1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 2 00:00:09,240 --> 00:00:13,200 Speaker 1: with Jonathan Ferrell and Lisa Brownowitz. Daily we bring you 3 00:00:13,320 --> 00:00:18,600 Speaker 1: insight from the best and economics, finance, investment, and international relations. 4 00:00:18,960 --> 00:00:23,840 Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com, 5 00:00:23,920 --> 00:00:29,520 Speaker 1: and of course on the Bloomberg Terminent. We begin at 6 00:00:29,560 --> 00:00:31,960 Speaker 1: this moment as we will for the coming days and 7 00:00:32,040 --> 00:00:35,120 Speaker 1: maybe even stretching out to two weeks. The City Group 8 00:00:35,159 --> 00:00:39,080 Speaker 1: just publishes they believe Mr paulib Be renominated our FED 9 00:00:39,159 --> 00:00:42,080 Speaker 1: coverage with Michael McKee, and we look forward to advising 10 00:00:42,120 --> 00:00:44,640 Speaker 1: you with the best guests we can find over the 11 00:00:44,680 --> 00:00:48,559 Speaker 1: coming days and weeks. We start strong with William Dudley 12 00:00:48,720 --> 00:00:52,120 Speaker 1: Bloomberg Opinion Columns, of course, the former president of the 13 00:00:52,120 --> 00:00:55,200 Speaker 1: New York Federal Reserve and UH for years, with Goldman 14 00:00:55,280 --> 00:00:58,640 Speaker 1: Sachs as well. Bill, you mentioned in your essay on 15 00:00:58,800 --> 00:01:03,600 Speaker 1: a FED with some degrees of constraint. I would say 16 00:01:03,640 --> 00:01:08,119 Speaker 1: a path forward is the Powell in the Brainer path 17 00:01:08,560 --> 00:01:12,920 Speaker 1: all that much different forward into twenty two, twenty three, 18 00:01:13,080 --> 00:01:16,720 Speaker 1: and twenty four. I don't think so. I think they're 19 00:01:16,760 --> 00:01:19,600 Speaker 1: pretty much in the same page in terms of thinking Anthony. 20 00:01:19,680 --> 00:01:23,560 Speaker 1: Inflation pressures that we're seen now are mostly transitory. Remember, 21 00:01:23,640 --> 00:01:27,319 Speaker 1: the entire f O MC has supported the current policy path. 22 00:01:27,640 --> 00:01:30,400 Speaker 1: There's been no dissents for for many many meetings, so 23 00:01:30,480 --> 00:01:33,360 Speaker 1: everybody's on board. And also remember the chair can'tons do 24 00:01:33,400 --> 00:01:35,000 Speaker 1: what the chair wants. They have to bring the rest 25 00:01:35,000 --> 00:01:36,600 Speaker 1: of the committee along with you. So I think the 26 00:01:36,600 --> 00:01:39,040 Speaker 1: difference between Paul and Brainer is pretty slight in terms 27 00:01:39,040 --> 00:01:41,240 Speaker 1: of what Monterrey policy actually is going to turn out 28 00:01:41,240 --> 00:01:43,440 Speaker 1: to be over the next couple of years. Some of 29 00:01:43,440 --> 00:01:47,080 Speaker 1: this is the guestimates of previous inflations. Paul Krugman and 30 00:01:47,080 --> 00:01:49,720 Speaker 1: Will Folks will talk about this with Jeffrey Lacker here 31 00:01:50,320 --> 00:01:53,160 Speaker 1: in a bit Bill Dudley Krugman leans to the post 32 00:01:53,240 --> 00:01:57,400 Speaker 1: World War two forty seven super inflation and then collapse 33 00:01:57,720 --> 00:02:02,880 Speaker 1: to Eisenhower deflation, where Mr Lacker of Richmond suggests, maybe 34 00:02:02,880 --> 00:02:05,760 Speaker 1: this is more pernicious like what we saw in the 35 00:02:05,840 --> 00:02:10,480 Speaker 1: nineties sixties. Which kind of inflation is this? Well, I 36 00:02:10,480 --> 00:02:11,960 Speaker 1: don't think we know the answer to that, because we 37 00:02:11,960 --> 00:02:14,680 Speaker 1: haven't had this kind of recovery from a pandemic before. 38 00:02:15,040 --> 00:02:17,760 Speaker 1: What we do know, though, is that the inflation pressures 39 00:02:17,760 --> 00:02:20,520 Speaker 1: are turning out to be higher for longer. We know 40 00:02:20,600 --> 00:02:23,080 Speaker 1: that that's starting to feed into wages, and we know 41 00:02:23,160 --> 00:02:26,760 Speaker 1: that that's starting to feed into inflation expectations. So even 42 00:02:26,760 --> 00:02:29,480 Speaker 1: if the initial impulse turned out to be transitory, you 43 00:02:29,520 --> 00:02:32,560 Speaker 1: could still have long lasting consequences. We also know that 44 00:02:32,560 --> 00:02:34,480 Speaker 1: the Federal Reserve is pretty late here in terms of 45 00:02:34,480 --> 00:02:36,639 Speaker 1: responding to any of this. They're still adding stimulus, They're 46 00:02:36,639 --> 00:02:39,840 Speaker 1: still buying treasuries and agency mortgage backed securities, which is 47 00:02:39,880 --> 00:02:41,880 Speaker 1: pretty remarkable if you just step away from it for 48 00:02:41,919 --> 00:02:44,160 Speaker 1: a moment and say, would you expect the Fed be 49 00:02:44,320 --> 00:02:47,000 Speaker 1: adding monetary policy SteamOS at a time that inflation is 50 00:02:47,040 --> 00:02:49,919 Speaker 1: running over six percent bell A market participant could be 51 00:02:49,960 --> 00:02:52,359 Speaker 1: super nimble. I could be nimble with the incoming dates 52 00:02:52,360 --> 00:02:54,800 Speaker 1: when change my mind. It seems to be a really 53 00:02:54,880 --> 00:02:58,480 Speaker 1: high bar for federals of participant to change their mind. 54 00:02:58,600 --> 00:03:01,040 Speaker 1: As you point out, this is way harder than expected 55 00:03:01,080 --> 00:03:04,160 Speaker 1: it would be. It's stickier, it's broader. But I don't 56 00:03:04,200 --> 00:03:06,799 Speaker 1: hear them changing their mind. But from your experience, what 57 00:03:06,840 --> 00:03:09,840 Speaker 1: does it take to change your view? But I think 58 00:03:09,880 --> 00:03:13,440 Speaker 1: they're in a type place because the fact is to 59 00:03:13,560 --> 00:03:16,280 Speaker 1: change their mind, they have to accelerate the taper to 60 00:03:16,320 --> 00:03:18,360 Speaker 1: get the taper done quicker, because they've made it very 61 00:03:18,360 --> 00:03:20,359 Speaker 1: clear that they're not going to taper and you're not 62 00:03:20,440 --> 00:03:22,400 Speaker 1: gonna be buying assets and at the same time being 63 00:03:22,520 --> 00:03:24,960 Speaker 1: raised raised short term interest rates. So the taper has 64 00:03:25,000 --> 00:03:28,040 Speaker 1: to be completed before they actually lift off. And to 65 00:03:28,080 --> 00:03:33,280 Speaker 1: accelerate the taper would be problematic because you tried to 66 00:03:33,800 --> 00:03:36,840 Speaker 1: put this out in a very controlled way to avoid 67 00:03:36,880 --> 00:03:39,280 Speaker 1: a taper tantrum. If you not accelerate the taper, you're 68 00:03:39,280 --> 00:03:41,160 Speaker 1: gonna get the taper tantrum that you're that you've been 69 00:03:41,160 --> 00:03:43,440 Speaker 1: trying to avoid for the last six or twelve months. 70 00:03:44,120 --> 00:03:46,040 Speaker 1: In your mind, Then do you conclude building this is 71 00:03:46,080 --> 00:03:49,320 Speaker 1: no longer a date independent Federal Reserve given what you 72 00:03:49,400 --> 00:03:53,200 Speaker 1: just said, well, I think that you know there's a 73 00:03:53,240 --> 00:03:55,000 Speaker 1: case to be made for accelerating the taper. I mean, 74 00:03:55,040 --> 00:03:57,120 Speaker 1: I think if you just look at the economic information 75 00:03:57,120 --> 00:04:00,000 Speaker 1: that we're seeing flash and higher for longer fleash next 76 00:04:00,000 --> 00:04:03,400 Speaker 1: dictations becoming unanchored, the labor market very tight. But I 77 00:04:03,400 --> 00:04:05,280 Speaker 1: think it's very difficult for them to actually do that 78 00:04:05,320 --> 00:04:08,280 Speaker 1: because that's an admission of a policy error, and it 79 00:04:08,320 --> 00:04:10,200 Speaker 1: creates the risk of this taper TENDERM so I think 80 00:04:10,440 --> 00:04:12,880 Speaker 1: end of the day, I think they'll probably wait. Should 81 00:04:12,880 --> 00:04:16,960 Speaker 1: they wait, We'll see, Bill, you said basically that they 82 00:04:17,000 --> 00:04:19,640 Speaker 1: have put themselves between a rock and a hard place. 