WEBVTT - Bloomberg Surveillance TV: August 5, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.920 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.519 Terminal and the Bloomberg Business app. Sarah Hunt of Alpied 0:00:37.560 --> 0:00:40.840 Saxon words, writing this, the totality of the data seems 0:00:40.880 --> 0:00:44.440 to have shifted, and that was a certainty last week, 0:00:44.680 --> 0:00:48.720 sticking the soft landing now is being called into questions. 0:00:48.720 --> 0:00:50.519 Sarah joins us now from Well, Sarah, good morning to you. 0:00:50.600 --> 0:00:51.120 Good morning. 0:00:51.159 --> 0:00:54.480 What changed to eight thirty Eastern time on Friday mornch I. 0:00:54.480 --> 0:00:57.120 Think it started to change on Thursday and Friday, just 0:00:57.240 --> 0:00:59.680 confirm the fact that the data was in fact getting weaker. 0:00:59.720 --> 0:01:03.040 Those im numbers were weak on the manufacturing side, and 0:01:03.080 --> 0:01:05.039 then you had a payrolls report that was much weaker 0:01:05.120 --> 0:01:07.280 than people expected and There's been a lot of controversy 0:01:07.280 --> 0:01:11.640 on the Perils Report of how much of how easy 0:01:11.720 --> 0:01:13.600 is it to interpret the data, and whether or not 0:01:13.640 --> 0:01:15.760 the birth death model makes a lot of difference. And 0:01:15.760 --> 0:01:17.840 when the numbers were high, nobody worried, and now that 0:01:17.840 --> 0:01:19.840 the numbers are coming down, people are really starting to 0:01:19.840 --> 0:01:22.080 worry and you start to hear that conversation again, like 0:01:22.120 --> 0:01:24.400 how strong was it really all year? And how strong 0:01:24.440 --> 0:01:26.120 is employment? And I think that that's part of the 0:01:26.120 --> 0:01:28.759 problem that you're having, and it just reinforced the fact 0:01:28.800 --> 0:01:30.000 that you had weak ism numbers. 0:01:30.040 --> 0:01:32.480 Let's shop up the equity market seven percent move lower 0:01:32.520 --> 0:01:36.160 almost on small camps. Last week, financials got battered on Friday, 0:01:36.160 --> 0:01:38.360 text get in hambered. This morning, banks it down again. 0:01:38.640 --> 0:01:40.640 Is there any think about these moves that you want 0:01:40.680 --> 0:01:43.679 to pick up the pieces anywhere anywhere at all? 0:01:43.760 --> 0:01:45.959 I think the place that most people are going to 0:01:45.959 --> 0:01:47.880 want to pick up the pieces is going to be technology. 0:01:47.920 --> 0:01:49.920 Because I think you had a guest on earlier this 0:01:49.960 --> 0:01:51.840 morning that made the point that the small cap trade 0:01:51.840 --> 0:01:53.360 in the bank trade didn't make a lot of sense 0:01:53.360 --> 0:01:55.160 if you thought the economy was going to get weaker. 0:01:55.400 --> 0:01:58.120 So I would say that that also is true, and 0:01:58.160 --> 0:02:00.120 that was one of those what else can we buy 0:02:00.120 --> 0:02:01.960 trades as opposed to we really need to be in 0:02:02.000 --> 0:02:04.280 these sectors right now. I think that some of what's 0:02:04.280 --> 0:02:06.600 happening in tech is just you haven't really had a 0:02:06.600 --> 0:02:09.640 correction in a long time. You had this market running 0:02:09.720 --> 0:02:12.120 right up from January to July, and then we did 0:02:12.120 --> 0:02:14.480 a complete U turn. So I think that that's where 0:02:14.480 --> 0:02:17.079 people are going to want to be. To day Ive's point, 0:02:17.080 --> 0:02:18.480 I don't think it's the end of the world, but 0:02:18.520 --> 0:02:21.640 it certainly is a very fast correction and a very 0:02:21.639 --> 0:02:25.000 strong correction when people were not necessarily expecting this much drama. 