WEBVTT - Markets Digest Softening Inflation Data 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.960 --> 0:00:15.560 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:15.600 --> 0:00:18.960 with Paul Sweeney. Join us each day for insight from 0:00:18.960 --> 0:00:23.160 the best in economics, finance, investment, and international relations. You 0:00:23.160 --> 0:00:26.520 can also watch the show live on YouTube. Visit the 0:00:26.520 --> 0:00:31.280 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:31.280 --> 0:00:34.320 mornings from seven to ten am Eastern from our global 0:00:34.360 --> 0:00:39.000 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:39.360 --> 0:00:42.920 or anywhere else you listen and always I'm Bloomberg Radio, 0:00:43.080 --> 0:00:47.199 the Bloomberg Terminal, and the Bloomberg Business App. Join us 0:00:47.200 --> 0:00:49.440 out from Whole Free Shirs. Really one of the most 0:00:49.479 --> 0:00:53.680 interesting economists out there, Stephanie Roth, and she brings truly 0:00:53.920 --> 0:00:58.840 prodigious mathematical abilities. You know, you remind me of Lordamesta 0:00:58.920 --> 0:01:04.240 retiring into Cleveland, fed. What does your mathiness do when 0:01:04.319 --> 0:01:11.080 you commit economics? What makes your economics study different because 0:01:11.120 --> 0:01:15.959 of your you know, Buck Dell and Columbia World Classic mathematics. 0:01:16.080 --> 0:01:18.240 I mean these days it's because there's so much seasonality 0:01:18.280 --> 0:01:19.720 problems in the data. That's been one of the most 0:01:19.720 --> 0:01:20.280 important show. 0:01:20.280 --> 0:01:21.240 So you agree. 0:01:20.959 --> 0:01:24.399 With with Anna along it at Bloomberg that there are 0:01:24.800 --> 0:01:25.560 data problems. 0:01:25.560 --> 0:01:27.240 Oh, there are data problems in a big way. I mean, 0:01:27.280 --> 0:01:29.479 look at core PC and Q four at average one 0:01:29.480 --> 0:01:31.640 point five percent, and in Q one and average four 0:01:31.640 --> 0:01:34.680 point two percent inflation, it was neither. We were running 0:01:34.680 --> 0:01:36.800 somewhere on two and a half to three percent. So 0:01:36.840 --> 0:01:39.479 there's just truly seasonality problems that are working the way through. 0:01:39.520 --> 0:01:41.760 When I think we learned that last week is the 0:01:41.840 --> 0:01:43.240 seasonality problems. 0:01:43.280 --> 0:01:46.600 And when you synthesize the math and the revisions leads 0:01:46.640 --> 0:01:48.320 you to a greater disinflation. 0:01:48.800 --> 0:01:50.800 Yes, and it leads me to believe that the FED 0:01:50.800 --> 0:01:51.320 can cut. 0:01:51.120 --> 0:01:52.280 Into actly does that? 0:01:52.600 --> 0:01:54.800 When you're a math major you do that? You don't 0:01:54.840 --> 0:01:58.040 say yes, Tom, You say yes, you stupid? 0:01:59.560 --> 0:02:03.320 So what's a favor? So steady? Is the FED behind 0:02:03.320 --> 0:02:03.640 a curve? 0:02:03.680 --> 0:02:05.880 Do you think should they have been cutting already given 0:02:06.000 --> 0:02:07.560 some of the real time data we see. 0:02:08.120 --> 0:02:10.600 I mean, I think could they have cut in July? 0:02:11.040 --> 0:02:11.400 Maybe? 0:02:11.400 --> 0:02:14.639 But the inflation data were bad in Q one. Understandably 0:02:14.680 --> 0:02:16.960 they want to be convinced, so September I don't think 0:02:16.960 --> 0:02:19.280 they're in a rush. September is perfectly fine. I think 0:02:19.280 --> 0:02:21.040 they probably need to be cutting this year, otherwise we 0:02:21.120 --> 0:02:23.680 might run into some problems similar to what we saw 0:02:24.000 --> 0:02:25.760 a couple of years ago with some of the regional banks. 