1 00:00:02,480 --> 00:00:08,600 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. So here's why I'm 2 00:00:08,640 --> 00:00:10,800 Speaker 1: so confused right now. Like, if someone said to me, 3 00:00:11,360 --> 00:00:15,000 Speaker 1: just one reason, if someone said to me, look, you know, 4 00:00:15,200 --> 00:00:18,119 Speaker 1: the economy is slowing down, clearly, job creation is in 5 00:00:18,200 --> 00:00:22,280 Speaker 1: the tank, is decelerating, housing is in the tank, et cetera. 6 00:00:22,520 --> 00:00:24,120 Speaker 1: There's a bunch of sectors that are soft. 7 00:00:24,120 --> 00:00:24,840 Speaker 2: When you'd rate. 8 00:00:24,720 --> 00:00:28,240 Speaker 1: Cuts, okay, that sounds good. Inflation has come down quite 9 00:00:28,240 --> 00:00:30,600 Speaker 1: a bit from where it was, but it's still elevated. 10 00:00:30,640 --> 00:00:32,880 Speaker 1: And then if someone said, look, the stock workers record 11 00:00:33,080 --> 00:00:36,400 Speaker 1: high PPI just came in super hot, Inflation is still 12 00:00:36,440 --> 00:00:39,000 Speaker 1: above levels, et cetera. Are you insane to even be 13 00:00:39,040 --> 00:00:41,440 Speaker 1: talking about rate cuts, I'd be like, oh, yeah, okay, 14 00:00:41,520 --> 00:00:43,960 Speaker 1: that makes sense too. Like I find many kinds of 15 00:00:44,080 --> 00:00:46,120 Speaker 1: arguments to be very persuasive right here. I don't have 16 00:00:46,200 --> 00:00:46,880 Speaker 1: strong views. 17 00:00:47,000 --> 00:00:50,040 Speaker 3: I'm not one for hyperbole. I try not to be right. 18 00:00:50,040 --> 00:00:51,600 Speaker 3: I try to be a good journalist in that sense. 19 00:00:51,640 --> 00:00:53,720 Speaker 3: But I would honestly say, like, this is one of 20 00:00:53,760 --> 00:00:58,120 Speaker 3: the most difficult macro environments to call in probably my 21 00:00:58,480 --> 00:01:02,400 Speaker 3: professional career, which is longer than I would necessarily like 22 00:01:02,440 --> 00:01:04,360 Speaker 3: it to be at this point. But as you said, 23 00:01:04,440 --> 00:01:06,880 Speaker 3: if you look at the stock market, which feeds into 24 00:01:06,880 --> 00:01:10,759 Speaker 3: financial conditions, right, look at financial conditions, like financial conditions 25 00:01:10,760 --> 00:01:13,479 Speaker 3: do not look that restrictive at the moment, and yet 26 00:01:13,560 --> 00:01:15,679 Speaker 3: you do have people who say that, actually we are 27 00:01:15,720 --> 00:01:18,920 Speaker 3: still in restrictive territory and the labor market is weakening, 28 00:01:19,000 --> 00:01:20,959 Speaker 3: as you said, and so we need a rate cut. 29 00:01:21,080 --> 00:01:23,320 Speaker 3: So we have this one body of people who are 30 00:01:23,360 --> 00:01:26,000 Speaker 3: talking about a potential FED policy there, and then we 31 00:01:26,040 --> 00:01:29,440 Speaker 3: have another body of people, including people from the Trump administration, 32 00:01:29,480 --> 00:01:31,520 Speaker 3: who are talking about the need to do a different 33 00:01:31,560 --> 00:01:32,760 Speaker 3: the basis point, Yeah. 34 00:01:32,760 --> 00:01:35,640 Speaker 1: It's all totally. You could make the argument that the 35 00:01:35,680 --> 00:01:38,400 Speaker 1: FED is either committing a policy or now are contemplating 36 00:01:38,440 --> 00:01:40,920 Speaker 1: a policy. Then there's this whole dynamic with the fact 37 00:01:40,959 --> 00:01:44,240 Speaker 1: that we know that there's this one incredible thing going on, 38 00:01:44,280 --> 00:01:46,920 Speaker 1: which is all the AI spending, and how that actually 39 00:01:46,920 --> 00:01:51,000 Speaker 1: intersects with macro is very confusing. So we have Jackson 40 00:01:51,040 --> 00:01:52,640 Speaker 1: Hole next week, which we're going to be. 41 00:01:52,640 --> 00:01:55,840 Speaker 3: Ad I'm excited about jackson Hole. So the scuttle butt 42 00:01:56,080 --> 00:01:59,360 Speaker 3: for journalists going to Jackson Hole is that apparently, like 43 00:01:59,440 --> 00:02:04,440 Speaker 3: the room are even higher depend than normal because behind 44 00:02:04,600 --> 00:02:08,040 Speaker 3: all the macro debate, which we just laid out. There's 45 00:02:08,080 --> 00:02:11,000 Speaker 3: also the question of FED independence. Right, so interest in 46 00:02:11,080 --> 00:02:13,359 Speaker 3: jackson Hole is like higher than it's ever been. 47 00:02:13,440 --> 00:02:15,720 Speaker 1: It's going to be a big Jackson Hole. Whatever the 48 00:02:15,760 --> 00:02:18,080 Speaker 1: formal theme of the conference is going to be. You know, 49 00:02:18,120 --> 00:02:20,840 Speaker 1: there's going to be some academic theme coming up. Whatever 50 00:02:20,880 --> 00:02:22,400 Speaker 1: that is, that's not going to be the theme. The 51 00:02:22,400 --> 00:02:23,880 Speaker 1: theme is going to be all of the talk about 52 00:02:23,960 --> 00:02:28,240 Speaker 1: FED independence. I did a deadlist. 53 00:02:28,320 --> 00:02:29,160 Speaker 2: I'm both the. 54 00:02:29,120 --> 00:02:32,200 Speaker 3: Most popular trader and most successful trader. 55 00:02:32,080 --> 00:02:33,959 Speaker 2: At Citadel FEDA is going viral. 56 00:02:34,240 --> 00:02:35,080 Speaker 4: Uh barches. 57 00:02:35,200 --> 00:02:37,280 Speaker 1: This isn't after school Special, except. 58 00:02:36,960 --> 00:02:39,520 Speaker 3: I've decided I'm going to base my entire personality going 59 00:02:39,520 --> 00:02:42,760 Speaker 3: forward on campaigning for a strategic pork reserve in the US. 60 00:02:43,000 --> 00:02:43,680 Speaker 1: Black goals. 61 00:02:43,840 --> 00:02:46,760 Speaker 3: These are the important questions that robots taking over the world. 62 00:02:46,919 --> 00:02:49,720 Speaker 1: No, I think that like in a couple of years, 63 00:02:49,919 --> 00:02:52,160 Speaker 1: the AI will do a really good job of making 64 00:02:52,240 --> 00:02:55,240 Speaker 1: the odd Launch podcast. One day that person will have 65 00:02:55,280 --> 00:02:56,280 Speaker 1: the mandate of heaven. 66 00:02:56,480 --> 00:02:58,720 Speaker 4: How do I get more popular and successful? 67 00:02:59,000 --> 00:02:59,679 Speaker 2: We do have. 68 00:03:02,200 --> 00:03:04,560 Speaker 3: You're listening to lots More, where we catch up with 69 00:03:04,560 --> 00:03:07,359 Speaker 3: friends about what's going on right now, because. 70 00:03:07,080 --> 00:03:10,160 Speaker 1: Even when the Odd Lots is over, there's always lots more. 71 00:03:10,360 --> 00:03:22,840 Speaker 3: And we really do have the perfect Guest'skanda. 72 00:03:17,680 --> 00:03:19,040 Speaker 1: And I used to have you here in. 73 00:03:18,960 --> 00:03:21,800 Speaker 4: Our when Joe's confused, you're the guy we turned to. 74 00:03:21,880 --> 00:03:24,880 Speaker 1: Yeah, that's right. Let's start actually just quick take. We're 75 00:03:24,919 --> 00:03:27,960 Speaker 1: recorded this nine oh four August fourteen, about thirty minutes 76 00:03:28,040 --> 00:03:31,800 Speaker 1: ago we got that really hot PPI report. But also 77 00:03:31,840 --> 00:03:34,040 Speaker 1: I don't know what that means, Like, is a big deal. 78 00:03:34,160 --> 00:03:35,800 Speaker 1: What does it say? What's going on there? 79 00:03:35,920 --> 00:03:36,040 Speaker 5: Is it? 80 00:03:36,160 --> 00:03:39,040 Speaker 1: What does it mean for PCE? Is it means that 81 00:03:39,280 --> 00:03:41,080 Speaker 1: margins are going to be crimped? What's going on there? 