1 00:00:03,240 --> 00:00:07,560 Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg Radio. 2 00:00:08,400 --> 00:00:11,080 Speaker 1: Welcome to the podcast. This is Barry Ridholts and this 3 00:00:11,119 --> 00:00:14,440 Speaker 1: week I am thrilled to have a friend as a guest. 4 00:00:14,560 --> 00:00:18,200 Speaker 1: His name is Laxman Arthur Sean. He is the head 5 00:00:18,800 --> 00:00:23,960 Speaker 1: of the Economic Cycle Research Institute, better known as Eckery. 6 00:00:24,000 --> 00:00:28,560 Speaker 1: They're the group that helps to date recessions all around 7 00:00:28,600 --> 00:00:32,400 Speaker 1: the world, as well as running their own analytics shop. 8 00:00:33,159 --> 00:00:39,240 Speaker 1: Up until recently, they've had a literally flawless track record. 9 00:00:39,360 --> 00:00:41,959 Speaker 1: Not a lot of people in economics can say that 10 00:00:42,800 --> 00:00:45,240 Speaker 1: at some point over the past few years they thought 11 00:00:45,320 --> 00:00:49,199 Speaker 1: we were at risk of an imminent recession, and what 12 00:00:49,360 --> 00:00:53,280 Speaker 1: ended up happening is QUEI either three or four came 13 00:00:53,320 --> 00:00:56,840 Speaker 1: along and that pretty much avoided what they thought was 14 00:00:56,880 --> 00:00:59,920 Speaker 1: the next recession. There was a big New York Time 15 00:01:00,360 --> 00:01:05,720 Speaker 1: piece about them a few years ago, which traditionally is 16 00:01:05,760 --> 00:01:09,319 Speaker 1: the kiss of death. To quote our guests from a 17 00:01:09,360 --> 00:01:12,920 Speaker 1: month ago, Paul Krugman. He who the gods wished to 18 00:01:13,000 --> 00:01:16,280 Speaker 1: destroy they first put on the cover of Business Week. 19 00:01:16,400 --> 00:01:23,000 Speaker 1: So perhaps a deep New York Times profile is roughly 20 00:01:23,120 --> 00:01:25,840 Speaker 1: the equivalent of that. I find him to be a 21 00:01:25,840 --> 00:01:29,800 Speaker 1: really interesting guy. I've known him for quite a number 22 00:01:29,840 --> 00:01:33,920 Speaker 1: of years. Our offices used to be literally block away 23 00:01:33,959 --> 00:01:36,000 Speaker 1: from each other. We would go to lunch pretty regularly 24 00:01:36,000 --> 00:01:38,880 Speaker 1: and chat about what was going on during the Great 25 00:01:38,920 --> 00:01:43,360 Speaker 1: Financial Crisis, what we both thought should happen, why what 26 00:01:43,400 --> 00:01:46,039 Speaker 1: the government was doing was either good or bad, or 27 00:01:46,160 --> 00:01:49,200 Speaker 1: might help or might not help, and just a really 28 00:01:49,200 --> 00:01:54,920 Speaker 1: really interesting guy, very data driven, sticks to his guns. 29 00:01:55,520 --> 00:01:59,240 Speaker 1: This is somewhat of an unusual period in time, and 30 00:01:59,280 --> 00:02:02,720 Speaker 1: I think that at the reason they saw a recession 31 00:02:02,760 --> 00:02:06,440 Speaker 1: coming and it didn't happen was I don't believe their 32 00:02:06,480 --> 00:02:10,919 Speaker 1: model fully incorporates the impact of what Qui was actually doing. 33 00:02:10,960 --> 00:02:14,160 Speaker 1: It was relatively unprecedented at the time. It's hard to 34 00:02:14,160 --> 00:02:17,400 Speaker 1: build that into a model. You know, invaders come from Mars. 35 00:02:17,720 --> 00:02:20,440 Speaker 1: What does that do to your your holiday spending forecast? 36 00:02:20,800 --> 00:02:22,720 Speaker 1: And the answer is it throws it off a bit. 37 00:02:23,160 --> 00:02:26,160 Speaker 1: That's that's their view of quantitative easing and what it 38 00:02:26,200 --> 00:02:29,799 Speaker 1: did to the model. But generally speaking, they're really insightful. 39 00:02:29,840 --> 00:02:33,880 Speaker 1: They're leading Economic index is excellent. It's done a really 40 00:02:33,880 --> 00:02:38,920 Speaker 1: good job about describing when the economy is actually getting 41 00:02:39,000 --> 00:02:41,960 Speaker 1: better or worse. Doesn't have to be a full blown recession. 42 00:02:42,040 --> 00:02:46,120 Speaker 1: Or a full blown robust expansion. They just have a 43 00:02:46,280 --> 00:02:48,840 Speaker 1: nice set of metrics, and I find him to be 44 00:02:48,880 --> 00:02:53,320 Speaker 1: a really interesting guy who a lot of this subject 45 00:02:53,360 --> 00:02:56,400 Speaker 1: matter can get really wonky, can get really deep, but 46 00:02:56,919 --> 00:03:01,080 Speaker 1: he does a lovely job explaining in planing lish all 47 00:03:01,120 --> 00:03:03,720 Speaker 1: the things that are going on in the economy, what 48 00:03:03,880 --> 00:03:07,240 Speaker 1: we need to be aware of, what the relationship for 49 00:03:07,360 --> 00:03:10,960 Speaker 1: you traders out there, what the relationship between the economy 50 00:03:10,960 --> 00:03:14,400 Speaker 1: and the market is. It's really not what everybody thinks 51 00:03:14,440 --> 00:03:18,079 Speaker 1: it is. It's a much shorter leading indicator, and very 52 00:03:18,120 --> 00:03:23,280 Speaker 1: often by the time a recession is over, the market 53 00:03:23,280 --> 00:03:27,280 Speaker 1: has already moved forward and is positive. It's it's quite fascinating, 54 00:03:27,720 --> 00:03:30,680 Speaker 1: uh to look at that relationship and how different it 55 00:03:30,760 --> 00:03:35,440 Speaker 1: is from lots of our expectations. I really enjoy his 56 00:03:35,440 --> 00:03:39,480 Speaker 1: his discussions on what's been going around globally. They have 57 00:03:39,600 --> 00:03:43,120 Speaker 1: a really huge database. They provide a lot of information 58 00:03:43,200 --> 00:03:48,440 Speaker 1: to corporate America, to multinational companies, and to governments around 59 00:03:48,440 --> 00:03:51,800 Speaker 1: the world. They're really a key player in econometric data. 60 00:03:52,200 --> 00:03:57,360 Speaker 1: Without any further ado, here's my conversation with Lachman A. Shan. 61 00:04:00,680 --> 00:04:03,800 Speaker 1: This is Masters in Business with Barry rid holts On 62 00:04:03,960 --> 00:04:07,800 Speaker 1: Bloomberg Radio. I'm pleased to bring a friend of mine 63 00:04:08,360 --> 00:04:12,440 Speaker 1: on the show. You probably, if you follow economic data, 64 00:04:12,880 --> 00:04:16,680 Speaker 1: have heard of him and his company, or you might 65 00:04:16,680 --> 00:04:20,200 Speaker 1: have seen him in somewhere in the financial circuit um. 66 00:04:20,240 --> 00:04:22,800 Speaker 1: He's really a fascinating guy, into some fascinating work, and 67 00:04:22,800 --> 00:04:25,320 Speaker 1: I think you're gonna enjoy this. Welcome to the show, 68 00:04:26,040 --> 00:04:31,920 Speaker 1: Laxman than of the Economic Cycle Research Institute, better known 69 00:04:32,080 --> 00:04:36,160 Speaker 1: as Eckery. You got it what well? Well said? Well pronounced? 70 00:04:36,640 --> 00:04:40,760 Speaker 1: I know some mouthful Listen. I've spent my whole childhood 71 00:04:40,800 --> 00:04:45,000 Speaker 1: having people RILs, so I always try and get people's 72 00:04:45,080 --> 00:04:48,200 Speaker 1: names more or less close. There you go, there you go. 73 00:04:48,240 --> 00:04:49,800 Speaker 1: Well it's well, you know, thanks a lot for having 74 00:04:49,800 --> 00:04:52,320 Speaker 1: me on. I'm looking forward to the conversation. So I 75 00:04:52,360 --> 00:04:55,560 Speaker 1: think the first place that a member of the public 76 00:04:55,720 --> 00:05:00,680 Speaker 1: might have become familiar with you was this fantastic profile 77 00:05:01,320 --> 00:05:05,240 Speaker 1: that the New York Times did of you, um about 78 00:05:05,240 --> 00:05:10,160 Speaker 1: two years ago. Is that about right eleven something like somewhere. 79 00:05:10,040 --> 00:05:15,360 Speaker 1: They couldn't have been more complimentary, they couldn't have been nicer. 80 00:05:16,120 --> 00:05:18,719 Speaker 1: And some people call that the kiss of death. And 81 00:05:18,760 --> 00:05:22,400 Speaker 1: as they do that, you're marked. The famous Paul Krugman 82 00:05:22,520 --> 00:05:27,480 Speaker 1: quote from Business Week is whom he whom the gods 83 00:05:27,520 --> 00:05:29,760 Speaker 1: seek to destroy, they first put on the cover of 84 00:05:29,800 --> 00:05:34,360 Speaker 1: Business Week. So this is a version of that um. 85 00:05:34,400 --> 00:05:37,719 Speaker 1: But what the Times mentioned that was so fascinating is, 86 00:05:38,440 --> 00:05:43,360 Speaker 1: unlike the traditional economists out there, the way your firm 87 00:05:43,440 --> 00:05:50,960 Speaker 1: looks at the economy anticipates recessions, intictrates recovery. Not only 88 00:05:51,040 --> 00:05:54,279 Speaker 1: is it a very different approach, it has a vastly 89 00:05:55,279 --> 00:06:01,880 Speaker 1: superior track record. And essentially you're study is of the 90 00:06:01,920 --> 00:06:06,200 Speaker 1: business cycle, hence the name economic cycle. Yeah, so tell 91 00:06:06,279 --> 00:06:08,760 Speaker 1: us a little bit about what your farm does. That's 92 00:06:08,920 --> 00:06:14,679 Speaker 1: we study recessions and recoveries. Okay, so that's what I've 93 00:06:14,800 --> 00:06:19,240 Speaker 1: done for all of my professional career. I started in 94 00:06:19,279 --> 00:06:30,039 Speaker 1: the nineteen with ression, right, a fairly mis um. People 95 00:06:30,040 --> 00:06:32,440 Speaker 1: were a little freaked out back then. Remember Japan was 96 00:06:32,440 --> 00:06:35,159 Speaker 1: going to take over the world and they bought thirty 97 00:06:35,240 --> 00:06:37,880 Speaker 1: Rockefeller Center. They bought and that was it. They're gonna 98 00:06:37,880 --> 00:06:39,960 Speaker 1: buy the United States and move it back to town. Yeah. 99 00:06:39,960 --> 00:06:44,600 Speaker 1: Bill Clinton won the that presidential election with its the 100 00:06:44,640 --> 00:06:48,560 Speaker 1: economy stupid, even though the recovery was starting, had already begun, 101 00:06:48,640 --> 00:06:52,360 Speaker 1: but are was so anemic. That's where that double dip 102 00:06:52,440 --> 00:06:56,200 Speaker 1: recession talk first game and all of that, and um, 103 00:06:56,240 --> 00:06:59,719 Speaker 1: that's that's where I kind of broke my teeth on 104 00:07:00,560 --> 00:07:03,159 Speaker 1: looking at recessions and recoveries with Jeffrey Moore up at 105 00:07:03,160 --> 00:07:06,920 Speaker 1: Columbia University. So let's talk for a moment about Jeffrey Moore, 106 00:07:06,960 --> 00:07:10,000 Speaker 1: because I think most people know the name for a 107 00:07:10,040 --> 00:07:13,320 Speaker 1: different Jeffrey guy who wrote the book Crossing the Chasm. 108 00:07:13,840 --> 00:07:18,800 Speaker 1: This is not that. This is Jeffrey Jeffrey Simore. So 109 00:07:19,760 --> 00:07:23,600 Speaker 1: I love some of the stuff about about his bio. First, 110 00:07:24,040 --> 00:07:26,360 Speaker 1: he essentially is the guy who I don't know if 111 00:07:26,360 --> 00:07:30,280 Speaker 1: you want to use the word discover or invented, invented 112 00:07:30,920 --> 00:07:33,720 Speaker 1: the idea of leading economic indicator right right. The Wall 113 00:07:33,720 --> 00:07:38,120 Speaker 1: Street Journal called him uh the father of leading indicators. 114 00:07:38,120 --> 00:07:41,840 Speaker 1: And to put it in perspective, Dr Moore UH was 115 00:07:41,960 --> 00:07:46,160 Speaker 1: the protege of Wesley Mitchell and Arthur Burns, earlier business 116 00:07:46,200 --> 00:07:49,360 Speaker 1: cycle researchers. Wesley Mitchell Burns eventually became Fed CHAMPI kam 117 00:07:49,400 --> 00:07:52,360 Speaker 1: fed chairman under Nixon in the nixt administration. Now, um, 118 00:07:52,400 --> 00:07:55,920 Speaker 1: but earlier Wesley Mitchell UH in the early part of 119 00:07:55,920 --> 00:07:59,400 Speaker 1: the last century. UH in the twenties helped to form 120 00:07:59,440 --> 00:08:02,000 Speaker 1: the National euro of Economic Research, and this is where 121 00:08:02,120 --> 00:08:05,480 Speaker 1: so known as the nb ER, which is the organization 122 00:08:05,600 --> 00:08:10,240 Speaker 1: that currently has a committee that officially dates dates the 123 00:08:10,280 --> 00:08:13,040 Speaker 1: beginning and end of recessions. But it always wasn't always 124 00:08:13,040 --> 00:08:15,440 Speaker 1: a committee, wasn't. No, no is Dr Moore. He he 125 00:08:15,560 --> 00:08:18,640 Speaker 1: used to say, he'd quipped that he would have lunch 126 00:08:18,680 --> 00:08:21,440 Speaker 1: with himself. I've a meeting with himself over lunch and 127 00:08:22,000 --> 00:08:24,520 Speaker 1: decide the dates. And so he's literally the guy who, 128 00:08:24,560 --> 00:08:30,240 Speaker 1: prior to the current incarnation of the NBR officially I said, 129 00:08:30,680 --> 00:08:32,640 Speaker 1: this is a recession. It began here in an end 130 00:08:32,679 --> 00:08:35,360 Speaker 1: of their correct Like, that's a lot of power. And yeah, 131 00:08:35,480 --> 00:08:37,600 Speaker 1: the shaded areas on your charts, when did they start 132 00:08:37,640 --> 00:08:41,880 Speaker 1: an end? Dr Moore picked him all until set them right. 133 00:08:41,960 --> 00:08:46,640 Speaker 1: So it's so so Mitchell figured out what was a 134 00:08:46,679 --> 00:08:50,560 Speaker 1: business cycle and that was a huge thing to figure out, 135 00:08:50,640 --> 00:08:54,880 Speaker 1: huge insight, huge insight. He started to do work UM 136 00:08:55,040 --> 00:08:58,640 Speaker 1: when More was working under him on leading indicators of 137 00:08:58,920 --> 00:09:03,280 Speaker 1: revivals because there were a lot of depressions and More 138 00:09:03,320 --> 00:09:07,280 Speaker 1: after Um World War two took up that work again 139 00:09:07,440 --> 00:09:11,800 Speaker 1: and refined it to leading indicators of revival and recession. 140 00:09:12,400 --> 00:09:15,040 Speaker 1: That's your first set of leading indicators. He worked with 141 00:09:15,080 --> 00:09:18,240 Speaker 1: a man named Julius Shiskin at the Commerce Department to 142 00:09:18,400 --> 00:09:21,600 Speaker 1: invent the idea of the statistics for a composite index. 143 00:09:22,120 --> 00:09:25,200 Speaker 1: They put the leading indicators in the composite index together, 144 00:09:25,360 --> 00:09:31,040 Speaker 1: those two ideas, and there's your original index of leading 145 00:09:31,040 --> 00:09:34,440 Speaker 1: economic Indicators, which they then gave to the Commerce Department. Fascinating. 146 00:09:34,480 --> 00:09:40,160 Speaker 1: We're talking with Lakshman than of Eckery about basically the 147 00:09:40,280 --> 00:09:45,160 Speaker 1: history of dating recessions, both of those so from nineteen 148 00:09:45,280 --> 00:09:51,200 Speaker 1: forty nine for the post war period up until it's 149 00:09:51,320 --> 00:09:55,200 Speaker 1: it's Dr Moore. After that they put in he retired. 150 00:09:55,480 --> 00:09:57,400 Speaker 1: He retires and he's head of the committee, the Business 151 00:09:57,400 --> 00:09:59,679 Speaker 1: Cycle Dating Committee. So how do you start working with 152 00:09:59,760 --> 00:10:02,920 Speaker 1: Doc to more UH? He when he retires from the 153 00:10:03,000 --> 00:10:08,160 Speaker 1: National Bureau UH where he was director, he starts forecasting 154 00:10:09,160 --> 00:10:12,439 Speaker 1: and he and he creates a research firm called the 155 00:10:12,480 --> 00:10:17,120 Speaker 1: Center for International Business Cycle Research, which originally was at 156 00:10:17,160 --> 00:10:20,600 Speaker 1: Rutgers and it moved very quickly over to UH Columbia 157 00:10:20,679 --> 00:10:24,320 Speaker 1: Business School, where Mitchell and Burns had also taught, and 158 00:10:24,600 --> 00:10:26,719 Speaker 1: that's where it was housed from the early eighties through 159 00:10:26,720 --> 00:10:29,240 Speaker 1: the mid nineties. And I began working with Dr Moore. 160 00:10:31,000 --> 00:10:35,080 Speaker 1: Right there, Let's let's make this really simple. Let's break 161 00:10:35,120 --> 00:10:40,760 Speaker 1: this down. What exactly is a recession? No, recession is 162 00:10:40,800 --> 00:10:45,000 Speaker 1: really at the heart of how a market economy works, 163 00:10:45,200 --> 00:10:49,800 Speaker 1: where it alternates between up swings and down swings and growth, 164 00:10:49,880 --> 00:10:53,640 Speaker 1: and some of those down swings, uh turn into recessions. 165 00:10:53,640 --> 00:10:57,280 Speaker 1: You actually contract and in other words, when the economy 166 00:10:57,400 --> 00:11:00,960 Speaker 1: is no longer growing, no longer flat, is actually getting 167 00:11:01,000 --> 00:11:02,920 Speaker 1: small and actually shrinking. So you might you might have 168 00:11:02,960 --> 00:11:05,520 Speaker 1: the overall economy expand three percent, and then it will 169 00:11:05,600 --> 00:11:09,360 Speaker 1: slow to two percent or one percent and hopefully re accelerate. 170 00:11:09,400 --> 00:11:12,400 Speaker 1: And sometimes it does, sometimes it doesn't, and sometimes you know, 171 00:11:12,440 --> 00:11:14,360 Speaker 1: in the in the recessions, it goes negative. Now I've 172 00:11:14,360 --> 00:11:17,160 Speaker 1: heard you give a very specific I don't want to 173 00:11:17,200 --> 00:11:21,960 Speaker 1: call it technical definition, but really your your textbook definition. 174 00:11:22,080 --> 00:11:24,079 Speaker 1: Describe what that is. Well, this is going back to 175 00:11:24,280 --> 00:11:27,680 Speaker 1: generations Zachary's the third generation of this research, going back 176 00:11:27,720 --> 00:11:31,640 Speaker 1: to Wesley Mitchell who helped to find what a recession is. 177 00:11:31,640 --> 00:11:39,319 Speaker 1: It's a pronounced, pervasive and persistent decline in output, employment, income, 178 00:11:39,840 --> 00:11:43,839 Speaker 1: and sales. So when you say pronounced, persistent and pervasive, 179 00:11:44,320 --> 00:11:49,280 Speaker 1: pronounced means it's significant, it's noticeable, persistent. Is it last 180 00:11:49,520 --> 00:11:52,400 Speaker 1: for a while. It has to last really about two 181 00:11:52,480 --> 00:11:55,959 Speaker 1: quarters at least. And pervasive is it's in most, if 182 00:11:55,960 --> 00:11:57,920 Speaker 1: not all, corners of the right. It can't just be 183 00:11:58,400 --> 00:12:00,400 Speaker 1: something hitting one spot of the accoun on me. It's 184 00:12:00,400 --> 00:12:03,560 Speaker 1: going to spread across and kind of infect So you 185 00:12:03,679 --> 00:12:07,160 Speaker 1: so cycles. You can have a vicious cycle, which is 186 00:12:07,280 --> 00:12:10,920 Speaker 1: a recession. It's snowballs, you know, because if let's say 187 00:12:11,200 --> 00:12:13,559 Speaker 1: production goes down, employment goes down, the income goes down, 188 00:12:13,640 --> 00:12:15,400 Speaker 1: you can't buy that much. Sales go down and that 189 00:12:15,480 --> 00:12:18,840 Speaker 1: kicks production down. So that's paradox of thrift. You get this. 190 00:12:19,200 --> 00:12:22,120 Speaker 1: My saving is otherwise would be your income. So if 191 00:12:22,120 --> 00:12:24,560 Speaker 1: I stop spending, you got it. Suddenly we have and 192 00:12:24,600 --> 00:12:27,679 Speaker 1: once everybody puts their while it's away, we get a 193 00:12:28,640 --> 00:12:31,400 Speaker 1: vicious The vicious cycle. Now that can also turn virtuous 194 00:12:31,400 --> 00:12:34,440 Speaker 1: and at times that you don't expect, like in two 195 00:12:34,440 --> 00:12:37,280 Speaker 1: thousand and nine, uh, where it kind of runs its 196 00:12:37,400 --> 00:12:41,280 Speaker 1: course to the downside fever breaks, and the fever breaks 197 00:12:41,360 --> 00:12:44,680 Speaker 1: you have some pent up demand. Uh, and you can 198 00:12:44,760 --> 00:12:48,720 Speaker 1: actually see it the vicious cycle turned virtuous where an 199 00:12:48,840 --> 00:12:54,520 Speaker 1: unexpected kind of sales leads to catches production is short, 200 00:12:54,760 --> 00:12:56,760 Speaker 1: and then you have to gear up and higher and 201 00:12:56,760 --> 00:12:59,280 Speaker 1: incomes and then you can work. You suddenly have a 202 00:12:59,320 --> 00:13:02,319 Speaker 1: virtual cycle. So the business cycle in a free market. 