WEBVTT - Peter Atwater on Consumers’ Decision-Making Process 0:00:02.040 --> 0:00:06.000 This is Master's in Business with Barry rid Holds on 0:00:06.240 --> 0:00:07.320 Bloomberg Radio. 0:00:07.960 --> 0:00:10.600 This week on the podcast, I have a special guest. 0:00:10.960 --> 0:00:14.000 His name is Peter Atwater and he is the author 0:00:14.240 --> 0:00:18.759 of several books, most recently The Confidence Map, Charting a 0:00:18.800 --> 0:00:22.000 Path from Chaos to Clarity. Peter has had a fascinating 0:00:22.040 --> 0:00:27.520 career in finance, JP Morgan, Bangwan, a few other large 0:00:27.520 --> 0:00:32.839 places where he got to see how people's sentiment and 0:00:32.960 --> 0:00:37.519 confidence levels affected their decision making. And this is everything 0:00:37.600 --> 0:00:43.080 from securitized credit cards to investing and beyond. I found 0:00:43.080 --> 0:00:47.000 this to be an absolutely fascinating conversation. We discussed everything 0:00:47.159 --> 0:00:51.720 from the shape of cars to January sixth, and how 0:00:51.840 --> 0:00:56.360 each of the events that we talked about or milestones 0:00:56.400 --> 0:01:01.360 in society reflect the confidence, life level and the degree 0:01:01.400 --> 0:01:06.840 of uncertainty that the population at large feels. These are 0:01:06.880 --> 0:01:10.480 things that can be measured, and from those measurements you 0:01:10.520 --> 0:01:13.839 could get a sense of what's likely to come next. 0:01:14.680 --> 0:01:17.839 I thought this discussion was absolutely fascinating, and I think 0:01:17.880 --> 0:01:21.760 you will also with no further ado my discussion with 0:01:21.880 --> 0:01:26.280 Financial Insights. Peter Atwater, Welcome to Bloomberg. 0:01:26.400 --> 0:01:27.959 Thanks so much, Barry. 0:01:27.760 --> 0:01:30.680 So let's talk a little bit about your background, which 0:01:30.680 --> 0:01:34.120 I find is kind of fascinating. You graduate William and 0:01:34.160 --> 0:01:37.520 Mary in eighty three. How did your career begin? Where 0:01:37.520 --> 0:01:39.440 did you go from college? 0:01:39.680 --> 0:01:43.560 Yeah? I have a very traditional finance background. Started at 0:01:43.640 --> 0:01:46.240 JP Morgan right out of school, went through their bank 0:01:46.280 --> 0:01:49.800 training program. Wanted a foreign assignment, and the next thing 0:01:49.840 --> 0:01:53.320 I knew, I was in Delaware. And what I was 0:01:53.480 --> 0:01:57.080 ended up doing, though, was the beginning of what we 0:01:57.200 --> 0:02:00.840 call asset back securities today, pulling to get other credit 0:02:00.880 --> 0:02:04.760 card loans for seers, for mbn A and first USA 0:02:05.440 --> 0:02:11.600 car loans. And if you remember your history, banks at 0:02:11.600 --> 0:02:16.800 that point were just beginning to compete with the big 0:02:16.880 --> 0:02:20.839 Wall Street firms and commercial paper and asset backed securities 0:02:21.160 --> 0:02:25.000 were the first securities that the FED gave banks permission 0:02:25.040 --> 0:02:29.480 to underwrite. And so suddenly we were having to compete 0:02:29.560 --> 0:02:35.680 with Solomon, with Bear, with the CSFB in their territory. 0:02:36.360 --> 0:02:40.640 And so my job basically became how do we outthink them? 0:02:41.280 --> 0:02:45.120 Because there was no way we could out muscle Marrow, 0:02:45.400 --> 0:02:47.280 and so we had to We had just had to 0:02:47.320 --> 0:02:51.800 be better at structuring, finding ways to make things less expensive, 0:02:52.040 --> 0:02:53.640 you know, bring something else to bear. 0:02:53.960 --> 0:02:56.120 So what years were this. When were you at JP Morgan. 