1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 2 00:00:09,200 --> 00:00:13,200 Speaker 1: with Jonathan Farrell and Lisa Abramowitz Jaily. We bring you 3 00:00:13,280 --> 00:00:18,600 Speaker 1: insight from the best and economics, finance, investment, and international relations. 4 00:00:18,840 --> 00:00:23,799 Speaker 1: To find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg dot Com, 5 00:00:23,920 --> 00:00:29,480 Speaker 1: and of course on the Bloomberg Terminal. I've got to 6 00:00:29,560 --> 00:00:31,360 Speaker 1: talk about the long term, and I can do that 7 00:00:31,400 --> 00:00:34,920 Speaker 1: with Joyce Chang, chair of Global Research at JP Morgan, 8 00:00:35,280 --> 00:00:37,960 Speaker 1: who I really don't like because she put out a 9 00:00:38,000 --> 00:00:41,200 Speaker 1: seven page special with a giant Phil schwagg Oh, Mike 10 00:00:41,200 --> 00:00:43,840 Speaker 1: Faroli helping out Jan Lloyd's and the rest of JP 11 00:00:44,000 --> 00:00:46,839 Speaker 1: Morgan on the fiscal state of the country. Joyce, I've 12 00:00:46,840 --> 00:00:49,360 Speaker 1: got to read every word of this report, and it's 13 00:00:49,360 --> 00:00:53,080 Speaker 1: a path out to two thousand fifty two. Nobody's talking 14 00:00:53,120 --> 00:00:56,040 Speaker 1: about this except you. How ugly is it for the 15 00:00:56,120 --> 00:01:01,000 Speaker 1: nation in our fiscal policy out thirty years? Hey, it's 16 00:01:01,040 --> 00:01:03,720 Speaker 1: looking pretty ugly, Tom. I mean, we're looking at debt 17 00:01:03,800 --> 00:01:06,440 Speaker 1: levels that are going to a record level. We're close 18 00:01:06,480 --> 00:01:09,039 Speaker 1: to a hundred percent, going to a hundred and seventy percent, 19 00:01:09,200 --> 00:01:11,720 Speaker 1: a hundred and eighty eight percent, and if you take 20 00:01:11,760 --> 00:01:14,840 Speaker 1: a look at our view that ten your treasury yields 21 00:01:14,840 --> 00:01:16,880 Speaker 1: are at five and a half percent. By the end 22 00:01:16,880 --> 00:01:19,600 Speaker 1: of the decade, you're well north of two percent of 23 00:01:19,640 --> 00:01:21,760 Speaker 1: g d P on the debt level. And this is 24 00:01:21,760 --> 00:01:26,120 Speaker 1: going to raise real questions about discill sustainability and the 25 00:01:26,160 --> 00:01:29,920 Speaker 1: debt trajectory if we see interest rates continue to rise 26 00:01:30,319 --> 00:01:33,160 Speaker 1: because the CEO on a tenure view is using only 27 00:01:33,200 --> 00:01:36,280 Speaker 1: three point eight percent for their treasury yield. You know, Tom, 28 00:01:36,319 --> 00:01:38,560 Speaker 1: we've got three point three five percent by the end 29 00:01:38,560 --> 00:01:40,399 Speaker 1: of the year. You know, you've got a great set 30 00:01:40,440 --> 00:01:42,600 Speaker 1: on this call. The only one that looks tan and arrested, 31 00:01:42,600 --> 00:01:44,360 Speaker 1: by the way, is Farole, and we know, you know 32 00:01:44,400 --> 00:01:46,880 Speaker 1: he's leading a cushe life. Let's start with a tan 33 00:01:47,080 --> 00:01:51,640 Speaker 1: arrested Faroli. Do we have the productivity and spirit of 34 00:01:51,680 --> 00:01:55,600 Speaker 1: this economy the little gross rate of Joe stiglets to 35 00:01:55,720 --> 00:01:59,680 Speaker 1: grow ourselves out of this conundrum? Well, you've got to 36 00:01:59,720 --> 00:02:02,320 Speaker 1: look at productivity for the first half of the year 37 00:02:02,360 --> 00:02:06,880 Speaker 1: and it was, as Mike says, atrocious, nearly seven percent decline. 38 00:02:06,880 --> 00:02:10,040 Speaker 1: And we're looking at pretty poor productivity ahead. So you 39 00:02:10,120 --> 00:02:14,280 Speaker 1: take any metric, any metric, you know, Larry Summers Jason Burman, 40 00:02:14,400 --> 00:02:16,800 Speaker 1: and you looked ten years out and on our view, 41 00:02:16,880 --> 00:02:19,880 Speaker 1: you're at something that looks really unsustainable. And I think 42 00:02:19,919 --> 00:02:22,280 Speaker 1: this is a conversation that's going to start right now, 43 00:02:22,320 --> 00:02:25,400 Speaker 1: because the real conversation is still on where are we 44 00:02:25,480 --> 00:02:27,720 Speaker 1: at in the site and what kind of landing isn't 45 00:02:27,960 --> 00:02:30,480 Speaker 1: Is it a hard landing or soft body. Yes, we're 46 00:02:30,480 --> 00:02:33,800 Speaker 1: avoiding an eminent recession, but we've got to look at 47 00:02:33,800 --> 00:02:37,280 Speaker 1: what potential growth is going forward, and we haven't at 48 00:02:37,360 --> 00:02:40,600 Speaker 1: only one and a half percent going forward? All right, choice, 49 00:02:40,600 --> 00:02:42,399 Speaker 1: that's exactly what I wanted to go. If we could 50 00:02:42,440 --> 00:02:46,280 Speaker 1: put this moment into the trajectory of thirty years, what 51 00:02:46,360 --> 00:02:48,440 Speaker 1: would it look like. Would it be a pivot point 52 00:02:48,520 --> 00:02:50,679 Speaker 1: to add more debt ahead of the tsunami or would 53 00:02:50,720 --> 00:02:53,239 Speaker 1: it be a pivot point to some sort of higher 54 00:02:53,240 --> 00:02:57,919 Speaker 1: inflationary regime Because of the geopolitical backdrop and the restoring 55 00:02:57,960 --> 00:03:00,639 Speaker 1: that you're seeing by a lot of companies. Well, but 56 00:03:00,800 --> 00:03:04,760 Speaker 1: there's the restoring the deglobalization, but there's also just poor 57 00:03:04,919 --> 00:03:08,200 Speaker 1: demographics that we're talking about here um and that's kind 58 00:03:08,200 --> 00:03:10,000 Speaker 1: of a trend that we're seeing look in Europe and 59 00:03:10,120 --> 00:03:13,840 Speaker 1: China as well. But it's taking potential growth down. And 60 00:03:13,919 --> 00:03:16,040 Speaker 1: we put that along with you know what we see 61 00:03:16,160 --> 00:03:20,160 Speaker 1: as labor productivity, which is too optimistic in the congressional budget, 62 00:03:20,400 --> 00:03:23,119 Speaker 1: you know line, and that really is a key reason 63 00:03:23,560 --> 00:03:27,040 Speaker 1: why we think the potential growth the productivity is going 64 00:03:27,080 --> 00:03:29,760 Speaker 1: to be lower going forward. You know. On top of that, 65 00:03:29,800 --> 00:03:33,680 Speaker 1: we do see rising treasury yields that are on the horizon. 