1
00:00:02,640 --> 00:00:05,360
Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul Sweene. You,

2
00:00:05,360 --> 00:00:07,640
Speaker 1: along with my co host Lisa Brahma wits each day

3
00:00:07,720 --> 00:00:10,240
Speaker 1: we bring you the most noteworthy and useful interviews for

4
00:00:10,280 --> 00:00:12,520
Speaker 1: you and your money, whether at the grocery store or

5
00:00:12,560 --> 00:00:15,480
Speaker 1: the trading floor. Find a Bloomberg penl podcast on Apple

6
00:00:15,520 --> 00:00:17,959
Speaker 1: podcast or wherever you listen to podcasts, as well as

7
00:00:17,960 --> 00:00:20,960
Speaker 1: at Bloomberg dot com. Right now, looking at the equity

8
00:00:21,000 --> 00:00:24,600
Speaker 1: market here smph up slightly, dow up about sixty points. Uh.

9
00:00:24,680 --> 00:00:27,360
Speaker 1: Not much movement in here after this job's report, but

10
00:00:27,400 --> 00:00:30,440
Speaker 1: let's see where the action might be. We've welcome our

11
00:00:30,520 --> 00:00:34,160
Speaker 1: good friend Vince Signarella. Vince is the global market macro

12
00:00:34,320 --> 00:00:37,280
Speaker 1: strategist for Bloomberg. Vince, thanks so much for joining us

13
00:00:37,280 --> 00:00:39,159
Speaker 1: here in a Bloomberg in act the broker studio. What

14
00:00:39,280 --> 00:00:40,960
Speaker 1: did you take out of the jobs data this morning?

15
00:00:41,080 --> 00:00:43,240
Speaker 1: We'll tell you. Larry's right and he's stealing my thunder

16
00:00:43,240 --> 00:00:45,080
Speaker 1: the rat. I wrote about this about seven years ago

17
00:00:45,120 --> 00:00:48,000
Speaker 1: when I was with Wall Street Journal. August is a

18
00:00:48,200 --> 00:00:53,200
Speaker 1: seasonally adjusted month um It often is revised higher. Last year,

19
00:00:53,240 --> 00:00:55,320
Speaker 1: in two thousand eighteen, the number was a blowout like

20
00:00:55,360 --> 00:00:58,800
Speaker 1: two eighties something, and then September was revised lower. So

21
00:00:59,480 --> 00:01:01,320
Speaker 1: you kind of look at the August jobs data and

22
00:01:01,400 --> 00:01:03,240
Speaker 1: you treat it like figure skating. You throw out the

23
00:01:03,280 --> 00:01:05,600
Speaker 1: high and the low, and you get somewhere of an

24
00:01:05,600 --> 00:01:09,360
Speaker 1: average over the summer. Let's just get your big picture

25
00:01:09,400 --> 00:01:11,840
Speaker 1: takeaway from the jobs report. When I looked at it,

26
00:01:12,080 --> 00:01:14,039
Speaker 1: my impulse was, this is a choose your own adventure

27
00:01:14,120 --> 00:01:16,399
Speaker 1: jobs report. There's good, there's bad, pick the narrative you

28
00:01:16,440 --> 00:01:18,800
Speaker 1: want go with it. The Fed certainly will the cut

29
00:01:18,880 --> 00:01:21,720
Speaker 1: rates come September eight. The question is what they're going

30
00:01:21,760 --> 00:01:23,560
Speaker 1: to do with it going forward, probably going to be,

31
00:01:23,760 --> 00:01:25,679
Speaker 1: you know, watching the data, as they've been saying for

32
00:01:25,720 --> 00:01:29,840
Speaker 1: a long time. Does this maturely shift markets in any

33
00:01:29,840 --> 00:01:31,960
Speaker 1: way over the next few weeks Ahead of that f

34
00:01:32,000 --> 00:01:34,080
Speaker 1: o MC getting its shut And I mean, I think

35
00:01:34,240 --> 00:01:36,160
Speaker 1: you were exactly correct. If you look at the private

36
00:01:36,200 --> 00:01:38,880
Speaker 1: payrolls numbers, they were disappointing. So if you if you

37
00:01:38,920 --> 00:01:40,640
Speaker 1: wanted to look at a week job's report, you could

38
00:01:40,640 --> 00:01:43,199
Speaker 1: look at that. You could look at the wage growth,

39
00:01:43,240 --> 00:01:46,400
Speaker 1: which was substantially higher than estimates, and that would give

40
00:01:46,440 --> 00:01:49,080
Speaker 1: you the positive narrative to the story. So there's it's

41
00:01:49,120 --> 00:01:51,320
Speaker 1: definitely a mixed job report. And as I said, August

42
00:01:51,480 --> 00:01:53,240
Speaker 1: is a month I kind of throw out, and I

43
00:01:53,280 --> 00:01:55,480
Speaker 1: think the FED and everybody else in the long run

44
00:01:55,560 --> 00:02:00,000
Speaker 1: will do the same. I think you also correct about September. Um.

45
00:02:00,800 --> 00:02:03,160
Speaker 1: My take for the FED for September is that they

46
00:02:03,160 --> 00:02:07,080
Speaker 1: will do They'll utter the draggy narrative, we don't want

47
00:02:07,120 --> 00:02:09,280
Speaker 1: to stand in the way of economic growth. This will

48
00:02:09,320 --> 00:02:13,440
Speaker 1: be an additional insurance cut, perhaps to keep things smoothing along.

49
00:02:13,960 --> 00:02:15,839
Speaker 1: They've They've shown us they could turn on a dime

50
00:02:15,880 --> 00:02:19,400
Speaker 1: if they need to have data changes, so there's no harm,

51
00:02:19,400 --> 00:02:21,960
Speaker 1: no foul by cutting basis points. And I wonder what

52
00:02:22,000 --> 00:02:23,839
Speaker 1: their messaging will be tho Vince. You know, I think

53
00:02:23,840 --> 00:02:26,280
Speaker 1: the you know, an insurance cut. I don't think it's

54
00:02:26,280 --> 00:02:28,040
Speaker 1: something that the market wants to hear. The market wants

55
00:02:28,080 --> 00:02:30,920
Speaker 1: to hear that we're into an easing cycle. Do you

56
00:02:30,919 --> 00:02:33,120
Speaker 1: think the FED will go that far? I doubt it.

57
00:02:33,240 --> 00:02:35,720
Speaker 1: I don't think they'll change the narrative from the last

58
00:02:35,760 --> 00:02:39,560
Speaker 1: statement that drastically, because the economy and the data don't

59
00:02:39,600 --> 00:02:41,640
Speaker 1: call for an easy cycle right now. They call for

60
00:02:41,800 --> 00:02:43,880
Speaker 1: the potential that they may have, you know, and you

61
00:02:43,919 --> 00:02:46,320
Speaker 1: won't hear this realistically from the Fed, either that they've

62
00:02:46,400 --> 00:02:49,000
Speaker 1: hiked a little bit too aggressively. If you if you

63
00:02:49,040 --> 00:02:51,400
Speaker 1: look at the natural rate of interest, which Williams has

64
00:02:51,400 --> 00:02:53,920
Speaker 1: put out a paper on the Feds Williams a couple

65
00:02:53,960 --> 00:02:56,720
Speaker 1: of years ago, the natural rate of interest right now

66
00:02:56,800 --> 00:02:59,880
Speaker 1: is some forty basis points below the FED funds. Right

67
00:03:00,639 --> 00:03:03,080
Speaker 1: you can easily see a fifty basis points cut in

68
00:03:03,120 --> 00:03:04,960
Speaker 1: the Fed fund rate just to bring us back to

69
00:03:05,400 --> 00:03:08,160
Speaker 1: sort of neutral ground. And they have the room to do,

70
00:03:08,440 --> 00:03:10,440
Speaker 1: all right. So before we dig too much into the

71
00:03:10,520 --> 00:03:12,600
Speaker 1: Job's report, we're gonna be getting more on that coming

72
00:03:12,680 --> 00:03:14,880
Speaker 1: up in the show. But I want to dig into

73
00:03:15,000 --> 00:03:18,519
Speaker 1: the China news overnight. Uh, the fact that they are

74
00:03:18,560 --> 00:03:20,919
Speaker 1: in fact engaging in more stimulus. And you said out