83 00:04:19,880 --> 00:04:22,520 Speaker 1: Are you saying that they've already committed a policy error 84 00:04:22,520 --> 00:04:25,640 Speaker 1: by waiting as long as they have, particularly for ending 85 00:04:25,800 --> 00:04:29,080 Speaker 1: their bond purchases. Well, I think they have made a 86 00:04:29,160 --> 00:04:33,440 Speaker 1: mistake in the sense of being so slow to start 87 00:04:33,480 --> 00:04:35,480 Speaker 1: the taper. They basically said, we're not going to start 88 00:04:35,520 --> 00:04:38,159 Speaker 1: the taper until we made substantial progress towards these goals 89 00:04:38,160 --> 00:04:41,120 Speaker 1: of employment and inflation. And now the taper isn't going 90 00:04:41,200 --> 00:04:44,160 Speaker 1: to be completed by until June of next year. On 91 00:04:44,279 --> 00:04:48,360 Speaker 1: the current trajectory, that's a very slow path of removal 92 00:04:48,360 --> 00:04:51,640 Speaker 1: of accommodation given the economic information that we're seeing. So 93 00:04:51,680 --> 00:04:54,159 Speaker 1: I think they've by locking themselves in this way. I 94 00:04:54,200 --> 00:04:57,480 Speaker 1: think they've doubled down on being late. This is an 95 00:04:57,480 --> 00:04:59,719 Speaker 1: important distinction when you say that this is the FEDS 96 00:04:59,800 --> 00:05:01,599 Speaker 1: do wing that they are are between a rock and 97 00:05:01,640 --> 00:05:04,120 Speaker 1: a hard place, when some people are arguing, even if 98 00:05:04,120 --> 00:05:06,160 Speaker 1: they were to raise rates, that wouldn't have a material 99 00:05:06,200 --> 00:05:09,040 Speaker 1: effect on the inflationary inputs, that won't solve supply chain 100 00:05:09,120 --> 00:05:12,880 Speaker 1: disruptions that won't necessarily heal some of the labor shortages. 101 00:05:13,200 --> 00:05:16,240 Speaker 1: Are you basically saying that at this point they are 102 00:05:16,480 --> 00:05:20,039 Speaker 1: lacking the tools to really curtail inflation in a controlled way, 103 00:05:20,360 --> 00:05:23,680 Speaker 1: and that they're hoping that it just remedies itself without 104 00:05:23,720 --> 00:05:27,680 Speaker 1: them having to act. I mean, monitary policy obviously can't 105 00:05:27,760 --> 00:05:32,120 Speaker 1: solve supply constraints. The only time can solve supply constraints. 106 00:05:32,360 --> 00:05:35,839 Speaker 1: But what monterrey policy can do is keep temporary shocks 107 00:05:35,839 --> 00:05:39,600 Speaker 1: to inflation from becoming more persistent and long lasting by 108 00:05:39,640 --> 00:05:42,840 Speaker 1: preventing it from getting into inflation expectations and getting into wages. 109 00:05:43,040 --> 00:05:44,680 Speaker 1: I think the biggest risk for the FED right now 110 00:05:44,720 --> 00:05:46,159 Speaker 1: is that the labor market may turn out to be 111 00:05:46,160 --> 00:05:49,760 Speaker 1: tighter sooner than what they anticipated. If that's the case, 112 00:05:50,160 --> 00:05:52,159 Speaker 1: they're gonna have to make monterrey policy much tighter at 113 00:05:52,240 --> 00:05:55,280 Speaker 1: some point. Bill, you've been in the trenches of market 114 00:05:55,360 --> 00:05:58,520 Speaker 1: economics working with Ed mcclvy, and of course a younger 115 00:05:58,600 --> 00:06:02,920 Speaker 1: Jan has a golden secs. Have you ever seen such 116 00:06:02,960 --> 00:06:09,320 Speaker 1: an odd consensus so many not idiosyncratic but original Modeling 117 00:06:09,520 --> 00:06:14,920 Speaker 1: forward twelve months of the guestimates of market economics, Well, 118 00:06:14,960 --> 00:06:17,480 Speaker 1: I think that the FETE has been very clear about 119 00:06:17,520 --> 00:06:20,560 Speaker 1: what their framework is and that been their applied trajectory 120 00:06:20,600 --> 00:06:23,360 Speaker 1: for interestry. I think that's unusual to to commit yourself 121 00:06:23,400 --> 00:06:25,240 Speaker 1: for so long into the future about what you're going 122 00:06:25,320 --> 00:06:28,080 Speaker 1: to do when, as we see, the economic environment can 123 00:06:28,160 --> 00:06:31,359 Speaker 1: change very quickly. It's also risking environment that's highly uncertain. 124 00:06:31,400 --> 00:06:32,760 Speaker 1: It's not like we have a lot of experience in 125 00:06:32,839 --> 00:06:35,599 Speaker 1: terms of recoveries from pandemics. So I think the FED 126 00:06:35,640 --> 00:06:38,160 Speaker 1: probably made a mistake by locking themselves to to to 127 00:06:38,440 --> 00:06:41,680 Speaker 1: into it a pre predicted path of how they were 128 00:06:41,680 --> 00:06:44,320 Speaker 1: going to be. Bill. There was one conversation this year 129 00:06:44,400 --> 00:06:46,159 Speaker 1: that's really stood out for me and I won't forget it. 130 00:06:46,160 --> 00:06:48,200 Speaker 1: It was sitting down with you and Mohammed, just going 131 00:06:48,240 --> 00:06:50,280 Speaker 1: into the summer, and you said something that really stunck 132 00:06:50,320 --> 00:06:52,839 Speaker 1: with Mohammed, and and we talked about it subsequently that 133 00:06:52,880 --> 00:06:54,560 Speaker 1: if the FETE started to move, they may have to 134 00:06:54,560 --> 00:06:56,960 Speaker 1: move more quickly to get back to neutral, to do 135 00:06:57,000 --> 00:06:58,520 Speaker 1: it more quickly. And that was an original thought at 136 00:06:58,520 --> 00:07:00,800 Speaker 1: the time going into summer. But I wonder if we 137 00:07:00,800 --> 00:07:02,520 Speaker 1: can add to that right now because we have this 138 00:07:02,560 --> 00:07:04,680 Speaker 1: bizarre situation on Wall Street at the moment where we 139 00:07:04,680 --> 00:07:06,680 Speaker 1: have this conversation about a FED being behind the curve, 140 00:07:07,080 --> 00:07:08,840 Speaker 1: and then I'll ask someone, Okay, what does the FED do? 141 00:07:09,279 --> 00:07:12,120 Speaker 1: And they'll say, one high CONQ three, one hiking Q four. 142 00:07:12,240 --> 00:07:13,880 Speaker 1: Then they'll repeat the move in the year after and 143 00:07:13,880 --> 00:07:15,480 Speaker 1: we'll have another two interest rate hikes. And it all 144 00:07:15,520 --> 00:07:18,480 Speaker 1: sounds very calm, very smooth, and very orderly. Bill, you 145 00:07:18,520 --> 00:07:20,559 Speaker 1: disagree with that to some extent, Can you just inform 146 00:07:20,600 --> 00:07:24,239 Speaker 1: our audience, how well, what's very unusual about the market 147 00:07:24,320 --> 00:07:26,280 Speaker 1: right now is the market expects the peak in short 148 00:07:26,360 --> 00:07:28,560 Speaker 1: term interest rates for the federal fund rate to be 149 00:07:28,600 --> 00:07:31,480 Speaker 1: around one in three quarters percent. One in three quarters 150 00:07:31,520 --> 00:07:33,520 Speaker 1: percent peak in the federal fund rate in this business 151 00:07:33,520 --> 00:07:35,800 Speaker 1: cycle will be the lowest peak ever going back all 152 00:07:35,840 --> 00:07:38,080 Speaker 1: the way to the nineteen fifties. So this idea that 153 00:07:38,160 --> 00:07:40,600 Speaker 1: somehow the peak in infestrates is going to be extremely 154 00:07:40,680 --> 00:07:44,760 Speaker 1: low environment where inflation is extremely high just seems completely 155 00:07:44,760 --> 00:07:47,160 Speaker 1: inconsistent to me. A lot of people will argue, though, Bill, 156 00:07:47,360 --> 00:07:48,960 Speaker 1: that one of the reasons why is because of all 157 00:07:49,000 --> 00:07:51,200 Speaker 1: the depth that's been issued, because of all of the 158 00:07:51,280 --> 00:07:55,880 Speaker 1: high valuations and stocks that pensions rely on retirees. So basically, 159 00:07:56,120 --> 00:07:58,520 Speaker 1: the FED will not allow the market to fall because 160 00:07:58,520 --> 00:08:00,680 Speaker 1: it could torpedo the economy at a time when they 161 00:08:00,680 --> 00:08:02,920 Speaker 1: have fewer tools to deal with it. Do you buy 162 00:08:02,960 --> 00:08:05,920 Speaker 1: that argument, Well, of course the Fed doesn't want to 163 00:08:05,960 --> 00:08:08,720 Speaker 1: cause a premature recession, but they're gonna the tightening of 164 00:08:08,800 --> 00:08:13,080 Speaker 1: Mantrey policy has to tighten financial conditions. Tighter financial conditions 165 00:08:13,160 --> 00:08:16,280 Speaker 1: is the mechanism that slows down at the economy, prevents 166 00:08:16,280 --> 00:08:19,680 Speaker 1: the economy from continue to overheat. Now, obviously there's risks 167 00:08:19,720 --> 00:08:22,160 Speaker 1: into doing that. You want to do enough to slow 168 00:08:22,200 --> 00:08:24,560 Speaker 1: the economy down so you don't have higher and higher inflation, 169 00:08:24,920 --> 00:08:26,520 Speaker 1: but not so much that you put push the e 170 00:08:26,520 --> 00:08:29,160 Speaker 1: commy into recession. The risk, of course have gone up. 171 00:08:29,760 --> 00:08:32,120 Speaker 1: The later you are to tighten Montrey policy, the higher 172 00:08:32,120 --> 00:08:34,719 Speaker 1: the risk that the tightening ultimately leads to recession. This 173 00:08:34,840 --> 00:08:37,000 Speaker 1: is crystal ball type stuff, Bill, But what kind of 174 00:08:37,040 --> 00:08:40,440 Speaker 1: right path do you imagine? How shallow, how stape incrementally? 