WEBVTT - Bloomberg Surveillance TV: November 27, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:36.959 Terminal and the Bloomberg Business app. We begin this hour 0:00:37.000 --> 0:00:39.320 with stocks at all time highs following seven straight days 0:00:39.320 --> 0:00:42.720 of games. John Stolfus of Oppenheimer remaining positive on equities 0:00:42.720 --> 0:00:45.559 and saying, quote, the broad rotation which began in the 0:00:45.600 --> 0:00:47.960 rally from last year's s and P five hundred low 0:00:48.159 --> 0:00:53.040 on October twenty seven, twenty twenty three, has repeatedly deflective volatility. 0:00:53.280 --> 0:00:55.720 John joined us now for more. John, Good morning, Laury 0:00:55.840 --> 0:00:59.680 once again yesterday deflecting volatility with that just another day 0:00:59.680 --> 0:01:00.400 support for you. 0:01:00.760 --> 0:01:03.200 Well, it was another data point, but in a series 0:01:03.240 --> 0:01:07.600 of data points that reflect the change in where we are. 0:01:08.000 --> 0:01:10.120 In essence, what it is is people are beginning to 0:01:10.160 --> 0:01:11.960 realize that this bull. 0:01:11.720 --> 0:01:12.840 Market has legs. 0:01:12.880 --> 0:01:16.200 There is a broadening that is undeniable in terms of 0:01:16.240 --> 0:01:19.960 the way investors have responded to their appetite for equities. 0:01:20.680 --> 0:01:24.040 I'd also say, you know, I think from a historical perspective, 0:01:24.080 --> 0:01:27.560 a lot of times the market is perceived as a 0:01:28.280 --> 0:01:31.679 place as a hotbed of fear and greed, but it 0:01:31.720 --> 0:01:33.000 also represents need. 0:01:33.720 --> 0:01:36.080 And the need is extraordinary. 0:01:35.360 --> 0:01:37.679 These days in terms of people's planning, whether it's for 0:01:37.720 --> 0:01:40.640 a kid's education, one's retirement in a world in which 0:01:41.520 --> 0:01:44.880 social security may not be any much the part of 0:01:44.959 --> 0:01:46.160 where it has been before. 0:01:46.520 --> 0:01:48.760 These are big themes the next several years, and maybe 0:01:48.760 --> 0:01:51.800 even the next several decades, forever our lifetime. I want 0:01:51.800 --> 0:01:53.600 to deal with the last twenty four aspects and then 0:01:53.640 --> 0:01:55.480 we can get to the bigger themes. Do you not 0:01:55.640 --> 0:01:58.720 think the threat from Donald Trump president like is credible? 0:01:58.920 --> 0:02:01.480 Does this market not belyve it's credible? Or is there 0:02:01.520 --> 0:02:03.320 really something to take away from this to sit here 0:02:03.320 --> 0:02:05.680 and say, actually, this equity market can handle it. It's 0:02:05.680 --> 0:02:06.760 resilient enough. 0:02:06.720 --> 0:02:09.200 A combination of the two in terms of the equity 0:02:09.240 --> 0:02:13.440 market being able to handle it. But the important thing 0:02:13.520 --> 0:02:19.200 is the market really cares ultimately about revenues and earnings, 0:02:19.280 --> 0:02:23.600 So areas that will be damaged by an aggressive trade 0:02:23.639 --> 0:02:25.080 policy with tariffs that. 0:02:25.080 --> 0:02:27.200 Are extreme would be problematic. 0:02:27.480 --> 0:02:31.399 That said, I think the market is recognizing that President 0:02:31.480 --> 0:02:38.760 Trump is essentially known for a pretty wild negotiation procedures. 0:02:38.800 --> 0:02:40.440 I mean, I always like to say when I speak 0:02:40.480 --> 0:02:44.200 with investors that I can just imagine if you had 0:02:44.200 --> 0:02:46.240 a property and this would be a small amount of 0:02:46.240 --> 0:02:48.640 money in New York, but you knew was worth about 0:02:48.639 --> 0:02:50.680 one hundred million, and you wanted to sell it to 0:02:50.760 --> 0:02:53.920 Donald Trump. My guesstimate is he'd start up with I 0:02:53.960 --> 0:02:55.360 think it's worth twenty million. 