00:00Is this an issue that the Fed has to weigh? Maybe not at this meeting, but over the coming meetings, how they're contributing to broader financial conditions.
00:08Yeah, I think it's definitely a concern for me. And to me, at least the way I look at it, this doesn't feel like the environment where the Fed should be delivering a lot of preemptive cuts or, you know, cutting as much as what the market is pricing in by the end of next year.
00:25To me, that kind of path feels like it's a little bit aggressive. I mean, the growth trajectory for the third quarter has been extraordinarily strong.
00:34The Atlanta Fed GDP now is tracking close to 4 percent. Looking at an employment picture that's kind of deteriorating, but not terrible.
00:42Inflation is still high and sticking well above the Fed's mandate. So to me, the market kind of getting ahead of its pricing in too many cuts seems like it's a bit much.
00:52And then you add in easy financial conditions, you're left with an environment where maybe the Fed has some sort of leeway in trying to not ease as much in this environment.
01:03So I'm going to pick up on Bob Michael's insight there about what I call log convexity.
01:08Are you seeing out there not bubble tendencies, but are you seeing on a log plot, a logarithmic plot, a convex acceleration where things are getting a little bit effervescent out there, a little bit exuberant?
01:22So to me, what is concerning is the fact that there's absolutely no volatility in the market.
01:28Look at bond volatility. You look at implied volatility in the bond market or in the equity market.
01:33There's absolutely no concern. So to me, the lack of volatility in this environment is also troubling because you tend to see a lot of investors kind of getting lulled into a sense of security
01:43and continuing to sell vol anytime you have a pop and vol.
01:48And that's an environment that is concerning, given the fact that we do have a decent amount of risk.
01:52We're going through a shutdown right now. There's potential for meaningful deterioration in a lot of these fundamentals that we're looking at.
02:01We have no clarity on the data. So I think a little bit of caution is required from that perspective.
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