175 00:08:40,440 --> 00:08:43,400 Speaker 1: What kind of moves would you expect. I think they're 176 00:08:43,400 --> 00:08:46,439 Speaker 1: gonna go, you know, start probably after you know, June 177 00:08:46,480 --> 00:08:48,319 Speaker 1: or a little bit later, and then they're gonna go 178 00:08:48,440 --> 00:08:50,800 Speaker 1: faster than what people think and to a higher rate 179 00:08:50,840 --> 00:08:53,040 Speaker 1: peak than what people think. Well, I think It's interesting 180 00:08:53,080 --> 00:08:55,440 Speaker 1: is people have completely forgotten about what happened between two 181 00:08:55,480 --> 00:08:57,200 Speaker 1: thousand and four and two thousand and six, where the 182 00:08:57,200 --> 00:09:00,679 Speaker 1: FED tightened seventeen times in a row, each meeting quarter 183 00:09:00,720 --> 00:09:03,000 Speaker 1: percentage point, taking the federal fund ray from one percent 184 00:09:03,040 --> 00:09:06,320 Speaker 1: to five and a quarter percent. That seems extreme, but 185 00:09:06,440 --> 00:09:10,319 Speaker 1: remember inflation wasn't a problem then, uh, and financial conditions 186 00:09:10,320 --> 00:09:13,240 Speaker 1: weren't as a cognative as they are today. So you know, 187 00:09:13,400 --> 00:09:15,760 Speaker 1: that's certainly an alternative type of pass that we could see. 188 00:09:15,760 --> 00:09:17,839 Speaker 1: I certainly expect the peak to be well above the 189 00:09:17,880 --> 00:09:20,800 Speaker 1: one and three quarters percent it's currently priced into financial markets. 190 00:09:20,840 --> 00:09:22,640 Speaker 1: Just not have a three handle bill just to squeeze 191 00:09:22,640 --> 00:09:25,240 Speaker 1: that question in what kind of thinking about Yeah, probably 192 00:09:25,280 --> 00:09:27,840 Speaker 1: probably three or four. Yeah, that's what I would You know, 193 00:09:27,920 --> 00:09:30,360 Speaker 1: obviously it's a crystal ball is cloudy? Was as you 194 00:09:30,360 --> 00:09:34,839 Speaker 1: get further out of there we go Fed speak. You 195 00:09:34,960 --> 00:09:37,120 Speaker 1: can't quite get away from the Fed too much. Tom, 196 00:09:37,200 --> 00:09:40,200 Speaker 1: that was such a rude question the clinic, the former 197 00:09:40,240 --> 00:09:42,040 Speaker 1: New York Fed President, thank you very much. Just to 198 00:09:42,080 --> 00:09:43,960 Speaker 1: get in the mind, Tom, of a policy maker at 199 00:09:43,960 --> 00:09:46,079 Speaker 1: the moment and a FLM a policy maker just to 200 00:09:46,120 --> 00:09:48,720 Speaker 1: speak hopingly about what they think compared to where this 201 00:09:48,760 --> 00:09:57,559 Speaker 1: market is. As we spoke with William Dudley earlier, we 202 00:09:57,640 --> 00:10:00,680 Speaker 1: now speak with Jeffrey Lacker of Wisconsin, and of course 203 00:10:00,960 --> 00:10:03,600 Speaker 1: of tenure at the Richmond Fed. And it is a 204 00:10:03,640 --> 00:10:07,520 Speaker 1: wonderful sequence of conversation because of the history of the 205 00:10:07,640 --> 00:10:12,880 Speaker 1: Richmond Fed. No one is is owned economic history like 206 00:10:13,000 --> 00:10:16,800 Speaker 1: the Richmond Fed. Back the over thrilled to Jeffrey Lacker 207 00:10:16,840 --> 00:10:20,000 Speaker 1: could join us, uh this morning, Jeff Lacker, we were 208 00:10:20,000 --> 00:10:23,960 Speaker 1: talking in the comments there of Bill Dudley of Berkeley, 209 00:10:24,040 --> 00:10:27,360 Speaker 1: and of course of the New York Fed shifting. Dare 210 00:10:27,400 --> 00:10:30,920 Speaker 1: I say, Jeff to the edge of lacquer, does it 211 00:10:31,040 --> 00:10:35,439 Speaker 1: surprise you to see moderates or even some doves approach 212 00:10:35,559 --> 00:10:40,959 Speaker 1: a more cautious Richmond view. It's certainly striking that a 213 00:10:41,080 --> 00:10:43,240 Speaker 1: number of people that you would historically think of as 214 00:10:43,400 --> 00:10:45,680 Speaker 1: on the dovish wig have come around to this. But 215 00:10:45,760 --> 00:10:48,240 Speaker 1: in a way it's not surprisingly. I think it's because 216 00:10:48,280 --> 00:10:53,199 Speaker 1: of how far out of bounds of historical pattern the 217 00:10:53,320 --> 00:10:57,040 Speaker 1: feds reaction for this inflation surge has been. People forget 218 00:10:57,120 --> 00:11:00,360 Speaker 1: that the reason we got inflation under control, haimed it 219 00:11:00,360 --> 00:11:02,640 Speaker 1: and then brought it down to two percent was by 220 00:11:02,679 --> 00:11:06,320 Speaker 1: reacting with alacrity to inflation, scares little blips in the 221 00:11:06,360 --> 00:11:11,680 Speaker 1: bond market that signaled the possibility of increased inflation expectations. Instead, 222 00:11:11,679 --> 00:11:14,319 Speaker 1: this FED seems to be willing to let it run. 223 00:11:14,320 --> 00:11:18,640 Speaker 1: And Jeffrey, and let's take at Jeffrey right now, to 224 00:11:18,679 --> 00:11:20,720 Speaker 1: the immedia debate at hand. And I do this in 225 00:11:20,800 --> 00:11:23,440 Speaker 1: honor of Thomas Humphrey, of course, and all the history 226 00:11:23,800 --> 00:11:26,400 Speaker 1: you've done, Paul Krugman has gone back to the history 227 00:11:26,640 --> 00:11:30,280 Speaker 1: of ninety seven, the post World War two spike down. 228 00:11:30,320 --> 00:11:36,040 Speaker 1: We came with massive disinflation, Eisenhower deflation, and then there's 229 00:11:36,040 --> 00:11:39,000 Speaker 1: a late sixties which was a little bit different. You 230 00:11:39,440 --> 00:11:43,600 Speaker 1: basically suggests Mr Kruegman maybe off and Mr Lacker maybe on, 231 00:11:44,000 --> 00:11:49,960 Speaker 1: with a more pernicious inflation of the late sixties discuss Well, 232 00:11:50,000 --> 00:11:53,880 Speaker 1: I can see why the episode is attractive for those 233 00:11:53,920 --> 00:11:57,640 Speaker 1: who are sanguine about this surge, But for me, it 234 00:11:57,720 --> 00:12:00,360 Speaker 1: seems like the nineteen sixties and early set and vis 235 00:12:00,480 --> 00:12:04,880 Speaker 1: is the more apt comparison. Inflation is ultimately about fiscal 236 00:12:04,920 --> 00:12:07,760 Speaker 1: and monetary policy, and at that time period you had 237 00:12:08,120 --> 00:12:12,720 Speaker 1: two very significant shifts shift in fiscal policy, with President 238 00:12:12,800 --> 00:12:16,959 Speaker 1: Johnson running a Great Society program, but also running an 239 00:12:17,080 --> 00:12:20,480 Speaker 1: escalation in the war in Vietnam that busted budgets. And 240 00:12:20,520 --> 00:12:24,360 Speaker 1: then on the monetary policy side, you had the gradual 241 00:12:24,440 --> 00:12:28,240 Speaker 1: and then sudden abandonment of the Breton Woods system, which 242 00:12:28,320 --> 00:12:31,719 Speaker 1: tied the value of the dollar, however loosely, but in 243 00:12:31,800 --> 00:12:35,000 Speaker 1: the long run to gold and tied down longer run 244 00:12:35,040 --> 00:12:40,440 Speaker 1: inflation expectations. In addition, you had the subservience of FED 245 00:12:40,520 --> 00:12:45,240 Speaker 1: Chairman William mc chesney, Martin and Arthur Burns to prevailing 246 00:12:45,760 --> 00:12:48,920 Speaker 1: political wins, a subservience that tilted them in the direction 247 00:12:49,000 --> 00:12:56,199 Speaker 1: of um reducing unemployment and setting inflation pressures aside. Today 248 00:12:56,600 --> 00:13:00,559 Speaker 1: now we obviously have a very striking and la change 249 00:13:00,559 --> 00:13:02,840 Speaker 1: in the fiscal outlook that's appeared over the last couple 250 00:13:02,880 --> 00:13:05,840 Speaker 1: of years. And on the monetary policy side, the Fed 251 00:13:06,000 --> 00:13:09,760 Speaker 1: rewrote its framework, it rewrote its philosophy last year, and 252 00:13:10,200 --> 00:13:14,520 Speaker 1: again it tilted towards greater concern about employment and less 253 00:13:14,520 --> 00:13:17,559 Speaker 1: of a concern about inflation, more of a willingness to 254 00:13:17,640 --> 00:13:21,520 Speaker 1: let it run. Do you agree? Do you agree then 255 00:13:21,720 --> 00:13:24,160 Speaker 1: that the remedy is going to be a very quick 256 00:13:24,400 --> 00:13:27,240 Speaker 1: series of rate hikes or perhaps a