WEBVTT - Key Jobs Reading and Tariff Rates Unveiled 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.160 us live on YouTube. 0:00:27.400 --> 0:00:29.320 We are advantaged with us. 0:00:29.440 --> 0:00:33.120 Claudia Som We're thrilled that she could join us here 0:00:33.200 --> 0:00:35.960 on each and every jobs a chief economist at News 0:00:35.960 --> 0:00:41.560 Century Advisors, Claudia, I guess a question to let you discuss. 0:00:42.479 --> 0:00:47.320 Maybe it's not an Nber recession, but if I've got 0:00:47.479 --> 0:00:52.839 a ginormous negative revision in an under one hundred thousand 0:00:53.440 --> 0:00:55.760 this month jobs report. 0:00:55.560 --> 0:01:00.400 What portion of America is now in recession? So we 0:01:00.440 --> 0:01:01.080 need we need to. 0:01:01.040 --> 0:01:05.400 Be really careful with these payroll numbers in that you know, 0:01:05.440 --> 0:01:09.520 it's telling us something about labor demand is slowing, right, 0:01:09.560 --> 0:01:12.000 and that that piece that contraction, that what it's a 0:01:12.040 --> 0:01:16.280 recession that's about demand falling short. We also are in 0:01:16.360 --> 0:01:18.480 a period it's very hard to measure, but we are 0:01:18.560 --> 0:01:21.280 in a period where it is likely that the labor. 0:01:21.120 --> 0:01:22.800 Supply is also slowing. 0:01:23.080 --> 0:01:26.520 You know, we've had dramatic retroductions in immigration. We also 0:01:26.520 --> 0:01:29.640 have an aging workforce, right, so we so those two 0:01:29.680 --> 0:01:32.679 things can come together and get you lower numbers in 0:01:32.760 --> 0:01:36.080 terms of payrolls. The bad piece, the thing that like 0:01:36.120 --> 0:01:37.480 the FED might want to react to, would be the 0:01:37.480 --> 0:01:40.959 weaker labor demand, that structural piece, that supply piece. That 0:01:41.080 --> 0:01:44.039 is not something the FED reacts to. So while these 0:01:44.040 --> 0:01:46.480 payroll numbers are pretty eye popping, you know, you know 0:01:46.560 --> 0:01:48.880 some attention, these are weaker than we thought in the revisions. 0:01:49.360 --> 0:01:52.000 Look at that unemployment rate, right, it ticked up, but 0:01:52.040 --> 0:01:55.000 that is still a good that looks like balance still 0:01:55.160 --> 0:01:55.720 to your. 0:01:55.640 --> 0:01:58.400 Yield was a negative ten basis points, it's now a 0:01:58.440 --> 0:02:03.320 negative fourteen basis point. To translate, folks, yields our lower 0:02:03.720 --> 0:02:07.240 bond prices higher the thirty year bond even as higher. 0:02:07.280 --> 0:02:11.160 Here modeling out that September meeting, Claudia sum, if I 0:02:11.200 --> 0:02:14.359 look at the data, my amateur answer is I want 0:02:14.400 --> 0:02:18.480 to smooth out to a three months unemployment rate. That 0:02:18.680 --> 0:02:24.240 statistic is thirty five thousand. I mean the President's going 0:02:24.280 --> 0:02:27.360 to go to Jerome Powell and say we're well under 0:02:27.400 --> 0:02:32.600 one hundred thousand on a ninety day jobs report. Can 0:02:32.639 --> 0:02:35.320 you say, okay, it's time to adjust. 0:02:35.520 --> 0:02:36.200 Could we have. 0:02:36.120 --> 0:02:40.680 An intermediate inter meeting rate cut. 0:02:43.680 --> 0:02:47.880 I mean I think that is highly unlikely. Again, the 0:02:47.960 --> 0:02:51.239 unemployment rate is four point two percent. Fair the Fed, 0:02:51.639 --> 0:02:55.680 there's there's movements, Like the FED can't change the labor supply. 0:02:55.720 --> 0:02:58.800 They can't think if they're structural changes, that's not their remit, 0:02:58.840 --> 0:03:01.840 that's not their tools, right, and so they're going to 0:03:01.880 --> 0:03:04.200 be watching very carefully the unemployment. It did move up, 0:03:04.480 --> 0:03:06.400 if it continues to move up, if it picks up 0:03:06.440 --> 0:03:08.600 pace as it moves up, Like these are real science, 0:03:08.760 --> 0:03:11.040 you know, the payrolls they're telling us something. And there 0:03:11.040 --> 0:03:13.480 certainly is a risk that there's more labor demand. But 0:03:13.600 --> 0:03:16.880 this is not this is not I mean, no one 0:03:16.960 --> 0:03:19.799 data release would tend to, you know, bring the FED 0:03:19.840 --> 0:03:23.480 into intermeding action. But this is not you know, just 0:03:23.600 --> 0:03:26.200 the broadbrush the top line numbers. This doesn't look like that. 0:03:26.400 --> 0:03:29.359 Paul in August in Michigan and Ann Arbor. Yeah, there's 0:03:29.400 --> 0:03:33.120 a junior, Claudia Sam's in graduate school who's going to 0:03:33.160 --> 0:03:34.760 look at the immigration overlay on. 0:03:34.920 --> 0:03:36.600 Yes, I know that's really what I like to see 0:03:36.600 --> 0:03:39.080 that Claudia, Tom and I try to, you know, kind 0:03:39.080 --> 0:03:41.440 of look at things on a rolling basis here, not 0:03:41.480 --> 0:03:43.640 get too caught up in one month here, one month there. 0:03:43.680 --> 0:03:47.520 The non farm payroll three month average change that's also 0:03:47.600 --> 0:03:49.640 notable here. It was one hundred and fifty thousand, kind 0:03:49.680 --> 0:03:52.080 of poking along, one hundred and fifty thousand last month, 0:03:52.360 --> 0:03:55.600 that gets revised down to sixty four thousand, and then 0:03:55.640 --> 0:03:58.200 this month comes in an even lower thirty five thousand. 0:03:59.320 --> 0:03:59.840 I don't know that. 0:04:00.200 --> 0:04:02.400 That seems like something's going on out there. How do 0:04:02.440 --> 0:04:03.080 we think about that? 0:04:05.960 --> 0:04:07.160 Right there? 0:04:07.560 --> 0:04:10.640 Yes, like in smoothing through the numbers, but again that 0:04:10.720 --> 0:04:14.720 these payrolls to put to piece apart, what is you know, 0:04:14.840 --> 0:04:17.400 supply and demand, and it's very hard. Like the immigration 0:04:17.600 --> 0:04:19.880 was we don't have good numbers in real time, but 0:04:19.920 --> 0:04:24.839 we see border crossings have basically stopped for unauthorized immigration, 0:04:25.360 --> 0:04:28.440 and the immigration you know whatever, you know, you think 0:04:28.440 --> 0:04:31.040 about the policies like it wasn't an important driver of 0:04:31.160 --> 0:04:34.000 labor force growth and these job gains that we needed 0:04:34.000 --> 0:04:36.039 to be making, you know, in years past to get 0:04:36.040 --> 0:04:39.440 that unemployment rate low. Well it's reversed, and it's it's 0:04:39.480 --> 0:04:41.360 done so very suddenly. So I don't want to write 0:04:41.360 --> 0:04:43.800 this all often. And the defense certainly wouldn't write this off. 0:04:43.839 --> 0:04:45.839 There is a sign that we've got some weakening of demand. 0:04:45.960 --> 0:04:49.559 We see that also in you know, in the GDP numbers, 0:04:49.640 --> 0:04:52.360 the consumer spending, we've seen some softening. So like it's 0:04:52.400 --> 0:04:54.800 this question of how do you pull the two pieces apart? 0:04:55.240 --> 0:04:57.840 And I mean one rough way to kind of see 0:04:57.880 --> 0:05:00.960 where you stand is to look at how unemployment rate 0:05:01.080 --> 0:05:03.680 is balancing out the people looking for work or are 0:05:03.680 --> 0:05:05.680 they still at about the same rate finding. 0:05:05.440 --> 0:05:08.520 That work clute, So yeah, it's going to be I 0:05:08.560 --> 0:05:10.359 can't wait to see what you're published there. Thank you 0:05:10.400 --> 0:05:13.360 so much, Claudia. Some new century advisors here on this 0:05:13.440 --> 0:05:17.160 job report. Really just the market's moving of the two 0:05:17.240 --> 0:05:20.320 year yield hasn't found about him here we're in fifteen 0:05:20.520 --> 0:05:21.320 basis points. 0:05:21.560 --> 0:05:24.919 That's a huge, a huge move joining. 0:05:24.680 --> 0:05:27.400 Us now, and I can't think of a better time 0:05:27.440 --> 0:05:30.160 to speak to Michael Darta, thrilled that he could join 0:05:30.240 --> 0:05:32.680 us here after doctor some Michael Darte is with Roth 0:05:33.240 --> 0:05:36.880 Capital as well. Michael Darta, I want you to synthesize 0:05:36.920 --> 0:05:42.200 this back to classic data, which is the animal spirit 0:05:42.400 --> 0:05:46.040 of the country. Can we have enough inflation to keep 0:05:46.160 --> 0:05:50.520 nominal GDP okay or all of a sudden is our 0:05:50.560 --> 0:05:54.760 stagflation going to become stag staggy? 0:05:56.520 --> 0:05:59.280 Thanks for having me on, Tom. Look, I think if 0:05:59.320 --> 0:06:02.279 you look at the first half, because we're obviously getting 0:06:02.320 --> 0:06:07.400 some distortions and volatility in the GDP statistics, but if 0:06:07.400 --> 0:06:11.960 you average the first and second quarter nominal GDP ran 0:06:12.200 --> 0:06:15.520 at about four percent, just to touch above four, you know, 0:06:15.640 --> 0:06:20.360 that's perfect. That's basically a non inflation area setting. Once 0:06:20.680 --> 0:06:26.080 these supply side shocks dissipate, we are seeing weakness and 0:06:26.200 --> 0:06:29.760 real growth. You know, if you look at real final 0:06:29.800 --> 0:06:34.160 sales to the private sector, just above one percent in 0:06:34.279 --> 0:06:38.360 Q two, barely two percent in Q one, and then 0:06:38.400 --> 0:06:40.640 we had a long streak of pretty close to three 0:06:40.680 --> 0:06:44.480 percent growth, you know, in the two years before that, 0:06:44.839 --> 0:06:47.680 and so we're definitely slowing here, but most of it 0:06:47.720 --> 0:06:50.360 looks like it's on the real side, and that's exactly 0:06:50.400 --> 0:06:53.560 what you'd expect from an adverse supply shock. So the 0:06:53.640 --> 0:06:56.240 challenge for the FED is just to you know, keep 0:06:56.279 --> 0:07:00.920 policy neutral, and that's the debate that's going on right 0:07:00.960 --> 0:07:05.680 now on the FOMC. But Claudia made the point that 0:07:05.720 --> 0:07:09.360 the unemployment rate is not lifting off. So those revisions 0:07:09.600 --> 0:07:12.040 minus two point fifty eight K for the last two 0:07:12.080 --> 0:07:15.800 months for payrolls or the prior two months. That looks 0:07:15.920 --> 0:07:19.080 very scary and recessionary, But the reality is you will 0:07:19.120 --> 0:07:23.960 not find one nb R recession in history without the 0:07:24.040 --> 0:07:29.040 unemployment rate shooting up meaningfully, meaning at least several hundred 0:07:29.120 --> 0:07:33.360 basis points from the cyclical trough. We're basically flat from 0:07:33.440 --> 0:07:37.120 year ago level, same with U six And so this 0:07:37.240 --> 0:07:40.600 is an economy where the supply side has taken a 0:07:40.680 --> 0:07:44.160 hit from tariffs and the demand side has moderated. But 0:07:44.440 --> 0:07:46.760 you know appropriately so. 0:07:46.160 --> 0:07:48.400 So, Michael, is it again. There's a lot of numbers 0:07:48.440 --> 0:07:50.920 to parts through here from today, a lot of negative revisions. 