WEBVTT - Surveillance: Central Bank Policy with Nordvig 0:00:05.120 --> 0:00:08.480 This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along 0:00:08.520 --> 0:00:12.360 with Jonathan Farrow and Lisa Abramowitz. Join us each day 0:00:12.400 --> 0:00:16.880 for insight from the best an economics, geopolitics, finance and investment. 0:00:17.280 --> 0:00:22.119 Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 0:00:22.320 --> 0:00:26.600 anywhere you get your podcasts, and always on Bloomberg dot Com, 0:00:26.640 --> 0:00:30.800 the Bloomberg Terminal, and the Bloomberg Business app. Tiens Nordvik 0:00:30.880 --> 0:00:34.880 joins us right now an important moment with accente data. 0:00:35.000 --> 0:00:38.680 Yen's perfect timing. Here we see the arch other pair 0:00:38.960 --> 0:00:44.199 Euro yen breakout. Strong euro weekend weekend technically through one 0:00:44.360 --> 0:00:48.360 forty eight is a huge deal against strong euro. Explain 0:00:48.440 --> 0:00:51.639 to mere mortals what the significance of a euro yen 0:00:51.840 --> 0:00:52.920 breakout means. 0:00:54.240 --> 0:00:54.400 Yees. 0:00:54.440 --> 0:00:58.200 So, we've had a situation here over the last month 0:00:58.280 --> 0:01:00.880 or so right where we had significant banking tension. It 0:01:00.920 --> 0:01:03.280 was not just in the US. We also saw pressure 0:01:03.280 --> 0:01:05.720 and credit Swiss, Torture Bank and so forth, and we've 0:01:05.720 --> 0:01:08.600 had a significant relief from that. So we've had euroen 0:01:09.200 --> 0:01:11.480 essentially go up four to five percent from those lows. 0:01:11.480 --> 0:01:14.360 So it's a very significant bounds as those banking tension 0:01:14.480 --> 0:01:18.360 concerns and the Eurozone have really been pushed in the background. 0:01:18.520 --> 0:01:20.680 In the US, it's a little bit more complicated, but 0:01:20.720 --> 0:01:22.720 so we have a very significant movement. At the same time, 0:01:22.800 --> 0:01:26.160 we continue to have this elevated speculation about whether the 0:01:26.240 --> 0:01:29.479 Banquet Japan is going to do something right. We've had 0:01:29.520 --> 0:01:32.760 incredible volatility around Bank oft Japan meetings. We have another 0:01:32.800 --> 0:01:38.280 one this week, and now the new Banquet Japan leadership 0:01:38.400 --> 0:01:41.840 is essentially signaling that they will still be patient. So 0:01:42.560 --> 0:01:44.760 I wouldn't say it's still the same as Corona, right, 0:01:44.800 --> 0:01:46.800 but they are sickling that they are not in a 0:01:46.920 --> 0:01:49.160 rush to exit from the easy So those are the 0:01:49.160 --> 0:01:52.240 things that's really pushing Uri in pretty significantly high. 0:01:52.320 --> 0:01:54.640 He ends your book on the Euro ten to fifteen 0:01:54.720 --> 0:01:58.920 years ago was definitive on what the euro needs to be. 0:02:00.120 --> 0:02:05.680 Europe escaped eurosclerosis? Has Europe you know the experiment coming 0:02:05.760 --> 0:02:08.680 out of the advent of the Euro. Have they escaped 0:02:08.720 --> 0:02:13.919 that permanent unemployment? Have they found a more Anglo saxon prosperity. 0:02:15.320 --> 0:02:18.560 We continue to see that when there's a crisis in Europe, 0:02:19.120 --> 0:02:22.440 the leadership tends to come together and do more stuff 0:02:22.440 --> 0:02:24.200 that they've been willing to do in the past, right, 0:02:24.240 --> 0:02:28.519 So the Corona virus episode was another example of them 0:02:29.040 --> 0:02:32.560 doing more and next generation EUO funds are still being 0:02:32.560 --> 0:02:36.760 dispersed around the European Union to support countries that needed. 