66 00:03:34,160 --> 00:03:36,000 Speaker 1: So you take a look at just where we are 67 00:03:36,120 --> 00:03:38,480 Speaker 1: with the primary death set, and you're going up to 68 00:03:38,640 --> 00:03:41,640 Speaker 1: levels that really do point to debt sustainability. When we 69 00:03:41,680 --> 00:03:43,360 Speaker 1: look at the debt service and this is and you 70 00:03:43,400 --> 00:03:46,080 Speaker 1: take the looks and yeah, it's gonna just um, you know, 71 00:03:46,320 --> 00:03:48,240 Speaker 1: really with the health care spending that's gonna go up 72 00:03:48,280 --> 00:03:50,560 Speaker 1: because of the demograssics. And this is one reason why 73 00:03:50,600 --> 00:03:52,160 Speaker 1: a lot of people have a confidence to go into 74 00:03:52,240 --> 00:03:55,040 Speaker 1: longer term treasuries because they say, there's no way that 75 00:03:55,120 --> 00:03:57,440 Speaker 1: this nation, given all the debt, can allow yields to 76 00:03:57,440 --> 00:04:00,000 Speaker 1: climb for a persistent level because of that DEAs sustainability. 77 00:04:00,040 --> 00:04:02,280 Speaker 1: Before getting into the theory of that, I want to 78 00:04:02,320 --> 00:04:04,360 Speaker 1: go to the moment that we're in because we're getting 79 00:04:04,360 --> 00:04:06,160 Speaker 1: a lot of gloom out of Wall Street, A lot 80 00:04:06,160 --> 00:04:09,200 Speaker 1: of the analytic notes are basically saying people are way 81 00:04:09,240 --> 00:04:11,680 Speaker 1: too optimistic. The rally doesn't really count. It's a bear 82 00:04:11,760 --> 00:04:14,080 Speaker 1: market rally, and then you can see it continue to 83 00:04:14,120 --> 00:04:16,839 Speaker 1: bleed up, the rally gaining steam. What makes for this 84 00:04:16,960 --> 00:04:20,279 Speaker 1: huge divergence between the tone among the top Wall Street 85 00:04:20,320 --> 00:04:24,680 Speaker 1: analysts and the tone among traders in the trenches. Well, look, 86 00:04:24,720 --> 00:04:27,320 Speaker 1: we've seen bear market rallies like in March, and then 87 00:04:27,320 --> 00:04:29,640 Speaker 1: the markets sold off again, and that's the question where 88 00:04:29,640 --> 00:04:32,520 Speaker 1: are we right now? Like, it's just clear that the 89 00:04:32,600 --> 00:04:35,000 Speaker 1: Zen has a lot more work to do, and I 90 00:04:35,040 --> 00:04:36,800 Speaker 1: think we're all looking at what's going to come out 91 00:04:36,839 --> 00:04:39,960 Speaker 1: on Wednesday with the CPI number. Now Faroli has the 92 00:04:40,040 --> 00:04:43,120 Speaker 1: forecast at eight point seven percent. I mean that's still 93 00:04:43,160 --> 00:04:45,159 Speaker 1: going to keep the set on high alert. And we 94 00:04:45,240 --> 00:04:48,120 Speaker 1: have seventy five basis points in our forecast for what 95 00:04:48,200 --> 00:04:50,560 Speaker 1: the set has to do, and still twenty five basis 96 00:04:50,600 --> 00:04:54,360 Speaker 1: points in November December. But a terminal rate which we 97 00:04:54,360 --> 00:04:56,279 Speaker 1: were talking, you know, three and a quarter now we 98 00:04:56,320 --> 00:04:59,320 Speaker 1: think could go up to three and three quarters per 99 00:04:59,360 --> 00:05:03,800 Speaker 1: cent of for we really see um inflation concerns come down. 100 00:05:03,839 --> 00:05:08,000 Speaker 1: Now it's not specifical um inflation it's the structural inflation, 101 00:05:08,279 --> 00:05:11,200 Speaker 1: so it's the wage for but also rent inflation, which 102 00:05:11,400 --> 00:05:13,760 Speaker 1: we have sort of north of seven percent, wage for 103 00:05:13,800 --> 00:05:17,280 Speaker 1: insistible north of five percent. So that's what we're focused on. 104 00:05:17,400 --> 00:05:19,880 Speaker 1: You know, in the coming days. A soft landing, I 105 00:05:19,880 --> 00:05:24,320 Speaker 1: think is going to be difficult to UM immaculate disinflation scenario. 106 00:05:24,400 --> 00:05:26,280 Speaker 1: I think it's gonna be very difficult to see that 107 00:05:26,400 --> 00:05:29,840 Speaker 1: play out well. And obviously we'll be watching the inflation 108 00:05:29,880 --> 00:05:31,960 Speaker 1: data on Wednesday, but will we're viewing it through the 109 00:05:32,040 --> 00:05:34,000 Speaker 1: lens of the jobs report we got on Friday, which 110 00:05:34,040 --> 00:05:37,559 Speaker 1: showed an incredibly strong labor market still and escalating wage 111 00:05:37,560 --> 00:05:40,720 Speaker 1: pressures in the economy. Yet that strong jobs report runs 112 00:05:40,720 --> 00:05:43,479 Speaker 1: in contrast to some softer data we have seen in 113 00:05:43,560 --> 00:05:46,640 Speaker 1: other parts. And I'm just wondering if you can glean 114 00:05:46,680 --> 00:05:51,679 Speaker 1: a consistent message from the economic data we are seeing. Now. Look, 115 00:05:51,800 --> 00:05:54,680 Speaker 1: we have come into this UM you know, this part 116 00:05:54,720 --> 00:05:57,560 Speaker 1: of disciple with excess savings, and that's actually been a 117 00:05:57,600 --> 00:06:02,560 Speaker 1: real cushion across developed markets and UM also in emerging markets. 118 00:06:02,560 --> 00:06:05,000 Speaker 1: But that excess savings is being you know, going to 119 00:06:05,040 --> 00:06:07,279 Speaker 1: weigh down. So on the third quarter of the year, 120 00:06:07,600 --> 00:06:10,760 Speaker 1: we have UM just you know, um one percent growth 121 00:06:10,880 --> 00:06:13,680 Speaker 1: for the US, that's what we're looking at. But you've 122 00:06:13,720 --> 00:06:16,480 Speaker 1: had very strong wage growth, you know, the labor market 123 00:06:16,480 --> 00:06:19,840 Speaker 1: being very strong. Also, your consumers holding it because of 124 00:06:19,839 --> 00:06:22,440 Speaker 1: this excess um you know, savings that they come into 125 00:06:22,480 --> 00:06:24,640 Speaker 1: the cycle with, but you're gonna you work through some 126 00:06:24,720 --> 00:06:27,760 Speaker 1: of that by the end of the year. So I 127 00:06:27,800 --> 00:06:29,960 Speaker 1: think we also have to look at what's happening outside 128 00:06:30,000 --> 00:06:33,600 Speaker 1: of the United States, and when we've got europe numbers sliding, 129 00:06:33,800 --> 00:06:36,839 Speaker 1: China sort of has disappointed on the stimulus. And on 130 00:06:36,920 --> 00:06:39,120 Speaker 1: top of that, remember that these moves in the month 131 00:06:39,160 --> 00:06:42,240 Speaker 1: of August are on very very poor liquidity. I mean, 132 00:06:42,240 --> 00:06:44,520 Speaker 1: we're heading it into some of the worst liquidity months 133 00:06:44,560 --> 00:06:49,080 Speaker 1: where liquidity is really amplified positively and negatively. So we're 134 00:06:49,120 --> 00:06:51,000 Speaker 1: at a point in the cycle right now where there's 135 00:06:51,040 --> 00:06:54,039 Speaker 1: a relief of no eminent procession. But I just think 136 00:06:54,040 --> 00:06:57,240 Speaker 1: that the liquidity also amplifies these moves. We can see 137 00:06:57,240 --> 00:07:00,559 Speaker 1: you see a very choppy market on ahead. Well, Joyce, 138 00:07:00,720 --> 00:07:02,880 Speaker 1: you mentioned China, and obviously we consider it from an 139 00:07:02,880 --> 00:07:05,960 Speaker 1: economic standpoint, but there's geopolitical risk to consider as well, 140 00:07:06,000 --> 00:07:09,159 Speaker 1: as we see continued drills happening in and around Taiwan. 