0:02:26.639 --> 0:02:28.519 So I mean, if I look at the I mean, 0:02:30.160 --> 0:02:32.720 the interesting thing here for a lot of investors is 0:02:32.880 --> 0:02:34.960 it feels like that that data we got in first 0:02:35.000 --> 0:02:36.480 quarter ofut inflation that suggests that. 0:02:36.440 --> 0:02:38.840 Inflation was still around. Yeah, We've got a couple of 0:02:38.840 --> 0:02:40.880 prints after that that suggested maybe not. 0:02:41.200 --> 0:02:41.320 So. 0:02:41.800 --> 0:02:44.920 I guess it's understandable for the FED to be waiting. 0:02:45.400 --> 0:02:47.080 Yeah, it is. And I think, I mean Powell was 0:02:47.120 --> 0:02:49.000 one of the people who really believed in the season is. 0:02:49.000 --> 0:02:51.239 I think some of the other FOMC members need to 0:02:51.280 --> 0:02:55.160 be more convinced than perhaps even Powell. But the CORPORC 0:02:55.360 --> 0:02:57.600 number should be something like point one five in the 0:02:57.600 --> 0:02:59.800 next month, and the seasonals go the other way throughout 0:02:59.840 --> 0:03:02.360 the of the year. And Oer is a big one. Oer, 0:03:02.480 --> 0:03:04.280 we should see the big next step down in the 0:03:04.280 --> 0:03:04.880 month of June. 0:03:04.919 --> 0:03:08.000 We should explain to our audience it's Oer's. 0:03:07.520 --> 0:03:11.000 Real estate exactly, real estate CPI, real estate inflation. 0:03:11.120 --> 0:03:13.480 Okay, very good, And that's the thing for everybody who's 0:03:13.520 --> 0:03:16.320 trying to run an apartment in the city retail sales tomorrow. 0:03:16.320 --> 0:03:18.040 How's the consumer doing? What do you expect to see 0:03:18.040 --> 0:03:19.679 from retail sales tomorrow? 0:03:19.960 --> 0:03:21.600 Yeah, that'll be that's going to be a big one, 0:03:21.600 --> 0:03:24.280 because you know, the street is looking for sort of 0:03:24.320 --> 0:03:25.880 a modest gain, but if you look at some of 0:03:25.919 --> 0:03:27.799 the alternative data, looks like it could be running a 0:03:27.840 --> 0:03:29.520 little bit hotter. Some of the credit card data look 0:03:29.720 --> 0:03:31.480 a little bit stronger, like you might actually get a 0:03:31.480 --> 0:03:35.040 bit of a bounce back if you net out what 0:03:35.040 --> 0:03:36.720 we've seen for the bulk of this year, it's been 0:03:36.760 --> 0:03:39.040 a consumer that's spending but slower than what we saw 0:03:39.120 --> 0:03:41.520 last year, which is arguably a good thing. I mean, 0:03:41.600 --> 0:03:44.040 especially good spending was so strong last year it was 0:03:44.120 --> 0:03:45.000 kind of unsustainable. 0:03:45.040 --> 0:03:47.920 We'll give me a proportional analysis here. What's your forward 0:03:48.040 --> 0:03:51.880 view on real GDP the one everybody follows, but also 0:03:52.080 --> 0:03:56.120 nominal GDP, real GDP plus the inflation element. What are 0:03:56.120 --> 0:03:57.320 those two numbers forward? 0:03:57.560 --> 0:04:00.000 Yeah, so we're looking for something around a two percent 0:04:00.120 --> 0:04:03.160 real GDP growth, which is kind of historical average. That's 0:04:03.360 --> 0:04:06.960 a normal trend, like solid solid, and then if you 0:04:07.000 --> 0:04:10.200 add a two point two percent something inflation like that, 0:04:10.320 --> 0:04:12.360 then you're looking at a four point two percent nominal 0:04:12.400 --> 0:04:13.160 GDP growth. 0:04:13.920 --> 0:04:16.279 Well, where's the gloom? I mean, all week in Sam 0:04:16.360 --> 0:04:20.000 row out with a spectacular six charts from the different 0:04:20.040 --> 0:04:23.360 street sources showing you know, I'm sorry it's a bull 0:04:23.440 --> 0:04:27.159 market because actually the economy is pretty good. Yeah, Stephanie, 0:04:27.600 --> 0:04:28.520 is that safe to say? 0:04:28.600 --> 0:04:28.840 Yeah? 0:04:28.839 --> 0:04:31.640 The economy is good and it's been an impressive rebalancing. 