WEBVTT - Lots More With Skanda Amarnath on This Moment in Macro 0:00:02.480 --> 0:00:08.600 Bloomberg Audio Studios, podcasts, radio news. So here's why I'm 0:00:08.640 --> 0:00:10.800 so confused right now. Like, if someone said to me, 0:00:11.360 --> 0:00:15.000 just one reason, if someone said to me, look, you know, 0:00:15.200 --> 0:00:18.119 the economy is slowing down, clearly, job creation is in 0:00:18.200 --> 0:00:22.280 the tank, is decelerating, housing is in the tank, et cetera. 0:00:22.520 --> 0:00:24.120 There's a bunch of sectors that are soft. 0:00:24.120 --> 0:00:24.840 When you'd rate. 0:00:24.720 --> 0:00:28.240 Cuts, okay, that sounds good. Inflation has come down quite 0:00:28.240 --> 0:00:30.600 a bit from where it was, but it's still elevated. 0:00:30.640 --> 0:00:32.880 And then if someone said, look, the stock workers record 0:00:33.080 --> 0:00:36.400 high PPI just came in super hot, Inflation is still 0:00:36.440 --> 0:00:39.000 above levels, et cetera. Are you insane to even be 0:00:39.040 --> 0:00:41.440 talking about rate cuts, I'd be like, oh, yeah, okay, 0:00:41.520 --> 0:00:43.960 that makes sense too. Like I find many kinds of 0:00:44.080 --> 0:00:46.120 arguments to be very persuasive right here. I don't have 0:00:46.200 --> 0:00:46.880 strong views. 0:00:47.000 --> 0:00:50.040 I'm not one for hyperbole. I try not to be right. 0:00:50.040 --> 0:00:51.600 I try to be a good journalist in that sense. 0:00:51.640 --> 0:00:53.720 But I would honestly say, like, this is one of 0:00:53.760 --> 0:00:58.120 the most difficult macro environments to call in probably my 0:00:58.480 --> 0:01:02.400 professional career, which is longer than I would necessarily like 0:01:02.440 --> 0:01:04.360 it to be at this point. But as you said, 0:01:04.440 --> 0:01:06.880 if you look at the stock market, which feeds into 0:01:06.880 --> 0:01:10.759 financial conditions, right, look at financial conditions, like financial conditions 0:01:10.760 --> 0:01:13.479 do not look that restrictive at the moment, and yet 0:01:13.560 --> 0:01:15.679 you do have people who say that, actually we are 0:01:15.720 --> 0:01:18.920 still in restrictive territory and the labor market is weakening, 0:01:19.000 --> 0:01:20.959 as you said, and so we need a rate cut. 0:01:21.080 --> 0:01:23.320 So we have this one body of people who are 0:01:23.360 --> 0:01:26.000 talking about a potential FED policy there, and then we 0:01:26.040 --> 0:01:29.440 have another body of people, including people from the Trump administration, 0:01:29.480 --> 0:01:31.520 who are talking about the need to do a different 0:01:31.560 --> 0:01:32.760 the basis point, Yeah. 0:01:32.760 --> 0:01:35.640 It's all totally. You could make the argument that the 0:01:35.680 --> 0:01:38.400 FED is either committing a policy or now are contemplating 0:01:38.440 --> 0:01:40.920 a policy. Then there's this whole dynamic with the fact 0:01:40.959 --> 0:01:44.240 that we know that there's this one incredible thing going on, 0:01:44.280 --> 0:01:46.920 which is all the AI spending, and how that actually 0:01:46.920 --> 0:01:51.000 intersects with macro is very confusing. So we have Jackson 0:01:51.040 --> 0:01:52.640 Hole next week, which we're going to be. 0:01:52.640 --> 0:01:55.840 Ad I'm excited about jackson Hole. So the scuttle butt 0:01:56.080 --> 0:01:59.360 for journalists going to Jackson Hole is that apparently, like 0:01:59.440 --> 0:02:04.440 the room are even higher depend than normal because behind 0:02:04.600 --> 0:02:08.040 all the macro debate, which we just laid out. There's 0:02:08.080 --> 0:02:11.000 also the question of FED independence. Right, so interest in 0:02:11.080 --> 0:02:13.359 jackson Hole is like higher than it's ever been. 0:02:13.440 --> 0:02:15.720 It's going to be a big Jackson Hole. Whatever the 0:02:15.760 --> 0:02:18.080 formal theme of the conference is going to be. You know, 0:02:18.120 --> 0:02:20.840 there's going to be some academic theme coming up. Whatever 0:02:20.880 --> 0:02:22.400 that is, that's not going to be the theme. The 0:02:22.400 --> 0:02:23.880 theme is going to be all of the talk about 0:02:23.960 --> 0:02:28.240 FED independence. I did a deadlist. 