WEBVTT - Bloomberg Surveillance TV: May 6, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.920 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:36.720 Terminal and the Bloomberg Business app. Be in a cheer 0:00:36.720 --> 0:00:39.400 of academy securities, wonders if the happy talk is overblown 0:00:39.640 --> 0:00:43.320 writing this, I like my exceptionalism to be exceptional, and 0:00:43.400 --> 0:00:45.440 I also like my data not to be dwarfed by 0:00:45.479 --> 0:00:48.159 plug numbers. I cannot help but wonder if, even on 0:00:48.200 --> 0:00:51.040 the jobs front, which has been close to exceptional, we 0:00:51.080 --> 0:00:53.680 are exposed to some sort of gap in perception and 0:00:53.720 --> 0:00:56.000 we might wind up finding out the Goldenlocks met the 0:00:56.000 --> 0:00:59.400 wrong group of bears. This story doesn't end so well. 0:01:00.040 --> 0:01:02.480 Owins this now from all Peyt, thank you for jumping 0:01:02.520 --> 0:01:04.679 on in front of a camera. We were very excited 0:01:04.720 --> 0:01:07.520 about talking about this topic with you. Can we talk 0:01:07.520 --> 0:01:10.240 about just how exceptional things truly are and whether you 0:01:10.240 --> 0:01:13.480 see this narrative gaping from being too hot to being 0:01:13.480 --> 0:01:15.480 too cold and happening very quickly. 0:01:16.280 --> 0:01:18.319 You know, I've generally been buried on the US dock 0:01:18.440 --> 0:01:20.440 market NASDAQ in particular for a little while, and people 0:01:20.480 --> 0:01:22.440 look at you with this level of sympathy. And if 0:01:22.480 --> 0:01:26.720 you look at it since mid January, it's heavily underperformed Europe. 0:01:26.760 --> 0:01:29.680 It's underperformed China massively, right, China's up twenty five to 0:01:29.720 --> 0:01:33.760 thirty percent since it's January lows. So this whole perception 0:01:33.840 --> 0:01:36.319 that there's this exceptionalism and it's showing through the markets, 0:01:36.319 --> 0:01:38.640 I think is an old story that we're clinging on to. 0:01:39.040 --> 0:01:41.720 And then you start looking at the data, right Chicago, PMI, 0:01:41.880 --> 0:01:44.080 and I understand Chicago's not what it once was in 0:01:44.160 --> 0:01:46.440 terms of a center of economic hub, but we are 0:01:46.480 --> 0:01:49.320 at a level that has previously only been associated with 0:01:49.400 --> 0:01:50.240 being in a crisis. 0:01:50.320 --> 0:01:51.920 So I think the data is there. 0:01:52.080 --> 0:01:55.000 Your previous guests, Morononica, I like the city Economic Surprise 0:01:55.040 --> 0:01:57.720 Index that's turned negative again, right, So I think there's 0:01:57.760 --> 0:02:00.800 all these things that are going on behind the scenes. 0:02:00.800 --> 0:02:03.960 And maybe we've just been so fixated on inflation and 0:02:04.000 --> 0:02:06.880 the FED that we're missing this real turn. And I 0:02:06.880 --> 0:02:09.480 think that's why we could see this gap to back 0:02:09.520 --> 0:02:10.600 to hard landing. 0:02:10.360 --> 0:02:11.160 Talk, Pete. 0:02:11.160 --> 0:02:14.480 Nowdad, we've been very focused on the central bank divergence, 0:02:14.520 --> 0:02:17.760 the prospect of the ECP cunning interest rates in June, 0:02:17.800 --> 0:02:19.640 and the Federal Reserve maybe not doing the same thing 0:02:19.720 --> 0:02:22.520 until much later this year. And to your point, we've 0:02:22.560 --> 0:02:26.119 missed the fact that the economic data has turned, that 0:02:26.120 --> 0:02:29.080 that surprise index is now negative, that the price section, 0:02:29.200 --> 0:02:32.040 the performance has been elsewhere. So Pete, the question to 0:02:32.080 --> 0:02:34.960 you is does it continue? Do you see more people 0:02:35.000 --> 0:02:37.200 getting on board? And how would you play this theme now? 0:02:37.240 --> 0:02:39.600 Would it be through equities, through foreign exchange? 