82 00:03:41,280 --> 00:03:44,119 Speaker 5: I mean, I think for PPI today should be seen 83 00:03:44,160 --> 00:03:46,920 Speaker 5: as at least showing the inflationary side of the story 84 00:03:47,000 --> 00:03:49,120 Speaker 5: is still there. Okay, not just in terms of like 85 00:03:49,160 --> 00:03:51,560 Speaker 5: some of the aggregates may be distorted for a lot 86 00:03:51,600 --> 00:03:54,360 Speaker 5: of reasons, but what matters for the FEDS inflation gauges 87 00:03:54,600 --> 00:03:56,800 Speaker 5: got moved up a bit. Okay, So what you're going 88 00:03:56,840 --> 00:04:01,280 Speaker 5: to be tracking for inflation for July, PIPPI both matter, 89 00:04:01,480 --> 00:04:02,960 Speaker 5: and so that's going to be moved. 90 00:04:02,840 --> 00:04:03,320 Speaker 2: Up a bit. 91 00:04:03,840 --> 00:04:05,640 Speaker 5: So we're gonna be running it roughly two point nine 92 00:04:05,640 --> 00:04:11,280 Speaker 5: percent on core PCE. Substantially, we are higher now than 93 00:04:11,320 --> 00:04:14,120 Speaker 5: we were last year. It is like it's starting to 94 00:04:14,120 --> 00:04:16,120 Speaker 5: look like the progress is starting to turn the other direction. 95 00:04:16,560 --> 00:04:19,240 Speaker 5: Now there may be some reasons why it is transitory 96 00:04:19,320 --> 00:04:22,679 Speaker 5: this time, that it is temporary, and yet it doesn't 97 00:04:22,720 --> 00:04:26,000 Speaker 5: really feel great, and I imagine for Chair Powell there's 98 00:04:26,040 --> 00:04:28,840 Speaker 5: a feeling of wait. I remember in twenty twenty one 99 00:04:28,880 --> 00:04:30,880 Speaker 5: in August that was pretty confident that it's just going 100 00:04:30,880 --> 00:04:33,600 Speaker 5: to be short term, and then we saw some increases 101 00:04:33,640 --> 00:04:35,160 Speaker 5: and I said, well, we got to focus on in 102 00:04:35,200 --> 00:04:38,039 Speaker 5: the labor market back first, and then people kind of 103 00:04:38,040 --> 00:04:41,200 Speaker 5: have held that against him accordingly, But now we have 104 00:04:41,600 --> 00:04:43,600 Speaker 5: inflation picking up, and yeah, we also see a lot 105 00:04:43,640 --> 00:04:47,640 Speaker 5: of job market maybe employment levels look fine. Yeah, the 106 00:04:47,680 --> 00:04:50,360 Speaker 5: momentum the job growth that we're seeing in the latest 107 00:04:50,360 --> 00:04:52,480 Speaker 5: release is understandably spooky too. 108 00:04:53,040 --> 00:04:56,320 Speaker 3: I asked Mary Daily this question before. But do starting 109 00:04:56,360 --> 00:04:59,000 Speaker 3: points matter here? Because if you look at the labor market, 110 00:04:59,080 --> 00:05:02,720 Speaker 3: the labor market as it's been really really strong in 111 00:05:02,800 --> 00:05:05,600 Speaker 3: recent years, like certainly much stronger than people had expected. 112 00:05:05,680 --> 00:05:08,640 Speaker 3: And so, okay, there are some signs of softening now 113 00:05:08,720 --> 00:05:10,920 Speaker 3: it does seem to be losing momentum, but we are 114 00:05:10,960 --> 00:05:14,800 Speaker 3: still starting from a place of strength. Does that mean 115 00:05:14,880 --> 00:05:18,120 Speaker 3: potentially the FED can you know, maybe let that one 116 00:05:18,200 --> 00:05:20,120 Speaker 3: go and look more at the inflation risk. 117 00:05:20,320 --> 00:05:23,440 Speaker 5: To your point, I think it certainly matters, It's not 118 00:05:23,520 --> 00:05:25,520 Speaker 5: the only thing that matter. I think momentum and starting 119 00:05:25,520 --> 00:05:29,440 Speaker 5: point both matter, and the starting point is better. The 120 00:05:30,120 --> 00:05:34,159 Speaker 5: momentum is some of the weakest we've seen outside of 121 00:05:34,200 --> 00:05:36,480 Speaker 5: recession in a while now. Some of them might be 122 00:05:36,560 --> 00:05:38,520 Speaker 5: due to immigration, some of that might be due to 123 00:05:38,560 --> 00:05:39,840 Speaker 5: tariff uncertainty. 124 00:05:40,000 --> 00:05:41,160 Speaker 2: Some of that might be due to. 125 00:05:42,600 --> 00:05:45,080 Speaker 5: Interest rates are higher, and that matters for some sectors more, 126 00:05:45,240 --> 00:05:48,719 Speaker 5: even if the financial conditions you just talked about are 127 00:05:48,760 --> 00:05:51,919 Speaker 5: still pretty accommodative if your time about capital markets. So 128 00:05:52,040 --> 00:05:54,480 Speaker 5: these are all kind of confusing in terms of what 129 00:05:55,080 --> 00:05:58,880 Speaker 5: is the actual, like labor market trajectory that's permissible. I 130 00:05:58,880 --> 00:06:01,760 Speaker 5: think the FED is right now inclined to cut in September, 131 00:06:01,800 --> 00:06:04,680 Speaker 5: given what we've seen in the labor market data. But 132 00:06:04,800 --> 00:06:07,240 Speaker 5: I will just warn just as the data got revised 133 00:06:07,279 --> 00:06:09,719 Speaker 5: before it could get revised again. It may be the 134 00:06:09,760 --> 00:06:13,560 Speaker 5: case that May and June were the weakest months for 135 00:06:13,680 --> 00:06:16,839 Speaker 5: job growth and that we see some local acceleration just 136 00:06:16,839 --> 00:06:19,400 Speaker 5: because there's a little bit more certainty on trade policy 137 00:06:19,400 --> 00:06:22,520 Speaker 5: than there was before. So there's still another job support 138 00:06:22,560 --> 00:06:25,560 Speaker 5: before the September meeting, and there's another bat to inflation 139 00:06:25,640 --> 00:06:27,160 Speaker 5: data that's also going to come out, and I think 140 00:06:27,200 --> 00:06:30,880 Speaker 5: that will actually probably matter in the sense that typically 141 00:06:30,920 --> 00:06:32,919 Speaker 5: you see price changes that are more volatile as you 142 00:06:32,920 --> 00:06:35,880 Speaker 5: get into back to school season, holiday season, the turn 143 00:06:35,920 --> 00:06:38,800 Speaker 5: of the calendar year. What we've seen thus far is 144 00:06:38,920 --> 00:06:41,359 Speaker 5: typically the more benign months, you typically don't see prices 145 00:06:41,400 --> 00:06:43,680 Speaker 5: change that much. So there's still a lot to play 146 00:06:43,680 --> 00:06:45,640 Speaker 5: for in terms of going into the September meeting. 147 00:06:46,240 --> 00:06:48,320 Speaker 1: So here's the thing I've been thinking about, trying to 148 00:06:48,320 --> 00:06:51,599 Speaker 1: conceptualize what's going on. And you know, as Tracy mentioned, 149 00:06:51,640 --> 00:06:55,200 Speaker 1: we talked to Mary Daily last week in Alaska and 150 00:06:55,480 --> 00:06:58,080 Speaker 1: she's kind of the view right now or she says 151 00:06:58,360 --> 00:07:00,680 Speaker 1: that she does not think that the tariffs will be 152 00:07:00,760 --> 00:07:05,240 Speaker 1: particularly inflationary ors inflationary on a sustained basis, And you know, 153 00:07:05,279 --> 00:07:08,120 Speaker 1: there's certainly an argument tariffs are tax increases, and tax 154 00:07:08,160 --> 00:07:10,280 Speaker 1: increases we don't think of as inflationary. We think of 155 00:07:10,320 --> 00:07:15,200 Speaker 1: them as disinflationary if anything. On the other hand, they 156 00:07:15,240 --> 00:07:18,720 Speaker 1: throw a wrench into supply chains. They have very different 157 00:07:18,800 --> 00:07:21,440 Speaker 1: effects across different like they sort of strike me as 158 00:07:21,520 --> 00:07:23,960 Speaker 1: like a bit of just like throwing sand into gears. 159 00:07:24,360 --> 00:07:27,880 Speaker 1: And if you combine throwing sand into gears with really 160 00:07:27,920 --> 00:07:31,800 Speaker 1: big deficits, and now that I'm middle age, I talk 161 00:07:31,840 --> 00:07:35,200 Speaker 1: about deficits. We've got a pretty big July deficit number. 