75
00:03:20,919 --> 00:03:23,360
Speaker 1: a note this morning that I thought was really important,

76
00:03:23,440 --> 00:03:26,360
Speaker 1: which is China wouldn't be engaging in additional rounds of

77
00:03:26,360 --> 00:03:29,000
Speaker 1: stimulus if they thought that we were anywhere close to

78
00:03:29,000 --> 00:03:31,280
Speaker 1: a trade deal. Yeah, and I think that that is

79
00:03:31,320 --> 00:03:34,720
Speaker 1: definitely the case. But I will the caveat to that, honestly,

80
00:03:34,920 --> 00:03:37,440
Speaker 1: is my sources from China last tw weeks have gone dark,

81
00:03:38,040 --> 00:03:41,680
Speaker 1: uh no news. So that sort of coincides with that

82
00:03:41,800 --> 00:03:44,400
Speaker 1: if you will, that I'm not hearing anything, which means

83
00:03:45,240 --> 00:03:48,119
Speaker 1: there really isn't any positive news that I can take from,

84
00:03:48,120 --> 00:03:51,880
Speaker 1: which which then raises a question, right, can additional Chinese

85
00:03:51,880 --> 00:03:55,880
Speaker 1: stimulus offset what we have seen in terms of a slowdown,

86
00:03:55,960 --> 00:03:59,640
Speaker 1: and that could actually ameliorate markets or calm them even

87
00:03:59,680 --> 00:04:01,880
Speaker 1: with how a trade A greatment, not not really a

88
00:04:02,240 --> 00:04:05,200
Speaker 1: China stimulus is for their own domestic economy. It's to

89
00:04:05,280 --> 00:04:09,640
Speaker 1: support their businesses. The hope is that the reserve requirement

90
00:04:09,680 --> 00:04:12,520
Speaker 1: cut will add liquidity, which Chinese banks will then lend

91
00:04:12,840 --> 00:04:16,279
Speaker 1: to businesses. And it's a it's a tax season coming

92
00:04:16,320 --> 00:04:18,520
Speaker 1: up at the end of September, so if business demand

93
00:04:18,720 --> 00:04:22,360
Speaker 1: requires capital. China wants to keep the domestic engine going

94
00:04:22,400 --> 00:04:25,760
Speaker 1: because they know the international engine is not there with

95
00:04:25,839 --> 00:04:28,240
Speaker 1: the tariffs, so they need to prop up the domestic

96
00:04:28,240 --> 00:04:30,920
Speaker 1: economy and I think that reserve re cirement cut is

97
00:04:30,960 --> 00:04:33,760
Speaker 1: to do that and that alone, and that to me

98
00:04:33,839 --> 00:04:37,320
Speaker 1: sends a signal that they're not anticipating the international economy

99
00:04:37,360 --> 00:04:40,440
Speaker 1: to lift them anytime soon. Let's bring a good friend,

100
00:04:40,480 --> 00:04:45,440
Speaker 1: Carl Ricka Donna Bloomberg Economics chief US economist. So Carl, welcome,

101
00:04:45,480 --> 00:04:47,600
Speaker 1: You're in our Bloomberg Interreactor Broker Studio. We'll love having

102
00:04:47,640 --> 00:04:49,800
Speaker 1: you here. I want to get your thoughts on the

103
00:04:49,880 --> 00:04:51,840
Speaker 1: job's number again, as we've kind of discussed, you're kind

104
00:04:51,839 --> 00:04:54,360
Speaker 1: of a goldilocks type of report. What was your take.

105
00:04:54,839 --> 00:04:57,760
Speaker 1: I'm gonna go on the side of whichever bear said

106
00:04:57,920 --> 00:05:00,760
Speaker 1: things were a little bit that too cold, So I'm

107
00:05:00,800 --> 00:05:03,080
Speaker 1: not gonna say goldilock scept for this report, although I

108
00:05:03,080 --> 00:05:05,159
Speaker 1: know some analysts are saying that, uh. And certainly if

109
00:05:05,160 --> 00:05:07,240
Speaker 1: we look at the reaction in the treasury market, it

110
00:05:07,279 --> 00:05:09,919
Speaker 1: also seems to have that sentiment that things were a

111
00:05:09,960 --> 00:05:13,440
Speaker 1: little on the chili side here. So what's impressive is

112
00:05:13,440 --> 00:05:15,600
Speaker 1: that the economy is holding up as well as it is.

113
00:05:15,640 --> 00:05:18,520
Speaker 1: So even the manufacturing sector, which is really front and

114
00:05:18,560 --> 00:05:22,200
Speaker 1: center in this trade skirmish and economic uncertainty and strong dollar,

115
00:05:22,560 --> 00:05:25,800
Speaker 1: still managed to eke out positive job games. Now, mind you,

116
00:05:25,920 --> 00:05:29,000
Speaker 1: the I s M earlier this week fell into minor

117
00:05:29,040 --> 00:05:31,560
Speaker 1: contractionary territory. I think it's going to stay there for

118
00:05:31,600 --> 00:05:35,360
Speaker 1: a couple more months. So the economy is weathering the storm,

119
00:05:35,440 --> 00:05:38,039
Speaker 1: but it certainly is not immune to what's happening. And

120
00:05:38,080 --> 00:05:40,839
Speaker 1: we can see that in this slowing pace of job creation.

121
00:05:40,920 --> 00:05:44,560
Speaker 1: So while that headline number one thirty, uh, not very impressive,

122
00:05:45,040 --> 00:05:49,039
Speaker 1: we have to factor out twenty five thousand census workers

123
00:05:49,040 --> 00:05:51,960
Speaker 1: that were hired for is to get an even better

124
00:05:52,000 --> 00:05:55,320
Speaker 1: sense of underlying momentum in the economy. But when we

125
00:05:55,360 --> 00:05:58,960
Speaker 1: do that and instead look at private sector hiring nine thousand,

126
00:05:59,240 --> 00:06:02,279
Speaker 1: that that goldilocks Paul. But I want to push back

127
00:06:02,320 --> 00:06:05,560
Speaker 1: because honestly, you did see better than expected wage growth,

128
00:06:05,720 --> 00:06:08,440
Speaker 1: which indicates that perhaps the labor market is tight and

129
00:06:08,440 --> 00:06:10,760
Speaker 1: that we're not adding as many jobs since simply because

130
00:06:10,760 --> 00:06:12,960
Speaker 1: there aren't that many people looking for work. Sure we

131
00:06:13,000 --> 00:06:16,000
Speaker 1: should be getting some wage pressure as the unemployment rate

132
00:06:16,120 --> 00:06:19,599
Speaker 1: is plunging below four percent. I think the unemployment rate

133
00:06:19,640 --> 00:06:22,000
Speaker 1: could actually hit three point four percent or three point

134
00:06:22,000 --> 00:06:24,440
Speaker 1: five percent by the end of this year. So things

135
00:06:24,520 --> 00:06:28,640
Speaker 1: absolutely are tightening. But remember one thing, Lisa, inflation is

136
00:06:28,680 --> 00:06:32,680
Speaker 1: a lagging economic indicator, and wage inflation is also a

137
00:06:32,760 --> 00:06:36,279
Speaker 1: lagging economic indicator. So what's more important is the activity

138
00:06:36,279 --> 00:06:39,200
Speaker 1: based metrics, things like the pace of hiring, in the

139
00:06:39,279 --> 00:06:43,120
Speaker 1: hours worked, and the aggregate income growth, and those were

140
00:06:43,200 --> 00:06:46,320
Speaker 1: on cooler trajectories in this report. How do you think

141
00:06:46,480 --> 00:06:50,160
Speaker 1: the FED should interpret this data? Well, the Fed has

142
00:06:50,200 --> 00:06:52,440
Speaker 1: to look at this data and say, yes, the economy

143
00:06:52,800 --> 00:06:57,440
Speaker 1: is losing some momentum. We're not at recession risk territory here,

144
00:06:57,600 --> 00:07:00,560
Speaker 1: but we're definitely looking at sub two percent growth in

145
00:07:00,600 --> 00:07:02,960
Speaker 1: the back half of the year. In that environment, the

146
00:07:03,000 --> 00:07:05,080
Speaker 1: Feds should be trying to take some of the steam

147
00:07:05,120 --> 00:07:07,200
Speaker 1: out of the trade weighted dollar, which is at record

148
00:07:07,279 --> 00:07:10,160
Speaker 1: high levels. Uh and therefore they should be cutting twenty