0:02:56.200 --> 0:02:59.080 I was there from eighty three to ninety six. 0:02:59.160 --> 0:03:02.120 Okay, and then what ultimately, so you missed all the 0:03:02.120 --> 0:03:02.919 fun during the. 0:03:03.000 --> 0:03:06.000 I did I did. I planted the seeds. 0:03:06.760 --> 0:03:10.520 Although back then performing credit card debt wasn't quite the 0:03:10.560 --> 0:03:15.519 same as ninja loans being fed into mortgage. 0:03:15.160 --> 0:03:19.440 Back I mean square. And you know, I left JP 0:03:19.560 --> 0:03:21.720 Morgan to actually go work for First USA, one of 0:03:21.760 --> 0:03:24.680 the credit card companies, and and you know, part of 0:03:24.680 --> 0:03:28.960 that was this clear view of the trajectory that securitization 0:03:29.160 --> 0:03:31.880 was going to change the business. You know, little did 0:03:31.919 --> 0:03:33.840 I realize that a year later we'd get bought by 0:03:33.880 --> 0:03:37.200 Bank One because Bank One needed desperately to have a 0:03:37.240 --> 0:03:41.120 credit card business. And so my career made another pivot 0:03:41.280 --> 0:03:43.760 to go from the treasure of a startup credit card 0:03:43.760 --> 0:03:46.200 company to being the treasure of the eighth largest bank 0:03:46.240 --> 0:03:46.800 in the country. 0:03:47.120 --> 0:03:50.960 Eventually you rise to the role of CEO of Private 0:03:51.040 --> 0:03:53.960 Client Services at Bank One. Tell us a little bit 0:03:54.000 --> 0:03:54.720 about that job. 0:03:54.880 --> 0:03:58.840 Yeah, So Bank One had merged with for Chicago, the 0:03:58.920 --> 0:04:03.080 merger with Tumultis, and so the board ultimately brought in 0:04:03.240 --> 0:04:07.200 Jamie Diamond. I talk about it merging with Jamie, you know, 0:04:07.240 --> 0:04:12.000 because this combination was a terrible cultural fit. It was 0:04:12.040 --> 0:04:16.080 almost viewed as a Tiffany by his Walmart combination. The 0:04:16.440 --> 0:04:20.480 egos were not happy with it, and Jamie did a 0:04:20.520 --> 0:04:23.320 great job of sort of reminding people that the enemy 0:04:23.360 --> 0:04:28.560 was outside the business. But he quickly uncovered where the 0:04:28.600 --> 0:04:33.200 merger had not executed the way it meant to. One 0:04:33.200 --> 0:04:35.839 of those was in the client the wealth management area, 0:04:36.360 --> 0:04:41.000 where we had lots of great skills in terms of 0:04:41.560 --> 0:04:45.599 trust and private banking and all of these elements, but 0:04:45.880 --> 0:04:49.080 no general practitioner. It was like we were running a 0:04:49.120 --> 0:04:52.440 hospital with no folks who could who could look at 0:04:52.440 --> 0:04:56.200 the patient holistically. And so one of the first things 0:04:56.240 --> 0:04:59.280 I did in that job was to identify who can 0:04:59.360 --> 0:05:02.320 be the point person so that you can cross sell 0:05:02.360 --> 0:05:06.720 and deliver a much fuller array of products than just, 0:05:07.080 --> 0:05:09.040 you know, the single products we were offering. 