0:02:55.919 --> 0:02:58.079 You know, he's a hard negotiator. 0:02:58.120 --> 0:03:01.240 And I think the issues here that I think you 0:03:01.320 --> 0:03:04.480 mentioned at the beginning, where you're talking about as they 0:03:04.520 --> 0:03:09.480 put this the cabinet together, is that this is what 0:03:09.520 --> 0:03:13.960 we're dealing with here are genuinely unfair trade situations for 0:03:14.040 --> 0:03:18.560 the American worker essentially and for American businesses. And the 0:03:18.720 --> 0:03:21.799 problem is how do you get to right size that 0:03:21.880 --> 0:03:27.000 with so many countries really providing support to their businesses 0:03:27.400 --> 0:03:31.920 very different than ours, where we have high regulation, we 0:03:32.040 --> 0:03:32.720 have all. 0:03:32.639 --> 0:03:33.320 Kinds of. 0:03:34.800 --> 0:03:37.960 Our labor is much more expensive because we provide better 0:03:38.000 --> 0:03:38.800 for our workers. 0:03:38.920 --> 0:03:41.600 So it's fair to say that what you're basically indicating 0:03:41.640 --> 0:03:44.680 is that this is a market that isn't taking it seriously, 0:03:45.120 --> 0:03:46.800 that Trump is actually going to put through any of this, 0:03:46.880 --> 0:03:48.720 and that's not what's getting priced into markets at all. 0:03:49.240 --> 0:03:51.400 Well, I wouldn't say it's not being priced into markets 0:03:51.400 --> 0:03:54.280 at all. The traders certainly reflected just as you mentioned, 0:03:54.280 --> 0:03:58.760 one of the automakers yesterday got slammed. You know, when 0:03:58.800 --> 0:04:01.520 you get to that kind of a thing, without a doubt, 0:04:01.600 --> 0:04:06.440 there's volatility inherent in this procedure. But it's likely the 0:04:07.800 --> 0:04:11.520 whole thing that the Trump ran on was essentially to 0:04:11.600 --> 0:04:14.600 be beneficial for the US, and I think this is 0:04:14.680 --> 0:04:16.919 these are four years that he's got and he's not 0:04:17.000 --> 0:04:20.080 got four years after this in terms of running again, 0:04:20.160 --> 0:04:23.920 So I think they're going to be very sensitive to it. 0:04:23.920 --> 0:04:27.000 It should look there's going to be volatility. There always is. 0:04:27.040 --> 0:04:29.680 There's always uncertainty, but if you've got to keep your 0:04:29.680 --> 0:04:32.080 eye on the ball, and it looks like through innovation, 0:04:33.080 --> 0:04:35.599 the process of where we are today and that the 0:04:35.720 --> 0:04:39.800 US is the consumer of choice for every vendor in 0:04:39.880 --> 0:04:43.160 the world, puts us into a fairly good position that 0:04:43.200 --> 0:04:48.040 the negotiations may originally start out pretty painful to look at, 0:04:48.080 --> 0:04:51.320 and then things actually work out remarkably better. 0:04:51.520 --> 0:04:53.800 Some people are saying this is the fifth year of 0:04:54.120 --> 0:04:57.800 his administration. Essentially it's a continuation of policies that had 0:04:57.839 --> 0:05:00.360 been in place. There are a number of people who 0:05:00.440 --> 0:05:02.200 begged to differ with that, saying this is a very 0:05:02.200 --> 0:05:06.200 different circumstance economically than it was in twenty sixteen. Inflation 0:05:06.360 --> 0:05:08.800 is more of a real risk, there's more momentum. 0:05:09.080 --> 0:05:10.719 Companies are already in a good spot. 0:05:11.120 --> 0:05:13.320 The deficit is a lot steeper, and people are worried 0:05:13.320 --> 0:05:16.960 about bond heields. How much does that temper the ability 0:05:17.000 --> 0:05:20.560 to really implement some of these policies. How much are 0:05:20.600 --> 0:05:24.040 you watching the bond space to understand how bullish to 0:05:24.120 --> 0:05:25.440 get in equity land? 0:05:25.720 --> 0:05:28.960 Oh, we definitely watch the bond space because everything works 0:05:29.040 --> 0:05:31.240 on credit, right, I