0:02:36.800 --> 0:02:40.600 So we have essentially a degree of physcal union building, right, 0:02:40.600 --> 0:02:42.639 So that was something that was missing and we're having 0:02:42.680 --> 0:02:47.160 a degree of it and that certainly is certainly helping 0:02:47.160 --> 0:02:49.040 on that front. There's a lot of talk about having 0:02:49.080 --> 0:02:51.760 a banking union as well. Right when you have banking tension, 0:02:51.960 --> 0:02:55.320 there's focused on supporting the banking system in various ways, 0:02:55.600 --> 0:02:57.960 and we're having that discussion again, right So we're not 0:02:58.040 --> 0:03:00.000 there yet. But I think the one thing that's really 0:03:00.040 --> 0:03:03.919 important that is different from when I wrote that book 0:03:04.080 --> 0:03:08.519 is we have those political tension that caused uncertainty about Okay, 0:03:08.560 --> 0:03:11.000 do the different countries have the willingness to do what 0:03:11.080 --> 0:03:14.040 it takes to stay in the Eurozone. We don't really 0:03:14.080 --> 0:03:16.960 have those debates at the moment. There's no debate in 0:03:17.000 --> 0:03:19.799 Italy about leaving the euro right now. There's no debate 0:03:20.040 --> 0:03:22.560 in Spain or other countries. Right So, if you do 0:03:22.639 --> 0:03:24.760 opinion polls, do people want to stick with the euro 0:03:25.560 --> 0:03:28.560 there's actually rising support for the euro, So that's something 0:03:28.600 --> 0:03:33.239 that cements the Euros status despite all the difficulties there 0:03:33.320 --> 0:03:35.240 is with economic integration and so forth. 0:03:35.360 --> 0:03:37.440 This was the reason why a lot of people earlier 0:03:37.440 --> 0:03:41.040 this year said that European equities in particular were a 0:03:41.080 --> 0:03:44.440 real place of brightness for the full year, given not 0:03:44.480 --> 0:03:47.480 only all of this potential optimism, but also this idea 0:03:47.600 --> 0:03:50.000 that they're not as tech heavy at a time when 0:03:50.000 --> 0:03:52.000 there would be a rotation out of that, well it 0:03:52.040 --> 0:03:54.280 hasn't really worked out that way, and you've seen actually 0:03:54.520 --> 0:03:56.640 big tech continue to lead in the US. What is 0:03:56.680 --> 0:03:58.680 that going to shift? Is Europe ever going to basically 0:03:58.720 --> 0:04:02.200 create some other common plex like it to rival the 0:04:02.280 --> 0:04:03.720 tech giants in the US. 0:04:04.440 --> 0:04:08.840 Well, so the European stock trade, like for example, in 0:04:08.880 --> 0:04:13.520 banking space, has worked out right. So BNP has recovered 0:04:13.520 --> 0:04:16.200 twenty percent from the lows, is up significantly in the year. 0:04:16.839 --> 0:04:19.279 So the fact that interest rates arising is creating a 0:04:19.279 --> 0:04:21.520 different environment for equities and banks have done very well. 0:04:21.560 --> 0:04:24.920 Obviously Europe doesn't have a tech sector, so on that front, 0:04:25.480 --> 0:04:28.080 tech sectors speak of, So that front, the US is 0:04:28.120 --> 0:04:30.960 going to be leading. But I think overall we have 0:04:31.040 --> 0:04:34.520 a situation where European equity markets have outperformed the US 0:04:34.520 --> 0:04:36.960 equity market, so the first time in a long time, Right, 0:04:37.240 --> 0:04:39.920 you can argue whether it's europe outperforming of the US 0:04:40.040 --> 0:04:43.760 underperforming outside of tech, and that's something that's very interesting. 0:04:44.000 --> 0:04:46.760 Don't forget that we've had a situation where last year 0:04:46.800 --> 0:04:49.880 we had like a very very serious energy crisis in 0:04:49.920 --> 0:04:55.120 the Eurozone, right, and now energy prices have dropped very notably, right. 0:04:55.200 --> 0:04:58.080 So part of the reason why we have the eurostrong, 0:04:58.600 --> 0:05:02.200 European stocks also can can do relatively well this year 0:05:02.440 --> 0:05:05.960 is that that energy crisis has abated, consumer confidence has 0:05:06.000 --> 0:05:09.320 come back. You look at services PMI. Services pmis have 0:05:09.440 --> 0:05:11.680 just resent resen over the last couple of months, right, 0:05:11.760 --> 0:05:16.000 So we've really recovered from that energy shock in a 0:05:16.040 --> 0:05:18.200 way that the support of the European economy, and obviously 0:05:18.200 --> 0:05:20.680 the ECB is still facing inflation, right. So the combination 0:05:20.720 --> 0:05:23.520 of too high inflation and growth that's actually getting better 0:05:23.760 --> 0:05:26.200 means that it's very very hard for the ECB to relax. 