WEBVTT - The Outlook for a Kevin Warsh-Led Fed 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business app. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.240 us live on YouTube. 0:00:27.400 --> 0:00:31.800 We speak with Claudia sam chief Economist, News Century Advisors. 0:00:31.960 --> 0:00:33.879 Maybe we'll get her back here for Wednesday when we 0:00:33.920 --> 0:00:36.400 get the actual reported government shutdown and all that's three 0:00:36.440 --> 0:00:41.320 or four days delayed. There's been all sorts of responsible 0:00:41.640 --> 0:00:48.559 and irresponsible writing thinking blathering on our new Chairman of 0:00:48.600 --> 0:00:52.120 the Federal Reserve. The nominee is Kevin Worsh. At the 0:00:52.159 --> 0:00:57.520 top of the responsible pile is Claudia sam Ace, academics 0:00:57.520 --> 0:01:02.440 from Michigan, Real fed Credit bill, changing the dialogue of 0:01:02.520 --> 0:01:08.360 recession in America. She has been careful and respectful about 0:01:08.760 --> 0:01:13.080 discussing the pros the cons of this new chairman. Claudia 0:01:13.200 --> 0:01:16.959 sim if we get a Chairman Worsh, what would you be? 0:01:17.120 --> 0:01:21.240 You said, your advice to Chairman Worsh to get through 0:01:21.280 --> 0:01:22.480 the first six months. 0:01:24.680 --> 0:01:27.480 Unfortunately, I think Kevin Walsh may need to start with 0:01:27.600 --> 0:01:32.840 an apology. He's been pretty tough on the staff and 0:01:32.880 --> 0:01:36.400 on current FED officials. You know, it's maybe the campaign 0:01:36.440 --> 0:01:40.080 to get the job. And I am wholeheartedly agree the 0:01:40.120 --> 0:01:42.560 FED can always do better and has made mistakes in 0:01:42.600 --> 0:01:45.520 the past, and there's ways to change the institution. But 0:01:45.640 --> 0:01:48.960 he said some pretty fiery stuff about people whose help 0:01:49.000 --> 0:01:51.320 he's going to need very soon, and I suspect he'll 0:01:51.320 --> 0:01:53.400 come in and be like, hey, you know we were collegues, 0:01:53.440 --> 0:01:56.280 ones for colleagues again, let's get to it, and I 0:01:56.320 --> 0:01:59.040 think the page will turn and off we go if 0:01:59.160 --> 0:02:03.080 some of his and pain promises of you know, breaking 0:02:03.120 --> 0:02:06.120 heads and laying off a bunch of people. If that happens, 0:02:06.160 --> 0:02:08.440 I think you'll have a pretty tough first six months. 0:02:08.800 --> 0:02:11.840 So that's not my anticipation. But you know, the leadership 0:02:11.880 --> 0:02:15.120 style changes, and Kevin worsh is trying to do something 0:02:15.200 --> 0:02:18.200 really difficult. He has big ideas about how to change 0:02:18.240 --> 0:02:21.400 the FED. Change is very hard at the FED. 0:02:21.680 --> 0:02:23.920 I mean I know that from being inside the building. 0:02:24.040 --> 0:02:26.200 So you know, good back to. 0:02:26.160 --> 0:02:27.160 Him, Claudia. 0:02:27.280 --> 0:02:29.840 We did not get the non pump payroll data today, 0:02:29.880 --> 0:02:32.280 but we have gotten some data in the less couple 0:02:32.320 --> 0:02:35.239 of days. Challenger job cuts high since two thousand and nine. 0:02:35.680 --> 0:02:38.440 Initial job as claims came in a little higher than expected, 0:02:39.400 --> 0:02:42.079 jolts openings fell to the LOWES level. So I think 0:02:42.080 --> 0:02:45.160 since twenty twenty, what is your view of kind of 0:02:45.440 --> 0:02:46.720 this labor market right now? 0:02:48.440 --> 0:02:49.400 So, even with. 0:02:49.400 --> 0:02:52.680 The data that we've gone this week, I agree with 0:02:52.720 --> 0:02:54.960 the assessment we heard from the FED at their last 0:02:55.000 --> 0:02:58.320 meeting that there are signs of stabilization, you know, the 0:02:58.360 --> 0:03:02.000 downside risk employment look a little bit less now. I think, 0:03:02.000 --> 0:03:05.440 you know, the data flow shows that this is still bumpy. 