mean, you know, it doesn't matter 0:05:31.240 --> 0:05:34.400 if it's related to the consumer's credit card or what 0:05:34.440 --> 0:05:37.640 businesses are doing in terms of their borrowing needs and 0:05:37.720 --> 0:05:41.280 refinancings and m and a what have you. But what 0:05:41.320 --> 0:05:44.440 we'd have to say is, I think, realistically, you know, 0:05:44.520 --> 0:05:47.120 it's the end of free money, and it's a good thing, 0:05:47.200 --> 0:05:49.719 and that bond issuers once again have to pay for 0:05:49.760 --> 0:05:53.040 the privilege of borrowing money. Our projection on the ten 0:05:53.160 --> 0:05:57.520 year yield is because of the stickiness that's inherent in inflation. 0:05:57.640 --> 0:06:01.279 When you're coming out of a period like this, you're probably. 0:06:00.839 --> 0:06:03.400 The range being priced to range. 0:06:03.880 --> 0:06:07.960 It's yield somewhere between three point four percent to as 0:06:08.040 --> 0:06:11.240 high as five. At five, everybody gets freaked out. Then 0:06:11.240 --> 0:06:13.960 you get come down back to about four point two 0:06:14.000 --> 0:06:18.279 where we are now. But historically, you know, it's go 0:06:18.360 --> 0:06:21.680 back hundreds of years when it comes to ten year borrowing, 0:06:22.000 --> 0:06:25.880 four percent tends to be about it, whether you're you're 0:06:25.920 --> 0:06:30.760 borrowing for frankinsense and murr your you know, pepper corn 0:06:30.839 --> 0:06:33.080 or whatever venice with you. 0:06:33.080 --> 0:06:36.400 In the Nativity scene. Thanksgiving First, chant let's get some 0:06:36.440 --> 0:06:39.440 price targets the next year or so. Morgus Stanley sixty 0:06:39.440 --> 0:06:43.320 five hundred, BBC sixty six hundred, BEMOS sixty seven, Deutsche 0:06:43.320 --> 0:06:45.440 Banks Binkie chat A seven K. Then know why you 0:06:45.440 --> 0:06:48.240 think about that? I was talking about you yesterday. The 0:06:48.279 --> 0:06:50.320 average forecast on the S and P for this year 0:06:50.400 --> 0:06:53.000 was forty eight hundred. You were at the high fifty 0:06:53.000 --> 0:06:56.119 two hundred, and he won't bullish enough. What's the lesson 0:06:56.120 --> 0:06:57.960 a twenty twenty four men, before we get into twenty 0:06:58.000 --> 0:07:00.320 twenty five, it's the lesson been for you, A real 0:07:00.360 --> 0:07:00.880 good question. 0:07:01.240 --> 0:07:03.760 It's the second second time you've asked me that question. 0:07:03.800 --> 0:07:05.919 What's the lesson been in the year? And it's a 0:07:05.960 --> 0:07:06.480 great question. 0:07:07.000 --> 0:07:07.520 Last ye. 0:07:09.080 --> 0:07:11.120 And we'd have we'd have to stay. 0:07:11.000 --> 0:07:13.360 With this is you know, we started last year last 0:07:13.360 --> 0:07:15.880 December we had fifty two hundred. By March we raised 0:07:15.920 --> 0:07:19.800 it to fifty five. By July we went to fifty nine, 0:07:20.240 --> 0:07:22.920 and most recently we went to sixty two hundred for 0:07:23.000 --> 0:07:27.600 this year. The thing that concerns me the most at 0:07:27.600 --> 0:07:30.760 this point is that that's what was The people that you. 0:07:30.800 --> 0:07:34.520 Mentioned were a mix of bears and bulls who have 0:07:34.600 --> 0:07:35.600 these high targets. 0:07:35.800 --> 0:07:38.280 So everybody's on the same side of the boat, which 0:07:38.360 --> 0:07:43.000 makes the market vulnerable to volatility that can come about 0:07:43.080 --> 0:07:47.160 from any piece of economic data, corporate guidance, or anything. 0:07:47.440 --> 0:07:50.160 The traders will jump on anything and they'll take it, 0:07:50.200 --> 0:07:52.320 and they'll throw a perfectly good stock down like a 0:07:52.360 --> 0:07:56.440 hot potato. Okay, meantime, it creates an opportunity for those 0:07:56.600 --> 0:08:00.160 need investors who are investing intermediate to longer term or 0:08:01.040 --> 0:08:03.720 for their goals and objectives to pick up babies that 0:08:03.800 --> 0:08:06.240 get thrown out with the bathwater. So you have to 0:08:06.320 --> 0:08:09.200 measure that our target won't come out. 0:08:09.120 --> 0:08:10.280 Until mid December. 