149
00:07:10,640 --> 00:07:14,280
Speaker 1: in September, October, December. In December, they should look at

150
00:07:14,280 --> 00:07:17,680
Speaker 1: their Bloomberg screens. If the yield curve is still inverted,

151
00:07:17,720 --> 00:07:20,200
Speaker 1: then keep those twenty five basis point cuts coming right

152
00:07:20,240 --> 00:07:22,720
Speaker 1: into the new year. Vince, is that what the market

153
00:07:22,760 --> 00:07:25,160
Speaker 1: is looking for? Just cut to zero basically on a

154
00:07:25,200 --> 00:07:27,960
Speaker 1: monthly trajectory. I didn't say zero, but the ten year

155
00:07:28,000 --> 00:07:30,160
Speaker 1: treasury yields at zero, they be They Fed better go

156
00:07:30,200 --> 00:07:32,680
Speaker 1: to zero as well. I think the market would like

157
00:07:32,760 --> 00:07:35,080
Speaker 1: them to do that. I personally would like to see

158
00:07:35,080 --> 00:07:39,000
Speaker 1: them get the ioe R closer to where the tenure is,

159
00:07:39,040 --> 00:07:41,280
Speaker 1: to keep that yield curve a little flatter and not

160
00:07:41,320 --> 00:07:44,760
Speaker 1: so inverted. Um. It makes absolutely no sense to have

161
00:07:44,880 --> 00:07:48,720
Speaker 1: FED funds right seventy five basis points above the tenure yield.

162
00:07:48,840 --> 00:07:52,080
Speaker 1: So the market is definitely asking exactly what Carl said,

163
00:07:52,400 --> 00:07:54,840
Speaker 1: give me that seventy five basis points. Give it to

164
00:07:54,880 --> 00:07:56,360
Speaker 1: me in a little bit out of time. We can't

165
00:07:56,360 --> 00:07:58,320
Speaker 1: really handle it all at once because that'll scare the

166
00:07:58,320 --> 00:08:01,000
Speaker 1: heck out of us. Um whether or not they'll get that,

167
00:08:01,000 --> 00:08:03,880
Speaker 1: that's a good question. I think they'll be a little

168
00:08:03,880 --> 00:08:06,320
Speaker 1: bit more reluctant to go that quickly. All right, Well,

169
00:08:06,400 --> 00:08:09,600
Speaker 1: we'll continue the conversation. Car Down and Bloomberg Economics Chief

170
00:08:09,640 --> 00:08:12,800
Speaker 1: US Economist, Thank you so much. Vince Ignarella, global macro

171
00:08:12,880 --> 00:08:15,200
Speaker 1: strategist for Bloomberg, both of you in our Bloomberg Interactive

172
00:08:15,200 --> 00:08:32,480
Speaker 1: Progra Studios. Thank you so much for being with us. Well,

173
00:08:32,520 --> 00:08:35,439
Speaker 1: it is Jobs Friday, and I think the mixed report

174
00:08:35,520 --> 00:08:39,320
Speaker 1: that we got from the Department would suggest that the

175
00:08:39,320 --> 00:08:41,840
Speaker 1: Fed probably has a little bit more ammunition should they

176
00:08:41,880 --> 00:08:45,000
Speaker 1: decide to cut rates at their next meeting. They get

177
00:08:45,000 --> 00:08:46,480
Speaker 1: a sense of kind of how this may play out.

178
00:08:46,480 --> 00:08:48,559
Speaker 1: We welcome our next guest, Chris Louse. He's a senior

179
00:08:48,600 --> 00:08:51,520
Speaker 1: fellow at the University of Virginia Miller Center. He was

180
00:08:51,600 --> 00:08:54,520
Speaker 1: former Deputy Secretary of Labor under President Obama. He joins

181
00:08:54,559 --> 00:08:57,719
Speaker 1: US from Virginia on the phone, Chris, thanks so much

182
00:08:57,720 --> 00:09:00,240
Speaker 1: for joining us. What was your take of the jobs

183
00:09:00,320 --> 00:09:04,000
Speaker 1: numbers that we saw this morning. You know, it's basically

184
00:09:04,040 --> 00:09:07,680
Speaker 1: what you'd expect in UH, an economy that clearly is

185
00:09:07,679 --> 00:09:11,559
Speaker 1: slowing down. How much is the unclear issue at this point.

186
00:09:11,600 --> 00:09:14,600
Speaker 1: And when you combine this with the consumer confidence numbers

187
00:09:14,600 --> 00:09:17,200
Speaker 1: from last week, the manufacturing numbers from earlier this week,

188
00:09:17,400 --> 00:09:19,360
Speaker 1: this is about what you'd expect. And you when you

189
00:09:19,360 --> 00:09:23,640
Speaker 1: look at the trend not only but particularly compared to

190
00:09:23,720 --> 00:09:27,880
Speaker 1: twenty eighteen, UH, this is a slowing economy and so

191
00:09:28,080 --> 00:09:32,520
Speaker 1: it will leave policymakers not only in Washington in Congress,

192
00:09:32,520 --> 00:09:34,200
Speaker 1: but also in the said trying to figure out, you know,

193
00:09:34,200 --> 00:09:37,319
Speaker 1: what the next step is. So the headline number missed,

194
00:09:37,520 --> 00:09:40,920
Speaker 1: but the wage increase beat. And I think this is

195
00:09:40,960 --> 00:09:42,959
Speaker 1: actually really important because a lot of people have said

196
00:09:43,000 --> 00:09:46,080
Speaker 1: it's been interesting, UH that the headline numbers of job

197
00:09:46,160 --> 00:09:48,800
Speaker 1: creations have been as high as they have, given where

198
00:09:48,800 --> 00:09:51,439
Speaker 1: we are in the credit cycle and the economic cycle,

199
00:09:51,480 --> 00:09:53,440
Speaker 1: and given how many jobs have already come back to

200
00:09:53,440 --> 00:09:57,200
Speaker 1: the market. You know, I'm wondering whether the lower than

201
00:09:57,240 --> 00:10:00,720
Speaker 1: expected number paired with better than expected wage it indicates

202
00:10:00,960 --> 00:10:04,200
Speaker 1: a tight labor market, getting that sort of sweet spotmentum

203
00:10:04,200 --> 00:10:06,800
Speaker 1: that people have been waiting for. Right. You know, the

204
00:10:06,840 --> 00:10:09,680
Speaker 1: wage growth I think with three which is pretty good,

205
00:10:09,720 --> 00:10:12,920
Speaker 1: but again, given the fact that we've been at below

206
00:10:12,960 --> 00:10:15,559
Speaker 1: four percent unemployment for you know, most of this year,

207
00:10:15,600 --> 00:10:18,240
Speaker 1: if not longer than that, you would expect higher wage

208
00:10:18,240 --> 00:10:21,320
Speaker 1: growth in that And I think what confounds us is

209
00:10:21,440 --> 00:10:25,200
Speaker 1: why that hasn't happened, and it may simply reflect a

210
00:10:25,360 --> 00:10:28,800
Speaker 1: changing economy at this point, is that a lot of

211
00:10:28,800 --> 00:10:30,880
Speaker 1: these low wage shops are going to stay low wage jobs,

212
00:10:30,920 --> 00:10:33,760
Speaker 1: in particular with a federal minimum wage that hasn't gone

213
00:10:33,800 --> 00:10:36,440
Speaker 1: up in ten years, and that the economically, the economy

214
00:10:36,559 --> 00:10:39,360
Speaker 1: is just fundamentally different than what we have seen during

215
00:10:39,440 --> 00:10:43,840
Speaker 1: previous economic expansions. It's interesting, Chris, I was just commenting

216
00:10:44,160 --> 00:10:47,920
Speaker 1: recently that you know, you walk down Main Street, USA anywhere,

217
00:10:48,040 --> 00:10:51,240
Speaker 1: and it's almost every single store, every establishment has a

218
00:10:51,320 --> 00:10:54,400
Speaker 1: help wanted sign out there. Um. It just again it

219
00:10:54,440 --> 00:10:57,960
Speaker 1: kind of goes to that wage story. What do you think,

220
00:10:58,000 --> 00:11:00,280
Speaker 1: given where we are in terms of three points seven

221
00:11:00,360 --> 00:11:03,920
Speaker 1: percent unemployment, would you expect to see wages even higher

222
00:11:04,280 --> 00:11:07,560
Speaker 1: in terms of growth than here. Well, I would normally

223
00:11:07,559 --> 00:11:10,080
Speaker 1: expect to see that given everything we've always learned about markets.