0:03:05.480 --> 0:03:07.840 We are not out of the woods yet. I would 0:03:07.960 --> 0:03:10.800 downplay the message from the Challenger data. 0:03:10.880 --> 0:03:11.560 It absolutely is. 0:03:11.520 --> 0:03:13.920 Important for every single person that's covering that data that 0:03:13.960 --> 0:03:16.520 got a pink slip, but it's it doesn't give us 0:03:16.520 --> 0:03:19.800 the flavor of like the whole set of businesses across 0:03:19.840 --> 0:03:23.000 the country. Honestly, the DROLT data, the job openings and 0:03:23.080 --> 0:03:28.040 labor turnover statistics that came out was much more upbeat. 0:03:28.120 --> 0:03:31.359 And the layoff rate nationally is still very low. It's 0:03:31.400 --> 0:03:33.600 like pre pandemic levels of low. 0:03:33.639 --> 0:03:34.200 So I think on. 0:03:34.240 --> 0:03:39.760 Layoffs, it's the pictures is okay, Actually it's actually pretty good. 0:03:40.240 --> 0:03:43.400 It's the hiring rate that is still very low, and 0:03:43.800 --> 0:03:46.520 that is a problem. Even if it's not recessionary. It 0:03:46.960 --> 0:03:50.200 is a real drain and a gradual increase in say unemployment. 0:03:50.640 --> 0:03:54.840 Is the low higher low fire phenomena. Is that okay 0:03:54.880 --> 0:03:58.080 for this economy? Is that shockingly unusual? How do you 0:03:58.080 --> 0:03:58.600 think about that? 0:03:59.720 --> 0:04:03.520 So what we're seeing right now is very unusual. We 0:04:03.640 --> 0:04:06.720 have a low hiring rate, which that happens from time 0:04:06.760 --> 0:04:09.640 to time. What makes it so unusual is we have 0:04:09.680 --> 0:04:12.520 an economy that is expanding it a pretty good clip. 0:04:13.080 --> 0:04:15.080 You know, do GDP numbers may be a little on 0:04:15.120 --> 0:04:18.120 the high side, but in genuc consumer spending is moving ahead, 0:04:18.160 --> 0:04:22.040 business investment, capital expenditures are happening right like. This economy 0:04:22.080 --> 0:04:24.960 is moving forward but not adding jobs. 0:04:25.720 --> 0:04:28.280 And that is that is unusual. 0:04:28.520 --> 0:04:30.960 And I think there are probably some reasons why that 0:04:31.040 --> 0:04:33.480 might be happening right now, like a lot, but it's 0:04:33.600 --> 0:04:36.080 this is not typical, and frankly, that makes it kind 0:04:36.080 --> 0:04:38.560 of not It makes it hard to read, and I 0:04:38.600 --> 0:04:42.880 don't think it's really sustainable. But it could go either way. 0:04:43.160 --> 0:04:46.120 Hiring could pick up or activity could slack off. 0:04:46.279 --> 0:04:48.640 Claudia, you know an undergraduate, You get there and you go, okay, 0:04:48.720 --> 0:04:51.400 labor economics junior here this is going to be a breeze, 0:04:51.400 --> 0:04:53.960 and then you get the textbooks like whoa, this has 0:04:54.000 --> 0:04:58.440 got a little bit of ambiguity to it and sophistication. 0:04:59.160 --> 0:05:01.800 The hiring di ynamic. We had one guest earlier this 0:05:01.839 --> 0:05:06.640 week say, the lack the dearth of hiring models out 0:05:06.720 --> 0:05:11.200 at a near eight percent unemployment rate, is our unemployment 0:05:11.279 --> 0:05:15.440 rate worser than the four point x percent we were quoting? 0:05:18.240 --> 0:05:20.719 Yeah, you know, it's one of there's a lot of 0:05:20.880 --> 0:05:23.120 reasons why the unemployment rate can move around. I think 0:05:23.160 --> 0:05:26.160 if you have the perspective of kind of bottoms up 0:05:26.160 --> 0:05:28.599 on the labor market, A lot of it's demographic. The 0:05:28.680 --> 0:05:31.440 population aging is one of the biggest pieces that means 0:05:31.480 --> 0:05:33.920 that we should have lower unemployment rates right now. 0:05:34.279 --> 0:05:34.479 Now. 0:05:34.480 --> 0:05:37.880 It is a cottage industries, particularly within kind of the FED, 0:05:37.960 --> 0:05:41.200 trying to figure out what's the unemployment rate that like 0:05:41.440 --> 0:05:44.800 is so low that it like sets off inflation, or 0:05:45.320 --> 0:05:47.560 is so high that it really is a sign that 0:05:47.600 --> 0:05:48.320 the FED needs. 