0:02:28.320 --> 0:02:29.160 I'm both the. 0:02:29.120 --> 0:02:32.200 Most popular trader and most successful trader. 0:02:32.080 --> 0:02:33.959 At Citadel FEDA is going viral. 0:02:34.240 --> 0:02:35.080 Uh barches. 0:02:35.200 --> 0:02:37.280 This isn't after school Special, except. 0:02:36.960 --> 0:02:39.520 I've decided I'm going to base my entire personality going 0:02:39.520 --> 0:02:42.760 forward on campaigning for a strategic pork reserve in the US. 0:02:43.000 --> 0:02:43.680 Black goals. 0:02:43.840 --> 0:02:46.760 These are the important questions that robots taking over the world. 0:02:46.919 --> 0:02:49.720 No, I think that like in a couple of years, 0:02:49.919 --> 0:02:52.160 the AI will do a really good job of making 0:02:52.240 --> 0:02:55.240 the odd Launch podcast. One day that person will have 0:02:55.280 --> 0:02:56.280 the mandate of heaven. 0:02:56.480 --> 0:02:58.720 How do I get more popular and successful? 0:02:59.000 --> 0:02:59.679 We do have. 0:03:02.200 --> 0:03:04.560 You're listening to lots More, where we catch up with 0:03:04.560 --> 0:03:07.359 friends about what's going on right now, because. 0:03:07.080 --> 0:03:10.160 Even when the Odd Lots is over, there's always lots more. 0:03:10.360 --> 0:03:22.840 And we really do have the perfect Guest'skanda. 0:03:17.680 --> 0:03:19.040 And I used to have you here in. 0:03:18.960 --> 0:03:21.800 Our when Joe's confused, you're the guy we turned to. 0:03:21.880 --> 0:03:24.880 Yeah, that's right. Let's start actually just quick take. We're 0:03:24.919 --> 0:03:27.960 recorded this nine oh four August fourteen, about thirty minutes 0:03:28.040 --> 0:03:31.800 ago we got that really hot PPI report. But also 0:03:31.840 --> 0:03:34.040 I don't know what that means, Like, is a big deal. 0:03:34.160 --> 0:03:35.800 What does it say? What's going on there? 0:03:35.920 --> 0:03:36.040 Is it? 0:03:36.160 --> 0:03:39.040 What does it mean for PCE? Is it means that 0:03:39.280 --> 0:03:41.080 margins are going to be crimped? What's going on there? 0:03:41.280 --> 0:03:44.119 I mean, I think for PPI today should be seen 0:03:44.160 --> 0:03:46.920 as at least showing the inflationary side of the story 0:03:47.000 --> 0:03:49.120 is still there. Okay, not just in terms of like 0:03:49.160 --> 0:03:51.560 some of the aggregates may be distorted for a lot 0:03:51.600 --> 0:03:54.360 of reasons, but what matters for the FEDS inflation gauges 0:03:54.600 --> 0:03:56.800 got moved up a bit. Okay, So what you're going 0:03:56.840 --> 0:04:01.280 to be tracking for inflation for July, PIPPI both matter, 0:04:01.480 --> 0:04:02.960 and so that's going to be moved. 0:04:02.840 --> 0:04:03.320 Up a bit. 0:04:03.840 --> 0:04:05.640 So we're gonna be running it roughly two point nine 0:04:05.640 --> 0:04:11.280 percent on core PCE. Substantially, we are higher now than 0:04:11.320 --> 0:04:14.120 we were last year. It is like it's starting to 0:04:14.120 --> 0:04:16.120 look like the progress is starting to turn the other direction. 0:04:16.560 --> 0:04:19.240 Now there may be some reasons why it is transitory 0:04:19.320 --> 0:04:22.679 this time, that it is temporary, and yet it doesn't 0:04:22.720 --> 0:04:26.000 really feel great, and I imagine for Chair Powell there's 0:04:26.040 --> 0:04:28.840 a feeling of wait. I remember in twenty twenty one 0:04:28.880 --> 0:04:30.880 in August that was pretty confident that it's just going 0:04:30.880 --> 0:04:33.600 to be short term, and then we saw some increases 0:04:33.640 --> 0:04:35.160 and I said, well, we got to focus on in 0:04:35.200 --> 0:04:38.039 the labor market back first, and then people kind of 0:04:38.040 --> 0:04:41.200 have held that against him accordingly, But now