224
00:11:10,120 --> 00:11:11,959
Speaker 1: And the other thing that's sort of interesting is that

225
00:11:12,320 --> 00:11:14,960
Speaker 1: labor force participation, while it picked up a little bit

226
00:11:15,240 --> 00:11:17,600
Speaker 1: UH this month, UM, it's essentially kind of been in

227
00:11:17,640 --> 00:11:20,520
Speaker 1: the same band over the last four or five years.

228
00:11:20,640 --> 00:11:23,600
Speaker 1: And so people really are not coming off the sidelines

229
00:11:23,679 --> 00:11:25,439
Speaker 1: right now to get jobs. And in part it's because

230
00:11:25,720 --> 00:11:29,880
Speaker 1: the demographics of this country have changed. People are retiring earlier, UM,

231
00:11:30,000 --> 00:11:33,200
Speaker 1: people are staying in school longer, UM. But a lot

232
00:11:33,240 --> 00:11:35,960
Speaker 1: of the traditional ideas of what it means when you

233
00:11:36,000 --> 00:11:39,560
Speaker 1: have low unemployment, higher wages people coming off the sidelines

234
00:11:39,679 --> 00:11:43,040
Speaker 1: just haven't happened so far. Chris, I want to shift

235
00:11:43,080 --> 00:11:45,400
Speaker 1: gears a little bit because it seems like the job's

236
00:11:45,440 --> 00:11:49,240
Speaker 1: report didn't necessarily shift market expectations that much. And and

237
00:11:49,280 --> 00:11:53,560
Speaker 1: speak to a Bill Dudley column of Federal Reserve, former

238
00:11:53,600 --> 00:11:56,720
Speaker 1: New York Fed President for Bloomberg Opinion where he was

239
00:11:56,760 --> 00:11:59,840
Speaker 1: talking about how right now, given where we are in

240
00:11:59,880 --> 00:12:02,679
Speaker 1: the economy, the Fed shouldn't really be cutting rates all

241
00:12:02,760 --> 00:12:07,160
Speaker 1: that much because it could potentially incentivize President Trump to

242
00:12:07,760 --> 00:12:12,600
Speaker 1: ramp up his trade war and basically hurt the economy

243
00:12:12,679 --> 00:12:16,200
Speaker 1: more in the long run, And I'm wondering whether you'd

244
00:12:16,200 --> 00:12:20,680
Speaker 1: weigh in on that, especially because the Chief Economic Council Director,

245
00:12:20,760 --> 00:12:23,120
Speaker 1: Larry Cudlow is just uh sort of railing against it

246
00:12:23,160 --> 00:12:27,280
Speaker 1: on Bloomberg Television moments ago. So what's your what's your take? Well,

247
00:12:27,320 --> 00:12:30,199
Speaker 1: I think, look, I mean, the what the President has

248
00:12:30,200 --> 00:12:32,520
Speaker 1: been able to do over the last couple of years

249
00:12:32,559 --> 00:12:34,360
Speaker 1: is he knows that the US economy is strong, and

250
00:12:34,360 --> 00:12:37,280
Speaker 1: that it's a it's certainly the strongest of any country

251
00:12:37,280 --> 00:12:39,600
Speaker 1: in the world that's resilient at this point. It's given

252
00:12:39,679 --> 00:12:42,559
Speaker 1: him a fair amount of latitude in waging this trade war,

253
00:12:42,600 --> 00:12:44,880
Speaker 1: not with just with China, but with Europe and our

254
00:12:45,280 --> 00:12:48,120
Speaker 1: friends in North America. It may turn out that he

255
00:12:48,160 --> 00:12:50,959
Speaker 1: has much a much shorter leash now in doing that,

256
00:12:51,480 --> 00:12:54,000
Speaker 1: and it may cause them to rethink this kind of

257
00:12:54,440 --> 00:12:57,520
Speaker 1: uh score short strategy that they're doing and maybe try

258
00:12:57,559 --> 00:13:00,200
Speaker 1: to cut a deal sooner rather than later. Be is

259
00:13:00,360 --> 00:13:02,800
Speaker 1: whether it's will interest rates or frankly, whether it's the

260
00:13:02,840 --> 00:13:06,080
Speaker 1: trillion dollar budget deficits that we're running right now. There's

261
00:13:06,160 --> 00:13:08,440
Speaker 1: not a lot of you know, the traditional levels that

262
00:13:08,480 --> 00:13:11,440
Speaker 1: we would use if this economy really starts to go

263
00:13:11,520 --> 00:13:14,600
Speaker 1: south this point and so um, I you know, I'm

264
00:13:14,640 --> 00:13:16,839
Speaker 1: not sure I can comment one way or another and

265
00:13:16,920 --> 00:13:19,640
Speaker 1: on Bill Dudley's column, other than to say that, Um,

266
00:13:19,679 --> 00:13:24,360
Speaker 1: if the President thinks the economy can withstand these headwinds, um,

267
00:13:24,400 --> 00:13:27,480
Speaker 1: he may be mistaken. Let's sort of shift the question

268
00:13:27,480 --> 00:13:30,280
Speaker 1: on its head, then, which is if the Federals were

269
00:13:30,320 --> 00:13:33,800
Speaker 1: too cut rates to zero, would that materially improve the

270
00:13:33,880 --> 00:13:38,120
Speaker 1: labor market at this point in the economic cycle. Look,

271
00:13:38,280 --> 00:13:40,120
Speaker 1: it certainly would help a little bit. I think the

272
00:13:40,200 --> 00:13:42,320
Speaker 1: challenge we also have to recognize is that we are now,

273
00:13:42,840 --> 00:13:45,959
Speaker 1: you know, nine plus years into this economic expansion. When

274
00:13:45,960 --> 00:13:49,120
Speaker 1: you look historically, Um, that's a long period of time.

275
00:13:49,520 --> 00:13:51,880
Speaker 1: And it's not just what's happening here in the United States,

276
00:13:51,920 --> 00:13:55,560
Speaker 1: but it's a slowing Chinese economy, it's Germany possibly going

277
00:13:55,600 --> 00:13:59,080
Speaker 1: into recession. It's the uncertainty around Brexit. So the U

278
00:13:59,160 --> 00:14:00,760
Speaker 1: s can certainly do a and the FITS can do

279
00:14:00,800 --> 00:14:03,440
Speaker 1: a lot um, But in this global economy, you know,

280
00:14:03,720 --> 00:14:06,440
Speaker 1: if other countries start to move south, it's hard for

281
00:14:06,480 --> 00:14:08,920
Speaker 1: the US to resist that as well. So Chris, do

282
00:14:08,960 --> 00:14:12,200
Speaker 1: you and your kind of outlook, are you discounting a

283
00:14:12,240 --> 00:14:14,520
Speaker 1: recession in the next six to twelve months? Or do

284
00:14:14,559 --> 00:14:18,160
Speaker 1: you think that the consumer can continue to support growing

285
00:14:18,280 --> 00:14:21,640
Speaker 1: US economy. Well, and that's really what has propped up, UM,

286
00:14:21,720 --> 00:14:24,400
Speaker 1: the US economy. I mean, we've seen business investment not

287
00:14:24,600 --> 00:14:26,880
Speaker 1: certainly be what we expected after the tax got in,

288
00:14:27,160 --> 00:14:30,200
Speaker 1: with the consumer confidence numbers from last Friday suggesting that

289
00:14:30,680 --> 00:14:35,320
Speaker 1: people might be pulling back on their own spending. Um. Look,

290
00:14:35,400 --> 00:14:39,040
Speaker 1: I don't think we're heading into recession before the next election,

291
00:14:39,120 --> 00:14:42,280
Speaker 1: but I certainly think you'll see economic growth that's well

292
00:14:42,320 --> 00:14:46,320
Speaker 1: below two percent. And I think, um, the President will

293
00:14:46,320 --> 00:14:50,480
Speaker 1: be running for re election essentially in a similar economic

294
00:14:50,560 --> 00:14:53,360
Speaker 1: time that he criticized Barack Obama for when he ran

295
00:14:53,400 --> 00:14:56,400
Speaker 1: for office in twenty sixteen, So I think that will Um,

296
00:14:56,400 --> 00:14:58,160
Speaker 1: I don't think we're heading into recession, but I think

297
00:14:58,240 --> 00:15:02,000
Speaker 1: for the President's purposes that challenges his re election bid.

