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Speaker 1: Bloomberg Audio Studios, podcasts, radio news, Crecy.

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Speaker 2: Did you read our newsletter con trips this week? Neil

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Speaker 2: Data and Scanda.

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Speaker 3: It would be terrible if I didn't. Not only did

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Speaker 3: I read them, I lightly edited them.

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Speaker 2: That's right.

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Speaker 1: You did? You did?

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Speaker 3: You did?

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Speaker 2: I think I uploaded the text of them and then

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Speaker 2: you edited them. I did a deadlist.

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Speaker 3: I'm both the most popular trader and most successful trader

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Speaker 3: at citadel.

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Speaker 2: FEA is going viral.

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Speaker 3: H barges.

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Speaker 2: This isn't after school special, except.

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Speaker 3: I've decided I'm going to base my entire personality going

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Speaker 3: forward on campaigning for a strategic pork reserve in the US.

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Speaker 2: Black goals.

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Speaker 3: These are the important questions that robots taking over the world.

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Speaker 2: No, I think that like in a couple of years,

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Speaker 2: the AI will do a really good job of making

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Speaker 2: the out launch podcast. One day that person will have

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Speaker 2: the mandate of Heaven.

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Speaker 3: How do I get more popular and successful?

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Speaker 2: We do have Welcome to lots More, where we catch

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Speaker 2: up with friends about what's going on right now.

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Speaker 3: Because even when odd Thoughts is over, there's always lots more.

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Speaker 2: And we really do have the perfect guest.

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Speaker 3: I have to say, though they were both great, and

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Speaker 3: I'm not just plugging our newsletter. Those were outstanding contributions,

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Speaker 3: and they sort of build on something that Scanda pointed

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Speaker 3: out earlier in the newsletter about how embedded or how

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Speaker 3: important AI is becoming to the US economy.

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Speaker 2: Yeah, and like this idea like there are signs of

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Speaker 2: slowing Oh yeah, I feel like we're in a moment

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Speaker 2: where actually there just aren't really many people talk about

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Speaker 2: the economy because we're either so transfixed by the goings

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Speaker 2: on in Washington or certain big tech stories like AI

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Speaker 2: that were in a period where there's this lull of

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Speaker 2: like just the meat and potatoes, like what's happening with

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Speaker 2: initial claims, what's happening with housing starts, what's happening with

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Speaker 2: the jobs report? And there's actually signs of slowdown?

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Speaker 3: Yeah, and there's also signs well, there's also signs of

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Speaker 3: inflation picking back.

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Speaker 1: Yeah.

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Speaker 3: And so that kind of raises the question about what's

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Speaker 3: the Fed's reaction function here. We thought it was sort

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Speaker 3: of skewed towards preventing a recession a little while ago,

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Speaker 3: but now like maybe they start caring about inflation again.

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Speaker 2: I don't know, But you know the other thing that's

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Speaker 2: happened over the last week is that we have had

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Speaker 2: this pretty substantial drop in ten year yields. As of

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Speaker 2: the time we were recording this, which is March twenty seventh,

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Speaker 2: we touched four point twenty five yesterday. We had been

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Speaker 2: at four point six five on February twelve.

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Speaker 3: So it's like the curve inverted again as well.

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Speaker 2: The curve. It's a weird time, John Turk, what do

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Speaker 2: you think, Why what happened that we were at four

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Speaker 2: point sixty five percent on the ten year February twelve

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Speaker 2: and right now we're at four point two eight eighty six.

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Speaker 4: Yeah, I think it's it's an interesting one.

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Speaker 1: I mean, as you guys kind of noted, I mean,

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Speaker 1: I think we came into this year with a lot

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Speaker 1: of excitement in terms of, you know, what the policy

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Speaker 1: impulse would mean for the economy. It seemed that the

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Speaker 1: animal spirits we're going to lead to a more meaningful

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Speaker 1: real growth impulse. I mean, I think the famous Dan

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Speaker 1: Druckie Miller said in a note or on a TV

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Speaker 1: interview that he hadn't seen the business community that's excited

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Speaker 1: in like his forty years in the business. And you know,

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Speaker 1: I think that We've had a little bit of a

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Speaker 1: transition in like what that policy impulse means and the

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Speaker 1: fact that it seemingly.

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Speaker 4: Is two sided. You know, as we're seeing today.

