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Speaker 1: Bloomberg Business App. Here's the right guy to talk about
Speaker 1: the partial derivatives of the algebraic function, boy known as
Speaker 1: American GDP. He majors in physics for mister Peck and
Speaker 1: the crew at Morgan Stanley Portfolio Solutions Group. CEE IO
Speaker 1: Jim Carren joins us. Right now, which of the alphabet
Speaker 1: soup of the function matters? The consumption, investment, government, or NX.
Speaker 2: Thank you, Tom. Well, Look, I think all of it matters,
Speaker 2: but right now I think consumption probably matters the most
Speaker 2: sev seventy percent of GDP. It's something that what we're
Speaker 2: looking at today is really about the strength of the consumer.
Speaker 2: The jobs data, all of that stuff is going to
Speaker 2: matter quite a bit. That's been probably the most surprising
Speaker 2: element of this period of time is that we've been
Speaker 2: able to bring in point the inflation rates down, but
Speaker 2: the jobs data is actually said relatively strong, which is
Speaker 2: kept surprising the strong GDP numbers.
Speaker 1: Does the yield space Paul's on the two year five
Speaker 1: percent yield, does the yield space describe Ellen Zenner's economics?
Speaker 1: You know, I think it does.
Speaker 2: It's just really a question of, like, if we have
Speaker 2: the two year yield flirting with five percent, that makes
Speaker 2: sense in an environment where we believe the Fed may
Speaker 2: only cut possibly one time this year, and that's really
Speaker 2: indicative of the strength. And you know, we're going to
Speaker 2: see what the first quarter GDP numbers come out to
Speaker 2: look like in the next four minutes or so. But
Speaker 2: what's also very important about that, though, is really tomorrow's
Speaker 2: PCEE number, the inflation number, So good growth like two
Speaker 2: and a half percent growth potentially, you know, as potential
Speaker 2: growth or two point seven percent is what's expected on
Speaker 2: the Bloomberg surveys for for PCE and you know, for
Speaker 2: GDP it's two point five percent. If that growth number
Speaker 2: is good, that's fine as long as inflation is low.
Speaker 2: But if inflation turns out to be high with strong growth,
Speaker 2: then the FED has a problem. The FED has no
Speaker 2: problem with strong growth and low inflation, full employment, strong growth,
Speaker 2: you know, stable prices, that's what the FED wants.
Speaker 3: So what are the good folks in Morgan Stanley, the
Speaker 3: investment management doing in terms of getting positioned here or
Speaker 3: for FED that I guess we now the market's now
Speaker 3: come to the conclusion, as you mentioned, they're not going
Speaker 3: to be cutting as much here.
Speaker 4: What do we do?
Speaker 1: Yeah?
Speaker 2: So so I think really, you know, the key element
Speaker 2: here is when we manage multi ascid portfolios across fixed
Speaker 2: income and equity, one of the things that we have
Speaker 2: to think about is how do we how do we
Speaker 2: use bonds to hedge equities. And one of the conclusions
Speaker 2: that we've come up with is that you may not
Speaker 2: want to be as long duration in periods of you know,
Speaker 2: potential turmoil like the correction that we're seeing in the
Speaker 2: markets today inequities as much as you had in the past.
Speaker 2: And the reason is is that I think that you know,
Speaker 2: the bull market and bonds, in my view, has ended
Speaker 2: we're likely to go sideways and arrange and interest rates
Speaker 2: for a long period of time, in which case having
Speaker 2: extra long duration in your portfolios these days is probably
Speaker 2: not the most.
Speaker 1: Awesome numbers on that. I mean, I'm sure many bond
Speaker 1: people short durations twenty years because they're all, yeah, now
Speaker 1: give me a year statistic. It's that of this blowney duration.
Speaker 2: Okay, yeah, now a good point, and it's good clarity
Speaker 2: to add. So the aggregate index for the US is
Speaker 2: about six and a half years of duration, so that's
Speaker 2: generally what people think of as neutral duration. What I
Speaker 2: would say is that you might want to be somewhat
Speaker 2: underweight that and have maybe somewhere on the order of
Speaker 2: like five to five and a half years of duration,
Speaker 2: so just slightly lower than index duration, I think is
Speaker 2: a more optimal hedge against the broad returns in your
Speaker 2: fixed income inequity portfolios. Now that may be financial market
Speaker 2: heresy to say go underweight duration and it reduces risk
Speaker 2: because typically people think adding bonds and adding duration is
Speaker 2: what reduces risk, and that's historically been true, but that's
Speaker 2: been true in a bond bull market.
Speaker 1: And we're ninety seconds away from a hugely anticipated GDP number.
Speaker 1: Let's review this. The quarter ends twelve thirty one, and
Speaker 1: they take a month to get it out. So now
Speaker 1: the quarter ends three thirty one, March thirty first, and
Speaker 1: get out your calendar. In four or five, six weeks along,
Speaker 1: we get the first look at GDP and I thought
Speaker 1: Veronica Clark was was good. Victoria Clark, it's city group
Speaker 1: of saying recently, the first look, the second look, the
Speaker 1: third look have been pretty smooth. You know, it hasn't
Speaker 1: been adjustment. So I think there's even more weight here.