298
00:15:02,960 --> 00:15:05,440
Speaker 1: Is consumer spending a leading or lagging indicator from your

299
00:15:05,560 --> 00:15:09,600
Speaker 1: bantage point? You know, that's actually an interesting question. I mean,

300
00:15:09,680 --> 00:15:13,040
Speaker 1: you know, UM, you've what you see now is consumer

301
00:15:13,080 --> 00:15:16,120
Speaker 1: debt at levels we haven't seen since, um, since before

302
00:15:16,240 --> 00:15:19,000
Speaker 1: the recession. So I think sometimes consumers are it's a

303
00:15:19,040 --> 00:15:21,360
Speaker 1: little bit lagging. They're they're kind of spending money, they're

304
00:15:21,400 --> 00:15:23,840
Speaker 1: taking out loans until they realize, wow, you know, maybe

305
00:15:23,880 --> 00:15:26,480
Speaker 1: the plant place I'm working at is not expanding as fast,

306
00:15:26,600 --> 00:15:28,840
Speaker 1: or you know, I was expecting in this pay raise,

307
00:15:29,120 --> 00:15:32,560
Speaker 1: so I'll say it's probably lagging. Um. But you know

308
00:15:32,600 --> 00:15:34,600
Speaker 1: what I'm also troubled by is the fact that, again,

309
00:15:34,600 --> 00:15:36,880
Speaker 1: as they said, not only consumer debt, but you see

310
00:15:36,880 --> 00:15:40,360
Speaker 1: these statistics about Americans not being able to come up

311
00:15:40,400 --> 00:15:43,680
Speaker 1: with four hundred dollars for an emergency expense, and what

312
00:15:43,720 --> 00:15:47,200
Speaker 1: you realize is that even a period of low unemployment,

313
00:15:47,560 --> 00:15:49,800
Speaker 1: a lot of people really are living paycheck to paycheck,

314
00:15:49,840 --> 00:15:52,080
Speaker 1: and it wouldn't take much of a downturn in the

315
00:15:52,080 --> 00:15:55,920
Speaker 1: economy to affect millions of people. Chris Lou thank you

316
00:15:56,040 --> 00:15:58,000
Speaker 1: so much, as always for spending time with us. Your

317
00:15:58,000 --> 00:16:01,800
Speaker 1: insights are very welcome. Chris slew is former Deputy Secretary

318
00:16:01,800 --> 00:16:04,680
Speaker 1: of Labor and senior Fellow at the University of Virginia

319
00:16:04,720 --> 00:16:23,200
Speaker 1: Miller Center. He worked under former President Obama. It took

320
00:16:23,240 --> 00:16:25,360
Speaker 1: a couple of hours, but bond investors have taken a

321
00:16:25,360 --> 00:16:27,880
Speaker 1: look at the job's data and said, no, not so great.

322
00:16:27,920 --> 00:16:30,120
Speaker 1: The economy ain't so hard. We're gonna keep buying right now,

323
00:16:30,200 --> 00:16:33,120
Speaker 1: Let's get a view from one such bond investor, Tad Ravel,

324
00:16:33,240 --> 00:16:36,560
Speaker 1: chief investment officer for fixed income at TCW, joining US

325
00:16:36,600 --> 00:16:39,240
Speaker 1: from Los Angeles. Tad thank you so much for spending

326
00:16:39,240 --> 00:16:41,520
Speaker 1: the time. First, I'd love to get your read on

327
00:16:41,560 --> 00:16:44,240
Speaker 1: the jobs report. Does that sort of confirm your bullish

328
00:16:44,280 --> 00:16:49,040
Speaker 1: stance currently on duration on US treasuries? I thought it

329
00:16:49,120 --> 00:16:52,760
Speaker 1: was a week report. Actually, I think that um when

330
00:16:52,760 --> 00:16:56,240
Speaker 1: you look at the year over year change in the

331
00:16:56,600 --> 00:16:59,600
Speaker 1: actual non farm payroll numbers a number of people at work,

332
00:17:00,040 --> 00:17:02,760
Speaker 1: it's at the lowest growth rate since I think maybe

333
00:17:02,800 --> 00:17:06,200
Speaker 1: two thousand and eleven. It was rising something like one

334
00:17:05,720 --> 00:17:09,120
Speaker 1: point three on a year over year basis very disappointing.

335
00:17:09,720 --> 00:17:12,040
Speaker 1: It's possible, of course, that it could get revised, but

336
00:17:12,200 --> 00:17:15,640
Speaker 1: notwithstanding that, I think it's actually pretty clear that the

337
00:17:15,760 --> 00:17:19,760
Speaker 1: jobs market has slowed down quite a bit. The uh

338
00:17:19,800 --> 00:17:24,359
Speaker 1: the rise in hourly earnings is superficially a could be

339
00:17:24,440 --> 00:17:26,520
Speaker 1: viewed as a as a positive sign, but in point

340
00:17:26,560 --> 00:17:29,720
Speaker 1: of fact, when companies start to pull back on their

341
00:17:29,760 --> 00:17:33,119
Speaker 1: hiring or start to let people go, it's oftentimes felt

342
00:17:33,240 --> 00:17:37,960
Speaker 1: by the lower wage cohort of those companies first, and

343
00:17:38,000 --> 00:17:40,920
Speaker 1: so consequently, when you look at numbers like the hourly

344
00:17:40,960 --> 00:17:44,399
Speaker 1: wages and even the average work week, those are not

345
00:17:44,480 --> 00:17:48,159
Speaker 1: necessarily indicative of actually the underlying health of the of

346
00:17:48,200 --> 00:17:51,120
Speaker 1: the labor market. But this shouldn't be surprising to anybody.

347
00:17:51,119 --> 00:17:53,200
Speaker 1: In our view, we do view ourselves in a pretty

348
00:17:53,280 --> 00:17:56,680
Speaker 1: late cycle type of type of environment. And um, well,

349
00:17:56,800 --> 00:18:00,320
Speaker 1: employment is something of a lagging indicator. It's the slee

350
00:18:00,720 --> 00:18:04,159
Speaker 1: uh follows on the heels of very weak manufacturing data.

351
00:18:04,400 --> 00:18:07,399
Speaker 1: And we have a manufacturing sector that both the US

352
00:18:07,480 --> 00:18:10,359
Speaker 1: and globally is either in recession or on the verge

353
00:18:10,359 --> 00:18:13,520
Speaker 1: of it. So it's it was a weak number, and um,

354
00:18:13,560 --> 00:18:16,439
Speaker 1: not a big surprise, I think. So, Ted, how do

355
00:18:16,480 --> 00:18:19,720
Speaker 1: you expect our friends at the Federal Reserve to interpret

356
00:18:19,800 --> 00:18:24,560
Speaker 1: this data? Oh? I don't actually think that they I

357
00:18:24,560 --> 00:18:27,880
Speaker 1: don't actually think that we should take their their rhetoric

358
00:18:28,040 --> 00:18:30,960
Speaker 1: at at face value. I don't really believe that they're

359
00:18:31,000 --> 00:18:33,199
Speaker 1: that they're data driven or when they say things like

360
00:18:33,280 --> 00:18:35,359
Speaker 1: they are data driven, as they have maintained for a

361
00:18:35,400 --> 00:18:38,080
Speaker 1: long period of time, they never say exactly what kind

362
00:18:38,119 --> 00:18:40,520
Speaker 1: of data that they're looking at. They're gonna ease. Um,

363
00:18:40,560 --> 00:18:42,480
Speaker 1: they've committed to that course of action. We're going to

364
00:18:42,520 --> 00:18:45,720
Speaker 1: get another twenty five fifty basis points of rate reduction.