0:05:48.160 --> 0:05:50.080 To step in and be aggressively cutting rates. 0:05:50.120 --> 0:05:53.080 So and that's that's really tricky because again it's not 0:05:53.279 --> 0:05:57.040 just like I said, with the jobless expansion, you when 0:05:57.080 --> 0:05:59.320 you're really trying to get a sense of what's happening 0:05:59.320 --> 0:06:02.080 in the economy. You got to take the unemployment rate 0:06:02.120 --> 0:06:03.680 and then go look at activity. You got to take 0:06:03.720 --> 0:06:07.400 the unemployment rate and go look at the demographics and 0:06:07.760 --> 0:06:11.600 what's happening with labor supply. So it's there's a lot 0:06:11.600 --> 0:06:14.960 of pieces that come together. So there's no one number 0:06:15.160 --> 0:06:15.880 that we should. 0:06:15.680 --> 0:06:16.720 Look for the unemployment rate. 0:06:16.880 --> 0:06:19.000 What I've always said, and this, you know, this shows 0:06:19.000 --> 0:06:22.400 with the dynamics, watch how it's moving. If the unemployment 0:06:22.440 --> 0:06:24.960 rate starts rising and it gets going more quickly, then 0:06:25.000 --> 0:06:26.240 we have a big problem. 0:06:26.839 --> 0:06:27.239 Claudia. 0:06:27.279 --> 0:06:31.240 President Trump really made good on his campaign pledge to 0:06:31.760 --> 0:06:36.240 a stop immigration, increased deportations. What effect has that had 0:06:36.279 --> 0:06:39.679 on the labor market. I haven't really seen it too much. 0:06:41.360 --> 0:06:43.840 Well, we've been seeing it, and actually I think, you know, 0:06:43.839 --> 0:06:46.279 with the job report being delayed, I think it's a 0:06:46.320 --> 0:06:50.360 good time to kind of emotionally prepare people for next Wednesday. 0:06:50.640 --> 0:06:54.800 We're going to get the annual revisions to the payrolls, 0:06:55.240 --> 0:06:58.200 and there we know from some preliminary estimates they're going 0:06:58.279 --> 0:07:00.760 to be downward and they're going to be big again, 0:07:01.040 --> 0:07:03.840 starting actually back into the spring of twenty twenty four. 0:07:03.920 --> 0:07:06.400 So it's not gonna fit nice through political narratives because 0:07:06.440 --> 0:07:08.640 we go across administrations, like it takes a long time 0:07:08.640 --> 0:07:11.560 to get all this data together, and we're gonna see 0:07:11.600 --> 0:07:15.440 a lot of red because because payroll increases in places 0:07:15.480 --> 0:07:17.960 we're low enough already that with the revisions, we expect 0:07:17.960 --> 0:07:21.680 we're gonna flip more months to payroll gains and the 0:07:21.680 --> 0:07:25.520 green to payroll decignely red and that will rattle people. 0:07:25.720 --> 0:07:29.200 Even though this goes back to your question, we shouldn't 0:07:29.320 --> 0:07:33.080 take the recession signed to it, like we really have 0:07:33.320 --> 0:07:36.560 had a slowdown in the labor's supply and immigration is 0:07:36.600 --> 0:07:39.320 an important piece of that, and that just means these 0:07:39.360 --> 0:07:41.360 payroll numbers. 0:07:41.440 --> 0:07:44.440 Okay, So at the Echos building, you got your unedible 0:07:44.480 --> 0:07:47.480 coffee from Michelle Smith. We're sitting at the desk doctor 0:07:47.600 --> 0:07:50.720 some and some wise guy goes, Okay, Claudia, how red 0:07:50.800 --> 0:07:53.600 is red gonna be? Do you have a revision statistic 0:07:53.640 --> 0:07:56.440 in your head? Oh? 0:07:56.560 --> 0:07:58.679 I do, but I don't. I actually think in terms 0:07:58.680 --> 0:07:59.600 of people watch. 