0:04:31.640 --> 0:04:33.640 We were coming from a place where inflation was running 0:04:33.640 --> 0:04:36.520 at nine percent and it's come come down back to 0:04:36.560 --> 0:04:38.600 something that's very close to what the Fed's looking at. 0:04:38.760 --> 0:04:41.560 And now we're looking at inflation to several decimal places. 0:04:41.800 --> 0:04:47.520 We were in a position where who fault, I mean, 0:04:48.080 --> 0:04:50.480 who cared what inflation was the second decimal when when 0:04:50.480 --> 0:04:52.839 you were seeingero point six percent month on month prints. 0:04:53.160 --> 0:04:55.720 But now that we're talking about something between point one 0:04:55.720 --> 0:04:57.159 and point no. 0:04:57.279 --> 0:05:00.480 But you can't in other times of distance in the 0:05:00.520 --> 0:05:05.000 early nineteen fifties, nobody was looking to three decimal points. 0:05:04.800 --> 0:05:07.360 That's a modern idiocy, that's fair, and. 0:05:07.320 --> 0:05:10.159 I mean there's so much FED communication and there's just 0:05:10.680 --> 0:05:13.520 all of that has changed a lot over the number 0:05:13.560 --> 0:05:17.200 of years. But now we're in an environment where it matters. 0:05:17.480 --> 0:05:19.160 Paul is at the Beach this week and study in 0:05:19.240 --> 0:05:20.960 central limit theorem exactly. 0:05:21.760 --> 0:05:22.520 Talk to us about this. 0:05:23.560 --> 0:05:25.840 You know the labor marketer, because I know the FEDS 0:05:25.880 --> 0:05:28.040 looking at the labor market and we're pushing up to 0:05:28.080 --> 0:05:31.640 four percent unemployment but still fully employed economy. 0:05:31.880 --> 0:05:34.480 How do you think about this US labor market? 0:05:35.040 --> 0:05:36.960 A lot of it has been driven by immigration, and 0:05:37.279 --> 0:05:39.400 by that I mean we were coming from a place 0:05:39.400 --> 0:05:41.839 where the labor market was really tight and we had 0:05:41.839 --> 0:05:44.800 a really strong influx of immigration, which is still ongoing, 0:05:45.200 --> 0:05:47.279 and that helped to rebalance the labor market or add 0:05:47.320 --> 0:05:49.040 a lot of supply where there wasn't really a supply. 0:05:49.080 --> 0:05:51.080 We don't have that as much as strong sort of 0:05:51.080 --> 0:05:54.039 domestic labor force growth, but now we got it from 0:05:54.080 --> 0:05:56.880 the outside. And these programs are ongoing until perhaps the 0:05:56.880 --> 0:05:59.200 next administration, and then it could change a bit. 0:05:59.400 --> 0:06:02.719 So on a non farm payrolls pick a number, what's 0:06:02.760 --> 0:06:06.120 the immigration plug there? Give give her audience scope and 0:06:06.200 --> 0:06:09.919 scale when people toss her around the phrase immigration. How 0:06:10.000 --> 0:06:11.719 much of that's in non farm payrolls? 0:06:11.760 --> 0:06:14.880 Sure, so when you think about the steady state of payrolls, 0:06:14.880 --> 0:06:17.960 gth forgetting about immigration, we're talking somewhere there's domestic growth 0:06:18.000 --> 0:06:20.360 of eighty five to one hundred thousand. That's without sort 0:06:20.400 --> 0:06:24.440 of strong immigration trends. Immigration trends roughly double that, double, 0:06:24.720 --> 0:06:30.360 roughly double that. So, for example, the Biden administration humanitarian 0:06:30.400 --> 0:06:35.039 parole programs, which is bringing in people from from Mexico 0:06:35.240 --> 0:06:38.920 and then Cuba, hating Nicaragua Venezuela, bringing in seventy five 0:06:38.960 --> 0:06:41.479 thousand people per month, and they're able to get a 0:06:41.480 --> 0:06:46.120 work visa within thirty days. So presumably if they're. 0:06:45.960 --> 0:06:48.440 Working, this is too important. You're telling me we got 0:06:48.480 --> 0:06:50.800 a run rate non farm payrolls of one hundred thousand 0:06:50.839 --> 0:06:53.279 a month, and you're willing to pop that up to 0:06:53.360 --> 0:06:57.280 one eighty or two hundred based on immigration in America. 0:06:57.440 --> 0:06:59.920 Yes, that's why this has been every balance. 