0:08:10.320 --> 0:08:14.239 As usual, we wait until people have gotten pretty crazy 0:08:14.280 --> 0:08:16.840 and take a look what happens. But we do have 0:08:16.920 --> 0:08:19.920 to say it's rather disconcerting when you hear people throwing 0:08:20.040 --> 0:08:23.720 around targets, you know, seven thousand. It sounds dramatic, but 0:08:23.800 --> 0:08:28.480 when you actually put it to the calculator, the percentage 0:08:28.600 --> 0:08:33.280 upside based on the innovation that exists, the ability for 0:08:33.400 --> 0:08:37.520 companies to navigate tougher waters as a result of the 0:08:37.600 --> 0:08:38.400 experience that. 0:08:40.720 --> 0:08:43.079 Managers have learned from the Great. 0:08:42.840 --> 0:08:48.840 Financial Crisis, the pandemic, the supply chain disruptions, and then 0:08:49.360 --> 0:08:53.600 the balance sheets of the consumer. You know, it looks 0:08:53.640 --> 0:08:56.480 like stocks could genuinely go quite a bit. 0:08:56.880 --> 0:08:59.320 Seventy people think we can get double digitate cents next year. 0:08:59.400 --> 0:09:01.400 We've talked about this is well. As human beings we 0:09:01.480 --> 0:09:04.760 unconditioned to overweight downside risk. We can spend the whole 0:09:04.760 --> 0:09:07.400 morning talking about downside risk. At LEASTA we'll no doubt 0:09:07.400 --> 0:09:09.760 want to do that. What could go right in twenty 0:09:09.800 --> 0:09:11.360 twenty five? What do you think could go right? 0:09:11.600 --> 0:09:14.080 Well, I think among the things that you could go 0:09:14.200 --> 0:09:18.000 right would be continued resilience in revenue and earnings growth 0:09:18.040 --> 0:09:19.000 on a broad basis. 0:09:19.040 --> 0:09:21.839 I mean, if you look at the EA page. 0:09:21.920 --> 0:09:24.680 On a Bloomberg right now, you've got four sectors with 0:09:24.720 --> 0:09:28.640 double digit returns. I think it's eight sectors with I'm sorry, 0:09:29.080 --> 0:09:34.160 four sectors with double digit earnings growth. You have eight 0:09:34.280 --> 0:09:37.600 with positive earnings growth, and you have three with negative 0:09:37.640 --> 0:09:40.800 earnings growth. So the dispersion that you see in that 0:09:40.960 --> 0:09:45.280 tells you that you know, it's real. There's things that 0:09:45.360 --> 0:09:48.240 are really working, things that are somewhat working, and some 0:09:48.360 --> 0:09:51.360 things that are and in that kind of an environment, 0:09:51.880 --> 0:09:55.040 based on what we've seen, the big surprises could be 0:09:55.120 --> 0:09:59.040 that resilience continues as an operative word in the markets, 0:09:59.320 --> 0:10:01.880 and that perhaps apps that we see that when the 0:10:01.920 --> 0:10:06.840 actual negotiations work out, that the countries involved will actually 0:10:08.000 --> 0:10:11.480 come to terms more readily because of the importance of 0:10:11.520 --> 0:10:13.800 the American consumer and American business. 0:10:14.080 --> 0:10:16.240 You put that together with something that you said that 0:10:16.280 --> 0:10:18.720 when there is a bad headline, the company has just 0:10:18.760 --> 0:10:21.160 get dropped like a hot potato. I'm thinking of Target, 0:10:21.240 --> 0:10:23.880 Best Buy, Dell, at HP yesterday when they came out 0:10:23.920 --> 0:10:27.560 with weakers and expected earnings. What's your lens for knowing 0:10:27.800 --> 0:10:30.520 when it's a good opportunity when you should actually. 0:10:30.200 --> 0:10:33.600 Pick that up. Well, you know, when we look at companies. 