jump again to 257 00:13:27,240 --> 00:13:29,400 Speaker 1: what Bill Dudley was talking about where we could get 258 00:13:29,440 --> 00:13:32,600 Speaker 1: three to four percent up and policy rates or peak 259 00:13:32,640 --> 00:13:36,360 Speaker 1: policy rates in the cycle. Three to four percent wouldn't 260 00:13:36,400 --> 00:13:41,600 Speaker 1: surprise me. Recycle, I think they're on track to a 261 00:13:41,880 --> 00:13:47,880 Speaker 1: major policy blunder and recovering from that, realizing they've waited 262 00:13:47,920 --> 00:13:51,920 Speaker 1: too long, it's going to cause them two of necessity, 263 00:13:52,040 --> 00:13:56,000 Speaker 1: raise rates sharply and try and engineer a cooling of 264 00:13:56,040 --> 00:13:59,280 Speaker 1: the labor market, and that very rarely turns out. Well, 265 00:13:59,400 --> 00:14:03,800 Speaker 1: it's Bill Dudley's pointed this out publicly that UM and 266 00:14:03,840 --> 00:14:06,719 Speaker 1: others as well, that the FED rarely is able to 267 00:14:06,720 --> 00:14:08,720 Speaker 1: get the unemployment rate to like go back up a 268 00:14:08,760 --> 00:14:11,680 Speaker 1: little bit without it going up fairly large amounts very 269 00:14:11,720 --> 00:14:14,840 Speaker 1: hard to calibrate just how much UM to take out 270 00:14:14,840 --> 00:14:17,920 Speaker 1: of the system, and UM, it seems to me plausible 271 00:14:17,960 --> 00:14:19,720 Speaker 1: that we get to three and a half four percent, 272 00:14:20,240 --> 00:14:24,480 Speaker 1: and in addition, that we pushed the economy into a recession. Yeah, well, 273 00:14:24,520 --> 00:14:25,880 Speaker 1: that's exactly where I was going to go with this, 274 00:14:25,960 --> 00:14:28,240 Speaker 1: Jeff Man. I'm looking right now at the average high 275 00:14:28,320 --> 00:14:30,640 Speaker 1: yield bond held. The average junk bond HEIL to the 276 00:14:30,680 --> 00:14:33,840 Speaker 1: United States is currently at four point to three percent. 277 00:14:34,000 --> 00:14:37,080 Speaker 1: That is all inclusive, you get the overnight rate at 278 00:14:37,120 --> 00:14:39,240 Speaker 1: three and a half to four percent, What does that 279 00:14:39,320 --> 00:14:41,600 Speaker 1: do to the valuations of these securities? What kind of 280 00:14:41,640 --> 00:14:44,080 Speaker 1: recession are we looking at? And won't the Fed be 281 00:14:44,160 --> 00:14:47,240 Speaker 1: reluctant to move in that kind of manner because of 282 00:14:47,280 --> 00:14:50,680 Speaker 1: the torpedoing effect on markets? Yeah, I think they're in 283 00:14:50,680 --> 00:14:53,840 Speaker 1: a situation where they need to avoid an era. They 284 00:14:53,880 --> 00:14:59,680 Speaker 1: need to pivot, recalibrate pretty rapidly, accelerate the taper get 285 00:14:59,680 --> 00:15:02,800 Speaker 1: ready increases started earlier next year in the first half, 286 00:15:03,280 --> 00:15:07,240 Speaker 1: and they're gonna need some good luck. And I think, um, 287 00:15:07,320 --> 00:15:10,600 Speaker 1: a lot of markets seem to me priced for a 288 00:15:10,640 --> 00:15:12,560 Speaker 1: lot of good luck. Jeff Flecker. I want to take 289 00:15:12,600 --> 00:15:15,720 Speaker 1: the freshwater heritage here of the wonderful Marvin good Friend 290 00:15:15,760 --> 00:15:18,840 Speaker 1: and of course his mentor Alan Meltzer at Carnegie mel 291 00:15:18,920 --> 00:15:21,840 Speaker 1: And Alan Meltzer lectured me like you lectured me. We've 292 00:15:21,880 --> 00:15:24,920 Speaker 1: got to look all in at the macro data in 293 00:15:24,960 --> 00:15:29,200 Speaker 1: America as an entirety. Or are we so polarized now 294 00:15:29,480 --> 00:15:32,680 Speaker 1: that the president's studying inflation has to look at it 295 00:15:32,680 --> 00:15:38,400 Speaker 1: as two chords, the haves and they have nots. Good question, 296 00:15:38,440 --> 00:15:40,360 Speaker 1: we typically haven't don't have a lot of data on 297 00:15:40,800 --> 00:15:45,400 Speaker 1: UM inflation rates by cohorts UM. I think, more broadly, 298 00:15:46,080 --> 00:15:51,040 Speaker 1: differential effects of inflation translated into UH, different political implications 299 00:15:51,080 --> 00:15:57,080 Speaker 1: for the FED, different levels of political system dissatisfaction for 300 00:15:57,120 --> 00:16:01,320 Speaker 1: the FED. On the employment side, I think UM, the 301 00:16:01,360 --> 00:16:07,960 Speaker 1: FEDS redefined maximum employment as broad and inclusive. UM. That's 302 00:16:08,280 --> 00:16:10,400 Speaker 1: all well and good, but it's really hard to measure, 303 00:16:10,440 --> 00:16:14,200 Speaker 1: and by adding more, essentially more goals, you sort of 304 00:16:14,200 --> 00:16:16,880 Speaker 1: weaken your attachment to any of them, and it raises 305 00:16:16,920 --> 00:16:22,360 Speaker 1: serious questions. I think like the FED has been UM 306 00:16:22,880 --> 00:16:30,200 Speaker 1: a slave to a deeply flawed and outmoded conception of 307 00:16:30,480 --> 00:16:34,160 Speaker 1: maximum employment, and I think they missed an opportunity lest 308 00:16:34,200 --> 00:16:38,000 Speaker 1: way to update that. Jeff one last question, because you're 309 00:16:38,000 --> 00:16:41,200 Speaker 1: gonna throw me off air. Who was closer to the 310 00:16:41,240 --> 00:16:47,520 Speaker 1: flawed concept? Governor Brainerd or Chairman Paul. I don't see 311 00:16:47,600 --> 00:16:50,200 Speaker 1: much daylight to between them on this. I think that 312 00:16:50,280 --> 00:16:54,000 Speaker 1: they're both strongly aligned with the House view that the 313 00:16:54,600 --> 00:16:59,920 Speaker 1: board staff and others in the system promulgate UM views 314 00:17:00,480 --> 00:17:05,840 Speaker 1: that views maximum employment as this timeless parameter that we 315 00:17:05,960 --> 00:17:08,880 Speaker 1: get to at the very end of a long expansion 316 00:17:09,160 --> 00:17:11,399 Speaker 1: if we're not if in the event that we're not 317 00:17:11,520 --> 00:17:14,879 Speaker 1: hit by any shocks in the meantime, and you have 318 00:17:14,960 --> 00:17:18,639 Speaker 1: to ask yourself the question, what was maximum employment in 319 00:17:18,720 --> 00:17:21,760 Speaker 1: the third quarter of two thousand and twenty one, Well, 320 00:17:21,800 --> 00:17:24,880 Speaker 1: whatever it was, we surely got there and went beyond. 321 00:17:25,240 --> 00:17:28,320 Speaker 1: So the modern view that corresponds to the Monar view, 322 00:17:28,320 --> 00:17:32,160 Speaker 1: which is that, uh, maximum employment in the natural rate, 323 00:17:32,240 --> 00:17:35,760 Speaker 1: call it what you will, is something that fluctuates substantially 324 00:17:36,480 --> 00:17:39,159 Speaker 1: over the business cycle, sub fluctuates with a lot of 325 00:17:39,200 --> 00:17:41,760 Speaker 1: different economic conditions, and the FED needs to take that 326 00:17:41,880 --> 00:17:43,760 Speaker 1: on board. This is why I love to speaking a 327 00:17:43,800 --> 00:17:46,440 Speaker 1: former FED presidents because, Jeff, you'd never say this ten 328 00:17:46,520 --> 00:17:52,680 Speaker 1: years ago. People speak them openly, I say, I said 329 00:17:52,720 --> 00:17:55,080 Speaker 1: in the committee, and now it's only a changement. Jeff, 330 00:17:55,080 --> 00:17:58,520 Speaker 1: thank you. Fund it there, Jeff Laca, former welcome FED president, 331 00:17:58,560 --> 00:18:07,120 Speaker 1: Thank you very much. Joining us now. Lori Calvacina, head 332 00:18:07,119 --> 00:18:09,879 Speaker 1: of US equity strategy at RBC Capital Markets. Laurie at 333 00:18:09,880 --> 00:18:14,600 Speaker 1: the close on Friday forty two year end two, you're 334 00:18:14,640 --> 00:18:17,679 Speaker 1: at fifty fifty. Walk us through the path to fifty 335 00:18:17,720 --> 00:18:21,680 Speaker 1: fifty year and twenty two. So thanks John, It's great 336 00:18:21,680 --> 00:18:23,719 Speaker 1: to be with you guys. As always, Um, look, we 337 00:18:23,760 --> 00:18:26,879 Speaker 1: wanted to really refocus the conversation as opposed to just 338 00:18:26,960 --> 00:18:28,520 Speaker 1: kind of thinking about where we're going to trade over 339 00:18:28,520 --> 00:18:30,080 Speaker 1: the next six weeks, where we're going to trade over 340 00:18:30,119 --> 00:18:32,560 Speaker 1: the next twelve months. And so we just went back 341 00:18:32,600 --> 00:18:35,120 Speaker 1: to our models on basically all of the economic back 342 00:18:35,160 --> 00:18:37,720 Speaker 1: tests and models point us to about fifty or higher. 