1
00:00:02,400 --> 00:00:06,760
Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

2
00:00:11,680 --> 00:00:15,480
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

3
00:00:15,520 --> 00:00:18,720
Speaker 2: with Lisa Bromwitz and Amerie Hordern. Join us each day

4
00:00:18,760 --> 00:00:22,280
Speaker 2: for insight from the best in markets, economics, and geopolitics

5
00:00:22,440 --> 00:00:24,880
Speaker 2: from our global headquarters in New York City. We are

6
00:00:24,960 --> 00:00:27,680
Speaker 2: live on Bloomberg Television weekday mornings from six to nine

7
00:00:27,720 --> 00:00:31,319
Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or

8
00:00:31,320 --> 00:00:33,960
Speaker 2: anywhere else you listen, and as always on the Bloomberg

9
00:00:34,040 --> 00:00:37,640
Speaker 2: Terminal and the Bloomberg Business App. This from Axios in

10
00:00:37,680 --> 00:00:40,160
Speaker 2: the last twenty four hours on Treasury Secretary Scott Beston,

11
00:00:40,159 --> 00:00:42,839
Speaker 2: here's the quote. The Secretary isn't happy. He let the

12
00:00:42,880 --> 00:00:43,440
Speaker 2: President know.

13
00:00:44,120 --> 00:00:46,519
Speaker 1: This is something that people keep talking about. His concern

14
00:00:46,840 --> 00:00:48,920
Speaker 1: was that it was going to royal markets, it would

15
00:00:48,920 --> 00:00:51,599
Speaker 1: be counterproductive, and they would actually make it more difficult

16
00:00:51,600 --> 00:00:54,040
Speaker 1: for them to nominate someone who would be more Trump

17
00:00:54,080 --> 00:00:57,120
Speaker 1: friendly to the Federal Reserve, which seems to be exactly

18
00:00:57,240 --> 00:00:57,880
Speaker 1: what is happening.

19
00:00:58,000 --> 00:01:00,320
Speaker 2: Joining us nas Patrick mccanry, the former chat the House

20
00:01:00,360 --> 00:01:03,960
Speaker 2: Financial Service Committee. Patrick, Welcome to the program. This pursuit

21
00:01:04,000 --> 00:01:07,120
Speaker 2: of the feder Reserve, does it introduce some financial stability risk.

22
00:01:08,200 --> 00:01:12,560
Speaker 3: Clearly, and this is the reason why you're reporting. We

23
00:01:12,720 --> 00:01:16,720
Speaker 3: just heard about Secretary Best and telling the present directly

24
00:01:16,840 --> 00:01:20,039
Speaker 3: is displeasure. Look, the substance of the question here is

25
00:01:20,040 --> 00:01:22,840
Speaker 3: whether or not the Chair of the Federal Reserve lined

26
00:01:22,880 --> 00:01:25,759
Speaker 3: before Congress. And what I would tell you is, having

27
00:01:25,840 --> 00:01:33,480
Speaker 3: experienced multiple dozens of testimonies by various FED chairs, the

28
00:01:33,560 --> 00:01:37,240
Speaker 3: FED chair coming to Congress is the most brief person

29
00:01:37,920 --> 00:01:43,200
Speaker 3: that appears before Congress period. The briefing book is really

30
00:01:43,680 --> 00:01:47,080
Speaker 3: the question here, not the FED chair. Was the briefing

31
00:01:47,080 --> 00:01:51,800
Speaker 3: book appropriately written to answer members of Congress questions about

32
00:01:51,800 --> 00:01:54,560
Speaker 3: the building project? I believe it was, And the amount

33
00:01:54,560 --> 00:01:57,400
Speaker 3: of discipline the FED puts into ensuring they have an

34
00:01:57,440 --> 00:02:01,320
Speaker 3: accurate briefing book for the FED, for any FED chair,

35
00:02:02,200 --> 00:02:05,000
Speaker 3: and I think that's the missing nuance of this story.

36
00:02:05,880 --> 00:02:07,200
Speaker 4: But there is no nuance here.

37
00:02:07,760 --> 00:02:11,400
Speaker 3: The President's flooding the zone on economic issues to open

38
00:02:11,440 --> 00:02:13,519
Speaker 3: the year. We're going to see a whole lot more

39
00:02:13,560 --> 00:02:16,160
Speaker 3: of this in the coming weeks. But he's coming out

40
00:02:16,240 --> 00:02:23,119
Speaker 3: guns of blazing with both progressive, populist and conservative and

41
00:02:23,360 --> 00:02:26,240
Speaker 3: market shaking ideas all in one week.

42
00:02:26,639 --> 00:02:29,200
Speaker 5: Buttrick you spent a ton of time with the FED Chair. Actually,

43
00:02:29,280 --> 00:02:32,600
Speaker 5: he has a ton of political capital on the Capitol.

44
00:02:32,680 --> 00:02:35,600
Speaker 5: He spent a lot of time with Republicans and Democrats.