162 00:07:35,280 --> 00:07:37,600 Speaker 1: It was ten percent higher than the year before. This 163 00:07:37,640 --> 00:07:40,480 Speaker 1: is despite the tariff revenue. If you're throwing sand into 164 00:07:40,480 --> 00:07:43,360 Speaker 1: gears of industry, making commerce less efficient by creating all 165 00:07:43,360 --> 00:07:46,160 Speaker 1: these frictions, and you're pushing in all this money by 166 00:07:46,160 --> 00:07:50,080 Speaker 1: expanding deficits, that strikes me as a potentially inflationary cocktail. 167 00:07:50,920 --> 00:07:51,600 Speaker 2: I would agree. 168 00:07:51,680 --> 00:07:53,600 Speaker 5: I think that's possibly have both right, that there is 169 00:07:53,640 --> 00:07:55,960 Speaker 5: some what I would call stackflation light right that it's 170 00:07:56,000 --> 00:07:59,000 Speaker 5: obviously unemployment rates are still low. That's pretty distinct from 171 00:07:59,040 --> 00:08:02,400 Speaker 5: the stackflation of the seventies. But the momentum in the 172 00:08:02,440 --> 00:08:05,160 Speaker 5: labor market seems weaker because I think there probably is 173 00:08:05,200 --> 00:08:11,360 Speaker 5: for any sort of trade sensitive sector, think about construction, manufacturing, retail, trade, wholesale, trade, warehousing. 174 00:08:11,760 --> 00:08:14,760 Speaker 5: These are all showing weakness and job growth more recently, 175 00:08:15,040 --> 00:08:17,480 Speaker 5: and so we're seeing that side of the equation that 176 00:08:17,920 --> 00:08:20,480 Speaker 5: should be disinflation area at the margin, because less labor 177 00:08:20,520 --> 00:08:23,040 Speaker 5: income should mean less consumer spending and at the same 178 00:08:23,040 --> 00:08:25,440 Speaker 5: time you're putting in costs adding to the business cost 179 00:08:25,440 --> 00:08:28,600 Speaker 5: structure in ways that businesses can't stomach bey on a 180 00:08:28,600 --> 00:08:31,240 Speaker 5: certain point, right, So some businesses are probably roll positioned 181 00:08:31,240 --> 00:08:36,200 Speaker 5: to absorbit the hit to margin, but there's a limit 182 00:08:36,240 --> 00:08:36,920 Speaker 5: to that as well. 183 00:08:37,040 --> 00:08:38,200 Speaker 2: I think the issue with sort of. 184 00:08:38,200 --> 00:08:41,720 Speaker 5: The tariff flesh trade shock, the modeling of it is 185 00:08:41,840 --> 00:08:45,640 Speaker 5: if you have costs be pushed through to consumers over 186 00:08:45,720 --> 00:08:48,480 Speaker 5: time that can still be consistent with just real incomes 187 00:08:48,600 --> 00:08:52,640 Speaker 5: sort of declining even if nominal income growth is onstead 188 00:08:52,640 --> 00:08:55,440 Speaker 5: of your footing. And so that would be a very 189 00:08:55,480 --> 00:08:57,199 Speaker 5: tricky backdrop for the fit to navigate. 190 00:08:58,559 --> 00:09:01,000 Speaker 3: Just going back to inflation for a second, can you 191 00:09:01,040 --> 00:09:03,480 Speaker 3: walk us through what's going on with energy prices at 192 00:09:03,480 --> 00:09:06,680 Speaker 3: the moment, because on the one hand, oil still pretty low, 193 00:09:06,840 --> 00:09:10,040 Speaker 3: as we talked a lot about in Alasta that or yeah, 194 00:09:10,120 --> 00:09:12,199 Speaker 3: people really care about the price of oil in Alaska, 195 00:09:12,320 --> 00:09:15,319 Speaker 3: not necessarily the way that most car driving Americans do. 196 00:09:16,320 --> 00:09:20,000 Speaker 1: So it's funny like in America on oil to quote 197 00:09:20,000 --> 00:09:22,280 Speaker 1: lower forty eight, which is a term I'd never used 198 00:09:22,280 --> 00:09:24,520 Speaker 1: as much than in the last week. It's like an 199 00:09:24,520 --> 00:09:26,680 Speaker 1: oil crisis is when it's really high there, it's the 200 00:09:26,720 --> 00:09:28,760 Speaker 1: exact opposite and right, keep going. 201 00:09:28,640 --> 00:09:30,760 Speaker 3: That's right, Okay, so oil prices are low, but at 202 00:09:30,800 --> 00:09:35,280 Speaker 3: the same time we're seeing some electricity prices rise, possibly 203 00:09:35,440 --> 00:09:38,000 Speaker 3: a sort of crowding out effect from all the data 204 00:09:38,000 --> 00:09:40,600 Speaker 3: center demand and AI enthusiasm and things like that. 205 00:09:41,080 --> 00:09:44,200 Speaker 5: Yeah, so I think that there's a bifurcation and energy prices. Right, 206 00:09:44,240 --> 00:09:47,920 Speaker 5: So we have your standard commodity prices, specifically for oil, 207 00:09:48,400 --> 00:09:50,439 Speaker 5: have stayed at the lower end of the range. Right, 208 00:09:50,720 --> 00:09:53,360 Speaker 5: we're still diffinitely speaking in the maybe low sixties, right 209 00:09:53,400 --> 00:09:54,040 Speaker 5: and WTI. 210 00:09:54,240 --> 00:09:56,680 Speaker 2: So these are prices that. 211 00:09:57,320 --> 00:10:00,840 Speaker 5: Should be not painful for the consumer. Yet we also 212 00:10:00,920 --> 00:10:05,240 Speaker 5: have electricity price increases. And the electricity price increases that 213 00:10:05,280 --> 00:10:07,480 Speaker 5: we've seen, some part of that is due to natural 214 00:10:07,520 --> 00:10:10,400 Speaker 5: gas price volatility, although natural gas prices more recently have 215 00:10:10,400 --> 00:10:12,720 Speaker 5: come down, but there's also an there are a lot 216 00:10:12,760 --> 00:10:14,760 Speaker 5: of things that go into electricity prices that are independent 217 00:10:14,800 --> 00:10:17,400 Speaker 5: of that. So in a lot of regions of the 218 00:10:17,400 --> 00:10:20,800 Speaker 5: country we're seeing capacity looks to be short for the 219 00:10:20,840 --> 00:10:22,600 Speaker 5: longest time. A lot of these a lot of what 220 00:10:22,640 --> 00:10:26,720 Speaker 5: you call thermal sources of electricity generation are typically not 221 00:10:26,800 --> 00:10:29,880 Speaker 5: very economical. Right, We're economical as short runs since because 222 00:10:30,679 --> 00:10:33,760 Speaker 5: we have more capacity than we need, so the ability 223 00:10:33,800 --> 00:10:37,080 Speaker 5: to be paid for that capacity is not great. So 224 00:10:37,080 --> 00:10:40,079 Speaker 5: that's why we retire coal plants, we retire nuclear plants. 225 00:10:40,440 --> 00:10:41,960 Speaker 5: Now you're seeing the other side of that, right, and 226 00:10:42,000 --> 00:10:44,640 Speaker 5: it takes a long time to build that stuff, and 227 00:10:44,840 --> 00:10:47,960 Speaker 5: so the retirements have are coming to a pause. For Hey, 228 00:10:48,040 --> 00:10:50,120 Speaker 5: actually we might be short on capacity if the data 229 00:10:50,160 --> 00:10:54,120 Speaker 5: centerler demands are there, and building new capacity is very expensive, 230 00:10:54,280 --> 00:10:58,120 Speaker 5: very time intensive, and that seems to be an issue. 231 00:10:58,160 --> 00:10:58,680 Speaker 2: And at least a. 232 00:10:58,679 --> 00:11:02,560 Speaker 5: Number of major regions there's like the mid Atlantic region PJM. 233 00:11:03,000 --> 00:11:04,800 Speaker 5: You're hearing this also show up though in terms of 234 00:11:05,120 --> 00:11:07,360 Speaker 5: rates are increasing in Georgia. And New England has its 235 00:11:07,360 --> 00:11:09,959 Speaker 5: own set of problems because it burns a lot of 236 00:11:10,040 --> 00:11:13,760 Speaker 5: natural gas electricity but also doesn't have the requisite pipeline capacity. 