141 00:07:09,840 --> 00:07:12,040 Speaker 1: How do you view just the tension between the U 142 00:07:12,080 --> 00:07:15,240 Speaker 1: S and China, potential decoupling further of the world's too 143 00:07:15,320 --> 00:07:18,000 Speaker 1: largest economies, and what that ultimately is going to mean 144 00:07:18,280 --> 00:07:22,080 Speaker 1: for the trajectory of the global economy moving forward. Look, 145 00:07:22,160 --> 00:07:24,240 Speaker 1: when we think about the coupling, we have to think 146 00:07:24,280 --> 00:07:27,680 Speaker 1: about what's desirable and undesirable, and you really have to 147 00:07:27,720 --> 00:07:31,280 Speaker 1: separate the global manufacturing hub from some of these issues 148 00:07:31,320 --> 00:07:35,040 Speaker 1: which are much more about national security and critical infrastructure. 149 00:07:35,200 --> 00:07:37,680 Speaker 1: But that's pretty tricky, and that's what US Taiwan is 150 00:07:37,680 --> 00:07:40,200 Speaker 1: showing is when we look at just the concerns about 151 00:07:40,240 --> 00:07:42,400 Speaker 1: the supply chain, because you have so much of the 152 00:07:42,400 --> 00:07:46,200 Speaker 1: supply chain really that does lead through the Taiwan Straits. 153 00:07:46,600 --> 00:07:48,720 Speaker 1: And when we look at this and revisit what the 154 00:07:48,760 --> 00:07:53,840 Speaker 1: precedents are nine when you had these kinds of attentions, 155 00:07:54,040 --> 00:07:56,560 Speaker 1: you had a financial market self, but not that much 156 00:07:56,600 --> 00:07:59,640 Speaker 1: impact to the real economy. Now the economies are much 157 00:07:59,720 --> 00:08:04,280 Speaker 1: more are integrated between Taiwan's dependency on Hong Kong and 158 00:08:04,280 --> 00:08:07,360 Speaker 1: trying to trade and also the global supply chain. So 159 00:08:07,440 --> 00:08:09,440 Speaker 1: I think that this is a tricky moment. I'm not 160 00:08:09,480 --> 00:08:12,080 Speaker 1: so sure that you're going to see these military exercises 161 00:08:12,160 --> 00:08:15,200 Speaker 1: come to a whole as quickly as people are you know, 162 00:08:15,400 --> 00:08:18,240 Speaker 1: hoping will occur. Joyce, I want to go back to 163 00:08:18,240 --> 00:08:21,000 Speaker 1: your wonderful fiscal essay, folks. You can get that from 164 00:08:21,080 --> 00:08:23,920 Speaker 1: JP Morgan. It's just a really tourtive force with Phil 165 00:08:23,920 --> 00:08:29,760 Speaker 1: Schwegel of CBO. Joyce, A simple question for our listeners 166 00:08:29,760 --> 00:08:33,800 Speaker 1: on radio, our viewers on TV, is the United States 167 00:08:33,880 --> 00:08:38,720 Speaker 1: becoming like France? Look, what we're doing is really going 168 00:08:38,760 --> 00:08:42,360 Speaker 1: to affect future generations if there isn't some attention that's 169 00:08:42,400 --> 00:08:45,720 Speaker 1: paid to the fiscal and the jet debt trajectory. I mean, 170 00:08:45,760 --> 00:08:48,240 Speaker 1: we're looking at debt servicing costs that are going to 171 00:08:48,720 --> 00:08:51,440 Speaker 1: double here and you know, record levels of death that 172 00:08:51,440 --> 00:08:55,719 Speaker 1: we've never seen before. So simply the fiscal outlook is unsustainable. 173 00:08:56,040 --> 00:08:58,079 Speaker 1: So you could compare it to France, you couldare it, 174 00:08:58,120 --> 00:09:01,240 Speaker 1: compare it to Japan on the debt issues. But I 175 00:09:01,280 --> 00:09:03,480 Speaker 1: think that it is really a moment where you have 176 00:09:03,559 --> 00:09:05,560 Speaker 1: to look at what needs to be done, particularly if 177 00:09:05,559 --> 00:09:08,760 Speaker 1: we see treasury yields continue to rise, because all of 178 00:09:08,760 --> 00:09:12,360 Speaker 1: the very midnight when we were at zero treasury fields. 179 00:09:12,360 --> 00:09:15,360 Speaker 1: But you really can see how this actually can change 180 00:09:15,400 --> 00:09:18,040 Speaker 1: by the course of a decade. We're not talking fifty years, 181 00:09:18,320 --> 00:09:20,280 Speaker 1: George change. Thank you so much. A tour to force 182 00:09:20,320 --> 00:09:29,320 Speaker 1: so JP Morgan is always a good time to security. 183 00:09:29,400 --> 00:09:32,400 Speaker 1: Over to Peter shere. He's head of macro strategy at 184 00:09:32,480 --> 00:09:37,320 Speaker 1: Academy Securities. Academy is in Annapolis and of course is 185 00:09:37,360 --> 00:09:40,800 Speaker 1: a Wall Street shop with a huge military band. Peter, 186 00:09:40,920 --> 00:09:44,040 Speaker 1: I would be remiss if I didn't speak to you 187 00:09:44,280 --> 00:09:48,240 Speaker 1: of your board's esteem public service and their thoughts on 188 00:09:48,280 --> 00:09:51,120 Speaker 1: what we're seeing on the Pacific rim in Taiwan. Has 189 00:09:51,160 --> 00:09:55,840 Speaker 1: that affected your call across the broad market. Yeah, it's 190 00:09:55,840 --> 00:09:58,560 Speaker 1: something we're very focused on. We have seventeen retired generals 191 00:09:58,559 --> 00:10:00,959 Speaker 1: and admirals whose service are g iCal Intelligence Group and 192 00:10:00,960 --> 00:10:04,240 Speaker 1: about the company or veterans. So first, it's very near 193 00:10:04,240 --> 00:10:05,800 Speaker 1: and dear to our hearts. But I think we are 194 00:10:05,840 --> 00:10:09,360 Speaker 1: looking at the escalation of what China is doing, and 195 00:10:09,480 --> 00:10:12,200 Speaker 1: it doesn't necessarily turn into something military, but it plays 196 00:10:12,200 --> 00:10:15,240 Speaker 1: on this theme that we've been seeing China separate from 197 00:10:15,320 --> 00:10:17,720 Speaker 1: the rest of the world become much more inward looking, 198 00:10:18,040 --> 00:10:20,760 Speaker 1: and China is going to continue to develop relationships with 199 00:10:20,800 --> 00:10:24,920 Speaker 1: autocratic nations at the expense of dealing with the West theater. 200 00:10:25,040 --> 00:10:26,880 Speaker 1: How much do you buy into this rally that we've 201 00:10:26,880 --> 00:10:30,840 Speaker 1: seen the gain in the SMP since that mid June low. 202 00:10:31,080 --> 00:10:33,720 Speaker 1: How much do you view this as wishful thinking at 203 00:10:33,720 --> 00:10:38,440 Speaker 1: a time of so much geopolitical and inflationary uncertainty. Oh, 204 00:10:38,559 --> 00:10:40,520 Speaker 1: I would say I think it's very wishful thinking. Having 205 00:10:40,520 --> 00:10:42,760 Speaker 1: said that, with VIX down at twenty two, I liked 206 00:10:42,760 --> 00:10:45,000 Speaker 1: the idea of just buying calls and puts coming into 207 00:10:45,000 --> 00:10:47,760 Speaker 1: the end of the summer. There's so little aquidity either 208 00:10:47,840 --> 00:10:50,000 Speaker 1: side to get traction. It feels right now again the 209 00:10:50,040 --> 00:10:54,240 Speaker 1: bulls are getting traction, especially after we you know, survive Friday. 