45
00:02:35,840 --> 00:02:37,880
Speaker 5: Do you think that that's what we're seeing played out

46
00:02:37,960 --> 00:02:41,200
Speaker 5: right now? All those meetings he has taken all the

47
00:02:41,200 --> 00:02:45,480
Speaker 5: political capital he put into going into meeting senators and

48
00:02:45,560 --> 00:02:48,520
Speaker 5: meeting House members. When you hear senator like Kennedy saying

49
00:02:48,520 --> 00:02:50,200
Speaker 5: we need this like we need a hole in the head,

50
00:02:50,240 --> 00:02:53,080
Speaker 5: it sounds like they are upset with what the DOJ

51
00:02:53,320 --> 00:02:53,800
Speaker 5: is doing.

52
00:02:54,680 --> 00:02:56,880
Speaker 4: Yes, and that is exactly what you're seeing.

53
00:02:57,320 --> 00:03:00,280
Speaker 3: Is this is why we got to listen and watch

54
00:03:00,400 --> 00:03:02,760
Speaker 3: Bloomberg because this is the type of nuance you need

55
00:03:02,800 --> 00:03:06,560
Speaker 3: to understand. The FED Chair puts an enormous amount of

56
00:03:06,560 --> 00:03:12,760
Speaker 3: time each week into ensuring his relationships around Washington.

57
00:03:12,360 --> 00:03:12,639
Speaker 6: D C.

58
00:03:13,160 --> 00:03:16,720
Speaker 3: I'm the beneficiary of that with the last four FED

59
00:03:16,800 --> 00:03:21,200
Speaker 3: Chairs in my service in Congress, and it means that

60
00:03:21,240 --> 00:03:23,280
Speaker 3: if there's a jump ball, you give them the benefit

61
00:03:23,320 --> 00:03:25,320
Speaker 3: of the doubt because you have a relationship with them

62
00:03:25,360 --> 00:03:26,320
Speaker 3: and you know them.

63
00:03:26,520 --> 00:03:27,200
Speaker 4: That's the goal.

64
00:03:27,560 --> 00:03:30,600
Speaker 3: It doesn't always work, the outreach doesn't always work. Doesn't

65
00:03:30,600 --> 00:03:33,120
Speaker 3: mean you have a good relationship, but at the very least.

66
00:03:33,200 --> 00:03:35,920
Speaker 3: The FED chair and all FED chairs have put a

67
00:03:36,000 --> 00:03:39,480
Speaker 3: lot of effort into ensuring they have relationships on the

68
00:03:39,560 --> 00:03:43,240
Speaker 3: hill that they have they have a political capital in

69
00:03:43,280 --> 00:03:46,920
Speaker 3: the tank so that when times get sideways or bad,

70
00:03:47,760 --> 00:03:50,560
Speaker 3: they will they will defend you or be helpful to you.

71
00:03:51,440 --> 00:03:56,360
Speaker 3: And this is a moment where you see that Japal

72
00:03:56,440 --> 00:03:59,480
Speaker 3: has put an enormous amount of equity that he's built

73
00:03:59,520 --> 00:04:01,760
Speaker 3: up on the hill in both the House and Senate side.

74
00:04:01,520 --> 00:04:03,520
Speaker 4: Both with Republicans and Democrats.

75
00:04:03,640 --> 00:04:06,440
Speaker 5: Some market participants say that because of what is going on,

76
00:04:06,480 --> 00:04:08,640
Speaker 5: he's going to stay on the Federal reserve in his

77
00:04:08,720 --> 00:04:11,560
Speaker 5: governor's seat till twenty twenty eight. If he were to

78
00:04:11,600 --> 00:04:15,119
Speaker 5: do that, do you think Republicans will actually view that

79
00:04:15,240 --> 00:04:18,880
Speaker 5: move as him being basically not withholding up to the

80
00:04:18,880 --> 00:04:21,640
Speaker 5: independence of the FED. Because it's very non traditional for

81
00:04:21,680 --> 00:04:24,000
Speaker 5: a FED chair to do so well.

82
00:04:24,000 --> 00:04:26,560
Speaker 3: It's a term of office number one and number two

83
00:04:26,640 --> 00:04:31,080
Speaker 3: a tradition that former chairs roll off the FED board.

84
00:04:31,680 --> 00:04:35,080
Speaker 3: It's a good practice for former FED chairs to roll

85
00:04:35,080 --> 00:04:38,200
Speaker 3: off the board. It allows their successor of the time

86
00:04:38,400 --> 00:04:43,080
Speaker 3: and runway to get up to speed. But in this case,

87
00:04:42,880 --> 00:04:49,520
Speaker 3: these are I would say this phase threats to counterbalance

88
00:04:49,880 --> 00:04:53,920
Speaker 3: the president in the Department of Justices threats here, and

89
00:04:53,960 --> 00:04:57,160
Speaker 3: that shows that JPAL is not powerless in the situation.