we have 0:04:41.600 --> 0:04:43.600 inflation picking up, and yeah, we also see a lot 0:04:43.640 --> 0:04:47.640 of job market maybe employment levels look fine. Yeah, the 0:04:47.680 --> 0:04:50.360 momentum the job growth that we're seeing in the latest 0:04:50.360 --> 0:04:52.480 release is understandably spooky too. 0:04:53.040 --> 0:04:56.320 I asked Mary Daily this question before. But do starting 0:04:56.360 --> 0:04:59.000 points matter here? Because if you look at the labor market, 0:04:59.080 --> 0:05:02.720 the labor market as it's been really really strong in 0:05:02.800 --> 0:05:05.600 recent years, like certainly much stronger than people had expected. 0:05:05.680 --> 0:05:08.640 And so, okay, there are some signs of softening now 0:05:08.720 --> 0:05:10.920 it does seem to be losing momentum, but we are 0:05:10.960 --> 0:05:14.800 still starting from a place of strength. Does that mean 0:05:14.880 --> 0:05:18.120 potentially the FED can you know, maybe let that one 0:05:18.200 --> 0:05:20.120 go and look more at the inflation risk. 0:05:20.320 --> 0:05:23.440 To your point, I think it certainly matters, It's not 0:05:23.520 --> 0:05:25.520 the only thing that matter. I think momentum and starting 0:05:25.520 --> 0:05:29.440 point both matter, and the starting point is better. The 0:05:30.120 --> 0:05:34.159 momentum is some of the weakest we've seen outside of 0:05:34.200 --> 0:05:36.480 recession in a while now. Some of them might be 0:05:36.560 --> 0:05:38.520 due to immigration, some of that might be due to 0:05:38.560 --> 0:05:39.840 tariff uncertainty. 0:05:40.000 --> 0:05:41.160 Some of that might be due to. 0:05:42.600 --> 0:05:45.080 Interest rates are higher, and that matters for some sectors more, 0:05:45.240 --> 0:05:48.719 even if the financial conditions you just talked about are 0:05:48.760 --> 0:05:51.919 still pretty accommodative if your time about capital markets. So 0:05:52.040 --> 0:05:54.480 these are all kind of confusing in terms of what 0:05:55.080 --> 0:05:58.880 is the actual, like labor market trajectory that's permissible. I 0:05:58.880 --> 0:06:01.760 think the FED is right now inclined to cut in September, 0:06:01.800 --> 0:06:04.680 given what we've seen in the labor market data. But 0:06:04.800 --> 0:06:07.240 I will just warn just as the data got revised 0:06:07.279 --> 0:06:09.719 before it could get revised again. It may be the 0:06:09.760 --> 0:06:13.560 case that May and June were the weakest months for 0:06:13.680 --> 0:06:16.839 job growth and that we see some local acceleration just 0:06:16.839 --> 0:06:19.400 because there's a little bit more certainty on trade policy 0:06:19.400 --> 0:06:22.520 than there was before. So there's still another job support 0:06:22.560 --> 0:06:25.560 before the September meeting, and there's another bat to inflation 0:06:25.640 --> 0:06:27.160 data that's also going to come out, and I think 0:06:27.200 --> 0:06:30.880 that will actually probably matter in the sense that typically 0:06:30.920 --> 0:06:32.919 you see price changes that are more volatile as you 0:06:32.920 --> 0:06:35.880 get into back to school season, holiday season, the turn 0:06:35.920 --> 0:06:38.800 of the calendar year. What we've seen thus far is 0:06:38.920 --> 0:06:41.359 typically the more benign months, you typically don't see prices 0:06:41.400 --> 0:06:43.680 change that much. So there's still a lot to play 0:06:43.680 --> 0:06:45.640 for in terms of going into the September meeting. 