0:05:26.279 --> 0:05:28.400 They have to continue going as we heard today as well. 0:05:28.520 --> 0:05:30.920 So Yen's basically it sounds like you are still very 0:05:30.920 --> 0:05:33.599 bullish in European banks and European equities more broadly as 0:05:33.640 --> 0:05:34.120 well as the euro. 0:05:35.400 --> 0:05:38.040 So I was certainly very I was treating very aggressively 0:05:38.040 --> 0:05:39.760 about it a month ago, and I actually did a 0:05:39.760 --> 0:05:42.680 summary tweet yesterday about it on my handle, like like 0:05:42.839 --> 0:05:45.080 there was no particular reason to think go to a 0:05:45.160 --> 0:05:47.000 bank was just about to go under, right, And we've 0:05:47.040 --> 0:05:51.480 recovered from that dramatic shock, and I think there's still 0:05:51.560 --> 0:05:53.640 some reasons to think that we're out of serial interest 0:05:53.680 --> 0:05:56.680 rate world. That's supported for the banking system overall, and 0:05:56.760 --> 0:05:58.720 for the euro. The ECP is going to continue to 0:05:58.760 --> 0:06:00.679 support it. So I think the big quest question here 0:06:00.880 --> 0:06:03.680 is what it's global growth is going to do. That's 0:06:03.680 --> 0:06:07.000 super important for the dollar, and we have some question 0:06:07.080 --> 0:06:09.880 marks in Asia now. So that's the new things that 0:06:09.920 --> 0:06:12.400 we're starting to really focus on in our research right now. 0:06:12.920 --> 0:06:16.080 Okay, let's go there on China. How does China fit 0:06:16.240 --> 0:06:21.520 into speculating or betting on a given currency pair, Which 0:06:21.640 --> 0:06:26.039 pair gives you the greatest efficacy to play your China guests. 0:06:27.200 --> 0:06:31.240 So typically when we've had you know, China stimulus, China 0:06:31.279 --> 0:06:34.320 growth recovery has been currencies like ARSI dollar that has 0:06:34.320 --> 0:06:38.280 benefited from Korean wan and we had a period in 0:06:38.360 --> 0:06:41.760 January and February where China linked assets all around the 0:06:41.760 --> 0:06:45.239 world from casino stocks to tourism stocks and so forth, 0:06:45.279 --> 0:06:48.679 all rallied hard. And now we've come to a point 0:06:48.680 --> 0:06:50.920 where it feels that some of those trades are very 0:06:50.920 --> 0:06:53.680 fully priced. And actually it's sort of the longer term 0:06:53.720 --> 0:06:56.680 growth concerns that are starting to feed into price action. 0:06:56.800 --> 0:07:00.280 We can see that in Chinese equities rolling all see 0:07:00.279 --> 0:07:03.320 it an iron ore rolling over. So it's kind of 0:07:03.360 --> 0:07:06.279 one of those things where perhaps we got it very 0:07:06.320 --> 0:07:08.840 fully embedded and we start to look at the more 0:07:08.920 --> 0:07:12.040 medium term past, it's just that short term shot. 0:07:12.120 --> 0:07:15.640 So are you saying au DKRW is the most efficient 0:07:15.800 --> 0:07:17.960 pair to play a China guess? 0:07:19.200 --> 0:07:23.040 So, I think when you have a growth bound in Europe, 0:07:23.040 --> 0:07:24.800 those are the assets that I'm moving. And I think 0:07:24.880 --> 0:07:28.040 right now, if we look at we have like very 0:07:28.080 --> 0:07:30.960 high frequency tracking of Chinese growth where we look at, okay, 0:07:30.960 --> 0:07:33.640 what is the momentum, and we can see at the 0:07:33.840 --> 0:07:36.120 end of March that's when we kind of had a 0:07:36.160 --> 0:07:38.880 peak in Chinese growth, and since then, over the last 0:07:38.880 --> 0:07:41.960 three four weeks, we've started to see the real momentum 0:07:42.000 --> 0:07:45.320 in the Chinese economy potentially peak out, and therefore you 0:07:45.400 --> 0:07:47.280 have to be a little bit more careful with those 0:07:47.640 --> 0:07:49.960 sort of China growth sensitive assets. 