0:07:00.120 --> 0:07:02.719 Now look at this, Torst and Slock, our good friend 0:07:02.720 --> 0:07:05.080 from Apollo just out with a note going to the 0:07:05.160 --> 0:07:08.279 same issue. The foreign born labor force has grown eleven 0:07:08.320 --> 0:07:11.559 percent since February twenty twenty, and the native born labor 0:07:11.600 --> 0:07:14.640 forces unchanged over the same period. So the growth in 0:07:14.680 --> 0:07:17.800 the labor force is entirely driven by immigration. 0:07:18.200 --> 0:07:20.120 Yeah, and by the way, that data might not even 0:07:20.120 --> 0:07:22.880 be fully capturing all the immigration because they're having trouble, 0:07:23.080 --> 0:07:25.120 especially in the household survey, which is what captures that, 0:07:25.520 --> 0:07:26.440 capturing all of that. 0:07:26.680 --> 0:07:30.640 Bob, can we slot Stephanie into your jobs day and 0:07:30.760 --> 0:07:33.400 just tell her people she can't be so mathy? Yes, 0:07:33.600 --> 0:07:34.920 that is emotional. 0:07:35.600 --> 0:07:37.040 This is great. 0:07:37.480 --> 0:07:41.120 You know, how do kids get so they love statistics? 0:07:41.440 --> 0:07:43.400 How do we get back to when we were kids 0:07:43.640 --> 0:07:47.280 and you have to take statistics at gunpoint and you 0:07:47.400 --> 0:07:49.440 did it and nobody complained, You just took it. 0:07:49.840 --> 0:07:51.840 Yeah, that's fair. I mean, I think it's kind of fun. 0:07:51.880 --> 0:07:54.000 You learn a lot from just digging into the data. 0:07:54.000 --> 0:07:54.640 Foundational. 0:07:54.920 --> 0:07:57.480 Yeah, it totally is. I mean, especially these days where 0:07:57.520 --> 0:07:59.280 the data are just so funky. In the post cos I. 0:07:59.280 --> 0:08:01.320 See that the dining room table and start talking one 0:08:01.320 --> 0:08:03.520 over square out of tea and the kids they throw, 0:08:03.720 --> 0:08:07.680 you know, they throw vegetables serving. It's definitely right, Thank 0:08:07.720 --> 0:08:20.960 you so much. She is with the Wolf. Researcher Stephen 0:08:21.000 --> 0:08:24.000 Major has led letter lead on this. It a just 0:08:24.120 --> 0:08:27.520 be see vigilant about a lower rate regime where they 0:08:27.680 --> 0:08:30.120 just be c Hong Kong. Stephen Major, are we finally 0:08:30.200 --> 0:08:33.040 two the lower rate regime you've been predicting. 0:08:34.840 --> 0:08:38.320 We've had to be very patient, Tom it seems to 0:08:38.360 --> 0:08:42.480 be coming through, and I think the catalyst was obviously 0:08:42.559 --> 0:08:46.480 not predicted by anyone. It seems to be the elections. 0:08:46.480 --> 0:08:50.760 Maybe in France and Mexico. They have one thing in common. 0:08:50.800 --> 0:08:55.600 They both bring chaos and concerns on the fiscal front, 0:08:55.960 --> 0:08:59.720 and bonds don't like it in those countries, and that 0:09:00.320 --> 0:09:05.080 into the safe havens like treasuries and buds, and I 0:09:05.120 --> 0:09:08.040 think that's helping, and it's taking the focus a bit 0:09:08.080 --> 0:09:11.000 away from every data release in the US and every 0:09:11.120 --> 0:09:11.880 FED speaker. 0:09:12.400 --> 0:09:15.280 Do you, as a grizzled veteran, do you get any 0:09:15.440 --> 0:09:20.480 value from monitoring the credit default swap market or is 0:09:20.520 --> 0:09:24.160 it just too ill liquid where Steve Major stays looking 0:09:24.240 --> 0:09:27.360 at full faith and credit bond market data. 0:09:27.559 --> 0:09:31.520 Yeah, it might give us a clue on sentiment and direction, 0:09:31.640 --> 0:09:35.440 but no one's going to default here. So the French 0:09:35.480 --> 0:09:38.520 spreads moved a bit, but the more interesting one So 0:09:38.559 --> 0:09:40.959 the French CDs has moved, But the one that's more 0:09:40.960 --> 0:09:45.160 interesting is the comparison between buons and oats, say in 0:09:45.200 --> 0:09:49.520 the five year segment. So I think CDs gives us 0:09:49.559 --> 0:09:52.920 some sort of warning, but I don't think it's it's 0:09:52.960 --> 0:09:56.920 particularly liquid, and I think you get much more value 0:09:56.920 --> 0:09:59.800 looking at the proper government bonds and their asset swap spreads. 