0:07:50.920 --> 0:07:53.880 But as you mentioned, as Claudia mentioned, that unemployment rate 0:07:53.960 --> 0:07:56.520 is staying right at four point two percent, and that's 0:07:56.960 --> 0:07:58.800 is that where you think the FED will keep its 0:07:58.840 --> 0:07:59.960 focus that number? 0:08:01.240 --> 0:08:01.840 I think so. 0:08:01.920 --> 0:08:05.520 I mean, that's essentially what poll FED chair Powell discussed 0:08:05.560 --> 0:08:10.480 this week in terms of the economy being in balance, 0:08:10.520 --> 0:08:14.080 supply and demand being in balance. I mean, look at 0:08:14.120 --> 0:08:17.880 the margin. I think these numbers definitely lead the FED 0:08:17.920 --> 0:08:21.160 to lower policy rates. The question is what is the 0:08:21.200 --> 0:08:25.440 timing and the magnitude futures markets are priced for about 0:08:25.600 --> 0:08:28.760 ninety basis points of cuts over the next twelve months. 0:08:29.160 --> 0:08:33.240 You know, but markets have anticipated sooner in deeper cuts 0:08:33.280 --> 0:08:36.680 than what the FED has been willing to deliver over 0:08:36.720 --> 0:08:40.160 the course of the last few years, So that's not new. 0:08:40.200 --> 0:08:43.880 I mean, the question here is do things really fall 0:08:43.920 --> 0:08:47.320 off from here unless the Fed gets moving and you 0:08:47.520 --> 0:08:51.760 risk markets, despite today's action, are pretty optimistic that we'll 0:08:51.760 --> 0:08:52.360 hang in there. 0:08:52.559 --> 0:08:53.240 Michael Darta. 0:08:53.280 --> 0:08:55.320 When you look at those jobs and if we're under 0:08:55.360 --> 0:08:58.080 one hundred thousand as a glide path, we get the 0:08:58.120 --> 0:09:01.040 emotion of a negative statistic. We don't well, we don't 0:09:01.080 --> 0:09:04.760 have that. What will the nominal tenuere you'll do? 0:09:07.480 --> 0:09:10.200 Well, you know, we're right in a range show here, 0:09:10.520 --> 0:09:12.600 tom right. I mean, you know, we came into the 0:09:12.960 --> 0:09:18.000 year pushing four point eight percent, and we obviously slumped 0:09:18.800 --> 0:09:21.679 below four for like a day when we had the 0:09:21.800 --> 0:09:25.720 risk off event when Trump first announced the reciprocal tariffs, 0:09:26.200 --> 0:09:28.400 and now we're kind of, you know, right in that range. 0:09:28.559 --> 0:09:32.200 I mean, it's interesting because reflectively, people start talking about 0:09:32.280 --> 0:09:35.160 fiscal deficits every time rates move up, but then when 0:09:35.160 --> 0:09:38.480 they come down, no one attributes that to an improving 0:09:38.480 --> 0:09:42.040 fiscal outlook. So perhaps something else is driving the rate 0:09:42.080 --> 0:09:44.840 structure here, and I think what's driving it is simply 0:09:45.520 --> 0:09:48.079 risk on and risk off. You know the contours of 0:09:48.120 --> 0:09:53.840 the business cycle in FED policy, rate expectations moving around, 0:09:53.960 --> 0:09:57.080 which is obviously hitched to both of those. And so 0:09:57.600 --> 0:10:00.360 you know the tenure yield here to me, I mean, 0:10:00.480 --> 0:10:03.000 you know, we're kind of neutral on box here for 0:10:03.040 --> 0:10:06.720 four ther to five percent, bullish you know, sub four percent, 0:10:06.800 --> 0:10:08.760 then I think you want to be more cautious. 0:10:09.240 --> 0:10:11.760 So, Michael, I'm starting to see in my inbox in 0:10:11.840 --> 0:10:14.920 social kind of a narrative that history may be repeating itself. 0:10:15.000 --> 0:10:17.640 Last year, the FED aired by not cutting in July, 0:10:17.800 --> 0:10:20.880 so they did catch up cut at their next meeting. 0:10:20.960 --> 0:10:23.040 Is that something that might be brewing again this year? 0:10:24.960 --> 0:10:27.600 I mean, Paul, it's possible, but I think you'd need 0:10:27.840 --> 0:10:31.480 ongoing data deterioration and perhaps some kind of a risk 0:10:31.559 --> 0:10:35.320 off event. You know, the FED did get going with 0:10:35.360 --> 0:10:39.760 a fifty basis point cut, you know last year, second 0:10:39.800 --> 0:10:43.199 half of the year they cut basis points, but then 0:10:43.240 --> 0:10:46.240 what happened They stopped the labor market stabilized, So I 0:10:46.400 --> 0:10:48.480 kind of think all in, you know, they're they're going 0:10:48.559 --> 0:10:53.720 to start restart in a more gradual manner September. Very 0:10:53.720 --> 0:10:57.760 well is still in play here. If you look at 0:10:57.800 --> 0:11:00.440 the labor market diffusion index. I just brought it up 0:11:00.440 --> 0:11:05.120 on my Bloomberg screen, Yes you go. We're at forty 0:11:05.200 --> 0:11:09.920 six point eight as of this July. So that's actually 0:11:09.960 --> 0:11:14.079 a little bit below where we were last summer, you know, which, 0:11:14.760 --> 0:11:17.240 along with the rising unemployment rate which we don't have 0:11:17.320 --> 0:11:19.600 this time, really kicked off alarm bells that the Fed 0:11:19.679 --> 0:11:22.320 was falling behind the curve. You also had lower bond 0:11:22.360 --> 0:11:27.079 market inflation expectations going into the early fall last year 0:11:27.120 --> 0:11:28.880 and what we have today, and that could be a 0:11:28.920 --> 0:11:33.120 consequence of this hectoring from the White House, which is 0:11:33.240 --> 0:11:34.960 backfiring in my opinion. 0:11:35.200 --> 0:11:37.959 So let's talk about that, Michael. 0:11:38.040 --> 0:11:40.280 And this is the history of Michael Dart and all 0:11:40.320 --> 0:11:44.160 that he has Wisconsin to me and and what a 0:11:44.200 --> 0:11:46.760 privilege yesterday Michael Darta to talk to Richard Clare to 0:11:46.840 --> 0:11:47.880 allow brainer. 0:11:47.679 --> 0:11:52.720 Back to back about the modern trend that if we 0:11:52.840 --> 0:11:56.360 cut rates or raise rates, we're establishing a new vector. 0:11:57.280 --> 0:12:00.920 Why can't the chairman come out and say, you know, 0:12:01.440 --> 0:12:04.760 back to Vulcar, back to Burns, we're going to do 0:12:04.800 --> 0:12:08.880 a one off twenty five be cut and reassess. 0:12:09.520 --> 0:12:11.760 To me, that's common sense. 0:12:11.920 --> 0:12:15.800 But it pushes against all of a modern academic theory, 0:12:15.840 --> 0:12:16.880 doesn't it. 0:12:18.360 --> 0:12:21.080 Yeah, I mean, I think tomic comes down to, you know, 0:12:21.120 --> 0:12:23.439 what are the markets priced in here? So the markets 0:12:23.440 --> 0:12:26.679 have priced in ninety one basis points over the next 0:12:26.720 --> 0:12:31.920 twelve months. So does the FMC guide markets for more 0:12:31.960 --> 0:12:33.320 than that or less than that? 0:12:33.920 --> 0:12:34.120 You know? 0:12:34.280 --> 0:12:36.160 Right now? I mean, I think you've got quite a 0:12:36.160 --> 0:12:38.960 bit of division on the committee. We did get two descents. 0:12:39.520 --> 0:12:42.120 That's the first time too. Fed Governor's descent. It looks 0:12:42.160 --> 0:12:47.800 like geniuses this morning since nineteen ninety three, right, But 0:12:48.040 --> 0:12:51.439 I think the focus has to be on price stability. 0:12:51.480 --> 0:12:55.120 I mean, obviously the FED wants to preserve the business site, 0:12:55.520 --> 0:12:58.440 but inflation is still above target. And if the FED 0:12:58.559 --> 0:13:02.559 is going to be harangued and cajoled into cutting rates 0:13:02.559 --> 0:13:06.840 when it's perhaps inappropriately inappropriate to do so, if inflation 0:13:06.960 --> 0:13:10.760 expectations go up, then long term interest rates go up, 0:13:10.920 --> 0:13:14.640 not down. So if the president's concerned about debt financing costs, 0:13:14.760 --> 0:13:17.560 let the FED do its job, you know, let's return 0:13:17.600 --> 0:13:21.960 inflation two target and price stability is the number one 0:13:22.160 --> 0:13:25.720 way that you're going to have moderate market interest rates. 0:13:25.720 --> 0:13:28.000 The other way is get the fiscal House and Order 0:13:28.160 --> 0:13:31.160 in Washington. D C has good luck for that face 0:13:31.320 --> 0:13:33.120 planted in that regard. 0:13:33.120 --> 0:13:35.720 Michael, Thank you so much, Michael darn Roth Capital, and 0:13:35.760 --> 0:13:38.080 they're really looking forward to his research, you know, published 0:13:38.120 --> 0:13:40.120 into the weekend. 0:13:40.400 --> 0:13:43.240 Christina Catmeny waiting for her first gray hair. She may 0:13:43.320 --> 0:13:43.720 get it. 0:13:43.880 --> 0:13:45.840 By the way, the two year yields are moving today 0:13:46.040 --> 0:13:49.079 with Invesco Christina cat Many here before. 