0:08:00.360 --> 0:08:02.040 Nobody's listening, So let's go no. 0:08:02.120 --> 0:08:05.640 But we know that the preliminary estimate was going to 0:08:05.640 --> 0:08:09.160 take something like sixty seventy thousand out a month over 0:08:09.200 --> 0:08:11.280 the period from the spring of March twenty twenty four 0:08:11.320 --> 0:08:13.520 to March twenty twenty five, and then after that we 0:08:13.600 --> 0:08:17.040 may have some additional downward revisions. And frankly, I think 0:08:17.160 --> 0:08:20.400 some of there's a potential even to get some surprise 0:08:20.560 --> 0:08:24.120 on the latest numbers because the BLS, and they're in 0:08:24.200 --> 0:08:27.600 their pledge to always do better with with their estimates. 0:08:27.160 --> 0:08:27.640 Have this. 0:08:27.760 --> 0:08:32.319 They will be unveiling their new birth death model and 0:08:33.000 --> 0:08:35.160 it's probably going to have a little less lift. So 0:08:35.200 --> 0:08:39.240 I think payrolls could be pretty unsettling. And again I 0:08:39.320 --> 0:08:41.360 don't I think there's a lot going on, and keep 0:08:41.360 --> 0:08:43.480 an eye on the unemployment, which I expect to say 0:08:43.600 --> 0:08:45.000 flat and maybe even tick down. 0:08:45.160 --> 0:08:45.960 She's seldom this. 0:08:46.240 --> 0:08:47.480 Yeah, I mean that's great. 0:08:47.520 --> 0:08:50.600 We don't have to promote anything. If doctor some sells 0:08:50.640 --> 0:08:53.240 on Wednesday this Jobs Day, four minutes after the jobs 0:08:53.720 --> 0:08:57.000 the Job's non report, Claudia, Sam, thank you, thank you, 0:08:57.120 --> 0:09:02.439 thank you. Stay with us. More from Bloomberg Surveillance coming 0:09:02.520 --> 0:09:03.480 up after this. 0:09:10.760 --> 0:09:14.320 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:09:14.400 --> 0:09:17.560 weekday afternoons from seven to ten am Eastern Listen on 0:09:17.640 --> 0:09:21.280 Applecarplay and Android Auto with the Bloomberg Business app or 0:09:21.440 --> 0:09:23.000 watch us live on YouTube. 0:09:23.120 --> 0:09:26.240 This is a joy Sean Simmons joys us right now. 0:09:26.280 --> 0:09:28.840 I pretty strategies at ubs, but I want to talk 0:09:28.880 --> 0:09:31.600 about and I remember this when Barok, I mean NYU 0:09:31.720 --> 0:09:34.400 was rocking on Peter Karr and Bruno de Pierre and 0:09:34.440 --> 0:09:37.560 all at KURRNT and Barok had the courage to come 0:09:37.600 --> 0:09:40.960 out with a huge venerable finance program they had and 0:09:41.040 --> 0:09:44.880 Dance Stefonica started the Quant program like twenty years ago 0:09:44.880 --> 0:09:48.120 at Brooke. How did you survive the Quant program at Brooke? 0:09:48.240 --> 0:09:48.959 It's a grind. 0:09:49.200 --> 0:09:53.240 It was definitely challenging, set us up to, you know, 0:09:53.360 --> 0:09:55.480 work very hard when we left bruth though. That's always 0:09:55.520 --> 0:09:57.640 the feedback that I hear every Brook studio. 0:09:57.760 --> 0:09:59.960 Apply it to this madness that you have to deal 0:09:59.960 --> 0:10:02.200 with with every day at ubs? How do you how 0:10:02.200 --> 0:10:05.520 do you deal with bitdog or or or anthropic? Is 0:10:05.559 --> 0:10:07.520 that what happened yesterday? I don't know. I don't know 0:10:07.559 --> 0:10:12.199 what clat is, But how do you apply quant academics 0:10:12.240 --> 0:10:13.640 to this madness we're living? 0:10:13.880 --> 0:10:16.000 You know, shifting sands? We got to we have to 0:10:16.000 --> 0:10:18.400 be creative on how we think about things. And uh, 0:10:18.720 --> 0:10:22.120 you know, applied statistical processes to all of it. 0:10:22.640 --> 0:10:25.080 Sean, I think for the you know, so for such 0:10:25.120 --> 0:10:27.240 a long period of time, for so many years, tech 0:10:27.360 --> 0:10:30.960 has led the equity markets, particularly in the US, less 0:10:30.960 --> 0:10:31.800 so in Europe. 