203 00:13:02,360 --> 00:13:06,320 Speaker 1: This is in every free market. As you've seen uh 204 00:13:06,520 --> 00:13:11,880 Speaker 1: formally planned economies like India or China loosen up and 205 00:13:11,960 --> 00:13:16,119 Speaker 1: become more free market oriented, you're seeing those cycles present themselves, 206 00:13:16,600 --> 00:13:18,760 Speaker 1: uh in a in a in a more traditional way 207 00:13:18,840 --> 00:13:21,040 Speaker 1: as we've seen in the developed world, and we're certainly 208 00:13:21,040 --> 00:13:24,400 Speaker 1: seeing that in China these days. That they're formally to 209 00:13:24,640 --> 00:13:28,200 Speaker 1: a double digit growth rate is now five or six percent, 210 00:13:28,280 --> 00:13:30,880 Speaker 1: which would be great in the United States, but their 211 00:13:30,920 --> 00:13:33,800 Speaker 1: economy is what half a third of our kind, it's 212 00:13:33,840 --> 00:13:37,480 Speaker 1: really much smaller on an absolute basis. You'll have you'll 213 00:13:37,520 --> 00:13:39,640 Speaker 1: have the you'll have these economies, and especially in the 214 00:13:39,640 --> 00:13:43,080 Speaker 1: post World War two period Western Europe, Japan, where they 215 00:13:43,080 --> 00:13:45,760 Speaker 1: get very high trend growth because they're rebuilding in all 216 00:13:45,800 --> 00:13:49,280 Speaker 1: of these things, and so they'll still have cycles in growth, 217 00:13:49,920 --> 00:13:52,280 Speaker 1: but it will be around a higher trend. What we're 218 00:13:52,280 --> 00:13:57,920 Speaker 1: seeing now, which is quite interesting from the cyclical bantage 219 00:13:57,920 --> 00:14:01,560 Speaker 1: point for that cyclical framework, is that the developed economies, 220 00:14:01,559 --> 00:14:06,840 Speaker 1: their trend growth is so low that the cycle, which 221 00:14:06,920 --> 00:14:09,679 Speaker 1: is endogenous. It's part of how a free market works. 222 00:14:10,360 --> 00:14:13,200 Speaker 1: Each downturn you have an easier chance to go negative. 223 00:14:13,360 --> 00:14:16,200 Speaker 1: So let's that brings up a really fascinating point. What 224 00:14:16,440 --> 00:14:20,320 Speaker 1: is it that actually causes a recession? And I want 225 00:14:20,360 --> 00:14:23,160 Speaker 1: to put that into a little context. I've been hearing 226 00:14:23,200 --> 00:14:26,720 Speaker 1: people for the past three years four years say, hey, 227 00:14:26,760 --> 00:14:29,720 Speaker 1: where at stoll speed? Like as if there's an airplane 228 00:14:29,720 --> 00:14:32,360 Speaker 1: and I engine slows down a little more, you lose 229 00:14:32,400 --> 00:14:35,440 Speaker 1: list and you crash. Where it's stall speed? Where risk 230 00:14:35,480 --> 00:14:40,200 Speaker 1: of recession? How come some slowdowns never really turned the 231 00:14:40,240 --> 00:14:45,680 Speaker 1: recession and other slowdowns there's some sort of external shocks 232 00:14:45,680 --> 00:14:48,720 Speaker 1: some economies, weather and others. It's like a drum that 233 00:14:48,920 --> 00:14:50,920 Speaker 1: caused them to tip over great point, and I think 234 00:14:52,200 --> 00:14:54,840 Speaker 1: it's really the reason we exist. I mean and and 235 00:14:55,280 --> 00:14:58,440 Speaker 1: I want to contrast it a bit with more mainstream economics. 236 00:14:58,520 --> 00:15:01,240 Speaker 1: But but first let me answer your question directly. A 237 00:15:01,360 --> 00:15:05,320 Speaker 1: key finding of generations of work. I'm talking decades of 238 00:15:05,320 --> 00:15:09,200 Speaker 1: work where the third generation now is that recession is 239 00:15:09,240 --> 00:15:12,880 Speaker 1: not simply caused by an external shock, you know, like 240 00:15:12,920 --> 00:15:16,040 Speaker 1: an oil shock or the FED did something or whatever. 241 00:15:16,200 --> 00:15:19,280 Speaker 1: Sometimes those things happen and there's no, even though some 242 00:15:19,280 --> 00:15:22,800 Speaker 1: of these are really big external shocks like Katrina. Katrina 243 00:15:22,840 --> 00:15:29,680 Speaker 1: could have been but recession because the recession our research shows, 244 00:15:29,680 --> 00:15:32,240 Speaker 1: and this is I'm looking over a lot of time, 245 00:15:32,440 --> 00:15:35,920 Speaker 1: many centuries, almost a century in some cases, and many 246 00:15:35,960 --> 00:15:38,440 Speaker 1: different economies around the world, and what we find is 247 00:15:38,760 --> 00:15:42,640 Speaker 1: the free market has this indog in, this cyclicality to 248 00:15:42,720 --> 00:15:46,160 Speaker 1: it where it wants to accelerates and decelerates. Now that's 249 00:15:46,920 --> 00:15:51,200 Speaker 1: going on. That's the nature of a free market at 250 00:15:51,240 --> 00:15:55,280 Speaker 1: its very essence. Now, shocks are always happening. If a 251 00:15:55,320 --> 00:16:00,680 Speaker 1: shock occurs when there's a cycle downturn, the vulnerability is there. 252 00:16:00,680 --> 00:16:03,360 Speaker 1: When when we when we have this the leading indicators 253 00:16:03,400 --> 00:16:05,920 Speaker 1: of the indicators of the cycle turning down, we like 254 00:16:06,000 --> 00:16:09,240 Speaker 1: to we describe it as a window of vulnerability opening. 255 00:16:09,760 --> 00:16:13,560 Speaker 1: And at that time, if there's a shock, very easy 256 00:16:13,640 --> 00:16:17,240 Speaker 1: for it to be recessionary more vulnerable, that more vulnerable. 257 00:16:17,280 --> 00:16:19,400 Speaker 1: It's like you have your compromise immune system and if 258 00:16:19,400 --> 00:16:21,320 Speaker 1: there's a shock boom, you're in trouble. On the other hand, 259 00:16:21,320 --> 00:16:24,280 Speaker 1: if you're in an upswing and you have a shock, 260 00:16:24,360 --> 00:16:27,280 Speaker 1: for example, uh Pearl Harbor, we had a big upswing 261 00:16:27,320 --> 00:16:30,000 Speaker 1: going on in the indicators and it's pretty massive shock. 262 00:16:31,320 --> 00:16:34,160 Speaker 1: But the nine eleven of its day just even in 263 00:16:34,200 --> 00:16:36,640 Speaker 1: some ways, it's bigger, right in some ways, and and 264 00:16:36,640 --> 00:16:38,960 Speaker 1: and and but definitely a nine eleven of its day 265 00:16:38,960 --> 00:16:41,800 Speaker 1: and and boom economy cruises right through it. And people 266 00:16:41,840 --> 00:16:46,800 Speaker 1: tend to associate recessions with the nearby shock. Nine eleven 267 00:16:46,840 --> 00:16:49,520 Speaker 1: is a great example that occurred half a year after 268 00:16:49,560 --> 00:16:52,640 Speaker 1: the recession was underway. The recession was a month or 269 00:16:52,640 --> 00:16:55,280 Speaker 1: two away from ending. Yeah, that much closer to the end. 270 00:16:55,400 --> 00:16:59,840 Speaker 1: But but everybody, you know, immediately their muscle memory brings 271 00:16:59,840 --> 00:17:03,240 Speaker 1: you to nine eleven and that recession. And I constantly 272 00:17:03,280 --> 00:17:06,320 Speaker 1: A'm saying to people, how can nine eleven in September 273 00:17:06,359 --> 00:17:09,040 Speaker 1: have caused a recession that began the previous March? Correct? 274 00:17:09,200 --> 00:17:11,520 Speaker 1: Correct in the same thing with Lehman, that's eight months 275 00:17:11,560 --> 00:17:14,760 Speaker 1: after the recession began, for example, That's right. So that's 276 00:17:15,160 --> 00:17:18,800 Speaker 1: let's talk about that September two thousand and eight. And 277 00:17:18,840 --> 00:17:22,480 Speaker 1: the recession was dated December two thousand and seven, two 278 00:17:22,480 --> 00:17:25,320 Speaker 1: thousand seven. So by the time Lehman and then A. I. G. 279 00:17:25,520 --> 00:17:29,760 Speaker 1: And everything else came along, we were already You're very vulnerable, right, 280 00:17:29,800 --> 00:17:32,240 Speaker 1: You're at a place where you're that's eight nine months. 281 00:17:32,880 --> 00:17:36,760 Speaker 1: So the way so from our again, from our fairly 282 00:17:36,840 --> 00:17:39,480 Speaker 1: unique perspective, right, and not a lot of people talk 283 00:17:39,560 --> 00:17:42,560 Speaker 1: from a from a cycle perspective, but from that perspective, 284 00:17:42,920 --> 00:17:45,560 Speaker 1: we're in this cyclical downturn already and then you have 285 00:17:45,800 --> 00:17:49,000 Speaker 1: a huge financial shock and it makes a bad recession, 286 00:17:49,480 --> 00:17:53,320 Speaker 1: the Great Recession. Today, I've been speaking with Lakshman, Arthur 287 00:17:53,400 --> 00:17:57,520 Speaker 1: Sean and and discussing various ways of looking at business 288 00:17:57,560 --> 00:18:03,000 Speaker 1: cycles and recessions, and obviously Bloomberg being a financial channel. 289 00:18:03,040 --> 00:18:06,359 Speaker 1: One of the questions that everyone wants to know, what's 290 00:18:06,440 --> 00:18:09,960 Speaker 1: the relationship between the stock market and the economy and 291 00:18:10,119 --> 00:18:13,679 Speaker 1: how to recessions fit into that site. Sure, well, I 292 00:18:13,720 --> 00:18:17,359 Speaker 1: mean stocks are key, key, key metrics in a free 293 00:18:17,359 --> 00:18:20,760 Speaker 1: market economy, right, It's all about what these equities are 294 00:18:20,760 --> 00:18:23,359 Speaker 1: worth in some sense, and in these market prices. So 295 00:18:23,480 --> 00:18:27,280 Speaker 1: market prices are UH an area you can go to 296 00:18:27,720 --> 00:18:30,960 Speaker 1: UH to see where you are in the cycle. Sometimes 297 00:18:30,960 --> 00:18:34,240 Speaker 1: are coincidence, sometimes they're leading. The stock prices are a 298 00:18:34,359 --> 00:18:37,280 Speaker 1: short leading indicator of the economy. They are part of 299 00:18:37,359 --> 00:18:41,240 Speaker 1: the original indicators that more developed back in the late 300 00:18:41,320 --> 00:18:44,320 Speaker 1: fifties and um, as I said, they they're they're a 301 00:18:44,400 --> 00:18:47,040 Speaker 1: short leading indicator. There. Let me let me stop you there, 302 00:18:47,040 --> 00:18:52,080 Speaker 1: because I've heard repeated endlessly. Oh, the stock mark gives 303 00:18:52,080 --> 00:18:56,960 Speaker 1: you years warning before recession. You're implying that's not true. No, no, no, 304 00:18:57,040 --> 00:19:01,520 Speaker 1: it's not. It's a short leader is maybe five six 305 00:19:01,560 --> 00:19:05,639 Speaker 1: months average lead, and then hidden inside the word average 306 00:19:05,800 --> 00:19:09,560 Speaker 1: is some variability. So there may have been a case 307 00:19:09,800 --> 00:19:12,080 Speaker 1: here and there where it had a long lead, but 308 00:19:12,119 --> 00:19:14,840 Speaker 1: I wouldn't classify it as a long leader, something that 309 00:19:14,960 --> 00:19:17,120 Speaker 1: led by three or four quarters. It's it's more likely 310 00:19:17,119 --> 00:19:19,800 Speaker 1: to be one or two quarters. Uh. And uh, it 311 00:19:19,880 --> 00:19:21,480 Speaker 1: might be a little bit longer lead at the peak 312 00:19:21,520 --> 00:19:24,320 Speaker 1: and a little shorter lead at the trough. But on 313 00:19:24,359 --> 00:19:28,520 Speaker 1: its own, it's a very imperfect indicator that it's not 314 00:19:28,560 --> 00:19:31,520 Speaker 1: a holy grail. Neither is even the leading index. Uh. 315 00:19:31,560 --> 00:19:33,480 Speaker 1: But one of the things you do when you put 316 00:19:33,840 --> 00:19:39,200 Speaker 1: leading indicators from different areas, different sources together into a 317 00:19:39,280 --> 00:19:43,159 Speaker 1: leading index, you get some confirmation. And so Uh. The 318 00:19:43,200 --> 00:19:47,119 Speaker 1: stock prices are one piece of the puzzle in a 319 00:19:47,280 --> 00:19:50,960 Speaker 1: set of short leading indicators that were created half a 320 00:19:51,000 --> 00:19:54,600 Speaker 1: century ago. So are some of the other short leading indicators. Oh, 321 00:19:54,640 --> 00:19:58,000 Speaker 1: you could you could look at things from the labor market, 322 00:19:58,040 --> 00:20:03,200 Speaker 1: things from capital investment, things from interest rates, uh, some 323 00:20:03,200 --> 00:20:08,400 Speaker 1: some sensitive commodity prices, um, some survey data which wasn't 324 00:20:08,400 --> 00:20:11,560 Speaker 1: available half a century ago. So these are different types 325 00:20:11,640 --> 00:20:15,320 Speaker 1: of short leading indicators. Uh. Some come from government, some 326 00:20:15,400 --> 00:20:17,959 Speaker 1: come from market prices, some come from private surveys. This 327 00:20:18,040 --> 00:20:22,040 Speaker 1: is you're diversifying your risk among your indicators here. Um. 328 00:20:22,200 --> 00:20:26,080 Speaker 1: But the the thing that people should know is any 329 00:20:26,080 --> 00:20:29,600 Speaker 1: one of these indicators is highly fallible even together. It's 330 00:20:29,640 --> 00:20:32,280 Speaker 1: not a holy grail, but it's certainly better than relying 331 00:20:32,320 --> 00:20:35,399 Speaker 1: on any single input. Absolutely. I can't tell you how 332 00:20:35,400 --> 00:20:39,400 Speaker 1: many times I've responded to people who are saying, because 333 00:20:39,440 --> 00:20:42,560 Speaker 1: of this factor, here's what's Hey, Listen, the market's much 334 00:20:42,600 --> 00:20:46,600 Speaker 1: more complex than that. The economy can't be depicted in 335 00:20:46,600 --> 00:20:49,760 Speaker 1: in a single variable. You need a multiple, a multiple 336 00:20:49,840 --> 00:20:52,400 Speaker 1: variate in order to come up with any sort of 337 00:20:52,760 --> 00:20:56,159 Speaker 1: not at all and so and so. Um. We've been 338 00:20:56,160 --> 00:20:57,840 Speaker 1: doing a lot of work in a half a century, right. 339 00:20:57,880 --> 00:21:01,200 Speaker 1: So in that time, we've i'm of a long leading indicators, 340 00:21:01,280 --> 00:21:04,040 Speaker 1: leading indicators of different sectors of the economy, of employment, 341 00:21:04,040 --> 00:21:09,080 Speaker 1: of inflation. And this larger array of leading indicators is 342 00:21:09,160 --> 00:21:13,000 Speaker 1: what we actually use not anyone leading UH index. And 343 00:21:13,160 --> 00:21:18,320 Speaker 1: also what's happened is that, um, the l e I 344 00:21:18,880 --> 00:21:21,720 Speaker 1: of course has been privatized, has been taken out of 345 00:21:22,119 --> 00:21:26,520 Speaker 1: the public sector, and you know, most people are more comfortable, 346 00:21:26,560 --> 00:21:29,720 Speaker 1: most economists are much more comfortable with econometric models and 347 00:21:29,880 --> 00:21:34,520 Speaker 1: estimations and extrapolations, and a lot of that has actually 348 00:21:34,600 --> 00:21:39,480 Speaker 1: started to appear inside the l e I numbers that 349 00:21:39,520 --> 00:21:43,199 Speaker 1: you're getting, So inside some of those components are extrapolated 350 00:21:43,280 --> 00:21:47,399 Speaker 1: econometric forecast, which is really kind of antithetical to the 351 00:21:47,400 --> 00:21:50,919 Speaker 1: whole idea. Less less than optimal in other words, is 352 00:21:50,960 --> 00:21:53,520 Speaker 1: when you're you're trying to fit the thing and then 353 00:21:53,560 --> 00:21:55,520 Speaker 1: it's it's it's no different to see what we do 354 00:21:55,880 --> 00:21:57,760 Speaker 1: have a model within a model. The idea is to 355 00:21:57,840 --> 00:22:00,879 Speaker 1: use the data to well inputs into your model so 356 00:22:01,000 --> 00:22:03,280 Speaker 1: you get a clean output. Yeah, that's what we do 357 00:22:03,440 --> 00:22:07,280 Speaker 1: is we don't use models. So a pure cyclical UH 358 00:22:07,440 --> 00:22:13,360 Speaker 1: framework won't even use an econometric type model anywhere in 359 00:22:13,520 --> 00:22:19,040 Speaker 1: its presentation. You're monitoring specific, very very limited cyclical indicators. 360 00:22:19,040 --> 00:22:22,040 Speaker 1: And here what's happening is, oh, this component isn't ready 361 00:22:22,040 --> 00:22:24,959 Speaker 1: to let me estimate it, and that is a totally 362 00:22:24,960 --> 00:22:26,720 Speaker 1: another that's a different ball game. That's what you see 363 00:22:26,760 --> 00:22:28,960 Speaker 1: every day when someone doesn't estimate off of a model, 364 00:22:29,040 --> 00:22:31,760 Speaker 1: and and most of those estimates are pretty uh, you know, 365 00:22:31,840 --> 00:22:35,199 Speaker 1: you get what medio garbage in garbage you said it, 366 00:22:36,160 --> 00:22:39,600 Speaker 1: I'm being polite. That's the g rated all right, all right, 367 00:22:39,680 --> 00:22:42,080 Speaker 1: So we have a minute left in this segment. When 368 00:22:42,080 --> 00:22:43,399 Speaker 1: we come back, I want to talk a little bit 369 00:22:43,440 --> 00:22:47,160 Speaker 1: about policy and politics. But one of the things that 370 00:22:47,240 --> 00:22:49,679 Speaker 1: we think of when we think about the market and 371 00:22:49,720 --> 00:22:53,080 Speaker 1: the economy is I have two thousand sticks out in 372 00:22:53,119 --> 00:22:56,200 Speaker 1: my head. And maybe it's a bad example because of 373 00:22:56,240 --> 00:23:00,440 Speaker 1: the bubble and the tech bus, but I remember earnings 374 00:23:00,440 --> 00:23:05,040 Speaker 1: misses starting long before the recession began. And perhaps that's 375 00:23:05,080 --> 00:23:08,800 Speaker 1: how the market picks this up long before the recession. 376 00:23:08,880 --> 00:23:11,600 Speaker 1: Is efficient. I think the market, the market left to 377 00:23:11,640 --> 00:23:14,760 Speaker 1: its own devices, is a is a you know, a 378 00:23:14,840 --> 00:23:19,119 Speaker 1: risk management tool. Um. But and here's just give you 379 00:23:19,119 --> 00:23:21,520 Speaker 1: the statistics in in in in three three out of 380 00:23:21,520 --> 00:23:26,960 Speaker 1: the last fifteen recessions, you saw, uh, the market go 381 00:23:27,119 --> 00:23:29,360 Speaker 1: up even when there was a recession. It's a couple 382 00:23:29,400 --> 00:23:33,000 Speaker 1: of times you've seen it disconnect. And the one that's 383 00:23:33,040 --> 00:23:36,000 Speaker 1: very interesting is that roaring twenties where it disconnected completely, 384 00:23:36,040 --> 00:23:38,840 Speaker 1: but it ended badly. This week, I'm sitting with Laxman 385 00:23:39,480 --> 00:23:44,200 Speaker 1: Acuthan of Eckery Economic Cycle Research, and we've been talking 386 00:23:44,600 --> 00:23:47,959 Speaker 1: about the relationship between the stock market and the economy. 387 00:23:48,440 --> 00:23:51,080 Speaker 1: I want to bring something up that's policy related that 388 00:23:51,240 --> 00:23:54,800 Speaker 1: I recall you writing. I don't remember it was oh 389 00:23:54,960 --> 00:23:57,639 Speaker 1: seven or oh eight, but you had written a piece 390 00:23:58,200 --> 00:24:02,600 Speaker 1: and published it somewhere where you essentially said, hey, there's 391 00:24:02,920 --> 00:24:06,560 Speaker 1: a recession coming, but there's also a last chance to 392 00:24:06,640 --> 00:24:10,280 Speaker 1: avoid this recession. And if Congress acts, you could miss 393 00:24:10,320 --> 00:24:14,960 Speaker 1: this recession. It absolutely does it was. There was a 394 00:24:15,000 --> 00:24:18,920 Speaker 1: brief window of opportunity in two thousand and seven, uh 395 00:24:19,000 --> 00:24:23,119 Speaker 1: where uh there was literally no inventory on the shelves. 