0:13:49.080 --> 0:13:51.480 I believe Steph Ross gonna join us. 0:13:51.679 --> 0:13:54.720 What does it mean for adults in the bond business 0:13:55.080 --> 0:13:58.000 when you see this is CFA level four, you see 0:13:58.000 --> 0:13:59.920 a ginormous two year yield move. 0:14:00.320 --> 0:14:03.280 Look, I mean we're getting a big steepening of the 0:14:03.360 --> 0:14:06.520 curve today, and I think the market has vacillated this 0:14:06.600 --> 0:14:09.080 year between is the Fed more concerned with growth? 0:14:09.120 --> 0:14:11.760 Are they more concerned with inflation? Which is it? And 0:14:11.960 --> 0:14:12.520 a lot of the. 0:14:12.480 --> 0:14:15.880 Economic weakness we've seen all year has really been soft data, 0:14:15.960 --> 0:14:18.320 and today is really the first signs that you're seeing 0:14:18.840 --> 0:14:21.960 some real hard data that's weakening. And it's not the 0:14:22.000 --> 0:14:25.560 seventy three number, it's that negative revision number, which is meaningful. 0:14:25.680 --> 0:14:29.520 We nailed that. Yeah, we nailed fucker nailed. 0:14:30.880 --> 0:14:33.400 So Christina, do you how do you think the Fed's 0:14:33.400 --> 0:14:34.920 going to view this data? It's almost like, boy, if 0:14:34.960 --> 0:14:37.120 they had known this data yesterday, would they have done 0:14:37.160 --> 0:14:39.840 something different? How do you think they are going to 0:14:39.880 --> 0:14:42.560 view this data? Here is a lip or is this 0:14:42.640 --> 0:14:43.200 something different? 0:14:43.520 --> 0:14:45.840 Was that right? Would they have done something different? 0:14:46.160 --> 0:14:48.000 I don't know that they would have done something different. 0:14:48.040 --> 0:14:51.320 And I think we've said really even coming into the 0:14:51.360 --> 0:14:55.320 summer that they they have the calendar on their side 0:14:55.360 --> 0:14:57.600 in terms of the gap to the September meeting, with 0:14:57.720 --> 0:15:01.360 two payroll reports, two CPI reports, you're really supposed to 0:15:01.360 --> 0:15:04.560 see a lot of these inflationary numbers come through from 0:15:04.600 --> 0:15:06.640 the terrorist shocks, which has all been delayed, and a 0:15:06.640 --> 0:15:08.680 lot of participants in the market have said, well, they 0:15:08.680 --> 0:15:10.440 haven't come through yet, So we just don't have to 0:15:10.440 --> 0:15:11.480 be worried about inflation. 0:15:11.600 --> 0:15:14.040 That's not our camp. I think that there are still risks. 0:15:14.080 --> 0:15:16.720 The Fed and Powell statements in the presser I think 0:15:16.920 --> 0:15:19.800 very clearly tells you he's concerned about not even just 0:15:19.840 --> 0:15:22.080 first order effects that haven't shown up, but second order. 0:15:22.360 --> 0:15:26.040 So there's a lot of time it certainly gives nods 0:15:26.080 --> 0:15:28.960 to the descents that we had this week that are 0:15:29.000 --> 0:15:31.440 talking for preemptive cuts or Tom what you were talking 0:15:31.480 --> 0:15:34.000 about earlier, of like, why don't we just ease because 0:15:34.040 --> 0:15:36.800 we know we're restrictive and give ourselves some wiggle room. 0:15:36.800 --> 0:15:39.120 But that hasn't been where the Fed's been anchored, even 0:15:39.160 --> 0:15:40.600 though a lot of us think maybe that's what they 0:15:40.600 --> 0:15:41.200 should be doing. 0:15:41.480 --> 0:15:45.560 Paul, continue the conversation. We've got a beautiful three months 0:15:45.600 --> 0:15:50.920 moving average chart. In October of twenty. 0:15:50.400 --> 0:15:53.760 Twenty three, when the market lifted, it was a two 0:15:53.960 --> 0:16:00.240 hundred thousand every month three months moving average. We're down 0:16:00.520 --> 0:16:02.120 to thirty five thousand. 0:16:02.840 --> 0:16:06.360 In defense of the President and Secretary Besson, that's a. 0:16:06.400 --> 0:16:07.880 Vector, Yeah, it is. 0:16:07.920 --> 0:16:10.720 It's certainly something to pay attention to. And again we're 0:16:10.760 --> 0:16:12.640 seeing in the short end of the curve the two 0:16:12.760 --> 0:16:15.400 year yield is now off seventeen basis points. We have 0:16:15.440 --> 0:16:18.640 a fifty fifty basis point steepening in the yield curve. 0:16:18.960 --> 0:16:19.840 What does that tell you? 0:16:21.280 --> 0:16:24.720 Look, in a lot of ways, the curve we think 0:16:24.960 --> 0:16:27.120 should be steeper. Still, even with this. 0:16:27.080 --> 0:16:29.720 Move today and coming into this week, really in the 0:16:29.800 --> 0:16:33.400 last month, you've seen kind of this retest of what 0:16:33.480 --> 0:16:35.240 has been the thesis this year, you've seen a big 0:16:35.280 --> 0:16:38.080 flattening in the last week. You've seen a big correction 0:16:38.240 --> 0:16:41.200 in foreign exchange with the dollars stronger, and now we're 0:16:41.280 --> 0:16:43.480 kind of turning these back on our heels. But with 0:16:44.000 --> 0:16:48.040 where we are in a cycle, the curve shouldn't be flat, 0:16:48.360 --> 0:16:50.800 and we've gotten in cash space almost down to back 0:16:50.880 --> 0:16:53.160 two tents close to a flat level, so we need 0:16:53.200 --> 0:16:55.560 to re steepen that out. And it tells you that 0:16:55.680 --> 0:16:58.600 even if the FED is not easy to yesterday or 0:16:58.720 --> 0:17:02.360 tomorrow in the pipeline that's in the trajectory and the 0:17:02.360 --> 0:17:05.880 long end should still be at where it is anchored 0:17:06.000 --> 0:17:10.200 or at higher levels because the inflationary risks remain out there. 0:17:10.440 --> 0:17:12.560 Have you ever been called a bond vigilante? 0:17:13.560 --> 0:17:13.600 No? 0:17:14.560 --> 0:17:18.400 No, are the bond vigilantes out today tell said what 0:17:18.480 --> 0:17:18.679 to do. 0:17:19.800 --> 0:17:20.679 I don't know if they are. 0:17:21.080 --> 0:17:23.520 I don't know if the bond vigilantes of old kind 0:17:23.520 --> 0:17:25.320 of remain in the same sense we're not. 0:17:25.560 --> 0:17:26.400 We don't have these. 0:17:26.560 --> 0:17:27.879 I think there's a lot of fear of like the 0:17:27.920 --> 0:17:30.679 Liz Trust moments, in these like dramatic selloups. 0:17:30.840 --> 0:17:33.320 Really today's move is a front end correction. 0:17:33.040 --> 0:17:36.800 And I think on that, But is that a narrative 0:17:36.840 --> 0:17:39.639 in the market about what are fiscal pressures? What are 0:17:39.640 --> 0:17:44.600 we doing big picture of like controlling inflation and supply 0:17:44.680 --> 0:17:46.159 and all be shot, We're bringing. 0:17:45.960 --> 0:17:49.080 Three hundred billion tariff revenue to pay for a big 0:17:49.119 --> 0:17:52.400 bill for a tax cut. I'll be political and say 0:17:52.440 --> 0:17:55.320 it's spread out across the death siles, and some people 0:17:55.320 --> 0:17:59.320 would say it's skewed for the fancy people like Paul Sweeney. Okay, fine, 0:18:00.080 --> 0:18:02.680 I'm looking at the screen and I got a ninety 0:18:02.760 --> 0:18:06.919 day moving average of non farm payrolls that Paul not 0:18:07.000 --> 0:18:08.120 that long ago, would have been. 0:18:08.400 --> 0:18:12.040 Is the economist Bart Simpson would say, a total cow. 0:18:12.600 --> 0:18:13.359 That's the bottom line. 0:18:13.400 --> 0:18:15.520 This is what people have been waiting for for really 0:18:15.560 --> 0:18:18.840 at least the last we're nine months, if not two years, 0:18:18.880 --> 0:18:20.800 right since twenty two when we were looking for this 0:18:20.920 --> 0:18:23.800 rolling recession is imminem. 0:18:23.640 --> 0:18:26.760 So credit, what do you do with credit here? I 0:18:26.760 --> 0:18:29.239 mean it sounds like maybe I'm not I don't want 0:18:29.280 --> 0:18:30.400 to take too much credit risk here. 0:18:30.480 --> 0:18:33.000 Yeah, So we have been a little bit more cautious 0:18:33.040 --> 0:18:35.719 on credit, and that's been a kind of a harder 0:18:35.760 --> 0:18:40.080 call because credit remains exceptionally tight, keeps grinding. You're in 0:18:40.200 --> 0:18:43.440 a slow supply period over the summer, so we kind 0:18:43.440 --> 0:18:45.840 of have bits and pieces of credit, but where we're 0:18:45.920 --> 0:18:51.880 probably most comfortable owning credit is higher quality front end paper. 0:18:52.240 --> 0:18:54.080 And then there are some things kind of globally that 0:18:54.119 --> 0:18:56.719 look interesting too, in Europe some credit. 0:18:57.320 --> 0:18:59.440 It's Friday, we're at the beach. Does a five year 0:18:59.600 --> 0:19:00.880 CD look good right now? 0:19:02.440 --> 0:19:05.399 I still think it looks looks pretty decent. 0:19:05.640 --> 0:19:10.760 Yeah, yeah, to your to your treasuries now that I mean, 0:19:11.200 --> 0:19:12.520 that's a big song in the two year? 0:19:12.640 --> 0:19:15.440 Okay, what are you going to do? What are you 0:19:15.480 --> 0:19:16.920 going to do when you get back to the office. 0:19:18.680 --> 0:19:20.600 I mean, are you gonna buy or you're selling? You know, 0:19:20.720 --> 0:19:23.240 but you get price up, yeled down in the two year? 0:19:23.520 --> 0:19:23.760 Yeah? 0:19:23.880 --> 0:19:26.000 Do you lighten up on that? Is it like a stock? 0:19:26.080 --> 0:19:26.840 Were you? 0:19:26.880 --> 0:19:29.560 So we've kind of shifted into more steepeners with this 0:19:29.640 --> 0:19:31.280 and kind of say like what are the tactical So 0:19:31.440 --> 0:19:33.919 it's it's again, what what's your big picture of thesis? 0:19:33.960 --> 0:19:36.159 I don't think that those have changed, right, Like we 0:19:36.240 --> 0:19:38.159 believe in a week or dollar, we believe that the 0:19:38.200 --> 0:19:41.080 curves should be steeper, but we keep vacillating of what 0:19:41.119 --> 0:19:43.520 the FEDS pricing, and I think coming into this the 0:19:43.560 --> 0:19:45.200 front end looks like it was stretched. 0:19:45.359 --> 0:19:45.800 Christina. 