0:07:50.040 --> 0:07:52.560 Right now, Yen wander for to get your perspective on that. 0:07:52.640 --> 0:08:05.440 Yen's Nordic then Efic Santa Data joining us now, Markey 0:08:05.480 --> 0:08:08.760 Ptel of Allspring Global Investments, Markey, wonderful to catch up 0:08:08.800 --> 0:08:11.280 with you. Tom mentioned this conversation at the very start 0:08:11.280 --> 0:08:14.640 of the program. Pushing forward to tech earnings later this week, Mark, 0:08:14.760 --> 0:08:16.600 you still hold a lot of tag. Can you walk 0:08:16.680 --> 0:08:18.560 us through where you're taking that equity exposure at the 0:08:18.560 --> 0:08:20.920 moment go and gets results later this week. 0:08:22.160 --> 0:08:24.400 Well, this is going to be a huge week for stocks. 0:08:24.520 --> 0:08:27.640 A huge number of companies are reporting. We still like 0:08:27.720 --> 0:08:32.040 the tech sector because certainly the understanding that there's a 0:08:32.040 --> 0:08:34.040 lot of inventory to be worked off, that we may 0:08:34.080 --> 0:08:35.600 have to wait for the second half of the year 0:08:35.640 --> 0:08:38.320 to see a turn in demand is well understood, and 0:08:38.360 --> 0:08:41.280 the stocks have anticipated that. Most have performed really well. 0:08:41.320 --> 0:08:44.160 So the question is can they have a decent results 0:08:44.200 --> 0:08:47.200 in the markets really go down because of that. We 0:08:47.240 --> 0:08:49.600 think we'd rather ride that out and say these companies 0:08:49.640 --> 0:08:52.240 have long term growth, they have good positions in the industry, 0:08:52.559 --> 0:08:55.680 strong balance sheets to withstand even if we do have 0:08:55.760 --> 0:08:56.560 a deep recession. 0:08:57.040 --> 0:08:59.880 Mark ya, look at tech and the rep here this 0:09:00.000 --> 0:09:03.319 how many people are afraid of. Is tech conservative? How 0:09:03.360 --> 0:09:07.120 do you determine a measured conservative cash flow from a 0:09:07.160 --> 0:09:08.880 high flyer that could be trouble. 0:09:11.480 --> 0:09:13.520 Well, I don't really know about the high flyers. I 0:09:13.600 --> 0:09:15.800 like to avoid the high flyers that might have trouble. 0:09:15.840 --> 0:09:19.120 But just looking at companies that have improved their market position, 0:09:19.280 --> 0:09:22.120 who are you know technological leaders that have a lot 0:09:22.160 --> 0:09:24.400 of cash on their balance sheet and also they pay 0:09:24.440 --> 0:09:27.560 a dividend. A lot of tech stocks pay. That's a 0:09:27.559 --> 0:09:28.000 good sign. 0:09:28.320 --> 0:09:30.280 You give us a name, Come on, no one's watching. 0:09:32.400 --> 0:09:34.800 Well, we think Broadcom is a is a good stock 0:09:34.920 --> 0:09:36.960 because it's diversified in a dividend. 0:09:38.040 --> 0:09:40.360 All right, Well, going forward, we talk about when to 0:09:40.440 --> 0:09:42.680 know when the cash out marquee. We have seen a 0:09:42.720 --> 0:09:44.480 huge run in some of the big tech names that 0:09:44.520 --> 0:09:47.079 are profitable. They've really been, frankly the backbone of any 0:09:47.080 --> 0:09:49.200 gains that they've gotten so far this year. When do 0:09:49.240 --> 0:09:50.600 you say that's enough? 0:09:53.360 --> 0:09:56.280 Well, I think that's true, But on a relative basis, 0:09:56.280 --> 0:09:59.600 we really don't know how deep of a economic correction 0:09:59.600 --> 0:10:02.360 we're going have, will be mild, will be more severe, 0:10:02.679 --> 0:10:06.319 and so tech prices may come down because it's pees 0:10:06.360 --> 0:10:09.000 have expanded. However, we don't know if other sectors will 0:10:09.040 --> 0:10:11.760 have very disappointing earnings if we have a big recession. 0:10:11.800 --> 0:10:13.320 So that's kind of the push and pool in the 0:10:13.360 --> 0:10:15.199 market of where you want to be positioned. 