0:06:46.240 --> 0:06:48.320 So here's the thing I've been thinking about, trying to 0:06:48.320 --> 0:06:51.599 conceptualize what's going on. And you know, as Tracy mentioned, 0:06:51.640 --> 0:06:55.200 we talked to Mary Daily last week in Alaska and 0:06:55.480 --> 0:06:58.080 she's kind of the view right now or she says 0:06:58.360 --> 0:07:00.680 that she does not think that the tariffs will be 0:07:00.760 --> 0:07:05.240 particularly inflationary ors inflationary on a sustained basis, And you know, 0:07:05.279 --> 0:07:08.120 there's certainly an argument tariffs are tax increases, and tax 0:07:08.160 --> 0:07:10.280 increases we don't think of as inflationary. We think of 0:07:10.320 --> 0:07:15.200 them as disinflationary if anything. On the other hand, they 0:07:15.240 --> 0:07:18.720 throw a wrench into supply chains. They have very different 0:07:18.800 --> 0:07:21.440 effects across different like they sort of strike me as 0:07:21.520 --> 0:07:23.960 like a bit of just like throwing sand into gears. 0:07:24.360 --> 0:07:27.880 And if you combine throwing sand into gears with really 0:07:27.920 --> 0:07:31.800 big deficits, and now that I'm middle age, I talk 0:07:31.840 --> 0:07:35.200 about deficits. We've got a pretty big July deficit number. 0:07:35.280 --> 0:07:37.600 It was ten percent higher than the year before. This 0:07:37.640 --> 0:07:40.480 is despite the tariff revenue. If you're throwing sand into 0:07:40.480 --> 0:07:43.360 gears of industry, making commerce less efficient by creating all 0:07:43.360 --> 0:07:46.160 these frictions, and you're pushing in all this money by 0:07:46.160 --> 0:07:50.080 expanding deficits, that strikes me as a potentially inflationary cocktail. 0:07:50.920 --> 0:07:51.600 I would agree. 0:07:51.680 --> 0:07:53.600 I think that's possibly have both right, that there is 0:07:53.640 --> 0:07:55.960 some what I would call stackflation light right that it's 0:07:56.000 --> 0:07:59.000 obviously unemployment rates are still low. That's pretty distinct from 0:07:59.040 --> 0:08:02.400 the stackflation of the seventies. But the momentum in the 0:08:02.440 --> 0:08:05.160 labor market seems weaker because I think there probably is 0:08:05.200 --> 0:08:11.360 for any sort of trade sensitive sector, think about construction, manufacturing, retail, trade, wholesale, trade, warehousing. 0:08:11.760 --> 0:08:14.760 These are all showing weakness and job growth more recently, 0:08:15.040 --> 0:08:17.480 and so we're seeing that side of the equation that 0:08:17.920 --> 0:08:20.480 should be disinflation area at the margin, because less labor 0:08:20.520 --> 0:08:23.040 income should mean less consumer spending and at the same 0:08:23.040 --> 0:08:25.440 time you're putting in costs adding to the business cost 0:08:25.440 --> 0:08:28.600 structure in ways that businesses can't stomach bey on a 0:08:28.600 --> 0:08:31.240 certain point, right, So some businesses are probably roll positioned 0:08:31.240 --> 0:08:36.200 to absorbit the hit to margin, but there's a limit 0:08:36.240 --> 0:08:36.920 to that as well. 0:08:37.040 --> 0:08:38.200 I think the issue with sort of. 0:08:38.200 --> 0:08:41.720 The tariff flesh trade shock, the modeling of it is 0:08:41.840 --> 0:08:45.640 if you have costs be pushed through to consumers over 0:08:45.720 --> 0:08:48.480 time that can still be consistent with just real incomes 0:08:48.600 --> 0:08:52.640 sort of declining even if nominal income growth is onstead 0:08:52.640 --> 0:08:55.440 of your footing. And so that would be a very 0:08:55.480 --> 0:08:57.199 tricky backdrop for the fit to navigate. 0:08:58.559 --> 0:09:01.000 Just going back to inflation for a second, can you 0:09:01.040 --> 0:09:03.480 walk us through what's going on with energy prices at 0:09:03.480 --> 0:09:06.680 the moment, because on the one hand, oil still pretty low, 0:09:06.840 --> 0:09:10.040 as we talked a lot about in Alasta that or yeah, 0:09:10.120 --> 0:09:12.199 people really care about the price of oil in Alaska, 0:09:12.320 --> 0:09:15.319 not necessarily the way that most car driving Americans do. 0:09:16.320 --> 0:09:20.000 So it's funny like in America on oil to quote 0:09:20.000 --> 0:09:22.280 lower forty eight, which is a term I'd never used 0:09:22.280 --> 0:09:24.520 as much than in the last week. It's like an 0:09:24.520 --> 0:09:26.680 oil crisis is when it's really high there, it's the 0:09:26.720 --> 0:09:28.760 exact opposite and right, keep going. 