237 00:11:14,080 --> 00:11:16,520 Speaker 3: I love that I'm double hedged to New England energy 238 00:11:16,559 --> 00:11:20,160 Speaker 3: prices plus conned in New York. Although although I do 239 00:11:20,240 --> 00:11:23,240 Speaker 3: have solar panels in Connecticut. Now, as we were discussing, 240 00:11:23,280 --> 00:11:26,320 Speaker 3: so sometimes sometimes my bill is actually negative, which is lovely. 241 00:11:26,760 --> 00:11:29,160 Speaker 1: The Texas hedge. This is the thing, which is that 242 00:11:29,600 --> 00:11:32,560 Speaker 1: so I mentioned in the beginning, so much investment happening 243 00:11:32,640 --> 00:11:36,520 Speaker 1: in AI which doesn't seem to like, I mean, doesn't 244 00:11:36,520 --> 00:11:38,600 Speaker 1: seem to be paying off economy wide yet. It's not 245 00:11:38,600 --> 00:11:41,120 Speaker 1: like we've seen some great dissinflationary boom or all these 246 00:11:41,120 --> 00:11:43,559 Speaker 1: companies suddenly getting more efficient. Though maybe there are I'm 247 00:11:43,600 --> 00:11:46,320 Speaker 1: sure you can find pockets. But there's a lot of spending, 248 00:11:46,320 --> 00:11:47,800 Speaker 1: and there's a lot of spending on gear, and there's 249 00:11:47,800 --> 00:11:49,960 Speaker 1: a lot of spending on buildings, and a little bit 250 00:11:49,960 --> 00:11:52,560 Speaker 1: of spending on labor. You know, some people have been 251 00:11:52,559 --> 00:11:55,520 Speaker 1: talking about this crowding out of fact. Jason Furman talked 252 00:11:55,559 --> 00:11:57,600 Speaker 1: about it in a tweet that maybe this just feels 253 00:11:57,640 --> 00:11:59,760 Speaker 1: like a fiscal crowded God, is that fair at this 254 00:11:59,760 --> 00:12:02,319 Speaker 1: point or is it too soon to tell, like whether 255 00:12:02,520 --> 00:12:03,599 Speaker 1: all this expenditures. 256 00:12:03,920 --> 00:12:05,520 Speaker 4: Has been writing about this quite a bit as well. 257 00:12:05,559 --> 00:12:07,559 Speaker 1: Yeah, I'm curious how you characterize. 258 00:12:07,120 --> 00:12:07,559 Speaker 2: It right down. 259 00:12:07,559 --> 00:12:10,200 Speaker 5: I mean, obviously there's some bid for resources that could 260 00:12:10,240 --> 00:12:13,480 Speaker 5: otherwise be deployed elsewhere, and also a bit sort of 261 00:12:13,520 --> 00:12:15,880 Speaker 5: if let's say you're an investor and you're obviously some 262 00:12:16,000 --> 00:12:18,840 Speaker 5: level of capital constraint going on, if you're investing everything 263 00:12:18,880 --> 00:12:21,800 Speaker 5: in AI and basically cutting spending an investment in other 264 00:12:21,840 --> 00:12:24,439 Speaker 5: areas there's some sort of crowding out effect. But I 265 00:12:24,440 --> 00:12:28,120 Speaker 5: would just also caution that's like a secondary effect right there. 266 00:12:28,120 --> 00:12:30,480 Speaker 2: The primary one is still that there's more investment. But 267 00:12:30,559 --> 00:12:31,959 Speaker 2: do us on. 268 00:12:32,040 --> 00:12:35,480 Speaker 1: The electricity front though, is that connected or is that 269 00:12:35,600 --> 00:12:38,280 Speaker 1: still just our manufactors pushing up the electricity cross and 270 00:12:38,360 --> 00:12:39,560 Speaker 1: maybe data stiers are one. 271 00:12:39,720 --> 00:12:42,080 Speaker 5: I think the data center effect is something probably better 272 00:12:42,120 --> 00:12:45,560 Speaker 5: to describe up until this very moment, like we're probably 273 00:12:45,640 --> 00:12:48,520 Speaker 5: hitting something. I'm an inflection point, right, so you are 274 00:12:49,800 --> 00:12:53,400 Speaker 5: like load demand for electricity has stopped sort of having 275 00:12:53,440 --> 00:12:57,040 Speaker 5: the sort of its local stagnation. Okay, but we haven't 276 00:12:57,120 --> 00:12:59,360 Speaker 5: yet seen the pick up. The pickup is probably coming 277 00:12:59,440 --> 00:13:03,040 Speaker 5: very soon, maybe right now, And as that happens and 278 00:13:03,360 --> 00:13:07,560 Speaker 5: it has its pass through into pricing over the coming years, 279 00:13:08,120 --> 00:13:09,760 Speaker 5: I think there will be some sort of so super 280 00:13:09,760 --> 00:13:12,760 Speaker 5: cycle dynamic to this that is likely to weigh on 281 00:13:12,920 --> 00:13:13,920 Speaker 5: costs and investment. 282 00:13:14,040 --> 00:13:15,800 Speaker 1: Just sorry, just a week there, Like those are like 283 00:13:16,000 --> 00:13:18,720 Speaker 1: price increases in Georgia that people are talking about, or 284 00:13:19,240 --> 00:13:21,640 Speaker 1: it's too early to say, oh, that's data centers. 285 00:13:21,920 --> 00:13:23,480 Speaker 5: It's a sort of yes and no question where the 286 00:13:23,480 --> 00:13:26,280 Speaker 5: economously give you both answers because it's like if something 287 00:13:26,360 --> 00:13:28,080 Speaker 5: stops going down and starts flattening out. 288 00:13:28,000 --> 00:13:30,200 Speaker 2: And starts to pick Yeah, yeah, there is a like. 289 00:13:30,240 --> 00:13:32,319 Speaker 5: It may not have started going up in outright terms, 290 00:13:32,320 --> 00:13:34,320 Speaker 5: but the dynamic is, it's part of the dynamic. 291 00:13:34,400 --> 00:13:35,920 Speaker 2: So I think that I think it's it's both. 292 00:13:49,920 --> 00:13:52,080 Speaker 3: As we mentioned, Joe and I are going to Jackson 293 00:13:52,080 --> 00:13:55,920 Speaker 3: Hole next week and the theme doesn't really matter. The 294 00:13:55,920 --> 00:13:58,600 Speaker 3: theme is central bank independence. And if Powell is going 295 00:13:58,679 --> 00:14:01,560 Speaker 3: to do what President and Trump is asking him to do, 296 00:14:01,600 --> 00:14:06,800 Speaker 3: which is cut rates, I'm thinking how to characterize this question, 297 00:14:07,520 --> 00:14:10,800 Speaker 3: How does like the central bank dynamic actually feed into 298 00:14:10,840 --> 00:14:12,400 Speaker 3: the discussion around rates. 299 00:14:13,559 --> 00:14:15,760 Speaker 5: I mean, I think there is on one level of the 300 00:14:15,760 --> 00:14:18,079 Speaker 5: Feder will tell you they're putting the blinders on and 301 00:14:18,160 --> 00:14:20,760 Speaker 5: they don't listen to what Scott Bessen does. One of 302 00:14:20,760 --> 00:14:24,520 Speaker 5: the most actively lobbying for was fifty basis points. And 303 00:14:24,640 --> 00:14:27,280 Speaker 5: yet you can't deny that there is going to be 304 00:14:27,360 --> 00:14:31,480 Speaker 5: some issue of how does the Fed do something in 305 00:14:31,520 --> 00:14:35,000 Speaker 5: a way where it doesn't look politically right. Legitimacy in 306 00:14:35,000 --> 00:14:36,840 Speaker 5: some ways of whatever the Fed does gets undermined. 307 00:14:36,840 --> 00:14:37,840 Speaker 4: There's an optics problem. 308 00:14:38,000 --> 00:14:40,520 Speaker 5: If they don't do what the Treasury says, then they're 309 00:14:40,560 --> 00:14:43,200 Speaker 5: clearly trying to push back against the Treasury in some way, 310 00:14:43,320 --> 00:14:45,480 Speaker 5: and so then there will be one set of stakeholders 311 00:14:45,480 --> 00:14:47,600 Speaker 5: who are upset, and at the same time there are 312 00:14:47,640 --> 00:14:50,040 Speaker 5: others who will be saying, like, if the Fed does 313 00:14:50,120 --> 00:14:52,560 Speaker 5: cut fifty basis points, it's like, Okay, they're just following 314 00:14:52,600 --> 00:14:54,960 Speaker 5: the Treasury, which just listened to Scott Besson now. And 315 00:14:55,000 --> 00:14:57,560 Speaker 5: that is a dilemma for how you really handle the 316 00:14:57,560 --> 00:14:59,640 Speaker 5: optics that Mary Daily talked about this on your episode, 317 00:14:59,640 --> 00:15:02,120 Speaker 5: which was you got to try to just explain your decisions, 318 00:15:02,160 --> 00:15:04,120 Speaker 5: try to be transparent, try to be consistent. 