0:02:39.720 --> 0:02:40.359 What would you do? 0:02:41.200 --> 0:02:43.040 You know? For me, I like rates right now. 0:02:43.080 --> 0:02:45.280 I started liking yields once they got above four sixty. 0:02:45.680 --> 0:02:47.400 I thought we'd be in a ten year range for 0:02:47.400 --> 0:02:49.200 forty four to sixty. I think we might go back 0:02:49.240 --> 0:02:51.399 to four thirty four to twenty five if the economic 0:02:51.440 --> 0:02:54.119 data continues weak. And to be honest, I think there's 0:02:54.120 --> 0:02:56.960 already been enough weak economic data that we've ignored, so 0:02:57.000 --> 0:02:58.640 I think we can see yields do better, So I 0:02:58.639 --> 0:03:00.240 think that's going to be the first way to play it. 0:03:00.520 --> 0:03:03.320 Then the question is how do equities respond. Right Friday, 0:03:03.320 --> 0:03:06.360 we clearly had a Goldilocks type situation where bonds do 0:03:06.400 --> 0:03:08.760 well and stocks do well. I think that could fade, 0:03:08.760 --> 0:03:11.240 and I think that could fade rather quickly as people 0:03:11.280 --> 0:03:14.000 start saying, hey, this has only been a subset of 0:03:14.000 --> 0:03:16.560 the economy that's been exceptional, and there has been a 0:03:16.600 --> 0:03:18.960 subset that's been exceptional. If the rest of the economy 0:03:18.960 --> 0:03:22.079 starts fading, these cannot do that well. So I think 0:03:22.120 --> 0:03:23.960 you get a bit of a retrenchment. I think in 0:03:24.000 --> 0:03:25.840 the mere term, I kind of like banks, I like 0:03:25.840 --> 0:03:28.040 some of those other sectors maybe to benefit from this. 0:03:28.160 --> 0:03:29.160 Goldilocks type thing. 0:03:29.480 --> 0:03:31.200 But I'm now very worried that we're not going to 0:03:31.200 --> 0:03:34.000 see a smooth transition from no landing to maybe softish 0:03:34.080 --> 0:03:37.400 landing to hard landing. I think we might gap because 0:03:37.400 --> 0:03:39.120 the data already supports some of that fear. 0:03:39.640 --> 0:03:41.760 There's a question about time horizon here, and whether this 0:03:41.840 --> 0:03:44.680 is a tactical a trade or a tactical view, or 0:03:44.720 --> 0:03:47.680 whether it's something that's strategic over the long term, or 0:03:47.760 --> 0:03:50.440 you start to see a greater chance of some sort 0:03:50.480 --> 0:03:55.000 of downturn that could more fundamentally challenge certain equity valuations. 0:03:55.280 --> 0:03:57.320 Which is it Is it just tactical, or is it 0:03:57.360 --> 0:03:59.120 something that has longer legs? 0:04:00.080 --> 0:04:02.080 For me, I think this is more fundamental, And we've 0:04:02.120 --> 0:04:03.880 been talking off and on for the past six months 0:04:03.920 --> 0:04:07.440 to a year that I view china resurgence as China 0:04:07.480 --> 0:04:09.760 trying to sell their own brands and compete more directly 0:04:09.840 --> 0:04:11.240 with us, which I think is going to put margin 0:04:11.280 --> 0:04:13.840 pressure on US companies and what I don't like. And 0:04:14.120 --> 0:04:16.880 my theory has always been China will work domestically first 0:04:17.400 --> 0:04:20.040 then sell into emerging markets, which they're doing. But I've 0:04:20.040 --> 0:04:22.920 always viewed kind of Europe as a potential weak link. Right, 0:04:22.960 --> 0:04:25.719 we have the ability to confront China, to draw lines 0:04:25.720 --> 0:04:28.239 in the sand and fight with China, and our brands 0:04:28.240 --> 0:04:31.280 are super successful. Europe to me always strikes me as 0:04:31.320 --> 0:04:33.400 they're a little bit more dependent on China than we are. 0:04:33.680 --> 0:04:37.400 Geez over there meeting with the French leader, I think 0:04:37.440 --> 0:04:39.919 you could see more go to that, And unlike in 0:04:39.960 --> 0:04:42.440 the past twenty years, where when China does well, we 0:04:42.480 --> 0:04:44.560 get a big slice of that, here, I think we 0:04:44.600 --> 0:04:46.000 are going to get less and less of a slice 0:04:46.040 --> 0:04:48.320 of that and more and more competition, and so I 0:04:48.320 --> 0:04:51.159 think this is strategic about valuations, not just a technical 0:04:51.279 --> 0:04:52.360 or tactical trade. 