90
00:04:57,240 --> 00:05:00,520
Speaker 3: The FAILL Reserve is not powerless in this situation. That's

91
00:05:00,600 --> 00:05:03,360
Speaker 3: one element of it. The other element of it is

92
00:05:03,760 --> 00:05:05,960
Speaker 3: that is clearly saying to the White House, think of

93
00:05:06,000 --> 00:05:08,320
Speaker 3: your nominees. Think of your nominees that have to go

94
00:05:08,400 --> 00:05:12,160
Speaker 3: before Capitol Hill in this context. And I think this

95
00:05:12,279 --> 00:05:15,600
Speaker 3: means that the President's first nominee to be share of

96
00:05:15,600 --> 00:05:17,800
Speaker 3: the Fileral Reserve is going to have one heck of

97
00:05:17,800 --> 00:05:22,719
Speaker 3: a time dealing with members of Congress given this context

98
00:05:22,800 --> 00:05:24,160
Speaker 3: of duj intervention.

99
00:05:25,240 --> 00:05:28,760
Speaker 2: Stay with us. More Bloomberg surveillance coming up after this.

100
00:05:37,920 --> 00:05:40,800
Speaker 2: So here's the latest. This morning. US productivity accelerating at

101
00:05:40,800 --> 00:05:43,400
Speaker 2: its fastest paced than two years, fueling hopes for further

102
00:05:43,480 --> 00:05:46,599
Speaker 2: AI driven gains. Norrian Rabini is the chairman of Rabini

103
00:05:46,640 --> 00:05:49,279
Speaker 2: Macro associate to me, writes the following, The US remains

104
00:05:49,279 --> 00:05:52,000
Speaker 2: at the center of a technology driven positive supply shock,

105
00:05:52,240 --> 00:05:56,039
Speaker 2: the racist growth and lowest inflation over time. Norrian joint

106
00:05:56,160 --> 00:05:57,760
Speaker 2: is now for more neurial Good morning, good to see you,

107
00:05:57,960 --> 00:05:59,880
Speaker 2: good seeing you. Fantastic to catch up with you, sir,

108
00:06:00,120 --> 00:06:02,560
Speaker 2: you polish not just for a year ahead, but three

109
00:06:02,600 --> 00:06:04,839
Speaker 2: to twenty thirty. Can you flash that out for us

110
00:06:05,000 --> 00:06:05,720
Speaker 2: a little bit more?

111
00:06:06,480 --> 00:06:10,159
Speaker 7: Yes, I mean everybody's talking about AI, J and AI,

112
00:06:10,200 --> 00:06:13,520
Speaker 7: but this is only one of the fifteen technology of

113
00:06:13,560 --> 00:06:14,040
Speaker 7: the future.

114
00:06:14,080 --> 00:06:15,599
Speaker 6: They're allreated to AI.

115
00:06:15,680 --> 00:06:22,000
Speaker 7: But is AI semiconductor by medical research, quantum fusion, defence tech, fintech,

116
00:06:22,120 --> 00:06:25,599
Speaker 7: new material science, you name it. And it's a race

117
00:06:25,680 --> 00:06:28,680
Speaker 7: between US and China. I don't think it's a zero

118
00:06:28,760 --> 00:06:30,680
Speaker 7: sum game. US is going to do well, China's going

119
00:06:30,720 --> 00:06:33,360
Speaker 7: to do well. But my estimate is that the US

120
00:06:33,400 --> 00:06:36,640
Speaker 7: potential growth is estimated today to be only one point

121
00:06:36,680 --> 00:06:39,880
Speaker 7: eighty percent, could be as i's four percent by the

122
00:06:39,960 --> 00:06:41,800
Speaker 7: end of the decade. And I've done a bit of

123
00:06:41,839 --> 00:06:44,000
Speaker 7: a bottom LP analysis. And by the way, the data

124
00:06:44,080 --> 00:06:47,720
Speaker 7: productivity after the gfc I was a productivity between two

125
00:06:47,760 --> 00:06:51,559
Speaker 7: thousand and nine and nineteen was only one percent. Since

126
00:06:51,560 --> 00:06:54,800
Speaker 7: twenty nineteen, in spite of the deep during COVID, that's

127
00:06:54,839 --> 00:06:57,640
Speaker 7: doubled to almost two percent one point nine in twenty

128
00:06:57,720 --> 00:07:00,559
Speaker 7: twenty four was two point four percent, and the number

129
00:07:00,600 --> 00:07:03,440
Speaker 7: from Q three suggests was almost five percent. And by

130
00:07:03,440 --> 00:07:06,680
Speaker 7: the way, the Atlanta Fed no cast for Q four

131
00:07:06,720 --> 00:07:10,160
Speaker 7: GDPs today is five point one percent, probably too high,

132
00:07:10,440 --> 00:07:12,440
Speaker 7: but given that one, given the job number, you'll have

133
00:07:12,480 --> 00:07:14,200
Speaker 7: another high PRODUCTIVY growth.

134
00:07:14,200 --> 00:07:15,440
Speaker 6: Now I don't think the product.

135
00:07:15,200 --> 00:07:17,880
Speaker 7: Growth is four percent or five percent, but there's definitely

136
00:07:17,880 --> 00:07:18,520
Speaker 7: an acceleration.