0:19:45.840 --> 0:19:48.400 Thank if someone's Christina Catmanni are in a huge day 0:19:48.840 --> 0:19:56.120 for Invesco in her bonds as well. 0:19:57.800 --> 0:20:01.080 You're listening to the Bloomberg Surveillance po podcast. Catch us 0:20:01.160 --> 0:20:04.480 live weekday afternoons from seven to ten am Eastern. Listen 0:20:04.520 --> 0:20:08.080 on Apple Karplay and Android Otto with the Bloomberg Business app, 0:20:08.280 --> 0:20:10.000 or watch us live on YouTube. 0:20:10.200 --> 0:20:11.800 Curious what you need to focus on? 0:20:12.359 --> 0:20:16.560 Clarida and BRAINERD they don't listen to us. They listened 0:20:16.560 --> 0:20:18.080 to Ernie Tedesky. 0:20:17.680 --> 0:20:20.960 Joining us now from the the Budget Lab at Yale. 0:20:21.000 --> 0:20:23.639 I should say Ernie Tedesky, who drives a lot of 0:20:23.680 --> 0:20:26.159 their mathematics. Ernie, I don't want to give away the 0:20:26.200 --> 0:20:29.200 publication of your report, but you're kind enough to say 0:20:29.640 --> 0:20:32.080 you've done an all night or trying to get out 0:20:32.160 --> 0:20:35.720 in front of a new tariff calculation from the President. 0:20:36.119 --> 0:20:41.439 Can you state that you're eighteen percent maybe adjusted for 0:20:41.560 --> 0:20:46.760 consumption substitution, seventeen percent tariff is going to go up. 0:20:48.440 --> 0:20:51.120 So actually, when you look at the list that came 0:20:51.160 --> 0:20:56.199 out last night, some of the tariffs went up, some 0:20:56.280 --> 0:20:59.040 of them went down from what was threatened before, So 0:20:59.080 --> 0:21:02.080 like Bangladesh, for example, went from thirty five percent to 0:21:02.119 --> 0:21:06.800 twenty percent, Thailand went from thirty six percent to nineteen percent. 0:21:07.200 --> 0:21:08.800 So it was kind of a mix when you add 0:21:08.840 --> 0:21:13.399 everything together. We had been at eighteen point two percent. 0:21:13.920 --> 0:21:16.760 Now we're at eighteen point three percent for the average 0:21:16.760 --> 0:21:20.080 effective terrafory. And the other big one is that Mexico 0:21:20.240 --> 0:21:22.960 got a ninety day stay. Yeah, they were supposed to 0:21:22.960 --> 0:21:24.800 go up to thirty percent there now at twenty That's 0:21:24.840 --> 0:21:29.199 another big factor in this too. So really, like versus 0:21:29.240 --> 0:21:32.800 forty eight hours ago, this list didn't make a giant difference. 0:21:33.160 --> 0:21:35.679 It's folks, I can't say enough about the importance of 0:21:35.680 --> 0:21:38.960 what they're doing in terms of the graphical representation. 0:21:39.520 --> 0:21:41.800 Ernie. I'll get to Mexico in a moment. Paul's got 0:21:41.800 --> 0:21:43.240 a bunch of questions too. 0:21:43.680 --> 0:21:48.760 You have an I take great offense to our analysis 0:21:49.040 --> 0:21:52.280 that we're back to Smoot Hawley thirty three and thirty four. 0:21:52.800 --> 0:21:56.480 If you look at the Tadesky horizontal line, we're back 0:21:56.520 --> 0:22:01.560 to nineteen eighteen, we're back to eighteen six two. Indeed, 0:22:01.600 --> 0:22:05.440 we are back to seventeen ninety eighty nine. What does 0:22:05.480 --> 0:22:10.959 that history mean for twenty twenty six in America. 0:22:11.160 --> 0:22:14.440 I mean, look like those were very different times back then. 0:22:15.200 --> 0:22:17.560 I think Number one, it means, you know, I agree 0:22:17.600 --> 0:22:20.879 with the administration, we're going to raise a substantial amount 0:22:20.920 --> 0:22:22.560 of revenue from these terracts and. 0:22:22.600 --> 0:22:26.399 Brainers said that yesterday. Lyle was all over that yesterday. 0:22:26.960 --> 0:22:30.600 Look, and one should not understate how important that is. 0:22:30.640 --> 0:22:33.760 We have an unsustainable fiscal trajectory. Well, you know, we 0:22:33.800 --> 0:22:36.960 project three trillion dollars over the next ten years. But look, 0:22:37.000 --> 0:22:40.840 we're also seeing evidence of this already in consumer pass 0:22:40.920 --> 0:22:45.600 through durble PCE that was part of the PCE report 0:22:45.640 --> 0:22:50.040 that came out yesterday accelerated the most over six months 0:22:50.240 --> 0:22:52.520 that it has since nineteen eighty seven, other than the 0:22:52.560 --> 0:22:56.560 depths of the pandemic. So, you know, the idea that 0:22:56.720 --> 0:22:59.080 we're going to somehow dodge a bullet and get through 0:22:59.119 --> 0:23:01.800 the Scott free I think is already empirically real. 0:23:02.400 --> 0:23:05.000 So, Ernie, that's a key point that the three trillion 0:23:05.000 --> 0:23:08.240 dollars over ten years that the US government's going to raise, 0:23:08.720 --> 0:23:12.879 that's not being paid by China, by Mexico, by the EU, 0:23:13.320 --> 0:23:16.520 that's being paid by the American economy, and I don't 0:23:16.560 --> 0:23:19.520 know where it comes from, the consumer, the importer of 0:23:19.600 --> 0:23:23.240 the retailer. Talk to us about it on a household basis, 0:23:23.640 --> 0:23:25.920 How much do you think consumers are going to pay 0:23:25.960 --> 0:23:26.800 on per household base? 0:23:26.920 --> 0:23:30.119 Yeah, no, this is a very very important question. So 0:23:30.800 --> 0:23:33.560 first of all, on your first point, you know, if 0:23:33.600 --> 0:23:37.320 foreigners were paying this tariff, we would expect import prices 0:23:37.320 --> 0:23:40.480 to decline. Import prices have not declined. If anything, they've 0:23:40.520 --> 0:23:43.760 picked up a little, so they're probably so on average, 0:23:43.760 --> 0:23:47.159 they're probably not shouldering much of all of this. You know, 0:23:47.200 --> 0:23:52.200 we think that right now consumers are paying about seventy 0:23:52.320 --> 0:23:54.840 percent of the tariff, you know, so that's the pass 0:23:54.880 --> 0:23:56.800 through right now, and we think that that's sticking up 0:23:56.800 --> 0:24:00.040 over time. It's still early ultimately these you know, so 0:24:00.200 --> 0:24:03.560 if these tariffs today stayed in effect and perpetuity, that 0:24:03.600 --> 0:24:06.800 would be twenty four hundred dollars per household per year 0:24:06.960 --> 0:24:10.320 after you know, say two years of days and pitching 0:24:10.560 --> 0:24:14.040 families at the bottom much more than that, And that's after. 0:24:13.920 --> 0:24:18.320 Text, right, that's after that, right, So you're talking yet. 0:24:18.000 --> 0:24:21.840 You know, somebody popping sixty seventy thousand a year, figure 0:24:21.840 --> 0:24:24.320 out the rent. Forget about the idiocy of New York City. 0:24:24.560 --> 0:24:27.879 I mean Ernie's living large up in New Haven. But 0:24:28.000 --> 0:24:32.000 the answer is twenty four hundred dollars after text that 0:24:32.400 --> 0:24:35.439 hammers the bottom of three deaths house, Folks, I can 0:24:35.520 --> 0:24:37.679 say this again, Ernie Tedesky with us before we go 0:24:37.760 --> 0:24:41.480 to trade minister a career here with John Farrell. 0:24:41.720 --> 0:24:44.120 The Budget labbit Yell. It's free, you go out, It's 0:24:44.119 --> 0:24:45.000 a website. 0:24:45.440 --> 0:24:49.760 It's spectacular, whatever your politics, and with all sorts of charts. 0:24:50.119 --> 0:24:50.920 Ernie Tedesky. 0:24:51.359 --> 0:24:58.960 Mexico Avocados, tomatoes, broccoli, The Budget labb at Yell. Food 0:24:59.040 --> 0:25:03.119 prices rice three point four percent in stay two point 0:25:03.200 --> 0:25:04.320 nine percent higher. 0:25:04.359 --> 0:25:08.200 Forever. Fresh produce from. 0:25:08.000 --> 0:25:12.679 Mexico I'm at living is initially seven percent up and 0:25:12.720 --> 0:25:16.560 then stabilizes it three point six percent higher. Is that 0:25:16.600 --> 0:25:19.960 why we delayed from Mexico? Is they explain to President 0:25:20.000 --> 0:25:21.960 Trump the price of tomatoes. 0:25:22.800 --> 0:25:25.880 So here's the good news about these tariffs is that 0:25:25.920 --> 0:25:30.840 they exempt products that are US MCA complying from Canada 0:25:30.880 --> 0:25:34.640 and Mexico. It's complicated, but like basically you can think 0:25:34.680 --> 0:25:37.800 of it that if your product is actually made substantially 0:25:37.840 --> 0:25:41.159 in Mexico and Canada, then it is exempt from the tariffs. 0:25:41.920 --> 0:25:45.359 Fresh produce is you know, eighty percent of the fresh 0:25:45.400 --> 0:25:47.840 produce that we get ninety percent of the fresh produce 0:25:47.840 --> 0:25:52.120 from Mexico right now, is US MCA complying. So it's 0:25:52.240 --> 0:25:55.760 not Mexican imports that are driving the food price increases 0:25:55.760 --> 0:25:59.440 from these tariffs. It's the non Canada and Mexico countries, 0:25:59.640 --> 0:26:04.960 so from Brazil, you know, bananas from Central America, that's 0:26:05.000 --> 0:26:07.000 what's getting hit by these interests right now. 0:26:07.400 --> 0:26:10.399 Are you surprised, Ernie that how it's played out, with 0:26:10.640 --> 0:26:14.000 Canada being such a big trading partner of the US 0:26:14.000 --> 0:26:17.119 that the boy the discussions with Canada Mexico seem to 0:26:17.160 --> 0:26:17.800 be quite different. 0:26:20.480 --> 0:26:23.320 It does surprise me. On the other hand, the their 0:26:23.400 --> 0:26:27.359 reactions have been quite different. You see no retaliation from 0:26:27.400 --> 0:26:31.479 Mexico to our tariffs so far, whereas Canada is the 0:26:31.520 --> 0:26:36.240 only country other than China that has levy counter tariffs 0:26:36.280 --> 0:26:39.879 and to their detriment, I might, I mean, the politics 0:26:39.880 --> 0:26:43.360 of doing that are completely understandable, but that just heightens 0:26:43.400 --> 0:26:46.600 the economic damage to Canada and to the United States 0:26:46.760 --> 0:26:49.800 from these tariffs. So it doesn't surprise me that our 0:26:49.960 --> 0:26:52.080 you know, counter counter reaction is different. 