365
00:18:45,760 --> 00:18:48,000
Speaker 1: I think that that's all baked into the cake. But

366
00:18:48,800 --> 00:18:52,400
Speaker 1: there is a there's almost an absurd disconnect, I think,

367
00:18:52,560 --> 00:18:56,080
Speaker 1: between the both the rhetoric and the actions of the

368
00:18:56,119 --> 00:19:00,399
Speaker 1: Federal Reserve on the one hand, and um the the

369
00:19:00,960 --> 00:19:05,359
Speaker 1: longer term understanding of what monetary policy is supposed to

370
00:19:05,440 --> 00:19:08,280
Speaker 1: be about, and for the idea that the central bank

371
00:19:08,359 --> 00:19:11,000
Speaker 1: is supposed to be independent taking a long term view

372
00:19:11,480 --> 00:19:15,359
Speaker 1: of the UH prosperity of the country as opposed to

373
00:19:15,400 --> 00:19:19,639
Speaker 1: responding to near term blips in the employment data or

374
00:19:19,680 --> 00:19:21,960
Speaker 1: whatever it is that they want to latch onto. But

375
00:19:22,119 --> 00:19:25,359
Speaker 1: the bias from the FED and from central banks around

376
00:19:25,400 --> 00:19:30,879
Speaker 1: the world, complete ridiculous nonsense of how do you really feel?

377
00:19:33,920 --> 00:19:37,199
Speaker 1: Since you ask, well, so look, look, I guess that

378
00:19:37,280 --> 00:19:38,600
Speaker 1: you know. We we can debate what the Fed is

379
00:19:38,640 --> 00:19:41,600
Speaker 1: going to do and how much they should cut, etcetera, um,

380
00:19:41,720 --> 00:19:45,160
Speaker 1: for for for days, and we will. But I'm curious

381
00:19:45,240 --> 00:19:47,520
Speaker 1: how much it matters. I mean, right now, it's not

382
00:19:47,560 --> 00:19:50,240
Speaker 1: as if monetary conditions are particularly tight. I mean, we're

383
00:19:50,240 --> 00:19:52,520
Speaker 1: watching this bond bonanza right now with any company that

384
00:19:52,560 --> 00:19:54,679
Speaker 1: wants to sell bonds can sell bonds, and they can

385
00:19:54,760 --> 00:19:56,840
Speaker 1: borrow at record low rates. So I'm looking at this

386
00:19:56,880 --> 00:19:59,440
Speaker 1: and wondering, let's say the FED cuts to zero, will

387
00:19:59,480 --> 00:20:03,040
Speaker 1: it matter. It's not going to matter in the long run, right,

388
00:20:03,040 --> 00:20:05,639
Speaker 1: Just as you said, seventy five billion dollars worth of

389
00:20:05,920 --> 00:20:09,280
Speaker 1: US corporate debt came to market this week. This idea

390
00:20:09,600 --> 00:20:14,080
Speaker 1: that if you simply lower the cost of borrow the

391
00:20:14,119 --> 00:20:18,480
Speaker 1: cost of credit, that you can maintain prosperity forever. That's

392
00:20:18,560 --> 00:20:21,080
Speaker 1: I think what I was getting on my soapbox about

393
00:20:21,119 --> 00:20:23,639
Speaker 1: a few moments ago. That's kind of the absurdity that

394
00:20:23,840 --> 00:20:28,320
Speaker 1: essentially economic growth is a function of very deep fundamental

395
00:20:28,400 --> 00:20:32,680
Speaker 1: factors that basically relate to having labor and capital work

396
00:20:32,760 --> 00:20:36,440
Speaker 1: together on a ongoing basis to find ways to be

397
00:20:36,720 --> 00:20:39,200
Speaker 1: more efficient and more productive over the course of time.

398
00:20:39,440 --> 00:20:43,040
Speaker 1: Simply lowering the input costs of financing and doing it

399
00:20:43,119 --> 00:20:46,560
Speaker 1: in an artificial way doesn't lead to higher efficiency. In fact,

400
00:20:46,560 --> 00:20:50,440
Speaker 1: it probably does the opposite, because it ends up maintaining

401
00:20:50,960 --> 00:20:55,760
Speaker 1: inefficient enterprises over leveraged enterprises and activities that are probably

402
00:20:55,760 --> 00:20:58,560
Speaker 1: supposed to be even though sort of a politically incorrect

403
00:20:58,640 --> 00:21:01,560
Speaker 1: thing to say, they're supposed to be swept aside. Eventually,

404
00:21:01,600 --> 00:21:05,320
Speaker 1: consumer tastes change, things become obsolete. You need to you

405
00:21:05,359 --> 00:21:07,639
Speaker 1: need to facilitate change, and one of the ways you

406
00:21:07,680 --> 00:21:11,399
Speaker 1: facilitate change actually is through normalizing rates. You failed to

407
00:21:11,400 --> 00:21:13,800
Speaker 1: do that, and maybe you end up in places like

408
00:21:14,320 --> 00:21:17,240
Speaker 1: uh where Europe and Japan have gone, which is just

409
00:21:17,920 --> 00:21:21,480
Speaker 1: long term inefficiency, and you get absolutely nowhere, which I

410
00:21:21,480 --> 00:21:24,160
Speaker 1: guess was sort of the point of your question. So, Ted,

411
00:21:24,280 --> 00:21:27,199
Speaker 1: given where we are late this latent cycle, as you

412
00:21:27,240 --> 00:21:31,199
Speaker 1: mentioned in presumably a continued Doubbish fed how are you

413
00:21:31,320 --> 00:21:35,880
Speaker 1: positioning your portfolio at the current time. Well, I think

414
00:21:35,920 --> 00:21:37,920
Speaker 1: that this is a point in the cycle where you're

415
00:21:37,920 --> 00:21:41,040
Speaker 1: supposed to first and foremost in your thought process is

416
00:21:41,080 --> 00:21:44,199
Speaker 1: supposed to be capital preservation. You're supposed to make your

417
00:21:44,240 --> 00:21:47,040
Speaker 1: bones in the early and mid stages of the cycle

418
00:21:47,520 --> 00:21:49,920
Speaker 1: when it's easy, so to speak, to make money. You

419
00:21:49,960 --> 00:21:53,359
Speaker 1: can almost almost anything you do in those periods is

420
00:21:53,359 --> 00:21:55,919
Speaker 1: going to work out. Well, there's their a beta trades,

421
00:21:55,920 --> 00:21:59,000
Speaker 1: there's lots of dislocation left over from the demise of

422
00:21:59,000 --> 00:22:01,520
Speaker 1: the last cycle. When you're this late in the cycle.

423
00:22:01,600 --> 00:22:04,080
Speaker 1: If you've been fortunate and you've and you've made your bones,

424
00:22:04,359 --> 00:22:06,919
Speaker 1: now you're supposed to be thinking about at least with

425
00:22:06,960 --> 00:22:10,280
Speaker 1: respect to a fixed income portfolio, is how do I

426
00:22:10,320 --> 00:22:13,800
Speaker 1: make my fixed income portfolio truly be a safe asset

427
00:22:13,880 --> 00:22:16,040
Speaker 1: class in the late cycle. If you want to take

428
00:22:16,400 --> 00:22:19,840
Speaker 1: risk elsewhere, I suppose that's that's perfectly reasonable and fine.

429
00:22:20,160 --> 00:22:22,320
Speaker 1: But at least with respect to your fixed income you

430
00:22:22,359 --> 00:22:25,359
Speaker 1: should be biased towards risk off type assets that would

431
00:22:25,359 --> 00:22:30,320
Speaker 1: include treasuries and agency mortgages. You should be looking really carefully,

432
00:22:30,359 --> 00:22:33,240
Speaker 1: in our view, at your high yield and emerging markets

433
00:22:33,280 --> 00:22:37,880
Speaker 1: and thinking, really, if you want significant exposure to these

434
00:22:37,880 --> 00:22:41,040
Speaker 1: asset classes so late in the cycle, a time when

435
00:22:41,320 --> 00:22:45,080
Speaker 1: they oftentimes perform or they will ultimately perform very badly,

436
00:22:45,440 --> 00:22:50,000
Speaker 1: so defensive with respect to credit, slightly overweight with respect

437
00:22:50,080 --> 00:22:53,560
Speaker 1: to duration. And that's I mean, that's those are two

438
00:22:53,560 --> 00:22:56,080
Speaker 1: of the most significant themes. How much have you reduced

439
00:22:56,320 --> 00:23:01,959
Speaker 1: your high old in emerging markets allocations recently? Not much recently. UM,

440
00:23:02,000 --> 00:23:03,800
Speaker 1: I guess we've been on the soapbox that we're in

441
00:23:03,840 --> 00:23:06,879
Speaker 1: a late cycle environment for a couple of years, so, uh,

442
00:23:07,119 --> 00:23:10,080
Speaker 1: we haven't. We haven't had to adjust it because we

443
00:23:10,119 --> 00:23:13,040
Speaker 1: actually moved to a pretty conservative stance going back a

444
00:23:13,080 --> 00:23:14,880
Speaker 1: couple of years ago, and we still think that that's

445
00:23:14,920 --> 00:23:18,000
Speaker 1: appropriate UM, although we did add in the fourth quarter

446
00:23:18,040 --> 00:23:22,640
Speaker 1: of last year, so we with the widening out and spreads,

447
00:23:22,800 --> 00:23:26,240
Speaker 1: we did add to our high yielded on corporate positions,

448
00:23:26,280 --> 00:23:30,000
Speaker 1: but UM as a as a general statement, uh, the

449
00:23:30,080 --> 00:23:34,359
Speaker 1: idea is to be underweight the investment grade component and

450
00:23:34,440 --> 00:23:38,640
Speaker 1: also to be very wary of the fallen angel risk.