396 00:24:23,119 --> 00:24:24,560 Speaker 1: It was just a little bit of a weirdness in 397 00:24:24,560 --> 00:24:29,040 Speaker 1: the inventory cycle, and at that moment some cash in 398 00:24:29,200 --> 00:24:33,760 Speaker 1: consumers pockets would have spurred a temporary I'm not saying 399 00:24:33,760 --> 00:24:36,159 Speaker 1: I would have solved anything long term, but a temporary 400 00:24:36,160 --> 00:24:40,479 Speaker 1: restocking and staved off the recession that began in December 401 00:24:40,520 --> 00:24:42,800 Speaker 1: of two thousand and seven. But thanks to the way 402 00:24:42,800 --> 00:24:48,360 Speaker 1: that you know, DC works, the Bush Pelosi Bernankee fiscal 403 00:24:48,440 --> 00:24:51,639 Speaker 1: stimulus that they did actually vote through, which was what 404 00:24:51,800 --> 00:24:54,480 Speaker 1: like a hundred and fifty, right, I mean that was 405 00:24:54,640 --> 00:24:57,439 Speaker 1: those the three checks. These are checks in the mail, right, 406 00:24:57,520 --> 00:25:00,639 Speaker 1: But they didn't they didn't arrive until two thousand and eight, 407 00:25:00,680 --> 00:25:03,360 Speaker 1: and then towards the summer and and the summer and 408 00:25:03,359 --> 00:25:05,560 Speaker 1: and the recession was already on the way. So it 409 00:25:06,119 --> 00:25:10,560 Speaker 1: I think in principle, if there's these little tactical moments, 410 00:25:10,640 --> 00:25:13,800 Speaker 1: you might be able to kind of throw a monkey 411 00:25:13,800 --> 00:25:17,080 Speaker 1: wrench inside of that vicious cycle just for a second. 412 00:25:17,080 --> 00:25:18,679 Speaker 1: You're not going to get rid of it, but you 413 00:25:18,720 --> 00:25:21,920 Speaker 1: could maybe stave it off so that you're ready for 414 00:25:22,119 --> 00:25:24,760 Speaker 1: or a little bit better prepared, instead of what we 415 00:25:24,800 --> 00:25:28,880 Speaker 1: had here, which was basically a debacle. And and uh, 416 00:25:29,040 --> 00:25:30,720 Speaker 1: I don't you know, it's hard to you know, I 417 00:25:30,720 --> 00:25:34,159 Speaker 1: guess it could have been worse, but um, the but 418 00:25:34,200 --> 00:25:38,119 Speaker 1: it's interesting in half, But it is kind of interesting 419 00:25:39,200 --> 00:25:42,680 Speaker 1: back in that back then an adorable number, isn't it cute? 420 00:25:42,840 --> 00:25:44,240 Speaker 1: But that was back in the day when it was 421 00:25:44,280 --> 00:25:46,080 Speaker 1: a really big number, and it sank like a stone. 422 00:25:46,240 --> 00:25:49,719 Speaker 1: Nobody even remembers it. And you and you see, you know, 423 00:25:49,840 --> 00:25:53,000 Speaker 1: these numbers they get so large that you don't know 424 00:25:53,040 --> 00:25:55,919 Speaker 1: what they mean. But they you know, it sounds like 425 00:25:55,960 --> 00:25:57,560 Speaker 1: it could have plugged a hole somewhere in a budget 426 00:25:57,720 --> 00:25:59,800 Speaker 1: we had. We had Jim Channis on a few weeks 427 00:26:00,119 --> 00:26:03,840 Speaker 1: when we were discussing his histories, and short Salary identifies 428 00:26:03,880 --> 00:26:08,479 Speaker 1: broad the first company he had identified cooking the books, 429 00:26:08,520 --> 00:26:12,359 Speaker 1: and and very famously short it was Baldwin, which was 430 00:26:12,520 --> 00:26:16,720 Speaker 1: a piano manufacturer that became an insurance company. And when 431 00:26:16,800 --> 00:26:19,800 Speaker 1: they went belly up, and this is the late eighties 432 00:26:19,840 --> 00:26:24,200 Speaker 1: early nineties, um, it was the biggest bankruptcy in history. 433 00:26:24,240 --> 00:26:26,679 Speaker 1: And it was nine billion dollars. And I'm like, oh, 434 00:26:26,720 --> 00:26:31,240 Speaker 1: that's adorable dollars. That's nothing, but a hundred and fifty 435 00:26:31,240 --> 00:26:35,119 Speaker 1: billion dollars in seven o eight was was still real money. 436 00:26:35,160 --> 00:26:37,679 Speaker 1: And remember, you know Washington is famous for gridlock. But 437 00:26:37,720 --> 00:26:44,520 Speaker 1: here you had again Bush and and bernanke Republican who's 438 00:26:45,040 --> 00:26:47,600 Speaker 1: effectively a bypart, and they all went at this fiscal 439 00:26:47,720 --> 00:26:50,359 Speaker 1: thing to get it done. I think that they saw 440 00:26:50,440 --> 00:26:53,720 Speaker 1: some writing on the wall. But even with that kind 441 00:26:53,720 --> 00:26:57,520 Speaker 1: of consensus, it's just too slow. So the idea that 442 00:26:57,920 --> 00:26:59,840 Speaker 1: I think in theory Congress might be able to say, 443 00:26:59,920 --> 00:27:02,439 Speaker 1: but in practice it's almost impossible to get ahead of 444 00:27:02,440 --> 00:27:06,000 Speaker 1: the cycle, especially these days where it's all so so. 445 00:27:06,560 --> 00:27:11,720 Speaker 1: What you're effectively saying much different than than what I've 446 00:27:11,760 --> 00:27:15,760 Speaker 1: been reading from some of the more extreme elements of 447 00:27:15,840 --> 00:27:19,639 Speaker 1: the political spectrum, is that you can engage in a 448 00:27:19,760 --> 00:27:24,960 Speaker 1: form of stimulus allah John Maynard Keynes and actually have 449 00:27:25,080 --> 00:27:28,400 Speaker 1: a net impact on the economy. I think, in very 450 00:27:28,520 --> 00:27:32,159 Speaker 1: unique circumstances that may be able to happen. But I 451 00:27:32,160 --> 00:27:35,280 Speaker 1: would actually at the same time, let me, let's let's 452 00:27:35,320 --> 00:27:39,600 Speaker 1: stop right there. So let's look at two recent policy 453 00:27:39,640 --> 00:27:43,080 Speaker 1: actions that have and we're going to keep it by partisan, 454 00:27:43,240 --> 00:27:45,399 Speaker 1: but there's a lot of politics behind both of this. 455 00:27:46,400 --> 00:27:50,679 Speaker 1: One was the stimulus in two thousand nine, and the 456 00:27:50,800 --> 00:27:55,959 Speaker 1: second was the sequester in two thousand thirteen. Each of 457 00:27:56,000 --> 00:28:01,600 Speaker 1: those were big chunks of money. Theoretically, do those two 458 00:28:01,640 --> 00:28:04,200 Speaker 1: things do for the economy? The stimulus you really want 459 00:28:04,200 --> 00:28:07,199 Speaker 1: to know? I think so sure that. So keep in 460 00:28:07,240 --> 00:28:12,120 Speaker 1: mind the stimulus really kind of a half estates hit. Well, 461 00:28:12,160 --> 00:28:13,920 Speaker 1: that's what I was gonna say. It's it's really kind 462 00:28:13,920 --> 00:28:17,800 Speaker 1: of half arsked because remember it is unemployment extension, and 463 00:28:17,840 --> 00:28:20,119 Speaker 1: some of it is temporary type cut, and not a 464 00:28:20,160 --> 00:28:23,560 Speaker 1: lot of it was what we think of like Eisenhower 465 00:28:23,600 --> 00:28:26,760 Speaker 1: in the interstate highway system was really a big, bad 466 00:28:26,840 --> 00:28:31,879 Speaker 1: stimulus that worked. Wonders goes to thesis. Now, Um, okay, 467 00:28:31,920 --> 00:28:35,880 Speaker 1: so you have a cycle and the cycle doesn't care 468 00:28:36,560 --> 00:28:41,000 Speaker 1: about the politics that's happening. It's this endogenous cycle in 469 00:28:41,040 --> 00:28:42,680 Speaker 1: a free market where we're going to have an ebb 470 00:28:42,720 --> 00:28:46,880 Speaker 1: and flow in our activity. And we had a nasty downturn. 471 00:28:47,720 --> 00:28:53,960 Speaker 1: Uh And by um, the spring of two thousand and nine, 472 00:28:54,040 --> 00:28:57,200 Speaker 1: the recession is still going on. Uh. In Davos in 473 00:28:57,240 --> 00:28:59,880 Speaker 1: April at that not in Davos, it was twenty meeting 474 00:28:59,880 --> 00:29:04,400 Speaker 1: in London. They were um talking about depression in April. Uh. 475 00:29:04,680 --> 00:29:07,400 Speaker 1: But the leading indicators had all turned up sharply so 476 00:29:07,520 --> 00:29:10,480 Speaker 1: that we were forecasting an end of recession by the 477 00:29:10,520 --> 00:29:13,480 Speaker 1: middle of oh nine. Uh. And I'm pretty sure the 478 00:29:13,520 --> 00:29:17,000 Speaker 1: stimulus was still kind of cooking its through. Yeah. So, 479 00:29:17,080 --> 00:29:21,920 Speaker 1: but so in other words, I'm saying the recession U ending. 480 00:29:22,200 --> 00:29:25,240 Speaker 1: See these things end right. Session was already that stimulus 481 00:29:25,240 --> 00:29:27,640 Speaker 1: is already too late to make much of an impact. 482 00:29:27,720 --> 00:29:29,520 Speaker 1: These are the facts. And two hundred and twenty two 483 00:29:29,600 --> 00:29:32,800 Speaker 1: years we've had forty seven recessions. The Fed's been around 484 00:29:32,800 --> 00:29:36,720 Speaker 1: for maybe half of those um so um. They've been 485 00:29:36,720 --> 00:29:38,600 Speaker 1: around when there have been a lot of recessions, so 486 00:29:38,640 --> 00:29:40,680 Speaker 1: they haven't been able to get rid of them, or 487 00:29:40,760 --> 00:29:42,520 Speaker 1: maybe they contributed to some I don't know. You know, 488 00:29:42,520 --> 00:29:46,320 Speaker 1: we could argue that took okay. So so the point 489 00:29:46,400 --> 00:29:49,000 Speaker 1: is is, like, you know, this is the condition of 490 00:29:49,040 --> 00:29:51,640 Speaker 1: the environment we're in that it has this cycle going 491 00:29:51,720 --> 00:29:54,520 Speaker 1: up and down, and so if things get really bad. 492 00:29:55,080 --> 00:29:57,840 Speaker 1: I am a very empathetic, sympathetic person. I am not 493 00:29:57,960 --> 00:30:01,560 Speaker 1: saying everybody should just be like in bubble. You know, 494 00:30:01,600 --> 00:30:05,040 Speaker 1: I'm not going there. And I understand I understand everybody 495 00:30:05,040 --> 00:30:07,880 Speaker 1: from both sides of the policy spectrum. They're trying to 496 00:30:07,960 --> 00:30:11,720 Speaker 1: figure out how to make things better and they have suggestions. 497 00:30:11,760 --> 00:30:15,080 Speaker 1: But the but the idea that you can go so 498 00:30:15,160 --> 00:30:18,360 Speaker 1: far as to get rid of the business cycle is 499 00:30:18,440 --> 00:30:21,840 Speaker 1: one that has been promoted many times and it's failed 500 00:30:22,040 --> 00:30:27,480 Speaker 1: many time and time again. Irving Fisher And so we're 501 00:30:27,520 --> 00:30:32,000 Speaker 1: speaking with Lakshman Than of the Economic Cycle Research Institute 502 00:30:32,440 --> 00:30:37,080 Speaker 1: about recessions and the impact of policies. So people have 503 00:30:37,200 --> 00:30:40,440 Speaker 1: been calling, at least they used to before the collapse, 504 00:30:41,040 --> 00:30:46,040 Speaker 1: the Greenspan era as the great moderation we seem to 505 00:30:46,080 --> 00:30:51,240 Speaker 1: have less recessions, less frequently, they were shallower. How do 506 00:30:51,280 --> 00:30:53,040 Speaker 1: you look at that and how what does that mean 507 00:30:53,080 --> 00:30:55,480 Speaker 1: going forward? I think it's very interesting. This is at 508 00:30:55,480 --> 00:30:58,320 Speaker 1: the core of something that's been concerning us since two 509 00:30:58,320 --> 00:31:01,400 Speaker 1: thousand and eight. And uh we we call it the 510 00:31:01,480 --> 00:31:04,160 Speaker 1: yo Yo years were we've entered our Yoyo years, which 511 00:31:04,200 --> 00:31:08,560 Speaker 1: is a period of weaker growth and more frequent recessions. 512 00:31:08,560 --> 00:31:11,560 Speaker 1: In the Greenspan years are related to that in a way, 513 00:31:11,560 --> 00:31:15,680 Speaker 1: they masked it. Trend growth in the United States, no 514 00:31:15,720 --> 00:31:18,000 Speaker 1: matter how you slice it has been getting weaker and 515 00:31:18,040 --> 00:31:21,360 Speaker 1: weaker since the mid seventies. The pace of each recovery 516 00:31:21,800 --> 00:31:25,200 Speaker 1: since the seventies has been getting weaker and weaker. It's 517 00:31:25,200 --> 00:31:29,160 Speaker 1: stairs stepping down now in the in the nineties, which 518 00:31:29,200 --> 00:31:33,280 Speaker 1: was which had relatively low trend growth compared to earlier decades. 519 00:31:33,800 --> 00:31:37,360 Speaker 1: As long as it's an extended, a long business cycle, 520 00:31:37,440 --> 00:31:39,400 Speaker 1: you don't matter. You don't mind that much. And and 521 00:31:39,400 --> 00:31:42,440 Speaker 1: and here the volatility of the cycle comes in. So 522 00:31:42,520 --> 00:31:48,560 Speaker 1: we have a relatively moderate cycle, not big swings, gentle swings, 523 00:31:48,600 --> 00:31:51,400 Speaker 1: but our altitude is low, so it feels okay. And 524 00:31:51,400 --> 00:31:54,560 Speaker 1: in fact, that was a very impressive on many statistical 525 00:31:54,560 --> 00:31:59,680 Speaker 1: accounts expansion. The problem is if the volatility returns and 526 00:31:59,800 --> 00:32:02,840 Speaker 1: you're altitude level at that little level, you're in big trouble. 527 00:32:03,280 --> 00:32:05,640 Speaker 1: And so let's take a look at Europe or the 528 00:32:05,760 --> 00:32:10,120 Speaker 1: UK after the Great Recession. Uh, they all recovered for 529 00:32:10,120 --> 00:32:11,880 Speaker 1: a little bit, and then they went back into recession, 530 00:32:12,440 --> 00:32:15,479 Speaker 1: and then they recovered again, and now they're all actually 531 00:32:15,480 --> 00:32:18,240 Speaker 1: turning down a little bit. So they're seeing more frequent 532 00:32:18,280 --> 00:32:21,800 Speaker 1: recessions in Europe right now. Already it's not even a 533 00:32:21,800 --> 00:32:25,840 Speaker 1: forecast anymore that this. Look at Japan in in in 534 00:32:25,960 --> 00:32:29,040 Speaker 1: twenty one years, well, in twenty one years, they've had 535 00:32:29,040 --> 00:32:32,320 Speaker 1: six recessions, They've had albonomics. They've almost shot everything they 536 00:32:32,360 --> 00:32:34,680 Speaker 1: can shoot at at the economy. The structural stuff is 537 00:32:34,680 --> 00:32:38,200 Speaker 1: a little their their version of QUI is what three 538 00:32:38,240 --> 00:32:42,680 Speaker 1: times six times hours. I think they're inversion, you know, 539 00:32:43,640 --> 00:32:46,000 Speaker 1: it's issue number ten now or something like that. And 540 00:32:46,040 --> 00:32:47,560 Speaker 1: this was a really big one, the one that they 541 00:32:47,560 --> 00:32:50,800 Speaker 1: did recently. And they're already slowing there in their third 542 00:32:50,880 --> 00:32:54,760 Speaker 1: decade of of weak growth. And Japan famously has been 543 00:32:54,760 --> 00:32:59,400 Speaker 1: fighting deflation. Europe is very clearly having some price problems 544 00:32:59,680 --> 00:33:02,280 Speaker 1: just in relation, and actually the US is too. I 545 00:33:02,320 --> 00:33:05,880 Speaker 1: think that we're not that exceptional. I think in this regard, 546 00:33:06,080 --> 00:33:08,000 Speaker 1: I know, dare I say, hey, I'm I'm a true 547 00:33:08,040 --> 00:33:10,920 Speaker 1: American here, but I'm but but I'm saying that that 548 00:33:11,280 --> 00:33:16,520 Speaker 1: on this cyclical count of slow trend growth we are 549 00:33:17,280 --> 00:33:19,120 Speaker 1: we need to face up to what's going on. Larry 550 00:33:19,160 --> 00:33:22,040 Speaker 1: Summers at the end of last year went out and 551 00:33:22,040 --> 00:33:24,760 Speaker 1: talked about secular stagnation and nobody wanted to hear it. 552 00:33:25,360 --> 00:33:27,160 Speaker 1: I still want to hear you still don't know. It's 553 00:33:27,200 --> 00:33:29,000 Speaker 1: not I don't want to hear anything from him. But 554 00:33:29,080 --> 00:33:31,479 Speaker 1: this isn't But this isn't fun to hear. PIMCO has 555 00:33:31,520 --> 00:33:33,800 Speaker 1: been talking about the new normal. These are all different 556 00:33:33,800 --> 00:33:36,640 Speaker 1: angles on this issue. Now. Is this a function of 557 00:33:36,720 --> 00:33:40,440 Speaker 1: where a more mature economy and therefore we're going to 558 00:33:40,520 --> 00:33:42,959 Speaker 1: have slower growth. Is it a function of the aging 559 00:33:43,000 --> 00:33:47,680 Speaker 1: of the baby boomers, globalization sending some jobs overseas? What 560 00:33:47,840 --> 00:33:53,040 Speaker 1: is it that credit issues, big, deleveraging big? Well, I 561 00:33:53,040 --> 00:33:56,560 Speaker 1: think the deleveraging actually is it's a contributing factor, but 562 00:33:56,640 --> 00:33:58,400 Speaker 1: I don't think it's causing it. So what I'm saying is, 563 00:33:58,400 --> 00:34:00,960 Speaker 1: when de leveraging is over, this problem doesn't go away. 564 00:34:01,200 --> 00:34:03,680 Speaker 1: I want to talk now in this segment where we 565 00:34:03,760 --> 00:34:08,200 Speaker 1: don't have any time limitations and we could just open 566 00:34:08,280 --> 00:34:10,840 Speaker 1: up our top button chill out a little bit. So 567 00:34:11,480 --> 00:34:13,960 Speaker 1: I you and I know each other for a long time, 568 00:34:14,080 --> 00:34:17,800 Speaker 1: we go to lunch on a regular basis. I'm very 569 00:34:17,840 --> 00:34:21,160 Speaker 1: familiar with your work. I want to talk a little 570 00:34:21,160 --> 00:34:24,239 Speaker 1: bit about your track record, which for the most part 571 00:34:24,280 --> 00:34:27,360 Speaker 1: has been excellent. But you've been getting some grief lately 572 00:34:27,680 --> 00:34:32,880 Speaker 1: about the call in that Hey, the US has at 573 00:34:32,880 --> 00:34:36,080 Speaker 1: an increasing risk of a recession, so there's a lot 574 00:34:36,120 --> 00:34:38,600 Speaker 1: of different things I want to come back to and discuss. 575 00:34:39,960 --> 00:34:44,000 Speaker 1: You know, anyone in the public eye gets grief from 576 00:34:44,040 --> 00:34:47,440 Speaker 1: a variety of people. How do you deal with that 577 00:34:47,480 --> 00:34:49,799 Speaker 1: sort of stuff? First? And then let's talk a little 578 00:34:49,840 --> 00:34:52,960 Speaker 1: bit about the actual call and what you guys said 579 00:34:53,000 --> 00:34:56,680 Speaker 1: and where you're going from from there. And again we 580 00:34:56,760 --> 00:35:00,680 Speaker 1: mentioned during the broadcast section section that the New York 581 00:35:00,680 --> 00:35:06,480 Speaker 1: Times gave you this phenomenal profile that talked about essentially 582 00:35:06,560 --> 00:35:10,279 Speaker 1: said you had a perfect forecasting, right, which is right, 583 00:35:10,400 --> 00:35:12,960 Speaker 1: that's the kiss of death. They never piss off the 584 00:35:12,960 --> 00:35:15,320 Speaker 1: trade and Gods my head trade or always used to 585 00:35:15,360 --> 00:35:18,359 Speaker 1: say anytime you were on a roll. It's like man, 586 00:35:18,520 --> 00:35:21,239 Speaker 1: you are living dangerous, like just shut up and stay 587 00:35:21,280 --> 00:35:24,120 Speaker 1: below the radar. So it's almost as if a profile 588 00:35:24,239 --> 00:35:27,400 Speaker 1: like that guarantees the next call is going to mean revert. 589 00:35:27,480 --> 00:35:30,000 Speaker 1: But talk a little bit about how do you deal 590 00:35:30,080 --> 00:35:32,839 Speaker 1: with just the people. You know, it's so easy for 591 00:35:32,880 --> 00:35:35,600 Speaker 1: people to dismiss somebody out of hand. It would be 592 00:35:35,640 --> 00:35:38,279 Speaker 1: really it would be really tough. I mean this, It 593 00:35:38,360 --> 00:35:41,439 Speaker 1: takes a certain type of person to do this. First off. 594 00:35:41,440 --> 00:35:43,160 Speaker 1: I mean I and I guess I have some of 595 00:35:43,200 --> 00:35:46,279 Speaker 1: those abilities. And I don't think skin small brain. Is 596 00:35:46,280 --> 00:35:48,640 Speaker 1: that what you're saying, you know, to a degree, I probably, 597 00:35:48,719 --> 00:35:50,920 Speaker 1: But but I think what it is is having a framework. 598 00:35:51,360 --> 00:35:53,879 Speaker 1: And I mean Jeffrey Moore, my mentor, Dr Jeffrey H. 599 00:35:53,880 --> 00:35:59,920 Speaker 1: Moore was um an interesting guy, uh for the same reason. 