343 00:18:37,920 --> 00:18:40,919 Speaker 1: Our valuation models um several of which are looking at 344 00:18:40,920 --> 00:18:43,200 Speaker 1: stocks versus bonds, reporting us to a number of about 345 00:18:43,240 --> 00:18:45,679 Speaker 1: fifty fifty. And I think what we're really seeing in 346 00:18:45,720 --> 00:18:48,520 Speaker 1: the data are two things. Is One, even though economic 347 00:18:48,560 --> 00:18:50,639 Speaker 1: growth is expected to cool off next year and we 348 00:18:50,680 --> 00:18:53,240 Speaker 1: do have some hurdles to get through frankly on supply 349 00:18:53,320 --> 00:18:56,000 Speaker 1: chains and inflation, if we're if we're right about where 350 00:18:56,000 --> 00:18:57,600 Speaker 1: the economy is going to end up next year, if 351 00:18:57,640 --> 00:18:59,560 Speaker 1: it's about a four percent type number, which is what 352 00:18:59,640 --> 00:19:03,280 Speaker 1: the economics community is anticipating right now, we should be 353 00:19:03,280 --> 00:19:06,840 Speaker 1: getting to somewhere around SMP. That would be fair value. 354 00:19:07,080 --> 00:19:08,879 Speaker 1: And all of our valuation work. If you look at 355 00:19:08,880 --> 00:19:12,359 Speaker 1: stocks versus bonds in particular, stocks are still the only 356 00:19:12,359 --> 00:19:14,240 Speaker 1: game in town, and I think that gets lost in 357 00:19:14,280 --> 00:19:16,760 Speaker 1: this equity market discussion. At some point in time, Yes, 358 00:19:16,800 --> 00:19:19,719 Speaker 1: we have extended valuations um. But stocks, at the end 359 00:19:19,720 --> 00:19:21,800 Speaker 1: of the day are an inflation hedge. And when we 360 00:19:21,800 --> 00:19:24,560 Speaker 1: look at our models that evaluate stocks versus bonds, we're 361 00:19:24,560 --> 00:19:28,680 Speaker 1: still seeing a case for eight percent type returns next year. Laura, 362 00:19:28,800 --> 00:19:32,159 Speaker 1: just a beautiful brief there. Um. I noticed Lory the 363 00:19:32,240 --> 00:19:35,040 Speaker 1: string from General Electric to J and J and this 364 00:19:35,080 --> 00:19:38,160 Speaker 1: morning the idea that Royal Dutch Shell will finally move 365 00:19:38,240 --> 00:19:40,960 Speaker 1: from the Netherlands back over the United Kingdom. And these 366 00:19:40,960 --> 00:19:44,439 Speaker 1: are corporations that adapt. They're gonna adapt based on what 367 00:19:44,520 --> 00:19:49,159 Speaker 1: you just said to seven, eight, even nine nominal g 368 00:19:49,280 --> 00:19:52,240 Speaker 1: d P if you, you know, forget about the mathiness 369 00:19:52,320 --> 00:19:55,239 Speaker 1: of it. You extrapolate, the interpolate whatever a phrase from 370 00:19:55,280 --> 00:19:58,720 Speaker 1: my childhood. How do you base your call? Is it 371 00:19:58,800 --> 00:20:02,120 Speaker 1: based simply on non an old g d P. It's 372 00:20:02,160 --> 00:20:04,320 Speaker 1: we we look at nominal GDP, we look at real 373 00:20:04,400 --> 00:20:07,119 Speaker 1: GDP um again, we look at stocks relative to bonds. 374 00:20:07,160 --> 00:20:09,240 Speaker 1: We look at a plain old fashioned pe multiple and 375 00:20:09,280 --> 00:20:12,280 Speaker 1: make an assessment about next year's earnings. And I'll tell you, Tom, 376 00:20:12,400 --> 00:20:15,880 Speaker 1: the earnings discussion is fascinating because there was so much 377 00:20:15,960 --> 00:20:18,800 Speaker 1: eggs on this last reporting season. But whether or not 378 00:20:18,840 --> 00:20:20,840 Speaker 1: companies were going to be able to manage through supply 379 00:20:20,920 --> 00:20:23,720 Speaker 1: chain pressures and inflation pressures, and there was a lot 380 00:20:23,760 --> 00:20:26,600 Speaker 1: of you know, complaining, and I'm not saying that it's unjustifiable, 381 00:20:27,240 --> 00:20:29,560 Speaker 1: but if you look at the inflation discussion, it was 382 00:20:29,560 --> 00:20:32,160 Speaker 1: pretty negative. We had a lot of companies talking about how, 383 00:20:32,520 --> 00:20:34,920 Speaker 1: you know, their inflation outlooks had gone up next year, 384 00:20:34,920 --> 00:20:36,760 Speaker 1: that they were caught off guard by the inflation that 385 00:20:36,800 --> 00:20:39,920 Speaker 1: they saw perk up in three Q. Supply chain pressures 386 00:20:39,960 --> 00:20:42,280 Speaker 1: have been real, they have been intense, but at the 387 00:20:42,320 --> 00:20:46,800 Speaker 1: same time, companies have demonstrated a remarkable ability to structurally 388 00:20:46,880 --> 00:20:49,959 Speaker 1: suck out costs from their systems. They have been applauding 389 00:20:49,960 --> 00:20:53,000 Speaker 1: their supply chain teams, their logistic teams. They've been getting 390 00:20:53,000 --> 00:20:55,119 Speaker 1: inventories on the shelves, they've been meeting the demand that 391 00:20:55,160 --> 00:20:57,800 Speaker 1: they can, and they are managing through in a remarkable way. 392 00:20:57,840 --> 00:21:01,080 Speaker 1: And I'm really hard pressed to understand why that won't 393 00:21:01,119 --> 00:21:04,080 Speaker 1: continue next year on the strength that we've already seen glory. 394 00:21:04,200 --> 00:21:06,879 Speaker 1: How much is a question mark here fiscal spending, the 395 00:21:06,880 --> 00:21:08,920 Speaker 1: idea that we're gonna get a fiscal drag next year, 396 00:21:09,119 --> 00:21:12,040 Speaker 1: and that could potentially affect how much consumers are willing 397 00:21:12,080 --> 00:21:13,879 Speaker 1: to absorb these costs. I mean, I'm struck with the 398 00:21:13,920 --> 00:21:16,359 Speaker 1: fact that nearly two out of three of the biggest 399 00:21:16,359 --> 00:21:20,399 Speaker 1: two AS companies actually reported substantially fatter profit margins this 400 00:21:20,520 --> 00:21:24,159 Speaker 1: year than back in two thousand nineteen. Well, look, I 401 00:21:24,160 --> 00:21:26,760 Speaker 1: think it's a question on consumers and corporates, and we 402 00:21:26,760 --> 00:21:29,600 Speaker 1: know that the corporates are passing along price increases, and 403 00:21:29,640 --> 00:21:31,520 Speaker 1: what we're seeing so far is that there is not 404 00:21:31,680 --> 00:21:35,359 Speaker 1: any negative feedback on underlying appetite, as I like to 405 00:21:35,400 --> 00:21:37,679 Speaker 1: call it. There have been some issues with meeting demand 406 00:21:37,720 --> 00:21:40,280 Speaker 1: technically here and there, not for everybody but a few, 407 00:21:40,280 --> 00:21:43,480 Speaker 1: but under underneath the surface, consumers still have the cash 408 00:21:43,520 --> 00:21:45,720 Speaker 1: to go out and spend, and still have the appetite 409 00:21:45,720 --> 00:21:47,359 Speaker 1: to go out and spend, even though frankly they've been 410 00:21:47,359 --> 00:21:49,680 Speaker 1: feeling lousy for the last couple of months. And I 411 00:21:49,720 --> 00:21:51,400 Speaker 1: think part of that is a testament to the fact 412 00:21:51,400 --> 00:21:54,439 Speaker 1: that we have this unbelievably strong labor market. We are 413 00:21:54,440 --> 00:21:57,240 Speaker 1: seeing wage gain increases, so at the end of the day, 414 00:21:57,280 --> 00:21:59,720 Speaker 1: the appetite is still there. And you know, I look 415 00:21:59,720 --> 00:22:01,680 Speaker 1: at some the forecast around the street that are calling 416 00:22:01,680 --> 00:22:04,399 Speaker 1: for negative numbers next year or severe pullback, and I 417 00:22:04,560 --> 00:22:06,560 Speaker 1: just simply don't see the case for a growth scare. 418 00:22:06,600 --> 00:22:08,760 Speaker 1: I don't see the case for the idea that we're 419 00:22:08,760 --> 00:22:11,159 Speaker 1: going to be flirting with recession, which is typically what 420 00:22:11,320 --> 00:22:14,840 Speaker 1: really pushes us down into negative territory and equities. Laurie, 421 00:22:14,880 --> 00:22:16,960 Speaker 1: great to catch up as always, good to see you. 422 00:22:17,200 --> 00:22:19,840 Speaker 1: To kick off a train in Wlauri Cavasina of OURBC 423 00:22:20,000 --> 00:22:27,800 Speaker 1: campital markets. Sometimes things need to be made pretty simple, 424 00:22:27,920 --> 00:22:30,919 Speaker 1: This from Manamaha Jan. Overall, we continue to believe that 425 00:22:30,960 --> 00:22:33,160 Speaker 1: the economic cycle in the US remains in the middle 426 00:22:33,240 --> 00:22:35,399 Speaker 1: innings with above trend GDP growth in twenty one and 427 00:22:35,440 --> 00:22:38,040 Speaker 1: twenty two. For investors, this means that the bullmarket still 428 00:22:38,040 --> 00:22:40,720 Speaker 1: likely has room to run. Markets tend not to enter 429 00:22:40,760 --> 00:22:44,920 Speaker 1: bear markets unless the economy is entering a recession, exactly 430 00:22:44,960 --> 00:22:47,600 Speaker 1: the point Lisa was making just moments ago. Joining us 431 00:22:47,640 --> 00:22:50,520 Speaker 1: now is Manamaha Chan, Senior investment strategist at Edward Jones. 