0:10:33.120 --> 0:10:34.240 Is that still the case? 0:10:34.280 --> 0:10:37.559 Do you think we've had such a rotation of software 0:10:37.559 --> 0:10:39.880 and some other tech spaces over the last several weeks here? 0:10:39.920 --> 0:10:40.640 How do you think about that? 0:10:40.760 --> 0:10:43.600 Yeah, it's been interesting, and we talked about this last time, 0:10:43.600 --> 0:10:46.440 but going into this year, we were I moved tech 0:10:46.480 --> 0:10:49.960 into neutral for our full year outlook. Okay, part of 0:10:49.960 --> 0:10:53.520 that thesis was, you know, just general increase competition between 0:10:53.640 --> 0:10:57.199 the different companies in the cohort, as well as kind 0:10:57.240 --> 0:11:00.679 of technical rotations within the space overall. So it wasn't 0:11:00.800 --> 0:11:04.559 just a general text going to lift rising tides, right, 0:11:06.200 --> 0:11:09.480 that is what's seemingly playing out right now. We still 0:11:09.520 --> 0:11:11.800 hold it as a neutral in our view for the year. 0:11:12.640 --> 0:11:15.280 So I do think there's going to be some opportunity 0:11:15.400 --> 0:11:18.319 opportunities with in tech, but it's not necessarily going to 0:11:18.320 --> 0:11:20.720 be the stalwart driver of the overall market. 0:11:21.000 --> 0:11:23.680 So we saw a rotation a lot of folks will say, 0:11:23.760 --> 0:11:26.360 kind of beginning early November, we saw rotation from some 0:11:26.440 --> 0:11:28.520 of the tech to some other areas of the market, 0:11:28.640 --> 0:11:32.240 some maybe some more value oriented sectors industrials and consumer 0:11:32.280 --> 0:11:34.040 stables and maybe even small and mid caps. 0:11:34.840 --> 0:11:36.439 Is that a thing for twenty six? 0:11:36.559 --> 0:11:38.600 You know, I think I would push back on that 0:11:38.640 --> 0:11:41.880 a bit. You know, we again this idea of breath. 0:11:41.960 --> 0:11:44.079 What we had coming into this year was kind of 0:11:44.120 --> 0:11:46.760 a more and more consensus idea of breadth within the 0:11:46.800 --> 0:11:49.240 market as a whole. But we really saw that being 0:11:49.320 --> 0:11:54.200 led by IWN, by small caps, by speculative growth. So 0:11:54.280 --> 0:11:58.160 it wasn't necessarily pure value or the quality group that 0:11:58.200 --> 0:12:01.560 we had expected this year. You know, I think the 0:12:01.600 --> 0:12:04.360 market got a bit ahead of its skis. From that perspective, 0:12:04.880 --> 0:12:07.560 we are kind of now starting to see that quality rotation. 0:12:07.640 --> 0:12:11.400 Quality improved yesterday. Value has clearly done very well, and 0:12:11.440 --> 0:12:13.040 we're seeing that speculative side come in. 0:12:13.200 --> 0:12:15.560 Sean Seimers as we continue. We welcome all of you 0:12:15.640 --> 0:12:20.120 across the nation. Is good football that weekend? So Duke 0:12:20.240 --> 0:12:21.680 unc when is it Saturday? 0:12:21.800 --> 0:12:24.320 Saturday? Are you going to I had a lot of 0:12:24.320 --> 0:12:26.720 offers to go, but no, it's okay. 0:12:26.960 --> 0:12:28.719 It might be you know, they're thinking about closing down 0:12:28.760 --> 0:12:31.680 the Dean Dome and moving the basketball court somewhere different 0:12:31.720 --> 0:12:32.280 than chopoil. 0:12:32.640 --> 0:12:34.040 Big issue in chap oil. 0:12:34.400 --> 0:12:36.800 Well, we'll discuss it. Come look for that, folks in 0:12:36.840 --> 0:12:39.480 the nine o'clock hour this morning. We welcome all of 0:12:39.520 --> 0:12:42.400 you on YouTube and of course subscribe to Bloomberg Podcast 0:12:42.559 --> 0:12:48.360 program announcement Bloomberg finally coalescing all of our video platform together. 0:12:48.760 --> 0:12:52.000 Look at that at the hub at Bloomberg dot com. 0:12:52.040 --> 0:12:56.840 Sean you mentioned value. Okay, nobody out there, including Alexis Christopherus, 0:12:56.920 --> 0:13:01.040 knows that John Deere has popped a twenty two point 0:13:01.120 --> 0:13:04.640 nine percent per year return for the last ten years. 