0:05:09.240 --> 0:05:12.120 You know, it's fascinating because there's the practice of investing 0:05:12.160 --> 0:05:14.680 and then there's the business of investing, and there are 0:05:14.720 --> 0:05:18.080 two very different things. I would imagine it's very similar 0:05:18.120 --> 0:05:20.680 in banking. There's the practice of banking and then the 0:05:20.680 --> 0:05:24.200 business of running a bank. You're what you're describing where 0:05:24.279 --> 0:05:28.400 the folks at Bank one were better at the former 0:05:28.440 --> 0:05:30.000 than the latter. Is that a fair way to say 0:05:30.000 --> 0:05:30.719 it was? 0:05:30.839 --> 0:05:33.839 This was an organization that had grown by acquisition, and 0:05:33.880 --> 0:05:37.080 so the mindset was always buy revenue, cut expense by 0:05:37.120 --> 0:05:39.280 revenue cut expense, and so long as you can keep 0:05:39.400 --> 0:05:46.039 doing that, you leave some fundamentals un dealt with, right 0:05:46.120 --> 0:05:49.320 and when you stop the roll up, then you have 0:05:49.360 --> 0:05:51.120 to look at how do you how do you integrate 0:05:51.160 --> 0:05:54.400 it or in some cases spin things off. But I'll 0:05:54.440 --> 0:05:57.560 tell you my timing couldn't have been worse, Sperry. I 0:05:57.600 --> 0:06:03.200 took that job in early two thousand and basically rode 0:06:03.200 --> 0:06:07.440 the market down, and I'll tell you nothing teaches you 0:06:07.520 --> 0:06:10.920 more about how things work than watching them not work 0:06:10.960 --> 0:06:13.560 on the way down. And so it was really eye 0:06:13.560 --> 0:06:21.320 opening to see how overconfidence turns into panic as we 0:06:21.360 --> 0:06:23.080 went through the dot com bubble. 0:06:23.160 --> 0:06:26.880 So you're anticipating my next question. It was your first 0:06:26.880 --> 0:06:29.640 book was Moods and Markets, the second book is all 0:06:29.680 --> 0:06:35.000 about confidence. What led to this interest in that aspect 0:06:35.040 --> 0:06:39.839 of behavioral finance? Was it the asset backed securities, was 0:06:39.839 --> 0:06:43.000 it watching a roll up entity, or was it the 0:06:43.200 --> 0:06:47.960 dot com collapse that sent asset prices depending on where 0:06:48.000 --> 0:06:51.840 you were invested. I like to remind people, nastec fell 0:06:51.920 --> 0:06:55.800 pete to troth eighty one percent. It's a big, big whack. 0:06:55.880 --> 0:06:58.680 That's great depression level fall. 0:06:58.920 --> 0:07:03.480 Yeah. I would say that my interest didn't arise until 0:07:03.720 --> 0:07:08.239 the Great Financial Crisis. You know, I had left the industry. 0:07:08.800 --> 0:07:11.520 I turned forty five and my son said, halfway, your dad, 0:07:11.560 --> 0:07:15.040 you're halfway to ninety and not horrifying kind of a 0:07:15.120 --> 0:07:18.120 tough you know, punch to the gut. And the other 0:07:18.160 --> 0:07:19.520 way to look at it is all right. I man, 0:07:19.560 --> 0:07:21.840 at this far, it's so far, so good. So this 0:07:22.000 --> 0:07:25.040 was two thousand and six. For the first time in 0:07:25.080 --> 0:07:28.800 my adult life, I had the opportunity to move away 0:07:28.920 --> 0:07:34.000 from the trees and start to see the forest, and 0:07:34.120 --> 0:07:36.680 to see what was happening in the mortgage space to 0:07:36.760 --> 0:07:41.320 your point Ninja loans and the wildness there, and then 0:07:41.400 --> 0:07:46.120 to watch as sentiments started to fall, how things started 0:07:46.160 --> 0:07:49.920 to come apart. And I ended up advising some hedge 0:07:49.960 --> 0:07:53.280 funds because my background as a treasurer bank treasurer, I 0:07:53.360 --> 0:07:56.360 dealt with the rating agencies. I'd