0:10:00.760 --> 0:10:04.920 So Stephen, you know, I'm kind of lazy enough to 0:10:04.960 --> 0:10:06.320 just say I think I'm just going to sit around 0:10:06.360 --> 0:10:08.480 in a US to your treasure and get four point 0:10:08.520 --> 0:10:11.600 seventy five percent. But you're the global head of fixed 0:10:11.640 --> 0:10:15.200 income at HSBC. Do you get anything more exciting for 0:10:15.240 --> 0:10:16.600 me than just the US Treasury? 0:10:18.160 --> 0:10:20.040 And I think you're wrong on the two years. You 0:10:20.120 --> 0:10:22.240 might want to go a bit longer. And the way 0:10:22.280 --> 0:10:26.880 I explain it to people is sort of simple opportunity cost. 0:10:27.120 --> 0:10:30.680 And to make it really simple, if you roll bills 0:10:30.720 --> 0:10:32.720 for one year, you can get five and a quarter 0:10:32.760 --> 0:10:36.000 to five and a half. But you see, if they're 0:10:36.040 --> 0:10:39.320 cutting rates, you won't get that in a year's time, 0:10:40.000 --> 0:10:45.280 So locking in for two years at four seventy ish 0:10:45.400 --> 0:10:47.080 seems like a good trade. 0:10:47.600 --> 0:10:49.679 Elsewhere globally, I think. 0:10:49.520 --> 0:10:52.920 You can find some some of the emerging markets looking 0:10:53.000 --> 0:10:59.440 quite interesting. India has been resilient in all of this 0:10:59.440 --> 0:11:04.560 this recent volatility, because when volatility goes up, spreads go out. 0:11:04.920 --> 0:11:08.040 That India is not really a spread market, it's on 0:11:08.080 --> 0:11:08.480 its own. 0:11:08.920 --> 0:11:13.240 So there's something to say there and I think in 0:11:13.360 --> 0:11:17.360 Europe there's there's still value to be had in government bonds, 0:11:17.360 --> 0:11:19.880 but you've got to keep away from the from the hotspots. 0:11:20.480 --> 0:11:23.240 So it's more like Spain, for example. 0:11:23.520 --> 0:11:27.160 It's attractive and and and again Germany is the one 0:11:27.200 --> 0:11:31.080 that wins in this situation. But you know, I know 0:11:31.160 --> 0:11:33.760 that four point seven doesn't sound very exciting, and you're 0:11:33.760 --> 0:11:36.760 looking for some more sex, drugs and rock and roll. 0:11:36.840 --> 0:11:40.319 But in the bond market, I'm afraid it's supposed to 0:11:40.360 --> 0:11:42.080 be boring exactly. 0:11:42.360 --> 0:11:43.280 How about credit risk? 0:11:43.320 --> 0:11:44.520 So if I want to take a little bit of 0:11:44.559 --> 0:11:47.880 credit risk, where do you see some opportunity out there? 0:11:47.920 --> 0:11:49.200 I know that you know a lot of folks are 0:11:49.240 --> 0:11:50.800 telling spreads are so tight. 0:11:51.400 --> 0:11:55.720 You've got to get defensive, and we're shortening in terms 0:11:55.720 --> 0:11:59.280 of spread duration. And what that means in plain English 0:11:59.400 --> 0:12:02.599 is will we'll we'll go to the front end. We 0:12:03.320 --> 0:12:07.080 can take some sort of more defensive trades. Some of 0:12:07.080 --> 0:12:09.400 those haven't done very well recently because it tends to 0:12:09.400 --> 0:12:13.000 push you into banks, and banks don't like some of 0:12:13.000 --> 0:12:17.160 the stuff going on. So high yield is okay at 0:12:17.200 --> 0:12:19.920 the front end, but you get your duration from the 0:12:20.000 --> 0:12:20.560 right place. 0:12:20.720 --> 0:12:22.080 The treasury market. 