319 00:15:04,480 --> 00:15:06,000 Speaker 2: That was really important things. 320 00:15:07,000 --> 00:15:09,880 Speaker 5: It'll matter to a point, and yet I'm sure there'll 321 00:15:09,920 --> 00:15:11,240 Speaker 5: be plenty of cynics that needs. 322 00:15:11,040 --> 00:15:12,360 Speaker 4: To start tweeting in all cats. 323 00:15:13,200 --> 00:15:16,040 Speaker 1: Uh did you see the headline yesterday. I think it 324 00:15:16,080 --> 00:15:20,040 Speaker 1: was attributing CNBC that David Servos is. 325 00:15:21,360 --> 00:15:23,560 Speaker 2: Know you guys laugh. I like David. 326 00:15:23,800 --> 00:15:25,640 Speaker 1: We have never had him on odd launch and which 327 00:15:25,680 --> 00:15:27,920 Speaker 1: is an oversight. I've always liked talking to David though, 328 00:15:28,120 --> 00:15:32,440 Speaker 1: but I feel like, you know, we never got unfortunately, 329 00:15:32,960 --> 00:15:38,720 Speaker 1: Paul McCully, the VET, the long haired iconoclastic guy from industry. Yeah, 330 00:15:38,760 --> 00:15:42,000 Speaker 1: and David Servos is like the next best shot of 331 00:15:42,040 --> 00:15:46,080 Speaker 1: this sort of iconoclassic guy who comes from Wall Street. 332 00:15:46,680 --> 00:15:49,280 Speaker 1: I like David. I like David. I feel like, you know, 333 00:15:49,360 --> 00:15:51,680 Speaker 1: he was like the closest thing to like a contemporary 334 00:15:51,920 --> 00:15:53,480 Speaker 1: kind of a mccaulleyish character. 335 00:15:53,600 --> 00:15:56,680 Speaker 3: I will say, from a sartorial perspective, it would be 336 00:15:56,760 --> 00:15:57,400 Speaker 3: very interesting. 337 00:15:57,520 --> 00:15:59,520 Speaker 1: Yeah, I like I've always loved talking to David. 338 00:16:00,120 --> 00:16:02,960 Speaker 5: I mean, he would certainly be a character, and so 339 00:16:03,040 --> 00:16:05,800 Speaker 5: you probably get livelier press conference. 340 00:16:05,680 --> 00:16:08,040 Speaker 1: Press coverage. Do you have any thoughts on the derby? 341 00:16:08,400 --> 00:16:10,920 Speaker 1: Every day the list of names gets longer. Do you 342 00:16:10,960 --> 00:16:12,560 Speaker 1: have any thoughts on this process. 343 00:16:12,760 --> 00:16:15,480 Speaker 5: I can't take it seriously, right, I think as far 344 00:16:15,520 --> 00:16:17,200 Speaker 5: as the number of names that have been thrown, I 345 00:16:17,240 --> 00:16:19,040 Speaker 5: don't think Yellen is being consideractive. 346 00:16:19,600 --> 00:16:22,640 Speaker 2: These are these are things that seems to very very I. 347 00:16:23,440 --> 00:16:26,760 Speaker 1: Saw that, and yeah, there. 348 00:16:26,640 --> 00:16:29,160 Speaker 2: Are some names, so, I mean, there are some names 349 00:16:29,160 --> 00:16:30,440 Speaker 2: to take seriously. I'm not saying that. 350 00:16:30,600 --> 00:16:33,240 Speaker 5: I do think the length of the list being offered, 351 00:16:33,320 --> 00:16:35,480 Speaker 5: some of them are clearly not serious. Name is being 352 00:16:35,480 --> 00:16:37,880 Speaker 5: put forth, but it may serve some tactical purpose for 353 00:16:38,320 --> 00:16:40,760 Speaker 5: the kind of policies they want. If they're trying to 354 00:16:40,760 --> 00:16:43,200 Speaker 5: broaden the list of people who they're considering. Get those 355 00:16:43,200 --> 00:16:46,880 Speaker 5: people to lobby more actively and publicly for lower rates, 356 00:16:46,920 --> 00:16:50,080 Speaker 5: then that might be something Nick Timrose. 357 00:16:50,160 --> 00:16:52,760 Speaker 1: But the Journal pointed this out in an article, which 358 00:16:52,840 --> 00:16:55,320 Speaker 1: is that if you have one hundred people who all 359 00:16:55,400 --> 00:16:57,960 Speaker 1: think that they're in the running to be Ventcher, that's 360 00:16:58,000 --> 00:17:00,200 Speaker 1: a hundred people going on TV saying now it's a 361 00:17:00,200 --> 00:17:02,920 Speaker 1: great time to cut rates. And then you're sort of like, wait, 362 00:17:02,960 --> 00:17:05,600 Speaker 1: why is it Powell cutting rates? Everyone on TV knows 363 00:17:05,680 --> 00:17:08,240 Speaker 1: now's the time. So yeah, there are some deep brilliance 364 00:17:08,320 --> 00:17:08,880 Speaker 1: going on here. 365 00:17:09,560 --> 00:17:12,119 Speaker 5: I do have asked, though, like all the lobbying for 366 00:17:12,240 --> 00:17:15,520 Speaker 5: lower rates, we have substantial number rate cuts priced in 367 00:17:15,560 --> 00:17:18,760 Speaker 5: over the next twelve months, and yet long. 368 00:17:18,680 --> 00:17:21,480 Speaker 2: Term indust rates haven't really budged that much. Yeah, which 369 00:17:21,520 --> 00:17:22,880 Speaker 2: is if you think about, like. 370 00:17:22,800 --> 00:17:24,720 Speaker 5: Where the pain points in the frustration are with like 371 00:17:24,800 --> 00:17:27,359 Speaker 5: higher interust rates right now or at least if you 372 00:17:27,480 --> 00:17:30,600 Speaker 5: to extendnything. Four point three percent fed funds rate is high, 373 00:17:30,680 --> 00:17:33,720 Speaker 5: and that's part of the reason why tenure yields are 374 00:17:34,119 --> 00:17:38,320 Speaker 5: at four point two four point three percent roughly speaking, like, 375 00:17:38,480 --> 00:17:40,840 Speaker 5: you're not getting much effect from the rate atecuts being 376 00:17:40,840 --> 00:17:42,680 Speaker 5: priced right now. And I do think I kind of 377 00:17:42,720 --> 00:17:44,840 Speaker 5: raise some questions about what is the actual objective here, 378 00:17:45,000 --> 00:17:48,280 Speaker 5: Even if you get the rate cuts you so desperately wish, 379 00:17:48,720 --> 00:17:49,720 Speaker 5: especially if it's coming, if it. 380 00:17:49,760 --> 00:17:51,880 Speaker 4: Doesn't feed into like the thirty year mortgage. 381 00:17:51,560 --> 00:17:54,240 Speaker 5: Rates, Yeah, exactly, like housing was the big pain point 382 00:17:54,400 --> 00:17:56,960 Speaker 5: and you're not really getting that effect. That to me 383 00:17:57,000 --> 00:17:59,960 Speaker 5: suggests like there is some level of a credibility gap 384 00:18:00,280 --> 00:18:02,000 Speaker 5: if you're just saying I'm going to cut rates no matter, 385 00:18:02,280 --> 00:18:04,119 Speaker 5: no matter what the inflation rate is, because I want 386 00:18:04,160 --> 00:18:06,880 Speaker 5: to do it for political motivation. I mean, I want 387 00:18:07,000 --> 00:18:10,000 Speaker 5: investors obviously need to be compensated on some level for risk, 388 00:18:10,080 --> 00:18:11,840 Speaker 5: or also for the risk that maybe some in the 389 00:18:11,920 --> 00:18:14,360 Speaker 5: future rates might go back up. If the people who 390 00:18:14,400 --> 00:18:17,480 Speaker 5: are arguing for lower rates today would argue for higher 391 00:18:17,560 --> 00:18:20,399 Speaker 5: rates under a different political environment, that's not exactly. That 392 00:18:20,400 --> 00:18:24,000 Speaker 5: doesn't lend itself to keeping getting long term interest rates lower. 393 00:18:24,080 --> 00:18:26,320 Speaker 3: And Oh, what's your take on why long term interest 394 00:18:26,400 --> 00:18:27,479 Speaker 3: rates haven't gone lower? 