0:10:33.760 --> 0:10:35.840 One of the reason why I can't mention individual companies, 0:10:35.880 --> 0:10:38.679 Oppenheimer doesn't like me to pitch my own stocks, right, 0:10:38.920 --> 0:10:40.960 But when we look at the companies, what we're always 0:10:40.960 --> 0:10:44.360 looking for it's the traditional It sounds a very easy 0:10:44.840 --> 0:10:48.360 out to say this, but essentially is good balance sheets, 0:10:48.800 --> 0:10:53.040 management that cares about their shareholders and their customers and 0:10:53.120 --> 0:10:59.280 their employees, and good ideas that they're managing through and hopefully. 0:10:58.840 --> 0:11:01.600 Some kind of an upgrade cycle. In technology. 0:11:01.800 --> 0:11:04.120 The thing is, we're all on the upgrade cycle, whether 0:11:04.160 --> 0:11:04.960 we like it or not. 0:11:05.240 --> 0:11:08.160 Ultimately, I will have to upgrade both. 0:11:08.000 --> 0:11:12.360 My fourteen my iPhone fourteen neither a recommendation to buy 0:11:12.440 --> 0:11:16.400 or cell applestock, and I will also have to update 0:11:16.520 --> 0:11:19.640 my success which. 0:11:18.440 --> 0:11:19.480 I still can't. 0:11:19.480 --> 0:11:21.440 I know, I know, which is is like an old 0:11:21.520 --> 0:11:22.080 model tea. 0:11:22.200 --> 0:11:23.319 It's like an advertisement. 0:11:23.480 --> 0:11:26.040 John, We're thankful for your optimism. Thank you, sir, I 0:11:26.040 --> 0:11:28.160 have a happy Thanksgiving with the family. Appreciate it same. 0:11:28.240 --> 0:11:31.160 Do you good to see Thank you John stufforstre of Oppenheim, 0:11:31.240 --> 0:11:43.920 a former New York Fed President Bill Dudley, wishing him 0:11:44.000 --> 0:11:47.400 luck right in the following. Market's exuberant response to his 0:11:47.480 --> 0:11:50.800 nomination certainly suggests this is what investors expects. Yeah, their 0:11:50.800 --> 0:11:54.800 optimism contrasts sharply with the difficulties he'll encounter in managing 0:11:54.800 --> 0:11:58.920 the treasury market, the country's fiscal trajectory, and the broader economy. 0:11:59.080 --> 0:12:01.480 Bill joined just now for more. But welcome to the program, sir. 0:12:01.600 --> 0:12:03.880 Let's get to those three points you make, managing the 0:12:03.920 --> 0:12:07.600 treasury market, the fiscal trajectory, and the broader economy. Of 0:12:07.640 --> 0:12:09.880 those three, Bill, what do you think is the biggest task? 0:12:11.080 --> 0:12:12.559 Haally managing the fiscal deficits? 0:12:12.600 --> 0:12:15.400 Since the Treasury Secretary doesn't have responsibility for text the 0:12:15.480 --> 0:12:18.080 spending policy, you can opine on it, but can he 0:12:18.080 --> 0:12:21.200 actually get it through Congress and get the administration to 0:12:21.240 --> 0:12:21.760 support it? 0:12:22.120 --> 0:12:24.040 So I think you know, we're on a trajectory. 0:12:23.679 --> 0:12:26.280 Right now where it's six percent of GDP deficits as 0:12:26.280 --> 0:12:29.160 far as the eye can see. And President let Trump 0:12:29.240 --> 0:12:32.400 has proposed things that will expand the deficit as opposed 0:12:32.400 --> 0:12:33.400 to contract the deficit. 0:12:34.440 --> 0:12:35.760 So I think that the. 0:12:35.480 --> 0:12:37.920 Fiscal OUTLOK longer term is probably the most challenging thing 0:12:38.000 --> 0:12:38.640 that he faces. 0:12:38.800 --> 0:12:41.560 But he gets some say on the maturity profile of 0:12:41.720 --> 0:12:44.600 US treasuries. What's your take of what's developed under Secretary 0:12:44.679 --> 0:12:47.719 Yeller at the Treasury and what changes would you anticipate 0:12:47.920 --> 0:12:49.440 in the is to come under Beston? 0:12:50.440 --> 0:12:52.400 Well, things didn't move a lot under Yell, and I 0:12:52.480 --> 0:12:54.600 think the maturity structure shortened a little bit. 0:12:55.200 --> 0:12:57.200 To Treasury typically doesn't want to. 0:12:57.520 --> 0:13:01.280 Move around the Treasury issuance calendar a lot because it 0:13:01.360 --> 0:13:03.239 basically unnerves market participants. 