0:10:15.640 --> 0:10:17.760 Have you been surprised at the market's reaction to some 0:10:17.800 --> 0:10:19.920 of these earnings Marketie and I asked, because people if 0:10:19.920 --> 0:10:23.120 it's waiting for the earnings recession and in certain areas 0:10:23.200 --> 0:10:25.280 it's come and markets don't care. I mean, what do 0:10:25.320 --> 0:10:25.800 you make of that? 0:10:27.559 --> 0:10:30.360 Well, so far this earning season, which is really only 0:10:30.400 --> 0:10:34.160 about twenty percent or so, the results have been surprisingly good, 0:10:34.440 --> 0:10:37.320 and the market was really looking for signs that companies 0:10:37.360 --> 0:10:40.679 would tone down their earnings expectation the quarter would be disappointing, 0:10:40.840 --> 0:10:42.760 and it hasn't been. So we're still waiting for that 0:10:42.880 --> 0:10:44.120 correction we haven't seen. 0:10:44.360 --> 0:10:47.000 We have seen a correction though, in nen interest margins 0:10:47.280 --> 0:10:49.839 at the smaller banks. Lisa talks about this through most 0:10:49.880 --> 0:10:51.960 of the last week. Is we've got to drip feeded news 0:10:52.000 --> 0:10:54.720 from small and medium sized lenders in the United States market, 0:10:55.000 --> 0:10:56.600 just in terms of taking a step back and trying 0:10:56.600 --> 0:11:00.000 to understand the broader economy. What is the relationship between 0:11:00.400 --> 0:11:04.040 declining the interest margins and bank lending to the rest 0:11:04.080 --> 0:11:05.640 of the economy. 0:11:07.120 --> 0:11:09.319 Well, I think everything rolls back to the Fed, and 0:11:09.360 --> 0:11:12.520 they're super aggressive policy last year that really put the 0:11:12.640 --> 0:11:15.320 banks kind of in a box on the interest margin. 0:11:15.640 --> 0:11:17.400 So we think we have to see the yell curve 0:11:18.720 --> 0:11:22.600 get not so inverted as a big thing, and see 0:11:22.640 --> 0:11:25.200 a little more stability from the Fed. And we think 0:11:25.200 --> 0:11:27.960 we've already seen even before the distress we saw in 0:11:27.960 --> 0:11:31.280 the first quarter, bank lending standards were tightening up, so 0:11:31.360 --> 0:11:34.120 they have already been on the watch and I think 0:11:34.160 --> 0:11:35.600 are in pretty good shape as far as that. 0:11:35.760 --> 0:11:38.240 Is, expecting that to continue. Potentially we get some more 0:11:38.320 --> 0:11:40.760 data on that early next month. Markie, thank you for that. 0:11:40.800 --> 0:11:48.240 As always, Marcobada of All Spring Globe and Investments, we. 0:11:48.200 --> 0:11:50.640 Feel that we need to pursue any good conversation with 0:11:50.720 --> 0:11:53.839 Dana Peterson, chief economists at the conference. Border really joins 0:11:53.880 --> 0:11:56.480 us now in the state of America, Dana, where's your 0:11:56.520 --> 0:11:59.400 GDP statistic that we're going to see this week? We 0:11:59.520 --> 0:12:01.760 sort of come down. We're all at three point two 0:12:01.840 --> 0:12:05.120 ish and we've come down. Give me the conference board 0:12:05.160 --> 0:12:07.320 statistic that you're working with right now. 0:12:08.559 --> 0:12:10.400 Well, we're probably looking at anything between one and a 0:12:10.440 --> 0:12:13.600 half to two percent growth in the month. Certainly, we 0:12:13.679 --> 0:12:17.199 had a very strong January in terms of consumer spending, 0:12:17.240 --> 0:12:20.920 but then February and March we're pretty pathetic. And also 0:12:21.000 --> 0:12:23.520 we think business investment continued to shrink, as well as 0:12:23.559 --> 0:12:27.760 residential investment. Of course, the wildcards are trade and inventories, 0:12:27.800 --> 0:12:30.960 which have been exactly wild well. 0:12:30.800 --> 0:12:33.680 Wor's domestic final sales. If you take out inventories and 0:12:33.720 --> 0:12:37.320 trade dynamics, you get into a domestic view of Y. 0:12:37.480 --> 0:12:40.760 We'll see plus I plus G plus NX And Dana, 0:12:40.840 --> 0:12:44.160 are we in domestic final sales recession now? 0:12:45.720 --> 0:12:48.080 Probably not in the first quarter, but we do think 0:12:48.160 --> 0:12:51.640 that the second quarter we definitely will see some negative readings. 0:12:52.200 --> 0:12:56.720 Certainly that'll be negative consumpt consumer spending, also business investment, 0:12:56.800 --> 0:12:58.599 and of course residential investment. 