Speaker 1: The Atlanta GDP number Paul two point seven percent, the
Speaker 1: Bloomberg survey two point five percent. Yep.
Speaker 3: So I mean this economy, the growth is slowed, but
Speaker 3: this growth is still there. Inflation is coming down. Yes,
Speaker 3: it's still sticky. But you put all that together well,
Speaker 3: and as Jim was just mentioning, it kind of suggests
Speaker 3: this FED doesn't have to and you know, get over.
Speaker 1: At skis toime. I'm glad we got the GDP price index.
Speaker 1: One point six percent was a prior and it explodes
Speaker 1: up to a three percent number. Here we're going to
Speaker 1: see in fifteen seconds there's also course PCEE price But
Speaker 1: then don't confuse that with the inflation data that we
Speaker 1: see tomorrow. Gets a little confusing. Jim Carron will explain
Speaker 1: that if he stays around here, it's Bloomberg's surveillance. Here
Speaker 1: is the data coming out. We get trade data first.
Speaker 1: It's pretty much a little bit larger deficit. But I'm
Speaker 1: not going to go we're wholesale inventories. I don't understand.
Speaker 1: Claims is a terrible number? Are you kidding me? Two
Speaker 1: hundred and seven thousand, and now we get the GDP
Speaker 1: statistics and this will be market moving two point five
Speaker 1: percent the survey. It comes in diminished Jim Carron one
Speaker 1: point six percent, personal consumption lighter, GDP price index three
Speaker 1: percent is three point one percent, and core PCEE price index,
Speaker 1: I guess I'm gonna say explodes. Maybe that's too large,
Speaker 1: three point four up to a three point seven percent statistic,
Speaker 1: and the VIX launches here the two year yield of
Speaker 1: four point ninety two percent. I think there's enough wow
Speaker 1: here just in the headline numbers, where there's almost confusion
Speaker 1: in the market. I think there is collosally in the market.
Speaker 3: I'm seeing we're seeing the S and P futures weaken
Speaker 3: a little bit here, down about one percent on the
Speaker 3: S and P and just looking at the short term
Speaker 3: of the yield curve to your treasures up one basis
Speaker 3: point four point nine to four percent. But again the
Speaker 3: GDP annualized the quarter on quarter, the kind of the
Speaker 3: headline number, one point six percent growth there in the
Speaker 3: first quarter consensus was two point five percent, as Thomas Minchek,
Speaker 3: and I'll also highlight prior period was three point four percent.
Speaker 4: So if you're looking for.
Speaker 3: A deceleration in the economy now, this data certainly kind
Speaker 3: of bears it.
Speaker 1: Chris Antsy driving our coverage for Top Live and he says,
Speaker 1: simply one point six percent growth rate is lower than
Speaker 1: any of the fifty nine estimates of the Bloomberg Service,
Speaker 1: of course except Jim Caron, he nailed it. But what
Speaker 1: we've got is a deterroring market nasiaka Facebook. One point
Speaker 1: three percent is well, I'm watching the two year yield
Speaker 1: four point nine four. Yes, it's gone green. We got
Speaker 1: a higher yield. They are four point ninety five percent. Yeah,
Speaker 1: really starting to move like there was almost a thirty
Speaker 1: second to lay there when the data came out, Paul.
Speaker 3: I mean he was just trying to grasp it here,
Speaker 3: but again is Bloomberg Live. We're just finding the reporting
Speaker 3: Bloomberg Live. You know, really talking about a significant underperformance
Speaker 3: there in the US economy finally starting to slow and
Speaker 3: you think about.
Speaker 4: The long and variable lags of the higher rates.
Speaker 1: Maybe we were seeing it fascinating. We'll get to Jim
Speaker 1: Karron here in a moment. Our economic indicators each and
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Speaker 1: numbers I think had enough shock factor. And you know
Speaker 1: I've been doing this a few years. The markets didn't
Speaker 1: move for thirty seconds, stunned.
Speaker 2: Well, you know this is a big miss. And like
Speaker 2: you said, you know many economists nobody really had this number.
Speaker 2: I mean, this is Look. One of the big positives
Speaker 2: to the first quarter was that there was a narrative
Speaker 2: that we were just growing very, very strong, and this
Speaker 2: is unwinding a lot of that narrative. So now this
Speaker 2: is actually a very friendly number for the FED because
Speaker 2: what the Fed has been saying is that we're going
Speaker 2: to get this economic cooling and we don't have to
Speaker 2: worry about potentially these inflation numbers that have been coming
Speaker 2: out hotter than you know, hotter than expected, that it's
Speaker 2: all going to correct itself. This is a major step
Speaker 2: in the right direction.
Speaker 4: It starts to.
Speaker 2: Put June back on the table. Potentially, it puts June
Speaker 2: back on the table. Now now we're not seeing that
Speaker 2: right now in terms of the price action of treasuries. Now,
Speaker 2: of course, everything's going to depend on is there a
Speaker 2: vision to this. Was there some type of an anomaly.
Speaker 2: We've got to go through the numbers, we have to
Speaker 2: go through the math of this whole thing. But effectively,
Speaker 2: a slow like this is going to bring down some
Speaker 2: of the inflation angst that's been in the markets.
Speaker 4: Yeah, I mean, I think it's really interesting.