210 00:10:54,280 --> 00:10:58,040 Speaker 1: But to me, the inventory overhang that remains a big concern. 211 00:10:58,280 --> 00:11:00,280 Speaker 1: And I'm just a little bit suspicious about how good 212 00:11:00,280 --> 00:11:04,160 Speaker 1: the job data was on Friday, Suspicious in that it's 213 00:11:04,160 --> 00:11:05,719 Speaker 1: not going to turn out to be that strong once 214 00:11:05,720 --> 00:11:09,240 Speaker 1: we get the revision speeder. Yeah, there's already right now. 215 00:11:09,280 --> 00:11:11,360 Speaker 1: Over the last four months, you've had this big disconnect 216 00:11:11,440 --> 00:11:14,240 Speaker 1: between the Establishment survey, which is the headline number, and 217 00:11:14,280 --> 00:11:17,240 Speaker 1: then the household survey, which goes into the unemployment rate. 218 00:11:17,360 --> 00:11:19,920 Speaker 1: They're about one point eight million dollars at one point 219 00:11:19,920 --> 00:11:21,959 Speaker 1: eight million jobs different over the last four months, which 220 00:11:22,000 --> 00:11:24,920 Speaker 1: is a pretty big thing. So if the household started 221 00:11:24,920 --> 00:11:27,199 Speaker 1: to confirm what we're seeing the establishment, that would mean 222 00:11:27,200 --> 00:11:29,480 Speaker 1: that the unemployment rate is probably much much lower, which 223 00:11:29,520 --> 00:11:31,880 Speaker 1: puts pressure on the FED or we're gonna get some revisions. 224 00:11:31,920 --> 00:11:33,480 Speaker 1: And I suspect it's gonna be more revisions to the 225 00:11:33,559 --> 00:11:35,920 Speaker 1: establishment and it will pull us a little bit more 226 00:11:35,920 --> 00:11:38,680 Speaker 1: in line with other anecdotal evidence on jobs. Does that 227 00:11:38,720 --> 00:11:42,040 Speaker 1: mean you're more in line with the FED pivot narrative. Yes, 228 00:11:42,120 --> 00:11:43,480 Speaker 1: I think the FED is going to have to pivot. 229 00:11:43,520 --> 00:11:45,320 Speaker 1: I think the FED has already gone too far. I 230 00:11:45,320 --> 00:11:47,760 Speaker 1: think you're seeing inflation roll over. I think you're see 231 00:11:47,800 --> 00:11:51,320 Speaker 1: supply chains fixed themselves. But it's the fact that the 232 00:11:51,360 --> 00:11:54,120 Speaker 1: consumer looks like they're trying to buy things on discount 233 00:11:54,120 --> 00:11:55,960 Speaker 1: that you're seeing margin pressure. I think all those are 234 00:11:56,000 --> 00:11:58,960 Speaker 1: actually going to be relatively I don't know that we 235 00:11:58,960 --> 00:12:01,199 Speaker 1: get to the point of being deep nationary. I think 236 00:12:01,200 --> 00:12:02,760 Speaker 1: by the end of this year, we're not talking about 237 00:12:02,800 --> 00:12:05,720 Speaker 1: inflation anymore. Peter, it's inside baseball Monday. That's what you 238 00:12:05,800 --> 00:12:07,920 Speaker 1: do when the Padres are swept by the Dodgers. So 239 00:12:07,960 --> 00:12:10,600 Speaker 1: we're going there Peter, I think I just heard you 240 00:12:10,640 --> 00:12:13,520 Speaker 1: say you want to do a collared transaction because we 241 00:12:13,559 --> 00:12:15,960 Speaker 1: may go long or we may go short. You and 242 00:12:16,040 --> 00:12:18,360 Speaker 1: I remember long ago when you do like a six 243 00:12:18,400 --> 00:12:22,480 Speaker 1: option trade and Peter Sheer would do an iron condor 244 00:12:22,760 --> 00:12:26,120 Speaker 1: or something like that. Can you be creative and options 245 00:12:26,160 --> 00:12:29,280 Speaker 1: now or do you eat it all up in premium? 246 00:12:29,440 --> 00:12:31,120 Speaker 1: You eat some of it in premium. But again, as 247 00:12:31,160 --> 00:12:32,920 Speaker 1: you mentioned, VIX is all the way back to twenty two, 248 00:12:33,000 --> 00:12:36,440 Speaker 1: so VIX is pretty low given the day to day seeing, 249 00:12:36,480 --> 00:12:39,080 Speaker 1: so I think you can trade your way out of it. Pete, 250 00:12:39,440 --> 00:12:41,520 Speaker 1: how much is a FED pivot going to be positive 251 00:12:41,520 --> 00:12:45,040 Speaker 1: for equities versus negative? I think it's going to turn 252 00:12:45,080 --> 00:12:46,840 Speaker 1: up to be more negative at first. I think the 253 00:12:46,880 --> 00:12:49,000 Speaker 1: realization that the market hasn't hit is the FED is 254 00:12:49,040 --> 00:12:51,240 Speaker 1: going to be pivoting because they pushed too far. So 255 00:12:51,320 --> 00:12:53,160 Speaker 1: I'm definitely not on the soft landing camp. I think 256 00:12:53,160 --> 00:12:55,840 Speaker 1: we pushed too far. I think we're seeing the consumer rollover. 257 00:12:55,920 --> 00:12:58,720 Speaker 1: I think you're seeing inventories build. So when people realize 258 00:12:58,760 --> 00:13:01,160 Speaker 1: that we're gonna have to pivot, the first reaction, yes, 259 00:13:01,200 --> 00:13:02,839 Speaker 1: maybe we rally. And I think that's the stage we've 260 00:13:02,840 --> 00:13:05,040 Speaker 1: been in. But then the reality is gonna hit like WHOA. 261 00:13:05,080 --> 00:13:06,840 Speaker 1: We have to be very careful what our future owning 262 00:13:06,920 --> 00:13:09,440 Speaker 1: is gonna look like. And it's very encouraging to see 263 00:13:09,440 --> 00:13:11,480 Speaker 1: this kind of merger Monday because you're seeing companies kind 264 00:13:11,520 --> 00:13:13,960 Speaker 1: of accept new valuations. But I think we're a long 265 00:13:14,000 --> 00:13:16,080 Speaker 1: way from being done, especially on the high flyers where 266 00:13:16,160 --> 00:13:18,560 Speaker 1: they still want to get paid acts the buyers at why, 267 00:13:18,640 --> 00:13:20,559 Speaker 1: and we've got to sort themselves out, and I think, 268 00:13:21,160 --> 00:13:23,480 Speaker 1: unfortunately it's going to be closer to why the lower 269 00:13:23,520 --> 00:13:26,559 Speaker 1: prices that come to fruition. Peter Sheer, thank you so much, 270 00:13:26,600 --> 00:13:30,199 Speaker 1: greatly appreciated with Academy securities there, particularly the update on 271 00:13:30,280 --> 00:13:36,520 Speaker 1: their thoughts on what's going on in the Pacific RIM. 272 00:13:36,679 --> 00:13:40,560 Speaker 1: Right now, we're gonna recalibrate into the Wednesday inflation report 273 00:13:40,559 --> 00:13:44,320 Speaker 1: with Dana Peterson. She's chief economist at the Conference Board, 274 00:13:44,400 --> 00:13:46,800 Speaker 1: with all of the ability of the Conference Board to 275 00:13:46,840 --> 00:13:50,280 Speaker 1: look at a different set of data out there, and 276 00:13:50,320 --> 00:13:52,720 Speaker 1: I want to go Dana. I know Lisa is really 277 00:13:52,760 --> 00:13:56,000 Speaker 1: focused on a job full economy, but