0:12:58.920 --> 0:13:01.840 Dana, have you been surprised to consumer confidence hanging in 0:13:01.880 --> 0:13:03.840 there at the fact that the economic data has not 0:13:03.920 --> 0:13:06.120 turned around more than it already has. 0:13:07.640 --> 0:13:11.360 Well, our overall measure of consumer confidence continues to just 0:13:11.440 --> 0:13:14.240 kind of move back and forth. It's definitely down from 0:13:14.280 --> 0:13:16.720 where it was at the peak last year or even 0:13:16.760 --> 0:13:20.000 the year before, but still not When you look at expectations, 0:13:20.040 --> 0:13:22.840 consumers still expect a recession at some point, and they've 0:13:22.840 --> 0:13:26.199 been signaling that for the last twelve out of thirteen months, 0:13:26.240 --> 0:13:28.880 and so something is about to happen. And certainly when 0:13:28.880 --> 0:13:31.880 we ask CEOs, they continue to believe that there is 0:13:31.920 --> 0:13:34.120 going to be a recession. It won't be long and 0:13:34.160 --> 0:13:36.040 it won't be deep, but it's going to happen. 0:13:36.240 --> 0:13:40.000 How much is this consistent throughout industries versus specific industries 0:13:40.000 --> 0:13:43.400 giving this signal very strongly, whereas others are a little 0:13:43.400 --> 0:13:45.760 bit more iffy on just the prospect. 0:13:46.400 --> 0:13:48.800 Well, when I look at the labor market and by industry, 0:13:49.080 --> 0:13:51.600 it's kind of split into three pieces. You have those 0:13:51.640 --> 0:13:54.440 former pandemic darlings that are not doing so well, like 0:13:54.559 --> 0:13:59.679 technology and retail and transportation, ware housing and finance. But 0:13:59.720 --> 0:14:01.400 then you have the ones in the middle that are 0:14:01.400 --> 0:14:04.120 just kind of hoarding labor and not doing anything. And 0:14:04.160 --> 0:14:08.120 then you definitely have those industries that are still adding workers, 0:14:08.200 --> 0:14:11.760 and that includes healthcare and hotels and restaurants all those 0:14:11.800 --> 0:14:13.640 experiential types of services. 0:14:14.160 --> 0:14:19.960 With inflation coming down, do we get an inflation adjusted wage, 0:14:20.680 --> 0:14:25.479 however you want to define it, that's level or increases, 0:14:25.560 --> 0:14:28.040 or do we still have negative real wage growth? 0:14:29.080 --> 0:14:32.760 Well, real wages are actually slightly positive right now, and 0:14:32.760 --> 0:14:37.080 that's because headline inflation has come off, but still underlying 0:14:37.120 --> 0:14:40.440 inflation less food, energy is still pretty sticky, and again 0:14:40.520 --> 0:14:44.400 wages are just slightly positive. So we think that with that, 0:14:44.560 --> 0:14:48.120 consumers are saying to themselves, well, you know, at least energy, 0:14:48.200 --> 0:14:50.840 at least gasoline is not as expensive as it was 0:14:50.880 --> 0:14:53.080 and so not eating some of my budget as much 0:14:53.080 --> 0:14:56.440 as it was. But certainly food and other services are 0:14:56.440 --> 0:14:57.560 still pretty expensive. 0:14:58.920 --> 0:15:01.400 I looked in a at the back and forth here 0:15:01.520 --> 0:15:04.160 of all the economic data coming out. I believe we 0:15:04.240 --> 0:15:07.160 have to get to a FED meeting May third. What 0:15:07.360 --> 0:15:10.880 matters for Chairman Powell and the rest of the voters 0:15:10.920 --> 0:15:13.760 at the FED towards May third? Which part of the 0:15:13.800 --> 0:15:16.040 new economic data will matter. 0:15:16.800 --> 0:15:20.000 Well, certainly this week's GDP report for the first quarter, 0:15:20.080 --> 0:15:24.520 but also the PCEE deflator inflation, whether or not we 0:15:24.560 --> 0:15:27.000 still continue to see stickiness in the core, or if 0:15:27.040 --> 0:15:29.280 it's just a function of what we saw in CPI 0:15:29.760 --> 0:15:34.480 and also daily lending data from banks to businesses and 0:15:34.560 --> 0:15:37.720 consumers and seeing how much that dips, because if it 0:15:37.760 --> 0:15:41.160 dips considerably, then that tells the Fed that, well, maybe 0:15:41.160 --> 0:15:43.960 this is the last hike that they'll need to implement, 0:15:44.320 --> 0:15:46.880 but certainly if inflation continues to be a problem, we 0:15:46.960 --> 0:15:48.560 might be looking at two more hikes. 