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Speaker 1: Tariffs are also a big part of that policy impulse,

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Speaker 1: and as we've seen over the last few weeks, it

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Speaker 1: has a very unevenness and too, either both the implementation

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Speaker 1: and the scope. So I think, you know, the market

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Speaker 1: kind of has had to adjust to you know, a

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Speaker 1: policy impulse that seemed to be unambiguously positive to one

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Speaker 1: that's more mixed, and I think the tenure is just

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Speaker 1: you know, kind of a reflection of that. I would

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Speaker 1: also note, as Tracy pointed out about you know, sort

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Speaker 1: of inflation pricing.

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Speaker 4: You know, a lot of the moves, especially.

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Speaker 1: Since the middle of January, is has been in real

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Speaker 1: gyields lower as in tenure break events have actually stayed

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Speaker 1: pretty firm. So you know, I think that the yeah,

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Speaker 1: the economy is having to the market is sort of

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Speaker 1: having to deal with you know, economy that's been a

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Speaker 1: little more confusing, and you know, the policy impulse is

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Speaker 1: is more muddled this time around, where you have you know,

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Speaker 1: the potential for tax custody regulation on one side, and

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Speaker 1: just a lot of tariff uncertainty that is potential in scope,

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Speaker 1: much more drastic than we saw in Trump one point

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Speaker 1: zero ye. So you know, I think that that is,

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Speaker 1: you know, sort of at the nexus of what's going

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Speaker 1: on here. And you know, just to add one more thing,

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Speaker 1: you know, you guys kind of made it up of

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Speaker 1: like the meat and potatoes of the economy. I think

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Speaker 1: that you know, for the last two years, we've been

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Speaker 1: in a very stable nominal GDP regime. It's we've kind

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Speaker 1: of oscillated between high fours and high fives, and you know,

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Speaker 1: the economy seems to be running on a few less

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Speaker 1: cylinders than it has been in the last couple of years.

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Speaker 1: You know, consumption is much more uneven and very biased

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Speaker 1: towards the high end outside of the AI capex cycle

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Speaker 1: really isn't that much capex. And we've seen that housing

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Speaker 1: has been in a lull now for a while, and

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Speaker 1: you know, hiring isn't that high.

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Speaker 4: So it's just a much more, you know, a lot

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Speaker 4: more cross currents.

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Speaker 1: Than I think the market probably had anticipated six weeks ago.

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Speaker 3: So we are recording this on February twenty seventh. In

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Speaker 3: about a week we are going to get us payrolls

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Speaker 3: for February. We just had initial claims, as Joe mentioned,

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Speaker 3: showing that they jump to the highest level so far

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Speaker 3: this year, I think, increasing by twenty two thousand. A

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Speaker 3: lot of that is the cuts in d C. What

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Speaker 3: are you saying on the labor side of things, Yeah,

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Speaker 3: I think that, you.

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Speaker 1: Know, from the labor market perspective, I still think the

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Speaker 1: economy is in a decent equilibrium in terms of that

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Speaker 1: we have a pretty stable unemployment rate, We're still churning

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Speaker 1: out pretty respectable levels of payroll growth per month, and

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Speaker 1: that that's you know, sort of been noted by the

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Speaker 1: Fed now that you know, they're much less worried about

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Speaker 1: the labor market side of their mandate.

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Speaker 4: Than they were saying Q three.

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Speaker 1: You know, but I think what's a little bit worrying

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Speaker 1: is that the labor market is kind of coming into this,

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Speaker 1: you know, whatever the DC impulse is. You know, I

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Speaker 1: would say a little bit more vulnerable to shocks than

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Speaker 1: it's been maybe over the last few years. And I

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Speaker 1: would I would namely say that because the hiring rate

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Speaker 1: is still quite low, which means it doesn't take much

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Speaker 1: in terms of you know, negative payroll impulses to sort

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Speaker 1: of lead to more drastic jumps in the unemployment rate.

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Speaker 1: So you know, I don't necessarily look at it right

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Speaker 1: now and say, you know, there's an obvious threat to

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Speaker 1: three months the labor market being materially weaker than it

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Speaker 1: is now. I still kind of get the sense that

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Speaker 1: it's pretty stable, but I would say that kind we

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Speaker 1: feel a bit more vulnerable given that we don't have

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Speaker 1: the cushion of a decent hiring rate. So probably a

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Speaker 1: bit more vulnerable. You know, if this DC impulse is

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Speaker 1: more of a shock, that could you know, it could

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Speaker 1: spiral a little quicker now than say a year or

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Speaker 1: two ago.