0:02:25.240 --> 0:02:27.440 But you have so much that's happening on an unwind 0:02:27.480 --> 0:02:28.919 of the carry trade. To your point on the end, 0:02:29.400 --> 0:02:32.640 there's so many different mechanical pieces underneath that it's hard 0:02:32.680 --> 0:02:34.959 to parse them all out because they're not obvious. It's 0:02:35.000 --> 0:02:37.560 not one thing like earnings were terrible. They weren't, they 0:02:37.560 --> 0:02:39.600 were okay. It's just a lot of different pieces. 0:02:39.680 --> 0:02:40.880 But I wonder, even if tech. 0:02:40.800 --> 0:02:43.760 Is the trade, is some of that huge enthusiasm we 0:02:43.800 --> 0:02:46.680 had over AI. It's not just done in a market 0:02:46.800 --> 0:02:48.679 where you need to worry about whether the FED is 0:02:48.720 --> 0:02:50.519 going to cut or not. Can you really be so 0:02:50.600 --> 0:02:53.320 hopeful on giving those companies more time to let their 0:02:53.360 --> 0:02:54.919 AI plays play out. 0:02:55.160 --> 0:02:55.959 Well, if you think. 0:02:55.800 --> 0:02:58.040 About some of the parallels that the people had made 0:02:58.080 --> 0:02:59.760 to like the two thousands, right, you had a lot 0:02:59.800 --> 0:03:02.240 of companies in the two thousands that were selling to 0:03:02.840 --> 0:03:05.160 customers that didn't have any money, so they were financing 0:03:05.200 --> 0:03:08.520 their own customers. It was a whole different situation than what's. 0:03:08.320 --> 0:03:09.200 Happening right now. 0:03:09.400 --> 0:03:11.880 I think that AI is like dark fiberback then. People 0:03:11.919 --> 0:03:14.240 are putting in capacity because they're not sure exactly how 0:03:14.240 --> 0:03:15.960 they're going to use it, but they're pretty sure they're 0:03:15.960 --> 0:03:17.520 going to find a use for it. Is that as 0:03:17.520 --> 0:03:18.880 fast as people expect it to be? 0:03:18.960 --> 0:03:19.520 Probably not. 0:03:19.760 --> 0:03:21.040 Is it what people expect it to be. 0:03:21.080 --> 0:03:21.680 It never is. 0:03:21.720 --> 0:03:24.480 It always changes, So I don't think that that goes away. 0:03:24.520 --> 0:03:27.080 And the companies that are bankrolling spending on this have 0:03:27.160 --> 0:03:29.840 a ton of money. It's not like they're in trouble 0:03:29.880 --> 0:03:32.320 in any way, shape or form. But the timing was 0:03:32.360 --> 0:03:34.239 always going to be, you know, wall streets. 0:03:33.919 --> 0:03:34.640 So quick immediate. 0:03:34.680 --> 0:03:36.560 I need to know immediately what's going to happen, And 0:03:36.600 --> 0:03:37.920 that's not the way it's playing out. 0:03:37.960 --> 0:03:38.760 And I think that that's. 0:03:38.640 --> 0:03:39.920 Part of what you're seeing here as well. 0:03:40.000 --> 0:03:41.920 But even so, when you do see these stocks swing 0:03:41.920 --> 0:03:43.720 to the upside, the moves are huge. I mean, you 0:03:43.800 --> 0:03:46.680 get again one hundred billion plus dollar moves on the 0:03:46.760 --> 0:03:49.320 upside or on the downside for just a single name 0:03:49.600 --> 0:03:51.920 like Nvidia. Does that make it harder just to stomach 0:03:51.960 --> 0:03:53.280 to hold on to the ride. 0:03:53.720 --> 0:03:55.800 It's one of the reasons why you're not supposed to 0:03:55.840 --> 0:03:57.760 look at your wordfolo every day, right, But we do 0:03:57.880 --> 0:03:59.960 anyway because that's what that's what we do for a living. 0:04:00.280 --> 0:04:02.320 And I think the problem is just you had to 0:04:02.360 --> 0:04:04.400 love large numbers. With a lot of these tech companies. 