137
00:07:18,920 --> 00:07:22,320
Speaker 2: Jobs is key. Is a jobless growth so called jobless growth?

138
00:07:22,640 --> 00:07:25,640
Speaker 6: Yeah, well, it's a jobless growth. There are three stories.

139
00:07:25,680 --> 00:07:28,320
Speaker 7: One is that the GDP number are wrong and the

140
00:07:28,360 --> 00:07:30,000
Speaker 7: GDP number are going to be revised.

141
00:07:29,680 --> 00:07:31,320
Speaker 6: Towards the weaker labor numbers.

142
00:07:31,720 --> 00:07:34,080
Speaker 7: The other one is that now the gp growth is

143
00:07:34,120 --> 00:07:37,400
Speaker 7: strong and you're going to have some adjustment upward of

144
00:07:37,440 --> 00:07:39,760
Speaker 7: the revised data. I think the third explanation is the

145
00:07:39,800 --> 00:07:42,240
Speaker 7: more correct one. You can have strong GDP growth and

146
00:07:42,280 --> 00:07:46,160
Speaker 7: having weak labor growth because we're having a productivity revolution.

147
00:07:46,560 --> 00:07:49,520
Speaker 7: If you're looking, for example, at the revenue real revenue

148
00:07:49,960 --> 00:07:53,640
Speaker 7: per worker of SMP five hundred firms since the launch

149
00:07:53,680 --> 00:07:57,440
Speaker 7: of CHAD GPT in November twenty twenty two, the average

150
00:07:57,440 --> 00:08:00,960
Speaker 7: has increased for SMP five hundred firms by fifteen percent

151
00:08:01,440 --> 00:08:03,480
Speaker 7: in the last three years, so it's almost five percent

152
00:08:03,520 --> 00:08:03,880
Speaker 7: per year.

153
00:08:04,320 --> 00:08:05,880
Speaker 6: And if you look at the bisector, of.

154
00:08:05,760 --> 00:08:08,280
Speaker 7: Course, a lot of it is closer to twenty percent

155
00:08:08,440 --> 00:08:12,040
Speaker 7: in tech and communications services, but it's very large also

156
00:08:12,320 --> 00:08:15,239
Speaker 7: across the board. So both at the micro data level

157
00:08:15,400 --> 00:08:17,680
Speaker 7: SMPFA and the firms and the macro one number, we're

158
00:08:17,720 --> 00:08:20,480
Speaker 7: seeing a productive revolutionary in the numbers.

159
00:08:20,840 --> 00:08:22,920
Speaker 1: I'm kind of dealing with whiplash right now because we

160
00:08:23,000 --> 00:08:25,880
Speaker 1: just had the Roy Metel CEO on defense sector in

161
00:08:25,920 --> 00:08:28,760
Speaker 1: Europe booming for all the wrong reasons, this idea that

162
00:08:28,800 --> 00:08:31,040
Speaker 1: he's more worried about the state of the world than

163
00:08:31,040 --> 00:08:33,160
Speaker 1: ever before. And here doctor doom is coming on to

164
00:08:33,160 --> 00:08:35,120
Speaker 1: tell us about how productivity boom is going to bring

165
00:08:35,200 --> 00:08:39,240
Speaker 1: everything to a better place. Why are you less concerned

166
00:08:39,600 --> 00:08:44,800
Speaker 1: about this overlay of rearmament and militarization that is also

167
00:08:44,880 --> 00:08:47,120
Speaker 1: coming in tandem with its productivity boom.

168
00:08:47,880 --> 00:08:51,079
Speaker 7: Well, there are geopolitical risk in the world, and I'm

169
00:08:51,160 --> 00:08:54,360
Speaker 7: aware of them. The question is whether I have a

170
00:08:54,400 --> 00:08:57,640
Speaker 7: significant economic and market effect. Look at the biggest one,

171
00:08:57,720 --> 00:09:00,760
Speaker 7: the two well day were between Easily and Iran last June.

172
00:09:01,920 --> 00:09:04,560
Speaker 7: All prices went up a little bit, stock markets wobbled,

173
00:09:04,960 --> 00:09:08,080
Speaker 7: and then given the Dran did not attack the old

174
00:09:08,080 --> 00:09:10,679
Speaker 7: facility of the Gulfies or blocked the street of hormos.

175
00:09:10,800 --> 00:09:14,520
Speaker 7: It went away, and that was a big, big deal Venezuela.

176
00:09:14,559 --> 00:09:17,319
Speaker 7: You know, we can discuss that length, but the macro

177
00:09:17,520 --> 00:09:20,280
Speaker 7: and market implication are close to zero. It's just less

178
00:09:20,280 --> 00:09:23,880
Speaker 7: than a million barrels a day. Russia Ukraine is a mess,

179
00:09:23,920 --> 00:09:26,440
Speaker 7: but it's not going to have an impact on global market.

180
00:09:26,200 --> 00:09:28,200
Speaker 6: Economy the way it did in twenty twenty two.