0:04:52.480 --> 0:04:54.440 And you've had this idea and it's been a brilliant 0:04:54.520 --> 0:04:57.000 one really that we've discussed at length. Why do you 0:04:57.040 --> 0:04:59.280 think now is the time the market is going to 0:04:59.360 --> 0:05:01.560 kind of come to to it given the fact that 0:05:01.640 --> 0:05:04.440 earnings have been coming in pretty well, we've seen them 0:05:04.480 --> 0:05:07.200 retain their earnings power, even if it's not pricing power. 0:05:07.800 --> 0:05:10.440 And there are a lot of things, including the jobs report, 0:05:10.680 --> 0:05:12.000 that weren't exactly terrible. 0:05:12.040 --> 0:05:15.320 Pete well, you know on the jobs report too, it's 0:05:15.760 --> 0:05:18.800 I think we mentioned in the first part the birth 0:05:18.839 --> 0:05:20.800 death model, which why they can't come up with a 0:05:20.800 --> 0:05:22.839 better name for that plug where they're trying to estimate 0:05:22.880 --> 0:05:25.159 how much jobs are created a new businesses. Right, that 0:05:25.200 --> 0:05:26.920 was three hundred and ninety three thousand out of one 0:05:26.960 --> 0:05:29.320 hundred ninety thousand, So we would have had job losses 0:05:29.520 --> 0:05:32.000 had that plug number not been so high. Maybe it's 0:05:32.080 --> 0:05:34.479 valid I question that because that's kind of the last 0:05:34.520 --> 0:05:37.039 outlier in the whole thing. And then I think in 0:05:37.120 --> 0:05:39.200 terms of why people who notice this China story much 0:05:39.200 --> 0:05:41.280 more You're starting to see reaction to Timu. 0:05:41.520 --> 0:05:44.160 You're starting to see parts of Europe react. 0:05:43.800 --> 0:05:46.799 To Shine and for the first time, right as Chinese 0:05:46.839 --> 0:05:50.159 stocks are doing better, there's signs that Chinese economy is bottom. 0:05:50.600 --> 0:05:51.960 I think people will be watching. 0:05:51.720 --> 0:05:54.000 Very closely for a few names to see how their 0:05:54.040 --> 0:05:57.200 sales into China go and if their sales disappoint what 0:05:57.400 --> 0:06:01.280 Chinese brands sales, you know, surge this whole view that oh, 0:06:01.400 --> 0:06:04.800 we're sales there are only week because China's week disappears. 0:06:04.800 --> 0:06:07.040 And that's when I think we really confront these valuation 0:06:07.160 --> 0:06:08.719 issues and multiple issues. 0:06:08.480 --> 0:06:10.920 Confusion around that with Apple the last week, Pete will 0:06:10.920 --> 0:06:12.400 save that for another day. I want to talk about 0:06:12.400 --> 0:06:15.320 the geopolitics with you. This from Axios just moments ago. 0:06:15.480 --> 0:06:19.080 Biden lettin Yahoo to speak about RAFA later on today 0:06:19.320 --> 0:06:21.440 they're reporting, Pete. If we get the same thing here 0:06:21.440 --> 0:06:23.920 at Bloomberg, we'll be sure to share it. Pete, your 0:06:24.040 --> 0:06:26.359 view the conversations with the general as you have in 0:06:26.400 --> 0:06:28.080 an academy, what does it look like? 0:06:29.360 --> 0:06:31.479 You know, I think we're still dubious that we will 0:06:31.520 --> 0:06:35.960 get any form of ceasefire until Israel is done, you know, 0:06:36.000 --> 0:06:38.919 eliminating hamas as a fighting force as much as they can. 0:06:38.800 --> 0:06:40.880 So they are likely to go into RAFA. 0:06:41.720 --> 0:06:43.240 You know, I think when you look at the data, 0:06:43.279 --> 0:06:46.000 as awful as it is, they have been very conservative. 