395 00:18:27,760 --> 00:18:29,960 Speaker 5: I think there's probably two things here that stick out 396 00:18:29,960 --> 00:18:33,840 Speaker 5: to me. One is, well, inflation still seems like it's there, right, 397 00:18:34,040 --> 00:18:36,479 Speaker 5: We're haven't gone things back to two percent, and so 398 00:18:36,680 --> 00:18:38,480 Speaker 5: there's just a risk of the Feds being caught off 399 00:18:38,520 --> 00:18:40,760 Speaker 5: sides here, if the FED starts to cut more aggressively 400 00:18:40,880 --> 00:18:43,520 Speaker 5: at a time when inflation might pick up, you can say, well, 401 00:18:43,560 --> 00:18:46,000 Speaker 5: this time inflation is transitory, but it's like we're dealing 402 00:18:46,000 --> 00:18:49,800 Speaker 5: with potentially big macro adjustments. They might be costly, and 403 00:18:49,880 --> 00:18:54,919 Speaker 5: if nominal incomes labor income growth is reasonably solid, the 404 00:18:55,000 --> 00:18:57,200 Speaker 5: cost might get pushed through right to the consumer because 405 00:18:57,200 --> 00:19:01,080 Speaker 5: the consumer can pay. And that's a that markets have 406 00:19:01,119 --> 00:19:03,840 Speaker 5: to be sensitive too. So there's a level of well, 407 00:19:03,960 --> 00:19:06,120 Speaker 5: you're actually adding more inflation risk, and so that needs 408 00:19:06,119 --> 00:19:06,800 Speaker 5: to be compensated for. 409 00:19:07,040 --> 00:19:07,520 Speaker 1: There's also I. 410 00:19:07,520 --> 00:19:10,679 Speaker 5: Think a level of political manipulation risk, right if you 411 00:19:10,960 --> 00:19:14,120 Speaker 5: actually did lower rates for reasons that aren't really grounded 412 00:19:14,280 --> 00:19:16,359 Speaker 5: in data. I mean, Kevin Worre said, I don't care 413 00:19:16,400 --> 00:19:18,879 Speaker 5: about data dependence. You're not doing things for like relatively 414 00:19:18,920 --> 00:19:21,800 Speaker 5: neutral reasons, and you're doing things for political convenience. 415 00:19:22,440 --> 00:19:22,640 Speaker 2: One. 416 00:19:22,680 --> 00:19:25,000 Speaker 5: The political convenience can cut the other way at at 417 00:19:25,000 --> 00:19:26,840 Speaker 5: another point in time. Let's say there are people who 418 00:19:26,840 --> 00:19:29,479 Speaker 5: are doing things for partisan reasons today and maybe it's 419 00:19:29,520 --> 00:19:31,320 Speaker 5: a different person in the White House in the future. 420 00:19:31,960 --> 00:19:35,000 Speaker 5: And then there's also just the issue of well, there's 421 00:19:35,000 --> 00:19:36,240 Speaker 5: just more instability. 422 00:19:36,359 --> 00:19:38,120 Speaker 2: I want more compensation for that risk. 423 00:19:38,280 --> 00:19:40,160 Speaker 5: And I do think like we're seeing if you look 424 00:19:40,200 --> 00:19:42,760 Speaker 5: at the slope between five years and five year notes 425 00:19:42,760 --> 00:19:46,320 Speaker 5: and ten year notes normally high, even considering that rate 426 00:19:46,359 --> 00:19:48,200 Speaker 5: cuts have been priced in. I know that Joe is 427 00:19:48,200 --> 00:19:50,800 Speaker 5: a little term premium skeptic, and I, to some extent 428 00:19:51,320 --> 00:19:53,440 Speaker 5: am too, But I do think that there's more suggestive 429 00:19:53,480 --> 00:19:57,120 Speaker 5: evidence now that you are seeing more demands for compensation 430 00:19:57,200 --> 00:20:00,000 Speaker 5: for risk, and that again kind of speaks to undermining 431 00:20:00,080 --> 00:20:02,560 Speaker 5: independence if you think that this process of setting interest 432 00:20:02,600 --> 00:20:07,040 Speaker 5: rates is not really being guided by something relatively neutral politically, 433 00:20:07,160 --> 00:20:09,400 Speaker 5: something that's more focused on the data, but it's really 434 00:20:09,480 --> 00:20:14,000 Speaker 5: just about pleasing certain presidential preferences and whims on a 435 00:20:14,040 --> 00:20:17,680 Speaker 5: short term basis. As a long term investor, I might 436 00:20:17,720 --> 00:20:18,280 Speaker 5: want more. 437 00:20:18,119 --> 00:20:20,920 Speaker 2: Compensation for that. There's some some merit to that argument. 438 00:20:20,960 --> 00:20:23,119 Speaker 3: At least, don't worry at Jackson Hole. Joe and I 439 00:20:23,160 --> 00:20:25,480 Speaker 3: are going to sit around a campfire and meditate on 440 00:20:25,560 --> 00:20:26,800 Speaker 3: the of the term premium. 441 00:20:26,840 --> 00:20:28,600 Speaker 1: Yeah, that's right, we're going to get it figured out. Actually, 442 00:20:42,440 --> 00:20:46,119 Speaker 1: don't these clowns in Washington, d C. Need to stop 443 00:20:46,160 --> 00:20:51,480 Speaker 1: their addiction to borrowing money. I'm entering my AM radio. 444 00:20:51,560 --> 00:20:53,280 Speaker 4: This is this is back to your middle age. 445 00:20:54,840 --> 00:20:56,840 Speaker 1: I want to be a yaccur on a radio. Don't 446 00:20:56,880 --> 00:21:00,159 Speaker 1: these clouds of DC you need to stop spending. But 447 00:21:01,000 --> 00:21:04,360 Speaker 1: deficits are very large, like you know, setting aside politics, 448 00:21:04,440 --> 00:21:08,720 Speaker 1: they're very big, especially given the low level of unemployment 449 00:21:08,800 --> 00:21:11,520 Speaker 1: rate four point two percent. Like, we're spending a lot 450 00:21:11,560 --> 00:21:13,600 Speaker 1: of money, and that's a lot of money, big pushed 451 00:21:13,640 --> 00:21:16,200 Speaker 1: into the economy, much of it going to low productivity 452 00:21:16,200 --> 00:21:18,639 Speaker 1: areas because of the growth of like healthcare, et cetera. 453 00:21:18,960 --> 00:21:21,480 Speaker 1: Don't we need to have some good old fashioned fiscal 454 00:21:21,520 --> 00:21:25,080 Speaker 1: consolidation With inflation still at these elevated levels. 455 00:21:24,840 --> 00:21:25,960 Speaker 2: There're certainly an ard for it. 456 00:21:25,960 --> 00:21:28,480 Speaker 5: If you wanted to try and get demand down, then 457 00:21:28,520 --> 00:21:29,919 Speaker 5: you could possibly do that, right, So if you think 458 00:21:29,920 --> 00:21:32,000 Speaker 5: demand is a problem, right, then you probably wouldn't be 459 00:21:32,000 --> 00:21:33,159 Speaker 5: so worried about the labor market, right. 460 00:21:33,200 --> 00:21:34,400 Speaker 2: So that's one part of it. 461 00:21:34,920 --> 00:21:37,679 Speaker 5: I also like folks that have been saying this, the 462 00:21:37,720 --> 00:21:40,520 Speaker 5: tariffs are a big revenue raiser, right, One part of 463 00:21:40,560 --> 00:21:43,639 Speaker 5: it is, Yeah, we're still seeing like either the fact 464 00:21:43,720 --> 00:21:45,399 Speaker 5: is like it's just doesn't matter in the context of 465 00:21:45,400 --> 00:21:47,280 Speaker 5: the deficit. Yeah, in which case it's not a big 466 00:21:47,320 --> 00:21:49,680 Speaker 5: revenue Raser. It's one argument you can make if you 467 00:21:49,680 --> 00:21:52,080 Speaker 5: think it's actually still a lot of money being raised 468 00:21:52,080 --> 00:21:55,080 Speaker 5: and yet we're still seeing ten year yield dynamics as 469 00:21:55,119 --> 00:21:57,560 Speaker 5: they are. Maybe it's something else. I mean, I think 470 00:21:57,800 --> 00:21:59,600 Speaker 5: the problem always with the story is about deficits and 471 00:21:59,640 --> 00:22:02,440 Speaker 5: how they interest rates tend to always be there's like 472 00:22:02,480 --> 00:22:04,000 Speaker 5: a missing link there, or at least there's not a 473 00:22:04,040 --> 00:22:07,040 Speaker 5: lot of robust correlation here between the scale of the 474 00:22:07,080 --> 00:22:08,879 Speaker 5: deficit and what interest rates. 