0:09:28.640 --> 0:09:30.760 That's right, Okay, so oil prices are low, but at 0:09:30.800 --> 0:09:35.280 the same time we're seeing some electricity prices rise, possibly 0:09:35.440 --> 0:09:38.000 a sort of crowding out effect from all the data 0:09:38.000 --> 0:09:40.600 center demand and AI enthusiasm and things like that. 0:09:41.080 --> 0:09:44.200 Yeah, so I think that there's a bifurcation and energy prices. Right, 0:09:44.240 --> 0:09:47.920 So we have your standard commodity prices, specifically for oil, 0:09:48.400 --> 0:09:50.439 have stayed at the lower end of the range. Right, 0:09:50.720 --> 0:09:53.360 we're still diffinitely speaking in the maybe low sixties, right 0:09:53.400 --> 0:09:54.040 and WTI. 0:09:54.240 --> 0:09:56.680 So these are prices that. 0:09:57.320 --> 0:10:00.840 Should be not painful for the consumer. Yet we also 0:10:00.920 --> 0:10:05.240 have electricity price increases. And the electricity price increases that 0:10:05.280 --> 0:10:07.480 we've seen, some part of that is due to natural 0:10:07.520 --> 0:10:10.400 gas price volatility, although natural gas prices more recently have 0:10:10.400 --> 0:10:12.720 come down, but there's also an there are a lot 0:10:12.760 --> 0:10:14.760 of things that go into electricity prices that are independent 0:10:14.800 --> 0:10:17.400 of that. So in a lot of regions of the 0:10:17.400 --> 0:10:20.800 country we're seeing capacity looks to be short for the 0:10:20.840 --> 0:10:22.600 longest time. A lot of these a lot of what 0:10:22.640 --> 0:10:26.720 you call thermal sources of electricity generation are typically not 0:10:26.800 --> 0:10:29.880 very economical. Right, We're economical as short runs since because 0:10:30.679 --> 0:10:33.760 we have more capacity than we need, so the ability 0:10:33.800 --> 0:10:37.080 to be paid for that capacity is not great. So 0:10:37.080 --> 0:10:40.079 that's why we retire coal plants, we retire nuclear plants. 0:10:40.440 --> 0:10:41.960 Now you're seeing the other side of that, right, and 0:10:42.000 --> 0:10:44.640 it takes a long time to build that stuff, and 0:10:44.840 --> 0:10:47.960 so the retirements have are coming to a pause. For Hey, 0:10:48.040 --> 0:10:50.120 actually we might be short on capacity if the data 0:10:50.160 --> 0:10:54.120 centerler demands are there, and building new capacity is very expensive, 0:10:54.280 --> 0:10:58.120 very time intensive, and that seems to be an issue. 0:10:58.160 --> 0:10:58.680 And at least a. 0:10:58.679 --> 0:11:02.560 Number of major regions there's like the mid Atlantic region PJM. 0:11:03.000 --> 0:11:04.800 You're hearing this also show up though in terms of 0:11:05.120 --> 0:11:07.360 rates are increasing in Georgia. And New England has its 0:11:07.360 --> 0:11:09.959 own set of problems because it burns a lot of 0:11:10.040 --> 0:11:13.760 natural gas electricity but also doesn't have the requisite pipeline capacity. 0:11:14.080 --> 0:11:16.520 I love that I'm double hedged to New England energy 0:11:16.559 --> 0:11:20.160 prices plus conned in New York. Although although I do 0:11:20.240 --> 0:11:23.240 have solar panels in Connecticut. Now, as we were discussing, 0:11:23.280 --> 0:11:26.320 so sometimes sometimes my bill is actually negative, which is lovely. 0:11:26.760 --> 0:11:29.160 The Texas hedge. This is the thing, which is that 0:11:29.600 --> 0:11:32.560 so I mentioned in the beginning, so much investment happening 0:11:32.640 --> 0:11:36.520 in AI which doesn't seem to like, I mean, doesn't 0:11:36.520 --> 0:11:38.600 seem to be paying off economy wide yet. It's not 0:11:38.600 --> 0:11:41.120 like we've seen some great dissinflationary boom or all these 0:11:41.120 --> 0:11:43.559 companies suddenly getting more efficient. Though maybe there are I'm 0:11:43.600 --> 0:11:46.320 sure you can find pockets. But there's a lot of spending, 0:11:46.320 --> 0:11:47.800 and there's a lot of spending on gear, and there's 0:11:47.800 --> 0:11:49.960 a lot of spending on buildings, and a little bit 0:11:49.960 --> 0:11:52.560 of spending on labor. You know, some people have been 0:11:52.559 --> 0:11:55.520 talking about this crowding out of fact. Jason Furman talked 0:11:55.559 --> 0:11:57.600 about it in a tweet that maybe this just feels 0:11:57.640 --> 0:11:59.760 like a fiscal crowded God, is that fair at this 0:11:59.760 --> 0:12:02.319 point or is it too soon to tell, like whether 0:12:02.520 --> 0:12:03.599 all this expenditures. 