Speaker 3: I'm looking at the WRP function to see how that's
Speaker 3: going to start reflecting any changes in the market's expectations
Speaker 3: for the FED.
Speaker 4: And you're right, it seemed like the.
Speaker 3: Market we started the year with six cuts. Potentially we
Speaker 3: got down to boy two or even fewer than two,
Speaker 3: just as recently as yesterday, and maybe this will cause
Speaker 3: the FED to maybe think about being a little more dubbish.
Speaker 2: And there's one other thing that I really want to
Speaker 2: bring these I think it's very, very important, is that
Speaker 2: earnings expectations are highly linked to GDP growth. So I
Speaker 2: know we're talking about the bond market a lot, let's
Speaker 2: talk about the equity market just for a second here.
Speaker 2: If earnings growth is slower in the first quarter, that's
Speaker 2: going to change a lot of people's full year earnings
Speaker 2: estimates for twenty twenty four and potentially even going forward.
Speaker 2: So the equity markets are actually responding more strongly on
Speaker 2: this because it's basically making many analysts take down some
Speaker 2: of their robust earnings expectation.
Speaker 1: We've got eight ways to go here, but let me
Speaker 1: go to what I learned in school. You know the textbooks. Yeah,
Speaker 1: you have physics envy, which is why Karen's here. And
Speaker 1: the answer is, you got to hang your hat on
Speaker 1: one thing, and to me, it's a ten year inflation
Speaker 1: adjust yield and forget about the math. And let's not
Speaker 1: impress people with a log And I'll semi log basis,
Speaker 1: I'm getting out to a real stress point at two
Speaker 1: point twenty six percent.
Speaker 2: Yeah, the real yields are certainly moving higher and into
Speaker 2: the point where this has historically demarked a bit of
Speaker 2: a slowing of economic activity. But none of this is
Speaker 2: happening in synchronicity to the extent that one of the
Speaker 2: things that we're also seeing is the price is paid
Speaker 2: components and the pricing components of the internals of the
Speaker 2: GDP number are actually causing the bond market a little
Speaker 2: bit of angst here. So on one hand, we have
Speaker 2: a weak headline print. On the other hand, we have
Speaker 2: some inflation and pricing pressures. So in theory, inflation is
Speaker 2: a lagging indicator, so inflation should fall on these things.
Speaker 2: But unless there's something that's just going, well.
Speaker 1: What's Ellen's saying? Stop? I mean, you got a team
Speaker 1: of fourteen people. Karen's there with two interns. Well they're
Speaker 1: from Voden, but Ellen Xander's got like twenty five people.
Speaker 1: What do they say about the disinflation vector in Morgan Stanley?
Speaker 2: Yeah, so look, I mean, it's, as Ellen likes to
Speaker 2: put it, it's going to be a slow, bumpy path lower.
Speaker 2: So you know inflation is likely to come down. It's
Speaker 2: just a question of does it come down in a
Speaker 2: linear fashion where people are comfortable with the pace but
Speaker 2: the trajectory. Nobody's really disagreeing with the direction of inflation.
Speaker 1: Everybody is.
Speaker 2: Most people agree that it's coming down. It's just a
Speaker 2: question of is it coming down fast enough for the
Speaker 2: FED to start their rate cutting cycle? And that's the debate.
Speaker 2: So what Ellen pushed out in terms of her FED
Speaker 2: forecast was from June to July that the first rate
Speaker 2: cut would start to come in July. And I don't
Speaker 2: think that this number might not change that in many ways.
Speaker 1: Okay, is there an inertial force here right now? Are
Speaker 1: we getting at where there's enough yields? We're on a
Speaker 1: truly on a physics basis. I make jokes about it,
Speaker 1: but seriously, are we getting a weight towards an inertial
Speaker 1: force of higher yields? Yeah?
Speaker 2: So, I think as you were saying earlier, you know,
Speaker 2: many people came into this year overweight fixed income, long duration,
Speaker 2: and this has been correcting.
Speaker 1: Now.
Speaker 2: The positives around this is that at this backup and yield,
Speaker 2: if you're looking at a multi ASSEID portfolio, you can
Speaker 2: start to think about owning US treasuries, You can think
Speaker 2: about owning bonds, high quality bonds now as a reasonable
Speaker 2: hedge against your equity, and you can actually potentially get
Speaker 2: some return from these levels.
Speaker 1: Sweet's gonna get us five percent to your you'd you
Speaker 1: a cup of coffee out on YouTube live chat James
Speaker 1: with a real smart insight stagflation. Jamie Diamond nails it, yep.
Speaker 1: I mean that's really what we're talking about. I mean,
Speaker 1: you know you mentioned David Weston. He's going to be
Speaker 1: with Professor Summers and Larry's going to pick it up
Speaker 1: and go here we are. But I mean that's what
Speaker 1: the research paper's paul to look like. Jim Careen, one
Speaker 1: more question. We're gonna go to doctor Wong and we're
Speaker 1: gonna bring Jim Karen back after doctor Wong.
Speaker 3: Hey, Jim, I'm looking at the two year just today
Speaker 3: up six basis points, as Tom said, for four point
Speaker 3: nine to nine percent, and you've mentioned fixing them as
Speaker 3: a hedge for equities that did not work in twenty
Speaker 3: twenty two, that sixty to forty portfolio did not work
Speaker 3: for anybody. Is that still something you guys think about?