0:26:52.520 --> 0:26:54.199 So mister Greer is going to be on are at 0:26:54.240 --> 0:26:56.920 a moment If you were sitting in a room this 0:26:57.000 --> 0:27:00.639 morning with mister Greer and the Secretary of Commerce the 0:27:00.680 --> 0:27:05.240 Secretary Treasury, they pop in to see doctor Tedesky, what 0:27:05.240 --> 0:27:08.119 what's a single thing you would say to the Secretary 0:27:08.119 --> 0:27:12.560 of Treasury now is he tries to advise a president 0:27:13.000 --> 0:27:15.360 who didn't take micro One on one. 0:27:16.880 --> 0:27:19.399 I would say, I would say two things. One is 0:27:19.400 --> 0:27:21.760 a question, one is a comment. The question would be 0:27:21.880 --> 0:27:24.639 what is the strategic goal here? You know, why are 0:27:24.680 --> 0:27:27.719 we tariffing things like nas and coffee? 0:27:27.720 --> 0:27:28.000 Again? 0:27:28.280 --> 0:27:31.719 Do you agree with Vice Chair Brainerd that the strategic 0:27:31.760 --> 0:27:34.400 goal is to raise revenue to pay for the other 0:27:34.520 --> 0:27:37.680 piece of budget lab analysis, that big big bill. 0:27:39.160 --> 0:27:41.040 I think that's a secondary goal. I think that this 0:27:41.160 --> 0:27:44.919 administration is true believers in tariffs. They think manufacturing and 0:27:45.040 --> 0:27:47.720 jobs will come back. But I would say two things. One, 0:27:48.200 --> 0:27:50.400 why then are we tariffing things that will never come 0:27:50.440 --> 0:27:55.000 back like bananas and coffee? And then the second thing 0:27:55.040 --> 0:27:57.480 I would say is is there a you know, can 0:27:57.480 --> 0:28:00.560 we work together to find a better way to raise 0:28:00.640 --> 0:28:04.280 the same amount of revenue that doesn't hit either lower 0:28:04.280 --> 0:28:06.879 income households or investment as much as tariffs do. 0:28:07.760 --> 0:28:13.240 So typically, Ernie, how should tariffs be used? How have 0:28:13.320 --> 0:28:16.560 they been used in the past successfully? And is that 0:28:16.600 --> 0:28:18.879 policy being you know, followed today. 0:28:19.680 --> 0:28:22.639 Look, there are this is another area where I agree 0:28:22.680 --> 0:28:26.120 with the administration. There are unfair trade practices out there 0:28:26.200 --> 0:28:30.600 against the United States, and tariffs are ammunition in resolving 0:28:30.640 --> 0:28:33.720 those disputes. That has absolutely been the case in the past. 0:28:34.280 --> 0:28:37.640 They have not since at least the nineteen thirties, been 0:28:37.760 --> 0:28:42.440 used for substantial revenue. And similar to that, we haven't 0:28:42.760 --> 0:28:45.280 you know, levied them broadly. If we've used them, it's 0:28:45.280 --> 0:28:49.520 been on very specific items, not because we you know, 0:28:49.920 --> 0:28:52.000 not because we don't like those items or those countries, 0:28:52.040 --> 0:28:54.080 but literally to try to get those countries to the 0:28:54.120 --> 0:28:57.080 table to resolve trade disputes. So this is very different 0:28:57.080 --> 0:28:58.880 than the way we've used tariffs in the past. 0:28:59.520 --> 0:29:02.240 Number fifth, nineteen oh one. I know you read this 0:29:02.280 --> 0:29:05.600 in Doug Erwin's Against the Tides September. 0:29:05.040 --> 0:29:06.200 Five, nineteen oh one. 0:29:06.320 --> 0:29:11.960 McKinley does a recant of his trade certitude. He does 0:29:11.960 --> 0:29:16.320 this the day before his assassination. Do you frame out 0:29:16.360 --> 0:29:20.160 here that if the president is whatever your politics was, 0:29:20.240 --> 0:29:23.800 I don't care if you frame out he's overcome by 0:29:23.840 --> 0:29:29.640 events like inflation. Could we have a Trump recant where 0:29:29.640 --> 0:29:32.120 he gets us back to Uruguay, where he gets us 0:29:32.160 --> 0:29:35.640 back to get. 0:29:34.760 --> 0:29:37.040 It's really hard for me to see that, you know, 0:29:37.160 --> 0:29:40.160 Number one, they are true believers. Number Two, now we're 0:29:40.200 --> 0:29:43.000 stuck with this three trillion dollars in revenue, which again 0:29:43.000 --> 0:29:45.120 I would emphasize like that part of it is a 0:29:45.160 --> 0:29:47.960 good thing and helpful. I think that that's going to 0:29:48.040 --> 0:29:52.720 hinder any future administration, Republican or Democratic, whether you know, 0:29:53.080 --> 0:29:55.720 if they don't like the tariffs, it's going to be 0:29:55.760 --> 0:29:58.480 hard for them to replace them, right because you're going 0:29:58.560 --> 0:30:00.920 to have status quo biased And you know, we can 0:30:01.520 --> 0:30:04.440 I consider a spreadsheeting, come up with all sorts of 0:30:04.480 --> 0:30:07.440 great theoretical alternatives all day long, but most of those 0:30:07.480 --> 0:30:11.960 alternatives require Congress to take a vote, which is which 0:30:12.000 --> 0:30:14.719 is going to make it hard to replace the revenue 0:30:14.720 --> 0:30:16.200 that's already in place very quickly. 0:30:16.280 --> 0:30:18.640 Or Ernie, we have judiciary action over the last two 0:30:18.720 --> 0:30:22.080 days in an Appleit court listening to the legality of 0:30:22.120 --> 0:30:25.200 the president's action. Could that be a bombshell where they 0:30:25.280 --> 0:30:27.800 say to President Trump, you can't do this. 0:30:29.560 --> 0:30:31.920 I would emercize I am not nearly as useful as 0:30:31.960 --> 0:30:35.200 a lawyer. We know that if we did, yeah, but 0:30:35.240 --> 0:30:38.240 if we did get a decision like that, yeah, I 0:30:38.240 --> 0:30:39.840 think it would. I think it would be a bombshell. 0:30:39.880 --> 0:30:41.720 It would not be the end, though. There are other 0:30:41.840 --> 0:30:44.560 legal authorities that, at least temporarily they could use to 0:30:44.760 --> 0:30:45.680 re raise tariffs. 0:30:45.880 --> 0:30:49.600 The website of the year for Bloomberg Surveillance, without question, 0:30:49.680 --> 0:30:52.920 the Budget Lab at Yale with the leadership of Earning Tedesk, 0:30:52.960 --> 0:30:54.840 has just been absolutely spectacular. 0:30:55.200 --> 0:30:59.080 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:30:59.120 --> 0:31:02.400 starting at seventy eight on Apple Coarclay, and Android Auto 0:31:02.560 --> 0:31:05.520 with the Bloomberg Business app. You can also listen live 0:31:05.600 --> 0:31:09.160 on Amazon Alexa from our flagship New York station. Just 0:31:09.200 --> 0:31:11.760 say Alexa Play Bloomberg eleven thirty. 0:31:12.320 --> 0:31:17.760 Anna rog Rana joins us senior technology analyst for Bloomberg Intelligence. 0:31:18.160 --> 0:31:20.240 Let me go to where Mark German is this morning, 0:31:20.320 --> 0:31:21.640 Anna rag There. 0:31:21.520 --> 0:31:24.920 Seems to be a haste to just do something in 0:31:25.120 --> 0:31:29.480 artificial intelligence after what we saw from Apple yesterday. 0:31:30.240 --> 0:31:32.880 Is em and a part of mister Cook's future. 0:31:34.640 --> 0:31:36.560 I mean, he talked about it last night on the call, 0:31:36.640 --> 0:31:38.640 and frankly speaking, he said, you know, they will look 0:31:38.640 --> 0:31:42.160 at deals, but I'm, to be honest, not so keen 0:31:42.200 --> 0:31:44.320 on them buying a very large company for a very 0:31:44.400 --> 0:31:47.640 large amount, because I would rather than partner with multiple 0:31:47.720 --> 0:31:50.680 vendors to use different models, because we are still in 0:31:50.800 --> 0:31:53.840 very early stages of figuring out which models will eventually 0:31:54.200 --> 0:31:56.280 be used for what functions. So I'm more in the 0:31:56.640 --> 0:31:59.000 partnership camp rather than buying camp. 0:31:59.120 --> 0:32:01.920 So would you see them doing partnerships with Google and 0:32:02.040 --> 0:32:04.960 Gemini and I perplexity. 0:32:06.120 --> 0:32:08.600 Yeah, I Tom, I really hope so, because there's a 0:32:08.640 --> 0:32:11.600 lot of money involved in that search deal. So if 0:32:11.600 --> 0:32:15.120 they were to do a revised deal including Gemini models 0:32:15.160 --> 0:32:17.920 and some kind of search agreement and then get paid 0:32:17.960 --> 0:32:20.320 for it, I think that's in the best interest of Apple, 0:32:21.000 --> 0:32:22.760 you know, both shareholders and employees. 0:32:23.200 --> 0:32:26.880 Honurk I saw China. They called out China as a 0:32:27.000 --> 0:32:30.959 source of growth there. That's been a big, big headwind 0:32:31.000 --> 0:32:33.040 or big question mark. I think for a lot of 0:32:33.040 --> 0:32:36.680 investors how Apple would perform in China given all the 0:32:36.720 --> 0:32:39.760 crosswinds there. What did you learn last night? About Apple 0:32:39.840 --> 0:32:41.520 in China. 0:32:41.640 --> 0:32:43.640 So two things happened in China, and that's something we 0:32:43.760 --> 0:32:46.560 discussed yesterday morning. One is the pull forward of demand 0:32:46.840 --> 0:32:49.480 across the world because of tariff related you know, you 0:32:49.520 --> 0:32:52.040 could see people are feared that the prices are going 0:32:52.080 --> 0:32:53.960 to go up, so they bought it. The second thing 0:32:53.960 --> 0:32:57.520 that happened specifically in China is some of Apple products, 0:32:57.560 --> 0:33:01.280 some of their phones were eligible for discus through the carriers. 0:33:01.280 --> 0:33:04.600 This is something that doesn't happen, you know, just hasn't 0:33:04.600 --> 0:33:07.240 happened before. So those were the two factors that helped 0:33:07.280 --> 0:33:10.960 them at least, you know, get over the positive territory 0:33:10.960 --> 0:33:11.600 after some time. 0:33:12.120 --> 0:33:15.640 Anrak probably the I would say on the average investor, 0:33:15.640 --> 0:33:18.040 I guess my biggest question about Apple is to what 0:33:18.160 --> 0:33:20.320 extent will they play and how will they play in 0:33:20.360 --> 0:33:23.760 the world of AI. Did we learn anything more last night? 