0:12:22.920 --> 0:12:26.960 Steve Major, how do we flip from our focus and 0:12:27.080 --> 0:12:30.520 short duration and move out to the belly of the 0:12:30.600 --> 0:12:35.079 curve and even out farther. What is the exercise of 0:12:35.160 --> 0:12:39.079 the process where mere mortals decide to have the confidence 0:12:39.120 --> 0:12:39.960 to buy longer? 0:12:40.960 --> 0:12:43.439 Yeah, I mean, I have to say, hand on hard 0:12:43.720 --> 0:12:49.520 it's very difficult to give a strong guarantee about buying 0:12:49.679 --> 0:12:52.520 ten years or longer in terms of the term premium. 0:12:52.960 --> 0:12:56.960 So that's part of the problem because you know what 0:12:57.000 --> 0:13:00.760 the scenarios are around the election, A lot of the known. 0:13:02.080 --> 0:13:04.840 At least if you're buying the twos to the fives, 0:13:04.960 --> 0:13:08.559 you should be okay, because the yield to maturity there 0:13:08.640 --> 0:13:11.839 is really driven by the policy rate and the expectations 0:13:11.840 --> 0:13:14.880 for that policy rate in the near term. Now that 0:13:15.160 --> 0:13:17.400 there's not much that either candidate's going to do to 0:13:17.440 --> 0:13:19.360 effect where PAG funds is going to be in one 0:13:19.440 --> 0:13:23.040 year's time, they might have an impact in five to 0:13:23.040 --> 0:13:25.640 ten years time, and that's why it starts to spill 0:13:25.679 --> 0:13:28.480 into the term premium. I think there's already a fair 0:13:28.559 --> 0:13:31.840 bit of term premium there. I mean, everyone on the call, 0:13:31.920 --> 0:13:34.000 everyone is listening to this nose. There's a lot of 0:13:34.040 --> 0:13:37.360 debt right everyone knows what the likely policies are going 0:13:37.440 --> 0:13:39.440 to be either candidate, so it's not like it was 0:13:39.480 --> 0:13:40.640 in twenty sixteen. 0:13:41.679 --> 0:13:43.920 Steve, it's time now, and you know we got to 0:13:43.920 --> 0:13:48.640 do this. It's time for obligatory soccer talk. I'm looking 0:13:48.679 --> 0:13:51.079 at Italy and they snuck bag it was a mountain 0:13:51.160 --> 0:13:55.679 Negroes Albania in England snuck by Serbia. But I'm looking 0:13:55.720 --> 0:14:01.240 at that. There's some like real games coming up, like Netherlands, Austria, France, 0:14:01.360 --> 0:14:04.800 Poland Lake. Some of these brackets are interesting. Does England 0:14:04.880 --> 0:14:07.199 have the easiest brackets since time began? 0:14:08.760 --> 0:14:12.200 No, there's no, there's no easy games. And I think 0:14:12.280 --> 0:14:14.800 that the first challenge is get out of your group. 0:14:15.240 --> 0:14:19.000 And you know in tournament football or tournament sports even 0:14:19.080 --> 0:14:21.160 you have to play your way into the tournament. This 0:14:21.160 --> 0:14:24.640 thing is for four weeks or so long, so it's 0:14:24.680 --> 0:14:26.000 best not to start too well. 0:14:26.240 --> 0:14:27.120 I would have thought. 0:14:26.920 --> 0:14:29.680 That Germany and Spain would be worried about how well 0:14:29.720 --> 0:14:33.760 they play, I mean, save your best game to the final. 0:14:34.520 --> 0:14:36.600 And I think England England did a good job of 0:14:36.680 --> 0:14:41.000 starting in a very average way, like Toenham. 0:14:41.320 --> 0:14:44.120 Very good, Steve Major, thank you so much. The Totenham 0:14:44.240 --> 0:14:46.720 strategy to football. Let's be average and. 0:14:47.040 --> 0:14:48.760 So this is what this is the Euros. 0:14:49.040 --> 0:14:49.800 I can't keep up. 0:14:49.840 --> 0:14:51.720 I can't keep up, I mean, but I will pay 0:14:51.760 --> 0:14:53.320 attention because I do like them. In the country we 0:14:53.560 --> 0:14:54.680 have we've internewed. 0:14:54.680 --> 0:14:57.720 If we have interview notes, okay, like Anthony Cascenzi talk 0:14:57.760 --> 0:15:00.760 about his damn Pool and Steph mad Island, Steve Major, 0:15:00.800 --> 0:15:03.720 you have to talk about west Ham football or whatever 0:15:03.800 --> 0:15:06.560 your England's doing. We should, says thank you, Steve Major, 0:15:06.640 --> 0:15:12.840 thank you so much. Will they just be seen. We 0:15:12.920 --> 0:15:14.920 need to dive into this and we're going to get 0:15:14.960 --> 0:15:17.400 him on many times here as we dive into the summer. 