0:12:03.920 --> 0:12:05.520 Has been writing about this quite a bit as well. 0:12:05.559 --> 0:12:07.559 Yeah, I'm curious how you characterize. 0:12:07.120 --> 0:12:07.559 It right down. 0:12:07.559 --> 0:12:10.200 I mean, obviously there's some bid for resources that could 0:12:10.240 --> 0:12:13.480 otherwise be deployed elsewhere, and also a bit sort of 0:12:13.520 --> 0:12:15.880 if let's say you're an investor and you're obviously some 0:12:16.000 --> 0:12:18.840 level of capital constraint going on, if you're investing everything 0:12:18.880 --> 0:12:21.800 in AI and basically cutting spending an investment in other 0:12:21.840 --> 0:12:24.439 areas there's some sort of crowding out effect. But I 0:12:24.440 --> 0:12:28.120 would just also caution that's like a secondary effect right there. 0:12:28.120 --> 0:12:30.480 The primary one is still that there's more investment. But 0:12:30.559 --> 0:12:31.959 do us on. 0:12:32.040 --> 0:12:35.480 The electricity front though, is that connected or is that 0:12:35.600 --> 0:12:38.280 still just our manufactors pushing up the electricity cross and 0:12:38.360 --> 0:12:39.560 maybe data stiers are one. 0:12:39.720 --> 0:12:42.080 I think the data center effect is something probably better 0:12:42.120 --> 0:12:45.560 to describe up until this very moment, like we're probably 0:12:45.640 --> 0:12:48.520 hitting something. I'm an inflection point, right, so you are 0:12:49.800 --> 0:12:53.400 like load demand for electricity has stopped sort of having 0:12:53.440 --> 0:12:57.040 the sort of its local stagnation. Okay, but we haven't 0:12:57.120 --> 0:12:59.360 yet seen the pick up. The pickup is probably coming 0:12:59.440 --> 0:13:03.040 very soon, maybe right now, And as that happens and 0:13:03.360 --> 0:13:07.560 it has its pass through into pricing over the coming years, 0:13:08.120 --> 0:13:09.760 I think there will be some sort of so super 0:13:09.760 --> 0:13:12.760 cycle dynamic to this that is likely to weigh on 0:13:12.920 --> 0:13:13.920 costs and investment. 0:13:14.040 --> 0:13:15.800 Just sorry, just a week there, Like those are like 0:13:16.000 --> 0:13:18.720 price increases in Georgia that people are talking about, or 0:13:19.240 --> 0:13:21.640 it's too early to say, oh, that's data centers. 0:13:21.920 --> 0:13:23.480 It's a sort of yes and no question where the 0:13:23.480 --> 0:13:26.280 economously give you both answers because it's like if something 0:13:26.360 --> 0:13:28.080 stops going down and starts flattening out. 0:13:28.000 --> 0:13:30.200 And starts to pick Yeah, yeah, there is a like. 0:13:30.240 --> 0:13:32.319 It may not have started going up in outright terms, 0:13:32.320 --> 0:13:34.320 but the dynamic is, it's part of the dynamic. 0:13:34.400 --> 0:13:35.920 So I think that I think it's it's both. 0:13:49.920 --> 0:13:52.080 As we mentioned, Joe and I are going to Jackson 0:13:52.080 --> 0:13:55.920 Hole next week and the theme doesn't really matter. The 0:13:55.920 --> 0:13:58.600 theme is central bank independence. And if Powell is going 0:13:58.679 --> 0:14:01.560 to do what President and Trump is asking him to do, 0:14:01.600 --> 0:14:06.800 which is cut rates, I'm thinking how to characterize this question, 0:14:07.520 --> 0:14:10.800 How does like the central bank dynamic actually feed into 0:14:10.840 --> 0:14:12.400 the discussion around rates. 