0:13:04.840 --> 0:13:08.560 Have we been a sleep that boring? As Gartman would say, 0:13:08.600 --> 0:13:12.119 things that fall on your feet are doing Apple like returns. 0:13:12.880 --> 0:13:15.160 I think there is part of that lack of awareness, 0:13:15.640 --> 0:13:17.920 and that's part of the thesis from Breadth right. If 0:13:17.960 --> 0:13:20.800 we don't have these kind of highlight tech names driving 0:13:20.800 --> 0:13:23.520 the overall market, and we are starting to see some 0:13:23.679 --> 0:13:27.520 improvement for those names from a fundamental standpoint, that's going 0:13:27.520 --> 0:13:29.840 to lead to some more improvement. We have a neutral 0:13:29.840 --> 0:13:33.280 positive on materials industrials for that. I think there is 0:13:33.320 --> 0:13:35.319 a bit of the bleed of just the overall AI 0:13:35.440 --> 0:13:38.800 narrative in some of these spaces, you know, utilities under 0:13:38.800 --> 0:13:41.960 performance right now is something that we would flag there 0:13:41.960 --> 0:13:43.680 where we think that is a bit of the AI 0:13:44.040 --> 0:13:46.800 kind of exposure that utilities have. In that general thought, 0:13:46.920 --> 0:13:49.960 even though those fundamentals still appear quite attractive. 0:13:50.640 --> 0:13:52.960 We're I guess, a little more than halfway through earnings 0:13:53.080 --> 0:13:55.360 season here, almost sixty percent of the way through the 0:13:55.440 --> 0:13:59.079 S and P five hundred, some pretty solid earnings this quarter, 0:13:59.200 --> 0:14:00.200 which support. 0:13:59.880 --> 0:14:02.199 What we saw in twenty twenty five. Is it enough 0:14:02.240 --> 0:14:03.560 to support this market going forward? 0:14:04.200 --> 0:14:05.120 I think so. 0:14:05.240 --> 0:14:07.760 I think one of the interesting things from a performance 0:14:07.760 --> 0:14:10.160 perspective on the back of reporting, there's kind of two 0:14:10.240 --> 0:14:14.000 key areas that I'm watching right now. One, falling margins 0:14:14.080 --> 0:14:16.040 or those margins that have been hurt have been the 0:14:16.360 --> 0:14:19.200 kind of pocket of results that are getting most penalized, 0:14:19.840 --> 0:14:22.400 so that kind of supports the overall quality idea through 0:14:22.440 --> 0:14:26.200 this year. The second is, you know, aside from consumer 0:14:26.320 --> 0:14:31.720 staples and industrials and one other, the median stock in 0:14:31.800 --> 0:14:35.120 all of these sectors is outperforming the aggregate or the 0:14:35.400 --> 0:14:38.760 you know, the whole average, which is pretty interesting, and 0:14:38.800 --> 0:14:41.640 again that earning's breadth idea. 0:14:41.880 --> 0:14:44.480 What's screening well for you guys these days, is are 0:14:44.560 --> 0:14:47.800 certain industry sectors there a certain factor out there that 0:14:47.840 --> 0:14:48.800 you guys are focusing on. 0:14:48.960 --> 0:14:50.920 Yeah, I mean, I mean it sounds like a broken record. 0:14:50.920 --> 0:14:54.640 We're still focused on that quality area. You know, we 0:14:54.680 --> 0:14:57.720 want to be away from kind of more speculative growers. 0:14:58.760 --> 0:15:01.840 We want to be looking at equal weight in disease, 0:15:02.560 --> 0:15:06.160 especially kind of those larger cap And I would say 0:15:06.200 --> 0:15:08.440 just kind of overall, you know, we do have a 0:15:08.480 --> 0:15:11.800 bias towards industrials versus kind of the overall consumer landscape. 0:15:11.840 --> 0:15:12.520 Can I go NERD? 0:15:12.800 --> 0:15:13.600 Yeah, definitely. 