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Speaker 2: I saw someone make this point on Twitter. I wish

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Speaker 2: I could remember who so I could give them credit.

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Speaker 3: He said.

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Speaker 2: One encouraging thing that we've seen lately in the markets

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Speaker 2: is that at long last, there are hints of the

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Speaker 2: inverse correlation between stocks and treasuries re emerging. That was

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Speaker 2: the famous condition of the twenty tens that if stocks

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Speaker 2: went down that day, your treasury is probably did well,

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Speaker 2: and you got that beautiful hedging effect from that. And

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Speaker 2: then it famously blew up in the immediate wake of COVID,

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Speaker 2: where you'd have these big down days in stocks and

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Speaker 2: also big down days and treasuries as inflation took center stage,

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Speaker 2: is the main source of economic worry, et cetera in

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Speaker 2: recent days? Are we potentially looking at signs that we

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Speaker 2: might go back to something resembling more pre COVID patterns

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Speaker 2: And is that a sign that the price on the

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Speaker 2: so called fed put is not so as far out

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Speaker 2: of the money as it had been in recent years.

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Speaker 4: Yeah, it's a good question. I'm not sure, you know.

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Speaker 1: I think that, you know, the simple empirics that have

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Speaker 1: kind of come out is that when core PC is

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Speaker 1: printing below three, you'll get a decent buffer from treasuries

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Speaker 1: in the way of a growth shock that will, you know,

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Speaker 1: cush and get the risk asset side of your portfolio.

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Speaker 4: And when you know.

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Speaker 1: Core PC is above three, you don't have that, and

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Speaker 1: you can their worlds, as we saw in twenty twenty two,

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Speaker 1: you lose. You lose on both. I think that it's

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Speaker 1: it's a little early on in terms of kind of

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Speaker 1: getting a sense for like what the tariff impact on

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Speaker 1: spot inflation is going to be, because you know, I

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Speaker 1: think that what's different to me about this time versus

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Speaker 1: you know, Trump one point zero is the psychology of

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Speaker 1: price stting is totally different.

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Speaker 4: Yeah, and as.

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Speaker 1: We see every Q one, you know, even in an

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Speaker 1: economy that's you know, much more balanced in terms of inflation,

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Speaker 1: where we you know, we've noted that you know, companies

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Speaker 1: don't feel this same ability to pass through price, but

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Speaker 1: we see every Q one the price resets. I've still

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Speaker 1: been pretty strong, especially as its place is now like Canada,

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Speaker 1: who are you know, being inflicted in all this?

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Speaker 4: It seems that you kind of have to keep.

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Speaker 1: An open mind that you know, spot inflation could move

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Speaker 1: a decent amount if the price centers feel that in

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Speaker 1: the post COVID world it's much easier to pass through

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Speaker 1: any pain on their input side to the output side.

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Speaker 1: So I think, from like a base case, I think

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Speaker 1: it's fair to say that, you know, we're not durably

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Speaker 1: going to a core PC plus three world, so that

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Speaker 1: Treasury should sort of.

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Speaker 4: You know, the underlying fundamentals of the sixty forty should

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Speaker 4: be okay.

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Speaker 1: But I wouldn't say it's all you know, it's it's

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Speaker 1: kind of all clear for return to the pre COVID world.

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Speaker 1: We just don't really know yet how price centers are

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Speaker 1: going to internalize this pass through.

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Speaker 3: Yeah, Joe, I remember Tom Barkin over at the Richmond

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Speaker 3: Fed making exactly this point, this idea that one of

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Speaker 3: the things companies learned from the post COVID world was

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Speaker 3: just how fast and perhaps just how far they could

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Speaker 3: push on price. And so that's still lingering in their minds,

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Speaker 3: even if they're not doing it as much as they

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Speaker 3: were back then. So it seems like they could raise

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Speaker 3: them very quickly if they if they saw a jet No.