0:13:03.520 --> 0:13:05.960 They regular and predictable is sort of the watchword of 0:13:06.000 --> 0:13:06.600 the Treasury. 0:13:06.800 --> 0:13:09.679 So I would be surprised if Best at todaything that 0:13:10.080 --> 0:13:13.280 significantly changed the maturity structure of the Treasury debt. I 0:13:13.280 --> 0:13:15.480 think the biggest problem the problem he faces is to 0:13:15.520 --> 0:13:18.600 convince his colleagues in the administration that we need more 0:13:18.640 --> 0:13:24.240 tax revenue, we need to control spending, and that requires, 0:13:24.360 --> 0:13:26.040 you know, make some tip difficult choices. 0:13:26.520 --> 0:13:28.800 Bill, if you were still on the Fed, how would 0:13:28.840 --> 0:13:31.160 you think about some of the policies and the personnel 0:13:31.240 --> 0:13:35.040 that have been implemented are now so far and factor 0:13:35.080 --> 0:13:35.720 that into. 0:13:35.600 --> 0:13:37.000 Your outlook for next year. 0:13:37.559 --> 0:13:38.960 You have to come out with a forecast. 0:13:38.960 --> 0:13:41.319 You've got to make a dot next month. 0:13:41.640 --> 0:13:43.000 How do you even begin to do that? 0:13:44.200 --> 0:13:46.280 Yeah, so far, the FED has been very silent about 0:13:46.760 --> 0:13:48.800 President elect Trump. There is nothing, for example, in the 0:13:48.880 --> 0:13:52.640 minutes about the election in the new policy mix. I think, 0:13:52.720 --> 0:13:54.679 you know, to the extent that things get priced into 0:13:54.840 --> 0:13:57.040 financial market is sort of hard for the FED to 0:13:57.080 --> 0:14:00.440 then ignore them, because if you have prices bodying a 0:14:00.440 --> 0:14:03.120 certain expectation, how do you not include those prices in 0:14:03.160 --> 0:14:08.160 your forecast. Back in December twenty sixteen, the FED staff 0:14:08.240 --> 0:14:12.320 put a big fiscal stimulus in their forecast for twenty seventeen. 0:14:12.840 --> 0:14:15.479 So when Paula says, we don't assume, we don't speculate, 0:14:15.679 --> 0:14:19.160 we don't guess. The reality is if the markets start 0:14:19.200 --> 0:14:22.400 to judge that something is highly likely, then the FED 0:14:22.440 --> 0:14:23.240 has to sort of take that. 0:14:23.240 --> 0:14:24.720 On board in terms of their own thinking. 0:14:24.960 --> 0:14:26.840 I think the biggest issue in the very short term 0:14:26.880 --> 0:14:30.000 is what's going to happen to territs, because if tarofts 0:14:30.040 --> 0:14:33.760 are raised to any close to the degree that the 0:14:34.320 --> 0:14:37.360 President elect Trump is talking about it's going to be inflationary, 0:14:37.400 --> 0:14:38.760 it's going to be bad for growth, it's going to 0:14:38.760 --> 0:14:42.200 be bad for proactivity. And PRESIDENTLEC. Trump's talking about putting 0:14:42.200 --> 0:14:46.400 on tarifts on China, Canada, Mexico, you know, on day one, 0:14:46.920 --> 0:14:49.640 So that's probably the thing that's going to happen most quickly. 0:14:50.080 --> 0:14:52.320 The fiscal stuff is going to take longer because the 0:14:52.360 --> 0:14:54.880 tax cuts don't expire to the end of twenty twenty five, 0:14:55.120 --> 0:14:57.000 so that's probably more of a twenty twenty sixth story. 0:14:57.200 --> 0:14:59.840 You know, you said that tariffs are going to be inflationary. 0:15:00.080 --> 0:15:02.520 We've heard some disagreement about that around this table. Some 0:15:02.520 --> 0:15:04.720 people say that maybe in the very short term there's 0:15:04.760 --> 0:15:08.280 a one time price increase, but longer term in tariffs 0:15:08.320 --> 0:15:11.240 have been shown to be disinflationary time and again, why 0:15:11.280 --> 0:15:13.200 do you think that that's not going to be the case. 0:15:14.680 --> 0:15:17.280 Well, they're disinflationary to the extent that the people who 0:15:17.320 --> 0:15:19.800 are buying these now more expensive goods don't have as 0:15:19.880 --> 0:15:22.680 much real income and so they can't buy as much 0:15:22.680 --> 0:15:25.760 and that hurts the growth rate of the economy. 