0:04:04.400 --> 0:04:07.200 The earnings moved so fast fro Nvidia in particular because 0:04:07.200 --> 0:04:09.480 people were scooping up those ships and they were being 0:04:09.480 --> 0:04:11.400 able to charge higher prices for them. So then the 0:04:11.480 --> 0:04:13.600 question becomes, Okay, when things settle down, what kind of 0:04:13.600 --> 0:04:15.800 pricing can they get an amdal All of a sudden, 0:04:15.800 --> 0:04:17.719 theres now becoming a player, which people thought that they 0:04:17.760 --> 0:04:19.160 would be, but that didn't seem to be. And then 0:04:19.160 --> 0:04:20.720 all of a sudden their earnings were good and they 0:04:20.720 --> 0:04:22.560 were like, yes, look out for us. So there's a 0:04:22.600 --> 0:04:25.119 lot of moving parts, and yes, those things swing around 0:04:25.120 --> 0:04:25.400 a lot. 0:04:25.560 --> 0:04:26.960 Let's just sit on the FED just for a moment. 0:04:27.120 --> 0:04:28.880 You'll catch up with ed Ouh Senning a little bit 0:04:28.920 --> 0:04:31.480 later this hour. He draws the distinction between a FED 0:04:31.480 --> 0:04:34.919 cutting to become less restrictive and a FED cutting to 0:04:34.920 --> 0:04:37.800 become accommodative. And I'm trying to work out where we're 0:04:37.800 --> 0:04:40.480 going to be in September. Are we cutting to normalize 0:04:40.800 --> 0:04:42.680 or are we cutting to address a growth shock, because 0:04:42.680 --> 0:04:44.880 that's very different things. And I just wonder how different 0:04:44.920 --> 0:04:47.840 your captain adication decisions would be based on what kind 0:04:47.839 --> 0:04:49.520 of decision we actually get in September. 0:04:49.839 --> 0:04:51.640 Well, that's part of the U turn, right, And that's 0:04:52.040 --> 0:04:53.880 If the FED had cut last week, which I would 0:04:53.920 --> 0:04:56.120 argue that they should have at least twenty five basis points, 0:04:56.440 --> 0:04:58.520 then I think the amplitude of this would have been lower. 0:04:58.680 --> 0:05:01.040 You still would have had a direction downtrend, but I 0:05:01.040 --> 0:05:03.280 don't know if the amplitude would have been so high. 0:05:03.440 --> 0:05:05.640 And I think part of the problem is that's what 0:05:05.720 --> 0:05:08.840 they were moving towards, which is cutting to normalize, and 0:05:08.880 --> 0:05:11.680 now the growth scares is making that shift to maybe 0:05:11.680 --> 0:05:13.880 they're cutting because they have to and that's where the 0:05:14.600 --> 0:05:16.480 fifty basis points I think is a push because I 0:05:16.520 --> 0:05:19.400 don't think that they want to look that worried about 0:05:19.400 --> 0:05:20.200 it in September. 0:05:20.480 --> 0:05:21.680 But I think that if. 0:05:21.560 --> 0:05:23.200 There really is a growth scare, I mean, we've been 0:05:23.200 --> 0:05:25.719 trying to position for slower growth anyway, so it's not 0:05:26.400 --> 0:05:29.719 like that's going to change our allocation too much. But 0:05:29.800 --> 0:05:33.359 in the end, this quick turn from markets and perception 0:05:33.400 --> 0:05:35.719 and investors from it's all fine, and we still have 0:05:35.760 --> 0:05:37.280 growth to oh my god, the world is coming to 0:05:37.360 --> 0:05:40.120 an end is really made all of the markets come down, 0:05:40.160 --> 0:05:42.240 and I mean everything is coming down right now. So 0:05:42.279 --> 0:05:44.760 I think that that's I don't think people are expecting 0:05:44.800 --> 0:05:45.880 the amplitude. 0:05:45.360 --> 0:05:45.960 Of that change. 0:05:46.040 --> 0:05:47.800 Okay, So I put it another way, at least right 0:05:47.839 --> 0:05:51.320 cuts worth buying, go right cuts, and I should sell. 0:05:51.480 --> 0:05:53.240 Oh that's a tough one too, because I mean, I 0:05:53.320 --> 0:05:55.599 think that the question about I was thinking about this 0:05:55.720 --> 0:05:58.480 in the green room, the question about rate cuts and 0:05:58.520 --> 0:06:01.320 what happens with rates When people are piling into treasuries 0:06:01.320 --> 0:06:04.040 as a safety trade, it stops becoming about rates and 0:06:04.080 --> 0:06:07.039 it starts becoming about safety. So it almost doesn't matter 0:06:07.080 --> 0:06:09.240 in the near term because people are piling into