451
00:23:39,040 --> 00:23:40,840
Speaker 1: There's been a lot of talk about the growth in

452
00:23:40,880 --> 00:23:44,120
Speaker 1: the triple B minus sector of the investment grade index

453
00:23:44,520 --> 00:23:51,320
Speaker 1: and the concomitant level of rating agency um discretion. I'm

454
00:23:51,320 --> 00:23:54,159
Speaker 1: sure that's exactly the word I'm looking for there. But

455
00:23:54,240 --> 00:23:56,960
Speaker 1: the idea that the forbearance I think is probably a

456
00:23:56,960 --> 00:23:59,119
Speaker 1: better way to put it, that the rating agencies have

457
00:23:59,200 --> 00:24:02,960
Speaker 1: allowed companies to take on levels of leverage that are

458
00:24:03,040 --> 00:24:07,920
Speaker 1: not consistent with long term metrics of being investment great.

459
00:24:07,920 --> 00:24:11,040
Speaker 1: Their companies out there right five turns and more of leverage.

460
00:24:11,240 --> 00:24:14,119
Speaker 1: They shouldn't be investment great, and they won't be basically

461
00:24:14,160 --> 00:24:17,000
Speaker 1: because the rating agencies will swing the axe on them

462
00:24:17,040 --> 00:24:20,960
Speaker 1: when the time comes. Got it. Excellent, stop there, very good,

463
00:24:21,200 --> 00:24:23,919
Speaker 1: Thanks very much. Tad Revelle, chief Investment Officer Fixed Income

464
00:24:24,240 --> 00:24:26,720
Speaker 1: for tc W, joining us on the pode from Los

465
00:24:26,800 --> 00:24:43,960
Speaker 1: Angeles well, it is jobs Day, and what better than

466
00:24:43,960 --> 00:24:46,959
Speaker 1: to talk to actually someone who is instrumental in creating

467
00:24:46,960 --> 00:24:49,920
Speaker 1: those jobs. And then, as the CEO of American Superconductor,

468
00:24:50,160 --> 00:24:52,399
Speaker 1: Daniel McGann, he joins us here in our Bluebgood Active

469
00:24:52,400 --> 00:24:55,560
Speaker 1: Broker Studios. Daniel, thank you so much for being here.

470
00:24:55,640 --> 00:24:59,440
Speaker 1: You came in two thumbs up. We're hiring. So first

471
00:24:59,480 --> 00:25:02,359
Speaker 1: before we get into the fact that you're still hiring. Um,

472
00:25:02,400 --> 00:25:06,639
Speaker 1: what is American Superconductor. American Superconductor is a systems based

473
00:25:07,080 --> 00:25:11,160
Speaker 1: technology provider that provides resiliency for the electricity grid as

474
00:25:11,200 --> 00:25:13,520
Speaker 1: well as for naval ships that go in harm's way.

475
00:25:13,640 --> 00:25:16,240
Speaker 1: So we try to move power with a purpose. So

476
00:25:16,400 --> 00:25:19,880
Speaker 1: for the electrical grid, I actually read the book called

477
00:25:20,040 --> 00:25:22,879
Speaker 1: The Grid about the electrical power business, so I'm I

478
00:25:22,960 --> 00:25:25,240
Speaker 1: was like Keith Grossman recommendation. Shout out to our old

479
00:25:25,240 --> 00:25:28,239
Speaker 1: Frank Keith. Um. The big issue for when people think

480
00:25:28,280 --> 00:25:32,640
Speaker 1: about power grids is security of the grid. Uh, give

481
00:25:32,680 --> 00:25:33,960
Speaker 1: us your sense of kind of where we are and

482
00:25:34,000 --> 00:25:36,440
Speaker 1: how your company fits in there. Yeah, it's the traditional

483
00:25:36,480 --> 00:25:39,199
Speaker 1: system kind of works as a hub and spoke, So

484
00:25:39,280 --> 00:25:42,480
Speaker 1: think about like a bicycle wheel. So anytime power moves

485
00:25:42,520 --> 00:25:45,480
Speaker 1: to where you need it. There's really typically only one

486
00:25:45,520 --> 00:25:47,639
Speaker 1: way for it to get there. There's no way for

487
00:25:47,680 --> 00:25:49,680
Speaker 1: it to get back if you're starting to generate clean

488
00:25:49,760 --> 00:25:51,840
Speaker 1: energy on the ali edge of the grid, and our

489
00:25:51,880 --> 00:25:54,360
Speaker 1: company is about trying to turn that grid really more

490
00:25:54,359 --> 00:25:57,320
Speaker 1: into a network like communications network or computing network. We

491
00:25:57,359 --> 00:26:01,199
Speaker 1: have multiple point connection to multiple point built in redundancy,

492
00:26:01,280 --> 00:26:06,000
Speaker 1: which increases resiliency UM either for outside threats or natural

493
00:26:06,040 --> 00:26:09,639
Speaker 1: threats with climate change. UM. We help bring more renewables

494
00:26:09,640 --> 00:26:11,960
Speaker 1: onto the grid, be it wind onto the transmission grid,

495
00:26:12,040 --> 00:26:15,760
Speaker 1: or be it solar onto the distribution grid. Okay, this

496
00:26:15,800 --> 00:26:18,000
Speaker 1: is such a fascinating topic to me, especially because you

497
00:26:18,040 --> 00:26:21,080
Speaker 1: came in you said we're hiring. There has been actually

498
00:26:21,080 --> 00:26:23,920
Speaker 1: a tremendous amount of hiring when it comes to renewable

499
00:26:23,960 --> 00:26:26,440
Speaker 1: energy sources and when it comes to that entire industry

500
00:26:26,480 --> 00:26:28,879
Speaker 1: and all of sort of the ancillary businesses that arise

501
00:26:28,960 --> 00:26:32,240
Speaker 1: around it. I'm wondering, have you continued to see strong

502
00:26:32,359 --> 00:26:37,040
Speaker 1: growth among your peers, competitors, etcetera. Because this is a

503
00:26:37,080 --> 00:26:41,080
Speaker 1: growing industry, even as people say that industrial production generally

504
00:26:41,119 --> 00:26:44,480
Speaker 1: is slowing down, the coal industry, losing jobs, etcetera. I

505
00:26:44,480 --> 00:26:46,880
Speaker 1: think you generally answer to your questions, Yes, I think

506
00:26:46,920 --> 00:26:49,359
Speaker 1: we're a little bit unique in that we have a

507
00:26:49,640 --> 00:26:54,480
Speaker 1: very high proprietary technology that UM offers a solution today

508
00:26:54,520 --> 00:26:57,320
Speaker 1: that's really needed. Now. We also are starting a new

509
00:26:57,359 --> 00:26:59,760
Speaker 1: business with the U. S. Navy to protect ships. That's

510
00:26:59,800 --> 00:27:02,199
Speaker 1: really where we see a tremendous amount of hiring here

511
00:27:02,200 --> 00:27:05,080
Speaker 1: in the US and across the spectrum of JABS. Be

512
00:27:05,160 --> 00:27:07,960
Speaker 1: at people with former military service that help us in

513
00:27:08,080 --> 00:27:14,159
Speaker 1: field service. Be a production engineer, engineering, be it manufacturing engineers,

514
00:27:14,160 --> 00:27:16,520
Speaker 1: be it support staff and accounting. Where we've been hiring

515
00:27:16,560 --> 00:27:19,240
Speaker 1: across the board. Tell us about the business you're doing

516
00:27:19,560 --> 00:27:23,000
Speaker 1: with the Navy. What's the technology there, what's the goal? Uh,

517
00:27:23,040 --> 00:27:25,160
Speaker 1: and just give us a little sense about that business. Yeah,

518
00:27:25,200 --> 00:27:27,439
Speaker 1: so this is UM. I guess the easiest analogy to

519
00:27:27,440 --> 00:27:30,840
Speaker 1: say is if you understand how noise canceling headphones work.