432 00:22:50,560 --> 00:22:52,640 Speaker 1: Congratulations on the new seat, mon A. Great to catch 433 00:22:52,680 --> 00:22:54,560 Speaker 1: up with you once again, Thank you, John. Great to 434 00:22:54,600 --> 00:22:57,320 Speaker 1: be back. Is it that simple? Is it that simple? 435 00:22:57,640 --> 00:23:01,520 Speaker 1: No recession? This equity market grinds higher. You know, really 436 00:23:01,560 --> 00:23:05,080 Speaker 1: when you look historically and we when we did the analysis, uh, 437 00:23:05,119 --> 00:23:07,680 Speaker 1: when we do get worried when we do hit those 438 00:23:07,680 --> 00:23:11,240 Speaker 1: twenty type drawdowns or bear markets. We do tend to 439 00:23:11,240 --> 00:23:13,480 Speaker 1: see an economy that is either in a recession or 440 00:23:13,600 --> 00:23:17,000 Speaker 1: entering recession, or the FED is close to the end 441 00:23:17,000 --> 00:23:19,160 Speaker 1: of its tightening cycle. Of course, as we look into 442 00:23:19,200 --> 00:23:22,159 Speaker 1: twenty two, neither of these conditions are in place, and 443 00:23:22,240 --> 00:23:25,600 Speaker 1: so yes, we think this bull market has legs still. Uh. 444 00:23:25,680 --> 00:23:28,880 Speaker 1: That being said, we do think that returns will likely moderate, 445 00:23:29,040 --> 00:23:32,080 Speaker 1: that we will likely see more normal levels of volatility. 446 00:23:32,640 --> 00:23:34,760 Speaker 1: Keep in mind, we are now in the third year 447 00:23:34,800 --> 00:23:37,240 Speaker 1: of very strong double digit gains in the smp SO 448 00:23:37,280 --> 00:23:40,080 Speaker 1: in two thousand nineteen we had percent. Last year was 449 00:23:40,080 --> 00:23:44,640 Speaker 1: close at seventeen. This year we're already at twenty. When 450 00:23:44,640 --> 00:23:47,480 Speaker 1: you look historically at those figures as well, a fourth 451 00:23:47,560 --> 00:23:50,720 Speaker 1: year of those type of returns is less likely. But 452 00:23:50,760 --> 00:23:53,800 Speaker 1: could we get positive returns in line with earnings growth. 453 00:23:54,000 --> 00:23:56,880 Speaker 1: We think that's fair. And I have the clearest memories 454 00:23:56,920 --> 00:24:01,520 Speaker 1: of when Wharton invented the dual degree track. You did that, 455 00:24:01,640 --> 00:24:05,400 Speaker 1: which is one of the most prestigious academic tracks in America. John, 456 00:24:05,400 --> 00:24:07,800 Speaker 1: It's very much equivalent to what goes on in the 457 00:24:07,920 --> 00:24:13,000 Speaker 1: United Kingdom. That track is based on humility. I want 458 00:24:13,040 --> 00:24:17,080 Speaker 1: you to speak to Edward D. Jones clients. Now they're 459 00:24:17,160 --> 00:24:20,560 Speaker 1: sprawled across this nation and they're looking at the fancy 460 00:24:20,600 --> 00:24:24,119 Speaker 1: people booming on both coasts. How do you respond to that? 461 00:24:24,480 --> 00:24:28,040 Speaker 1: What do you tell the rest of America about the 462 00:24:28,080 --> 00:24:32,639 Speaker 1: boom economy of the elite? Yeah. Look, certainly in the 463 00:24:32,680 --> 00:24:35,040 Speaker 1: United States we continue to see a little bit of 464 00:24:35,359 --> 00:24:38,600 Speaker 1: this dual track, as you're alluding to, this K shaped recovery, 465 00:24:38,640 --> 00:24:41,560 Speaker 1: where part of the economy and part of you know, 466 00:24:41,680 --> 00:24:44,280 Speaker 1: investor basin is doing well and and part of it 467 00:24:44,080 --> 00:24:46,199 Speaker 1: is is not doing so well. But what we like 468 00:24:46,320 --> 00:24:48,639 Speaker 1: to tell our clients, you know, at Edward Jones, certainly 469 00:24:48,680 --> 00:24:52,400 Speaker 1: we have seventeen million plush nearly two trillion dollars in assets. 470 00:24:52,440 --> 00:24:56,880 Speaker 1: We think generally the course is to remain uh diversified 471 00:24:56,920 --> 00:24:59,679 Speaker 1: in your portfolios, stick with equities. You know, there's been 472 00:24:59,680 --> 00:25:02,520 Speaker 1: a lot of talk on inflation and inflation fears. When 473 00:25:02,560 --> 00:25:04,919 Speaker 1: you look historically, one of the best asset classes to 474 00:25:04,960 --> 00:25:09,000 Speaker 1: own in an inflationary environment is equities. And even if 475 00:25:09,000 --> 00:25:10,520 Speaker 1: you look at this here, yes, c p I is 476 00:25:10,560 --> 00:25:12,399 Speaker 1: at six point two percent, but as we alluded to, 477 00:25:12,520 --> 00:25:16,639 Speaker 1: S and P returns close to so you know, it 478 00:25:16,720 --> 00:25:19,840 Speaker 1: certainly makes sense to to stay that course within equities. 479 00:25:19,880 --> 00:25:22,480 Speaker 1: Of course, uh, you know, we continue to like here 480 00:25:22,560 --> 00:25:25,640 Speaker 1: that value cyclical trade. We think that has legs as well. 481 00:25:26,160 --> 00:25:28,000 Speaker 1: We're mindful that as we get towards the end of 482 00:25:28,040 --> 00:25:30,600 Speaker 1: next year, there is some uh you know, the top 483 00:25:30,720 --> 00:25:33,359 Speaker 1: the comps get tougher for value and maybe easier for growth, 484 00:25:33,400 --> 00:25:36,960 Speaker 1: but from now value continues to remain attractive. Start to 485 00:25:37,000 --> 00:25:38,680 Speaker 1: look outside the U S. You know, we talked about 486 00:25:38,720 --> 00:25:41,159 Speaker 1: tremendous growth here in the US. Well, there may be 487 00:25:41,240 --> 00:25:43,920 Speaker 1: some room for catch up in areas of emerging markets, 488 00:25:44,160 --> 00:25:48,120 Speaker 1: even non US developed markets, as we get hopefully better 489 00:25:48,200 --> 00:25:50,879 Speaker 1: vaccine and COVID trends longer term, as we get these 490 00:25:50,880 --> 00:25:54,440 Speaker 1: supply chain issues hopefully easing, and of course hopefully we'll 491 00:25:54,440 --> 00:25:56,520 Speaker 1: start to see some stability out of China, and we'll 492 00:25:56,560 --> 00:25:59,760 Speaker 1: we'll hear from Biden and Presidente later today as well. 493 00:26:00,000 --> 00:26:02,400 Speaker 1: Own A. No one sees truly dark clouds, and that's 494 00:26:02,400 --> 00:26:04,600 Speaker 1: what we've been talking about. Recession seems to be off 495 00:26:04,600 --> 00:26:07,159 Speaker 1: the table, and you do have consumer confidence at the 496 00:26:07,200 --> 00:26:10,159 Speaker 1: lowest since two thousand and eleven here in the United States. 497 00:26:10,160 --> 00:26:13,200 Speaker 1: You do have things that are sort of screamed publishests 498 00:26:13,200 --> 00:26:14,879 Speaker 1: like my twelve year old son asking whether he can 499 00:26:14,880 --> 00:26:17,960 Speaker 1: buy an unfungible token this morning. I am wondering, from 500 00:26:17,960 --> 00:26:20,480 Speaker 1: your perspective, whether this gives you concern, Not my son, 501 00:26:20,680 --> 00:26:22,960 Speaker 1: but the idea that no one sees truly dark clouds. 502 00:26:24,080 --> 00:26:28,280 Speaker 1: You know, certainly when you think about black Swan events, 503 00:26:28,320 --> 00:26:31,720 Speaker 1: and last year could certainly be considered one. Yes, it 504 00:26:31,840 --> 00:26:34,040 Speaker 1: is hard for economists to sit here and predict what 505 00:26:34,119 --> 00:26:37,400 Speaker 1: could really derail the market from a really true black 506 00:26:37,440 --> 00:26:40,680 Speaker 1: Swan event. Um. But generally we do have a good 507 00:26:40,720 --> 00:26:43,320 Speaker 1: sense of what earnings growth will look like next year. 508 00:26:43,880 --> 00:26:46,040 Speaker 1: We do have a good sense of, uh, you know, 509 00:26:46,040 --> 00:26:49,320 Speaker 1: whether or not we're seeing any big holes in the 510 00:26:49,359 --> 00:26:51,640 Speaker 1: economy when we look at areas like credit spreads, when 511 00:26:51,640 --> 00:26:54,120 Speaker 1: we look at areas like even the VIX index, which 512 00:26:54,119 --> 00:26:57,080 Speaker 1: is a fear index. UM. So when we track these 513 00:26:57,119 --> 00:27:00,119 Speaker 1: economic metrics, um, and you know, we've we've done of 514 00:27:00,119 --> 00:27:04,199 Speaker 1: historically and they've provided a really good basis for you know, 515 00:27:04,440 --> 00:27:08,360 Speaker 1: looking at the future, we're not seeing any huge holes 516 00:27:08,440 --> 00:27:10,440 Speaker 1: or areas of concern. You know, I think the biggest 517 00:27:10,440 --> 00:27:13,600 Speaker 1: ones would be inflation and a FED policy mistake. Uh. 518 00:27:13,640 --> 00:27:16,800 Speaker 1: And thus far, we're hopeful that inflation does ease from 519 00:27:16,800 --> 00:27:19,280 Speaker 1: these peak levels. You know, we've talked about supply chain easing. 