I want to 278 00:13:56,040 --> 00:14:00,600 Speaker 1: go to your call for restriction by the Fed after 279 00:14:00,760 --> 00:14:05,400 Speaker 1: Jackson whole. Are we going to calibrate for September one, 280 00:14:05,679 --> 00:14:08,320 Speaker 1: after Jackson the Hole. Do we just need to get 281 00:14:08,360 --> 00:14:12,480 Speaker 1: to Wyoming before we can look to the FED meeting? Oh, 282 00:14:12,480 --> 00:14:15,240 Speaker 1: Wyoming certainly is beautiful, but I think that the FED 283 00:14:15,360 --> 00:14:18,640 Speaker 1: is certainly data dependent. We're gonna get several more readings 284 00:14:18,640 --> 00:14:23,480 Speaker 1: on inflation, another jobs report, certainly updates on on GDP, 285 00:14:23,640 --> 00:14:25,160 Speaker 1: and I think the Fed is going to be looking 286 00:14:25,200 --> 00:14:27,800 Speaker 1: at all of these indicators to determine whether or not 287 00:14:27,920 --> 00:14:30,520 Speaker 1: needs to go another seventy five basis points of fifty 288 00:14:30,560 --> 00:14:32,840 Speaker 1: basis points. But I think whatever it is, the FED 289 00:14:32,960 --> 00:14:35,120 Speaker 1: is going to continue to raise interest rates to really 290 00:14:35,120 --> 00:14:37,720 Speaker 1: a rist inflation. I mean, let's do the math here. 291 00:14:37,760 --> 00:14:42,360 Speaker 1: If it's one seventy beat move, there's to fifty beat moves, 292 00:14:42,400 --> 00:14:45,040 Speaker 1: which is a stick. I get it, But what's the 293 00:14:45,120 --> 00:14:48,360 Speaker 1: so what whether it's one move or two moves is 294 00:14:48,400 --> 00:14:53,600 Speaker 1: a precursor to restriction doesn't matter? Well, I think you know, 295 00:14:53,680 --> 00:14:56,000 Speaker 1: just getting above three pc on the FED funds, right, 296 00:14:56,120 --> 00:14:58,800 Speaker 1: that's restriction. And you know, we can sit around and 297 00:14:58,920 --> 00:15:03,520 Speaker 1: argue about it. But I think the fact the fact 298 00:15:03,560 --> 00:15:07,000 Speaker 1: that that's been raising rates this aggressively, this quickly, you know, 299 00:15:07,040 --> 00:15:10,240 Speaker 1: it certainly is going to feel restrictive. Or already seeing 300 00:15:10,280 --> 00:15:13,400 Speaker 1: that show up in the GDP data, Danta, do you 301 00:15:13,440 --> 00:15:15,600 Speaker 1: buy the data that we get on Friday? We heard 302 00:15:15,600 --> 00:15:18,960 Speaker 1: Peter Shea just earlier saying that the data doesn't seem 303 00:15:19,000 --> 00:15:22,040 Speaker 1: to cohere with some of the granular, on the ground 304 00:15:22,280 --> 00:15:25,800 Speaker 1: specific inputs. So do you think that it's going to 305 00:15:25,800 --> 00:15:27,440 Speaker 1: get revised a lot lower it is going to give 306 00:15:27,440 --> 00:15:31,440 Speaker 1: a less rosie picture of the labor market? Well, I 307 00:15:31,480 --> 00:15:33,640 Speaker 1: mean it's I mean, how much can you revise down? 308 00:15:33,960 --> 00:15:36,960 Speaker 1: That was an astounding number over more than half a 309 00:15:36,960 --> 00:15:39,400 Speaker 1: million jobs added in July. That would be a huge 310 00:15:39,440 --> 00:15:42,440 Speaker 1: dour vision, And whatever their visions are, they're probably going 311 00:15:42,480 --> 00:15:45,200 Speaker 1: to be minor. What the labor markets telling us is 312 00:15:45,240 --> 00:15:48,680 Speaker 1: that we still have a very strong labor market. Many 313 00:15:48,760 --> 00:15:51,680 Speaker 1: people are seeing their wages rise, many people being hired, 314 00:15:51,760 --> 00:15:55,240 Speaker 1: especially in those in person services that struggle to find workers. 315 00:15:55,840 --> 00:15:58,200 Speaker 1: It's really it's really astounding what we're seeing. And I 316 00:15:58,240 --> 00:16:00,680 Speaker 1: don't think that the numbers are lying to us. So 317 00:16:00,800 --> 00:16:03,240 Speaker 1: let's talk about what we heard from Peter Bouchar, which 318 00:16:03,280 --> 00:16:05,840 Speaker 1: I thought was really fascinating that Tom brought ups that 319 00:16:06,240 --> 00:16:09,760 Speaker 1: people are over hiring and companies are scarred by what 320 00:16:09,880 --> 00:16:13,000 Speaker 1: happened post pandemic when they have fired a lot of 321 00:16:13,000 --> 00:16:15,560 Speaker 1: people and then had to bring on staff that just 322 00:16:15,800 --> 00:16:17,760 Speaker 1: was not there. How much is that going to be 323 00:16:17,840 --> 00:16:21,240 Speaker 1: a persistent theme throughout whatever happens in this next cycle. 324 00:16:22,320 --> 00:16:24,920 Speaker 1: We think that labor shortages are here to stay. A 325 00:16:24,920 --> 00:16:28,200 Speaker 1: lot of it's demographic. You have more people retiring from 326 00:16:28,200 --> 00:16:31,080 Speaker 1: the labor market that you do young people available to 327 00:16:31,200 --> 00:16:34,600 Speaker 1: refill those jobs. We also have very strict immigration policies 328 00:16:34,640 --> 00:16:37,520 Speaker 1: in the US um that makes it very difficult to 329 00:16:37,560 --> 00:16:40,760 Speaker 1: find labor from outside of the country. And still you 330 00:16:40,800 --> 00:16:44,040 Speaker 1: have many people who challenge with childcare issues. Many people 331 00:16:44,040 --> 00:16:46,120 Speaker 1: don't want to work to in three jobs. That's why 332 00:16:46,160 --> 00:16:49,840 Speaker 1: they're trying to find higher wage jobs. We think that 333 00:16:49,880 --> 00:16:52,120 Speaker 1: this is just going to be an issue even beyond 334 00:16:52,520 --> 00:16:55,160 Speaker 1: what we're thinking is going to be a brief recession 335 00:16:55,200 --> 00:16:57,480 Speaker 1: in the US. Okay, So what does that mean for 336 00:16:57,520 --> 00:17:03,640 Speaker 1: how persistent upward pressure on wage is is likely to be? Well, Certainly, 337 00:17:03,680 --> 00:17:07,200 Speaker 1: if inflation continues to be elevated and the FED struggles 338 00:17:07,200 --> 00:17:11,359 Speaker 1: to get back down to the two inflation target, we 339 00:17:11,400 --> 00:17:14,440 Speaker 1: think that there's probably the potential for a wage price 340 00:17:14,520 --> 00:17:19,120 Speaker 1: spiral already. If you match up the PC deflator with 341 00:17:19,240 --> 00:17:22,480 Speaker 1: the e C. I. They're both moving together, and that's 342 00:17:22,520 --> 00:17:25,320 Speaker 1: really a challenge that the Fed is trying to prevent 343 00:17:25,400 --> 00:17:29,960 Speaker 1: from happening with its actions. But obviously its actions have 344 00:17:30,080 --> 00:17:32,119 Speaker 1: a lagged effect. It takes a while for us to 345 00:17:32,119 --> 00:17:34,200 Speaker 1: see the real impact of it, as evidenced by how 346 00:17:34,200 --> 00:17:37,359 Speaker 1: strong the payroll's report was on Friday. So can the 347 00:17:37,359 --> 