520
00:27:30,880 --> 00:27:33,720
Speaker 1: You know the idea that you're trying to UM limit

521
00:27:33,800 --> 00:27:37,560
Speaker 1: the ambient noise by putting in almost the opposite signal,

522
00:27:37,720 --> 00:27:40,680
Speaker 1: right and having it be completely quiet. It's that kind

523
00:27:40,680 --> 00:27:43,560
Speaker 1: of stealth technology. We're bringing two ships to protect them

524
00:27:43,560 --> 00:27:47,920
Speaker 1: against mine fields. The way mine fields detective ship UM

525
00:27:48,080 --> 00:27:51,119
Speaker 1: is through a change in magnetism around the ship. The

526
00:27:51,160 --> 00:27:53,320
Speaker 1: Earth is a big magnet. Everything kind of goes in

527
00:27:53,359 --> 00:27:58,000
Speaker 1: the certain directions. Why compasses work. Um, A ship disrupts

528
00:27:58,040 --> 00:28:01,240
Speaker 1: that field locally, which means mind can see it or

529
00:28:01,280 --> 00:28:04,199
Speaker 1: feel it as it passes by. What our technology is.

530
00:28:04,200 --> 00:28:08,040
Speaker 1: It dynamically disguises that ship. Why it's underway, so the

531
00:28:08,080 --> 00:28:11,359
Speaker 1: minefield can't see the ship. Minds are a big deal. Um.

532
00:28:11,640 --> 00:28:14,800
Speaker 1: Non nation state actors can acquire them. Um. It's it's

533
00:28:14,800 --> 00:28:17,879
Speaker 1: a main way to to change or thwart movement of

534
00:28:17,880 --> 00:28:21,000
Speaker 1: our ships at sea. It's something our allies are certainly

535
00:28:21,520 --> 00:28:24,040
Speaker 1: very much involved with in concert with the U. S. Navy.

536
00:28:24,320 --> 00:28:27,240
Speaker 1: So it's very topical and now, but there's a future

537
00:28:27,280 --> 00:28:30,840
Speaker 1: business and power moving power, generating power either to move

538
00:28:30,920 --> 00:28:35,200
Speaker 1: the ship or or make the weapons go. Electrification of

539
00:28:35,280 --> 00:28:38,160
Speaker 1: the Navy is happening now and probably over the next

540
00:28:38,160 --> 00:28:40,920
Speaker 1: decade or so. We're in a very unique position with

541
00:28:41,000 --> 00:28:44,120
Speaker 1: a host of proprietary technology that we can deploy with

542
00:28:44,200 --> 00:28:47,120
Speaker 1: the help of the U. S. Navy. Fascinating. How easy

543
00:28:47,160 --> 00:28:49,920
Speaker 1: is it free to hire people for this expansion. It's

544
00:28:49,920 --> 00:28:52,960
Speaker 1: been great because we try to hire people that have

545
00:28:53,040 --> 00:28:57,600
Speaker 1: a certain level of technical skill. Um. We're based in Massachusetts,

546
00:28:57,600 --> 00:28:59,760
Speaker 1: which is where we do our manufacturing for our grid

547
00:28:59,800 --> 00:29:02,920
Speaker 1: and a Navy business UM, and we've been able to

548
00:29:02,960 --> 00:29:06,239
Speaker 1: find a tremendous amount of talent. We've been able to

549
00:29:06,280 --> 00:29:09,080
Speaker 1: identify that talent, we've been able to retain talent for

550
00:29:09,160 --> 00:29:11,640
Speaker 1: you know, our of our average time of services very

551
00:29:11,720 --> 00:29:14,360
Speaker 1: much longer than our peers, so we're able to retain

552
00:29:14,440 --> 00:29:16,120
Speaker 1: that town as well. It really comes down to the

553
00:29:16,160 --> 00:29:19,880
Speaker 1: mission of the company. UM Smarter, Cleaner, better energy is

554
00:29:19,920 --> 00:29:22,320
Speaker 1: something that people really can get emotionally behind that they

555
00:29:22,360 --> 00:29:24,640
Speaker 1: realize that when they go home to their significant other,

556
00:29:25,080 --> 00:29:27,880
Speaker 1: the things that they're trying to do at work are

557
00:29:27,880 --> 00:29:31,920
Speaker 1: helping humanity. So just looking at your stock, it's kind

558
00:29:31,920 --> 00:29:33,120
Speaker 1: of a I'm not sure how to look at a

559
00:29:33,200 --> 00:29:35,920
Speaker 1: year to date stocks down, that's the bad news. The

560
00:29:35,920 --> 00:29:38,840
Speaker 1: good news over trillion twelve months, it's up thirty seven percent.

561
00:29:39,040 --> 00:29:42,440
Speaker 1: So what's what? What? What? What investors kind of focusing

562
00:29:42,480 --> 00:29:44,080
Speaker 1: on with your company and your stuff. If you go

563
00:29:44,160 --> 00:29:46,960
Speaker 1: back over say the past year we've had UM, you know,

564
00:29:47,320 --> 00:29:49,560
Speaker 1: go back a little bit. We made a decision to

565
00:29:49,560 --> 00:29:52,640
Speaker 1: diversify our product line and expand our total available market.

566
00:29:52,680 --> 00:29:54,640
Speaker 1: That's a mission that we've been on for a few

567
00:29:54,720 --> 00:29:57,160
Speaker 1: years now we're seeing the beginning of that to start

568
00:29:57,160 --> 00:29:59,880
Speaker 1: to pay off. So part of the change in the

569
00:30:00,000 --> 00:30:03,240
Speaker 1: positive inflection points in the stock have been around delivering

570
00:30:03,240 --> 00:30:05,560
Speaker 1: an order for this new resilient electric grid to do

571
00:30:05,640 --> 00:30:08,720
Speaker 1: multipoint connection throughout the grid, delivering not one but to

572
00:30:08,920 --> 00:30:12,440
Speaker 1: ship orders for this new ship protection system. So this

573
00:30:12,520 --> 00:30:14,760
Speaker 1: is a company that's been a lot about a dream

574
00:30:14,760 --> 00:30:17,480
Speaker 1: and a vision for a long time. We're now starting

575
00:30:17,520 --> 00:30:21,560
Speaker 1: to pay that dream often to growth and uh profit.

576
00:30:21,600 --> 00:30:24,800
Speaker 1: We actually we're positive operating cash flow for um to

577
00:30:25,080 --> 00:30:27,920
Speaker 1: two of the four quarters last year. Damn again, thank

578
00:30:27,960 --> 00:30:29,920
Speaker 1: you so much for joining us. Dana is the CEO

579
00:30:30,120 --> 00:30:33,280
Speaker 1: of Americans super Conductor. Joining us here in our Bloomberg

580
00:30:33,320 --> 00:30:37,640
Speaker 1: Interactive Broker Studio American super Conductor stock symbol a m

581
00:30:37,920 --> 00:30:42,520
Speaker 1: SC on your terminal. Thanks for listening to the Bloomberg

582
00:30:42,560 --> 00:30:44,800
Speaker 1: P and L podcast. You can subscribe and listen to

583
00:30:44,800 --> 00:30:48,040
Speaker 1: interviews at Apple Podcast or whatever podcast platform you prefer.

584
00:30:48,440 --> 00:30:51,240
Speaker 1: Paul Sweeney I'm on Twitter at pt Sweeney and Lisa

585
00:30:51,240 --> 00:30:53,880
Speaker 1: abram Boyd's I'm on Twitter at Lisa A. Bramoyd's one

586
00:30:54,080 --> 00:30:56,719
Speaker 1: before the podcast. You can always catch us worldwide I'm

587
00:30:56,720 --> 00:30:57,560
Speaker 1: Bloomberg Radio