treasuries 0:06:09.279 --> 0:06:11.760 because that's someplace to put money, and I don't know 0:06:11.800 --> 0:06:13.920 when that flips back to know, we really care about 0:06:13.920 --> 0:06:16.479 what the Fed's doing, and that's why I'm buying bonds too. 0:06:16.640 --> 0:06:18.280 I need to buy bonds because they're safe. 0:06:18.839 --> 0:06:20.400 You mentioned what would happen if we got a fifty 0:06:20.400 --> 0:06:22.359 basis point cut, Sarah. If the FED does do what 0:06:22.400 --> 0:06:25.719 this market is saying, an inter meeting FED cut, what 0:06:25.760 --> 0:06:26.680 would the reaction be? 0:06:27.360 --> 0:06:30.159 I think, unfortunately, because they missed the opportunity last week, 0:06:30.200 --> 0:06:33.960 the reaction to an inter meeting cut would be what 0:06:34.040 --> 0:06:35.920 are they seeing that we don't see? And I think 0:06:35.960 --> 0:06:37.840 that's what they don't want to do, right, That's what 0:06:37.880 --> 0:06:40.480 markets don't want to have, is that kind of you know, 0:06:40.520 --> 0:06:42.280 two weeks ago everything was fine, or a week ago 0:06:42.279 --> 0:06:43.839 everything was fine, and now you feel like you have 0:06:43.880 --> 0:06:46.400 to come and intervene when twenty five basis points to 0:06:46.480 --> 0:06:48.200 be fair is not a huge cut. It's just that 0:06:48.200 --> 0:06:50.279 people were worried that if they went twenty five, they 0:06:50.279 --> 0:06:52.960 would expect that they keep going. And I don't that 0:06:53.400 --> 0:06:55.520 kind of concern. I don't really understand. I think the 0:06:55.520 --> 0:06:57.520 FED has more power than that, but they seem to 0:06:57.520 --> 0:06:59.760 get trapped into perception, and I think that that's. 0:06:59.720 --> 0:07:00.440 Part the issue. 0:07:00.480 --> 0:07:01.839 I just want to make sure I walk away with 0:07:01.880 --> 0:07:03.880 the right impression of where you were at currently. Do 0:07:03.880 --> 0:07:06.240 you think the pendulum swung too far in the other direction? 0:07:06.360 --> 0:07:06.560 Now? 0:07:06.640 --> 0:07:07.200 Absolutely? 0:07:07.680 --> 0:07:09.440 But I don't know. But it doesn't so in stocks 0:07:09.440 --> 0:07:12.160 are in bonds, both both. 0:07:12.000 --> 0:07:13.840 Right now because the bond is a panic where am 0:07:13.840 --> 0:07:15.360 I going to put my money? And the stocks are, 0:07:15.440 --> 0:07:17.240 Oh my goodness, the world is coming to an end. 0:07:17.480 --> 0:07:20.360 But the question is, you know, did the whole Olympic stick? 0:07:20.400 --> 0:07:21.040 The landing thing? 0:07:21.080 --> 0:07:23.560 When does that knife stick? And does it keep falling? 0:07:23.600 --> 0:07:25.800 And I don't know because things always move too far, 0:07:26.080 --> 0:07:28.560 and there have been a lot of really levered trades 0:07:28.960 --> 0:07:31.520 that are underneath all of this that, yeah, everything else 0:07:31.520 --> 0:07:33.560 that are unwinding that we can't see, and that's where 0:07:33.560 --> 0:07:35.720 it's hard to figure out where does that stop. I 0:07:35.720 --> 0:07:38.200 think that this is an overreaction, but I don't know 0:07:38.240 --> 0:07:40.600 when that overreaction stops, because I don't think that the 0:07:40.720 --> 0:07:43.120 underneath is as bad as it has been in the 0:07:43.160 --> 0:07:45.400 last couple of times the market's really had problem. 