Speaker 3: Is that still something we should keep in our toolbox.
Speaker 1: Yeah, you know.
Speaker 2: I mean we have to think about how we use
Speaker 2: bonds to hedge. And in the in the idea was
Speaker 2: that you could passively buy fixed income and it would
Speaker 2: just represent a great hedge. And this is one of
Speaker 2: the reasons why I think you should hold less fixed
Speaker 2: income exposure in terms of duration to hedge against your
Speaker 2: hedge against your equity portfolio. So to have slightly less
Speaker 2: like you know, I was saying six and a half
Speaker 2: years of duration is the is the index average, that's
Speaker 2: you know, that's what's considered neutral. I'm saying you should
Speaker 2: have maybe five or five and a half years of duration.
Speaker 2: So I do think we need to think differently about this.
Speaker 2: We have to remember that for forty years from nineteen
Speaker 2: eighty one to twenty twenty one, bonds are in a
Speaker 2: bull market. Today I think they're largely going to move sideways.
Speaker 2: So you're expected returns from the coupon.
Speaker 4: How to fix it up?
Speaker 1: Him, let's finish up with you so you can go
Speaker 1: back and publish what part of the yield curve will
Speaker 1: be most affected by sub two percent GDP, so.
Speaker 2: You know, look in theory, what it should be is
Speaker 2: the ten year yield. So in theory, the curve should
Speaker 2: start to flatten down because if you have a weaker
Speaker 2: growth economy and it shows that you're going into a
Speaker 2: slow period and a slow patch, longer duration actually will
Speaker 2: be a reasonable hedge in that particular environment. So the
Speaker 2: front end right now, and I think the bond market
Speaker 2: is looking at one thing, that's the consumer side, that's
Speaker 2: the price aside. The equity market is looking at the
Speaker 2: whole picture, and it's looking at that one point six
Speaker 2: versus the two point five, and I think that is
Speaker 2: the I think that's the mismatch right now in the market.
Speaker 2: So right now we have bonds on returns in equity
Speaker 2: returns highly correlated. That's dangerous. High correlation is dangerous. So
Speaker 2: there's no place to hide, right So if you bought
Speaker 2: bonds to hedge this number, you lost at least right
Speaker 2: now at this point. But like Anna was saying, I
Speaker 2: do think that some of this bond sell off will
Speaker 2: start to get reversed once it gets digest. Yes, it's
Speaker 2: you know, imports are very important component.
Speaker 1: Well, all, I got to make some news here today.
Speaker 1: I mean, there's no quret. We got to make some
Speaker 1: News Ian Lingoenn, and we're sorry, we can't get Ian
Speaker 1: Lingen in from BEMO. He's got to go into a
Speaker 1: Bank of Montreal at conference call. But Ian Lingen has said,
Speaker 1: at some point the ten year goes price up, yield down.
Speaker 1: Is this the moment where we finally get a catalyst
Speaker 1: for a lower ten year yield that, just as one example,
Speaker 1: brings mortgage relief across America.
Speaker 2: So in my opinion, the answer is yes. I do
Speaker 2: think that you know, four to seventy five and the
Speaker 2: ten year yield. I know we're kind of close to
Speaker 2: that right now. So let's call us let's say that
Speaker 2: we're let's say that we're just about there. I think
Speaker 2: that's a reasonable line in the sand to draw, and
Speaker 2: it's it's a place where I would start to take
Speaker 2: some bond risk.
Speaker 1: Paul rounded up four digits. I know you want to
Speaker 1: jump in and rounded up Paul four digits five percent
Speaker 1: in a two year yield.
Speaker 3: Exactly right, Hey, Jim, as you go back to your
Speaker 3: offices at Morgan Stanley Investment Management, you sit down with
Speaker 3: your pms this morning, are you guys going to change
Speaker 3: anything in your portfolios? Change your outBut change your allocations.
Speaker 3: So about it maybe a world that maybe stagflation is
Speaker 3: something we have to think about it.
Speaker 2: Well, I don't know. I mean, I think it's a
Speaker 2: little early to call for stackflation. But you know, so
Speaker 2: we've moved more towards a neutral posture at this point.
Speaker 2: So we've taken our equity from overweight to underweight end
Speaker 2: of the first quarter. But I think in bonds we
Speaker 2: are going to start to take our duration up a
Speaker 2: little bit higher because these yields are appetizing, so that
Speaker 2: that's likely the next move for us.
Speaker 1: Go ahead, Paul. Now this is one more question to
Speaker 1: Karen Jerseys having a tantrum. It's take your daughter to work?
Speaker 1: Did you bring any kids in? Now?
Speaker 4: My kids?
Speaker 1: I got afterthought today? I go you want to come
Speaker 1: into work with dad? She's looking at I mean, like,
Speaker 1: you know, is it that? Or go to Eli's on
Speaker 1: Madison Avenue and chat on twenty five dollars at cheeseburgers? Exactly?
Speaker 1: You know? I mean, what you know what you're gonna do?
Speaker 1: Elayne's waiting, Paul, get a question real quick.
Speaker 4: What do you think this the Fed's gonna do? Looking
Speaker 4: at this data today?