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Speaker 2: I'm fascinated by that. The reminder that price increases can

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Speaker 2: be part of the corporate playbook is not going to

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Speaker 2: be forgotten. By the way, I should mention John Turik

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Speaker 2: as the founder and CEO of JST Advisors. Been a

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Speaker 2: few years since we had them on. It's nice having

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Speaker 2: them back. Let's talk about the DC impulse. So I

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Speaker 2: think right now, these cuts that we've seen towards federal employment,

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Speaker 2: you know, very few people would say they're going to

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Speaker 2: meaningfully change the dial on you know, deficits, et cetera

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Speaker 2: at this point, but they're real, and there happened, and

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Speaker 2: there's a lot of anxiety and there are a lot

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Speaker 2: of people who are out of a job that never

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Speaker 2: expected to be And there are a lot of stories

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Speaker 2: we saw in a recent there was I think there's

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Speaker 2: the Conference Board survey respondent saying that expectations of fewer

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Speaker 2: jobs existing six months from now that spiked in the

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Speaker 2: survey highest level. Now, I think since like twenty thirteen,

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Speaker 2: talk to us like a little bit about like how

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Speaker 2: you are thinking about the sort of macro impulse from

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Speaker 2: the labor market cutting that's happening in DC.

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Speaker 1: Yeah, I mean I think that, you know, as a

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Speaker 1: as a baseline, you know, it's hard to see that

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Speaker 1: it being a you know, an outsized factor in terms

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Speaker 1: of like kind of the status quo in the labor market.

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Speaker 1: But I think, you know, kind of as I said,

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Speaker 1: I think you have to kind of take it in

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Speaker 1: the context of the hiring rate in the economy is

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Speaker 1: lower now, so I think the labor market as.

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Speaker 4: A whole is more vulnerable to.

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Speaker 1: Things that you know, kind of net net shouldn't be

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Speaker 1: as big of a deal. And I think that's kind

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Speaker 1: of gotten the market's attention as we you know, we've

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Speaker 1: kind of, like you know, over the last few weeks,

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Speaker 1: entertained more left tail risks is that, you know, the

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Speaker 1: starting conditions really matter when you're dealing with exogenous variables,

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Speaker 1: and you know.

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Speaker 4: The starting conditions for the labor market are.

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Speaker 1: You know, it's steady, but it's not bulletproof, and it

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Speaker 1: has been bulletproof, you know, probably for.

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Speaker 4: The last three years, maybe really since COVID.

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Speaker 1: So yeah, I think, you know, it's hard to say,

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Speaker 1: you know, it's hard to map out the sort of

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Speaker 1: the spillover in terms of like you know, what number

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Speaker 1: claims will be in four weeks, But I think you

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Speaker 1: really have to keep an open mind to the left

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Speaker 1: tail side that the starting point isn't great.

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Speaker 2: By the way, Tracy, for people listening who want to

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Speaker 2: understand this sort of why some of the engines that

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Speaker 2: are not that we're growing are not there anymore, I thought,

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Speaker 2: you know, so Neil's more points, real lend coomes aren't

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Speaker 2: rising anymore, the housing market is no longer showing the

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Speaker 2: signs of life. Local government spending is clearly there is

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Speaker 2: a fiscal retrudgment. Clearly it's not just what's happening in DOSE,

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Speaker 2: it's also state and locals which are no longer flush

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Speaker 2: with money. So like they're like, this is when when

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Speaker 2: John here is talking about you know, not as many

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Speaker 2: engines are firing. There's some pretty big forces that sort

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Speaker 2: of give people caution or why the hiring rate is

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Speaker 2: not great right now?

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Speaker 3: Yeah. Absolutely. And John, you brought up earlier the tariffs,

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Speaker 3: and I think some of those are slated to start

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Speaker 3: as soon as next week. How long would you expect

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Speaker 3: it would take for the effects of those to feed

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Speaker 3: into the US economy, either in terms of corporate earnings

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Speaker 3: or the inflation rate.

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Speaker 1: You know. I think the interesting thing about tariffs as

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Speaker 1: opposed to a lot of other policy measures is the

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Speaker 1: impact is like fairly mechanical, so you know it immediately

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Speaker 1: it has its effects impact, It immediately has its you know,

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Speaker 1: direct trade impact. And I think, you know, kind of

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Speaker 1: the deeper questions will be like what are like the

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Speaker 1: broader externalities, because I you know, something that like really

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Speaker 1: fascinated me was Governor maclam gave us a Bank of

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Speaker 1: Bank Bank of Canada gave a speech last week and

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Speaker 1: he was talking about sort of like what these numbers

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Speaker 1: would mean for the Canadian economy, and he was saying, well,

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Speaker 1: you know, they're huge because you know, trade is twenty

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Speaker 1: five percent of the national income in Canada trade with

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Speaker 1: the US.