475 00:22:08,800 --> 00:22:12,280 Speaker 2: End up looking like. And I do think like institutional. 476 00:22:11,680 --> 00:22:14,359 Speaker 5: Descriptions of what's going on kind of have a little 477 00:22:14,359 --> 00:22:16,040 Speaker 5: more merit, Like we are doing some things at the 478 00:22:16,040 --> 00:22:20,120 Speaker 5: Central Bank and in ways that can undermine investor confidence. 479 00:22:20,160 --> 00:22:23,239 Speaker 5: I think that strikes me as more compelling. But at 480 00:22:23,280 --> 00:22:25,080 Speaker 5: the margin, if you wanted to address the deficit for 481 00:22:25,119 --> 00:22:27,560 Speaker 5: whatever reason, yeah, there's probably a lot of room to 482 00:22:27,600 --> 00:22:29,640 Speaker 5: do that when we've just did a pretty big sort 483 00:22:29,680 --> 00:22:33,720 Speaker 5: of consolidation of corporate tax cuts and at the same time, 484 00:22:34,240 --> 00:22:36,880 Speaker 5: like there's obviously an aging population that does have more 485 00:22:36,920 --> 00:22:40,960 Speaker 5: demands for the major social insurance programs. 486 00:22:41,520 --> 00:22:42,080 Speaker 2: Thank you, Joe. 487 00:22:42,320 --> 00:22:44,680 Speaker 1: Yeah, I've become a crazy It's just like we need 488 00:22:44,720 --> 00:22:47,439 Speaker 1: to I'm not gonna I don't give policy advice. By 489 00:22:47,440 --> 00:22:50,280 Speaker 1: the way, Tracy were telling us Konda Amornath, executive director 490 00:22:50,320 --> 00:22:52,440 Speaker 1: of employeeent Oh yeah, we should just twenty minutes, and 491 00:22:52,560 --> 00:22:53,560 Speaker 1: probably should have said that. 492 00:22:54,119 --> 00:22:56,680 Speaker 3: Okay, so we're going to Jackson Hall. One of the 493 00:22:56,760 --> 00:22:59,040 Speaker 3: nice things about Jackson Hole is that you can run 494 00:22:59,040 --> 00:23:02,520 Speaker 3: into people well, you know, just if you're hiking outside 495 00:23:02,600 --> 00:23:05,200 Speaker 3: of the lodge the hotel over there. If we were 496 00:23:05,240 --> 00:23:08,720 Speaker 3: to run into Jerome Powell, what's the one question we 497 00:23:08,760 --> 00:23:09,400 Speaker 3: should ask. 498 00:23:09,760 --> 00:23:12,000 Speaker 5: Well, the one question I selfishly am interested in is 499 00:23:12,040 --> 00:23:13,720 Speaker 5: what are they going to do with the framework here? 500 00:23:13,800 --> 00:23:13,960 Speaker 3: Right? 501 00:23:14,040 --> 00:23:18,240 Speaker 5: So the framework review that was there was much fanfair 502 00:23:18,240 --> 00:23:19,119 Speaker 5: about it in. 503 00:23:20,320 --> 00:23:21,200 Speaker 4: The whole fate thing. 504 00:23:21,320 --> 00:23:22,200 Speaker 2: This was the fate thing. 505 00:23:22,240 --> 00:23:25,639 Speaker 5: This was when they cited flexible average inflation targeting, that 506 00:23:25,760 --> 00:23:30,080 Speaker 5: high employment wasn't inherently a bad thing or inherently inflationary thing. 507 00:23:30,520 --> 00:23:32,720 Speaker 5: They made some tweaks to their framework. There are people 508 00:23:32,720 --> 00:23:34,760 Speaker 5: who blame those tweaks for the reason why the FED 509 00:23:34,880 --> 00:23:37,360 Speaker 5: allowed all this inflation to happen. I think they kind 510 00:23:37,359 --> 00:23:40,199 Speaker 5: of messed around some counterfactuals. But they are doing the 511 00:23:40,200 --> 00:23:42,720 Speaker 5: same exercise now but just much more low profile. And 512 00:23:42,760 --> 00:23:44,840 Speaker 5: maybe that makes sense because this is sort of a 513 00:23:44,880 --> 00:23:48,080 Speaker 5: time of leadership flux where there is going to be 514 00:23:48,080 --> 00:23:50,480 Speaker 5: someone else who's FED chair in a year, and maybe 515 00:23:50,480 --> 00:23:52,000 Speaker 5: that person will want to have more of a say 516 00:23:52,040 --> 00:23:54,919 Speaker 5: and doesn't want to be thomped on. But they have 517 00:23:54,960 --> 00:23:57,320 Speaker 5: said that they want to do some of these changes 518 00:23:57,359 --> 00:24:00,120 Speaker 5: to their framework and then do a review of their communication. 519 00:24:00,680 --> 00:24:04,600 Speaker 5: And especially at a moment when you have these conflicting 520 00:24:04,600 --> 00:24:06,480 Speaker 5: forces where there are things that are pushing up inflation 521 00:24:06,600 --> 00:24:08,280 Speaker 5: at the same time there are signs that labor markets 522 00:24:08,320 --> 00:24:10,040 Speaker 5: are slowing, it just feels. 523 00:24:09,800 --> 00:24:11,199 Speaker 2: Like what the FED is going to communicate is going 524 00:24:11,240 --> 00:24:11,840 Speaker 2: to be confusing. 525 00:24:12,000 --> 00:24:15,640 Speaker 5: I want a good example of this from your episode 526 00:24:15,640 --> 00:24:19,040 Speaker 5: with Mary Daily was basically saying, well, we have goods 527 00:24:19,040 --> 00:24:22,400 Speaker 5: inflation that might be tariffs, but like services x housing 528 00:24:22,880 --> 00:24:26,159 Speaker 5: looks to be like not inflationary. And the FED basically 529 00:24:26,160 --> 00:24:28,080 Speaker 5: said the same story in twenty twenty one. And then 530 00:24:28,119 --> 00:24:30,960 Speaker 5: it's spread, and it's spread because for some people say, well, 531 00:24:30,960 --> 00:24:33,239 Speaker 5: it's because the lad Marcus is too strong. They kind 532 00:24:33,240 --> 00:24:35,480 Speaker 5: of missed that goods prices matter to service prices. So 533 00:24:35,480 --> 00:24:38,439 Speaker 5: think about insurance, think about the. 534 00:24:38,800 --> 00:24:40,000 Speaker 2: Cost of goods matters there. 535 00:24:40,160 --> 00:24:44,119 Speaker 5: If you think about leasing rental, airfares matter are affected 536 00:24:44,119 --> 00:24:47,360 Speaker 5: by energy prices, food services prices are affected by food prices, 537 00:24:47,800 --> 00:24:49,720 Speaker 5: and so the FED could easily be caught off sides again. 538 00:24:49,800 --> 00:24:52,800 Speaker 5: And I think that's something that I worry about. Independent 539 00:24:52,840 --> 00:24:54,840 Speaker 5: of whoever is the leader, where it's Chris Waller, whether 540 00:24:54,880 --> 00:24:59,040 Speaker 5: it's Kevin Warsh, whether it's David Servos, David Zervos. 541 00:24:59,000 --> 00:25:01,240 Speaker 4: This is something that I think is really unappreciated. 542 00:25:01,600 --> 00:25:04,639 Speaker 3: You know, we've seen car insurers saying that they're going 543 00:25:04,680 --> 00:25:07,400 Speaker 3: to raise rates because the cost of parts is expected 544 00:25:07,440 --> 00:25:09,280 Speaker 3: to go up under terraffs. And there are all these 545 00:25:09,320 --> 00:25:12,600 Speaker 3: sort of hidden connections in the economy, as we've learned 546 00:25:12,600 --> 00:25:15,400 Speaker 3: on our trip to Alaska once again, where you could 547 00:25:15,480 --> 00:25:19,479 Speaker 3: see terraf inflations start to show up. So one example is, 548 00:25:19,680 --> 00:25:23,679 Speaker 3: you know, you think you're buying Alaskan salmon made in Alaska, 549 00:25:23,720 --> 00:25:25,960 Speaker 3: caught in Alaska, but it turns out a bunch of 550 00:25:26,000 --> 00:25:28,480 Speaker 3: that salmon gets sent to China for processing and so 551 00:25:28,560 --> 00:25:31,520 Speaker 3: it gets reimported into the US. And so even something 552 00:25:31,720 --> 00:25:34,800 Speaker 3: like Alaskan salmon, you would see a teriff impact. 