Speaker 2: So I still think it's Powell's remarks from from from
Speaker 2: a week ago still hold. I think he's still waiting
Speaker 2: to see more confidence. We still have to see those
Speaker 2: inflation numbers come out softer consistently.
Speaker 1: Yep. Yeah, this has been great. I really look forward
Speaker 1: to to talk about triangulation. I'm gonna blame Steve Roach
Speaker 1: for this. Maybe there's somebody else. They fight like cats
Speaker 1: and dogs at Morgan Stanley. They've got my greatest respect.
Speaker 1: The next meeting of Karen Zettner and Mike Wilson, that's
Speaker 1: gonna be it.
Speaker 4: It's gonna be We should have a remote broadcast.
Speaker 1: We should we should do a live broadcast. It's like
Speaker 1: the NFL draft. We'll have to see Jim. Karen, thank
Speaker 1: you so much, particularly for coming in today. Greatly appreciate
Speaker 1: that perfect person, perfect time. Constant Hunter joins us, working
Speaker 1: with Julia cornetto at micropolicy perspectives. Constant, I want to
Speaker 1: go to the eye. I want to go to the
Speaker 1: business spirit. Given sub two percent GDP with an inflation impulse,
Speaker 1: I have a ten year real yield back to two
Speaker 1: thousand and nine levels where it pretty much sustain two
Speaker 1: thousand and four to the crisis, and then two thousand
Speaker 1: and nine. Does the higher inflation adjusted yield does that
Speaker 1: begin to impinge now on American business?
Speaker 5: Well, that is the question Tom, and I think it
Speaker 5: has been impinging on American business right. When we look
Speaker 5: at financial conditions for those who can access the capital markets,
Speaker 5: financial conditions look fairly accommodated.
Speaker 3: Right.
Speaker 5: We have higher equity markets, people are going to the
Speaker 5: bond market and issuing debt. When you look at financial
Speaker 5: conditions for households. When you look at financial conditions for
Speaker 5: small and medium sized businesses, they are tighter. However, with
Speaker 5: that said, we are still seeing record new business formations.
Speaker 5: So there is something happening under the hood of this
Speaker 5: economy that is different than previous cycles. And as we know,
Speaker 5: history rhymes, it doesn't repeat very good constant.
Speaker 3: Obviously, the market was looking for if you look at consensus,
Speaker 3: was looking for a slow down in GDP in this quarter,
Speaker 3: but not this slow Does that change your thoughts about
Speaker 3: I don't know what the Fed will do, what investors
Speaker 3: should do, what you guys should do their macro policy perspectives.
Speaker 5: Yeah, Well, as you can imagine, our Bloomberg Chat has
Speaker 5: been very active this morning with amongst ourselves and with
Speaker 5: our clients. Right. So the view, of course is this
Speaker 5: makes it a more difficult calculus for the FED, and
Speaker 5: certainly that higher inflation number gives a clause. I will say, though,
Speaker 5: if you think about so there's two things, then they're
Speaker 5: necessarily congruent things because we're at a time when we're
Speaker 5: in an inflection point, and inflection points data gets very funky, right,
Speaker 5: and we've been pointing that out with some of the
Speaker 5: contradictions that we see within the labor market data, both
Speaker 5: the official data and some of the webscraping that we're
Speaker 5: doing with regard to company intentions to hire and fire right.
Speaker 5: And so what we have here is we have stronger
Speaker 5: services consumption, which quite honestly, I think economists have been
Speaker 5: waiting for that outside services consumption for several quarters, and
Speaker 5: goods consumption just persisted in being strong. Finally, we have
Speaker 5: the decline in goods consumption. That means that in all likelihood,
Speaker 5: this low to negative pricing we're seeing in goods will continue.
Speaker 5: That will give some relief to overall CPI.
Speaker 1: I'm sorry, I want to talk Constance about the bigger picture.
Speaker 1: The mail and Paul gets all the you know, Lisa
Speaker 1: gets the love notes constant I get hate mail, and
Speaker 1: the hate mail I get is simple. You guys are nuts.
Speaker 1: Most of us feel like it's a recession and we're
Speaker 1: getting crushed by inflation. If we have a run rate
Speaker 1: sub two percent GDP and the fancy people are living large,
Speaker 1: what portion of America now is in recession with an
Speaker 1: elevated inflation, right, it's got to be what half the country?
Speaker 5: Well, that's an excellent question, and I have to delve
Speaker 5: into the numbers to give an exact give an exact figure.
Speaker 5: But you bring up a very good point. And as
Speaker 5: you know, every time we get the CPI numbers, I
Speaker 5: do a table that shows the annualized pace of individual
Speaker 5: components since February twenty twenty. And while yes, the month
Speaker 5: of a month pace seems to be doing better, and
Speaker 5: the year of a year piece pace is doing better
Speaker 5: than the height, what people are anchoring to with is
Speaker 5: that cumulative increase they have to pay, and they can't
Speaker 5: get out of paying things like, for example, like vehicle insurance.
Speaker 5: It's not easy to substitute homeowners insurance, not easy repstute
Speaker 5: and these really do take a bite. Now, with that said,
Speaker 5: on vehicle insurance it looks like that was a one off.