181
00:09:28,240 --> 00:09:31,319
Speaker 7: So and US China, they are of course in a

182
00:09:31,400 --> 00:09:35,760
Speaker 7: competitive strategic competition, but right now the trade tension for

183
00:09:35,840 --> 00:09:38,720
Speaker 7: all the reasons we know, are some limited. So every

184
00:09:38,760 --> 00:09:42,200
Speaker 7: time there is a geopoliga risk, people say stuff could happen,

185
00:09:42,320 --> 00:09:44,400
Speaker 7: But so far those that we've seen in the last

186
00:09:44,440 --> 00:09:48,760
Speaker 7: few decades, living aside the seventies with the shocks of

187
00:09:48,800 --> 00:09:51,320
Speaker 7: Young Kippur and the a Islamic Revolution have not a

188
00:09:51,400 --> 00:09:52,000
Speaker 7: market effect.

189
00:09:52,320 --> 00:09:53,960
Speaker 8: Do you think, though, that the United States is going

190
00:09:54,000 --> 00:09:56,880
Speaker 8: to lose some of its luster as an investment haven

191
00:09:57,280 --> 00:10:01,280
Speaker 8: in terms of the ongoing conflict between the US and

192
00:10:01,520 --> 00:10:02,960
Speaker 8: traditional allies like Europe.

193
00:10:03,160 --> 00:10:04,520
Speaker 1: Have you seen anything like that or do you think

194
00:10:04,520 --> 00:10:06,080
Speaker 1: that's overstaid in productivity really is.

195
00:10:06,040 --> 00:10:06,760
Speaker 6: Going to rule the rust.

196
00:10:06,880 --> 00:10:10,079
Speaker 7: You know, I've been saying since last year that tech

197
00:10:10,360 --> 00:10:13,280
Speaker 7: trump stariffs because I think that the upside coming from

198
00:10:13,280 --> 00:10:15,880
Speaker 7: tech is two hundred business points. Well, if you add

199
00:10:15,960 --> 00:10:19,840
Speaker 7: all the impacts of the bad circulationary policies of Trump trade,

200
00:10:19,840 --> 00:10:23,439
Speaker 7: the restrictions of migration, physical definity, trying to affect the

201
00:10:23,440 --> 00:10:26,760
Speaker 7: independence of the FED, the rule of law, the maximum

202
00:10:26,960 --> 00:10:29,040
Speaker 7: From an empedia point of view, it could be a

203
00:10:29,040 --> 00:10:32,320
Speaker 7: negative fifty business points downside to potential growth. So you

204
00:10:32,320 --> 00:10:34,760
Speaker 7: have an upside of two hundred from technology, you have

205
00:10:34,760 --> 00:10:36,880
Speaker 7: a downside of fifty. Is a ratio four to one,

206
00:10:37,080 --> 00:10:40,439
Speaker 7: So tech Trump starff. So the stuff that is technology

207
00:10:40,480 --> 00:10:44,679
Speaker 7: is first or everything else including geopolitics is second or older.

208
00:10:44,920 --> 00:10:47,240
Speaker 5: Is this why the AI trade the market pretty much

209
00:10:47,240 --> 00:10:52,319
Speaker 5: shrugged off at independence yesterday as a serious concern.

210
00:10:52,679 --> 00:10:55,880
Speaker 7: You know, I believe that you know there is some

211
00:10:55,960 --> 00:10:59,920
Speaker 7: fraudiness of course in the AI sector. But if you

212
00:11:00,080 --> 00:11:02,360
Speaker 7: talk to all these companies, I think that they would

213
00:11:02,360 --> 00:11:05,560
Speaker 7: all argue that we are maybe to worst five years

214
00:11:05,600 --> 00:11:08,720
Speaker 7: away or best three years away from AGI. However you

215
00:11:08,840 --> 00:11:11,720
Speaker 7: want to define it. Now, if we are achieving artificial

216
00:11:11,760 --> 00:11:15,560
Speaker 7: general intelligence, the valuation of the say, not every of

217
00:11:15,640 --> 00:11:18,200
Speaker 7: the mark seven is going to reach AGI, but maybe

218
00:11:18,240 --> 00:11:18,960
Speaker 7: three or four will.

219
00:11:19,520 --> 00:11:21,040
Speaker 6: So the value of a firm that.

220
00:11:21,120 --> 00:11:23,240
Speaker 7: Is going to be having AGI is going to be

221
00:11:23,320 --> 00:11:24,960
Speaker 7: five xs of its current value.

222
00:11:25,040 --> 00:11:26,280
Speaker 6: So that's the RaSE.