00:17:39,960 Speaker 1: Fed act quickly enough that they are actually going to 348 00:17:40,000 --> 00:17:42,760 Speaker 1: be able to last of that and get that under control, 349 00:17:42,880 --> 00:17:44,440 Speaker 1: or are we going to be looking at a situation 350 00:17:44,480 --> 00:17:47,040 Speaker 1: where this actually does end up eventually out of the 351 00:17:47,040 --> 00:17:50,480 Speaker 1: federal reserves. Hands well, I think the Feed is acting 352 00:17:50,520 --> 00:17:52,919 Speaker 1: as quickly as it can. I mean, other than raising 353 00:17:53,000 --> 00:17:56,600 Speaker 1: rates every month um. Certainly at every meeting since March 354 00:17:56,680 --> 00:17:59,320 Speaker 1: they've addressed they've raised interest rates, and I think the 355 00:17:59,359 --> 00:18:02,680 Speaker 1: Feed's doing it can. But as you said, monetary policy 356 00:18:02,760 --> 00:18:05,320 Speaker 1: comes with the lagged effect. First you're going to see 357 00:18:05,359 --> 00:18:08,600 Speaker 1: the effects on things like mortgage rates in the housing market, 358 00:18:09,000 --> 00:18:12,160 Speaker 1: and then consumer spending and then inflation, and so it's 359 00:18:12,160 --> 00:18:14,840 Speaker 1: going to take some time. But I you know, we 360 00:18:14,880 --> 00:18:17,359 Speaker 1: feel that the Fed can probably do its job and 361 00:18:17,400 --> 00:18:20,399 Speaker 1: get things done in terms of bringing down inflation. Dana 362 00:18:20,560 --> 00:18:23,280 Speaker 1: is O E R does any measurement of housing, rent 363 00:18:23,400 --> 00:18:25,560 Speaker 1: or ownership get in the way of their plan. I 364 00:18:25,560 --> 00:18:29,000 Speaker 1: mean it can. Can housing be such a crisis, is 365 00:18:29,040 --> 00:18:31,879 Speaker 1: so expensive, so persistent, that it just gets in the 366 00:18:31,920 --> 00:18:35,879 Speaker 1: way of their best outcomes? Well, surelely. Housing is a 367 00:18:36,000 --> 00:18:40,919 Speaker 1: huge driver of inflation right now for consumers in the US, 368 00:18:41,080 --> 00:18:45,320 Speaker 1: and certainly as long as home prices evaluations of new 369 00:18:45,320 --> 00:18:47,960 Speaker 1: and existing homes continued to rise, that's going to show 370 00:18:48,040 --> 00:18:50,000 Speaker 1: up in the O E. R and and rents with 371 00:18:50,080 --> 00:18:53,359 Speaker 1: a lag of course, and so that really does present 372 00:18:53,400 --> 00:18:56,399 Speaker 1: a challenge for the FED. Danna, I gotta leave it there, 373 00:18:56,440 --> 00:18:59,000 Speaker 1: Dana Peterson, thank you so much, greatly appreciate it. With 374 00:18:59,119 --> 00:19:08,320 Speaker 1: the conference board, it's always an important conversation with Libby Cantrell, 375 00:19:08,400 --> 00:19:11,840 Speaker 1: head of Public Policy Strategy at PIMCO, but this morning, 376 00:19:12,480 --> 00:19:18,359 Speaker 1: after historic legislation, it's really critical as well. We're thrilled 377 00:19:18,400 --> 00:19:20,840 Speaker 1: Libby Cantrall could join us here at our world headquarters. 378 00:19:21,040 --> 00:19:23,040 Speaker 1: Let me, I want to cut to the chase. How 379 00:19:23,080 --> 00:19:30,880 Speaker 1: do you put into process the legislation of thousands of pages. Well, 380 00:19:30,920 --> 00:19:35,000 Speaker 1: that's a good question. Unfortunately, UH Washington is quite quite 381 00:19:35,440 --> 00:19:39,800 Speaker 1: expert at doing that. Most of bills tend to be hundreds, 382 00:19:39,880 --> 00:19:42,840 Speaker 1: if not thousands of pages. Um. But I think that 383 00:19:43,000 --> 00:19:45,960 Speaker 1: what uh, what this sort of underscores how quickly this 384 00:19:46,000 --> 00:19:48,439 Speaker 1: bill was able to come together, to be to be 385 00:19:48,560 --> 00:19:51,400 Speaker 1: passed by the Senate, we passed by the House later 386 00:19:51,440 --> 00:19:53,879 Speaker 1: this week, and then promptly signed into law, is that 387 00:19:54,000 --> 00:19:57,960 Speaker 1: many of these ideas Tom have actually been percolating in 388 00:19:58,000 --> 00:20:01,760 Speaker 1: Washington for years. Take the drug prices in terms of 389 00:20:01,800 --> 00:20:05,080 Speaker 1: allowing medicare to to negotiate drug prices with pharma, that 390 00:20:05,320 --> 00:20:07,479 Speaker 1: is a concept that literally has been perplained since I 391 00:20:07,520 --> 00:20:09,440 Speaker 1: was on the hill back in your two thousand three. 392 00:20:09,520 --> 00:20:12,199 Speaker 1: So in some ways, many of these ideas again have 393 00:20:12,280 --> 00:20:15,440 Speaker 1: already been in text. Uh, we're able to be put 394 00:20:15,480 --> 00:20:19,199 Speaker 1: into two legislation immediately. The big question, of course, was 395 00:20:19,240 --> 00:20:21,960 Speaker 1: just to get that fit, that unity, the unanimity among 396 00:20:21,960 --> 00:20:24,480 Speaker 1: those fifty senators on the neat the question, I asked 397 00:20:24,480 --> 00:20:28,360 Speaker 1: our Jack Fitzpatrick. Can the Republicans take it away? If 398 00:20:28,400 --> 00:20:31,400 Speaker 1: they win the House in the Senate, can they take 399 00:20:31,400 --> 00:20:33,880 Speaker 1: it away? It will be very difficult, And I think 400 00:20:33,880 --> 00:20:36,399 Speaker 1: what you've seen even with the Trump tax cuts is 401 00:20:36,400 --> 00:20:41,360 Speaker 1: it's very difficult to take things away, to take benefits away, 402 00:20:41,440 --> 00:20:45,480 Speaker 1: particularly on something like the drug pricing for for Medicare. 403 00:20:45,600 --> 00:20:49,159 Speaker 1: That's something that pulls incredibly well, more than eighty percent 404 00:20:49,200 --> 00:20:52,359 Speaker 1: of Americans support that provision. Older people tend to vote 405 00:20:52,760 --> 00:20:55,560 Speaker 1: so particularly for that difficult to take away. And then 406 00:20:55,560 --> 00:20:59,040 Speaker 1: on the climate piece, and as a reminder, four hundred 407 00:20:59,080 --> 00:21:03,840 Speaker 1: billion dollars of tax incentives for production and for consumption 408 00:21:03,960 --> 00:21:06,480 Speaker 1: on the sort of the clean energy tax front, all 409 00:21:06,520 --> 00:21:08,920 Speaker 1: of that, you know, pretty difficult to take away as well, 410 00:21:08,920 --> 00:21:11,680 Speaker 1: and most of those last for ten years. And Leasta, 411 00:21:11,680 --> 00:21:14,959 Speaker 1: I looked at the Medicare Medicaid combination for federal budget. 