520 00:27:19,480 --> 00:27:21,959 Speaker 1: We also think we won't see a repeat of what 521 00:27:22,000 --> 00:27:25,280 Speaker 1: we saw this year in commodity prices, energy prices um, 522 00:27:25,280 --> 00:27:27,520 Speaker 1: you know, going up another thirty or forty dollars. We 523 00:27:27,560 --> 00:27:30,760 Speaker 1: won't see a repeat of auto prices increasing to the 524 00:27:30,760 --> 00:27:33,399 Speaker 1: magnitude they did this here UM. And so you know, 525 00:27:33,440 --> 00:27:36,800 Speaker 1: from that perspective, we feel comfortable with the view that 526 00:27:37,119 --> 00:27:41,199 Speaker 1: positive earnings growth above trend GDP growth UM. Certainly a 527 00:27:41,240 --> 00:27:44,679 Speaker 1: consumer that is showing really high appetite for demand and 528 00:27:44,680 --> 00:27:47,000 Speaker 1: we're seeing that. We'll see how the retail sales figure 529 00:27:47,000 --> 00:27:49,679 Speaker 1: comes out, but certainly the last couple have been strong, 530 00:27:50,320 --> 00:27:52,800 Speaker 1: and so to us this is not a demand shock, 531 00:27:52,880 --> 00:27:55,720 Speaker 1: which would probably be more worrisome than what we're seeing 532 00:27:55,720 --> 00:27:57,680 Speaker 1: in the marketplace, which is more of a supply shock. 533 00:27:58,280 --> 00:28:00,480 Speaker 1: MONA great to catch up and roll, Wishing you the 534 00:28:00,520 --> 00:28:03,240 Speaker 1: best for the year. Head, thank you, thank you, thank 535 00:28:03,280 --> 00:28:11,560 Speaker 1: you very much. Money John that of Edwich Giants right 536 00:28:11,600 --> 00:28:14,840 Speaker 1: now it is an annual visit, but this year highly unusual. 537 00:28:14,960 --> 00:28:19,800 Speaker 1: Steven Sadof is foundational in retail. His his heritage at 538 00:28:19,800 --> 00:28:23,480 Speaker 1: Saxforth Avenue and now senior advisor at MasterCard. We're thrilled 539 00:28:23,520 --> 00:28:25,840 Speaker 1: that he could join us. I've never seen an essay 540 00:28:25,920 --> 00:28:28,399 Speaker 1: like you wrote for master Card, you and your team, 541 00:28:28,440 --> 00:28:31,080 Speaker 1: Steve Sadov of the Bang Up Year. What I love 542 00:28:31,560 --> 00:28:33,680 Speaker 1: is you go back and do a compare and contrast 543 00:28:33,760 --> 00:28:38,040 Speaker 1: not pandemic, but with two thousand nineteen, reaching out to 544 00:28:38,080 --> 00:28:41,560 Speaker 1: the guestimates of this holiday season, and I see retail 545 00:28:41,680 --> 00:28:45,239 Speaker 1: up twelve percent after auto and guests taken out, and 546 00:28:45,280 --> 00:28:48,880 Speaker 1: I see what Lisa cares about bubbles, bangles and beads up. 547 00:28:50,360 --> 00:28:54,320 Speaker 1: Explain that two year arc that we see in retail. Well, 548 00:28:54,360 --> 00:28:56,560 Speaker 1: good to see you, Tom. And it really is a 549 00:28:56,600 --> 00:29:00,000 Speaker 1: healthy consumer right now, and it looks like a very 550 00:29:00,040 --> 00:29:04,600 Speaker 1: strong Thanksgiving, Black Friday and back and holiday season. If 551 00:29:04,600 --> 00:29:07,920 Speaker 1: you look at it versus two thousand nineteen, we're seeing 552 00:29:08,000 --> 00:29:11,440 Speaker 1: some real recovery in the consumer. We're looking at growth 553 00:29:11,480 --> 00:29:15,240 Speaker 1: in the double digit range, twelve versus pre pandemic levels. 554 00:29:15,680 --> 00:29:22,680 Speaker 1: Department stores, apparel, luxury accessories, UH all doing extremely well 555 00:29:23,000 --> 00:29:26,040 Speaker 1: and the consumer is healthy. They're back and what we're 556 00:29:26,040 --> 00:29:29,040 Speaker 1: seeing is good margins with the retailers. We're seeing the 557 00:29:29,040 --> 00:29:31,959 Speaker 1: consumer having a lot of money in their pockets, and 558 00:29:32,000 --> 00:29:33,840 Speaker 1: this is across the high end as well as the 559 00:29:33,840 --> 00:29:37,600 Speaker 1: lower end of the consumer. You have lived inflation abouts 560 00:29:37,600 --> 00:29:42,520 Speaker 1: It's sex Fifth Avenue. They directly affected the every floor 561 00:29:43,040 --> 00:29:46,400 Speaker 1: of the Great Store. What does this inflation about mean 562 00:29:46,520 --> 00:29:52,560 Speaker 1: for master Card and the optimism you have about retail buyers. Well, 563 00:29:52,560 --> 00:29:54,960 Speaker 1: I think right now it's saying that as we get 564 00:29:55,000 --> 00:29:57,320 Speaker 1: through the rest of this year, we're really on a 565 00:29:57,560 --> 00:30:00,640 Speaker 1: very good glide path to a strong consume humor. The 566 00:30:00,680 --> 00:30:04,240 Speaker 1: holiday forecast was for seven point four percent growth for 567 00:30:04,320 --> 00:30:07,000 Speaker 1: the overall season. We're looking at Black Friday and the 568 00:30:07,040 --> 00:30:12,400 Speaker 1: type of range we're looking at Black the Thanksgiving week 569 00:30:12,440 --> 00:30:15,840 Speaker 1: in the double digit range. So the consumer is healthy. 570 00:30:16,160 --> 00:30:20,120 Speaker 1: Now we've got pricing, we've got inflation. The retailers are 571 00:30:20,160 --> 00:30:22,240 Speaker 1: taking pricing and you're seeing it in some of the 572 00:30:22,320 --> 00:30:25,280 Speaker 1: margins that you're seeing coming out of a lot of 573 00:30:25,320 --> 00:30:28,520 Speaker 1: the brands and the retailers right now. So it is 574 00:30:28,560 --> 00:30:33,560 Speaker 1: an inflationary environment. Hopefully it will start to ease as 575 00:30:33,600 --> 00:30:36,600 Speaker 1: we go into next year, but the supply chain issues 576 00:30:36,600 --> 00:30:40,320 Speaker 1: are real and that inflationary number is factored in into 577 00:30:40,360 --> 00:30:43,240 Speaker 1: the overall of growth rate. How much Steve is this 578 00:30:43,640 --> 00:30:47,160 Speaker 1: a supply chain disruption issue, the idea of shortages of labor. 579 00:30:47,200 --> 00:30:49,880 Speaker 1: How much is this company is taking advantage of all 580 00:30:49,880 --> 00:30:52,320 Speaker 1: of these concerns and then jacking up prices way more 581 00:30:52,360 --> 00:30:54,479 Speaker 1: than they've been able to for years when they've been 582 00:30:54,520 --> 00:30:58,240 Speaker 1: forced to keep them down due to global competition. I 583 00:30:58,320 --> 00:31:00,880 Speaker 1: don't know whether it's taking advantage or not. We're in 584 00:31:00,920 --> 00:31:05,080 Speaker 1: an environment where companies are able to get pricing through 585 00:31:05,120 --> 00:31:09,600 Speaker 1: with their customers, but they're seeing real price increases. I mean, 586 00:31:09,640 --> 00:31:12,520 Speaker 1: if you look at the transportation cost, you look at 587 00:31:12,520 --> 00:31:16,520 Speaker 1: the labor input costs, all of these are very dramatic. UH. 588 00:31:16,560 --> 00:31:20,640 Speaker 1: In many cases, if a brand has pricing power, some 589 00:31:20,720 --> 00:31:23,840 Speaker 1: categories you have pricing power, others you don't. Where you 590 00:31:23,880 --> 00:31:26,800 Speaker 1: have pricing power, I'm seeing them taking pricing at margin, 591 00:31:27,120 --> 00:31:29,760 Speaker 1: which means that they're getting a flow through and you're 592 00:31:29,800 --> 00:31:32,360 Speaker 1: seeing it in overall prices and in terms of their 593 00:31:32,360 --> 00:31:35,600 Speaker 1: growth margins. Steve, when we were talking about former President 594 00:31:35,640 --> 00:31:38,680 Speaker 1: Trump's policies, we discussed the effect on retail from some 595 00:31:38,720 --> 00:31:42,040 Speaker 1: of the tariffs that he implemented across the world. How 596 00:31:42,160 --> 00:31:46,840 Speaker 1: much are those tariffs still instated and still raising prices 597 00:31:46,880 --> 00:31:50,200 Speaker 1: for end consumers in a way that perhaps President Biden 598 00:31:50,520 --> 00:31:54,960 Speaker 1: could alter. Well, the prices through the tariffs