223
00:11:26,360 --> 00:11:28,280
Speaker 7: So if you think of it this way, yeah, there

224
00:11:28,320 --> 00:11:31,440
Speaker 7: is some fraudings, there can be a correction. But with

225
00:11:31,600 --> 00:11:34,000
Speaker 7: US growth at two percent for the last few decades,

226
00:11:34,240 --> 00:11:37,160
Speaker 7: the average return on SMP five hundred was twelve percent

227
00:11:37,720 --> 00:11:41,440
Speaker 7: including dividends of Nasdaq was sixteen percent, and was with

228
00:11:41,559 --> 00:11:44,520
Speaker 7: two percent. Suppose growth is not two three, let alone

229
00:11:44,520 --> 00:11:48,079
Speaker 7: three and a half four. American exceptionalism has to become

230
00:11:48,160 --> 00:11:50,640
Speaker 7: even stronger, because if it was American exception it's with

231
00:11:50,840 --> 00:11:53,319
Speaker 7: one point eight percent road. With higher roads, it has

232
00:11:53,360 --> 00:11:55,520
Speaker 7: to be better than that on average. Now there'll be

233
00:11:55,520 --> 00:11:59,319
Speaker 7: winners and losers. But within the publicly traded firms, all

234
00:11:59,360 --> 00:12:02,600
Speaker 7: the carn ecolomy, and among the startups, many of them

235
00:12:02,600 --> 00:12:04,440
Speaker 7: are going to go bust. But if you're looking at

236
00:12:04,480 --> 00:12:07,040
Speaker 7: the medium the horizon with higher growth, you've got to

237
00:12:07,080 --> 00:12:10,040
Speaker 7: have higher returns. And we're seeing based on the data

238
00:12:10,040 --> 00:12:12,559
Speaker 7: on real revenue growth for a segreef Avander firms, then

239
00:12:12,600 --> 00:12:15,679
Speaker 7: most of those productivity grains are gotten by the firms.

240
00:12:16,040 --> 00:12:19,000
Speaker 7: Real wages are growing less than productivity. In liberal costs

241
00:12:19,080 --> 00:12:21,640
Speaker 7: are falling. That's why there is my least, that's why

242
00:12:21,640 --> 00:12:25,040
Speaker 7: people are worrying about affordability. But from a profitability point

243
00:12:25,080 --> 00:12:27,079
Speaker 7: of view, the corporate sector is doing great.

244
00:12:27,960 --> 00:12:31,440
Speaker 2: Stay with us more Bloomberg surveillance coming up after this.

245
00:12:40,760 --> 00:12:44,000
Speaker 2: Tifinitely wanting a pincoat joined us no more, Tifinitely welcome

246
00:12:44,040 --> 00:12:45,520
Speaker 2: to the program. We'd love you if you on one.

247
00:12:45,520 --> 00:12:47,640
Speaker 2: The data we just go up. But so the outlook

248
00:12:47,640 --> 00:12:50,000
Speaker 2: for inflation, is there a better story to tell?

249
00:12:52,400 --> 00:12:54,760
Speaker 9: Yeah, well, I mean it sounds like it was a

250
00:12:54,880 --> 00:12:57,920
Speaker 9: very mixed bag, as Mike McKee just described. You know,

251
00:12:58,040 --> 00:13:03,200
Speaker 9: it seems like the softer than expected numbers came really

252
00:13:03,240 --> 00:13:05,720
Speaker 9: from the good side, and even on the good side,

253
00:13:05,760 --> 00:13:07,720
Speaker 9: it was it was very much a mixed picture. So

254
00:13:07,760 --> 00:13:11,599
Speaker 9: you have TERRIORF related passed through that's happening at a

255
00:13:11,720 --> 00:13:15,400
Speaker 9: very uneven paced depending on industries. So you had electronic products,

256
00:13:15,880 --> 00:13:18,080
Speaker 9: you know, that appeared prices were down quite a bit,

257
00:13:18,120 --> 00:13:20,520
Speaker 9: but other things like apparel were up. So it's a

258
00:13:20,559 --> 00:13:23,319
Speaker 9: pretty it looks like a pretty confusing number, quite frankly,

259
00:13:23,600 --> 00:13:25,240
Speaker 9: you know. And on top of that, you did have

260
00:13:25,320 --> 00:13:29,200
Speaker 9: government related distortions because of the shutdown, you know, so

261
00:13:29,320 --> 00:13:31,080
Speaker 9: I think the FED will have to parse through this.

262
00:13:31,400 --> 00:13:33,560
Speaker 9: You know, the way that we read the you know,

263
00:13:33,600 --> 00:13:36,360
Speaker 9: the Tea leaves more recently is that after seventy five

264
00:13:36,400 --> 00:13:39,600
Speaker 9: basis points of cuts that they've implemented in the second

265
00:13:39,640 --> 00:13:42,360
Speaker 9: half of twenty twenty five, they're much closer to neutral.

266
00:13:42,360 --> 00:13:44,880
Speaker 9: They're on the higher end of their own range estimated

267
00:13:44,960 --> 00:13:47,880
Speaker 9: range for neutral, and as a result of that, with

268
00:13:47,920 --> 00:13:52,000
Speaker 9: the labor market stable, they they're pretty comfortable pausing here

269
00:13:52,080 --> 00:13:54,120
Speaker 9: to just get more information and see what happens.