600 00:36:00,200 --> 00:36:02,200 Speaker 1: I don't purport to be as bright as he was. 601 00:36:02,760 --> 00:36:06,640 Speaker 1: But he was able uh in academia, which can be 602 00:36:06,719 --> 00:36:09,360 Speaker 1: a pretty rough environment. You know, you can get stabbed 603 00:36:09,360 --> 00:36:12,719 Speaker 1: in the back there often. And and he went against 604 00:36:12,840 --> 00:36:16,680 Speaker 1: the grain in terms of forecasting, and he did not 605 00:36:17,560 --> 00:36:22,320 Speaker 1: uh go into the model building econometrics, and he instead 606 00:36:22,440 --> 00:36:26,520 Speaker 1: stayed with the monitoring of cyclical indicators and developing that 607 00:36:27,200 --> 00:36:31,560 Speaker 1: type of research which was not in fashion in academia. 608 00:36:31,719 --> 00:36:35,000 Speaker 1: And that framework that we have there is what I'm 609 00:36:35,760 --> 00:36:39,080 Speaker 1: taking advantage of today at Equery, with all of our 610 00:36:39,120 --> 00:36:40,920 Speaker 1: research group. I mean, just to be clear, there's a 611 00:36:40,960 --> 00:36:43,280 Speaker 1: lot of people behind me. This is not all my work. 612 00:36:43,360 --> 00:36:48,799 Speaker 1: I have a huge it's a full floor. You have 613 00:36:48,880 --> 00:36:51,040 Speaker 1: a couple of dozen people, are you yeah, and they 614 00:36:51,080 --> 00:36:54,759 Speaker 1: are focused, Like you know, we're all really impressed with 615 00:36:54,800 --> 00:36:59,759 Speaker 1: this cyclical framework of monitoring the indicators and the we 616 00:37:00,000 --> 00:37:03,720 Speaker 1: actually don't even consider ourselves forecasters. We we we consider 617 00:37:03,760 --> 00:37:11,120 Speaker 1: ourselves monitors. Were monitoring very limited and with an eye 618 00:37:13,200 --> 00:37:16,120 Speaker 1: and uh, we're we're watching these indicators. And so when 619 00:37:16,200 --> 00:37:19,839 Speaker 1: I say to you, here's what they're saying, um, it 620 00:37:19,960 --> 00:37:25,399 Speaker 1: may even go against my gut instinct, but I have 621 00:37:25,800 --> 00:37:29,239 Speaker 1: a lot of respect for the framework. And that is 622 00:37:29,920 --> 00:37:32,080 Speaker 1: why sometimes I think I can stand in a room 623 00:37:32,080 --> 00:37:36,600 Speaker 1: where everybody disagrees and say, well, here's what I think. 624 00:37:36,760 --> 00:37:38,880 Speaker 1: Here's what the framework is. It's not about it's not 625 00:37:38,920 --> 00:37:41,560 Speaker 1: about what some guy whispered to me in a corner somewhere, 626 00:37:41,600 --> 00:37:44,239 Speaker 1: you know, who supposedly knows something. It's rather it's what 627 00:37:44,320 --> 00:37:47,080 Speaker 1: the framework of objective indicators are saying are they moving 628 00:37:47,080 --> 00:37:49,880 Speaker 1: in a pronounced, pervasive, in persistent way one way or 629 00:37:49,920 --> 00:37:52,160 Speaker 1: the other, And then it's my job to kind of 630 00:37:52,200 --> 00:37:54,600 Speaker 1: figure out the story around that, trying to explain it. 631 00:37:55,080 --> 00:37:57,560 Speaker 1: So let's put this into a little context. Here we 632 00:37:57,600 --> 00:38:03,400 Speaker 1: are in which just came off a quarter that either 633 00:38:03,600 --> 00:38:09,439 Speaker 1: was really weak or actually contractually contracted slightly. Although now 634 00:38:09,440 --> 00:38:12,560 Speaker 1: we're in the second quarter, the data looks much better. 635 00:38:12,600 --> 00:38:15,319 Speaker 1: I think a lot of the weather related issues in 636 00:38:15,440 --> 00:38:19,600 Speaker 1: Q one just deferred certain purchases, deferred certain activities to 637 00:38:19,680 --> 00:38:22,360 Speaker 1: Q two. So as bad as Q one looks, Q 638 00:38:22,520 --> 00:38:26,040 Speaker 1: two looks that much better. But how do we look 639 00:38:26,080 --> 00:38:32,160 Speaker 1: at the past couple of years? How would you describe? Sure? Sure? Sure? Well, um, 640 00:38:32,200 --> 00:38:36,080 Speaker 1: I think in twenty you know, when we look backwards, Uh, 641 00:38:38,239 --> 00:38:43,200 Speaker 1: time will tell if we were technically correct on our 642 00:38:43,680 --> 00:38:48,680 Speaker 1: recession call. Yeah, it looks like there was a Uh, 643 00:38:48,719 --> 00:38:52,880 Speaker 1: the epicenter of the weakness of the downturn will be 644 00:38:53,000 --> 00:38:57,440 Speaker 1: in the fourth quarter of and in the first quarter 645 00:38:58,120 --> 00:39:03,439 Speaker 1: of where you have annualized GDP growth for that half 646 00:39:03,480 --> 00:39:08,879 Speaker 1: a year at a fraction of barely positive. And if 647 00:39:08,920 --> 00:39:11,800 Speaker 1: you look underneath and see why what was the growth, 648 00:39:12,239 --> 00:39:15,919 Speaker 1: it was a freak outsized contribution of agriculture, which never 649 00:39:15,920 --> 00:39:19,319 Speaker 1: contributes to GDP. It surrounding aera typically, and it made 650 00:39:19,400 --> 00:39:22,000 Speaker 1: up the bulk of that growth. So the rest of 651 00:39:22,000 --> 00:39:25,080 Speaker 1: the economy was not in action during that time, right, 652 00:39:25,160 --> 00:39:30,319 Speaker 1: So essentially flat for two quoters or not? There no negative? See, 653 00:39:30,480 --> 00:39:32,279 Speaker 1: I mean it was the agriculture that made it just 654 00:39:32,520 --> 00:39:35,319 Speaker 1: skate a little bit of it. And now would that 655 00:39:35,360 --> 00:39:38,080 Speaker 1: be considered No, I mean the revisions are still coming. 656 00:39:38,080 --> 00:39:40,640 Speaker 1: These revisions are not over. So, but let's use the 657 00:39:40,719 --> 00:39:45,719 Speaker 1: three piece. So it was persistent? Does two quarters two 658 00:39:45,760 --> 00:39:47,520 Speaker 1: quarters is persistent? Yeah, you could have. You could have 659 00:39:47,520 --> 00:39:52,040 Speaker 1: a short recession and then throughout the entire economy except 660 00:39:52,040 --> 00:39:56,040 Speaker 1: for agriculture apparently, so it was nearly Well, agriculture is 661 00:39:56,080 --> 00:39:58,759 Speaker 1: not I mean non farm is where we focus. I 662 00:39:58,800 --> 00:40:02,560 Speaker 1: mean the farm industry is not a big component typically 663 00:40:02,600 --> 00:40:05,799 Speaker 1: of this economy. So and then what I pronounced, was 664 00:40:05,840 --> 00:40:08,200 Speaker 1: it a deep No, it would have been mild. It 665 00:40:08,320 --> 00:40:09,959 Speaker 1: was not. That was not that was not a deep. 666 00:40:10,080 --> 00:40:12,080 Speaker 1: That was not a deep if so, at most it 667 00:40:12,239 --> 00:40:16,240 Speaker 1: was possibly a short mild recession. Correct. That absolutely breakes 668 00:40:16,280 --> 00:40:20,359 Speaker 1: perfect sense to me. But you've gone on television. I've 669 00:40:20,360 --> 00:40:22,239 Speaker 1: seen you on bloom. But I've seen you in CNBC. 670 00:40:22,840 --> 00:40:27,000 Speaker 1: You've gotten back and forth with Joe Karnan about and 671 00:40:27,480 --> 00:40:30,080 Speaker 1: I thought you did an admirable job. I think keep 672 00:40:30,120 --> 00:40:32,360 Speaker 1: blaming what you're trying to explain in a thirty seconds 673 00:40:32,360 --> 00:40:35,799 Speaker 1: sound bite. But how do you deal with that sort 674 00:40:35,800 --> 00:40:38,160 Speaker 1: of nonsense when people are just I think one of 675 00:40:38,200 --> 00:40:42,239 Speaker 1: the things is binary. People are buying recession, yes or no. Well, 676 00:40:42,320 --> 00:40:45,960 Speaker 1: I think people equate recession with the end of the world, 677 00:40:46,719 --> 00:40:49,440 Speaker 1: and I just always a losing it. I don't, you know, 678 00:40:49,560 --> 00:40:52,520 Speaker 1: I don't. I think a recession, as bad as it 679 00:40:52,560 --> 00:40:55,960 Speaker 1: can be for for for people who are near the 680 00:40:56,000 --> 00:40:59,160 Speaker 1: collateral damage, they can be very cathartic. I mean, there's 681 00:40:59,280 --> 00:41:02,640 Speaker 1: reasons for recessions, you know, there's It does squeeze out 682 00:41:02,640 --> 00:41:05,080 Speaker 1: your excesses and sets you and it will properly set 683 00:41:05,120 --> 00:41:08,680 Speaker 1: you up for growth in the current environment. One could 684 00:41:08,800 --> 00:41:14,200 Speaker 1: argue that all of this recession denial, or all of 685 00:41:14,239 --> 00:41:17,560 Speaker 1: the policies designed to kind of like dot by hook 686 00:41:17,640 --> 00:41:20,000 Speaker 1: or by crook to pull some demand from next quarter 687 00:41:20,040 --> 00:41:26,280 Speaker 1: into this quarter, actually is keeping trying to subvert that process, 688 00:41:26,280 --> 00:41:30,360 Speaker 1: which is actually a very healthy process for a market economy. Um. 689 00:41:30,400 --> 00:41:32,759 Speaker 1: You know, people point to the UK and say, oh, 690 00:41:32,760 --> 00:41:34,799 Speaker 1: look it's growing well, austerity works well or whatever. They 691 00:41:34,840 --> 00:41:38,319 Speaker 1: have some argument right, Actually they had to recessions which 692 00:41:38,360 --> 00:41:40,600 Speaker 1: really squeeze a lot of stuff out and set them 693 00:41:40,640 --> 00:41:43,440 Speaker 1: up for some growth. Now, I'm sorry to say that 694 00:41:43,440 --> 00:41:45,440 Speaker 1: that'll that'll fade a little bit at some point. But 695 00:41:46,440 --> 00:41:53,560 Speaker 1: still these recessions do set you up for more sustained growth. 696 00:41:53,719 --> 00:41:56,839 Speaker 1: And when you have a policy which is just so 697 00:41:56,960 --> 00:41:59,839 Speaker 1: limited to pulling next quarter into this quarter, low inch 698 00:41:59,920 --> 00:42:05,680 Speaker 1: or traits some some tax break if you keep pulling 699 00:42:07,120 --> 00:42:09,920 Speaker 1: demand from the from next quarter into this quarter, from 700 00:42:09,920 --> 00:42:12,479 Speaker 1: the future into now what's left of the future. That 701 00:42:12,480 --> 00:42:15,480 Speaker 1: that's reminds me of a country song, how can I 702 00:42:15,560 --> 00:42:18,600 Speaker 1: miss you if you won't go away? So how could 703 00:42:18,600 --> 00:42:22,280 Speaker 1: you get How did you ever find that pent up demand? 704 00:42:22,360 --> 00:42:25,000 Speaker 1: How could you squeeze out those excesses if you never 705 00:42:25,080 --> 00:42:27,879 Speaker 1: let the cycle one its natural course? That's and that's 706 00:42:28,000 --> 00:42:31,440 Speaker 1: and so the I I get, I get the arguments, 707 00:42:31,600 --> 00:42:35,760 Speaker 1: and I think that there are reasonable arguments for extraordinary 708 00:42:36,200 --> 00:42:40,080 Speaker 1: uh intervention uh at the depths of the Great recession. 709 00:42:40,200 --> 00:42:42,399 Speaker 1: I get it. But that was a long time ago, 710 00:42:42,840 --> 00:42:46,920 Speaker 1: wasn't that Number one? Yes, it was, and number Two, 711 00:42:48,160 --> 00:42:50,239 Speaker 1: I think we all know the bottom line was that 712 00:42:50,280 --> 00:42:54,040 Speaker 1: we have these banks festied with bad mortgages, and so 713 00:42:54,200 --> 00:42:56,600 Speaker 1: if we had another bad recession, we would have wasted 714 00:42:56,600 --> 00:42:59,959 Speaker 1: all bailout dollars when the banks would have collapsed again. 715 00:43:00,160 --> 00:43:02,319 Speaker 1: Another I don't know if that's still the case. No, No, 716 00:43:02,360 --> 00:43:05,359 Speaker 1: I mean another way of looking at it is, um 717 00:43:05,440 --> 00:43:07,880 Speaker 1: you know, the FED takes rates to zero or close 718 00:43:07,920 --> 00:43:10,319 Speaker 1: to them effectively, and then what are they supposed to 719 00:43:10,320 --> 00:43:13,319 Speaker 1: do next? So that while they're pushing on a stream, 720 00:43:13,360 --> 00:43:14,800 Speaker 1: but they don't want to admit that, so that they say, so, 721 00:43:14,840 --> 00:43:16,319 Speaker 1: now we're gonna do the wealth effect. We're gonna make 722 00:43:16,360 --> 00:43:17,759 Speaker 1: the house price go up, We're gonna make the stock 723 00:43:17,800 --> 00:43:19,200 Speaker 1: price go up, and then you're gonna go out and 724 00:43:19,200 --> 00:43:22,640 Speaker 1: spend right and the wealth of and you see that's broken. 725 00:43:22,840 --> 00:43:25,319 Speaker 1: That that that hasn't happened. So let's talk about that, 726 00:43:25,360 --> 00:43:28,560 Speaker 1: because that's a pet peeve of mine for two reasons. 727 00:43:28,360 --> 00:43:32,160 Speaker 1: The first reason is, I think, and I've written about 728 00:43:32,160 --> 00:43:35,360 Speaker 1: this extensively, I think the wealth effect is something that 729 00:43:35,520 --> 00:43:37,920 Speaker 1: the FED gets completely wrong. And I have to go 730 00:43:37,920 --> 00:43:40,840 Speaker 1: out to Jackson Hole one summer and would agree, we 731 00:43:40,880 --> 00:43:42,920 Speaker 1: would agree with you from the evidence but when you 732 00:43:43,040 --> 00:43:45,680 Speaker 1: look in so let's talk about a cycle for a second. 733 00:43:45,719 --> 00:43:49,080 Speaker 1: When we look in a strong economic cycle. You mentioned 734 00:43:49,320 --> 00:43:53,040 Speaker 1: the areas that you have in recovery. You have income gains, 735 00:43:53,080 --> 00:43:56,920 Speaker 1: you have employment gains, you have manufacturing gains. What was 736 00:43:57,000 --> 00:44:01,680 Speaker 1: the fourth one, income, manufacturing, retails als gales. So you 737 00:44:01,760 --> 00:44:04,560 Speaker 1: had all these things that are going positively. Ellen, what 738 00:44:04,640 --> 00:44:08,440 Speaker 1: a surprise. Lots of people are working, they're getting wage gains, 739 00:44:08,480 --> 00:44:11,640 Speaker 1: they're going out and spending that money on houses, cars, 740 00:44:11,680 --> 00:44:16,680 Speaker 1: and other consumer goods, both durable and non durable. Manufacturing 741 00:44:16,680 --> 00:44:19,399 Speaker 1: and exports are working well. And oh, by the way, 742 00:44:19,480 --> 00:44:24,080 Speaker 1: the stock market is doing really well on those circumstances. Hey, 743 00:44:24,160 --> 00:44:27,880 Speaker 1: it looks like it looks like when the stock market 744 00:44:27,920 --> 00:44:32,759 Speaker 1: goes up, everybody's really happy. But actually that's getting the 745 00:44:32,800 --> 00:44:38,880 Speaker 1: causation backwards. The positive fundamental underlying factors that are rising 746 00:44:39,000 --> 00:44:42,400 Speaker 1: or lifting all boats. That's the tail that's wagging the 747 00:44:42,400 --> 00:44:44,960 Speaker 1: door of the stock market. Isn't what's making all these 748 00:44:45,000 --> 00:44:47,840 Speaker 1: good things happen. All these good things are making the 749 00:44:47,840 --> 00:44:51,359 Speaker 1: stock market, and that's where the FED gets it backwards. Well, 750 00:44:51,360 --> 00:44:53,600 Speaker 1: typically it does work that way, and that's why in 751 00:44:53,640 --> 00:44:56,640 Speaker 1: twelve out of the last fifteen downturns, you've seen the 752 00:44:56,640 --> 00:44:59,160 Speaker 1: stock market react, and three of them they did the 753 00:44:59,280 --> 00:45:01,719 Speaker 1: Roaring twenties. Didn't Now remember the Roaring twenties. I mean 754 00:45:01,760 --> 00:45:07,160 Speaker 1: I don't. I wasn't born, but they say it sounds 755 00:45:07,239 --> 00:45:10,279 Speaker 1: pretty uh you know they were people were pretty excited, right, 756 00:45:10,360 --> 00:45:12,239 Speaker 1: and so they had they had a recession. They had 757 00:45:12,239 --> 00:45:15,040 Speaker 1: those crazy dance, they had the crazy dance, they had 758 00:45:15,080 --> 00:45:17,880 Speaker 1: all kinds of not no booze, what I mean, you 759 00:45:17,920 --> 00:45:22,360 Speaker 1: can imagine, uh, you know, if there was no disrespect 760 00:45:22,400 --> 00:45:23,799 Speaker 1: to Jim Kramer here, but if there was a Jim 761 00:45:23,880 --> 00:45:25,760 Speaker 1: Kramer there, he would have been saying bye bye bye, 762 00:45:25,840 --> 00:45:29,000 Speaker 1: right that at that moment. And and so here we 763 00:45:29,040 --> 00:45:31,360 Speaker 1: have a recession. It's a it's a full blown pronounce 764 00:45:31,360 --> 00:45:35,160 Speaker 1: pervasive position whatever in all the indicators from twenty seven. 765 00:45:35,280 --> 00:45:39,080 Speaker 1: Stock market goes up. Wow, that's amazing. Okay, recession ends 766 00:45:39,120 --> 00:45:42,600 Speaker 1: now the fundamentals are back, uh in in play, and 767 00:45:42,760 --> 00:45:47,040 Speaker 1: you got another two years of market games not too shaty. 768 00:45:47,480 --> 00:45:50,640 Speaker 1: And then it all ends badly because well, given those numbers, 769 00:45:50,640 --> 00:45:52,520 Speaker 1: no surprise. Well, and it was built. There was some 770 00:45:52,680 --> 00:45:57,080 Speaker 1: there was some, there was some New York active other things. 771 00:45:57,120 --> 00:45:59,200 Speaker 1: There was different kinds of consumer financing was coming in 772 00:45:59,440 --> 00:46:02,359 Speaker 1: all kinds of average. Okay, so that's we're not that. 773 00:46:03,040 --> 00:46:06,359 Speaker 1: But what it what that shows you is that what's 774 00:46:06,400 --> 00:46:11,080 Speaker 1: going on now has happened before. Okay, this it's it's 775 00:46:11,120 --> 00:46:14,080 Speaker 1: not like everything's broken and it doesn't make any sense 776 00:46:14,160 --> 00:46:19,000 Speaker 1: this this can happen, But it does suggest that, um, 777 00:46:19,040 --> 00:46:22,600 Speaker 1: that feeling that you have that it might not end well, um, 778 00:46:22,760 --> 00:46:25,400 Speaker 1: you know there's some precedent for that. Uh. And I 779 00:46:25,480 --> 00:46:28,600 Speaker 1: can't say, uh that tomorrow is going to be bad 780 00:46:28,719 --> 00:46:33,240 Speaker 1: or whatever, but you know, ultimately, if we don't have 781 00:46:34,040 --> 00:46:39,799 Speaker 1: uh stronger economic growth on a sustained basis, that disconnect 782 00:46:40,000 --> 00:46:43,560 Speaker 1: between some of the expectations and the fundamentals may have 783 00:46:43,600 --> 00:46:47,839 Speaker 1: to get reconciled. So that brings us back to your 784 00:46:47,960 --> 00:46:53,200 Speaker 1: previous comment that you end up with you end up 785 00:46:53,280 --> 00:46:56,839 Speaker 1: with a situation where you have more frequent recessions even 786 00:46:56,840 --> 00:47:00,600 Speaker 1: though they're more shallow. And so is that what we know, 787 00:47:00,680 --> 00:47:03,240 Speaker 1: they're not necessarily more they don't have to be more shallow. 788 00:47:03,360 --> 00:47:09,200 Speaker 1: So in UH remember Japan, UH seventeen years ago on 789 00:47:09,239 --> 00:47:14,000 Speaker 1: April one, raised it's UH tax, and this past April one, 790 00:47:14,160 --> 00:47:17,480 Speaker 1: they raised their tax against sales tax and um, it 791 00:47:17,520 --> 00:47:20,359 Speaker 1: didn't work out well because at the time either well 792 00:47:21,080 --> 00:47:23,200 Speaker 1: currently it doesn't seem to be working out too well. 793 00:47:23,280 --> 00:47:26,000 Speaker 1: And last time didn't they just print like a five 794 00:47:26,040 --> 00:47:29,320 Speaker 1: point nine percent GDP or something crazy like in anticipation 795 00:47:29,440 --> 00:47:33,200 Speaker 1: of the tax. So if you're so everybody's front running, 796 00:47:33,239 --> 00:47:35,480 Speaker 1: the new Q two is going to be a jerk 797 00:47:35,520 --> 00:47:38,200 Speaker 1: back the other way. So when does the tax take effect? 