0:07:45.440 --> 0:07:47.440 I'm just trying to work out where we actually really 0:07:47.480 --> 0:07:49.080 are at the moment, and we'd ask this question a 0:07:49.080 --> 0:07:51.160 few times over the last few weeks coming into that 0:07:51.240 --> 0:07:54.280 unemployment report, if we triggered the psalm rule, and clearly 0:07:54.320 --> 0:07:55.560 a psalm's going to have our own thoughts on our 0:07:55.600 --> 0:07:57.280 own rule live late to this morning, So you should 0:07:57.280 --> 0:07:58.920 look out for that, I said, if we triggered it 0:07:58.960 --> 0:08:01.520 with this market behavior as if we're in a recession already, 0:08:02.040 --> 0:08:03.960 even if the Fed policy makes that everyone else said, 0:08:03.960 --> 0:08:05.960 would not with the market begin to behave like we're 0:08:05.960 --> 0:08:08.240 in a recession or ready, and this tease up. I 0:08:08.240 --> 0:08:10.240 think the data a little bit later. Let's say we 0:08:10.240 --> 0:08:12.440 get M services and it comes in strong. Is that 0:08:12.560 --> 0:08:14.920 data that this market's going to ignore because it's so 0:08:15.000 --> 0:08:16.960 firmly fixated on the view that that's where we are 0:08:17.000 --> 0:08:20.000 now a recession and it embraces weakness, that ignores strength. 0:08:20.000 --> 0:08:21.400 I'm just trying to work out how we respond to 0:08:21.400 --> 0:08:24.560 incoming information, how sensitive we are to strong data, how 0:08:24.600 --> 0:08:26.239 sensitive we are to weak data. 0:08:26.400 --> 0:08:28.200 Well, I think this goes back to Danny's point how 0:08:28.280 --> 0:08:32.040 much of this is underlying mechanical trading problems and how 0:08:32.120 --> 0:08:33.800 much of this is a reaction to the data. It 0:08:33.920 --> 0:08:36.439 started as a reaction to data, and then it became 0:08:36.520 --> 0:08:38.920 its own problem. And that's again the problem of highly 0:08:39.000 --> 0:08:41.200 levered trades is that when they go against you, the 0:08:41.280 --> 0:08:44.240 forced unwind is not necessarily things that people want to do, 0:08:44.440 --> 0:08:46.480 but it's things that people have to do. So the 0:08:46.559 --> 0:08:50.640 data can help slow that down, possibly, but it's not 0:08:50.720 --> 0:08:53.560 as much reactive to data as it is reactive to 0:08:53.640 --> 0:08:56.640 margin calls and to other issues that are underneath that 0:08:56.800 --> 0:08:59.240 on the financial side. So I think that the data 0:08:59.280 --> 0:09:02.280 would help, but bad data could make it worse. Good 0:09:02.360 --> 0:09:04.160 data might make it a little bit better, but I 0:09:04.160 --> 0:09:06.440 don't know how much that's going to stop this. This 0:09:06.520 --> 0:09:09.680 has to stop on its own because there's some calming 0:09:09.720 --> 0:09:11.719 down of forced selling, and I feel like that's what 0:09:11.840 --> 0:09:13.920 we are right that right now, forced. 0:09:13.679 --> 0:09:16.520 Buying at the Japanese yen as well, in particular. So Hun, 0:09:16.600 --> 0:09:29.240 thank you, Vampire Saxon Woods, let's park all the price 0:09:29.280 --> 0:09:31.120 action and just sit on this. I know many of 0:09:31.120 --> 0:09:33.640 you have heard this phrase in the last few weeks. 0:09:33.679 --> 0:09:35.440 In fact, for the last few months, we've been talking 0:09:35.440 --> 0:09:38.040 about the so called Psalm rule, the rise of the 0:09:38.120 --> 0:09:41.480 unemployment rate in July triggering the Psalm rule, a recession 0:09:41.520 --> 0:09:44.280 indicator for so many which has a perfect track record 0:09:44.280 --> 0:09:47.160 over the past half century. Claudia sam herself of New 0:09:47.160 --> 0:09:50.480 Century advisors, saying this, I don't look at this and 0:09:50.559 --> 0:09:53.079 big pictures say we are in recession. But I look 0:09:53.120 --> 0:09:55.440 at this and I say we're not headed in a 0:09:55.480 --> 0:09:59.200 good direction. Claudia joins us. Now for more, Claudia famous, 0:09:59.200 --> 0:10:01.040 if you weren't already, I think you know that. Anyway, 0:10:01.080 --> 0:10:03.079 it's great to catch up with you. I just want 0:10:03.120 --> 0:10:05.680 to take a beat and just sit on this from moment. Claudya, 0:10:05.720 --> 0:10:07.880 let's go from the very beginning. Tell us what the 0:10:07.880 --> 0:10:11.160 