270
00:13:54,360 --> 00:13:57,160
Speaker 1: It was quite a confusing number is an evergreen statement

271
00:13:57,240 --> 00:13:59,960
Speaker 1: for the past twelve months and probably the next twelve

272
00:14:00,040 --> 00:14:02,360
Speaker 1: lots of data that we're about to get. Tiffany, I

273
00:14:02,440 --> 00:14:04,360
Speaker 1: just wonder when do you think that we will get

274
00:14:04,400 --> 00:14:07,080
Speaker 1: a number that is not confusing, that gives us a

275
00:14:07,080 --> 00:14:09,720
Speaker 1: little bit more information, given the fact that this is

276
00:14:09,760 --> 00:14:13,600
Speaker 1: a muddied economy with slow hires, slow fire, the idea

277
00:14:13,679 --> 00:14:16,679
Speaker 1: that maybe you're getting disinflation, you're not getting a job's recovery,

278
00:14:16,679 --> 00:14:18,240
Speaker 1: but at the same time you're getting growth.

279
00:14:20,360 --> 00:14:23,080
Speaker 9: Yeah, yeah, I mean so, I do think that you know,

280
00:14:23,120 --> 00:14:26,280
Speaker 9: we we've heard from from various you know, companies and

281
00:14:26,560 --> 00:14:30,160
Speaker 9: other industry sources that the holiday shopping season was was

282
00:14:30,200 --> 00:14:31,920
Speaker 9: going to be a key season where they were trying

283
00:14:31,960 --> 00:14:35,960
Speaker 9: to hold prices, you know, maybe even you know, elevate

284
00:14:36,040 --> 00:14:40,000
Speaker 9: discounts in order to gain market share, and then more

285
00:14:40,040 --> 00:14:43,480
Speaker 9: potential tariff passed through would be likely in the first

286
00:14:43,480 --> 00:14:45,640
Speaker 9: part of next year. You know, we also had an

287
00:14:45,640 --> 00:14:49,080
Speaker 9: inventory story. You had a bunch of stocking ahead of tariffs.

288
00:14:49,080 --> 00:14:52,160
Speaker 9: You know, companies were holding higher inventories, you know, and

289
00:14:52,240 --> 00:14:54,560
Speaker 9: some of that was probably getting them through the holiday season.

290
00:14:54,800 --> 00:14:56,160
Speaker 9: So I think it's really going to be a little

291
00:14:56,160 --> 00:14:58,840
Speaker 9: bit of a test, you know, early next year, you know,

292
00:14:58,880 --> 00:15:01,280
Speaker 9: to see how companies react to this new regime.

293
00:15:01,360 --> 00:15:01,520
Speaker 8: You know.

294
00:15:01,560 --> 00:15:03,880
Speaker 9: The other part of this, of course, is that we

295
00:15:04,000 --> 00:15:08,640
Speaker 9: have a Supreme Court decision coming out that will have

296
00:15:08,720 --> 00:15:12,880
Speaker 9: implications for tariffs. The administration has talked about rebuilding the

297
00:15:12,880 --> 00:15:16,600
Speaker 9: current regime even if the Supreme Court strikes down you know,

298
00:15:16,640 --> 00:15:19,960
Speaker 9: the tariffs on legal issues, so that adds are wrinkled

299
00:15:19,960 --> 00:15:22,320
Speaker 9: to this, you know. And then the final thing that

300
00:15:22,680 --> 00:15:25,000
Speaker 9: you know, we'll have material implications is that we do

301
00:15:25,080 --> 00:15:28,200
Speaker 9: have offsetting fiscal stimulus that's coming. This will be one

302
00:15:28,240 --> 00:15:31,680
Speaker 9: of the biggest refund tax seasons in recent memories. So

303
00:15:31,720 --> 00:15:35,520
Speaker 9: the economy overall doing strong, they're winners and losers under

304
00:15:35,520 --> 00:15:38,120
Speaker 9: the surface, you know. And on top of that, we

305
00:15:38,160 --> 00:15:40,560
Speaker 9: are getting some fiscal stimulus, so we'll have to see

306
00:15:40,560 --> 00:15:43,520
Speaker 9: how inflation evolves amid all those factors. We think early

307
00:15:43,600 --> 00:15:46,080
Speaker 9: next year, which sector of the really year, excuse me,

308
00:15:46,120 --> 00:15:46,840
Speaker 9: which sector.

309
00:15:46,600 --> 00:15:48,360
Speaker 1: Of the economy, Tiffany, do you think is going to

310
00:15:48,440 --> 00:15:50,720
Speaker 1: drive inflation given the fact that people don't think it's

311
00:15:50,720 --> 00:15:53,480
Speaker 1: going to come from housing, and so far it hasn't

312
00:15:53,520 --> 00:15:55,440
Speaker 1: really come from manufacturing.