798 00:47:38,520 --> 00:47:43,600 Speaker 1: April one? So all just now? Oh so so Q 799 00:47:43,840 --> 00:47:46,359 Speaker 1: one was before the tax? Correct, So you bought your 800 00:47:46,360 --> 00:47:49,200 Speaker 1: bicycle or your air conditioner before and then you didn't 801 00:47:49,200 --> 00:47:51,120 Speaker 1: have to pay five percent more in tax? Is that 802 00:47:51,160 --> 00:47:53,680 Speaker 1: what it is? It's five percent doubled that they doubled 803 00:47:53,680 --> 00:47:57,120 Speaker 1: it practically right, So when trying to stimulate spending, why 804 00:47:57,160 --> 00:47:59,759 Speaker 1: would you want to put a further dragon. I will 805 00:47:59,800 --> 00:48:03,040 Speaker 1: not I will not try to explain the policies of 806 00:48:03,120 --> 00:48:07,239 Speaker 1: these countries. I'm not I'm not a free market absolutist, 807 00:48:07,320 --> 00:48:09,800 Speaker 1: but it's pretty clear. If you want more of something, 808 00:48:09,880 --> 00:48:12,680 Speaker 1: tax it less. If you want less of something, tax 809 00:48:12,719 --> 00:48:14,840 Speaker 1: it more. Well, And I would say from a cycle 810 00:48:14,840 --> 00:48:17,319 Speaker 1: point of view where I can add something that that 811 00:48:17,480 --> 00:48:21,000 Speaker 1: when the cycle is decelerating, you probably don't want to 812 00:48:21,000 --> 00:48:23,719 Speaker 1: push it down further. You know, if I if I 813 00:48:23,719 --> 00:48:25,480 Speaker 1: had to raise taxes at some point, I do it 814 00:48:25,600 --> 00:48:27,279 Speaker 1: when the cycle was going up, not when I was 815 00:48:27,320 --> 00:48:31,319 Speaker 1: going down as they did in seven. Now people think 816 00:48:31,400 --> 00:48:33,799 Speaker 1: Japan has had deflation forever. Actually no, it didn't start 817 00:48:33,920 --> 00:48:38,479 Speaker 1: till after this policy mistake where they raised taxes going 818 00:48:38,600 --> 00:48:42,839 Speaker 1: into a downturn, and that recession that they had, uh 819 00:48:44,440 --> 00:48:47,760 Speaker 1: was one of the nastiest, most severe recessions they've had, 820 00:48:47,880 --> 00:48:54,040 Speaker 1: and it brought to that economy real persistent deflation. Now 821 00:48:54,080 --> 00:48:57,680 Speaker 1: in Europe you're fighting disinflation. In the US, you're fighting disinflation. 822 00:48:57,719 --> 00:49:00,840 Speaker 1: We're not a deflation. But although we have been seeing 823 00:49:00,880 --> 00:49:04,160 Speaker 1: signs of an uptick in inflation, you've seen in in 824 00:49:04,400 --> 00:49:06,399 Speaker 1: in in the stuff that normal people care about, which 825 00:49:06,440 --> 00:49:09,200 Speaker 1: is food and energy. You know, you know, the cost 826 00:49:09,239 --> 00:49:11,239 Speaker 1: of your iPad might go down a little bit, but 827 00:49:11,600 --> 00:49:16,839 Speaker 1: the food and the energy part, uh, that is non discretionary. Uh, 828 00:49:16,880 --> 00:49:19,920 Speaker 1: that part's going up. So the money that's left for 829 00:49:20,040 --> 00:49:24,799 Speaker 1: discretionary spending, which is very cyclical, is smaller, and so 830 00:49:24,880 --> 00:49:26,920 Speaker 1: the cyclical piece of your economy. Right when you look 831 00:49:26,960 --> 00:49:29,320 Speaker 1: at the rebound, the so called rebound and retail sales 832 00:49:29,320 --> 00:49:33,640 Speaker 1: that we had in the last print. You'll you'll notice 833 00:49:33,680 --> 00:49:35,839 Speaker 1: that it's what people need. It's not what they want, 834 00:49:36,239 --> 00:49:39,000 Speaker 1: but they're buying. And I think that kind of discribed 835 00:49:39,120 --> 00:49:42,600 Speaker 1: stuff that describes what's going on. I mean, uh, and 836 00:49:42,760 --> 00:49:45,800 Speaker 1: and when we talk about who who who can benefit 837 00:49:45,960 --> 00:49:50,839 Speaker 1: from looking at cyclical risk. If you're on the business side, uh, 838 00:49:50,880 --> 00:49:55,960 Speaker 1: if you're uh a discretionary type of business, your product 839 00:49:56,040 --> 00:49:59,080 Speaker 1: is somewhat discretionary, very cyclical. You have to be very 840 00:49:59,120 --> 00:50:02,040 Speaker 1: sensitive to the cycle. If you sell toilet paper, you know, 841 00:50:02,120 --> 00:50:04,399 Speaker 1: even in a downturn, you're gonna sell toilet paper. So 842 00:50:04,640 --> 00:50:07,680 Speaker 1: this raises an interesting question, not so much about toilet paper, 843 00:50:07,760 --> 00:50:11,560 Speaker 1: but about who are the folks that use your research. 844 00:50:12,040 --> 00:50:13,960 Speaker 1: Who are your you don't have to name names, but 845 00:50:14,360 --> 00:50:16,680 Speaker 1: who are the sort of people who are your clients. 846 00:50:16,760 --> 00:50:22,040 Speaker 1: It's really those who want to manage cyclical risks. So 847 00:50:22,480 --> 00:50:28,640 Speaker 1: in broad strokes, you'll have that that that includes governments, industry, investors, 848 00:50:28,760 --> 00:50:33,840 Speaker 1: all three so so so in in in in for investors. Uh, 849 00:50:33,920 --> 00:50:39,920 Speaker 1: it's it's uh largely around an asset allocation decision because 850 00:50:41,440 --> 00:50:43,359 Speaker 1: it's not a day trader stuff. Right, there's the day 851 00:50:43,360 --> 00:50:46,120 Speaker 1: traders couldn't couldn't really care about our stuff. But but 852 00:50:46,280 --> 00:50:48,640 Speaker 1: but are there any day traders left? I think I 853 00:50:48,680 --> 00:50:51,920 Speaker 1: think that they're you know, stegasaurus and day traders are 854 00:50:52,000 --> 00:50:53,840 Speaker 1: kind of there. You go about the same number of 855 00:50:53,920 --> 00:50:55,560 Speaker 1: roaming the Yeah, I know. But if you want to 856 00:50:55,560 --> 00:50:57,880 Speaker 1: look at what what region of the world, what country, 857 00:50:58,000 --> 00:51:01,160 Speaker 1: stocks and bonds, real estate, commodities, those kinds of asset 858 00:51:01,760 --> 00:51:06,719 Speaker 1: uh shifts and fourth, that's stuff that cycle indicators can 859 00:51:06,760 --> 00:51:08,799 Speaker 1: tell you about the risk of things going one way 860 00:51:08,920 --> 00:51:13,120 Speaker 1: or another. And when you look at businesses, the cyclical 861 00:51:13,160 --> 00:51:16,319 Speaker 1: businesses where there's there's a discretionary spending component, those are 862 00:51:16,320 --> 00:51:21,080 Speaker 1: the businesses that are really interested in managing cycle risk. 863 00:51:21,160 --> 00:51:25,120 Speaker 1: Manufacturing is very interested in that, they're very cyclical. Uh 864 00:51:25,200 --> 00:51:28,200 Speaker 1: so those kind of companies. And what about governments, do 865 00:51:28,280 --> 00:51:33,360 Speaker 1: you guys actually date recessions for twenty one countries sounds 866 00:51:33,440 --> 00:51:39,239 Speaker 1: like a strange Well, yeah, when does it become serious? So, well, 867 00:51:39,520 --> 00:51:42,319 Speaker 1: twenty one countries, you're the arbiter of one recession being right. 868 00:51:42,520 --> 00:51:46,320 Speaker 1: So for policymakers, I mean, I think, uh, certainly, um 869 00:51:46,360 --> 00:51:48,600 Speaker 1: at the central bank level, there's a lot of interest. 870 00:51:49,320 --> 00:51:53,920 Speaker 1: I think for longer term policymakers, like how do we 871 00:51:53,960 --> 00:51:58,000 Speaker 1: get out of this mess. Uh, there's interest, but it's 872 00:51:58,040 --> 00:52:01,359 Speaker 1: more on a theoretical level, because if we are in 873 00:52:01,440 --> 00:52:05,160 Speaker 1: this low growth, more frequent recession, it does all kinds 874 00:52:05,200 --> 00:52:08,800 Speaker 1: of things to your budget policy. Uh, you know, because 875 00:52:08,840 --> 00:52:11,040 Speaker 1: you're going to have high on the you know, long 876 00:52:11,120 --> 00:52:13,480 Speaker 1: term un employment's gonna be high, disability payments are gonna 877 00:52:13,480 --> 00:52:16,080 Speaker 1: be high, all these other transfers are gonna be high. 878 00:52:16,120 --> 00:52:19,440 Speaker 1: So your budget issues are are there, and there's no 879 00:52:19,520 --> 00:52:23,240 Speaker 1: clear policy that is going to jerk your trend growth 880 00:52:23,320 --> 00:52:27,279 Speaker 1: right up. Uh and so, and this isn't something that's 881 00:52:27,280 --> 00:52:29,239 Speaker 1: simply about the US. We're seeing it in Europe, We're 882 00:52:29,239 --> 00:52:32,239 Speaker 1: seeing it in Japan. This is a global phenomenon. This 883 00:52:32,280 --> 00:52:36,719 Speaker 1: is a global phenomenon of more developed economies. And it 884 00:52:36,840 --> 00:52:40,120 Speaker 1: may have demographics, it may have globalization. It's certainly I 885 00:52:40,160 --> 00:52:44,520 Speaker 1: think productivity growth is an issue which has been pretty weak. Now. 886 00:52:44,600 --> 00:52:48,200 Speaker 1: Is it weak because it's gained so much over the 887 00:52:48,200 --> 00:52:51,280 Speaker 1: past thirty years, or is it just weak because companies 888 00:52:51,320 --> 00:52:56,160 Speaker 1: aren't investing in capex and other such things that improve 889 00:52:56,239 --> 00:53:00,200 Speaker 1: productivity the way they did ten years ago. Well, Um, 890 00:53:00,239 --> 00:53:02,880 Speaker 1: probably a little bit of both. Probably a little bit 891 00:53:02,920 --> 00:53:05,239 Speaker 1: of both. I mean, that's an interesting I was talking 892 00:53:05,280 --> 00:53:07,960 Speaker 1: earlier this morning about the policies, you know, low interest 893 00:53:08,040 --> 00:53:11,160 Speaker 1: rates or or a tax break on cap X. And 894 00:53:11,239 --> 00:53:14,920 Speaker 1: it's interesting because you're essentially paying businesses to the extent 895 00:53:14,960 --> 00:53:16,920 Speaker 1: they will invest to invest in something that will get 896 00:53:17,000 --> 00:53:19,960 Speaker 1: rid of a job. You know, that's a lot of 897 00:53:19,960 --> 00:53:22,080 Speaker 1: what they're that they've been doing. And when you look 898 00:53:22,120 --> 00:53:25,239 Speaker 1: at businesses I you may have seen Larry Fink from 899 00:53:25,280 --> 00:53:30,359 Speaker 1: black Rock wrote a letter to his peers, uh two 900 00:53:30,360 --> 00:53:34,040 Speaker 1: months ago, and he said, please please please spot Star 901 00:53:34,120 --> 00:53:37,440 Speaker 1: spendence your money, you know, and sitting on reckon amounts 902 00:53:37,440 --> 00:53:40,560 Speaker 1: of cash but breaks them out and um. But the 903 00:53:40,640 --> 00:53:43,480 Speaker 1: businesses are not that interested in doing it because the 904 00:53:43,600 --> 00:53:47,359 Speaker 1: demand is, you know, lackluster. It's kind of black. One 905 00:53:47,400 --> 00:53:51,080 Speaker 1: of the things we noticed really early to mid two 906 00:53:51,160 --> 00:53:56,360 Speaker 1: thousands people call it business intelligence or other types of software. 907 00:53:56,360 --> 00:54:00,560 Speaker 1: There's a a few dozen publicly traded companies, everything from 908 00:54:00,600 --> 00:54:05,480 Speaker 1: salesforce to business objects as tons of them. And when 909 00:54:05,520 --> 00:54:07,840 Speaker 1: you speak to the people who are fairly senior in 910 00:54:07,880 --> 00:54:12,360 Speaker 1: those companies, they'll basically say, our whole presentation is to 911 00:54:12,440 --> 00:54:16,360 Speaker 1: walk into any company and say this software is going 912 00:54:16,440 --> 00:54:20,000 Speaker 1: to cost you twelve million dollars and the CEO CFO 913 00:54:20,560 --> 00:54:22,799 Speaker 1: wants to kick him out of the room, and he says, 914 00:54:22,880 --> 00:54:25,760 Speaker 1: before you throw me out, it's gonna save you thirty 915 00:54:25,800 --> 00:54:29,000 Speaker 1: seven million dollars in the first two years alone, and 916 00:54:29,040 --> 00:54:31,719 Speaker 1: if it doesn't, I'll refund the twelve million. Go on, 917 00:54:31,840 --> 00:54:34,879 Speaker 1: I'm listening. Here's what it does, Here's how it makes 918 00:54:34,880 --> 00:54:37,319 Speaker 1: you more efficient, here's how much staff you could lay off. 919 00:54:37,320 --> 00:54:40,560 Speaker 1: Blah blah blah. So look, I know my office what 920 00:54:40,640 --> 00:54:44,560 Speaker 1: we do with less than ten people. Ten forget twenty 921 00:54:44,640 --> 00:54:47,200 Speaker 1: years ago. Ten years ago would have taken forty people. 922 00:54:47,440 --> 00:54:49,839 Speaker 1: You know, there was a Dilbert comic of a year 923 00:54:49,920 --> 00:54:53,000 Speaker 1: or two ago where the caption says that the job 924 00:54:53,080 --> 00:54:57,720 Speaker 1: market is uh uh changing quicker than people can evolve. 925 00:54:58,360 --> 00:55:01,799 Speaker 1: And that's kind of what we're in and it's displaced 926 00:55:01,840 --> 00:55:05,840 Speaker 1: a lot of people who will not be able to work. 927 00:55:06,160 --> 00:55:08,359 Speaker 1: And it's not even just in the U s. It's 928 00:55:08,360 --> 00:55:10,799 Speaker 1: happening in Europe. It's happening to Triman. And you see, 929 00:55:11,120 --> 00:55:15,120 Speaker 1: older people are having to work longer, and younger people 930 00:55:15,120 --> 00:55:17,840 Speaker 1: are having a tougher time starting off in a good spot, 931 00:55:17,880 --> 00:55:21,520 Speaker 1: and that impacts their entire career path for their life. 932 00:55:22,120 --> 00:55:25,560 Speaker 1: So they begin Yeah, the the era if you graduate 933 00:55:25,640 --> 00:55:29,160 Speaker 1: college in the midst of recession, your lifetime earnings are 934 00:55:29,200 --> 00:55:32,400 Speaker 1: significantly lower than someone who graduates in the midst of 935 00:55:32,400 --> 00:55:36,239 Speaker 1: a boom. Luck of the draw just absolutely has nothing 936 00:55:36,239 --> 00:55:38,720 Speaker 1: to do with the skill set. So we also noticed 937 00:55:38,760 --> 00:55:40,640 Speaker 1: with creating a lot of tech jobs, with creating a 938 00:55:40,640 --> 00:55:43,799 Speaker 1: lot of energy jobs, but we're also creating a lot 939 00:55:43,880 --> 00:55:47,840 Speaker 1: of low wage jobs. So it's restaurant workers, it's employees. 940 00:55:47,880 --> 00:55:50,719 Speaker 1: The energy jobs are high paying, mining and energy and 941 00:55:50,760 --> 00:55:53,960 Speaker 1: these and dirt there, and and they don't play how 942 00:55:53,960 --> 00:55:55,680 Speaker 1: many people. I mean, yeah, if you can get them, 943 00:55:55,680 --> 00:55:58,320 Speaker 1: they're they're they're interesting and high paying. To North Dakota 944 00:55:58,360 --> 00:56:01,000 Speaker 1: where the unemployment rate is zero. But there's but there's 945 00:56:01,120 --> 00:56:03,279 Speaker 1: not and it's not going to move the dial on 946 00:56:03,320 --> 00:56:06,680 Speaker 1: the big numbers. And what you see is average hourly earnings. 947 00:56:07,360 --> 00:56:10,440 Speaker 1: It's going up, ticking up slowly. Uh, And that sounds 948 00:56:10,480 --> 00:56:13,440 Speaker 1: pretty good, right, But it's it's heavily weighted with it's 949 00:56:13,440 --> 00:56:15,799 Speaker 1: a fat head long tail. But it's actually not even 950 00:56:15,880 --> 00:56:18,440 Speaker 1: true if I mean, it's true that it's going up, 951 00:56:18,640 --> 00:56:21,239 Speaker 1: but it's going up for a statistically poor reason. The 952 00:56:21,280 --> 00:56:24,720 Speaker 1: reason that's going up is because the pace at which 953 00:56:24,840 --> 00:56:29,319 Speaker 1: your hours are being reduced, and is go is they're 954 00:56:29,320 --> 00:56:33,040 Speaker 1: being reduced faster than your wage is being reduced. So 955 00:56:33,120 --> 00:56:36,160 Speaker 1: people are working less but getting paid more per hour. Yeah, 956 00:56:36,160 --> 00:56:38,319 Speaker 1: you know, they're both going down. You're getting you're working 957 00:56:38,400 --> 00:56:41,560 Speaker 1: less hours and you're getting paid less, but the hours 958 00:56:41,600 --> 00:56:44,640 Speaker 1: are falling faster than your pay. So your average hourly 959 00:56:44,680 --> 00:56:50,440 Speaker 1: earnings go up, but NETT income going down. Yeah, and 960 00:56:50,440 --> 00:56:52,440 Speaker 1: that's really the only thing that matters. And you're saving. 961 00:56:52,760 --> 00:56:55,839 Speaker 1: People are diving into their savings and it's down at 962 00:56:55,840 --> 00:56:58,320 Speaker 1: a low, low level. And when you go to credit, 963 00:56:58,840 --> 00:57:01,759 Speaker 1: the kind of credit you can at is um You 964 00:57:01,800 --> 00:57:05,319 Speaker 1: can get stuff that's collateralized like a car loan, uh 965 00:57:05,480 --> 00:57:07,160 Speaker 1: and you might even have to stretch it out over 966 00:57:07,239 --> 00:57:10,080 Speaker 1: seven years. You can get a mortgage, but they'd rather 967 00:57:10,120 --> 00:57:12,040 Speaker 1: sell a house to somebody who's paying cash. And a 968 00:57:12,040 --> 00:57:13,759 Speaker 1: lot of people do pay cash. Just by the way. 969 00:57:13,760 --> 00:57:16,040 Speaker 1: There's just something And I've been back and forth with 970 00:57:16,120 --> 00:57:19,920 Speaker 1: Johnathan Miller about this today. Something came out today. I 971 00:57:19,960 --> 00:57:23,680 Speaker 1: sent it to him. Coasted struck me as wrong. Of 972 00:57:23,760 --> 00:57:27,120 Speaker 1: the homes purchased in Manhattan ap purchased with cash. Seems 973 00:57:27,160 --> 00:57:30,360 Speaker 1: like that number just seems way high. It might be 974 00:57:31,320 --> 00:57:34,600 Speaker 1: condos but still it's a huge point. I mean, whether 975 00:57:34,680 --> 00:57:38,040 Speaker 1: whether the numbers wrong. That's the general thrust of that 976 00:57:38,160 --> 00:57:41,439 Speaker 1: is cashes can the cash can go out and buy, 977 00:57:41,560 --> 00:57:44,320 Speaker 1: but but most people don't. You know, most people have 978 00:57:44,440 --> 00:57:47,200 Speaker 1: to They can't afford to buy a house outright. And 979 00:57:47,200 --> 00:57:49,880 Speaker 1: and so it's either speculative business or just wealthy people 980 00:57:49,880 --> 00:57:52,040 Speaker 1: who are doing it are wealthy global people who are 981 00:57:52,040 --> 00:57:54,000 Speaker 1: doing it. The Chinese are trying to get the money 982 00:57:54,000 --> 00:57:56,040 Speaker 1: out of China because they said, we're going to slow 983 00:57:56,080 --> 00:57:58,680 Speaker 1: this thing down, so you get your money out. And 984 00:57:58,760 --> 00:58:02,840 Speaker 1: it's either London, New York, kirk California, Vancouver. You there. 985 00:58:02,840 --> 00:58:05,720 Speaker 1: These they call them see through towers. Not like in 986 00:58:05,800 --> 00:58:08,640 Speaker 1: the nineteen eighties where it was a pejorative term in 987 00:58:08,760 --> 00:58:11,400 Speaker 1: Dallas when the energy boom busted and they had all 988 00:58:11,400 --> 00:58:15,040 Speaker 1: these buildings that were unrented. They have these hot, gorgeous 989 00:58:15,120 --> 00:58:18,840 Speaker 1: luxury high rise apartment buildings fully sold out, almost no 990 00:58:18,840 --> 00:58:22,560 Speaker 1: one living there, a vertical ghost. It's an asset and 991 00:58:22,600 --> 00:58:24,200 Speaker 1: if they have to it's a lifeboat. If they have 992 00:58:24,240 --> 00:58:25,440 Speaker 1: to get out, they have a place to live for 993 00:58:25,560 --> 00:58:28,600 Speaker 1: a student loan, government government guaranteed student loan. And you've 994 00:58:28,640 --> 00:58:31,560 Speaker 1: seen the growth there has been pretty helpless. Right, So, 995 00:58:31,680 --> 00:58:35,200 Speaker 1: but when you go to just regular consumer credit or 996 00:58:35,240 --> 00:58:37,000 Speaker 1: other kinds of loans, or you know, if you've got 997 00:58:37,040 --> 00:58:39,520 Speaker 1: if you go through the motions, I think someone putting down, 998 00:58:39,520 --> 00:58:42,720 Speaker 1: they gotta put down for a house, and it's it's 999 00:58:42,760 --> 00:58:44,800 Speaker 1: not terribly easy to get the mortgage. You gotta go 1000 00:58:44,800 --> 00:58:46,520 Speaker 1: through a lot of stuff together. Plus you have the 1001 00:58:46,520 --> 00:58:48,320 Speaker 1: return of p m I, you have the return of 1002 00:58:48,360 --> 00:58:52,480 Speaker 1: mortgage insurance. I'm hearing some people, and again I know 1003 00:58:52,600 --> 00:58:56,080 Speaker 1: enough people in the real estate industry that this is anecdotal, 1004 00:58:56,320 --> 00:59:00,120 Speaker 1: but interesting, um, and we we know the plural of 1005 00:59:00,120 --> 00:59:04,360 Speaker 1: anecdote isn't data. However, when you hear someone say they're 1006 00:59:04,360 --> 00:59:07,960 Speaker 1: putting down and therefore they don't have to put any 1007 00:59:08,000 --> 00:59:10,080 Speaker 1: sort of mortgage insurance, and then by the time they're 1008 00:59:10,080 --> 00:59:13,280 Speaker 1: done with closing costs and this and that, you know, 1009 00:59:13,400 --> 00:59:15,120 Speaker 1: you're kind of on the border of getting a proof 1010 00:59:15,200 --> 00:59:17,520 Speaker 1: for this. We want you to have mortgage insurance anyway, 1011 00:59:17,560 --> 00:59:20,400 Speaker 1: if you want us to underwrite the mortgage. So now, 1012 00:59:20,600 --> 00:59:24,200 Speaker 1: in Canada, which had a huge housing boom but didn't 1013 00:59:24,240 --> 00:59:28,080 Speaker 1: have a bus like we did, mortgage insurance is fairly 1014 00:59:28,280 --> 00:59:33,920 Speaker 1: mandatory and unless you put it used to be down. 1015 00:59:34,280 --> 00:59:38,400 Speaker 1: I think they lowered that to down. So and pretty 1016 00:59:38,480 --> 00:59:42,640 Speaker 1: much they have a highly regulated There are no exotic 1017 00:59:42,960 --> 00:59:48,840 Speaker 1: negative amorization interests, only mortgages. It's pretty straightforward. So, yeah, 1018 00:59:48,880 --> 00:59:51,880 Speaker 1: there's credit in the United States, but it's not certainly 1019 00:59:51,960 --> 00:59:55,440 Speaker 1: not loose credit. It's not easy to get a mortgage. 