412 00:21:15,000 --> 00:21:18,480 Speaker 1: Thank you Robert Jamison for helping out of Washington and 413 00:21:18,560 --> 00:21:22,240 Speaker 1: not out of sixty and LBJ, but roughly Nixon. We've 414 00:21:22,240 --> 00:21:25,560 Speaker 1: gone from one percent of GDP out really approaching six 415 00:21:25,640 --> 00:21:28,679 Speaker 1: percent of GDP for those two programs. I did not 416 00:21:28,760 --> 00:21:31,040 Speaker 1: know that. That's really fascinating and a reason why this 417 00:21:31,080 --> 00:21:32,960 Speaker 1: has been such a big issue. And of course I 418 00:21:32,960 --> 00:21:36,080 Speaker 1: looked at the pharmaceutical company's shares ahead of the open 419 00:21:36,200 --> 00:21:38,600 Speaker 1: thinking that they'd be tanking because they were going to 420 00:21:38,640 --> 00:21:42,240 Speaker 1: get less income from Medicare. They are not Libby, which 421 00:21:42,320 --> 00:21:45,520 Speaker 1: raises a question about what the tangible effect on investment 422 00:21:45,520 --> 00:21:48,080 Speaker 1: will be from this bill if even you know, you 423 00:21:48,080 --> 00:21:51,080 Speaker 1: had David Sowerby on earlier decrying some of the concerns 424 00:21:51,080 --> 00:21:55,400 Speaker 1: about the taxes on buybacks, share repurchases as well as 425 00:21:55,680 --> 00:21:59,680 Speaker 1: that minimum corporate tax imposed. Is there a corporate imp 426 00:22:00,080 --> 00:22:03,359 Speaker 1: uh read through that is not getting priced in or 427 00:22:03,600 --> 00:22:06,320 Speaker 1: is this not a significant a move in terms of 428 00:22:06,680 --> 00:22:10,080 Speaker 1: cripping profits as some would say, is at leasta on 429 00:22:10,119 --> 00:22:13,119 Speaker 1: your on your point about the pharma companies, and they 430 00:22:13,160 --> 00:22:15,159 Speaker 1: actually got a little bit of a lifeline over the 431 00:22:15,200 --> 00:22:17,800 Speaker 1: weekend because one of the bigger provisions that would have 432 00:22:18,160 --> 00:22:21,400 Speaker 1: that was in the bill that would have required that 433 00:22:21,720 --> 00:22:27,000 Speaker 1: pharmaceutical companies negotiate with private insurers on on the pharma prices, 434 00:22:27,000 --> 00:22:29,240 Speaker 1: actually got stripped out of the bill because of some 435 00:22:30,000 --> 00:22:33,960 Speaker 1: parliamentary mumbo jumbo didn't qualify for the so called reconciliation bill. 436 00:22:34,040 --> 00:22:36,680 Speaker 1: So that's maybe why you're actually seeing a little bit 437 00:22:36,800 --> 00:22:42,080 Speaker 1: of support in those in those names this morning. But overall, uh, 438 00:22:42,240 --> 00:22:44,320 Speaker 1: you know, I don't think we should overstate the impact 439 00:22:44,359 --> 00:22:47,560 Speaker 1: of this bill. I think invariably there will be winners 440 00:22:47,560 --> 00:22:51,960 Speaker 1: and losers. Losers like the pharmaceutical industry because some of 441 00:22:51,960 --> 00:22:57,199 Speaker 1: those provisions obviously still still still persisted at technology. Some 442 00:22:57,280 --> 00:22:59,280 Speaker 1: of the company some of the companies that have been 443 00:22:59,320 --> 00:23:03,080 Speaker 1: able to take advantage of this sort of book income 444 00:23:03,800 --> 00:23:08,280 Speaker 1: UH corporate tax rate as sort of arbitrage, will also 445 00:23:08,760 --> 00:23:11,560 Speaker 1: be losers. And then you know big winners obviously renewable 446 00:23:11,560 --> 00:23:13,600 Speaker 1: which is renewables which are really priced in. So I 447 00:23:13,640 --> 00:23:16,119 Speaker 1: think sort of the macro impact or or even the 448 00:23:16,160 --> 00:23:19,680 Speaker 1: sector impact has likely been pretty much priced in here, 449 00:23:20,040 --> 00:23:23,160 Speaker 1: but overall, and sort of my world, the political impact 450 00:23:23,520 --> 00:23:25,360 Speaker 1: I don't think has actually been priced in. I think 451 00:23:25,359 --> 00:23:29,119 Speaker 1: this is a huge boon for Democrats who really needed it, right, 452 00:23:29,200 --> 00:23:34,159 Speaker 1: the price of gas, UH, Biden's UH disapproval ratings, the 453 00:23:34,200 --> 00:23:37,879 Speaker 1: generic ballot all have been major headwinds for the Democrats 454 00:23:37,920 --> 00:23:40,280 Speaker 1: going into the mid terms, and here they are here 455 00:23:40,280 --> 00:23:42,480 Speaker 1: they are able to go in at sort of the 456 00:23:42,600 --> 00:23:46,439 Speaker 1: eleventh hour UH and really campaign on the fact that 457 00:23:46,480 --> 00:23:48,919 Speaker 1: they can govern and they can get a big piece 458 00:23:49,080 --> 00:23:52,640 Speaker 1: of their agenda that they campaid on in through, which 459 00:23:52,760 --> 00:23:55,000 Speaker 1: was the climate piece. So Libby, what is the market 460 00:23:55,040 --> 00:23:58,080 Speaker 1: read through in terms of if the Democrats keep the Senate, 461 00:23:58,119 --> 00:24:00,399 Speaker 1: if the Democrats don't lose as much of a house, 462 00:24:00,600 --> 00:24:05,320 Speaker 1: which seems to be the feeling that's increasingly getting speculated upon. Yes, 463 00:24:05,400 --> 00:24:07,480 Speaker 1: So I think at least the conventional wisdom that the 464 00:24:07,520 --> 00:24:10,159 Speaker 1: Democrats will lose the House is probably right if you 465 00:24:10,200 --> 00:24:13,439 Speaker 1: look at history, right, since World War Two, the Party 466 00:24:13,520 --> 00:24:16,359 Speaker 1: and Power has lost an average of twenty five seats 467 00:24:16,359 --> 00:24:20,160 Speaker 1: in the House. So just it passes prologue, Democrats face 468 00:24:20,240 --> 00:24:23,199 Speaker 1: an uphill battle, but the margins there do count, you know. 469 00:24:23,200 --> 00:24:25,639 Speaker 1: I think our view is that they could lose maybe 470 00:24:25,640 --> 00:24:28,240 Speaker 1: as little as few as ten seats or as many 471 00:24:28,320 --> 00:24:31,439 Speaker 1: as fifty seats, sort of depending on voter enthusiasm and 472 00:24:31,440 --> 00:24:34,920 Speaker 1: what's actually happening UH in October and to the to 473 00:24:35,040 --> 00:24:37,520 Speaker 1: the build up of November. UM. And that margin does 474 00:24:37,640 --> 00:24:40,600 Speaker 1: matter because UH and the long term, because that means 475 00:24:40,720 --> 00:24:43,199 Speaker 1: if they lose fewer seats, then they're going to be 476 00:24:43,240 --> 00:24:48,800 Speaker 1: able to more likely recapture the House. In on the Senate, though, 477 00:24:48,840 --> 00:24:50,560 Speaker 1: and we've been saying this for a while, it's much 478 00:24:50,640 --> 00:24:53,360 Speaker 1: more of a jump ball. The Senate tends to not 479 00:24:53,400 --> 00:24:55,600 Speaker 1: be as much of a national election because of course 480 00:24:55,600 --> 00:24:58,080 Speaker 1: only third of the Senate seats are up for re election. 