313
00:15:58,200 --> 00:16:00,480
Speaker 9: Yeah, well so, I mean, I I think that the

314
00:16:00,560 --> 00:16:03,640
Speaker 9: labor market as well, is not really a place that

315
00:16:03,680 --> 00:16:08,160
Speaker 9: you're seeing inflationary pressures. It's really it's really the wealth

316
00:16:08,200 --> 00:16:11,840
Speaker 9: effect right now that appears to be driving you know,

317
00:16:11,880 --> 00:16:15,800
Speaker 9: elevated domestic demand, more resilient consumption than I think anyone

318
00:16:16,080 --> 00:16:19,240
Speaker 9: was expecting. You know, we're tracking consumption growth in the

319
00:16:19,520 --> 00:16:21,560
Speaker 9: second half of the year, you know, two and a

320
00:16:21,600 --> 00:16:23,600
Speaker 9: half percent, and that's in a time when you have

321
00:16:23,680 --> 00:16:27,240
Speaker 9: real label real labor income growth at one So you're

322
00:16:27,280 --> 00:16:30,760
Speaker 9: clearly getting a wealth effect here that's keeping demand elevated,

323
00:16:31,080 --> 00:16:33,560
Speaker 9: you know, So that appears to be the source of

324
00:16:33,960 --> 00:16:37,280
Speaker 9: demand and some potential inflationary pressures, you know, and just

325
00:16:37,320 --> 00:16:39,360
Speaker 9: how that comes out in the data. Again, it's a

326
00:16:39,400 --> 00:16:42,280
Speaker 9: winners and losers economy, and that that should be reflected

327
00:16:42,280 --> 00:16:45,200
Speaker 9: in the CPI as well. The housing side has been

328
00:16:45,360 --> 00:16:48,240
Speaker 9: a relative loser here. It does look like to us

329
00:16:48,240 --> 00:16:52,120
Speaker 9: that rents will moderate, you know, quite dramatically. We think

330
00:16:52,160 --> 00:16:55,680
Speaker 9: they could be below a pre pandemic trend. But on

331
00:16:55,720 --> 00:16:57,600
Speaker 9: the other side of that, you're you are still getting

332
00:16:57,600 --> 00:16:59,760
Speaker 9: some of this TERRAF related pass through that's keeping core

333
00:16:59,800 --> 00:17:02,640
Speaker 9: good is elevated. You know, that should peak in the

334
00:17:02,640 --> 00:17:05,240
Speaker 9: first part of this year and moderate there after. But

335
00:17:05,240 --> 00:17:07,280
Speaker 9: but in the meantime we are we are still getting it.

336
00:17:07,560 --> 00:17:09,480
Speaker 5: Given this latest data, do you think it opens the

337
00:17:09,480 --> 00:17:11,159
Speaker 5: door for the Fed maybe not to cut, but to

338
00:17:11,200 --> 00:17:13,360
Speaker 5: be dubvish.

339
00:17:13,440 --> 00:17:15,840
Speaker 9: I mean, I think that the Fed will, you know,

340
00:17:16,040 --> 00:17:19,679
Speaker 9: I think I think they certainly will, you know, they will,

341
00:17:19,960 --> 00:17:23,000
Speaker 9: uh they they will say that inflation, you know it

342
00:17:23,040 --> 00:17:25,240
Speaker 9: does has looked better than expected, and I think I

343
00:17:25,240 --> 00:17:28,840
Speaker 9: think that's absolutely right, you know. So with that, you know,

344
00:17:28,840 --> 00:17:31,880
Speaker 9: I think there's certainly reason for them to have an

345
00:17:31,880 --> 00:17:36,120
Speaker 9: outlook of continued interest rate cuts towards their estimates of neutral.

346
00:17:36,400 --> 00:17:38,960
Speaker 9: So I think the conversation you know, from Federal Reserve

347
00:17:39,040 --> 00:17:42,800
Speaker 9: officials is throughout this year is really going to shift

348
00:17:43,040 --> 00:17:45,880
Speaker 9: from you know, where do we think neutral interest rate

349
00:17:45,920 --> 00:17:48,440
Speaker 9: policy really is at this point? You know, I think

350
00:17:48,520 --> 00:17:51,399
Speaker 9: post you know, after the teriff related price adjustments happened.

351
00:17:51,440 --> 00:17:54,480
Speaker 9: You know, underlying inflation you know, does look pretty good here.

352
00:17:54,800 --> 00:17:56,639
Speaker 9: And so when you have inflation that's getting close to

353
00:17:56,680 --> 00:18:00,040
Speaker 9: target and a labor market that's stable, you know, you

354
00:18:00,040 --> 00:18:02,080
Speaker 9: really need to think about where is neutral policy. So

355
00:18:02,119 --> 00:18:04,440
Speaker 9: that's the conversation we think they'll be having in twenty

356
00:18:04,440 --> 00:18:04,960
Speaker 9: twenty six.

357
00:18:05,720 --> 00:18:09,280
Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best

358
00:18:09,280 --> 00:18:12,600
Speaker 2: in markets, economics, and geopolitics. You can watch the show

359
00:18:12,680 --> 00:18:15,600
Speaker 2: live on Bloomberg TV weekday mornings from six am to

360
00:18:15,760 --> 00:18:19,440
Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify

361
00:18:19,640 --> 00:18:21,879
Speaker 2: or anywhere else you listen, and as always, on the

362
00:18:21,880 --> 00:18:24,320
Speaker 2: Bloomberg Terminal and the Bloomberg Business app