1020 00:59:55,640 --> 00:59:59,080 Speaker 1: And unless you have a high income and a good credit, 1021 00:59:59,200 --> 01:00:03,040 Speaker 1: raining and plenty of room you're not over extending yourself, 1022 01:00:03,120 --> 01:00:04,840 Speaker 1: You're gonna have a tough time getting a mortgage in 1023 01:00:04,880 --> 01:00:08,840 Speaker 1: the United States. And and so what's and so, so 1024 01:00:08,880 --> 01:00:11,200 Speaker 1: what's interesting, that's the kind of the lay of the land. 1025 01:00:11,360 --> 01:00:16,160 Speaker 1: And and what's interesting is that at the end of 1026 01:00:16,240 --> 01:00:19,440 Speaker 1: last year, we have the second half of last year, 1027 01:00:19,480 --> 01:00:23,840 Speaker 1: we have some growth in the second there is some 1028 01:00:23,960 --> 01:00:26,240 Speaker 1: lift happening to the economy, and we're looking for it 1029 01:00:26,280 --> 01:00:31,200 Speaker 1: to be pronounced, pervasive and persistent, and we want to 1030 01:00:31,240 --> 01:00:33,360 Speaker 1: put an end of that. Well, so we get pronounced 1031 01:00:33,360 --> 01:00:36,080 Speaker 1: and we get pervasive, we didn't get persistent. And the 1032 01:00:36,200 --> 01:00:39,560 Speaker 1: leading indicators forward looking indicators at the end of last 1033 01:00:39,640 --> 01:00:43,840 Speaker 1: year had all turned down before the weather got bad. 1034 01:00:44,720 --> 01:00:48,200 Speaker 1: The leading indicators of construction had turned down well before 1035 01:00:48,240 --> 01:00:50,640 Speaker 1: the weather got back. The leading indicators of home price 1036 01:00:50,680 --> 01:00:54,480 Speaker 1: inflation turned down even before the taper tantrum when Bernardi 1037 01:00:54,560 --> 01:00:59,800 Speaker 1: opened his mouth. So that was last June, the last spring. Yeah, 1038 01:00:59,800 --> 01:01:02,600 Speaker 1: it's a year ago. And so what what this is 1039 01:01:02,600 --> 01:01:05,240 Speaker 1: saying is that when we go back to what is 1040 01:01:05,280 --> 01:01:07,400 Speaker 1: a cycle, why is there one? It's it's part of 1041 01:01:07,400 --> 01:01:10,400 Speaker 1: the free market, that there were these indulge inous, cick 1042 01:01:10,480 --> 01:01:15,040 Speaker 1: local forces that had been rolling over before Bernanki opens 1043 01:01:15,080 --> 01:01:19,560 Speaker 1: his mouth, before the bad weather, and then uh, we 1044 01:01:19,640 --> 01:01:21,640 Speaker 1: get something like Q one. Now I'm not saying Q 1045 01:01:21,880 --> 01:01:26,640 Speaker 1: one GDP as weak as it was was um unrelated 1046 01:01:26,680 --> 01:01:27,960 Speaker 1: to weather. I think weather had a lot to do 1047 01:01:28,000 --> 01:01:30,000 Speaker 1: with it, obviously, and so we will get some bounce 1048 01:01:30,000 --> 01:01:33,840 Speaker 1: back from that. But but that I suspect is noise. 1049 01:01:34,480 --> 01:01:39,560 Speaker 1: I think the trend inside of that remains down. And 1050 01:01:39,680 --> 01:01:42,560 Speaker 1: when we look at the forward indicators, there's no imminent 1051 01:01:42,880 --> 01:01:46,760 Speaker 1: lift that's supposed that that's there. And so you look 1052 01:01:46,880 --> 01:01:50,560 Speaker 1: at um the thinking on the economy and there seems 1053 01:01:50,600 --> 01:01:53,040 Speaker 1: to be confusion. You know, there's there's there's still a 1054 01:01:53,120 --> 01:01:57,120 Speaker 1: relatively kind of optimistic we're gonna get escape philosophies on 1055 01:01:57,160 --> 01:02:01,880 Speaker 1: and so forth. But there are sarious signals like bond yields, 1056 01:02:01,920 --> 01:02:05,800 Speaker 1: for example, that are saying, you know, there's something happening. 1057 01:02:05,800 --> 01:02:08,400 Speaker 1: Maybe it's geopolitical stuff, maybe it's something else. We don't 1058 01:02:08,440 --> 01:02:12,760 Speaker 1: know exactly, but it doesn't fit this picture of everything's 1059 01:02:12,800 --> 01:02:17,360 Speaker 1: green light, no doubt about that. You mentioned Bernanke, who's 1060 01:02:17,480 --> 01:02:20,880 Speaker 1: no longer with the FED. What sort of relationship does 1061 01:02:21,280 --> 01:02:25,720 Speaker 1: eck Rey have with the Federal Reserve? Um, you know, nothing, 1062 01:02:26,400 --> 01:02:29,400 Speaker 1: uh that I can like officially speak of or anything 1063 01:02:29,440 --> 01:02:32,000 Speaker 1: like that. I what I can talk about is that, uh, 1064 01:02:32,120 --> 01:02:35,240 Speaker 1: earlier there was a there was a close personal relationship 1065 01:02:35,280 --> 01:02:40,120 Speaker 1: between my mentor, Jeffrey Moore and uh Sherman Greenspan uh 1066 01:02:40,120 --> 01:02:44,840 Speaker 1: And um, you know, Bernankey was probably aware of all 1067 01:02:44,880 --> 01:02:50,280 Speaker 1: of that. And I do know that, you know, the 1068 01:02:50,320 --> 01:02:52,560 Speaker 1: central banks are aware of our stuff, and in particular 1069 01:02:52,600 --> 01:02:54,840 Speaker 1: the future inflation gauge, right because they'd love to see 1070 01:02:54,840 --> 01:02:58,320 Speaker 1: some inflation right there looking they would love to see 1071 01:02:58,360 --> 01:03:01,800 Speaker 1: some inflation and anywhere Europe too. In Europe and these 1072 01:03:01,880 --> 01:03:03,920 Speaker 1: and these future inflation gauges for the Eurozone and for 1073 01:03:03,960 --> 01:03:07,320 Speaker 1: the US UM have been down, you know, week for 1074 01:03:07,400 --> 01:03:09,800 Speaker 1: an extended period of time. Recently, at the end of 1075 01:03:09,840 --> 01:03:11,680 Speaker 1: last year, the future inflation gates started to pick up 1076 01:03:11,680 --> 01:03:15,920 Speaker 1: a little bit, but it seems to have stalled out, 1077 01:03:15,960 --> 01:03:19,760 Speaker 1: which is kind of a concern. Do you ever look 1078 01:03:19,800 --> 01:03:23,160 Speaker 1: at things like the billion price project, that product billion 1079 01:03:23,200 --> 01:03:26,400 Speaker 1: price project at m I T where they're tracking all 1080 01:03:26,440 --> 01:03:30,280 Speaker 1: these online prices instead of relying on the BLS output 1081 01:03:30,440 --> 01:03:32,680 Speaker 1: or sure, sure and that's a that's a that's a 1082 01:03:32,800 --> 01:03:37,240 Speaker 1: very interesting way to get at where prices are now. 1083 01:03:37,880 --> 01:03:42,040 Speaker 1: Uh And we think that's very interesting. It's a coincident indicator. 1084 01:03:42,480 --> 01:03:45,200 Speaker 1: Uh not that doesn't really tell you anything about the future. So, 1085 01:03:45,800 --> 01:03:49,120 Speaker 1: but that's still a nice alternate data set. We look 1086 01:03:49,120 --> 01:03:52,080 Speaker 1: at the BLS data, we look p P I, c 1087 01:03:52,240 --> 01:03:54,880 Speaker 1: p I g GDP to flatter all of these items 1088 01:03:54,920 --> 01:03:58,560 Speaker 1: we're looking at, uh, all heavily modeled, with all sorts 1089 01:03:58,560 --> 01:04:00,960 Speaker 1: of all heavily model But what happens is over time 1090 01:04:01,320 --> 01:04:05,520 Speaker 1: they're going to get the cyclical direction right right, and 1091 01:04:05,640 --> 01:04:09,720 Speaker 1: just to ignore the markings on the vertical access and 1092 01:04:09,800 --> 01:04:12,240 Speaker 1: look at the line. Yeah, I don't, I don't, Yeah, 1093 01:04:12,320 --> 01:04:14,720 Speaker 1: I don't say that any one of these numbers is correct, 1094 01:04:14,920 --> 01:04:17,360 Speaker 1: you know, I I but but is this just came up, 1095 01:04:18,000 --> 01:04:21,720 Speaker 1: just came up this morning the Boskin Commission. A friend 1096 01:04:21,840 --> 01:04:26,280 Speaker 1: had tweeted on the his handle on Twitter as a 1097 01:04:26,360 --> 01:04:31,320 Speaker 1: Relevant Investor that his wife was complaining that lamb chops 1098 01:04:31,320 --> 01:04:34,040 Speaker 1: are now too expensive, and I said, hey, the Boston 1099 01:04:34,080 --> 01:04:37,600 Speaker 1: Commission said you could substitute chicken wings for that, and 1100 01:04:37,640 --> 01:04:41,160 Speaker 1: it's the same. There's no food inflation just because you've 1101 01:04:41,200 --> 01:04:44,320 Speaker 1: been priced out of one food and are substituting a 1102 01:04:44,440 --> 01:04:47,640 Speaker 1: cheaper food. You know, they're trying to take a any 1103 01:04:47,640 --> 01:04:50,640 Speaker 1: way to not show higher inflation back in the seventies 1104 01:04:50,640 --> 01:04:54,040 Speaker 1: and eighties, and today it's the opposite. Today they want 1105 01:04:54,040 --> 01:04:56,160 Speaker 1: to show something. I was talking with somebody who's writing 1106 01:04:56,160 --> 01:04:58,320 Speaker 1: an article in there, and they're basically, what are you 1107 01:04:58,360 --> 01:05:01,200 Speaker 1: going to believe the a stick or your lying eyes? 1108 01:05:01,360 --> 01:05:03,840 Speaker 1: I mean, you know if you're we all know we 1109 01:05:03,920 --> 01:05:07,040 Speaker 1: all are. But you also have to put that into perspective. 1110 01:05:07,560 --> 01:05:10,640 Speaker 1: We fill our cars with gasoline, and there are ten 1111 01:05:10,680 --> 01:05:14,680 Speaker 1: ft tall prices on each corner showing the sign of that. 1112 01:05:15,840 --> 01:05:19,480 Speaker 1: But you know I spend fifty dollars a week on gasoline. 1113 01:05:19,800 --> 01:05:23,760 Speaker 1: Is not by go back thirty years, fuel was nine 1114 01:05:23,800 --> 01:05:26,800 Speaker 1: percent of the family budget. Today even at at a 1115 01:05:26,840 --> 01:05:29,080 Speaker 1: hundred dollars a barrel, it's two and a half percent. 1116 01:05:29,520 --> 01:05:33,080 Speaker 1: So even though we see that we don't realize that 1117 01:05:33,120 --> 01:05:35,960 Speaker 1: could look in Europe it's twelve dollars a gallon, so 1118 01:05:36,040 --> 01:05:39,320 Speaker 1: that's a whole different story. But I think people's perspective 1119 01:05:39,400 --> 01:05:42,800 Speaker 1: on what they're spending money on. You don't really see 1120 01:05:42,840 --> 01:05:46,160 Speaker 1: what college costs, what healthcare costs until you write that 1121 01:05:46,240 --> 01:05:49,200 Speaker 1: check for how much. And that's gone up in a 1122 01:05:49,440 --> 01:05:53,120 Speaker 1: huge way, much bigger impact than what you buy every day, 1123 01:05:53,160 --> 01:05:55,360 Speaker 1: and has a disproportioned impact to you see, and and 1124 01:05:55,400 --> 01:05:58,200 Speaker 1: it goes back to needs and wants and and I 1125 01:05:58,240 --> 01:06:01,480 Speaker 1: think what may be happening is that you're right, the 1126 01:06:01,480 --> 01:06:03,920 Speaker 1: the energy components say at the gas tank is a 1127 01:06:04,120 --> 01:06:07,080 Speaker 1: smaller fraction of your family budget than it used to be. 1128 01:06:07,160 --> 01:06:10,040 Speaker 1: But what's happening is that you don't have a lot 1129 01:06:10,080 --> 01:06:12,840 Speaker 1: of money left over for discretionary spending at the end 1130 01:06:12,880 --> 01:06:18,440 Speaker 1: of the day. And that is making you either go 1131 01:06:18,520 --> 01:06:23,360 Speaker 1: into your savings or take out credit. And taking our credit, 1132 01:06:25,240 --> 01:06:26,880 Speaker 1: I mean the plan here is to get you to 1133 01:06:26,960 --> 01:06:31,160 Speaker 1: borrow morning more money, right, which as we see, so 1134 01:06:31,200 --> 01:06:34,920 Speaker 1: this is where you see where the policy um of 1135 01:06:35,480 --> 01:06:40,200 Speaker 1: I think denying what is happening is dangerous. Uh, we're 1136 01:06:40,240 --> 01:06:43,439 Speaker 1: not going back to three train growth anytime soon or never, 1137 01:06:43,800 --> 01:06:47,120 Speaker 1: just uh not next decade. Yeah, it looks like five 1138 01:06:47,160 --> 01:06:50,000 Speaker 1: ten years. It's not happening, right, And so if that 1139 01:06:50,200 --> 01:06:52,200 Speaker 1: is indeed true, and I think I can argue pretty 1140 01:06:52,200 --> 01:06:58,000 Speaker 1: strongly that it is, then shouldn't our policies consider that possibility? 1141 01:06:58,160 --> 01:07:01,600 Speaker 1: And we don't want to think about it. Here's a 1142 01:07:01,720 --> 01:07:05,200 Speaker 1: policies and I'm not listening, not now. The policy instead is, oh, 1143 01:07:05,240 --> 01:07:07,880 Speaker 1: you know, don't worry, don't freak out, to be happy, 1144 01:07:08,360 --> 01:07:12,840 Speaker 1: interest rates will stay low. And if you shut off 1145 01:07:12,840 --> 01:07:14,560 Speaker 1: and consume, and if you default, it was your fault, 1146 01:07:14,920 --> 01:07:16,360 Speaker 1: you know, And he said, it's a it's a kind 1147 01:07:16,360 --> 01:07:19,000 Speaker 1: of a weird set up here. Well, it is true, 1148 01:07:19,000 --> 01:07:21,520 Speaker 1: if you default, it's your fault, but you're the one 1149 01:07:22,200 --> 01:07:24,320 Speaker 1: to buying this in the first place when the policy 1150 01:07:24,440 --> 01:07:29,120 Speaker 1: is to borrow. Uh And um, I don't know how 1151 01:07:29,160 --> 01:07:31,240 Speaker 1: the whole student loan thing will get reconciled, but at 1152 01:07:31,240 --> 01:07:34,160 Speaker 1: some point that I'll have to the Elizabeth Warren proposal 1153 01:07:34,280 --> 01:07:37,600 Speaker 1: to say, hey, people, who are you know, we've bailed 1154 01:07:37,600 --> 01:07:40,960 Speaker 1: out banks, you have this trillions and student loans, why 1155 01:07:41,000 --> 01:07:45,600 Speaker 1: not reset that to the what we're currently lending. You'll 1156 01:07:45,640 --> 01:07:48,960 Speaker 1: you'll it'll be tremendously stimulative because suddenly all these students 1157 01:07:49,360 --> 01:07:51,000 Speaker 1: will be able to afford to move out of their 1158 01:07:51,040 --> 01:07:54,800 Speaker 1: parents base, or they'll buy another Apple product. Um they're 1159 01:07:54,840 --> 01:07:57,480 Speaker 1: buying that apple product anyway. The question is can we 1160 01:07:57,520 --> 01:07:59,800 Speaker 1: get them out of their parents based and the format 1161 01:07:59,840 --> 01:08:04,000 Speaker 1: how household formation get married? Have two point three kids 1162 01:08:04,040 --> 01:08:06,560 Speaker 1: by a half, buy a car, and that's how we'll 1163 01:08:06,600 --> 01:08:10,520 Speaker 1: get you know. The weird thing about the millennials, the 1164 01:08:10,640 --> 01:08:13,280 Speaker 1: group that I think are defined as being born between 1165 01:08:13,400 --> 01:08:17,880 Speaker 1: nine eight and two thousand, strictly in numbers, not necessarily 1166 01:08:17,880 --> 01:08:21,120 Speaker 1: in proportions, but in numbers, they're a bigger group than 1167 01:08:21,160 --> 01:08:25,640 Speaker 1: the baby Boomers were. Like, this is potentially a demographic 1168 01:08:26,520 --> 01:08:31,400 Speaker 1: cohort that can drive now the problems and their risk averse. 1169 01:08:31,520 --> 01:08:35,880 Speaker 1: They're underemployed, they're unemployed or unemployed. They're forming households at 1170 01:08:35,880 --> 01:08:38,439 Speaker 1: a much lower rate than the previous generation because their 1171 01:08:38,479 --> 01:08:41,840 Speaker 1: peer group is in the same situation. There's something kind 1172 01:08:41,840 --> 01:08:45,040 Speaker 1: of like I think, you know, in an earlier generation, 1173 01:08:45,080 --> 01:08:46,840 Speaker 1: if you lived at home, it's like what are you doing? 1174 01:08:46,880 --> 01:08:48,960 Speaker 1: You get right out right, and because your peers were, 1175 01:08:49,640 --> 01:08:51,320 Speaker 1: Now if your peers are at home, I can stay 1176 01:08:51,360 --> 01:08:53,479 Speaker 1: at home too. Right, there's a different slightly different in 1177 01:08:53,760 --> 01:08:58,160 Speaker 1: it's far less socially framed upon. Right, that's it's not 1178 01:08:58,280 --> 01:09:01,559 Speaker 1: stigmatized like it would have been with the generation. I'm 1179 01:09:01,600 --> 01:09:03,120 Speaker 1: not gonna get I'm not going to get the quote 1180 01:09:03,200 --> 01:09:05,680 Speaker 1: exactly right, but I'm gonna be able to paraphrase this. 1181 01:09:06,479 --> 01:09:07,640 Speaker 1: I want to go to the other end of the 1182 01:09:07,640 --> 01:09:12,559 Speaker 1: spectrum to retirees and uh. During Yellen's confirmation and may 1183 01:09:12,640 --> 01:09:16,439 Speaker 1: I think it was a Senate confirmation here, yes, and 1184 01:09:16,479 --> 01:09:21,200 Speaker 1: there was there was a senator from a retiree state, 1185 01:09:21,240 --> 01:09:23,920 Speaker 1: like an Arizona state, something like that. And so it's 1186 01:09:23,920 --> 01:09:27,439 Speaker 1: either McCain or whoever was McCain someone I don't yeah, 1187 01:09:27,439 --> 01:09:30,200 Speaker 1: as probably junior center. And so he says, you know, 1188 01:09:30,880 --> 01:09:36,599 Speaker 1: miss Yellen, UM, my constituents have done everything that they 1189 01:09:36,640 --> 01:09:41,799 Speaker 1: were supposed to do. They worked, they saved for their retirement. Uh, 1190 01:09:41,840 --> 01:09:45,760 Speaker 1: they worked out their budget, they set everything up, and 1191 01:09:45,920 --> 01:09:50,360 Speaker 1: your policies are crushing them because of the zero interest rates. 