0:15:13.640 --> 0:15:17.320 Okay, Now seeing telab would talk about tail distributions and 0:15:18.000 --> 0:15:21.280 and the rest of it. What is the shadow out 0:15:21.320 --> 0:15:23.800 there you see? Is it a margin build up? Is 0:15:23.840 --> 0:15:26.600 it a leverage build up? Is if you look at 0:15:27.000 --> 0:15:31.040 all the sleepiness of a Gaussian belt curve distribution and 0:15:31.080 --> 0:15:34.600 you and I know that's not reality when you look 0:15:34.640 --> 0:15:38.160 at the quant reality. What's your number one worry right now? 0:15:39.040 --> 0:15:41.480 I you know, there's a lot of discussion at the 0:15:41.560 --> 0:15:44.320 end of last year about the cockroaches in high yield. 0:15:45.000 --> 0:15:49.280 I'm not the credit strategist, but I know Matt Mish 0:15:49.320 --> 0:15:51.320 has put out some great work in that front. 0:15:51.400 --> 0:15:53.280 He's got a little experience, it's got a. 0:15:53.280 --> 0:15:56.800 Little experience, and I would you know, I would lean 0:15:56.880 --> 0:15:59.920 that direction. One of my key models kind of uses 0:16:00.480 --> 0:16:03.880 high yield spreads as an input. That has been a 0:16:04.000 --> 0:16:06.720 very positive sport for the equities markets over the past 0:16:06.960 --> 0:16:09.040 few years and always kind of when we see that 0:16:09.160 --> 0:16:10.960 rattle that that normally. 0:16:11.200 --> 0:16:14.640 So how do you handle the fact is our four 0:16:14.680 --> 0:16:18.920 ohe case are grossly non diversified compared to any sense 0:16:18.960 --> 0:16:20.720 of a recent nineteen seventy four. 0:16:21.360 --> 0:16:24.280 Yeah, I think there's kind of two sides to that. 0:16:24.360 --> 0:16:28.240 One is that has been very supportive of equity valuations 0:16:28.680 --> 0:16:31.000 over the past number of years, right kind of price 0:16:31.040 --> 0:16:35.160 ins and discriminate flows just into equity buckets and equity 0:16:35.160 --> 0:16:38.960 indices has been supportive of, you know, higher valuations over 0:16:39.000 --> 0:16:42.200 the past couple of years. From the other side, you know, 0:16:42.360 --> 0:16:46.200 that's if you have options, you can always take a 0:16:46.200 --> 0:16:48.000 look at them. If not, you know, always talk to 0:16:48.040 --> 0:16:48.960 a financial advisor. 0:16:49.760 --> 0:16:51.920 Valuation a couple of ways to look at it. You 0:16:51.920 --> 0:16:52.600 just look at the SMP. 0:16:52.920 --> 0:16:56.080 You could argue that it's expensive you strip out some 0:16:56.120 --> 0:16:58.160 of the big camp names, maybe less So. 0:16:58.160 --> 0:16:59.960 How do you guys think about just the market valuation. 0:17:00.160 --> 0:17:03.000 I'll say we do break out kind of the tech 0:17:03.000 --> 0:17:05.600 plus code, where from the rest of the S and 0:17:05.600 --> 0:17:10.080 B five hundred it still does appear a bit expensive. However, 0:17:10.119 --> 0:17:12.879 you know, when we're talking about those pricing discriment flows, 0:17:12.920 --> 0:17:17.040 when you have this constant bid to equities overall, that's 0:17:17.119 --> 0:17:19.919 going to drive a higher evaluation. So it really is 0:17:19.960 --> 0:17:23.880 going to become a flows dynamic supportive of margins. If 0:17:23.880 --> 0:17:26.160 we can see the consensus margin growth over the next 0:17:26.200 --> 0:17:27.200 couple of years, should. 0:17:27.000 --> 0:17:29.000 We get them in trouble with ubs complainants? Oh yeah, 0:17:29.040 --> 0:17:32.119 it's Friday. Let's do that. Sean Simons with the Union 0:17:32.160 --> 0:17:35.160 Bank of Switzerland. The best research I know on bitcoin 0:17:35.280 --> 0:17:39.000 is a bank of International Settlements in Geneva. Sean Simon's 0:17:39.040 --> 0:17:42.160 on bitcoin. You're young enough this weekend, Alexis. Come on. 0:17:42.320 --> 0:17:45.320 Sean's going to be in a bar somewhere downtown where 0:17:45.359 --> 0:17:48.000 I never go, and fourteen kids are going to lean 0:17:48.040 --> 0:17:50.840 forward and say, hey, brain, o bitcoin, what do you 0:17:50.920 --> 0:17:51.439 think go. 0:17:51.960 --> 0:17:53.480 I'm a pass fan. I'm gonna be sitting on my 0:17:53.520 --> 0:17:57.440 couch