0:15:25.920 --> 0:15:27.920 So there is an effect on growth. 0:15:28.520 --> 0:15:30.800 The key question of terrorists is when prices go up 0:15:30.800 --> 0:15:34.040 to they get into wages. You know, the first Trump 0:15:34.240 --> 0:15:38.280 term increase in terrorists was well advertised, but the magnitude 0:15:38.360 --> 0:15:40.160 is actually quite small, went from about one a half 0:15:40.200 --> 0:15:42.160 percent of imports to three percent of imports. 0:15:42.600 --> 0:15:44.120 The magnitudes he's talking about this. 0:15:44.120 --> 0:15:47.400 Time are much much larger, So the price effect will 0:15:47.440 --> 0:15:49.640 be much greater. And I would expect that's at least 0:15:49.640 --> 0:15:51.080 some of that will get into wages, and if it 0:15:51.080 --> 0:15:52.600 gets into wages, then it keeps going. 0:15:52.680 --> 0:15:53.840 It's not a one time effect. 0:15:54.080 --> 0:15:54.280 Bill. 0:15:54.320 --> 0:15:57.120 Do you think that because of the uncertainty around policy 0:15:57.120 --> 0:15:59.920 and the potential for some of these policies to be inflationary, 0:16:00.280 --> 0:16:02.400 do you think on the margins that can push more 0:16:02.440 --> 0:16:05.600 members to really want to go even slower when it 0:16:05.640 --> 0:16:06.920 comes to rate cuts. 0:16:08.360 --> 0:16:08.920 Eventually. 0:16:09.280 --> 0:16:11.320 I think right now the Fed still on a you know, 0:16:11.440 --> 0:16:15.520 Madre policies restrictive, the dual mandate objectives of employment inflation 0:16:15.600 --> 0:16:18.800 are roughly imbalanced. We need to head towards neutral, and 0:16:18.840 --> 0:16:22.720 so I think there's still a trajectory to go towards neutral. 0:16:22.920 --> 0:16:24.560 But I think, you know, as they said more and 0:16:24.600 --> 0:16:28.200 more recently carefully, so December is not a done deal. 0:16:28.520 --> 0:16:30.880 I think it's probably more likely than not. At this point. 0:16:31.400 --> 0:16:34.080 It basically depends on the economic data, and you know 0:16:34.120 --> 0:16:35.880 the FED is basically data depended at this point. 0:16:35.920 --> 0:16:37.840 This is the one reason why Bessett's. 0:16:37.400 --> 0:16:40.360 Idea of putting in a shadow governor that Fed to 0:16:40.440 --> 0:16:46.720 basically make pronouncements as Powell's air apparent, makes a little sense, 0:16:46.800 --> 0:16:48.680 because what the FED. 0:16:48.560 --> 0:16:49.840 Does over the next year is really going to be 0:16:49.960 --> 0:16:51.440 driven by Defense Bill. 0:16:51.480 --> 0:16:53.680 How messy would that be if we had a shadow 0:16:53.800 --> 0:16:55.600 chair in the middle of next year. 0:16:55.960 --> 0:16:59.280 I think it's a absolutely terrible idea. I think one, 0:16:59.320 --> 0:17:01.720 I don't think it would do much. Number two just 0:17:02.480 --> 0:17:04.760 annoy all the other members of the Federal Reserve. So 0:17:04.800 --> 0:17:07.840 you have this shadowed person coming in to be chair 0:17:08.359 --> 0:17:11.119 after he's probably annoyed everybody else within the Federal Reserve 0:17:11.200 --> 0:17:13.399 system by undercutting the current chairman. 0:17:13.520 --> 0:17:15.560 That doesn't sound like a good recipe for success. 