still are there, 599 00:31:55,160 --> 00:31:57,520 Speaker 1: and we do need to see them come down because 600 00:31:57,560 --> 00:32:00,840 Speaker 1: the consumer is going to feel the feeling the effect 601 00:32:00,880 --> 00:32:04,080 Speaker 1: of these UH higher prices. So is there an opportunity 602 00:32:04,120 --> 00:32:08,480 Speaker 1: to take off some of the tariffs. Absolutely over time, 603 00:32:08,920 --> 00:32:12,800 Speaker 1: But right now the issue is that the consumer is 604 00:32:12,840 --> 00:32:16,680 Speaker 1: facing some of these UH price increases. However, they do 605 00:32:16,800 --> 00:32:19,120 Speaker 1: have money in their pocket. If I look at the 606 00:32:19,160 --> 00:32:22,520 Speaker 1: month of October, for example, we're looking at six percent 607 00:32:22,640 --> 00:32:25,200 Speaker 1: type of growth on top of when you had Amazon 608 00:32:25,280 --> 00:32:28,000 Speaker 1: Prime Day and you had the early promotions year ago. 609 00:32:28,080 --> 00:32:31,000 Speaker 1: So the consumer spending as we go into next year, 610 00:32:31,040 --> 00:32:33,120 Speaker 1: it's going to start lapping a little tougher. You had 611 00:32:33,120 --> 00:32:37,760 Speaker 1: the some of the UH the government payments that started 612 00:32:37,840 --> 00:32:42,080 Speaker 1: last January, so the environment, especially with the inflation, is 613 00:32:42,120 --> 00:32:44,000 Speaker 1: going to get tougher. But as we go through the 614 00:32:44,040 --> 00:32:47,680 Speaker 1: holiday season, I feel very good that you have good 615 00:32:47,760 --> 00:32:50,360 Speaker 1: momentum across all these categories. Steve, I want to bring 616 00:32:50,440 --> 00:32:52,480 Speaker 1: up a board again in radio. Let me describe this 617 00:32:52,560 --> 00:32:54,800 Speaker 1: board to you, because I think it's just that important. 618 00:32:54,880 --> 00:32:58,000 Speaker 1: It talks about the explosive two year growth and what 619 00:32:58,120 --> 00:33:01,840 Speaker 1: we see, particularly our of the Amazon and the rest 620 00:33:01,840 --> 00:33:05,840 Speaker 1: of the digital space is just a hugely explosive growth 621 00:33:06,360 --> 00:33:11,160 Speaker 1: of fifty point two percent arcing across two years. Steve, 622 00:33:11,880 --> 00:33:14,760 Speaker 1: you're a sex for thevenue guy. What does that mean 623 00:33:14,840 --> 00:33:18,200 Speaker 1: to you to see that statistic of fifty percent e 624 00:33:18,360 --> 00:33:22,480 Speaker 1: commerce growth in twenty four months. I think it shows 625 00:33:22,520 --> 00:33:25,440 Speaker 1: the digitization of America that this is here to stay. 626 00:33:25,560 --> 00:33:28,000 Speaker 1: That you're seeing the seven percent growth on top of 627 00:33:28,040 --> 00:33:30,680 Speaker 1: the UH you know, in terms of on top of 628 00:33:30,720 --> 00:33:33,120 Speaker 1: the going from twelve percent of commerce to eight percent 629 00:33:33,200 --> 00:33:37,040 Speaker 1: of commerce. Digital is real. The consumer wants an omni 630 00:33:37,120 --> 00:33:40,360 Speaker 1: channel experience. They want to buy products anywhere, they want 631 00:33:40,360 --> 00:33:42,360 Speaker 1: to be able to get them. And the winners are 632 00:33:42,400 --> 00:33:45,560 Speaker 1: being able to do in store, online, buy online, pickup 633 00:33:45,560 --> 00:33:48,760 Speaker 1: in store. And that's tom in the luxury sector as 634 00:33:48,800 --> 00:33:51,480 Speaker 1: well as in the UH entry you know, even the 635 00:33:51,520 --> 00:33:54,480 Speaker 1: dollar store type of environment. So I think what you 636 00:33:54,600 --> 00:33:58,120 Speaker 1: have as an environment where the consumer is king, they 637 00:33:58,160 --> 00:34:00,680 Speaker 1: have all the data and they want to shop conveniently. 638 00:34:00,720 --> 00:34:03,000 Speaker 1: And uh, you know, those of us in the luxury 639 00:34:03,000 --> 00:34:05,480 Speaker 1: sector used to think that digital wasn't going to play. 640 00:34:05,520 --> 00:34:08,240 Speaker 1: They weren't in a shop online. That's just not true anymore. 641 00:34:08,280 --> 00:34:10,919 Speaker 1: Look at what Sacks did they're building their Sacks dot 642 00:34:10,920 --> 00:34:14,799 Speaker 1: com businesses and investing in it, Lisa, And let's Dove 643 00:34:14,880 --> 00:34:18,000 Speaker 1: tell this in and make some money for MasterCard and Steve, Lisa, 644 00:34:18,040 --> 00:34:20,319 Speaker 1: now you and I need a road trip to the 645 00:34:20,400 --> 00:34:24,239 Speaker 1: Sacks Fifth Avenue shoe floor. You go up that elevator 646 00:34:24,440 --> 00:34:27,000 Speaker 1: where they used to go click click click on the elevator, 647 00:34:27,239 --> 00:34:31,680 Speaker 1: and you open out into an extravagance of shoes. Lisa, 648 00:34:31,719 --> 00:34:34,719 Speaker 1: how far are we from them amazoning that and like 649 00:34:34,840 --> 00:34:37,839 Speaker 1: taking a firm in there, so any any person could 650 00:34:37,840 --> 00:34:40,840 Speaker 1: migrate out to a sensible three or four pair shoe 651 00:34:40,880 --> 00:34:43,960 Speaker 1: acquisition a reasonable All this tells you a lot about 652 00:34:44,000 --> 00:34:46,719 Speaker 1: Tom King, not about my shoe proclivities. I'll just put 653 00:34:46,760 --> 00:34:49,400 Speaker 1: that there just to have this up though, Steve. You 654 00:34:49,440 --> 00:34:51,920 Speaker 1: know what we're talking about. Going to Sacks fifth Avenue 655 00:34:52,239 --> 00:34:54,719 Speaker 1: is a high class issue, right. People go there if 656 00:34:54,719 --> 00:34:57,000 Speaker 1: they want to spend, usually a lot more money than 657 00:34:57,120 --> 00:35:00,680 Speaker 1: say somebody who shops in some of the other retailers. 658 00:35:00,680 --> 00:35:02,600 Speaker 1: And I wonder, at to Thoma's point earlier in the 659 00:35:02,640 --> 00:35:06,799 Speaker 1: show the bifurcated recovery, whether the spending is a bifurcated 660 00:35:06,840 --> 00:35:09,520 Speaker 1: spending of the halves and bigger ticket items and the 661 00:35:09,640 --> 00:35:13,080 Speaker 1: have nots still restricting some of their purchases. I'm not 662 00:35:13,160 --> 00:35:15,279 Speaker 1: so sure. I agree with Tom on that I think 663 00:35:15,280 --> 00:35:18,560 Speaker 1: the consumers healthy across the high and clearly the luxury environment. 664 00:35:18,560 --> 00:35:22,200 Speaker 1: You look at growth versus year ago, or even thirty 665 00:35:22,320 --> 00:35:25,680 Speaker 1: sevcent growth versus two years ago in some in the 666 00:35:25,760 --> 00:35:30,720 Speaker 1: luxury sector. Luxury, the high end electronics, jewelry very very strong. 667 00:35:30,920 --> 00:35:32,839 Speaker 1: But if I look at the dollar stores, I look 668 00:35:32,880 --> 00:35:35,279 Speaker 1: at the recovery and some of the uh, the t 669 00:35:35,440 --> 00:35:38,279 Speaker 1: j X is of the world, I think, and even 670 00:35:38,280 --> 00:35:41,280 Speaker 1: the strength you see in the targets, uh. The consumer 671 00:35:41,360 --> 00:35:43,480 Speaker 1: at the lower end had a lot of some of 672 00:35:43,520 --> 00:35:46,880 Speaker 1: it because of the government's support programs, the labor market 673 00:35:46,920 --> 00:35:50,680 Speaker 1: being very strong, wages going up, the consumers spending at 674 00:35:50,680 --> 00:35:55,279 Speaker 1: all levels right now. That's great. Only only Sex could 675 00:35:55,320 --> 00:35:57,800 Speaker 1: come up with a central Park theme for their shoes 676 00:35:57,840 --> 00:36:01,120 Speaker 1: floor with MasterCard and of course to gentlemen, always and 677 00:36:01,239 --> 00:36:04,439 Speaker 1: forever from Sex. Steve Sadof with us this morning. Steve, 678 00:36:04,440 --> 00:36:08,560 Speaker 1: thank you. This is the Bloomberg Surveillance Podcast. Thanks for listening. 679 00:36:08,920 --> 00:36:11,680 Speaker 1: Join us live weekdays from seven to ten a m. 680 00:36:11,800 --> 00:36:16,280 Speaker 1: Eastern on Bloomberg Radio and on Bloomberg television each day 681 00:36:16,320 --> 00:36:19,960 Speaker 1: from six to nine am for insight from the best 682 00:36:20,000 --> 00:36:25,080 Speaker 1: in economics, finance, investment, and international relations. And subscribe to 683 00:36:25,120 --> 00:36:29,879 Speaker 1: the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com, 684 00:36:29,960 --> 00:36:33,200 Speaker 1: and of course, on the terminal. I'm Tom Keene, and 685 00:36:33,320 --> 00:36:35,200 Speaker 1: this is Bloomberg.