psund rule is, what you wanted it to be used for, 0:10:11.600 --> 0:10:14.360 and whether you think it's applicable in Alpa market like 0:10:14.400 --> 0:10:15.080 this one. 0:10:16.360 --> 0:10:19.400 So the origin of the recession indicator was in a 0:10:19.440 --> 0:10:23.360 proposal I had to improve fiscal policy, put it on 0:10:23.440 --> 0:10:27.240 autopilot automatic stabilizers in a recession. It's a rule in 0:10:27.280 --> 0:10:30.240 the sense of not the economy must do something. It 0:10:30.320 --> 0:10:33.240 was a rule in the sense of policymakers do something. 0:10:33.840 --> 0:10:37.320 It may end up playing out that way. So, but 0:10:37.480 --> 0:10:39.120 what the idea of it was was to look at 0:10:39.160 --> 0:10:42.920 the historical record in the United States and find the pattern, 0:10:43.040 --> 0:10:45.839 find the unemployment rate, increase. It's very important to look 0:10:45.840 --> 0:10:50.120 at changes at which in the past the US has 0:10:50.200 --> 0:10:53.520 been in a recession months into a recession. This is 0:10:53.559 --> 0:10:56.840 not a forecast, right, and so it's just trying to 0:10:56.840 --> 0:11:01.439 capture and yet it is absolutely true it doesn't have 0:11:01.520 --> 0:11:03.760 to be that way this time. And frankly, if we 0:11:03.840 --> 0:11:05.760 look at all of what we know about the US 0:11:05.800 --> 0:11:09.400 economy right now, it is very unlikely that we are 0:11:09.520 --> 0:11:12.680 in a recession. And yet a really important question is 0:11:12.679 --> 0:11:15.880 where are we headed. And those changes in the unemployment 0:11:15.920 --> 0:11:18.960 rate that the sambrule picks up on, they do not 0:11:19.160 --> 0:11:21.920 look encouraging, right, They're headed in the wrong direction, and 0:11:21.960 --> 0:11:24.160 that momentum is what can get us in trouble. 0:11:24.679 --> 0:11:27.079 So, Claudia, for just all of those people out there 0:11:27.320 --> 0:11:29.720 who are talking about your name, who are talking about 0:11:29.760 --> 0:11:32.080 the same rule, using as an excuse to sell, using 0:11:32.120 --> 0:11:35.160 as an excuse to say that the FED should be moving. 0:11:34.920 --> 0:11:36.720 Sooner, Just what do you say to those people? 0:11:39.559 --> 0:11:42.840 Calm is important in a moment like this, regardless of 0:11:42.880 --> 0:11:46.160 what indicator data points you're looking at. You know, the 0:11:46.200 --> 0:11:49.319 fear does no good. And this, again, this was trying 0:11:49.360 --> 0:11:52.760 to give a simple summary of one piece of the 0:11:53.320 --> 0:11:56.120 US economy, the labor market is very important. There's a 0:11:56.160 --> 0:11:59.800 lot of complications right now. Again it's this balance between 0:12:00.720 --> 0:12:03.920 calm but take it seriously. Right, Like, there is slowing 0:12:03.920 --> 0:12:06.600 in the US economy, and we have seen that the 0:12:06.640 --> 0:12:09.880 point is to keep that slowing from really pulling us 0:12:09.880 --> 0:12:13.200 in reverse. We're not there yet. Usually dissemble by the 0:12:13.240 --> 0:12:16.640 time it triggers, we're past that point. Right, So there 0:12:16.679 --> 0:12:20.080 is this opportunity of as I said, the Federal Reserve 0:12:20.120 --> 0:12:22.720 has a lot of place to ease there is. We 0:12:22.840 --> 0:12:25.920 do come into this in a position of strength, broadly speaking, 0:12:25.920 --> 0:12:28.760 in the economy. So that's really important for weathering a 0:12:28.800 --> 0:12:32.280 storm like this that has many different contributors to it. 0:12:32.280 --> 0:12:36.000 Today, I didn't mean to use your pun as a segue, 0:12:36.080 --> 0:12:38.280 but I want to in terms of storm and weathering 0:12:38.320 --> 0:12:40.720 it because on Friday there was just this huge debate 0:12:40.760 --> 0:12:43.640 when the numbers dropped of people saying, look, don't believe 0:12:43.640 --> 0:12:46.040 the numbers you're going to see because they will revert quickly. 