1192 01:09:50,360 --> 01:09:53,559 Speaker 1: Not so far from the truth. And she responds, and 1193 01:09:53,600 --> 01:09:57,320 Speaker 1: it was an amazing moment of I'm going to say 1194 01:09:57,360 --> 01:10:01,480 Speaker 1: cognitive dissonants where she says, well, you know, my policies 1195 01:10:01,840 --> 01:10:04,560 Speaker 1: or our I think Chairman Bernanke's policies that she was 1196 01:10:05,120 --> 01:10:08,360 Speaker 1: going saying she was going to continue, Um, you know, 1197 01:10:08,360 --> 01:10:10,160 Speaker 1: they shouldn't look at it that way. They should look 1198 01:10:10,200 --> 01:10:13,040 Speaker 1: at it, uh that these policies are giving them an 1199 01:10:13,040 --> 01:10:17,519 Speaker 1: economy that they can go, that they can go and 1200 01:10:17,560 --> 01:10:21,160 Speaker 1: find a job in so assuming they can. But it's 1201 01:10:21,320 --> 01:10:22,800 Speaker 1: I thought it was kind of funny that you're telling 1202 01:10:22,800 --> 01:10:25,200 Speaker 1: a retiree to go find a job and that's the plan. 1203 01:10:26,280 --> 01:10:30,040 Speaker 1: So here's that weird. Here's the more articulate way she 1204 01:10:30,040 --> 01:10:34,040 Speaker 1: should have said that, Hey, listen, we're confronted. Let me 1205 01:10:34,200 --> 01:10:37,559 Speaker 1: let me put it this way. Imagine if someone pushes 1206 01:10:37,600 --> 01:10:40,920 Speaker 1: a button and everybody who testifies in Congress has to 1207 01:10:40,960 --> 01:10:45,240 Speaker 1: tell the truth, just hypothet So it's like that Jim 1208 01:10:45,280 --> 01:10:49,200 Speaker 1: Carrey movie that's which is, which is utterly hilarious. But 1209 01:10:50,040 --> 01:10:52,719 Speaker 1: imagine if you could push the truth button and Yellen says, 1210 01:10:53,600 --> 01:10:56,879 Speaker 1: I'm completely empathetic to the people in your state. However, 1211 01:10:57,000 --> 01:10:59,840 Speaker 1: you have to understand, this economy is hanging on by 1212 01:10:59,840 --> 01:11:04,240 Speaker 1: its fingernails. You have a Congress that refuses to do 1213 01:11:04,320 --> 01:11:07,599 Speaker 1: what we normally do after recession, which is stimulated. In fact, 1214 01:11:07,960 --> 01:11:11,120 Speaker 1: if this economy would have if this Congress would have 1215 01:11:11,200 --> 01:11:13,639 Speaker 1: did what the Congress in No. One oh two did, 1216 01:11:14,040 --> 01:11:15,960 Speaker 1: then we'd have a two and a half percent g 1217 01:11:16,040 --> 01:11:21,759 Speaker 1: d P and a five unemployment rate. Instead, government, state, local, 1218 01:11:21,800 --> 01:11:24,840 Speaker 1: and federal are a drag on the economy because they're 1219 01:11:24,880 --> 01:11:29,800 Speaker 1: laying off huge numbers of policemen, firemen, teachers, etcetera. So 1220 01:11:29,880 --> 01:11:31,640 Speaker 1: that's the first truth I have to share with you, 1221 01:11:31,680 --> 01:11:33,320 Speaker 1: And the second truth I have to share with you 1222 01:11:33,479 --> 01:11:36,680 Speaker 1: is we're the only game in town. And if we 1223 01:11:36,760 --> 01:11:40,320 Speaker 1: stop quee, at least this is what I believe, she believes. 1224 01:11:40,640 --> 01:11:44,400 Speaker 1: If we stop que, you idiots keep telling me that 1225 01:11:44,479 --> 01:11:47,240 Speaker 1: que doesn't work and the policies of failure. Hey, if 1226 01:11:47,280 --> 01:11:52,120 Speaker 1: I stop this, we're back in a recession. Home prices plummet, 1227 01:11:52,920 --> 01:11:57,400 Speaker 1: rates normalize, Banks that have their books laden with bed 1228 01:11:57,479 --> 01:12:03,360 Speaker 1: mortgages start not only going, but we end up back 1229 01:12:03,360 --> 01:12:05,760 Speaker 1: in a great recession again. Well, you guys are not 1230 01:12:05,760 --> 01:12:07,120 Speaker 1: gonna be able to fix this. You don't know that 1231 01:12:07,120 --> 01:12:08,840 Speaker 1: it would be a I would. I would. I'm just 1232 01:12:08,880 --> 01:12:12,960 Speaker 1: telling you the truth. She would say, Hey, do you 1233 01:12:13,000 --> 01:12:15,960 Speaker 1: want us to let Bank America City, Meryl Goldman? You 1234 01:12:15,960 --> 01:12:17,719 Speaker 1: want us to let those guys go back again? Because 1235 01:12:17,720 --> 01:12:20,240 Speaker 1: you guys spend a trillion dollars and it's a false 1236 01:12:20,240 --> 01:12:22,320 Speaker 1: set up to even think that we can avoid recessions. 1237 01:12:22,320 --> 01:12:25,040 Speaker 1: I think that's part of bad framing here. And if 1238 01:12:25,080 --> 01:12:27,640 Speaker 1: we want to go down the road of like different scenarios, 1239 01:12:27,720 --> 01:12:32,280 Speaker 1: what might have happened? I I sometimes wonder, um, what 1240 01:12:32,880 --> 01:12:38,280 Speaker 1: if the Great Recession was greater? So my you know, 1241 01:12:38,720 --> 01:12:42,519 Speaker 1: look I'm talking my book now you know my view was, Hey, 1242 01:12:42,560 --> 01:12:44,760 Speaker 1: the right thing to do is down the street. We 1243 01:12:44,800 --> 01:12:47,639 Speaker 1: have that nice building with the vertical columns. It's called 1244 01:12:47,680 --> 01:12:50,040 Speaker 1: the bankruptcy Court. And I don't care if you Goldman 1245 01:12:50,080 --> 01:12:53,920 Speaker 1: Saxon Leman with Mancamara City Group what we ended up 1246 01:12:53,960 --> 01:12:58,560 Speaker 1: doing for GM prepackaged bankruptcy where the government is providing 1247 01:12:59,040 --> 01:13:04,639 Speaker 1: the dead rim possess shan finance, the dip finance, that's 1248 01:13:04,720 --> 01:13:07,960 Speaker 1: the that's tearing off the band aid. Maybe the Dow 1249 01:13:08,040 --> 01:13:11,080 Speaker 1: wouldn't have found a bottom at six and change. Maybe 1250 01:13:11,400 --> 01:13:13,519 Speaker 1: the six six six bottom in the SMP would have 1251 01:13:13,560 --> 01:13:17,280 Speaker 1: been five five five or four for four. Picture if 1252 01:13:17,280 --> 01:13:19,960 Speaker 1: that sets you up for better, but then you're much healthier. 1253 01:13:20,040 --> 01:13:24,000 Speaker 1: My favorite example is you take the bank American Merrill 1254 01:13:24,080 --> 01:13:29,760 Speaker 1: Lynch Countrywide Company, which is one company you basically say 1255 01:13:29,800 --> 01:13:35,400 Speaker 1: to to Countrywide, you'r to that whole group. Your your bankrupt. 1256 01:13:35,680 --> 01:13:37,840 Speaker 1: So we're gonna spin out Merrill Lynch as a free 1257 01:13:37,840 --> 01:13:42,000 Speaker 1: standing debt free investment bank. We're gonna spin out Countrywide 1258 01:13:42,320 --> 01:13:47,760 Speaker 1: as a free standing debt free no bad mortgages zombies. Right, 1259 01:13:47,760 --> 01:13:51,360 Speaker 1: We're gonna take Bank of America. We're gonna take all 1260 01:13:51,400 --> 01:13:54,439 Speaker 1: of your shareholders and wipe them out. We're gonna take 1261 01:13:54,479 --> 01:13:57,040 Speaker 1: your bond holders and give them a giant haircut, so 1262 01:13:57,479 --> 01:14:00,200 Speaker 1: the bonds are worth fifteen cents on the dollar. We're 1263 01:14:00,240 --> 01:14:03,760 Speaker 1: gonna take all the what people are calling toxic assets, 1264 01:14:03,760 --> 01:14:08,120 Speaker 1: but really it's toxic prices. These assets at tens on 1265 01:14:08,160 --> 01:14:11,200 Speaker 1: the dollar have upside. We're gonna spin that out and 1266 01:14:11,200 --> 01:14:14,000 Speaker 1: sell it to the public. Then we take Bank America 1267 01:14:14,080 --> 01:14:16,439 Speaker 1: and we spin them out as a free standing, clean bank. 1268 01:14:16,920 --> 01:14:19,840 Speaker 1: And if we do that, bank after bank after bank, 1269 01:14:20,280 --> 01:14:22,759 Speaker 1: it's a lot of turmoil, it's a lot of fear, 1270 01:14:23,560 --> 01:14:26,479 Speaker 1: but it's over. At the end of two thousand and nine, 1271 01:14:26,960 --> 01:14:30,280 Speaker 1: you have a healthy economy with a healthy banking system 1272 01:14:30,320 --> 01:14:36,479 Speaker 1: and the possibility of normal, not fed manipulated growth. But 1273 01:14:36,560 --> 01:14:41,760 Speaker 1: politically that was especially when you again, I'm gonna I'm 1274 01:14:41,760 --> 01:14:45,800 Speaker 1: gonna when you have a surgical screw up, you don't 1275 01:14:45,840 --> 01:14:48,080 Speaker 1: send the guys in to fix it who were operating 1276 01:14:48,560 --> 01:14:52,160 Speaker 1: on the patient. So taking taking Larry Summers and taking 1277 01:14:52,160 --> 01:14:55,800 Speaker 1: Tim Geithner, who were two of many key players who 1278 01:14:55,840 --> 01:14:59,519 Speaker 1: helped create the crisis, putting these guys back in charge, 1279 01:15:00,240 --> 01:15:02,000 Speaker 1: there's not going to be an emission of, hey, we 1280 01:15:02,080 --> 01:15:05,679 Speaker 1: really screwed up. With greater recessions, a great recession, among 1281 01:15:05,840 --> 01:15:11,400 Speaker 1: other things, may have resulted in a more wholesale change 1282 01:15:11,400 --> 01:15:15,320 Speaker 1: in Washington, Chad. You see, because it takes a lot 1283 01:15:15,439 --> 01:15:18,559 Speaker 1: like people explore, explain that. Because I'm on the same 1284 01:15:18,600 --> 01:15:21,360 Speaker 1: page as you are. I mean, look at the you know, 1285 01:15:21,520 --> 01:15:23,640 Speaker 1: you know, because then you're going to say, I I 1286 01:15:23,680 --> 01:15:25,280 Speaker 1: don't want you to try to fix it. I want 1287 01:15:25,280 --> 01:15:29,040 Speaker 1: someone new. Right, That's right. Not only do I not 1288 01:15:29,120 --> 01:15:32,120 Speaker 1: want you to fix it, you and your party, you, 1289 01:15:32,240 --> 01:15:35,679 Speaker 1: the Republicans, you, the Democrats, you're both out. We're gonna 1290 01:15:35,720 --> 01:15:38,439 Speaker 1: try something new. And by the way, this idea of 1291 01:15:38,479 --> 01:15:43,840 Speaker 1: finance being economy, let once these guys go belly up, 1292 01:15:44,680 --> 01:15:48,360 Speaker 1: that reverts back to its historical me. It was wildly outsized. 1293 01:15:48,400 --> 01:15:53,559 Speaker 1: We had financialized our economy. The process of definancializing the 1294 01:15:53,600 --> 01:15:56,880 Speaker 1: economy was interrupted by the bailoff, you know, and and 1295 01:15:57,400 --> 01:15:59,920 Speaker 1: you know, again taking that really big picture over a 1296 01:16:00,040 --> 01:16:03,080 Speaker 1: couple of centuries, forty seven recessions in twenty and twenty 1297 01:16:03,080 --> 01:16:05,720 Speaker 1: two years. Some of them were bad, uh, some of 1298 01:16:05,720 --> 01:16:11,280 Speaker 1: them were mild, but we've survived them. Which what is 1299 01:16:11,360 --> 01:16:14,599 Speaker 1: this notion, This is what I would really push back 1300 01:16:14,600 --> 01:16:18,120 Speaker 1: against this, What is this notion that we can do 1301 01:16:18,400 --> 01:16:23,320 Speaker 1: all kinds of crazy things in in in, in in, 1302 01:16:23,320 --> 01:16:27,000 Speaker 1: in the name of avoiding recession. That is a silly 1303 01:16:27,040 --> 01:16:31,479 Speaker 1: That is a really silly thing for policymakers to actually do, 1304 01:16:32,200 --> 01:16:38,000 Speaker 1: because the price you're paying relates to significant components of 1305 01:16:38,000 --> 01:16:39,960 Speaker 1: the future, and we're feeling it that now, I think 1306 01:16:40,080 --> 01:16:44,080 Speaker 1: petically reduced growth. People feel that and look at you 1307 01:16:44,120 --> 01:16:46,479 Speaker 1: can look around at other major developed economies and you 1308 01:16:46,479 --> 01:16:49,439 Speaker 1: look at Europe and they're they're sick in many ways, 1309 01:16:49,479 --> 01:16:51,880 Speaker 1: and you look at Japan and they're sick in many ways. 1310 01:16:52,560 --> 01:16:55,080 Speaker 1: And do we really want to do the same thing? 1311 01:16:55,200 --> 01:16:58,240 Speaker 1: I mean, can we consider something else? Well, this is 1312 01:16:58,280 --> 01:17:01,559 Speaker 1: what happens when you have a finance sector that's very 1313 01:17:01,600 --> 01:17:04,280 Speaker 1: fragile and you have a banking sector. So the good 1314 01:17:04,280 --> 01:17:06,840 Speaker 1: news is and you could tell me if this isn't 1315 01:17:06,880 --> 01:17:11,240 Speaker 1: any of the data. Five years later, we have an 1316 01:17:11,240 --> 01:17:16,559 Speaker 1: economy that, uh, in theory, a lot of the bad 1317 01:17:16,640 --> 01:17:20,280 Speaker 1: housing has been bought by private equity because they've been 1318 01:17:20,320 --> 01:17:23,240 Speaker 1: able to borrow money for practically free. So you have 1319 01:17:23,400 --> 01:17:27,120 Speaker 1: thirty five billion dollars and PE funds that are have 1320 01:17:27,240 --> 01:17:30,320 Speaker 1: become the new home flippers right there buying renting them. 1321 01:17:30,320 --> 01:17:32,080 Speaker 1: And then in a way a period of time, you 1322 01:17:32,160 --> 01:17:36,520 Speaker 1: have banks that have been slowly shedding all these mortgages 1323 01:17:36,600 --> 01:17:41,519 Speaker 1: and all these foreclosures and bank old real estate. But 1324 01:17:41,600 --> 01:17:42,800 Speaker 1: you have this, but we don't really know what the 1325 01:17:42,880 --> 01:17:44,640 Speaker 1: data is because they don't have to disclose it. You 1326 01:17:44,680 --> 01:17:48,439 Speaker 1: know that this is true, and yeah, you know, interest 1327 01:17:48,520 --> 01:17:53,760 Speaker 1: rates are very important component of the free market. And 1328 01:17:54,040 --> 01:18:00,160 Speaker 1: when when you interfear and and and put your on 1329 01:18:00,240 --> 01:18:03,719 Speaker 1: the skin manage control. Look, isn't that even the opposite 1330 01:18:03,720 --> 01:18:06,000 Speaker 1: of what a free market is? By the way, that 1331 01:18:06,200 --> 01:18:09,880 Speaker 1: that was that was always the great paradox about Alan Greenspan, 1332 01:18:10,000 --> 01:18:14,080 Speaker 1: the ultimate randy and free marketer, who refused to take 1333 01:18:14,080 --> 01:18:17,200 Speaker 1: his hand off the wheel. Here you go, so so here, 1334 01:18:17,240 --> 01:18:20,880 Speaker 1: you know, you might argue, under certain emergency moments you 1335 01:18:20,920 --> 01:18:23,920 Speaker 1: have to do things. But at what point is the 1336 01:18:23,920 --> 01:18:26,720 Speaker 1: emergency over? And when do we get to see what 1337 01:18:26,760 --> 01:18:30,439 Speaker 1: it feels like without the pain medicine and what where 1338 01:18:30,479 --> 01:18:34,280 Speaker 1: we really are because that ten years after the Christ, 1339 01:18:34,360 --> 01:18:36,600 Speaker 1: that is an important thing to understand. What does it 1340 01:18:36,640 --> 01:18:39,479 Speaker 1: feel like to stand on your leg? You're not gonna 1341 01:18:39,560 --> 01:18:43,120 Speaker 1: know that until that's my my I don't do forecast. 1342 01:18:43,200 --> 01:18:46,040 Speaker 1: The one prediction i'mill in a way make is you're 1343 01:18:46,120 --> 01:18:49,360 Speaker 1: probably not going to see that one of two things happen. 1344 01:18:49,680 --> 01:18:55,920 Speaker 1: Either ten years elapse or someone named Paul as their 1345 01:18:56,000 --> 01:18:59,920 Speaker 1: last name becomes elected president. So if Ron Paul ran 1346 01:19:00,000 --> 01:19:02,920 Speaker 1: In Pole becomes president, and I'm by the way, I'm 1347 01:19:02,960 --> 01:19:05,960 Speaker 1: I'm right, I'm wishy washing on both of them, although 1348 01:19:05,960 --> 01:19:08,960 Speaker 1: I find Ron Pole to be a fascinating dude. But 1349 01:19:08,960 --> 01:19:10,840 Speaker 1: but when you get someone who's going to step in 1350 01:19:10,920 --> 01:19:14,080 Speaker 1: and say, hey, I'm a libertarian and I don't believe 1351 01:19:14,120 --> 01:19:17,320 Speaker 1: the government should be interfering in the free market. Therefore 1352 01:19:17,360 --> 01:19:19,160 Speaker 1: I'm going to have the FED stand down, and if 1353 01:19:19,160 --> 01:19:23,040 Speaker 1: we go into a recession, it'll be cleansing, it'll be Catharctic, 1354 01:19:23,080 --> 01:19:26,000 Speaker 1: and the economy we will, we we will. It's not 1355 01:19:26,040 --> 01:19:28,240 Speaker 1: even if the idea that you're not going to go 1356 01:19:28,320 --> 01:19:32,320 Speaker 1: into recession is just far. It will happen. And I 1357 01:19:32,360 --> 01:19:36,040 Speaker 1: would feel much better if I was on the policy 1358 01:19:36,080 --> 01:19:38,599 Speaker 1: and responsible for policy, or just even as an American, 1359 01:19:39,040 --> 01:19:42,200 Speaker 1: if we had an interest rate to cut when we 1360 01:19:42,240 --> 01:19:45,320 Speaker 1: went into when we went into being able to cut 1361 01:19:45,400 --> 01:19:50,040 Speaker 1: rates rates high enough that you could on a tactical 1362 01:19:50,040 --> 01:19:53,120 Speaker 1: basis reduce an interest rate from the central bank because 1363 01:19:53,160 --> 01:19:55,720 Speaker 1: the fiscal side can move that quickly. Now I know, 1364 01:19:55,880 --> 01:19:59,200 Speaker 1: it's like the emergency. In case of emergency, break glass 1365 01:20:00,200 --> 01:20:04,080 Speaker 1: glass is broken there. So I look, we're not Japan. 1366 01:20:04,160 --> 01:20:06,120 Speaker 1: Japan is so different than us, where we we have 1367 01:20:06,160 --> 01:20:08,840 Speaker 1: a lot of things going for us that they don't. 1368 01:20:09,280 --> 01:20:11,519 Speaker 1: But when you look at them and they're into their 1369 01:20:11,720 --> 01:20:15,439 Speaker 1: third lost decade, I don't even think people understand that 1370 01:20:15,439 --> 01:20:19,000 Speaker 1: they are generations their twenties, five, four or five years 1371 01:20:19,000 --> 01:20:24,160 Speaker 1: into this thing, right, So, um, here they are, and uh, 1372 01:20:24,200 --> 01:20:27,360 Speaker 1: they own a ton of their treasury market, of their 1373 01:20:27,400 --> 01:20:31,960 Speaker 1: treasury their own the j the Japanese treasury market is 1374 01:20:31,960 --> 01:20:35,000 Speaker 1: the second largest treasuring market and the Bank of Japan 1375 01:20:35,040 --> 01:20:38,240 Speaker 1: owns most of it. Uh, lending money to themselves. Yeah, 1376 01:20:38,360 --> 01:20:40,280 Speaker 1: at least they know what it is looking for. This 1377 01:20:40,360 --> 01:20:42,240 Speaker 1: is and that's even kind of a weird concept if 1378 01:20:42,240 --> 01:20:45,519 Speaker 1: you think too hard about it. My my, again, my 1379 01:20:45,680 --> 01:20:48,160 Speaker 1: anti FED friends would say, isn't that what the Federal 1380 01:20:48,200 --> 01:20:50,800 Speaker 1: Reserve is doing? They all start they are and I 1381 01:20:51,240 --> 01:20:52,920 Speaker 1: you know, if you start to think too much about 1382 01:20:52,920 --> 01:20:55,280 Speaker 1: it, it it gets bothersome. But but let's think too much 1383 01:20:55,280 --> 01:20:58,120 Speaker 1: about it just yet. And and just one one. It 1384 01:20:58,200 --> 01:21:00,519 Speaker 1: was a couple of weeks ago there was no private 1385 01:21:00,520 --> 01:21:02,320 Speaker 1: bid for a j GB for a day and a half. 1386 01:21:02,439 --> 01:21:08,040 Speaker 1: That's unbelievable. That's a problem. Well like point six, Now, 1387 01:21:08,040 --> 01:21:09,599 Speaker 1: what if they get what if they get what they 1388 01:21:09,600 --> 01:21:13,280 Speaker 1: wish for an interest rates go up, they'll be able 1389 01:21:13,320 --> 01:21:15,800 Speaker 1: to sell more debt, but they're ongoing debt is going 1390 01:21:15,840 --> 01:21:20,879 Speaker 1: to be more. So this is one of the reasons 1391 01:21:21,000 --> 01:21:25,120 Speaker 1: why I think you really do need to believe the 1392 01:21:25,720 --> 01:21:27,479 Speaker 1: FED in the US that they want to get out 1393 01:21:27,479 --> 01:21:30,599 Speaker 1: of this game, and that they're serious about getting out 1394 01:21:30,600 --> 01:21:33,560 Speaker 1: of it, and that the plan is that the economy 1395 01:21:33,600 --> 01:21:38,120 Speaker 1: needs to reach escape velocity soon. And I'm afraid on 1396 01:21:38,280 --> 01:21:43,479 Speaker 1: that last part escape pelocity isn't happening. So so let's 1397 01:21:43,640 --> 01:21:46,400 Speaker 1: put you in charge of policy for a moment. Let's 1398 01:21:46,400 --> 01:21:50,479 Speaker 1: have a hypothetical play. You're in charge of policy. What 1399 01:21:50,520 --> 01:21:54,519 Speaker 1: do you do all policy? You're you're philosopher king, what 1400 01:21:54,560 --> 01:21:56,559 Speaker 1: do you do? Yeah? You know, I would, I would, 1401 01:21:56,960 --> 01:22:01,439 Speaker 1: I would be less scared of a recession. Uh. And 1402 01:22:01,760 --> 01:22:04,280 Speaker 1: uh so that's bullet point number one. Recessions are going 1403 01:22:04,320 --> 01:22:07,800 Speaker 1: to happen. To learn to expect it, deal with it, 1404 01:22:08,320 --> 01:22:10,400 Speaker 1: and don't be freaked out by it. Don't be freaked 1405 01:22:10,439 --> 01:22:13,280 Speaker 1: out by it, don't. Uh, the world we all always turns, 1406 01:22:13,360 --> 01:22:15,679 Speaker 1: So we all always turns. I mean, there there are 1407 01:22:16,040 --> 01:22:20,000 Speaker 1: lots of policy challenges that we have, but the main 1408 01:22:20,160 --> 01:22:24,960 Speaker 1: one is that our trend growth uh is so low. 1409 01:22:25,160 --> 01:22:27,120 Speaker 1: Do we do anything about that? Or is it just 1410 01:22:27,240 --> 01:22:29,200 Speaker 1: a fact of life that we have to Except you 1411 01:22:29,439 --> 01:22:34,800 Speaker 1: you have to think about productivity. What what can we 1412 01:22:34,840 --> 01:22:37,880 Speaker 1: do to improve productives? I'm open for suggestions on that. 1413 01:22:38,400 --> 01:22:41,639 Speaker 1: But but but here you're probably talking about it destroyed 1414 01:22:41,760 --> 01:22:45,160 Speaker 1: Facebook and productivity goes up. You're probably talking about different 1415 01:22:45,600 --> 01:22:51,559 Speaker 1: ideas around uh, infrastructure and education and things of this nature. 