in the front end of the curve. So we've now actually on the noomics. We've moved into a situation called contango, meaning that prices for nearer term delivery are now below that of prices for longer term delivery. So this is a clear takeaway that right now from an oil standpoint, fundamentals are extremely weak, and I would suspect that we'll see the chances are going into the quarter OPEC plus either extending the cuts or increasing those cuts into the new year. Steven Shark over the arc of Bloomberg surveillance twenty years. One of the great shocks has been America's success with hydrocarbons into the new year. Are we energy independent? No, not at this point. Now. I want to point out that we were energy independent a few years ago. In keeping in mind, energy independence does not mean we do not have to import a BTU from anywhere around the world. We wore a fluid trader in the world. We wore the dominant krudeoil producer in the world, and we wore the swing producer. That is so for all intents and purposes, we wore an energy independent when it comes to hydrocarbons, and that is just a shout out to how well how efficient the industry has grown over the past fifteen to twenty years. But given current policy right now, no, we're not energy independent and going into the new year, big risk is that we are playing a zero sum game. That is to say that we are taking off dispatchable BTUs natural gas, nukes, coal faster than we can replace them renewables. That's not opinion, that is fact. The regulators are telling the government this is so, and yet the government is still going ahead enforcing these retirements where we don't have enough power. So everyone out there get used to this and get ready. There's going to be a huge jump in volatility over the next two years, a huge jump in pricing for electricity and for other alternative BTUs because we're quite not ready for the transition that the government is forced in upon the industry. Stephen with a big one is Stephen Schork at the Short Group. A lot of happy talk this week. Jeanette low Strtigas wrang in on this meeting between Biden and Jain, saying this the meeting does not change the trajectory of US Chinese relations. Tom the US will continue to push for de risking or decoupling with China in order to protect this national security interest, and China will continue to push to develop a multi polar world against US interest. Janet Low there join us now from strtigis MS Lord, Jeannette. I look at where we are, and of course the major question is what's the next step. What is the next step. Should we look for President Biden to visit China. Yeah, that's probably, to somewhat extent unlikely. I think maybe if we look back at last year, we had a meeting between Biden and She in November of twenty twenty two, and you know, not much occurred out of that. After that, a couple months later, we had that spy balloon flying over Montana, which then ruptured relations again. So I don't necessarily think that there's going to be a lot more steps moving forward. It was also very interesting to have the Defense Secretary at the exact same time in the Philippines talking about continued coordination while this APEC and the Biden She summit was happening in San Francisco. So I think this is going to be about trying to lower the temperature, trying to make sure we have continued communications. As you guys have mentioned, having she he wanted to he's having some domestic issues. This is also a good opportunity for him to kind of have a reset. But ultimately, I think that the two sides are going to continue on their trajectories and this is not going to change the overall path. What it is going to do is just make things a little bit easier in the short term. We have an election coming up in the US. We don't want to continue tensions with the China. But at the same time, if Biden was to be too conciliatory towards China, we have a whole lot of hawks in Congress who would then pounce him on that. So Janetta, I very much agree with your analysis. Can you take it one step further? How easy is it to de risk without decoupling? Right? And I think that this is part of the issue too. I mean, you have the US has been trying to make strides to de risk from China, but it's going to take quite a bit of time. Obviously, We're quite reliant on China for supply chains, for critical minerals, for a whole host of things, and so it's going to be very difficult to actually move those pieces away. And so I think that trend is in place and you're going to see it continue over the next couple of years. But that also means that to some extent, you almost need a daytunt at the highest level so that you can build these pieces out from the bottom and ultimately get to that de risking. I don't think decoupling is probably where the ultimate goal is, but it is really about trying to protect US national security interests and making sure there is reduced dependency on China. And I do think that you are seeing that you regardless of the fact that you have to make choices between how you align with US and China, there is an effort or there is a realization across the globe that having too much dependency on China is not a good thing either. And from Chrona's perspective, de risking involves building little pipes around the US at the core of the system. How far can they go into building basically an alternative global system. So this is obviously something that they have been working on, and they would like to continue to accelerate that. I think the one thing that is important is I think the fact that the US is not doing this alone is important that they will actually be more successful and actually trying to at least move supply chains. China is still going to be involved, China is still going to try to work with their partners in Asia to get around some of those pieces. But the other thing is that is if you look at China trying to build this multipolar world, they have been doing that over the course of a couple of years. They're trying to obviously move away from the US dollar, They're trying to get other countries to do the same. But if you are looking at China also being in a place of having economic weakness, that also is not necessarily conducive to them actually being the leader of that movement. So there's a lot of things that have to be worked out on both sides to actually reach their ultimately ultimate goal. And I think that's why we're going to kind of see a I don't want us to use the term muddle through, but kind of a muddle through scenario where they continue down their path but there is obviously some need to be conciliatory in the interim quickly, here Jin ed and I've been guilty of this all week. I have failed and taken my eye off Ukraine, Ukraine in this cold December. What will that debate, that study look like. Right, So this is the US does not have a lot of military aid left to provide to Ukraine at the moment unless Congress appropriates more funding. And so the spring offensive has not necessarily produced the results that the both sides were looking for. We're going into the winter, which makes it more difficult for there to be progress on the battlefield. Think that you will see an effort in Congress to try to come back from a Thanksgiving holiday and pass Biden's National Security Supplemental, which would provide aid for Ukraine as well as Israel and Taiwan and the border. But that is something that they still are trying to find a solution on. They need to figure out whether or not they can add border policy changes in order to get Republican support for that bill. But if we don't get aid to Ukraine over the next couple of weeks, there is probably going to be a strong hole put into Ukraine's defenses because they really do need more money. You obviously have Europe also supporting them, but Europe has been struggling to get some aid packages passed, some munitions given to them as well, so it's it's been put on the back burner. But I think you might start to see more discussion over over the next month in Congress. At least this is a fine We're going to seek out it to the new year. Jeanette low A shatigas Jeanette, thank you. 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