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Speaker 4: Excuse me?

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Speaker 1: Will that impact because it'll eventually sorts sort of you know,

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Speaker 1: feedback into the US. So, you know, I think that,

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Speaker 1: you know, in terms of the scope, I think that

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Speaker 1: the two things now that are sort of critical are

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Speaker 1: you know, in terms of who eats sort of the

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Speaker 1: cost corporations really you know, take a bigger share or

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Speaker 1: while they try to pass it on, and then I think,

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Speaker 1: you know, sort of the you know, the next the

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Speaker 1: next big dominant will be the question of like what

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Speaker 1: is the bigger impact the mechanical effect on price or

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Speaker 1: the more psychological effect on growth, where it just becomes

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Speaker 1: very hard to operate in an environment where you know,

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Speaker 1: we're a you know, a tweet of away from or

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Speaker 1: sorry whatever platform uses.

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Speaker 4: Now from like a you know, it's very hard to

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Speaker 4: plan in that sort of world.

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Speaker 1: You know, we had two weeks ago we thought we

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Speaker 1: were delayed until April, and then today it comes out

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Speaker 1: that they start next week. You know, I think those

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Speaker 1: are kind of the two like very immediate questions that

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Speaker 1: will get a real feel for, I think pretty quickly,

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Speaker 1: and then you know, kind of zooming out the bigger

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Speaker 1: questions is like how does the global economy absorb this

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Speaker 1: because some of these numbers this time around, and I

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Speaker 1: think it's a big point emphasized, where like a lot

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Speaker 1: of the tariffs last time, we're really focused on China

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Speaker 1: and substitution effects like kicked in pretty quickly, and also

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Speaker 1: the companies had.

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Speaker 4: Time to sort of digest that this was coming. Where

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Speaker 4: this time around, both.

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Speaker 1: In terms of scope and who it's applicable to, seems

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Speaker 1: much more vast.

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Speaker 4: So you know, I think that will be uh, really crucial.

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Speaker 2: To watch Tracy. Something I've been thinking about a lot

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Speaker 2: is that if you want to find like the sort

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Speaker 2: of first of all, admire the fact that Trump still

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Speaker 2: pushed primarily primarily to truth. So even though Twitter is

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Speaker 2: sort of the spiritual home of trump Ism is on Twitter.

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Speaker 2: So the fact that he's sticking the truth social I

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Speaker 2: sort of admire.

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Speaker 3: Do you think talks to him wondering.

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Speaker 2: Like what does Elon think about this, that he's still

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Speaker 2: holding out on truth social anyway? You know, I always think, like,

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Speaker 2: you know, there's sort of like a core pillar of

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Speaker 2: the sort of Trump coalition in the United States is

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Speaker 2: like small business owners and small business optimism. You know,

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Speaker 2: it's been through the roof since the election, but they

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Speaker 2: don't like tariffs by and large. And if you look

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Speaker 2: at any regional business survey, et cetera, you'll find a

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Speaker 2: lot of clearly politically inclined respondents who are excited about

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Speaker 2: the Trump administration and then say, but we're worried about trade.

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Speaker 2: And I'm actually, for the first time, especially assuming these

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Speaker 2: tariffs go into effact, extremely excited about the headline numbers

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Speaker 2: of the FIB survey in the coming months. So you

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Speaker 2: have this core Republican constituency which is totally on board

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Speaker 2: generally with everything except tariffs. I think that's gonna be

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Speaker 2: something interesting.

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Speaker 3: You know, It's going to be really interesting to see

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Speaker 3: whether I guess political allegiance trumps some of the feelings

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Speaker 3: around business effects. Ooh, I said Trump's there's a pun

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Speaker 3: for you.

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Speaker 2: It's crazy his name is Trump. Sorry, I always think, like,

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Speaker 2: what an amazing appam anyway, I mean, you owned the

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Speaker 2: casino and his name is Trump. I know this has

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Speaker 2: been observed hundreds of times, but it still always blows

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Speaker 2: my mind.

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Speaker 3: Thank you Joe for reminding us.

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Speaker 2: It's his real name that blows my mind all the time.

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Speaker 3: Lots more is produced by Carmen Rodriguez and dash Ell Bennett,

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Speaker 3: with help from Moses Ondom and Cal Brooks.

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Speaker 2: Our sound engineer is Blake Maples. Sage Bauman is the

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Speaker 2: head of Bloomberg Podcasts.

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