0:06:46.040 --> 0:06:50.479 They've taken some losses. It's a very tricky situation. We 0:06:50.520 --> 0:06:54.400 would like, probably as you know, entire community to see some. 0:06:54.360 --> 0:06:55.280 Sort of ceasefire. 0:06:55.600 --> 0:06:58.640 It seems unlikely and there is concern about what state 0:06:58.680 --> 0:07:01.120 the hostages would be in after being there for so long, 0:07:01.240 --> 0:07:04.520 so that's another kind of worrisome thing. So we don't 0:07:04.560 --> 0:07:08.280 see an immediate ceasefire unfortunately, and we see as we 0:07:08.320 --> 0:07:10.920 all really want to progress into RAFA to eliminate more 0:07:10.960 --> 0:07:11.880 of aromas as a threat. 0:07:12.040 --> 0:07:13.960 If that is the case, is they're still upside risk 0:07:14.000 --> 0:07:15.840 for crude because we're not in the nineties, We're not 0:07:15.880 --> 0:07:18.960 in the eighties on WCI, we're in the seventies. Pete 0:07:18.960 --> 0:07:21.760 on Brent, we're eighty three fifty seven. Is there still 0:07:21.800 --> 0:07:23.560 that upside risk off the back of this or do 0:07:23.560 --> 0:07:25.320 you think this market is insulted from it? 0:07:26.080 --> 0:07:27.160 Yeah, and we took off some of this. 0:07:27.200 --> 0:07:29.120 A few weeks ago we were saying we were less fullishcrewed. 0:07:29.120 --> 0:07:31.280 We're now getting back to fully bullish, and I think 0:07:31.360 --> 0:07:33.840 as we head towards the election, I would not be 0:07:33.920 --> 0:07:37.440 surprised to see spots of activity and around Russian and 0:07:37.480 --> 0:07:40.480 Ukraine other things that kind of pushed crude prices higher. 0:07:40.560 --> 0:07:40.720 Right. 0:07:41.120 --> 0:07:43.320 You know, one theory would certainly be that if Houdin 0:07:43.440 --> 0:07:47.200 wants Trump to be elected, higher crude prices would suit 0:07:47.240 --> 0:07:49.240 put them very well. So I'd be watch out on 0:07:49.280 --> 0:07:51.480 that front. So right now, back at these levels, I 0:07:51.480 --> 0:07:53.800 think you kind of get crewed as a hedge almost 0:07:53.840 --> 0:07:56.600 for free, because we do have demand growing for data centers, 0:07:56.840 --> 0:07:58.320 et cet Right, they're going to need energy. 0:07:58.360 --> 0:08:00.160 That energy is gonna be powered by. 0:08:00.120 --> 0:08:02.720 Something, So I like energy a lot again, so I 0:08:02.720 --> 0:08:04.080 put that a high on my list of things I 0:08:04.080 --> 0:08:07.120 want to own, both as a geopolitical hedge and outright. 0:08:06.880 --> 0:08:08.640 Got it, Pete, this was awesome. It's going to hear 0:08:08.680 --> 0:08:21.960 from your pitachure and academy securities. Citi's Veronica Clik joins 0:08:22.000 --> 0:08:24.200 us around the table here in New York City. Veronica, 0:08:24.320 --> 0:08:26.520 I mentioned a city quote a little bit earlier summer 0:08:26.560 --> 0:08:29.119 doven happened so fast. I think we should say upfront 0:08:29.160 --> 0:08:33.760 that was Andrew Hollenhorst. That was not Veronica, but you 0:08:33.760 --> 0:08:36.240 do not want to take responsibility for that. Let's talk 0:08:36.240 --> 0:08:39.319 about how quickly this conversation could switch to rake cuts 0:08:39.320 --> 0:08:41.080 this summer, which has been the base case for you 0:08:41.120 --> 0:08:42.520 and the team for quite a while. 0:08:42.640 --> 0:08:44.360 Yeah, yeah, I mean, I think we saw the early 0:08:44.400 --> 0:08:46.480 signs of that last week. We heard from Power of 0:08:46.520 --> 0:08:48.319 course on on Wednesday, and I think it was important 0:08:48.360 --> 0:08:50.920 to us that, you know, he really didn't endorse this 0:08:51.240 --> 0:08:54.800 hawkish repricing that you know, the market had experience over. 0:08:54.640 --> 0:08:55.560 The last couple of weeks. 