0:12:46.080 --> 0:12:47.839 Because a lot of it has to do with weather, 0:12:47.920 --> 0:12:49.840 A lot of it has to do with Hurricane Beryl. 0:12:50.160 --> 0:12:52.320 But by the way, the BLS comes out and says 0:12:52.559 --> 0:12:56.360 there's no discernible impact which side of this do fall on, Claudia, 0:12:56.400 --> 0:12:59.240 Whether the numbers we saw on Friday are something that 0:12:59.280 --> 0:13:02.199 can somewhat re verse because it's a weather impact. 0:13:03.000 --> 0:13:05.079 Is absolutely the case that any indicator, and the so 0:13:05.320 --> 0:13:08.679 rule fits into this, should not be designed to overreact 0:13:08.760 --> 0:13:11.199 to one months of data. Right, So this looks it 0:13:11.280 --> 0:13:15.319 smooths across months. The pattern it's responding to is a 0:13:15.360 --> 0:13:19.600 gradual increase, gradual steady increase in unemployment over the past year. Right, 0:13:19.640 --> 0:13:24.240 So there's that in terms of weather effects. I the 0:13:24.280 --> 0:13:26.960 beer of Labor Statistics has the ability and the experience 0:13:27.040 --> 0:13:29.439 to look very carefully at the geographic data to get 0:13:29.480 --> 0:13:32.439 a sense of where its effects are. I think they 0:13:32.480 --> 0:13:37.880 take those statements very seriously, and I agree with them 0:13:38.000 --> 0:13:39.920 for a lot of reason, including their statement that the 0:13:40.000 --> 0:13:44.000 unemployment raid specifically the ambos On was not affected the 0:13:44.080 --> 0:13:48.520 labor force status was not affected being home because being 0:13:48.679 --> 0:13:51.320 unable to work because of the weather doesn't flip you 0:13:51.480 --> 0:13:54.160 out of being employed to unemployed. So it gets really 0:13:54.200 --> 0:13:57.880 technical in that, but absolutely that one month that was 0:13:57.920 --> 0:14:00.280 a big surprise was a negative one a prior of 0:14:00.320 --> 0:14:02.800 just some of them. Reverse is probably the right one, 0:14:02.960 --> 0:14:05.400 but it is the context of the year as a whole, 0:14:05.920 --> 0:14:10.359 and even moderate slowing. And this increase in the unemployment 0:14:10.480 --> 0:14:15.240 rate has been in the past consistent with early in recession. 0:14:15.320 --> 0:14:18.439 So we might not be there, but we're getting uncomfortably 0:14:18.600 --> 0:14:19.960 close to that situation. 0:14:20.560 --> 0:14:23.000 Cloda, you've worked at the Federal Reserve. You know better 0:14:23.040 --> 0:14:26.360 than most how that institution operates, how slowly it can 0:14:26.440 --> 0:14:29.160 move sometimes. How do you think it's going to respond 0:14:29.200 --> 0:14:31.680 to this data, not just on Friday, but the data 0:14:31.680 --> 0:14:34.240 from Thursday as well as we go into Jackson Hoe 0:14:35.640 --> 0:14:36.400 on a day like. 0:14:36.400 --> 0:14:40.160 Today, when, as you said, the panic word is loubing 0:14:40.240 --> 0:14:42.800 large for many people. The fact that the Federal Reserve 0:14:42.880 --> 0:14:45.360 is slow moving and deliberate, it's a good thing. The 0:14:45.480 --> 0:14:50.200 last thing we need is them joining into that kind 0:14:50.240 --> 0:14:53.240 of that energy, that emotional energy, and yet they're watching 0:14:53.280 --> 0:14:57.840 it very carefully. The market functioning, liquid these are all 0:14:58.200 --> 0:15:00.480 you know. The reason that we have the Fed is 0:15:00.520 --> 0:15:03.240 to make sure the markets keep functioning. Monetary policy then 0:15:03.320 --> 0:15:06.400 came later, right, So there is this aspect of them 0:15:06.480 --> 0:15:10.920 being diligent in terms of them looking at Friday's report 0:15:11.200 --> 0:15:15.800 and changing dramatically their views on a September rate change. 