0:15:17.480 --> 0:15:21.960 David Rosenberg owns the study of inflation. He was literally 0:15:22.280 --> 0:15:26.400 iconic at Merrill Lynch and Parsing inflation. Frankly, folks, he 0:15:26.480 --> 0:15:29.400 invented it. He did it before anybody, and it's good 0:15:29.440 --> 0:15:31.720 to have him on when he's right, which is we've 0:15:31.760 --> 0:15:36.720 got a new disinflationary tendency. How extensive David Rosenberg, can 0:15:36.760 --> 0:15:38.040 our disinflation be. 0:15:40.080 --> 0:15:45.400 Well? I think that the disinflation momentum, which has restored 0:15:45.440 --> 0:15:48.600 itself after some of the earlier distortions, it's going to 0:15:48.600 --> 0:15:51.880 surprise a lot of the what I call inflation phobes. 0:15:52.880 --> 0:15:54.880 I think we're going to finish the year very close 0:15:54.960 --> 0:15:58.920 to two percent on headline inflation, and the way I'm 0:15:58.960 --> 0:16:02.720 seeing the agriates apply act demand curves behaving, I think 0:16:02.720 --> 0:16:04.400 we're going to get down towards one and a half 0:16:04.400 --> 0:16:05.800 percent by the end of next year. 0:16:06.680 --> 0:16:07.160 Wow. 0:16:07.240 --> 0:16:10.840 So, David, what what drives that inflation down? Because if 0:16:10.840 --> 0:16:12.560 you talk to the you know, the folks on the street, 0:16:12.600 --> 0:16:16.200 they're saying, boy, my supermarket in the gas station. 0:16:16.920 --> 0:16:19.520 I'm just not seeing it. What's going to be taking 0:16:19.600 --> 0:16:20.600 us down that route? 0:16:21.840 --> 0:16:23.840 Well, I think the problem is that people tend to 0:16:23.880 --> 0:16:27.880 conflate prices with inflation, and inflation is not the price level, 0:16:27.960 --> 0:16:30.800 it's the call it the year of year percent change 0:16:31.280 --> 0:16:34.720 in the price level. I mean, look at Paul Vulker 0:16:37.120 --> 0:16:41.040 in the Hall of Fame of Central Bankers for being 0:16:41.080 --> 0:16:44.000 the greatest inflation dragon slayer of all time. But you know, 0:16:44.080 --> 0:16:48.640 nobody calls him the CPI dragon slayer. Prices never went 0:16:48.680 --> 0:16:51.840 down under Vulgar. In fact, the CPI in a seven 0:16:51.880 --> 0:16:56.080 year tenure one up forty percent. What he's renowned for 0:16:56.760 --> 0:17:00.360 was taking the inflation rate down from fourteen percent down 0:17:00.400 --> 0:17:05.919 to four percent. So, yes, prices are high undeniably, but 0:17:05.960 --> 0:17:09.040 the rate of change is dissipating. We had a couple 0:17:09.040 --> 0:17:11.000 of earl yeer quirks. Let's face it, a lot of 0:17:11.000 --> 0:17:15.200 it was auto insurance in response to the lag run 0:17:15.320 --> 0:17:17.800 up and claims that seems to have run us. Course, 0:17:18.440 --> 0:17:21.880 you know if the rental measures are taking their time subsiding, 0:17:22.000 --> 0:17:23.919 but we know that that steering us in the face. 0:17:24.960 --> 0:17:28.160 You know, my analysis is just strictly top down. It's 0:17:28.160 --> 0:17:30.920 really looking at where's the output gap today? And then 0:17:31.240 --> 0:17:33.840 what's your forecast on how the agurate demand and accords 0:17:33.840 --> 0:17:35.000 offers are moving. 0:17:35.119 --> 0:17:36.879 But then, David, what is this FED going to do? 0:17:37.600 --> 0:17:39.640 You are a great student of the history of our 0:17:39.680 --> 0:17:43.119 central bank, and there's this absolute delusion. I see that 0:17:43.160 --> 0:17:45.960 the FED can get out front. Don't they by definition 0:17:46.080 --> 0:17:49.480 have to be dramatically exposed and weight weight weight for 0:17:49.560 --> 0:17:51.000 the Rosenberg disinflation. 