0:15:48.880 --> 0:15:51.480 We're speaking with Dana Peterson of the Conference Board at 0:15:51.520 --> 0:15:54.800 a time of great uncertainty of exactly where we are 0:15:55.040 --> 0:15:57.680 in this economic cycle and data. There was a lot 0:15:57.680 --> 0:15:59.720 of discussion earlier in this year about whether we'd be 0:15:59.760 --> 0:16:03.400 going back to the low flation, low growth kind of 0:16:03.520 --> 0:16:05.480 environment that we had for so many years, and with 0:16:05.600 --> 0:16:08.080 the race, could go back to that in the next 0:16:08.120 --> 0:16:11.600 few years, do you see that as a likelihood akin 0:16:11.640 --> 0:16:14.080 to what IMF was saying last in the past couple 0:16:14.120 --> 0:16:14.840 of weeks. 0:16:15.640 --> 0:16:18.200 Well, we certainly do think that growth over the well 0:16:18.400 --> 0:16:20.960 beyond this year is going to pick up, but still 0:16:20.960 --> 0:16:25.160 be materially below what we're used to seeing, probably closer 0:16:25.200 --> 0:16:28.280 to potential between one and a half and one point 0:16:28.280 --> 0:16:31.120 eight percent growth, and that's not certainly not to two 0:16:31.120 --> 0:16:32.880 and a half to three percent growth that we saw 0:16:33.000 --> 0:16:36.280 before the pandemic, but inflation will be tough to keep 0:16:36.320 --> 0:16:38.680 down because they're going to be these structural drivers of 0:16:38.760 --> 0:16:41.240 higher inflation. So that means the FED will have to 0:16:41.320 --> 0:16:44.920 keep interest rates higher for longer in order to get 0:16:44.920 --> 0:16:47.920 inflation back to the two percent target and maintain it there. 0:16:48.200 --> 0:16:50.680 What does it say, Dana that so many people before 0:16:50.760 --> 0:16:52.960 this period of time said that this economy could not 0:16:53.040 --> 0:16:56.240 handle higher interest rates, and that suddenly we are seeing 0:16:56.360 --> 0:16:58.560 ongoing growth in the face of interest rates that that 0:16:58.920 --> 0:17:01.960 are the highest they've been going back to the nineteen eighties, 0:17:02.520 --> 0:17:05.240 and that people believe that the FED will eventually have 0:17:05.280 --> 0:17:08.439 to cut But you're saying not really that much, given 0:17:08.680 --> 0:17:10.320 how much inflation is going to pick up. What does 0:17:10.359 --> 0:17:12.600 that mean about what the right rate is. 0:17:14.320 --> 0:17:17.879 Well, when I look at the economy, different aspects of 0:17:17.920 --> 0:17:21.240 it are behaving differently, so I use different a lot. 0:17:21.480 --> 0:17:24.320 So if you look at the housing market, residential investment 0:17:24.440 --> 0:17:27.400 that's really come off, and that really moves first when 0:17:27.440 --> 0:17:30.720 interest rates rise, and then business investment has come off 0:17:30.720 --> 0:17:33.080 a little bit, and consumers have pulled back on spending 0:17:33.119 --> 0:17:36.080 on durable goods, which are things that they need to finance. 0:17:36.359 --> 0:17:38.960 The last shoot to drop really is services, And I 0:17:38.960 --> 0:17:41.480 think it's going to take some weakness in the labor 0:17:41.520 --> 0:17:46.800 market or even belief that people consumers believing that they 0:17:46.840 --> 0:17:49.040 might get let go even though they may not, and 0:17:49.040 --> 0:17:52.640 that's really going to bring things back into balance. 0:17:53.000 --> 0:17:54.560 Dan, I one final question. We've got to go to 0:17:54.600 --> 0:17:57.200 some breaking news here, but Dana Peterson, it's too important 0:17:57.280 --> 0:18:01.000 you open this conversation by talking about sub too percent growth. 0:18:01.520 --> 0:18:04.879 Can I assume that with sub two percent growth x 0:18:04.920 --> 0:18:08.600 percent of America's in recession, how big is that part 0:18:08.640 --> 0:18:13.280 of America that feels recession even if the GDP statistic 0:18:13.400 --> 0:18:14.000 is positive. 