0:15:15.800 --> 0:15:19.280 I think that that would be unlike them, and I 0:15:19.320 --> 0:15:21.960 think it would be premature. Right they're pointed in the 0:15:22.040 --> 0:15:25.840 right direction. They have some time to get there, but yes, 0:15:25.880 --> 0:15:28.480 they are slow moving, particularly when it comes to the 0:15:28.560 --> 0:15:29.440 economic data. 0:15:29.880 --> 0:15:32.560 How do you imagine they'll frame that first interest rate cut? 0:15:32.720 --> 0:15:34.000 Do you think that's going to be framed as a 0:15:34.000 --> 0:15:37.680 mid cycle adjustment, the process towards sort of normalization, or 0:15:37.680 --> 0:15:40.640 the first step towards taking a more accommodative stance. Given 0:15:40.680 --> 0:15:42.440 what's developing, how do you think they're going to frame it? 0:15:42.480 --> 0:15:43.880 Just give them what we know so far. 0:15:45.000 --> 0:15:49.240 In the September feels like a lifetime away right now. Yeah, 0:15:49.520 --> 0:15:54.760 I think they if they can. The FED likes to 0:15:54.920 --> 0:15:57.880 move in on the path it's set out. The path 0:15:57.920 --> 0:16:01.480 it has set out is to begin normalizing interest rates. 0:16:01.520 --> 0:16:04.840 Because inflation is normalized and we are in you know, 0:16:05.320 --> 0:16:08.000 kind of everything is planned in that right direction. I 0:16:08.000 --> 0:16:10.680 think they're going to want to keep to that narrative 0:16:10.720 --> 0:16:14.200 and to that path if they can. You know, the 0:16:14.320 --> 0:16:18.720 last few days have called into question whether that is appropriate. 0:16:18.720 --> 0:16:20.600 It will be appropriate at that point. And I will 0:16:20.640 --> 0:16:22.240 say one thing for the Fed, you know it is 0:16:22.320 --> 0:16:24.240 it is very deliberate. It can be very slow moving. 0:16:25.080 --> 0:16:28.560 But when the facts change and it gets its mind 0:16:28.600 --> 0:16:30.880 around it, it will move and it will do what 0:16:30.920 --> 0:16:33.240 it has to do. And we are in a position 0:16:33.320 --> 0:16:35.760 right now where they have the ability to do quite 0:16:35.760 --> 0:16:37.560 a bit, and that is notable. 0:16:38.000 --> 0:16:39.840 And John made the point that both City and JP 0:16:39.880 --> 0:16:42.280 Morgan have changed their call now to see two consecutive 0:16:42.320 --> 0:16:45.680 fifty basis points cuts from the Fed. Claude, what difference 0:16:45.880 --> 0:16:49.560 does it actually make moving twenty five or fifty in September. 0:16:52.640 --> 0:16:57.560 It it will all it all fits within the context 0:16:57.600 --> 0:17:01.640 of that moment. Right for someone changing to fifty point cuts, 0:17:01.680 --> 0:17:05.919 particularly consecutive ones, that's that's a pretty dire outlook for 0:17:05.960 --> 0:17:08.639 the economy when we get to that point. Or you 0:17:08.640 --> 0:17:13.000 know in the intervening that that's not where my baseline is. 0:17:13.040 --> 0:17:15.159 I don't think that's where the fence is. I mean, 0:17:15.200 --> 0:17:18.560 looking at the data and where we're at. And yet 0:17:18.840 --> 0:17:21.600 you know, clearly if we were seeing large moves like 0:17:21.640 --> 0:17:24.800 that out of the gate, there's there's a real problem. 0:17:25.560 --> 0:17:29.080 But you know, but we saw some big moves out 0:17:29.080 --> 0:17:31.400 of the gate and fighting inflation in twenty twenty two 0:17:31.400 --> 0:17:34.119 in the other direction, and you know, you you the 0:17:34.160 --> 0:17:36.800 FED will take its policy to where it needs to 0:17:36.840 --> 0:17:39.440 be to the conditions in the economy. 0:17:40.040 --> 0:17:42.840 Chlodia, we appreciate your time. Just fantastic to space you 0:17:42.880 --> 0:17:45.920 passed some Clodia Son of New Century advises. 0:17:54.760 --> 0:17:55.280