553 00:25:34,960 --> 00:25:37,480 Speaker 1: I know we should do we didn't do a fish episode, 554 00:25:37,520 --> 00:25:40,600 Speaker 1: but that was really I didn't had not realized how 555 00:25:40,720 --> 00:25:44,800 Speaker 1: much American fish is processed in China that reimported the 556 00:25:44,840 --> 00:25:47,639 Speaker 1: miracle of shipping. I have one last, one last question. 557 00:25:48,359 --> 00:25:51,399 Speaker 1: Things are like, so stocks are doing fine, He's like, oh, 558 00:25:51,440 --> 00:25:54,600 Speaker 1: it's doom and all this stuff and polit up politics 559 00:25:54,680 --> 00:25:59,320 Speaker 1: and the deficit and interest rate, et cetera. Like stocks 560 00:25:59,320 --> 00:26:02,480 Speaker 1: are like super or looking is it one hundred percent? Yeah, 561 00:26:02,520 --> 00:26:04,480 Speaker 1: But that's because it's all this like tech money and 562 00:26:04,520 --> 00:26:08,000 Speaker 1: AI spending. It doesn't totally satisfy me. There's other parts 563 00:26:08,040 --> 00:26:10,000 Speaker 1: the finance in doing are like, what's going on there 564 00:26:10,080 --> 00:26:11,960 Speaker 1: that does not seem like a market that is worried 565 00:26:12,000 --> 00:26:13,520 Speaker 1: about all these things that we talk about. 566 00:26:13,640 --> 00:26:16,080 Speaker 5: Yeah, it does seem like there's more growth optimism in 567 00:26:16,359 --> 00:26:19,199 Speaker 5: CAV markets. And I think tech is part of the 568 00:26:19,240 --> 00:26:21,520 Speaker 5: story right now that seem to five hundred kind of 569 00:26:21,560 --> 00:26:25,800 Speaker 5: adjust for reclassification is about half tech, right, So it's 570 00:26:25,800 --> 00:26:28,560 Speaker 5: clearly growing in terms of its relevance. And at the 571 00:26:28,600 --> 00:26:31,560 Speaker 5: same time, all this tech spending is probably keeping the 572 00:26:31,600 --> 00:26:34,719 Speaker 5: business cycle afloat on some level, at least more so 573 00:26:34,800 --> 00:26:36,320 Speaker 5: than would otherwise be the case. 574 00:26:37,440 --> 00:26:39,400 Speaker 2: But if you look at stuff. 575 00:26:39,080 --> 00:26:41,240 Speaker 5: Like even in equal weight to SMPU, you look at 576 00:26:41,280 --> 00:26:43,159 Speaker 5: other sort of measures that may be more neutral to 577 00:26:43,320 --> 00:26:46,960 Speaker 5: the tech dynamic. They've also shown these amount of optimism, right, 578 00:26:47,040 --> 00:26:49,280 Speaker 5: so those that are also telling you there's a lot 579 00:26:49,320 --> 00:26:52,600 Speaker 5: of confidence, that confidence might be misplaced, but over at 580 00:26:52,640 --> 00:26:54,520 Speaker 5: least of the short run, like there's some wisdom in it, 581 00:26:54,560 --> 00:26:56,160 Speaker 5: and that to me is like a reason to probably 582 00:26:56,160 --> 00:26:59,679 Speaker 5: shade against taking the bleakest view right now. And I 583 00:26:59,680 --> 00:27:01,720 Speaker 5: think even if you look at the jobs report that 584 00:27:01,880 --> 00:27:04,040 Speaker 5: everyone I think right fully said has a lot of 585 00:27:04,080 --> 00:27:07,480 Speaker 5: weakness in it, look at total hours growth among rank 586 00:27:07,480 --> 00:27:10,240 Speaker 5: and file employees, if you look at total income. 587 00:27:09,960 --> 00:27:12,560 Speaker 2: Growth among those workers, it's. 588 00:27:12,440 --> 00:27:14,919 Speaker 5: Pretty fine, much fine. It was that was actually okay, 589 00:27:15,320 --> 00:27:19,280 Speaker 5: And so we might have gotten the worst job support already. 590 00:27:19,520 --> 00:27:21,320 Speaker 5: If we don't, then obviously the FED can probably have 591 00:27:21,359 --> 00:27:23,760 Speaker 5: more confidence cutting. But if it's actually the case that, 592 00:27:23,880 --> 00:27:26,640 Speaker 5: like there's actually was a we had a Liberation Day shock, 593 00:27:26,720 --> 00:27:29,679 Speaker 5: but it didn't break things, especially because things got reversed 594 00:27:29,680 --> 00:27:31,720 Speaker 5: to a large degree, then you might be left a 595 00:27:31,760 --> 00:27:34,120 Speaker 5: situation where it's just slowing growth in real terms, and 596 00:27:34,160 --> 00:27:37,760 Speaker 5: maybe the nominal trajectory of the economy that total dollars spend, 597 00:27:37,800 --> 00:27:42,720 Speaker 5: total dollars earned aren't as adversely affected, and that might 598 00:27:42,760 --> 00:27:44,760 Speaker 5: not be a world in which you expect both high 599 00:27:44,800 --> 00:27:47,520 Speaker 5: rate cuts or anything that's sort of deeply recessionary, at 600 00:27:47,600 --> 00:27:49,000 Speaker 5: least in the short run trade. 601 00:27:49,080 --> 00:27:51,399 Speaker 1: So you know, I did run into Jerome Paul, you know, 602 00:27:51,800 --> 00:27:56,080 Speaker 1: Jackson Hall, just like serendipitously, I forgot about Yeah. No, 603 00:27:56,160 --> 00:27:58,399 Speaker 1: it was like it was you hadn't come yet and 604 00:27:58,400 --> 00:27:59,720 Speaker 1: it was just in the lodge and you were sitting 605 00:27:59,760 --> 00:28:00,680 Speaker 1: there with a couple of people. 606 00:28:00,680 --> 00:28:01,800 Speaker 4: I think, did you say hi? 607 00:28:02,240 --> 00:28:04,840 Speaker 1: Yeah? And I froze, like I did. I froze because 608 00:28:04,840 --> 00:28:06,399 Speaker 1: I couldn't write. Think it didn't seem like the right 609 00:28:06,440 --> 00:28:08,840 Speaker 1: time to like actually like to shop in retrospect. I 610 00:28:08,880 --> 00:28:11,080 Speaker 1: should have liked said something about the dead and like, 611 00:28:11,200 --> 00:28:14,000 Speaker 1: you know, because I had seen Dednco that year, and 612 00:28:14,000 --> 00:28:15,199 Speaker 1: I should that would have been a good thing. 613 00:28:15,240 --> 00:28:15,720 Speaker 2: But I said, so. 614 00:28:16,240 --> 00:28:18,520 Speaker 1: It's really beautiful here, injected litle. I've never been like 615 00:28:18,560 --> 00:28:19,720 Speaker 1: I sounded really stupid. 616 00:28:19,920 --> 00:28:22,399 Speaker 3: I yelled at one of his secret service people without 617 00:28:22,440 --> 00:28:24,639 Speaker 3: knowing it was one of his secret service people. He 618 00:28:24,760 --> 00:28:28,520 Speaker 3: was like, he was stuffing a bag into the airplane, oh, 619 00:28:28,560 --> 00:28:31,760 Speaker 3: in a really violent way. That was crushing my own 620 00:28:31,840 --> 00:28:34,399 Speaker 3: bag that had something kind of breakable in it. And 621 00:28:34,480 --> 00:28:36,520 Speaker 3: so I was like excuse me, stop doing that, and 622 00:28:36,560 --> 00:28:37,560 Speaker 3: then he got really angry. 623 00:28:37,640 --> 00:28:37,840 Speaker 2: Yeah. 624 00:28:37,840 --> 00:28:45,320 Speaker 1: Well, lots More is produced by Carmen Rodriguez and dash 625 00:28:45,320 --> 00:28:48,000 Speaker 1: Ol Bennett, with help from Moses Ondam and Kill Brooks. 626 00:28:48,400 --> 00:28:51,560 Speaker 3: Our sound engineer is Blake Maples. Sage Bauman is the 627 00:28:51,600 --> 00:28:52,920 Speaker 3: head of Bloomberg Podcasts. 628 00:28:53,440 --> 00:28:56,800 Speaker 1: Please rate, review, and subscribe to Odd, Lots and lots 629 00:28:56,800 --> 00:28:59,720 Speaker 1: More on your favorite podcast platforms. 630 00:28:59,440 --> 00:29:02,000 Speaker 3: And remember so that Bloomberg subscribers can listen to all 631 00:29:02,040 --> 00:29:06,360 Speaker 3: our podcasts ad free by connecting through Apple Podcasts. Thanks 632 00:29:06,360 --> 00:29:12,160 Speaker 3: for listening, Joe, you do a worryingly good impression of 633 00:29:12,200 --> 00:29:12,600 Speaker 3: a crank.