on Sunday. I want to be very clear about that. Yeah, 0:17:58.000 --> 0:17:59.880 you know, one of the things when we see risk 0:18:00.520 --> 0:18:02.320 and you can talk about Bitcoin, you can talk about 0:18:02.359 --> 0:18:04.040 what silver has done, you can talk about any of 0:18:04.080 --> 0:18:08.719 the speculative growers where retail participation has been. You know, 0:18:08.960 --> 0:18:12.199 there is a fear right when when your personal value 0:18:12.240 --> 0:18:15.239 has moved that lower. You know, if we see a 0:18:15.440 --> 0:18:20.520 reduced retail bid into equities, that is a low dynamic 0:18:20.560 --> 0:18:22.399 that has been kind of a stalwart in the market 0:18:22.400 --> 0:18:24.679 over the past number of years, and that could be 0:18:24.720 --> 0:18:27.600 a shift. You know, if there's not that by the 0:18:27.640 --> 0:18:32.040 dip mentality from retail institutions having to sell or reposition 0:18:32.640 --> 0:18:35.600 causes some of the large moves that we've seen and 0:18:35.800 --> 0:18:37.159 kind of have used to not seeing. 0:18:37.240 --> 0:18:39.480 And there's the key phrase, folks having to sell. Selz 0:18:39.520 --> 0:18:43.040 Simon's thank you so much equity where in quantit ubs 0:18:44.800 --> 0:18:49.000 Stay with us. More from Bloomberg Surveillance coming up after this. 0:18:56.240 --> 0:18:59.800 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:19:00.160 --> 0:19:03.440 day afternoons from seven to ten am Eastern Listen on Apple, 0:19:03.480 --> 0:19:06.800 Karplay and Android Otto with the Bloomberg Business app, or 0:19:06.960 --> 0:19:08.680 watch us live on YouTube. 0:19:09.000 --> 0:19:11.359 It is a perfect time to talk to the gentle 0:19:11.440 --> 0:19:15.440 lady from Texas Danielle di Martino Booth is definitive feeder 0:19:15.480 --> 0:19:19.400 Reserve Bank Texas, working for President Fisher years ago over 0:19:19.480 --> 0:19:23.120 their academics out of the different universities of Texas, She's 0:19:23.240 --> 0:19:26.440 always taken a different tact and I wanted to get 0:19:26.480 --> 0:19:30.399 her on for one simple reason. Danielle, how will Chairman 0:19:30.520 --> 0:19:36.280 worsh be greeted by the presidents not only Boston, Chicago, 0:19:36.680 --> 0:19:41.600 New York, but the fractious crew of Kansas City and Dallas. 0:19:43.320 --> 0:19:45.080 Well, first of all, thank you for having me on 0:19:45.119 --> 0:19:48.320 this morning, Tom, And that's a really good question. We 0:19:48.440 --> 0:19:52.320 have seen a much more hawkish tilt come out of 0:19:52.359 --> 0:19:57.320 the Central Bank district presidents. Lori Logan Bloomberg did a 0:19:57.359 --> 0:19:59.560 great feature on her recently. She's kind of got her 0:19:59.560 --> 0:20:02.000 own mark. It's deest that I started in Dallas. She 0:20:02.160 --> 0:20:04.000 keeps that up and running and she has some very 0:20:04.040 --> 0:20:07.240 definitive ideas about the balance sheet. I think she would 0:20:07.240 --> 0:20:11.399 be of the same mind as a future chairsh We 0:20:11.440 --> 0:20:14.119 need to shrink that balance r right. I think that 0:20:14.160 --> 0:20:16.920 most districts presidents would concur with that. 0:20:17.600 --> 0:20:20.360 The trick will be execution, Tom, you know. 0:20:20.400 --> 0:20:22.359 It's going to be execution. But folks, this is great 0:20:22.400 --> 0:20:24.560 because you know, Paul, we get people on from London. 0:20:24.720 --> 0:20:27.520 Bank of England comes out five to four vote and 0:20:27.560 --> 0:20:31.040 everybody's like, well, well, well, Daniel Di Martino Booth is 0:20:31.040 --> 0:20:33.800 not well, well well, Daniel, are we going to see 0:20:33.840 --> 0:20:37.520 five to four votes? Like the Supreme Court with Chairman. 0:20:37.240 --> 0:20:41.880 Warsh It's entirely feasible. And again it's going to depend 0:20:41.960 --> 0:20:44.399