0:08:55.559 --> 0:08:57.520 And I think this is a fad that is still 0:08:57.559 --> 0:08:59.640 just waiting for a little bit more confidence on the 0:08:59.720 --> 0:09:02.400 inflation data, just a couple more months of a softer 0:09:03.040 --> 0:09:06.360 pace of inflation after that very strong key one, and 0:09:06.440 --> 0:09:08.880 then of course on Friday we had softer employment data 0:09:09.000 --> 0:09:10.800 and that is something that certainly could get the Fed 0:09:10.840 --> 0:09:11.200 to get. 0:09:11.040 --> 0:09:11.360 More of it. 0:09:11.520 --> 0:09:13.640 Let's talk about Friday. I see what below consensus going 0:09:13.679 --> 0:09:16.560 into the number, you were talking about downside risk as well. 0:09:16.720 --> 0:09:19.679 We got that downside risk. It materialized. Why do you 0:09:19.679 --> 0:09:21.040 not see that as a one off? Why don'd you 0:09:21.080 --> 0:09:22.640 see that as a sign of more to country? 0:09:22.880 --> 0:09:23.200 Yeah? 0:09:23.280 --> 0:09:25.559 Yeah, I mean, also, you know one hundred and seventy 0:09:25.559 --> 0:09:27.760 five thousand jobs is by no means a weak pace 0:09:27.840 --> 0:09:30.480 of job growth on the surfaces, could still be a 0:09:30.480 --> 0:09:33.000 pretty strong employment report. I think the issue for us, though, 0:09:33.080 --> 0:09:35.680 is that you, for for some time, you know, four 0:09:35.760 --> 0:09:38.400 or five six months now, we have seen a lot 0:09:38.400 --> 0:09:40.800 of other labor market data that have been deteriorating. The 0:09:41.160 --> 0:09:43.679 hiring rate in the Jolts numbers last week that's been 0:09:43.679 --> 0:09:46.720 coming down. We saw that in the employment sub components 0:09:46.760 --> 0:09:50.440 of these isms pmis a lot of signs that point 0:09:50.520 --> 0:09:53.160 to hiring really slowing. And this is the time of 0:09:53.240 --> 0:09:55.360 year when you would normally be hiring a lot of people. 0:09:56.120 --> 0:09:58.480 And I think this is finally where we're starting to see, 0:09:58.559 --> 0:10:01.680 you know, the very consistently strong payrolls, which is almost 0:10:01.679 --> 0:10:03.480 an outlier that's starting to crack. Now. 0:10:03.760 --> 0:10:05.599 You sent out a note as we introduced to you 0:10:05.640 --> 0:10:07.920 while we're on air, and you talk about how FED 0:10:07.960 --> 0:10:10.640 President New York FED President John Williams is likely to 0:10:10.720 --> 0:10:15.560 affirm Powell's concern about the labor market an increase focus 0:10:15.760 --> 0:10:16.760 on the employment mandem. 0:10:17.160 --> 0:10:19.400 He's going to speak today at one pm. Why do 0:10:19.440 --> 0:10:19.959 you think. 0:10:19.800 --> 0:10:21.719 He's going to lean into that at a time where 0:10:21.760 --> 0:10:24.359 a lot of people take j. Powell as uniquely dubvish 0:10:24.400 --> 0:10:26.920 and frankly pointing to a rate cut a lot sooner 0:10:26.920 --> 0:10:27.640 than previously. 0:10:27.960 --> 0:10:30.080 Yeah, yeah, I mean, I think Williams is generally one 0:10:30.120 --> 0:10:33.000 of the more dubbish officials that we hear from. And 0:10:33.040 --> 0:10:35.720 I think, you know, Powell does speak for a lot 0:10:35.720 --> 0:10:38.080 of the center of that committee, and Williams is part 0:10:38.080 --> 0:10:40.319 of that. It is important to hear that confirmed in 0:10:40.520 --> 0:10:43.600 the other speakers. But it was a pretty interesting shift 0:10:43.600 --> 0:10:45.440 that we heard from Powell. I think on Wednesday. You know, 0:10:45.520 --> 0:10:48.079 back in March he was saying that there are no cracks, 0:10:48.120 --> 0:10:51.280 you know, in the labor market data. And on Wednesday, 0:10:51.320 --> 0:10:53.319 you know, the first question, one of the first questions 0:10:53.360 --> 0:10:55.600 about you know, how do we know that rates are restrictive? 