0:14:13.559 --> 0:14:15.760 I mean, I think there is on one level of the 0:14:15.760 --> 0:14:18.079 Feder will tell you they're putting the blinders on and 0:14:18.160 --> 0:14:20.760 they don't listen to what Scott Bessen does. One of 0:14:20.760 --> 0:14:24.520 the most actively lobbying for was fifty basis points. And 0:14:24.640 --> 0:14:27.280 yet you can't deny that there is going to be 0:14:27.360 --> 0:14:31.480 some issue of how does the Fed do something in 0:14:31.520 --> 0:14:35.000 a way where it doesn't look politically right. Legitimacy in 0:14:35.000 --> 0:14:36.840 some ways of whatever the Fed does gets undermined. 0:14:36.840 --> 0:14:37.840 There's an optics problem. 0:14:38.000 --> 0:14:40.520 If they don't do what the Treasury says, then they're 0:14:40.560 --> 0:14:43.200 clearly trying to push back against the Treasury in some way, 0:14:43.320 --> 0:14:45.480 and so then there will be one set of stakeholders 0:14:45.480 --> 0:14:47.600 who are upset, and at the same time there are 0:14:47.640 --> 0:14:50.040 others who will be saying, like, if the Fed does 0:14:50.120 --> 0:14:52.560 cut fifty basis points, it's like, Okay, they're just following 0:14:52.600 --> 0:14:54.960 the Treasury, which just listened to Scott Besson now. And 0:14:55.000 --> 0:14:57.560 that is a dilemma for how you really handle the 0:14:57.560 --> 0:14:59.640 optics that Mary Daily talked about this on your episode, 0:14:59.640 --> 0:15:02.120 which was you got to try to just explain your decisions, 0:15:02.160 --> 0:15:04.120 try to be transparent, try to be consistent. 0:15:04.480 --> 0:15:06.000 That was really important things. 0:15:07.000 --> 0:15:09.880 It'll matter to a point, and yet I'm sure there'll 0:15:09.920 --> 0:15:11.240 be plenty of cynics that needs. 0:15:11.040 --> 0:15:12.360 To start tweeting in all cats. 0:15:13.200 --> 0:15:16.040 Uh did you see the headline yesterday. I think it 0:15:16.080 --> 0:15:20.040 was attributing CNBC that David Servos is. 0:15:21.360 --> 0:15:23.560 Know you guys laugh. I like David. 0:15:23.800 --> 0:15:25.640 We have never had him on odd launch and which 0:15:25.680 --> 0:15:27.920 is an oversight. I've always liked talking to David though, 0:15:28.120 --> 0:15:32.440 but I feel like, you know, we never got unfortunately, 0:15:32.960 --> 0:15:38.720 Paul McCully, the VET, the long haired iconoclastic guy from industry. Yeah, 0:15:38.760 --> 0:15:42.000 and David Servos is like the next best shot of 0:15:42.040 --> 0:15:46.080 this sort of iconoclassic guy who comes from Wall Street. 0:15:46.680 --> 0:15:49.280 I like David. I like David. I feel like, you know, 0:15:49.360 --> 0:15:51.680 he was like the closest thing to like a contemporary 0:15:51.920 --> 0:15:53.480 kind of a mccaulleyish character. 0:15:53.600 --> 0:15:56.680 I will say, from a sartorial perspective, it would be 0:15:56.760 --> 0:15:57.400 very interesting. 0:15:57.520 --> 0:15:59.520 Yeah, I like I've always loved talking to David. 0:16:00.120 --> 0:16:02.960 I mean, he would certainly be a character, and so 0:16:03.040 --> 0:16:05.800 you probably get livelier press conference. 0:16:05.680 --> 0:16:08.040 Press coverage. Do you have any thoughts on the derby? 0:16:08.400 --> 0:16:10.920 Every day the list of names gets longer. Do you 0:16:10.960 --> 0:16:12.560 have any thoughts on this process. 0:16:12.760 --> 0:16:15.480 I can't take it seriously, right, I think as far 0:16:15.520 --> 0:16:17.200 as the number of names that have been thrown, I 0:16:17.240 --> 0:16:19.040 don't think Yellen is being consideractive. 0:16:19.600 --> 0:16:22.640 These are these are things that seems to very very I. 0:16:23.440 --> 0:16:26.760 Saw that, and yeah, there. 