Speaker 5: Three state regulators California, New York, and New Jersey allowed
Speaker 5: insurers to increase the vehicle insurance price, so that looks
Speaker 5: like it was.
Speaker 1: A one up.
Speaker 5: But still the mood is that that it's hard to
Speaker 5: control where price increases are coming from, and they're continue
Speaker 5: to be rolling surprises.
Speaker 1: Bluebrig surveillance. We always go to anecdotal evidence joining us
Speaker 1: now Paul Sweeney with a hate mail from New Jersey.
Speaker 1: How bad is the insurance story?
Speaker 4: It's it is.
Speaker 3: I mean, it's it's crazy here, but that's just you know,
Speaker 3: one of the many costs of living in.
Speaker 1: These are fixed costs. These are not like variable costs.
Speaker 1: I mean, it's like Hamburg very quickly, or a data check.
Speaker 1: Markets deteriorate SPX and negative one point three percent NASDAC
Speaker 1: negative one point seven percent. VIX is actually pretty quiescent,
Speaker 1: still under seventeen sixteen point eight six and that ten
Speaker 1: year real yield sum it all up up six massive
Speaker 1: basis points two point two nine percent. That takes us
Speaker 1: back to two thousand and nine and even back to
Speaker 1: two thousand and.
Speaker 3: Six, and Tom red headline across the Bloomberg Terminal traders
Speaker 3: push back timing a first rate FED rate cut to December. Constance,
Speaker 3: do you even maybe take it a little bit further
Speaker 3: and think about is this a FED even contemplating a
Speaker 3: rate hike?
Speaker 4: Is that something is possible.
Speaker 5: I don't think we're ready for a rate hike because one,
Speaker 5: you know, cocomminant with this weaker growth is going to
Speaker 5: be weaker jobs data. So we push back the first
Speaker 5: rate cut to September. But I really think there's a
Speaker 5: case for we get up to five percent on the
Speaker 5: ten year before this is all over.
Speaker 3: Interesting, All right, Constant, thank you so much for joining
Speaker 3: us Constants on our senior advisor macro policy perspective.
Speaker 1: John Stolfus of OpCo. John, how do I stay in
Speaker 1: markets on days like this?
Speaker 6: Well, thanks for having me on the on the show.
Speaker 6: I've gotta say this. I think the question, you know
Speaker 6: that traders ask right away is that should I go
Speaker 6: or should I stay? You know, like the old hit song.
Speaker 6: And there's a pants passing fancy potential here, capricious nature
Speaker 6: of the fast reaction. But for investors who are investing
Speaker 6: for it anywhere from two, three, five, seven years forward,
Speaker 6: you know, out it's a quick moment to pause and
Speaker 6: ponder check out the babies that are getting chucked out
Speaker 6: with the bath water, whether it's it's in technology, industrials,
Speaker 6: consumer discretionary, and a host of other cyclical stocks. In particular,
Speaker 6: we'd have to think is worth checking the opportunity that's
Speaker 6: available because the trend we believe is our friend, and
Speaker 6: the trend is led by the FED, which is acted
Speaker 6: incredibly responsible this FED fund hike cycle reflecting what we
Speaker 6: call the Ben Bernanke a legacy.
Speaker 1: John comes on the market's negative six hundred and he
Speaker 1: lifts it down a negative five eighty. He's a force.
Speaker 3: Hey John, John, what do you think you know, some
Speaker 3: of the reporting coming out and some of the words
Speaker 3: coming off of Wall Street this morning is maybe calling
Speaker 3: into question whether the FED will cut at all in
Speaker 3: twenty four. How do you think the Fed's going to
Speaker 3: look at some of this data and then of course
Speaker 3: the important PC data tomorrow.
Speaker 6: I think we'll have to see what happens with that
Speaker 6: data tomorrow. I think when Mike McKee was talking, he
Speaker 6: really hit some some important spots to consider there. But
Speaker 6: what I would say is there is effectively, you know,
Speaker 6: we came into this year when a lot of people
Speaker 6: were expecting. I think it went from it was it
Speaker 6: was five to seven up to eleven. People thought the
Speaker 6: economy was falling apart. Apparently we looked at it. We
Speaker 6: thought the FED was going to cut likely too, which
Speaker 6: rubbed up against the FEDS three sort of intimated costs
Speaker 6: that they were talking about early on.
Speaker 1: And I think there's.
Speaker 6: Still they still had at who knows what where we're
Speaker 6: headed in terms of the near term commentary, But we've
Speaker 6: got to say we think the economy, you know, as
Speaker 6: was mentioned earlier, the consumer is good business, remarkably resilient.
Speaker 6: You know, we're still early in the earning season, but
Speaker 6: some some things that.
Speaker 1: Goes okay, to make the observation that money market funds
Speaker 1: are going to become more comfortable here, sweety's on the
Speaker 1: five point zero two percent two your yield, that's going
Speaker 1: to be comfortable here, and you're going to tell me
Speaker 1: you how it. Share buybacks are going to click in
Speaker 1: our shared buybacks to the rescue of the market.