0:17:15.560 --> 0:17:18.520 When you think about the chairman's power comes from its 0:17:18.520 --> 0:17:21.040 ability to move the committee in a chief consensus. So 0:17:21.119 --> 0:17:23.920 I think the share chairman the chaff chairman, if he 0:17:23.960 --> 0:17:26.439 did what best at the implies that he would do 0:17:27.000 --> 0:17:29.560 would alienate most of his colleagues on the FED. 0:17:29.920 --> 0:17:32.160 Bill Dudley. Thank you, sir, the former New York Fed 0:17:32.160 --> 0:17:44.280 President of the Federal Reserve through the next year. Thankful 0:17:44.280 --> 0:17:46.679 this morning because we get these second chance of speaking 0:17:46.720 --> 0:17:49.399 to Situ rich candoundly for us to research to reach it. 0:17:49.440 --> 0:17:51.480 We'll try again. Thanks for being able to understand. You 0:17:51.560 --> 0:17:53.359 heard the question, but you didn't get to answer it. 0:17:53.400 --> 0:17:55.760 So we'll start there again. Department stores, it's been a 0:17:55.800 --> 0:17:58.680 struggle for a long long time. What aren't they doing right? 0:17:58.760 --> 0:18:00.680 What do they need to fix? Its fixable? 0:18:02.240 --> 0:18:04.240 Well, I don't know that it's really fixable. 0:18:04.280 --> 0:18:08.240 It's really a sector issue, which is really it's widespread. 0:18:08.280 --> 0:18:11.800 It's because consumers just haven't been shopping as much, particularly 0:18:11.840 --> 0:18:14.000 in the B and C tier malls where a lot 0:18:14.040 --> 0:18:18.080 of these department stores have heavy concentration. We're talking about Mac's, 0:18:18.119 --> 0:18:19.800 We're talking about Coals, of. 0:18:19.680 --> 0:18:21.359 Course, JAYC. Penny. 0:18:21.720 --> 0:18:26.199 These are the anchor stores that really thrived in like 0:18:26.280 --> 0:18:31.400 the nineteen eighties and even before, but essentially since two 0:18:31.440 --> 0:18:34.280 thousand they have been on a downturn. A ton of 0:18:34.320 --> 0:18:38.800 competition certainly from e commerce, certainly from higher ends stores 0:18:38.960 --> 0:18:41.760 and brands really that have decided to all go direct 0:18:41.800 --> 0:18:45.280 to consumer. So that's been some of their biggest challenge. 0:18:45.320 --> 0:18:48.600 And I don't know that it's necessarily fixable. It's really 0:18:48.600 --> 0:18:50.960 a shift in the retail landscape altogether. 0:18:51.560 --> 0:18:54.680 Streida, What does this mean in terms of just how 0:18:54.760 --> 0:18:57.200 much this land could shift going forward? 0:18:57.280 --> 0:18:58.200 Because if the. 0:18:58.080 --> 0:19:00.840 Whole model of a strip mall is outdated, well there's 0:19:00.840 --> 0:19:02.080 a lot more carnage to come. 0:19:03.440 --> 0:19:03.680 Well. 0:19:03.720 --> 0:19:07.800 We've talked about the transformation of these retail venues for 0:19:07.840 --> 0:19:09.760 a long time, and a lot of it is about 0:19:10.040 --> 0:19:13.720 switching out the real estate with other anchor tenants, or 0:19:13.840 --> 0:19:18.199 breaking up the anchor tenants into smaller plots where you 0:19:18.359 --> 0:19:21.680 have perhaps smaller tenants that are in them. We've seen 0:19:21.720 --> 0:19:25.160 these anchor tenants switch to everything from grocery stores which 0:19:25.200 --> 0:19:29.800 are growing, to gyms and fitness facilities. In some cases, 0:19:29.880 --> 0:19:32.160 it could just be a mixed use facility where you're 0:19:32.160 --> 0:19:36.119 transforming it into some sort of an office space and 0:19:36.280 --> 0:19:39.240 really really distressed areas. We've seen some of these anchor 0:19:39.280 --> 0:19:44.000 tenants become churches or schools or things completely unrelated to retail. 0:19:44.480 --> 0:19:47.760 All I can say is I provide some research at home, 0:19:47.880 --> 0:19:52.000 some research regarding retail with some of the family members, 0:19:52.040 --> 0:19:55.600 and I hear a lot about drops of different types 0:19:55.640 --> 0:19:59.080 of products and different influencers that are doing said drops. 0:19:59.200 --> 0:20:02.600 Is the entire mo model of retail fundamentally changing in 0:20:02.640 --> 0:20:05.520 a way that some retailers like Gap are really aware of, 0:20:05.800 --> 0:20:08.760