0:16:26.640 --> 0:16:29.160 Are some names, so, I mean, there are some names 0:16:29.160 --> 0:16:30.440 to take seriously. I'm not saying that. 0:16:30.600 --> 0:16:33.240 I do think the length of the list being offered, 0:16:33.320 --> 0:16:35.480 some of them are clearly not serious. Name is being 0:16:35.480 --> 0:16:37.880 put forth, but it may serve some tactical purpose for 0:16:38.320 --> 0:16:40.760 the kind of policies they want. If they're trying to 0:16:40.760 --> 0:16:43.200 broaden the list of people who they're considering. Get those 0:16:43.200 --> 0:16:46.880 people to lobby more actively and publicly for lower rates, 0:16:46.920 --> 0:16:50.080 then that might be something Nick Timrose. 0:16:50.160 --> 0:16:52.760 But the Journal pointed this out in an article, which 0:16:52.840 --> 0:16:55.320 is that if you have one hundred people who all 0:16:55.400 --> 0:16:57.960 think that they're in the running to be Ventcher, that's 0:16:58.000 --> 0:17:00.200 a hundred people going on TV saying now it's a 0:17:00.200 --> 0:17:02.920 great time to cut rates. And then you're sort of like, wait, 0:17:02.960 --> 0:17:05.600 why is it Powell cutting rates? Everyone on TV knows 0:17:05.680 --> 0:17:08.240 now's the time. So yeah, there are some deep brilliance 0:17:08.320 --> 0:17:08.880 going on here. 0:17:09.560 --> 0:17:12.119 I do have asked, though, like all the lobbying for 0:17:12.240 --> 0:17:15.520 lower rates, we have substantial number rate cuts priced in 0:17:15.560 --> 0:17:18.760 over the next twelve months, and yet long. 0:17:18.680 --> 0:17:21.480 Term indust rates haven't really budged that much. Yeah, which 0:17:21.520 --> 0:17:22.880 is if you think about, like. 0:17:22.800 --> 0:17:24.720 Where the pain points in the frustration are with like 0:17:24.800 --> 0:17:27.359 higher interust rates right now or at least if you 0:17:27.480 --> 0:17:30.600 to extendnything. Four point three percent fed funds rate is high, 0:17:30.680 --> 0:17:33.720 and that's part of the reason why tenure yields are 0:17:34.119 --> 0:17:38.320 at four point two four point three percent roughly speaking, like, 0:17:38.480 --> 0:17:40.840 you're not getting much effect from the rate atecuts being 0:17:40.840 --> 0:17:42.680 priced right now. And I do think I kind of 0:17:42.720 --> 0:17:44.840 raise some questions about what is the actual objective here, 0:17:45.000 --> 0:17:48.280 Even if you get the rate cuts you so desperately wish, 0:17:48.720 --> 0:17:49.720 especially if it's coming, if it. 0:17:49.760 --> 0:17:51.880 Doesn't feed into like the thirty year mortgage. 0:17:51.560 --> 0:17:54.240 Rates, Yeah, exactly, like housing was the big pain point 0:17:54.400 --> 0:17:56.960 and you're not really getting that effect. That to me 0:17:57.000 --> 0:17:59.960 suggests like there is some level of a credibility gap 0:18:00.280 --> 0:18:02.000 if you're just saying I'm going to cut rates no matter, 0:18:02.280 --> 0:18:04.119 no matter what the inflation rate is, because I want 0:18:04.160 --> 0:18:06.880 to do it for political motivation. I mean, I want 0:18:07.000 --> 0:18:10.000 investors obviously need to be compensated on some level for risk, 0:18:10.080 --> 0:18:11.840 or also for the risk that maybe some in the 0:18:11.920 --> 0:18:14.360 future rates might go back up. If the people who 0:18:14.400 --> 0:18:17.480 are arguing for lower rates today would argue for higher 0:18:17.560 --> 0:18:20.399 rates under a different political environment, that's not exactly. That 0:18:20.400 --> 0:18:24.000 doesn't lend itself to keeping getting long term interest rates lower. 0:18:24.080 --> 0:18:26.320 And Oh, what's your take on why long term interest 0:18:26.400 --> 0:18:27.479 rates haven't gone lower? 0:18:27.760 --> 0:18:29.960 I think there's probably two things here that stick out 0:18:29.960 --> 0:18:33.840 to me. One is, well, inflation still seems like it's there, right, 0:18:34.040 --> 0:18:36.479 We're haven't gone things back to two percent, and so 0:18:36.680 --> 0:18:38.480 there's just a risk of the Feds being caught off 0:18:38.520 --> 0:18:40.760 sides here, if the FED starts to cut more aggressively 0:18:40.880 --> 0:18:43.520 at a time when inflation might pick up, you can say, well, 0:18:43.560 --> 0:18:46.000