0:33:23.800 --> 0:33:26.120 Did Tim Cook have anything else to really share? 0:33:27.520 --> 0:33:29.600 I think he repeated a lot what he repeated back 0:33:29.600 --> 0:33:33.760 in June in the Worldwide Developer Conference about Apple intelligence 0:33:33.800 --> 0:33:36.840 and embedding more throughout the ecosystem and the operating system. 0:33:37.200 --> 0:33:38.800 But you know, at the end of the day, series 0:33:39.000 --> 0:33:42.080 most important because that's the that's the voice command where 0:33:42.120 --> 0:33:44.479 you ask for things and they are a bit behind 0:33:44.520 --> 0:33:47.040 on that. And you know that's where the partnerships may 0:33:47.080 --> 0:33:51.280 come in and help them accelerate with that particular you know, 0:33:51.360 --> 0:33:53.520 function and then get it improved quite a bit. 0:33:54.120 --> 0:33:56.840 Andrak, you published an energy your ride this morning. He 0:33:56.840 --> 0:33:59.400 thinks I doesn't read I don't read his research read it. 0:33:59.600 --> 0:33:59.760 I do. 0:34:00.240 --> 0:34:02.520 Rag. After I was done looking at the Chicago Cubs 0:34:02.840 --> 0:34:06.520 non trading deadline, I looked at your piece on Jenai 0:34:06.720 --> 0:34:10.600 to lift Microsoft over twenty twenty six consensus. 0:34:10.680 --> 0:34:12.440 We talked about this yesterday. 0:34:12.480 --> 0:34:17.080 But now that we've got Microsoft, Meta, Amazon, Apple in AWE. 0:34:17.120 --> 0:34:19.239 Do you have a better clarity. 0:34:18.760 --> 0:34:22.200 About late twenty six into twenty twenty seven. 0:34:23.640 --> 0:34:23.839 Yeah. 0:34:23.880 --> 0:34:26.120 I think from a growth rate point of view, Microsoft 0:34:26.160 --> 0:34:29.440 will still do better than all the others, largely because 0:34:29.440 --> 0:34:32.080 of their relationship with open Aiye. So remember one thing. 0:34:32.120 --> 0:34:34.919 Every time you and I spend more time on CHACKGPT, 0:34:35.400 --> 0:34:38.239 a lot of that processing is done by Microsoft. That's 0:34:38.239 --> 0:34:41.120 really their biggest advantage right now. And that's where you know, 0:34:41.120 --> 0:34:44.360 Amazon shareholders are unhappy about it because they didn't see 0:34:44.400 --> 0:34:47.960 that lift in revenue growth as what Microsoft saw or 0:34:48.360 --> 0:34:49.200 what Google saw. 0:34:49.520 --> 0:34:51.520 So how do the upstart stay in the game. 0:34:51.600 --> 0:34:54.719 I'm going to pick on Perplexity just because Joe Wisenhal 0:34:54.800 --> 0:34:59.839 told me to. But how does someone like Perplexity con 0:35:00.120 --> 0:35:01.320 heat with these giants? 0:35:02.719 --> 0:35:05.839 See see Perplexity is fine in that case because it's 0:35:05.880 --> 0:35:10.560 competing directly with Mode, with OpenAI and other applications that 0:35:10.600 --> 0:35:14.000 are AI based applications. So it is trying to basically tell, 0:35:14.480 --> 0:35:17.680 you know, users like myself that don't go to chat GPT, 0:35:18.200 --> 0:35:19.640 start using my application. 0:35:19.760 --> 0:35:20.280 It's better. 0:35:20.560 --> 0:35:23.120 It's really in that realm they fight, you know, whether 0:35:23.160 --> 0:35:26.040 it comes to somebody like an Amazon or Microsoft or Google, 0:35:26.560 --> 0:35:29.440 the question is who is hosting that app on their 0:35:29.480 --> 0:35:32.239 cloud platform, and you know whichever. If you let's say, 0:35:32.239 --> 0:35:34.920 for the sake of discussion, if Perplexity is hosted on 0:35:34.920 --> 0:35:37.600 one of these platforms and their user count goes up, 0:35:38.239 --> 0:35:40.400 they make more money on the back end, not so 0:35:40.520 --> 0:35:41.399 much on the front end. 0:35:42.160 --> 0:35:45.680 Amazon also reported last night on a rag after the close. 0:35:47.320 --> 0:35:49.839 It looks like they're the stocks trading down about seven 0:35:49.880 --> 0:35:53.080 eight percent here, weaker than expected operating income and maybe 0:35:53.080 --> 0:35:55.759 trailing the sales growth ahead of its cloud rivals. Here 0:35:56.760 --> 0:35:58.399 help us think about Amazon right here? 0:35:59.640 --> 0:36:01.920 Yeah again, this is there are two factors of it. 0:36:02.480 --> 0:36:05.799 They do not have a chat gptal like app that 0:36:05.960 --> 0:36:08.520 runs on their platform, which is why they don't get 0:36:08.520 --> 0:36:12.080 that you know, consumer lift that Microsoft is getting. The 0:36:12.120 --> 0:36:15.080 second thing is their round rate is very high. According 0:36:15.120 --> 0:36:17.440 to last night's number, they're running at somewhere aroun one 0:36:17.480 --> 0:36:21.200 hundred and twenty billion dollars in revenue compared to Microsoft's 0:36:21.200 --> 0:36:24.320 seventy five and Google's fifty. So there is a difference 0:36:24.360 --> 0:36:27.000 in growth rates. I mean, it's just pretty logical. But 0:36:27.160 --> 0:36:28.520 you know that's what I said. If you were to 0:36:28.560 --> 0:36:32.320 strip out Microsoft's AI contribution, you know, they would be 0:36:32.400 --> 0:36:34.959 running in their twenties also, so I think the most 0:36:34.960 --> 0:36:38.440 people do not, you know, I think the bigger disappointment 0:36:38.560 --> 0:36:40.879 is both the other cloud vendors beat by a big 0:36:40.920 --> 0:36:44.160 amount and these guys just met and that the reason 0:36:44.200 --> 0:36:46.279 for that is the lack of a consumer app. Now, 0:36:46.880 --> 0:36:50.640 I think over time Amazon will come back and showcase 0:36:50.960 --> 0:36:53.919 that they will also get AI workloads, but they will 0:36:53.920 --> 0:36:56.319 come more from the enterprise side, not so much from 0:36:56.360 --> 0:36:57.160 the consumer. 0:36:57.040 --> 0:36:59.239 So very quickly, and I think this could really help 0:36:59.280 --> 0:37:03.600 the dummies, like a rag. How are each of their 0:37:03.760 --> 0:37:06.760 audiences or potential audiences. 0:37:06.160 --> 0:37:07.280 Of AI different. 0:37:07.840 --> 0:37:14.120 Who's Amazon going after, Who's Microsoft going after, Who's Google 0:37:14.280 --> 0:37:15.560 and others going after? 0:37:16.880 --> 0:37:18.840 Yeah, all of them are pretty much going after the 0:37:18.920 --> 0:37:22.160 same kind of customer. But Amazon is pretty much dedicated 0:37:22.200 --> 0:37:25.080 to large enterprises. So let's say if JP Morgan is 0:37:25.120 --> 0:37:28.480 experimenting right now to creating an app internally or a 0:37:28.560 --> 0:37:31.960 chat about internally that has AI, over time, the usage 0:37:31.960 --> 0:37:34.879 of that will grow and that would help AWS. As 0:37:34.920 --> 0:37:37.440 I said, the case with Microsoft is because of their 0:37:37.480 --> 0:37:40.400 relationship with open Ai. You know, chat GPD has gone 0:37:40.400 --> 0:37:43.560 from you know, arguably somewhere around you know, seven hundred 0:37:43.600 --> 0:37:46.680 million users daily and the number of time, the amount 0:37:46.719 --> 0:37:48.480 of time you're using on the app is quite big 0:37:48.560 --> 0:37:51.400 every day. So Microsoft is making more money off of it. 0:37:51.400 --> 0:37:53.919 It's more a timing issue than so much that one 0:37:53.960 --> 0:37:54.799 is better than the other. 0:37:55.120 --> 0:37:58.080 ANDROK, thank you so much, Inerragrano, which is real expertise 0:37:58.160 --> 0:37:59.960 there with Bloomber Intelligence. 0:38:06.600 --> 0:38:10.520 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:38:10.520 --> 0:38:13.840 starting at seven am Eastern on Applecarplay and Android Auto 0:38:13.960 --> 0:38:16.799 with the Bloomberg Business app. You can also watch us 0:38:16.840 --> 0:38:21.160 live every weekday on YouTube and always on the Bloomberg terminal. 0:38:21.239 --> 0:38:24.759 Sebastian Page joins us some tiro Price his book on 0:38:24.880 --> 0:38:27.920 leadership out. I'll get that out on Twitter and I'm 0:38:28.000 --> 0:38:30.960 LinkedIn here and it's Sebastian, thanks for joining us today. 0:38:31.040 --> 0:38:34.440 The heritage of tiro Price, back to my ute is 0:38:34.480 --> 0:38:37.960 you guys were out front on technology and growth. 0:38:38.360 --> 0:38:43.480 Tiro Price on the reaffirmation of this technology juggernaut in 0:38:43.600 --> 0:38:44.200 MEG seven. 0:38:44.440 --> 0:38:50.320 We absolutely love to research technology, understand technology, capture the trends. 0:38:51.680 --> 0:38:52.000 Tom. 0:38:52.040 --> 0:38:55.600 I hear the same words from different analysts and portfolio 0:38:55.600 --> 0:39:00.000 managers on our platform these days about AI, same expression. 0:39:00.600 --> 0:39:04.120 They're all saying, it's real. And if you look at 0:39:04.120 --> 0:39:07.480 the projections for spending on AI for the next twelve months, 0:39:07.800 --> 0:39:12.080 it's not decelerating, it's accelerating. It's expected to go up 0:39:12.080 --> 0:39:15.360 by eighty percent globally. So here we are it's not 0:39:15.520 --> 0:39:18.400 just about spending, it's also about productivity games. 0:39:18.840 --> 0:39:22.440 So Sebastian, does that say we continue to just focus 0:39:22.520 --> 0:39:25.000 on the MAG seven or just some of the big 0:39:25.040 --> 0:39:28.240 tech names, or are you trying to find value outside 0:39:28.280 --> 0:39:30.040 of that group that's worked so well. 0:39:30.560 --> 0:39:33.400 That's such an important question because everything I just said 0:39:33.840 --> 0:39:37.120 is basically the consensus. Stocks are up thirty percent in 0:39:37.160 --> 0:39:39.560 three and a half months, the price earnings ratios at 0:39:39.560 --> 0:39:44.040 twenty two, and the market is more concentrated than pretty 0:39:44.120 --> 0:39:48.440 much any time and history, so you're going into earning season. 