0:10:55.640 --> 0:10:57.760 He answered that with, you know, we'll look at all 0:10:57.760 --> 0:10:59.600 the signs that we see that the labor markets coming 0:10:59.600 --> 0:11:02.320 into better balance. You pointed out that following hiring rate 0:11:02.840 --> 0:11:05.040 some of the surveys that are weaker. So I do 0:11:05.120 --> 0:11:07.199 think this is a Powell and the center of the 0:11:07.240 --> 0:11:09.560 Committee that are getting worried about the employment side. 0:11:09.600 --> 0:11:11.600 John's been really good on this and just saying how 0:11:11.679 --> 0:11:15.400 much has the balance of risks or balance of waitings 0:11:15.520 --> 0:11:19.360 changed since Fed Charity Powell spoke in other words, how 0:11:19.600 --> 0:11:22.600 bad does the next print, the next two prints have 0:11:22.679 --> 0:11:22.880 to be? 0:11:23.000 --> 0:11:24.520 How weak does the CPI. 0:11:24.280 --> 0:11:26.200 Report that we get next week have to be to 0:11:26.280 --> 0:11:28.760 reintroduce the idea of a July rate cut. 0:11:28.880 --> 0:11:32.280 Yeah, I think the more slowing in the labor market 0:11:32.320 --> 0:11:35.880 data that we see, maybe the bar gets higher for 0:11:35.960 --> 0:11:39.079 what is bad inflation data for the Fed. So I 0:11:39.160 --> 0:11:41.040 don't think, you know, they're going to be too reactive 0:11:41.080 --> 0:11:43.320 to the data that we saw on Friday. Again, one 0:11:43.400 --> 0:11:46.520 hundred and seventy five thousand jobs, a low unemployment rate 0:11:46.520 --> 0:11:47.080 three point nine. 0:11:47.120 --> 0:11:48.680 That's still a pretty healthy print. 0:11:49.480 --> 0:11:51.400 But I think as you're getting to you know, four 0:11:51.440 --> 0:11:54.440 percent unemployment a bit above that, that would definitely. 0:11:54.120 --> 0:11:55.199 Get more and more worrying. 0:11:55.960 --> 0:11:57.800 And on the inflation side of things, I think you 0:11:57.880 --> 0:12:01.000 just need, you know, a couple months where PC inflation 0:12:01.120 --> 0:12:03.360 is running, you know, point two zero point two five 0:12:03.520 --> 0:12:07.200 softer than February March that we saw, but not dramatically softer. 0:12:07.320 --> 0:12:08.440 I think that's enough to do it. 0:12:08.679 --> 0:12:11.480 Jpellll laughed at the idea of stagflation or just basically 0:12:11.480 --> 0:12:13.800 dismissed it. Instead, it doesn't believe in the stag or 0:12:13.800 --> 0:12:17.480 the flation the nineteen seventies. Do you think that there 0:12:17.640 --> 0:12:21.480 is something that rhymes uncomfortably with that in the services 0:12:21.520 --> 0:12:22.439 read we got Friday. 0:12:22.880 --> 0:12:23.839 I wouldn't say yet. 0:12:23.840 --> 0:12:25.240 I mean I do kind of agree with Paul. I 0:12:25.240 --> 0:12:28.280 don't think we are in that environment now. We could 0:12:28.320 --> 0:12:30.840 see some stickiness to inflation, absolutely. 0:12:30.840 --> 0:12:32.720 But something that's more stuck. 0:12:32.800 --> 0:12:35.120 Get around two and a half to three percent inflation, 0:12:35.240 --> 0:12:38.959 not not a big reacceleration, And typically you would expect 0:12:38.960 --> 0:12:41.960 to see you activity data weakening first and then with 0:12:42.040 --> 0:12:44.559 some lag you would see that show up in softer inflation. 0:12:45.240 --> 0:12:47.439 So we might have a period that even looks more 0:12:47.480 --> 0:12:51.000 stagflationary where activity data is weak and inflation hasn't slowed yet. 0:12:51.400 --> 0:12:53.120 But I think if that officials would think that that 0:12:53.160 --> 0:12:54.200 inflation is slowness. 