Speaker 6: I don't think it's just shared buybacks, I would I
Speaker 6: would think it really has to do with with the
Speaker 6: fact that earnings and revenue, particularly earnings growth has been
Speaker 6: significantly resilient, and revenue growth hasn't really you know, on
Speaker 6: an idiosyncratic basis, that can surely disappoint, but overall it
Speaker 6: shows a resilience that is main tamed, which likely tells
Speaker 6: us corporations are better and naturally so after fifteen years
Speaker 6: of SESSI crises at navigating tougher environments and with with AI,
Speaker 6: just where AI is today, not where it's going to
Speaker 6: be in the future. This is this is like what's
Speaker 6: going on I.
Speaker 1: E Io Paul Stulfus's crater in the market negative six
Speaker 1: twenty on the doubts.
Speaker 3: Fault, John, I know you guys took your year in
Speaker 3: price target up to I guess fifty five hundred on
Speaker 3: the S and P. What's kind of the driver? Is
Speaker 3: that an earnings driven market? Is that a FED driven market?
Speaker 4: How do you what are the drivers?
Speaker 6: Combination of the two. It's a combination of the FED.
Speaker 6: It's earnings driven. It has to do with innovation, and
Speaker 6: it's as we saw the rally from the late October
Speaker 6: of last year broadening to the other sectors, expectations that
Speaker 6: that innovation will feed into other sacs. There is other
Speaker 6: than technology and consumer discretionary and industrials, and within that
Speaker 6: that kind of of a feature. The nice thing is
Speaker 6: you have several things playing. It's not it's a fundamentally
Speaker 6: better story towards a normalization where bond issuers pay for
Speaker 6: the privilege of borrowing money, bond buyers get something in return.
Speaker 6: It hurts the It hurts the fast fast crowd, you know,
Speaker 6: because they like to be highly leveraged, and they will protest.
Speaker 6: The FEDS are luted to cut rates drastically, and I
Speaker 6: think Powell does not want to. He certainly doesn't want
Speaker 6: to be Arthur Burns that he doesn't want to have
Speaker 6: to become Paul Valker again. You know, I've been doing this.
Speaker 6: I came in and during the period where Vulker was
Speaker 6: beginning his second term, and so I've lived with the
Speaker 6: Fed through fifteen years of green span, and green span
Speaker 6: was almost a science. He was listing with inflation that
Speaker 6: was sticky.
Speaker 1: We're almost a negative seven hundred doubt. Go away, sulface
Speaker 1: with us some op goo. We really look forward to
Speaker 1: his research report from Oppenheimer and Company. He has been
Speaker 1: in this market. He has enjoyed a multi year bull market.
Speaker 1: You're taking to look at the front pages and because
Speaker 1: children are in the building, they're appropriate stories today. Lisa,
Speaker 1: what are you got all right?
Speaker 7: Yes, we're keeping a PG for the kids today. Okay,
Speaker 7: So we've heard a lot about a lot of workers
Speaker 7: being afraid that AI is going to take over their jobs.
Speaker 7: That's that's a big thing. But we had one IT
Speaker 7: company who's telling the Financial Times that technology could do
Speaker 7: away with call centers. You have a lot of the
Speaker 7: call centers. This is the head of Tata Consultancy Services
Speaker 7: said AI is rest and yeah, they definitely know, especially
Speaker 7: over in India, quote minimal needs need for call centers
Speaker 7: as soon as this year, as soon as a year.
Speaker 7: And so it's going to show that it's going to
Speaker 7: have a bad cut across Asia.
Speaker 1: But you know how they show you the chat chat
Speaker 1: and there's no person on the other end. It's just
Speaker 1: a computer algorithm. It doesn't work. That's my sophisticated analysis
Speaker 1: that frusctrating.
Speaker 7: You're sitting there like representative, like I just want to talk.
Speaker 5: To a person.
Speaker 1: Why is this going to work?
Speaker 7: Well, they're saying that what's going to happen is that
Speaker 7: the chatbots are going to be able to analyze the
Speaker 7: customer's transaction history and do much of the work that
Speaker 7: are done by those call center. So they're saying they're
Speaker 7: not going.
Speaker 1: To run it. I need I need some new tang
Speaker 1: zero right now. I love sending a message into our
Speaker 1: control room telling Michael the lazy puke sleeping right now
Speaker 1: because it's take your children to work week, Go get
Speaker 1: me a coffee in a ten zero zero. It's about
Speaker 1: time we put these kids to work. What that's next?
Speaker 7: So we're talking about kids, we're talking about girls.
Speaker 4: I love this.
Speaker 7: It's a girl power story. So all right here we go. Okay,
Speaker 7: the Queen's Park Ladies. It's an under twelve soccer team
Speaker 7: in England. They are undefeated. They're playing in a boys
Speaker 7: soccer league. Okay, so they're kicking butt. They're hoping to
Speaker 7: inspire younger girls to get into the sport. They've won
Speaker 7: all twenty two matches and at first the boys were laughing,
Speaker 7: you know when they saw these girls come out. And
Speaker 7: who's got the laws behind us?
Speaker 1: Mohammed el Arian. I have told you we're not having
Speaker 1: a beverage in London. Me and John Pharaoh and doctor
Speaker 1: el Arian and we're you know, the two of us.