0:39:48.640 --> 0:39:53.120 It's interesting listening to Bloomberg Surveillance. Everybody was saying, we're 0:39:53.120 --> 0:39:56.560 going to get positive surprises, We're going to get positive surprises. 0:39:56.640 --> 0:39:59.040 And I get a little bit philosophical here and I ask, 0:39:59.360 --> 0:40:03.120 is it still surprise if everybody expects a surprise? Yep, 0:40:03.239 --> 0:40:07.479 probably not, and you're seeing that now. So long way 0:40:07.480 --> 0:40:10.960 of saying, we're long diversification in our portfolios, you should 0:40:11.000 --> 0:40:14.080 own the growth stocks, but from an asset allocation top 0:40:14.160 --> 0:40:17.880 down perspective, we're long diversification, and we're getting most of 0:40:17.920 --> 0:40:21.040 it right now from international value, small and midcaps. 0:40:21.160 --> 0:40:21.520 Really. 0:40:21.560 --> 0:40:23.680 So we saw earlier in the year when there was 0:40:23.719 --> 0:40:27.040 some of this volatility around Liberation Day and the shock 0:40:27.080 --> 0:40:30.400 of tariffs, investors were taking money out of the US, 0:40:30.960 --> 0:40:33.360 out of the dollar, out of US stocks, out of bonds, 0:40:33.440 --> 0:40:35.799 and putting in elsewhere the rest of the world, including 0:40:36.120 --> 0:40:38.360 European equities in a big way, who've been out performing. 0:40:38.440 --> 0:40:40.799 Is that still the call there or is that just 0:40:40.840 --> 0:40:42.320 a short term trade. 0:40:42.480 --> 0:40:45.440 You know, from a macro perspective, it's counterintuitive. But some 0:40:45.480 --> 0:40:51.240 of this is jolting Europe in particular into spending fiscal infrastructure. 0:40:51.760 --> 0:40:54.680 We expect the debt to GDP in Germany to go 0:40:54.800 --> 0:40:58.040 up by twenty percent over the next ten years. 0:40:57.800 --> 0:40:58.640 So that could be. 0:40:59.000 --> 0:41:02.879 I still believe long in the exceptionalism and the dynamicism 0:41:02.960 --> 0:41:05.840 of the US economy, but right now you have macro 0:41:06.440 --> 0:41:08.280 momentum semester Patrid. 0:41:08.280 --> 0:41:11.440 There's suppose a VIX blows out to nineteen point one 0:41:11.560 --> 0:41:14.680 zero over two big figures out with the tensions of 0:41:14.719 --> 0:41:18.800 the morning. Okay, I get Windsor Ontario and the stereotype 0:41:19.040 --> 0:41:21.720 of an auto industry in Canada flat on its back. 0:41:22.320 --> 0:41:24.640 You've lived, I mean, did you see Jean Bellavoue at 0:41:24.640 --> 0:41:27.080 the forum? I did not? 0:41:27.200 --> 0:41:30.560 Yeah, I mean you know you lived Quebec. Fine, What 0:41:30.600 --> 0:41:34.560 do does tariffs mean for the rest of Canada? Not Windsor, 0:41:34.880 --> 0:41:38.520 but for resource Canada? What christiph Friedland used to talk 0:41:38.560 --> 0:41:41.080 about plywood and sexy things like that. 0:41:41.239 --> 0:41:41.879 What's it mean? 0:41:42.320 --> 0:41:46.760 It matters a lot. It probably matters more than counterrentatively, 0:41:46.840 --> 0:41:50.520 Again for the US. In the US, goods subject to 0:41:50.600 --> 0:41:56.320 tariffs represent only nine percent of GDP. So I gotta say, Tom, 0:41:56.640 --> 0:42:00.279 I'm both a Canadian citizen and a US citizen, so 0:42:00.760 --> 0:42:05.520 I have a view that's I would say neutral here, 0:42:05.840 --> 0:42:08.640 But generally speaking, it looks like Canada just wants to 0:42:08.680 --> 0:42:10.799 get a better deal and that's why they're holding out. 0:42:11.120 --> 0:42:14.080 Should others hold out? I mean, is that what TiAl 0:42:14.160 --> 0:42:16.840 Price would say is it is a new terriff for 0:42:17.000 --> 0:42:19.920 as your budget lab says, we're back. 0:42:19.800 --> 0:42:22.840 To nineteen thirty three. Should that all the country's push? 0:42:23.120 --> 0:42:26.080 Look, you know, on days like today, it sounds like 0:42:26.280 --> 0:42:30.880 it feels like tariffs are driving the entire US economy. Again, 0:42:30.960 --> 0:42:34.520 goods subject to tariffs represent nine percent of GDP. There 0:42:34.600 --> 0:42:37.799 are knock on and implied to facts, but you have 0:42:38.040 --> 0:42:43.160 many other factors that in my mind matter more fiscal spending, 0:42:43.239 --> 0:42:47.080 the strength of the consumer, the corporate earnings. These all 0:42:47.120 --> 0:42:48.000 look pretty good. 0:42:48.719 --> 0:42:53.200 Well, one more question your book. Beyond diversification, it's absolutely phenomenal. 0:42:53.320 --> 0:42:54.480 Let's go there right now. 0:42:54.800 --> 0:42:59.880 How should our listeners and viewers diversify given the global 0:42:59.880 --> 0:43:01.279 trauma that we're in right now? 0:43:01.800 --> 0:43:03.760 Yeah, you know, Tom, I don't know if you'd noticed. 0:43:04.040 --> 0:43:06.320 When I go to the dentist, my dentist always wants 0:43:06.360 --> 0:43:09.120 investment advice. I think I guess they have a little 0:43:09.120 --> 0:43:11.759 bit of money on the dentists are well paid, and oh, 0:43:11.800 --> 0:43:13.799 you're in the investment business. What should you do? But 0:43:13.880 --> 0:43:16.160 you have two seconds to say something. I always say 0:43:16.160 --> 0:43:19.320 the most trite thing to say, which is stay invested, 0:43:19.440 --> 0:43:23.200 stay diversified. And I have in my notes for you 0:43:23.280 --> 0:43:26.200 all today the headline is be boring. We actually have 0:43:26.239 --> 0:43:29.320 a lot of our tactical positions, not all that are neutral. 0:43:29.600 --> 0:43:33.359 We are long diversification. Sometimes it's painful when markets become 0:43:33.400 --> 0:43:35.839 more and more concentrated, but I think that's the right 0:43:35.880 --> 0:43:36.480 thing to do, right. 0:43:37.000 --> 0:43:40.000 Sebastian Page, thank you so much for getting its started 0:43:40.000 --> 0:43:40.400 this morning. 0:43:40.400 --> 0:43:42.080 He's a t ro price. 0:43:42.640 --> 0:43:46.560 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:43:46.560 --> 0:43:49.880 starting at seven am Eastern on Applecarplay and Android Auto 0:43:50.000 --> 0:43:52.959 with the Bloomberg Business app. You can also listen live 0:43:53.040 --> 0:43:56.600 on Amazon Alexa from our flagship New York station, Just 0:43:56.680 --> 0:43:59.200 say Alexa Play Bloomberg eleven thirty. 0:43:59.360 --> 0:44:03.719 We finished strong, Strong, Strong with Anna Wong who saw 0:44:03.719 --> 0:44:06.280 this coming, Doctor Wong. Before we get the market open, 0:44:06.760 --> 0:44:10.920 Kayleie Cox over at Ridtholtz identifies that the labor force 0:44:10.960 --> 0:44:14.640 has declined for the third straight month. It's the first 0:44:14.640 --> 0:44:19.239 time that's happened since twenty eleven. You nailed this with 0:44:19.360 --> 0:44:22.960 your historic discussion on birth death models in that is 0:44:23.000 --> 0:44:26.279 the vector in place to get to a negative non 0:44:26.360 --> 0:44:27.279 farm payrolls. 0:44:27.560 --> 0:44:30.839 I think I think today's very weak payrolls report and 0:44:30.880 --> 0:44:34.880 the massive Doward revision suggests that the negative payroll is 0:44:34.920 --> 0:44:39.359 probably with us right now. So with today's reading and 0:44:39.440 --> 0:44:42.840 our read that the overstatement per month is roughly between 0:44:43.160 --> 0:44:47.480 eighty thousand to one hundred thousand, that means today's print 0:44:47.800 --> 0:44:51.799 means slightly negative payrolls. So I think today's print will 0:44:51.800 --> 0:44:56.520 bring back the recession narrative because it is very very weak. 0:44:56.640 --> 0:44:59.160 Claudia Sum didn't want to go there, you know. No, 0:44:59.360 --> 0:45:00.880 that's so that's where she wus. 0:45:01.000 --> 0:45:02.400 And how do you think that the FED is going 0:45:02.480 --> 0:45:05.080 to view this data point? Again, it's just one data point. 0:45:05.120 --> 0:45:08.640 We heard that from President Hammock of the Cleveland FED. 0:45:09.000 --> 0:45:10.560 How do you guys think the FED will view this? 0:45:11.239 --> 0:45:15.480 Yeah, so President's Beth Hammock is basically the most hawkish 0:45:15.680 --> 0:45:17.800 individual in THEMC committee. 0:45:17.800 --> 0:45:24.360 According to our spectrometer yes, and in terms of this peril, however, 0:45:24.640 --> 0:45:28.960 it really vindicated Chris Waller's position, and in fact, Chris 0:45:29.000 --> 0:45:33.880 Waller issued at dissent note today and it basically confirmed 0:45:33.880 --> 0:45:36.840 his read of the labor market. As you have to 0:45:36.920 --> 0:45:39.839 read beneath the headlines and go into details and think 0:45:39.880 --> 0:45:44.520 about the revisions, because even today's revisions are larger than 0:45:44.640 --> 0:45:47.800 what I would have expected, and I'm more ready on 0:45:47.840 --> 0:45:51.160 the high side in the market. So it so I 0:45:51.200 --> 0:45:53.799 think Chris Waller will gain a lot of plout within 0:45:53.880 --> 0:45:57.000 the FOLC and will be we will likely. 0:45:56.840 --> 0:45:59.000 Be seeing an earlier rate cut this year. 0:45:59.080 --> 0:46:01.759 Doctor one. I understand people like you. 0:46:01.760 --> 0:46:05.240 You were at Chicago and you're trained to be measured, 0:46:05.719 --> 0:46:08.360 get on a trend. We don't want to cut rates 0:46:08.440 --> 0:46:11.719 until we really have a trend in place. Isn't it 0:46:11.760 --> 0:46:14.960 a perfect time to just do a twenty five beep 0:46:15.080 --> 0:46:16.839 cut and reassess. 0:46:19.239 --> 0:46:22.880 I think the policy role would say say, yes, they 0:46:22.920 --> 0:46:23.879 should be cutting now. 0:46:24.480 --> 0:46:27.240 But at the same time, I think I think. 0:46:27.080 --> 0:46:31.560 Today's very weak payrolls report and the massive downward revision 0:46:31.600 --> 0:46:35.120 suggests that the negative payroll is probably with us right now. 0:46:35.520 --> 0:46:39.600 So with today's reading and our read that the overstatement 0:46:39.680 --> 0:46:43.720 per month is roughly between eighty thousand to one hundred thousand. 