1416 01:22:51,800 --> 01:22:54,280 Speaker 1: But and I'm not an expert on either of those, 1417 01:22:54,320 --> 01:22:58,400 Speaker 1: but those are areas where those are productivity enhancing type. 1418 01:22:58,960 --> 01:23:01,320 Speaker 1: Um the policy east that you want to be thinking about. 1419 01:23:01,840 --> 01:23:05,680 Speaker 1: And give me an example of a productivity enhancing policy. Well, 1420 01:23:05,760 --> 01:23:09,840 Speaker 1: let's just say that some of the infrastructure worked better. Listen, 1421 01:23:09,880 --> 01:23:12,479 Speaker 1: you're talking, you're preaching to the every day when you 1422 01:23:12,520 --> 01:23:14,559 Speaker 1: go into the office, someone's like, oh my gosh, I 1423 01:23:14,600 --> 01:23:16,519 Speaker 1: was stuck for We're here in New York City and 1424 01:23:16,760 --> 01:23:18,080 Speaker 1: you know, I was stuck in the subway for twenty 1425 01:23:18,120 --> 01:23:20,280 Speaker 1: minutes because X Y Z happens. See, I only take 1426 01:23:20,320 --> 01:23:23,360 Speaker 1: the seven. There is the best of But a couple 1427 01:23:23,360 --> 01:23:26,280 Speaker 1: of years ago, I was in Troy complete. That's that's 1428 01:23:26,320 --> 01:23:31,840 Speaker 1: an infrastructure example. They completely renovated this line and the 1429 01:23:32,040 --> 01:23:35,920 Speaker 1: trains come like anyone who runs for seven is an 1430 01:23:35,960 --> 01:23:39,120 Speaker 1: idiot because they seem to come every two and a 1431 01:23:39,160 --> 01:23:42,880 Speaker 1: half minutes. And I'm not a productivity enhancing you genormous. 1432 01:23:42,920 --> 01:23:45,559 Speaker 1: You can rely on it. It's there. You you see 1433 01:23:45,560 --> 01:23:47,720 Speaker 1: the trainer. You know I'm walking down the stairs. The 1434 01:23:47,760 --> 01:23:50,960 Speaker 1: doors are open. I don't run to the doors closed. 1435 01:23:51,600 --> 01:23:54,439 Speaker 1: They there's a term called pre walking. You walk to 1436 01:23:54,479 --> 01:23:56,719 Speaker 1: the spot on the platform that's gonna let you off 1437 01:23:57,400 --> 01:23:59,639 Speaker 1: at where you want to be in and your exit 1438 01:23:59,680 --> 01:24:03,599 Speaker 1: stoff profess and they're different for every stop. So people 1439 01:24:03,600 --> 01:24:06,400 Speaker 1: don't all bunch up. It's not this. There's some really 1440 01:24:06,439 --> 01:24:12,200 Speaker 1: fascinating people outright, civic engineering. There's a lot of fascinating things. 1441 01:24:12,200 --> 01:24:15,800 Speaker 1: So the pre walking is, so I've this happened this morning. 1442 01:24:15,840 --> 01:24:18,720 Speaker 1: I walked down the stairs and as I'm walking down 1443 01:24:18,720 --> 01:24:21,679 Speaker 1: the stairs to the seven, as the subway doors start 1444 01:24:21,720 --> 01:24:25,040 Speaker 1: to close, people are running and I'm just think to myself, Idget's, 1445 01:24:25,200 --> 01:24:28,200 Speaker 1: you know, just morons. And by the time I walk 1446 01:24:28,400 --> 01:24:32,800 Speaker 1: halfway down the platform to where I know when I 1447 01:24:32,880 --> 01:24:35,280 Speaker 1: get into is gonna let me out by the stairs, 1448 01:24:35,640 --> 01:24:38,960 Speaker 1: we're gonna get out in Grand Central, the other train 1449 01:24:39,080 --> 01:24:42,599 Speaker 1: is already pulling into the platform. They come like three there, 1450 01:24:42,680 --> 01:24:46,000 Speaker 1: three during rush hour three minutes. It's it might as 1451 01:24:46,040 --> 01:24:50,440 Speaker 1: well be a giant conveyor belt. That's a that's a 1452 01:24:50,439 --> 01:24:55,280 Speaker 1: a good example. Um, but these things, you know, I 1453 01:24:55,320 --> 01:24:58,600 Speaker 1: don't think there's any one silver bullet here. Uh. And 1454 01:24:59,640 --> 01:25:05,320 Speaker 1: and only the other component is if you have this 1455 01:25:05,320 --> 01:25:11,760 Speaker 1: this theoretical preemptive fed policy where if they're ahead of 1456 01:25:11,800 --> 01:25:16,880 Speaker 1: the cycle, not behind it, uh, then they could act countercyclically. 1457 01:25:16,920 --> 01:25:19,240 Speaker 1: When there's a run up in the cycle, they could 1458 01:25:19,240 --> 01:25:21,920 Speaker 1: tamp it down, and there's a downturn, they can cut 1459 01:25:21,920 --> 01:25:24,839 Speaker 1: off the bottom a little bit, smooth out and smooth 1460 01:25:24,880 --> 01:25:30,240 Speaker 1: the volatility a little bit towards all. Oh, the Great moderation, right. Um, Now, 1461 01:25:30,280 --> 01:25:33,280 Speaker 1: the problem with the Great Moderation is that, uh, if 1462 01:25:33,320 --> 01:25:36,720 Speaker 1: you look at it closely, Um, the best explanation is 1463 01:25:36,760 --> 01:25:40,000 Speaker 1: we were lucky. It's not it's not that the FED 1464 01:25:40,040 --> 01:25:44,080 Speaker 1: did anything particularly helpful. And and when you look at 1465 01:25:44,200 --> 01:25:47,240 Speaker 1: FED policy over time, you find that they're very reactive. 1466 01:25:47,960 --> 01:25:51,000 Speaker 1: Including the most recent cycle, they were late to the game, 1467 01:25:51,600 --> 01:25:54,639 Speaker 1: uh and totally and then they've been they've been trying 1468 01:25:54,640 --> 01:25:57,400 Speaker 1: to make up for it in size. And that's actually 1469 01:25:57,560 --> 01:26:01,160 Speaker 1: pro cyclical because if you're hind the highs are higher 1470 01:26:02,080 --> 01:26:04,400 Speaker 1: behind the curve. If you think about an engineering kind 1471 01:26:04,400 --> 01:26:06,880 Speaker 1: of thing, and these the way it feeds back, it 1472 01:26:06,920 --> 01:26:09,320 Speaker 1: actually makes the cycle bigger. And they're behind it in 1473 01:26:09,360 --> 01:26:13,080 Speaker 1: a big way. Remember subprime was contained you see. So 1474 01:26:13,200 --> 01:26:16,960 Speaker 1: this also bugs me a little bit because you know 1475 01:26:17,120 --> 01:26:23,320 Speaker 1: at some point, uh, that volatility comes back, and that 1476 01:26:23,960 --> 01:26:28,400 Speaker 1: when you're at low altitude, uh, makes makes for a 1477 01:26:28,439 --> 01:26:31,519 Speaker 1: bumpy ride. And uh, we don't even have interest rates 1478 01:26:31,520 --> 01:26:33,880 Speaker 1: anywhere where you can lower them. So this is why 1479 01:26:34,000 --> 01:26:37,320 Speaker 1: I have some anxiety. So if we were an aircraft 1480 01:26:37,439 --> 01:26:40,080 Speaker 1: and Q one comes along, we're essentially scraping our belly 1481 01:26:40,120 --> 01:26:43,080 Speaker 1: along the top of the wheat fields. If we're lucky, 1482 01:26:43,160 --> 01:26:47,439 Speaker 1: maybe even you know. And and when we look at 1483 01:26:47,640 --> 01:26:50,439 Speaker 1: the statistics on the United States and on Europe and 1484 01:26:50,479 --> 01:26:55,280 Speaker 1: on an on Japan in particular, uh, the patterns are 1485 01:26:55,360 --> 01:26:59,320 Speaker 1: basically the same. Uh. You know we I know that 1486 01:26:59,360 --> 01:27:02,920 Speaker 1: people year look across the pond at Connell, Europe and 1487 01:27:02,960 --> 01:27:05,080 Speaker 1: we say, yeah, you guys got problems, Yeah you have 1488 01:27:05,160 --> 01:27:09,720 Speaker 1: some inflation issues. But actually we're a mirror image of that. Uh. 1489 01:27:09,760 --> 01:27:11,960 Speaker 1: And both of us are actually kind of following a 1490 01:27:12,000 --> 01:27:14,880 Speaker 1: track that Japan uh is They're in front of us 1491 01:27:14,880 --> 01:27:20,240 Speaker 1: on it. And so I don't think we can really 1492 01:27:20,280 --> 01:27:23,280 Speaker 1: reasonably claim that we're different here. So back to the 1493 01:27:23,280 --> 01:27:27,519 Speaker 1: original question, what would benevolent dictator Lachman do? Well, one thing, 1494 01:27:27,760 --> 01:27:30,200 Speaker 1: the first thing you said was be a little more 1495 01:27:30,240 --> 01:27:33,479 Speaker 1: anticipatory and not as reactive. Well, the second thing I'm 1496 01:27:33,479 --> 01:27:37,599 Speaker 1: hearing is, if you're gonna spend spend on productivity enhancing 1497 01:27:37,600 --> 01:27:44,040 Speaker 1: things like infrastructure, roads, bridges, cell systems, internet, go down 1498 01:27:44,120 --> 01:27:46,720 Speaker 1: the whole the whole run, what is that? What else 1499 01:27:46,800 --> 01:27:49,400 Speaker 1: is left for us to do to get back on track? 1500 01:27:49,640 --> 01:27:52,280 Speaker 1: I would, and I expect an op ed from you 1501 01:27:53,080 --> 01:27:55,720 Speaker 1: on this one of these days, how to fix the 1502 01:27:55,840 --> 01:27:59,519 Speaker 1: US economy free easy steps. I think I think my 1503 01:28:00,080 --> 01:28:04,000 Speaker 1: it's are best spent on gonna make risk, But but 1504 01:28:04,040 --> 01:28:06,000 Speaker 1: are you going to actually make me? I will write 1505 01:28:06,120 --> 01:28:09,240 Speaker 1: this how to fix the Economy and threesy steps. So 1506 01:28:09,280 --> 01:28:14,720 Speaker 1: the first thing, uh, except that recessions are inviable, right, 1507 01:28:14,840 --> 01:28:18,560 Speaker 1: you can't. Second thing is be a little more anticipatory, 1508 01:28:18,640 --> 01:28:21,280 Speaker 1: not quite as reactive well, which they've been trying to 1509 01:28:21,320 --> 01:28:23,000 Speaker 1: do in theory. They can't. They just can't do it. 1510 01:28:23,280 --> 01:28:25,080 Speaker 1: I'm not gonna hold They're not gonna hold my breath 1511 01:28:25,080 --> 01:28:28,240 Speaker 1: on that, because because basically they're all economists, right, they 1512 01:28:28,240 --> 01:28:31,439 Speaker 1: all got these models, and models at their very root 1513 01:28:31,960 --> 01:28:35,760 Speaker 1: do not forecast recessions because they extrapolate things. So what 1514 01:28:35,800 --> 01:28:37,439 Speaker 1: they're saying is, oh, look at grew a couple of 1515 01:28:37,439 --> 01:28:39,240 Speaker 1: percent last quarter, is gonna go a couple of percent 1516 01:28:39,280 --> 01:28:44,840 Speaker 1: next quarter. Although fair to the economists, they have forecasts 1517 01:28:45,240 --> 01:28:47,640 Speaker 1: twelve of the past two recessions. So there you go. 1518 01:28:47,760 --> 01:28:50,960 Speaker 1: I have to give them that. So so the second 1519 01:28:51,040 --> 01:28:55,960 Speaker 1: so we have the enhanced productivity through infrastructure to not 1520 01:28:57,320 --> 01:28:59,600 Speaker 1: this void recessions at all costs but accepted as a 1521 01:28:59,680 --> 01:29:01,479 Speaker 1: natural part of the cycle. Right. This is really on 1522 01:29:01,520 --> 01:29:03,720 Speaker 1: the fiscal side. It's less of the central bank issue, right, 1523 01:29:04,160 --> 01:29:07,960 Speaker 1: which is why the truth telling Janet Yellen said, hey man, 1524 01:29:08,040 --> 01:29:10,400 Speaker 1: this is up to you guys. You guys have left 1525 01:29:10,400 --> 01:29:13,760 Speaker 1: this on. This is the big this is the big 1526 01:29:13,800 --> 01:29:16,920 Speaker 1: switcheroo that happened. Okay, you have the great recession and 1527 01:29:16,960 --> 01:29:20,000 Speaker 1: then you have the central bank come in and say, oh, 1528 01:29:20,080 --> 01:29:22,640 Speaker 1: it's not structural. There's no, no, nothing to see here. 1529 01:29:22,640 --> 01:29:24,760 Speaker 1: It's not structural. It's all cyclical. We'll take care of it. 1530 01:29:25,120 --> 01:29:28,559 Speaker 1: And five years later they're like, you know, maybe maybe 1531 01:29:28,560 --> 01:29:31,320 Speaker 1: it is structural, and actually it is. It probably very 1532 01:29:31,680 --> 01:29:35,040 Speaker 1: likely is structural, in which case it's not a central 1533 01:29:35,040 --> 01:29:38,240 Speaker 1: bank issue in the first place. It's really a policy issue. 1534 01:29:38,560 --> 01:29:41,320 Speaker 1: And this is where the discussion should be in Washington 1535 01:29:41,600 --> 01:29:45,400 Speaker 1: about what's going on with trend growth because, by the way, 1536 01:29:45,520 --> 01:29:47,800 Speaker 1: look at Europe in Japan and this is the world 1537 01:29:47,880 --> 01:29:49,400 Speaker 1: we live in and what are we going to do 1538 01:29:49,400 --> 01:29:53,680 Speaker 1: about So another another column I haven't written is but 1539 01:29:53,840 --> 01:29:55,559 Speaker 1: is in the back of my head, and we've talked 1540 01:29:55,600 --> 01:29:59,439 Speaker 1: about it before, is on that exact point. And if 1541 01:29:59,479 --> 01:30:03,880 Speaker 1: I want the most controversial headline I could get, by 1542 01:30:04,160 --> 01:30:06,400 Speaker 1: the way, people don't realize this. When you submit a 1543 01:30:06,400 --> 01:30:09,599 Speaker 1: column to Bloomberg of the Washington Post in New York Times, 1544 01:30:10,240 --> 01:30:13,559 Speaker 1: you give them a proposed headline, but an editor actually 1545 01:30:13,640 --> 01:30:16,000 Speaker 1: writes that you don't get to so every now and 1546 01:30:16,040 --> 01:30:18,439 Speaker 1: then I'm like, hey, that's a really good headline, And 1547 01:30:18,760 --> 01:30:20,880 Speaker 1: then there are other times were like, no, that's not 1548 01:30:20,920 --> 01:30:22,679 Speaker 1: at all what I mean, and you're gonna close trouble 1549 01:30:22,720 --> 01:30:25,080 Speaker 1: with that. But um so having a good editor is 1550 01:30:25,120 --> 01:30:30,040 Speaker 1: really really important. But what the headline that just pruss 1551 01:30:30,080 --> 01:30:35,639 Speaker 1: my cranium was how the Federal Reserve supports the Tea Party, 1552 01:30:36,160 --> 01:30:41,840 Speaker 1: And essentially the Federal Reserve could have said, as you suggested, Hey, 1553 01:30:41,880 --> 01:30:45,519 Speaker 1: recessions are inevitable. This is a fiscal not a monetary issue. 1554 01:30:45,920 --> 01:30:49,559 Speaker 1: This is not a this is a structural issue that 1555 01:30:49,600 --> 01:30:52,080 Speaker 1: we are not involved. So I'm not gonna We're not 1556 01:30:52,120 --> 01:30:55,200 Speaker 1: gonna do anything because it's non cyclical and it's up 1557 01:30:55,240 --> 01:30:58,439 Speaker 1: to you. And if you guys don't do anything, stuff 1558 01:30:58,520 --> 01:31:01,520 Speaker 1: is gonna get really bad. But the self correcting mechanism 1559 01:31:01,600 --> 01:31:04,200 Speaker 1: is you idiots get thrown out of office and someone 1560 01:31:04,200 --> 01:31:08,519 Speaker 1: else will come in and fix it. So so in 1561 01:31:08,680 --> 01:31:13,479 Speaker 1: a really again, these are the unintended consequences. Earlier, I 1562 01:31:13,520 --> 01:31:18,520 Speaker 1: said the FED bailout prevented the ongoing definancialization of the economy. 1563 01:31:19,200 --> 01:31:23,879 Speaker 1: Now I'm saying the FED bailout the FED monetary policy 1564 01:31:23,880 --> 01:31:28,679 Speaker 1: instead of fiscal policy is keeping people elected who under North. 1565 01:31:28,960 --> 01:31:33,880 Speaker 1: Look when things get bad, President, senators, congressmen, governors, they 1566 01:31:33,920 --> 01:31:36,120 Speaker 1: all get thrown out, all right. Next is what this 1567 01:31:36,160 --> 01:31:37,879 Speaker 1: is where I was going with Maybe the Great Recession 1568 01:31:37,880 --> 01:31:40,000 Speaker 1: wasn't great enough. That's why I wanted to bring you 1569 01:31:40,040 --> 01:31:42,720 Speaker 1: back to and then and then Barry also in so 1570 01:31:42,760 --> 01:31:45,479 Speaker 1: it's in March and April of two thousand and nine 1571 01:31:45,479 --> 01:31:48,800 Speaker 1: that we're forecasting our recovery. Now, if you were asking me, 1572 01:31:49,479 --> 01:31:55,240 Speaker 1: do we need emergency Central bank intervention towards the end 1573 01:31:55,240 --> 01:31:58,200 Speaker 1: of O nine or into I don't think I could 1574 01:31:58,200 --> 01:32:02,120 Speaker 1: have argued for it. Oh okay, but what do you 1575 01:32:02,240 --> 01:32:04,400 Speaker 1: know later weight fine, but but but but but but 1576 01:32:04,400 --> 01:32:06,080 Speaker 1: but when you're on the other side, when you've gone 1577 01:32:06,120 --> 01:32:10,439 Speaker 1: through and you're the why why we still already? So 1578 01:32:10,600 --> 01:32:13,200 Speaker 1: that would have been a moment to back off. If 1579 01:32:13,240 --> 01:32:14,960 Speaker 1: we had to, we could have come back. You always 1580 01:32:15,000 --> 01:32:17,679 Speaker 1: reserve the right to come back, But at that moment 1581 01:32:17,720 --> 01:32:20,080 Speaker 1: you've got the cycle going. The other way. But here, 1582 01:32:21,479 --> 01:32:25,559 Speaker 1: if you're reactive, you're not forward looking, which is what 1583 01:32:25,680 --> 01:32:28,040 Speaker 1: the system is, then you don't see that and you 1584 01:32:28,080 --> 01:32:31,240 Speaker 1: miss the opportunity. And I think that's a really great 1585 01:32:31,800 --> 01:32:35,720 Speaker 1: not to end on. So locksman, this has been really fascinating. 1586 01:32:35,720 --> 01:32:38,920 Speaker 1: I'm gonna start calling you a lot, and um what 1587 01:32:38,960 --> 01:32:41,800 Speaker 1: will end up doing. The broadcast part will go up 1588 01:32:41,920 --> 01:32:45,280 Speaker 1: on I don't know the queue yet when it's released, 1589 01:32:45,320 --> 01:32:47,720 Speaker 1: but I'll send you some infos. So here's what I'm 1590 01:32:47,720 --> 01:32:49,280 Speaker 1: gonna do. Here's what I'm gonna start doing when each 1591 01:32:49,320 --> 01:32:51,720 Speaker 1: of these go to broadcasts. So I'm gonna put up 1592 01:32:51,760 --> 01:32:55,559 Speaker 1: a page about this. By the way, I didn't get 1593 01:32:55,600 --> 01:32:59,880 Speaker 1: to mention you wrote a book eating Beating the business side, 1594 01:33:00,040 --> 01:33:01,920 Speaker 1: the business cycle, So I'll put up a link to 1595 01:33:02,000 --> 01:33:05,559 Speaker 1: that on Amazon. I'll put up so we'll have that 1596 01:33:05,600 --> 01:33:09,400 Speaker 1: explains the framework that we use. I'll link back to 1597 01:33:09,479 --> 01:33:13,920 Speaker 1: Eckery you guys, and and full disclosure, you've published in 1598 01:33:13,960 --> 01:33:15,840 Speaker 1: my blog the Big Picture every time, and then you'll 1599 01:33:15,880 --> 01:33:19,719 Speaker 1: do a longer form article and we'll we'll post it there. 1600 01:33:20,240 --> 01:33:22,200 Speaker 1: But you put out on your side are a couple 1601 01:33:22,200 --> 01:33:24,880 Speaker 1: of regular charts that get up there. Absolutely there's the 1602 01:33:24,920 --> 01:33:27,720 Speaker 1: weekly leading index there, the future inflation gauges there. The 1603 01:33:27,800 --> 01:33:32,120 Speaker 1: business cycle dates are all there for one economies around 1604 01:33:32,120 --> 01:33:36,000 Speaker 1: the world, so including all the bricks, and that's all 1605 01:33:36,000 --> 01:33:38,800 Speaker 1: at business cycle dot com. Thanks so much for coming, 1606 01:33:38,840 --> 01:33:41,800 Speaker 1: Thank you, Barry, thanks for having me. You're listening to 1607 01:33:41,960 --> 01:33:45,719 Speaker 1: Masters in Business with Berry rid Holts on Bloomberg Radio.