0:12:54.280 --> 0:12:56.600 Which on to work out Veronica the whether these are 0:12:56.600 --> 0:12:59.320 the early signs of companies word about inflation but ultimately 0:12:59.400 --> 0:13:03.120 losing price power protecting marchin bind lank off workers. Are 0:13:03.120 --> 0:13:03.959 we starting to see that. 0:13:03.920 --> 0:13:07.320 Develop I think we are seeing signs that businesses are 0:13:07.360 --> 0:13:09.280 looking to cut labor costs. That's why we see the 0:13:09.400 --> 0:13:12.079 hiring rate falling. You know, we had some anecdotes in 0:13:12.120 --> 0:13:15.160 the THESMS last week about not replacing workers if they 0:13:15.160 --> 0:13:18.319 happened to leave. We've seen hours worked coming down, your 0:13:18.320 --> 0:13:21.040 more part time employment. All those early signs that businesses 0:13:21.280 --> 0:13:24.040 are looking to cut labor costs and in layoffs haven't 0:13:24.080 --> 0:13:25.960 really happened yet, But that would be the last step. 0:13:26.120 --> 0:13:28.000 Would you just imagine the FED will see that as 0:13:28.040 --> 0:13:30.960 inflation comes next? Is that the leaning indicator for inflation? 0:13:31.040 --> 0:13:33.240 Because I think a big feature of your research, and 0:13:33.520 --> 0:13:35.559 if our audience at home are too familiar with it, 0:13:35.640 --> 0:13:37.880 you believe this FED can cut with inflation closer to 0:13:37.920 --> 0:13:39.439 three Yeah, that too, I. 0:13:39.360 --> 0:13:41.400 Think, Yeah, it's a matter of priorities. 0:13:41.400 --> 0:13:43.480 They're going to be more focused on that employment side 0:13:43.520 --> 0:13:45.760 of the mandate and they will be thinking that. You know, 0:13:45.760 --> 0:13:48.040 if you start to see the weakening in the labor market, 0:13:48.040 --> 0:13:50.920 weakening demand, that should mean that wages are slowing, and 0:13:50.960 --> 0:13:52.880 that should mean that inflation is also slowing. 0:13:52.880 --> 0:13:53.640 Eventually, can we. 0:13:53.640 --> 0:13:56.199 Get the economists perspective on an argument we've had all morning? 0:13:56.240 --> 0:13:59.480 Not an argument eight debate, wed you here, different channel debate, 0:13:59.640 --> 0:14:03.959 untelctual stuff. You know. Anyway, I've gone off on one 0:14:03.960 --> 0:14:06.720 PMO whether this is a feature or a bug of 0:14:06.720 --> 0:14:10.040 FED communication? The wild swings and understand you haven't changed 0:14:10.040 --> 0:14:13.240 your base case at all more recently anyway, but we've 0:14:13.240 --> 0:14:15.560 seen massive swings in market price and to go from 0:14:15.640 --> 0:14:18.680 seven cuts to want to want to some in just 0:14:18.720 --> 0:14:20.680 a couple of data points, it's amazing. Is that a 0:14:20.720 --> 0:14:22.120 feature or a bug of communication? 0:14:22.320 --> 0:14:22.960 I don't know if it. 0:14:23.080 --> 0:14:25.760 I mean so certainly we haven't gotten the clearest communication 0:14:25.840 --> 0:14:27.880 from the FED. You know, we know that they want 0:14:27.920 --> 0:14:30.360 more confidence, but what is more confidence? What does that 0:14:30.440 --> 0:14:33.280 look like? So it is a bit of a communication issue. 0:14:33.320 --> 0:14:35.440 But I think it's also just a data issue. There's 0:14:35.520 --> 0:14:38.040 not a good clear signal in the data right now, 0:14:38.040 --> 0:14:41.120 and in markets are very sensitive to every little data appointment. 0:14:41.680 --> 0:14:44.120 Another argument we were having, and it was an argument, 0:14:44.360 --> 0:14:47.640 was about the long and variable lags in the mortgage market, 0:14:47.680 --> 0:14:50.440 in particular in the housing market. Do you buy into 0:14:50.520 --> 0:14:53.880 this argument that if the FED cuts rates that will 0:14:54.000 --> 0:14:56.920 unleash a lot of sales, it will then drive prices down. 0:14:58.000 --> 0:14:59.520 It's yeah, I mean that's tricky. 