0:46:43.880 --> 0:46:49.120 That means today's print means slightly negative payrolls. So I 0:46:49.160 --> 0:46:53.440 think today's print will bring back the recession narrative because 0:46:53.760 --> 0:46:55.120 it is very, very weak. 0:46:55.239 --> 0:46:57.919 Claudia sum didn't want to go there, you know, No, 0:46:57.960 --> 0:47:00.520 that's so, it's whatso rules do you think that the 0:47:00.560 --> 0:47:02.319 FED is going to view this data point? 0:47:02.320 --> 0:47:04.560 Again, it's just one data point. We heard that from 0:47:05.040 --> 0:47:08.200 President Hammock of the Cleveland Fed. How do you guys 0:47:08.200 --> 0:47:09.160 think the FED will view this? 0:47:09.560 --> 0:47:13.720 Yeah, so President's Beth Hammick is basically the most hawkish 0:47:13.960 --> 0:47:19.879 individual in THEMC committee according to our spectrometer. Yes, and 0:47:20.160 --> 0:47:24.880 in terms of this peril however, it really vindicated Chris 0:47:24.920 --> 0:47:28.800 Waller's position, and in fact, Chris Waller issued at dissent 0:47:29.000 --> 0:47:33.640 note today and it basically confirmed his read of the 0:47:33.719 --> 0:47:36.759 labor market as you have to read beneath the headlines 0:47:36.800 --> 0:47:40.240 and go into details and think about the revisions, because 0:47:40.480 --> 0:47:45.120 even today's revisions are larger than what I would have expected, 0:47:45.200 --> 0:47:47.480 and I'm already on the high side in the market. 0:47:47.600 --> 0:47:51.120 So it so I think Chris Waller will gain a 0:47:51.160 --> 0:47:54.359 lot of plout within the FOOC and will be we 0:47:54.400 --> 0:47:57.360 will likely be seeing an earlier rate cut this year and. 0:47:57.440 --> 0:47:59.520 A stay with this, please please please stay with us, 0:48:00.160 --> 0:48:01.400 with us Bloomberg Economics. 0:48:01.400 --> 0:48:03.759 We're going to get the markets opening. Come back to 0:48:03.840 --> 0:48:05.360 doctor Wong what you need. 0:48:05.200 --> 0:48:09.400 To know futures deteriity that came back actually off the report. 0:48:09.440 --> 0:48:13.359 They're now negative sixty four on SPX, vix out two 0:48:13.400 --> 0:48:16.960 point two zero points for Global Wall Street, and we 0:48:16.960 --> 0:48:20.400 welcome you worldwide. Good morning in the Friday Pacific evening. 0:48:20.960 --> 0:48:24.800 It's real simple. You have a two year US yield 0:48:24.880 --> 0:48:32.000 now a full twenty basis points yield down, price up 0:48:32.080 --> 0:48:35.520 on the two year yield as you get the markets open, 0:48:35.680 --> 0:48:37.080 are John Tucker all right? 0:48:37.280 --> 0:48:40.000 And the opening bill report being brought to you by Oppenheimer. 0:48:40.000 --> 0:48:43.840 Oppenheimer focuses the power of their thinking on you, creating 0:48:43.880 --> 0:48:46.399 customized plans to help achieve your goals. Put the power 0:48:46.400 --> 0:48:50.800 of Oppenheimer thinking into your investing, wealth management, capital markets, 0:48:51.160 --> 0:48:52.120 investment banking. 0:48:52.560 --> 0:48:53.120 Right out of the. 0:48:53.080 --> 0:48:55.359 Gate, we are lower has and P five hundred down 0:48:55.440 --> 0:48:58.719 one percent, sixty two points lower sixty two seventy eight 0:48:58.760 --> 0:49:01.200 on the index. The down Jones and Lavage down three 0:49:01.280 --> 0:49:04.000 hundred seventy eight points. The NASDK one hundred right now 0:49:04.040 --> 0:49:06.399 two hundred and seventy five points lower, That is down 0:49:06.520 --> 0:49:10.360 one point two percent. Shares of Amazon helping lead the 0:49:10.400 --> 0:49:13.920 declines right now seven percent lower, and shares of Apple 0:49:14.080 --> 0:49:16.720 up in the early going. They are up right now 0:49:16.840 --> 0:49:20.800 one and a half percent. That is your opening bell report, 0:49:20.880 --> 0:49:21.840 poland Tom. 0:49:21.840 --> 0:49:23.839 Thanks so much, John, so much. Good we're coming out. 0:49:24.000 --> 0:49:26.399 Ernie Tdesky, thank you so much for joining us from 0:49:26.400 --> 0:49:29.160 the budget lab at Yale in the last two hours. 0:49:29.200 --> 0:49:33.320 Here's Tedesky reporting in as we go to anamwog here again, 0:49:33.440 --> 0:49:37.640 down in negative four hundred on a market opening. Tedesky, 0:49:38.160 --> 0:49:41.439 The two hundred and fifty three thousand negative two month 0:49:41.520 --> 0:49:47.120 downward revision is the largest since at least nineteen seventy nine, 0:49:47.280 --> 0:49:52.440 other than the COVID noise. Doctor Wang, I understand people 0:49:52.520 --> 0:49:55.560 like you. You were at Chicago and you train to 0:49:55.640 --> 0:49:58.920 be measured, get on a trend. We don't want to 0:49:58.920 --> 0:50:01.720 cut rates until we really have a trend in place. 0:50:02.480 --> 0:50:05.520 Isn't it a perfect time to just do a twenty 0:50:05.560 --> 0:50:08.000 five beep cut and reassess. 0:50:08.880 --> 0:50:14.040 I think the policy rule would say say yes, they 0:50:14.080 --> 0:50:17.200 should be cutting now, But at the same time, I 0:50:17.239 --> 0:50:20.160 think what the FED is thinking about is that inflation 0:50:20.280 --> 0:50:24.960 might be surging in the next couple of months. And 0:50:25.040 --> 0:50:28.799 so in my team, we are scraping online prices to 0:50:28.920 --> 0:50:32.120 get a real time look at what how prices are doing. 0:50:32.680 --> 0:50:35.720 And what we're seeing is actually a mixture. 0:50:35.840 --> 0:50:40.320 We see some goods that has raised prices a lot 0:50:40.680 --> 0:50:43.839 in the past three months, already feeling like maybe they 0:50:43.840 --> 0:50:47.360 could not pass through all the taraf to the consumer 0:50:47.400 --> 0:50:50.160 because they're seeing a drop in demand. So those things 0:50:50.200 --> 0:50:54.000 are things like sporting equipments because you know, we really 0:50:54.080 --> 0:50:57.640 have seen an audio equipment because those two categories have 0:50:57.800 --> 0:51:01.439 seen well, the firms in those sectors thought they would 0:51:01.840 --> 0:51:04.959 raise the price by over ten percent and consumers would 0:51:04.960 --> 0:51:07.200 just take it, but turns out people are just not 0:51:07.400 --> 0:51:10.440 as happy about that. But on the other hand, we're 0:51:10.440 --> 0:51:15.839 starting to see toys prices going up, men's furnishings, apparels 0:51:15.880 --> 0:51:18.719 and suits, sewing suits going up. 0:51:18.760 --> 0:51:23.399 It's bow ties and they're killing it's killing the bow ties, 0:51:23.600 --> 0:51:24.520 I think, and. 0:51:24.680 --> 0:51:25.160 Let me do this. 0:51:25.200 --> 0:51:28.919 I want to get this. Yeah, this is Neil Dutta here. 0:51:29.360 --> 0:51:34.080 The prime age employment age prime age employment rate has 0:51:34.120 --> 0:51:35.160 declined point. 0:51:34.920 --> 0:51:36.319 Five percent over the last year. 0:51:36.400 --> 0:51:40.040 This is not good and it's a reminder that unemployment 0:51:40.120 --> 0:51:45.120 being low is not necessarily a fair representation of what's 0:51:45.160 --> 0:51:48.960 going on in the job market. Dutta really pushing against it. 0:51:49.160 --> 0:51:52.279 He's looking at non farm payrolls. Others are looking at 0:51:52.280 --> 0:51:54.080 the comfort of four point two. 0:51:54.000 --> 0:51:57.120 Percent, and along Calie Cox red Holts Wealth Management is 0:51:57.120 --> 0:51:59.319 out on social saying the labor force declined for the 0:51:59.360 --> 0:52:02.640 third straight month, the first time that's happened since twenty eleven. 0:52:03.200 --> 0:52:04.680 What's going on there with the workforce? 0:52:05.000 --> 0:52:08.719 Yeah, so the decline in the last two months, and 0:52:08.800 --> 0:52:11.120 I think we haven't looked at the details for this month, 0:52:11.160 --> 0:52:13.400 but I think the trend in the last three months 0:52:13.760 --> 0:52:16.759 is that it's the youth, the people who are graduating 0:52:16.800 --> 0:52:18.880 out of college, the people who are in their early 0:52:19.040 --> 0:52:23.560 twenties that are driving this decline and labor force. And 0:52:23.640 --> 0:52:26.640 I think, you know, I know, the narrative of there 0:52:26.719 --> 0:52:30.359 is that it's immigration, it's undocumented, but actually I think 0:52:30.400 --> 0:52:33.000 the dominant thing is the youth, and we need to 0:52:33.000 --> 0:52:35.719 figure out what's the story there. There's some signs that 0:52:35.880 --> 0:52:39.920 it's related to AI and that with firms trying to 0:52:41.000 --> 0:52:43.960 I mean, replacing a lot of entry jobs, white collar 0:52:44.120 --> 0:52:47.759 entry jobs with AI. There's just less need for you know, 0:52:48.120 --> 0:52:51.360 interns or younger. It's just harder out there for people 0:52:51.360 --> 0:52:52.680 graduating out of college. 0:52:52.760 --> 0:52:56.040 We're calling interns this year junior analysts. I don't know why, 0:52:56.080 --> 0:52:57.799 but that's what HR told me. 0:52:57.920 --> 0:53:01.080 Anamong thank you, thank you, thank you. Really leading the 0:53:01.160 --> 0:53:01.640 nation on. 0:53:01.760 --> 0:53:06.560 Careful analysis of her labor economy. She's the Bloomberg Economics. 0:53:06.920 --> 0:53:11.799 This is the Bloomberg Surveillance podcast, available on Apple, Spotify, 0:53:11.880 --> 0:53:16.200 and anywhere else you get your podcasts. Listen live each weekday, 0:53:16.320 --> 0:53:19.759 seven to ten am Eastern on Bloomberg dot com, the 0:53:19.840 --> 0:53:23.880 iHeartRadio app, tune In, and the Bloomberg Business app. You 0:53:23.920 --> 0:53:27.279 can also watch us live every weekday on YouTube and 0:53:27.480 --> 0:53:29.200 always on the Bloomberg terminal.