481 00:24:58,359 --> 00:25:02,680 Speaker 1: Republicans have actually more difficult map uh this this cycle, 482 00:25:03,000 --> 00:25:06,480 Speaker 1: and some of the candidates that are running on the 483 00:25:06,520 --> 00:25:10,880 Speaker 1: Republican ticket in battleground states like Georgia and Pennsylvania, maybe 484 00:25:10,880 --> 00:25:14,480 Speaker 1: even in Ohio are less are sort of less experienced, 485 00:25:14,560 --> 00:25:17,439 Speaker 1: more green, and as a result, maybe have less of 486 00:25:17,440 --> 00:25:21,320 Speaker 1: a chance to win, even when the national mood is 487 00:25:21,400 --> 00:25:24,199 Speaker 1: really much more supportive for Republicans. So I think bottom 488 00:25:24,240 --> 00:25:27,399 Speaker 1: line here is the House is likely lost for Democrats 489 00:25:27,400 --> 00:25:30,200 Speaker 1: at least at this point, but the margin does matter. 490 00:25:30,320 --> 00:25:32,600 Speaker 1: The set up much more of a jump ball. Lastly, 491 00:25:32,640 --> 00:25:35,720 Speaker 1: in terms of the sort of the policy implications, though, 492 00:25:36,000 --> 00:25:39,560 Speaker 1: as long as Republicans take back just one chamber, that 493 00:25:39,640 --> 00:25:42,600 Speaker 1: means that Biden's legislative agenda for the next two years 494 00:25:42,640 --> 00:25:45,200 Speaker 1: is likely you know, dead, or at least on ice 495 00:25:45,600 --> 00:25:48,320 Speaker 1: for for a bit. There's still some chance of bipartisan 496 00:25:49,040 --> 00:25:52,320 Speaker 1: legislation around tech and some other areas, but probably on ice. 497 00:25:52,840 --> 00:25:55,480 Speaker 1: So that really is for the market's perspective what people 498 00:25:55,480 --> 00:25:57,959 Speaker 1: will be really focused on. But again, folks like me 499 00:25:58,359 --> 00:26:00,040 Speaker 1: are focusing a little bit on the longer term and 500 00:26:00,200 --> 00:26:02,760 Speaker 1: sort of the readthrough for twenty four in particular. Well, 501 00:26:02,800 --> 00:26:06,040 Speaker 1: like you mentioned voter enthusiasm a moment ago, I'm wondering 502 00:26:06,080 --> 00:26:08,240 Speaker 1: if there's a lesson to be learned from Kansas and 503 00:26:08,240 --> 00:26:11,680 Speaker 1: the abortion vote there, the turnout that we saw, is 504 00:26:11,720 --> 00:26:14,679 Speaker 1: there an underestimation of the galvanizing effect that some of 505 00:26:14,720 --> 00:26:17,800 Speaker 1: the social issues like abortion may actually have on voters 506 00:26:17,800 --> 00:26:22,160 Speaker 1: approaching the midterm beyond just kind of the macroeconomic environment. Yeah. Again, 507 00:26:22,160 --> 00:26:23,960 Speaker 1: and this is again another piece of good news of 508 00:26:24,000 --> 00:26:27,399 Speaker 1: the Democrats have had over the last several weeks. Of course, 509 00:26:27,720 --> 00:26:31,560 Speaker 1: a voter turnout in Kansas much higher than expected, that 510 00:26:31,640 --> 00:26:35,520 Speaker 1: ballot initiative loss by almost twenty points. Now, there's some 511 00:26:35,640 --> 00:26:39,679 Speaker 1: vidiosyncrasies that I think are maybe difficult to extrap extrapolate 512 00:26:39,720 --> 00:26:43,199 Speaker 1: from Kansas sort of nationally. Um, but I think it 513 00:26:43,359 --> 00:26:46,359 Speaker 1: is you know, I think that for Democrats, uh, they're 514 00:26:46,400 --> 00:26:49,119 Speaker 1: They're big takeaway is that this is a galvanet now 515 00:26:49,200 --> 00:26:52,080 Speaker 1: is an galvanizing issue. Now. One important distinction, of course, 516 00:26:52,160 --> 00:26:54,199 Speaker 1: is that was a particular issue that was on the 517 00:26:54,240 --> 00:26:58,520 Speaker 1: ballot versus just uh, you know, the midterm elections which 518 00:26:58,520 --> 00:27:00,840 Speaker 1: are more general where candidates are on the out quickly. 519 00:27:00,960 --> 00:27:03,680 Speaker 1: And this is completely unfair. But it's unfair Monday here 520 00:27:04,440 --> 00:27:07,639 Speaker 1: is well, we have this ginormous legislation. Is this the 521 00:27:07,680 --> 00:27:10,640 Speaker 1: window for President Biden to say he's a one term president? 522 00:27:11,960 --> 00:27:15,000 Speaker 1: I highly doubt he will do that. Yeah, I mean 523 00:27:15,040 --> 00:27:18,560 Speaker 1: theory theoretically, sure, I think he will not do that, 524 00:27:18,920 --> 00:27:22,400 Speaker 1: especially before the mid terms. Um. But at the time 525 00:27:22,480 --> 00:27:24,720 Speaker 1: it's it's a good point in that he will likely 526 00:27:24,800 --> 00:27:27,800 Speaker 1: have to decide whether he really is going to run 527 00:27:27,960 --> 00:27:33,840 Speaker 1: for shortly thereafter, remember that in the debates start in 528 00:27:34,000 --> 00:27:36,960 Speaker 1: June of next year, So we actually need to have 529 00:27:37,080 --> 00:27:39,760 Speaker 1: a pretty good idea the British Where in the hell 530 00:27:39,880 --> 00:27:47,320 Speaker 1: is Pharaoh gonna come back? If you make that British Yeah, Lisa, 531 00:27:47,440 --> 00:27:49,640 Speaker 1: come on the British like they get it done soon, 532 00:27:49,720 --> 00:27:53,600 Speaker 1: Act trust and all that. And Livy's depressing me with debate. 533 00:27:53,720 --> 00:27:56,240 Speaker 1: You know the debate start in June. Yes, well if 534 00:27:56,280 --> 00:27:59,480 Speaker 1: if ye ready, how many people will be on stage? 535 00:28:00,080 --> 00:28:01,679 Speaker 1: Two people? Well, look, I think that if I think 536 00:28:01,720 --> 00:28:03,680 Speaker 1: the President Biden does not win, that we are going 537 00:28:03,720 --> 00:28:06,000 Speaker 1: to see a very kind of open and potentially kind 538 00:28:06,040 --> 00:28:08,720 Speaker 1: of messy and raucous primary in the Democratic side, And 539 00:28:08,760 --> 00:28:11,520 Speaker 1: the same thing on the republic last time wasn't wrong exactly, 540 00:28:11,560 --> 00:28:13,159 Speaker 1: I think that will be the last time it was 541 00:28:13,200 --> 00:28:16,080 Speaker 1: just on one side, right, Come on the British stewarts. Well, 542 00:28:16,119 --> 00:28:18,320 Speaker 1: it's also parliamentary system, Tom, you know that. I mean 543 00:28:18,520 --> 00:28:24,600 Speaker 1: is knows a lot of things. I know that. Thank you, 544 00:28:24,640 --> 00:28:29,280 Speaker 1: Elizabeth Kentroll greatly appreciate that. This is the Bloomberg Surveillance Podcast. 545 00:28:29,520 --> 00:28:32,919 Speaker 1: Thanks for listening. Join us live weekdays from seven to 546 00:28:33,000 --> 00:28:36,480 Speaker 1: ten a m. Eastern on Bloomberg Radio and on Bloomberg 547 00:28:36,520 --> 00:28:41,000 Speaker 1: Television each day from six to nine am for insight 548 00:28:41,280 --> 00:28:45,440 Speaker 1: from the best in economics, finance, investment, and international relations. 549 00:28:45,920 --> 00:28:50,560 Speaker 1: And subscribe to the Surveillance podcast on Apple, podcast, SoundCloud, 550 00:28:50,720 --> 00:28:54,320 Speaker 1: Bloomberg dot com, and of course on the terminal. I'm 551 00:28:54,360 --> 00:28:57,040 Speaker 1: Tom Keene, and this is Bloomberg