0:14:59.640 --> 0:15:01.840 We actual we have seen in the last six months 0:15:01.920 --> 0:15:04.120 or so that new listings of homes have been coming 0:15:04.200 --> 0:15:07.240 up some and we have seen some softness in prices. 0:15:07.600 --> 0:15:09.920 Maybe that is related to you know, earlier this year 0:15:09.920 --> 0:15:11.880 we had mortgage rates much lower than they are now, 0:15:12.360 --> 0:15:14.800 So maybe there's there is some of that. But I 0:15:14.840 --> 0:15:16.800 think in a in an environment where the feed is 0:15:16.800 --> 0:15:20.000 is cutting and it's because of economic backdrop, like we 0:15:20.040 --> 0:15:22.760 see a weakening labor market that is weaker demand even 0:15:22.880 --> 0:15:23.560 for for housing. 0:15:23.680 --> 0:15:26.360 I mean it links to this question of basative future bug. 0:15:26.520 --> 0:15:29.040 Does all the volativity matter if it doesn't have an effect? 0:15:29.480 --> 0:15:31.720 Yeah, yeah, good question. I mean maybe at some point 0:15:31.760 --> 0:15:33.760 it is going to have an effect, and I think 0:15:33.880 --> 0:15:35.720 we are we are in that hard part now. 0:15:35.840 --> 0:15:36.040 You know. 0:15:36.040 --> 0:15:38.920 We we went from the soft landing narrative to the 0:15:38.960 --> 0:15:40.920 no landing narrative and the you know Q one of 0:15:40.960 --> 0:15:43.960 this year, and that stickiness of inflation is where you 0:15:44.000 --> 0:15:45.400 get them to the hard landing. 0:15:45.920 --> 0:15:49.280 Ronica enjoyed this as always. Veronica, clock the city. You've 0:15:49.280 --> 0:15:51.480 breaking things down on the Fetter reserve with tons of 0:15:51.480 --> 0:16:03.680 fed space coming up. Ken joined us now for more 0:16:03.720 --> 0:16:06.040 on this conversation. Ken, let's talk about the overhang first 0:16:06.080 --> 0:16:08.280 before we talk about the reasons to be positive this 0:16:08.440 --> 0:16:10.640 the OJ overhang. What do you think the end result 0:16:10.680 --> 0:16:11.080 is going to be. 0:16:12.600 --> 0:16:15.040 I think there's going to be some tweaking in terms 0:16:15.080 --> 0:16:19.160 of best practices for a ticket master, and John, I 0:16:19.200 --> 0:16:21.800 really want to set the stage here. There's eighteen or 0:16:21.800 --> 0:16:25.000 twenty one analysts with a buy. We went to a hold. 0:16:25.400 --> 0:16:30.640 There's still euphoria of consumers moving from product to experiences 0:16:31.160 --> 0:16:34.480 and liberty media John Malone on twenty three percent of 0:16:34.520 --> 0:16:38.240 this company and all the media analysts are just have 0:16:38.400 --> 0:16:39.960 fatigued with video streaming. 0:16:40.080 --> 0:16:41.720 So why not Live Nation? 0:16:42.400 --> 0:16:47.360 We beg too different because the businesses are kind of different. 0:16:47.760 --> 0:16:51.200 Concerts is almost like the supermarket, a loss leader. It's 0:16:51.280 --> 0:16:54.000 eighty percent over eighty percent of revenue but doesn't really 0:16:54.040 --> 0:16:57.600 make money, but that feeds into advertising and sponsorship. 0:16:58.240 --> 0:17:00.400 Ticket Master the tickets. 0:17:00.200 --> 0:17:03.520 Is only thirteen percent of last year's revenues, but it's 0:17:03.600 --> 0:17:07.080 the majority of the earnings. So that's the area to focus. 0:17:07.080 --> 0:17:10.399 And that's why your question John on the DOJ on 0:17:10.680 --> 0:17:13.320 what will they do to maybe constrain this business as 0:17:13.359 --> 0:17:13.920 a concern. 0:17:14.119 --> 0:17:16.760 There's lots of overhangs more broadly elsewhere, not just in 0:17:16.800 --> 0:17:19.080 this sector, but also for big tech. Can this came 0:17:19.119 --> 0:17:23.199 from Tavid costing of Goldman wristling to lawsuits found by 0:17:23.320 --> 0:17:27.680 US authorities against big tech companies may also be underpriced. Ken. 0:17:27.800 --> 0:17:29.840