Speaker 1: We're trying to get him to pick up the tab
Speaker 1: and we're saying, doctor, he did pretty well in the
Speaker 1: investment business, folks, And we said, Mohammad, would you just
Speaker 1: buy QPR And he's he's trying, he's trying to decide
Speaker 1: should he buy QPR, which is in the Champions League,
Speaker 1: or should he go big yeah, like to leave you know,
Speaker 1: by Arsenal or whatever. But the QPR ladies are getting
Speaker 1: it done.
Speaker 4: They are yeah, under twelve very much.
Speaker 7: Yeah, good morning, yeah.
Speaker 1: Yeah.
Speaker 7: And the reason they did is because when they first
Speaker 7: start years ago, there weren't there wasn't a girl's league,
Speaker 7: so they didn't have the competition. So that's why they
Speaker 7: joined the boys. They didn't have a girls It was
Speaker 7: about six years ago when the clubs started. Yeah, and
Speaker 7: they didn't have a girl's lea back then.
Speaker 4: So well, girls sports here, I mean, you know your
Speaker 4: daughter is huge.
Speaker 7: Yeah, girl sports here are really big. I know when
Speaker 7: I was younger, I was an athlete. I played with
Speaker 7: the boys on the basketball team.
Speaker 4: Did you they didn't have middle school the star stuff stuff?
Speaker 1: How many D one schools are going to recruit your daughter?
Speaker 7: She was like, you D two, D three, Okay, d one,
Speaker 7: It is tough. D one is tough, but it's and
Speaker 7: it's a big workload with the school and the D
Speaker 7: one's got.
Speaker 1: She had a ball the other night which landed in
Speaker 1: stet Nives.
Speaker 7: She did another home where she did.
Speaker 4: Okay, I'm telling you, girl power.
Speaker 3: Love it.
Speaker 1: Girl power.
Speaker 7: So, since we're talking about kids, and new report says
Speaker 7: US birth rates actually fell last year to the lowest
Speaker 7: level in more.
Speaker 4: Than forty years.
Speaker 7: So this is from the US National Center of hell Statistics.
Speaker 7: It fell two three point five nine million, not just
Speaker 7: the US birth rates and other countries worldwide. And we
Speaker 7: all know why. The experts are saying, you know, paid
Speaker 7: family skywriting and healthcare, childcare costs, it's all the same.
Speaker 7: But peek were shifted to women in their thirties and forties.
Speaker 7: Those rates declined in twenty twenty three from the year earlier.
Speaker 4: So my four offspring, that's an you.
Speaker 1: Are a rare case.
Speaker 7: Okay, it's not having four children anywhere.
Speaker 1: I think it's the one thing, the one thing I
Speaker 1: learned in the pandemic, other than listening to the medical pros.
Speaker 1: Thank you all the people that saved us at MODERNA
Speaker 1: and Pfizer is as well. The number one thing I
Speaker 1: learned is we lived all the evidence that our childcare
Speaker 1: system is broken. We all lived it. Everyone.
Speaker 4: Yeah, the childcare is Cristy.
Speaker 3: I mean Matt Miller during this time came back from
Speaker 3: Germany where they have paid childcare and it's just and
Speaker 3: his wife.
Speaker 4: Has just shocked that that we don't have that here
Speaker 4: in the US. She said, wait, this is the United States.
Speaker 3: You guys don't have paid healthcare so you can go
Speaker 3: to work and do all that kind of stuff.
Speaker 4: And then during the pandemic, of course it became that
Speaker 4: much more.
Speaker 1: Yeah, are you dunners or one more?
Speaker 7: No, this one's for you now. I know you like
Speaker 7: your doc Martin's Tom, but this is a new thing
Speaker 7: you may have to switch to.
Speaker 4: Okay.
Speaker 7: It is a snowfer or a sneffer.
Speaker 1: I saw this. Okay.
Speaker 7: It is a cross between a sneaker and a loafer.
Speaker 7: All right, So New Balance is coming out with it.
Speaker 7: It's in August. It's kind of it looks like it
Speaker 7: has a great out mesh, but it has no laces.
Speaker 7: So they're hoping that this is different from you know,
Speaker 7: the slip on shoes, different from that. This is more
Speaker 7: high end, so they're hoping, Yeah, I'm going to go
Speaker 7: to the executive.
Speaker 3: Here's here's where I got really disappointed. One of my
Speaker 3: all time favorite people, why look up to David west.
Speaker 4: Always stressed to the nines.
Speaker 3: He is now with his wonderfully tailored suits coming in.
Speaker 4: I mean he's a player, he is.
Speaker 3: He is wearing these kind of sneak things with wear suits.
Speaker 3: And if David Weston can go casual, Michael McKee, the
Speaker 3: world's coming to it.
Speaker 4: Michael McKee again, another one.
Speaker 1: I'm rebelling. I'm just not going, you know, in the
Speaker 1: hallway at the front door, where missus Keane says, shut
Speaker 1: up and throw this out. She has my last pair
Speaker 1: of decent Bowers skates like they're not They're just below
Speaker 1: like what the NHL people wear. And I think they're going,
Speaker 1: I'm not putting those on again. I don't think so.
Speaker 1: But you can get me in old fart sneakers without laces.
Speaker 1: I apoloze this. Yeah, you know, I may have to
Speaker 1: hire somebody. Michael Rainier, do you want to come over
Speaker 1: and tie my shoelaces? It be It'll be great.
Speaker 7: You have to tie the laces, just slip them on.
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