0:18:15.160 --> 0:18:18.280 Well, I think definitely people with lower incomes because much 0:18:18.320 --> 0:18:21.600 of their paychecks get eaten up by inflation. But also 0:18:21.760 --> 0:18:25.400 we're seeing worries among people who have higher incomes, especially 0:18:25.400 --> 0:18:28.119 the middle class, because they're the ones who pay the 0:18:28.119 --> 0:18:31.720 most taxes, they also pay a lot of in terms 0:18:31.800 --> 0:18:35.639 of inflation. They're still very much affected, and so I 0:18:35.680 --> 0:18:38.480 think it's those groups that are definitely feeling the pinch 0:18:38.560 --> 0:18:39.000 right now. 0:18:39.520 --> 0:18:43.359 Dana, Thank you so much, Dana Peterson, with a conference board. 0:18:53.920 --> 0:18:56.600 This guy leads the way. Rich Greenfield had to wear 0:18:56.600 --> 0:18:59.520 a flat coat, flat jacket and helmet here years ago 0:19:00.160 --> 0:19:02.200 media as a cell side analyst who was one of 0:19:02.200 --> 0:19:05.560 the courageous guys out there in a really vicious time 0:19:05.760 --> 0:19:10.160 for IPOs and secondary offerings in that he's aged nicely 0:19:10.480 --> 0:19:14.199 like Shud Partners and joins us this morning, Rich, I 0:19:14.200 --> 0:19:16.840 got to cut to the chase. I've never seen more 0:19:16.920 --> 0:19:22.200 capital deployed and misallocated in fourteen different ways. How bad 0:19:22.440 --> 0:19:26.240 will the rationalizations of labor be across all of the 0:19:26.359 --> 0:19:27.640 rich greenfield space. 0:19:29.840 --> 0:19:32.600 I mean, look, you know, I mean, look, the reality 0:19:32.760 --> 0:19:34.760 is is, you know, we saw a lot of what 0:19:34.800 --> 0:19:39.840 I would call over hiring during sort of the pandemic, 0:19:39.880 --> 0:19:42.800 where I think there was just this sort of you know, 0:19:42.960 --> 0:19:46.359 incredible surge of activity around a lot of these companies. 0:19:46.359 --> 0:19:48.200 I mean, obviously they were first depressed for like a 0:19:48.320 --> 0:19:51.760 nanosecond and then we just saw this massive explosion in 0:19:51.760 --> 0:19:54.720 a lot of these digital businesses. And you're seeing a 0:19:54.840 --> 0:19:57.000 right sizing now. I mean, you know, look look at 0:19:57.000 --> 0:20:00.919 what's happening to companies like Meta and Google, you know, 0:20:00.960 --> 0:20:04.040 Alphabet et cetera, but even Netflix and others. I mean, 0:20:04.040 --> 0:20:07.320 you've seen sort of across the board head count reductions, 0:20:07.720 --> 0:20:11.199 not because business is collapsing, but I think more than 0:20:11.240 --> 0:20:13.080 anything else, Tom, is just that they got a little 0:20:13.080 --> 0:20:15.879 ahead of themselves in terms of hiring and just brought 0:20:15.880 --> 0:20:20.719 on too many people relative to your overall revenue growth. 0:20:20.840 --> 0:20:24.040 Rich, you and your team have been leaders in trying 0:20:24.040 --> 0:20:27.679 to monitor the consolidation of what we call entertainment. I 0:20:27.680 --> 0:20:30.320 think I saw a photo this weekend, folks of people 0:20:30.320 --> 0:20:34.639 buying Taylor Swift's merch and it was like four miles 0:20:34.680 --> 0:20:36.840 long to buy you know, Taylor Swift t shirts and 0:20:36.880 --> 0:20:39.840 coffee mugs and that Rich, I want to talk about 0:20:39.960 --> 0:20:43.960 monopsony or the consolidation here under monopoly and where price 0:20:44.040 --> 0:20:46.520 is set. Are we just going to have one or 0:20:46.520 --> 0:20:49.680 two or three entertainment vendors at the end of the day. 0:20:51.160 --> 0:20:54.040 I mean, right now, things are pretty amazing for the consumer, Tom, 0:20:54.080 --> 0:20:57.679 I mean, yes, you have the legacy multi channel bundle 0:20:57.720 --> 0:21:00.439 that you and I have been sort of watching melt 0:21:00.520 --> 0:21:03.359 down over the course of the last ten to fifteen years. 0:21:03.359 --> 0:21:06.080 You know what people like to call cord cutting. But 0:21:06.359 --> 0:21:09.040