0:17:53.240 --> 0:17:55.760 Well, I don't think that they have to wait weight weight. 0:17:56.040 --> 0:18:01.200 I think that the FED is still somewhat shamed for 0:18:01.440 --> 0:18:04.720 having missed nine percent inflation in the summer of twenty 0:18:04.760 --> 0:18:09.320 twenty two and leaning so hard on transitory although eighteen 0:18:09.359 --> 0:18:12.679 months in real time doesn't sound transitory, but in the 0:18:12.680 --> 0:18:16.200 overall annals of economic history, eighteen months is still pretty transitory. 0:18:16.240 --> 0:18:22.800 But they still seem to be fighting for their credibility, 0:18:22.880 --> 0:18:26.120 and you know when they talk about that they need 0:18:26.160 --> 0:18:30.040 more confidence, just saying that they need more months or 0:18:30.040 --> 0:18:34.159 many more months of the disinflation trend that we dominated 0:18:34.240 --> 0:18:37.639 most of last year. So I think that part of 0:18:37.640 --> 0:18:40.280 it is basically the horrible memory of what happened in 0:18:40.320 --> 0:18:43.240 twenty twenty one twenty twenty two and blowing the call. 0:18:43.960 --> 0:18:45.680 And that's one of the reasons I think that they're 0:18:46.560 --> 0:18:49.080 going to be deliberately slow to start cutting interest rates, 0:18:49.080 --> 0:18:50.840 but I think when they do, they're going to be 0:18:50.880 --> 0:18:51.880 pretty significant. 0:18:52.480 --> 0:18:56.119 Are they deliberately slow, David, or are they are ready 0:18:56.200 --> 0:18:58.919 behind the curve in terms of not cutting rates. 0:19:00.320 --> 0:19:03.439 Well, look, the yield curves told them they've been behind 0:19:03.440 --> 0:19:07.080 the curve for at least a year. I think that 0:19:08.280 --> 0:19:10.439 you know what got in the way last year was 0:19:10.840 --> 0:19:14.600 the boost taggrit demand from the fiscal stimulus. So many 0:19:14.600 --> 0:19:17.160 people thought the deficit was going to expand twenty five 0:19:17.200 --> 0:19:19.320 percent in a year when the unemployment rate was self 0:19:19.359 --> 0:19:22.560 of four percent. So you know, I think that was 0:19:22.600 --> 0:19:25.000 part of it was the fiscal stimulus, and I think 0:19:25.040 --> 0:19:27.359 nobody at the FED was expecting that every penny and 0:19:27.400 --> 0:19:30.159 then some of the excess savings file was going to 0:19:30.160 --> 0:19:33.240 be used to stimulate, you know, consumer expenditures. But that 0:19:33.320 --> 0:19:36.680 did happen all in the rearview mirror. So I think 0:19:36.720 --> 0:19:39.560 that you know that are they behind the curve? I 0:19:39.560 --> 0:19:42.040 think they're behind the curve. I think that people will 0:19:42.080 --> 0:19:44.920 be surprised at how soft the demand side of the economy, 0:19:45.480 --> 0:19:47.800 well as it was in the first quarter, but going forward. 0:19:47.880 --> 0:19:50.680 But also I think that the confidence the FED knees 0:19:50.760 --> 0:19:52.520 on the inflation front is going to come. I think 0:19:52.560 --> 0:19:55.680 they'll be cutting by the September meeting David Rosenberg. 0:19:55.680 --> 0:19:58.879 With this Rosenberg Research in Toronto, we continue Paul Kruman, 0:19:58.920 --> 0:20:02.200 the laureate publishing in the recent hours, and he agrees 0:20:02.240 --> 0:20:05.800 with Rosenberg headline X shelter two point one percent core 0:20:06.000 --> 0:20:10.920 inflation X shelter sub two percent one point nine percent. 0:20:11.080 --> 0:20:16.919 What does the stock market do, David Rosenberg given a disinflation? 0:20:17.160 --> 0:20:20.440 I understand there's ambiguity there. Which way does it tilt? 0:20:22.040 --> 0:20:23.879 Well, you know, Tom, when you're asking me about the 0:20:23.920 --> 0:20:26.280 stock market today, you've also just asked me about what's 0:20:26.320 --> 0:20:30.720