securitize stuff. I mean, 0:07:56.360 --> 0:08:00.840 I knew how things go bad. Having spent a lot 0:08:00.840 --> 0:08:03.760 of time in troubled banks at my time at JP Morgan, 0:08:04.880 --> 0:08:11.160 and so what interested me as Lehman collapsed and what 0:08:11.200 --> 0:08:15.320 was going on was this sense that the crisis isn't done. 0:08:15.920 --> 0:08:18.960 We're moving a lot of risk from the private sector 0:08:19.000 --> 0:08:21.760 to the public sector, but we have an eliminated risk. 0:08:22.800 --> 0:08:27.280 And at the same time, everybody's saying things are getting 0:08:27.320 --> 0:08:29.640 going to get worse, and now the market starts to 0:08:29.680 --> 0:08:35.000 turn up. And that combination of the crowd saying things 0:08:35.040 --> 0:08:37.600 are only going to get worse and the market going 0:08:37.679 --> 0:08:39.520 up was a game changer for me. 0:08:39.720 --> 0:08:44.800 It's like, well, the term capitulation means surrender. Yeah, right, 0:08:44.880 --> 0:08:48.240 so when everybody throws in the towel, you know, I 0:08:48.280 --> 0:08:51.840 love asking people, you know, if they're bullish or beersh as. 0:08:51.880 --> 0:08:55.160 The first question and then the second question is what 0:08:55.240 --> 0:08:58.560 was your last transaction in the market. And invariably, if 0:08:58.640 --> 0:09:02.320 they're bullish, they just bought something, and if their bears, 0:09:02.280 --> 0:09:05.560 they just sold something. And it's a chicken and egg issue. 0:09:06.000 --> 0:09:08.800 Are they bullish because they bought something or did they 0:09:08.840 --> 0:09:12.120 buy something because they're bullish? Sometimes it's hard to tease 0:09:12.160 --> 0:09:12.800 the two apart. 0:09:13.080 --> 0:09:17.600 It's entirely reflexive, and so I say a lot. Our 0:09:17.960 --> 0:09:23.520 confidence level, our stories, and our actions exist in equilibrium 0:09:23.760 --> 0:09:27.960 at all times. I don't care which is chicken or egg. 0:09:28.320 --> 0:09:30.960 I just know that if I talk to Barry Ritholtz 0:09:30.960 --> 0:09:33.240 and I know what you're doing, I know what your 0:09:33.320 --> 0:09:35.560 story is, and I know how you feel, and I 0:09:35.559 --> 0:09:38.800 can pick one of the three and pretty well deduce 0:09:38.960 --> 0:09:40.600 what the other two are likely to be. 0:09:40.920 --> 0:09:46.439 You know, the old trader's aphorism is news follows price, 0:09:46.720 --> 0:09:50.839 meaning when the price stocks are going up, the narratives 0:09:50.840 --> 0:09:53.760 are great, and when the prices are going down, the 0:09:53.880 --> 0:09:58.800 narratives are usually negative. Although I have a vivid recollection. 0:09:58.960 --> 0:10:03.880 In the beginning, if they war, oil prices had spiked 0:10:04.679 --> 0:10:09.200 the same day US accidentally bombed and important mosque, and 0:10:09.360 --> 0:10:14.760 that was a headline, U Air Force accidentally destroys mosque, 0:10:15.720 --> 0:10:19.360 causing oil prices to spike. By the end of the day, 0:10:19.520 --> 0:10:22.280 oil prices had come back down and got negative. So 0:10:22.360 --> 0:10:28.560 the online headlines were US bombs my mosque accidentally, oil 0:10:28.600 --> 0:10:32.480 prices fall. It's like, well, which was it? Or maybe 0:10:32.480 --> 0:10:35.520 you're these just wholly unrelated things and we're trying to 0:10:35.559 --> 0:10:36.280 create a story. 0:10:36.520 --> 0:10:39.720 Yeah, I always feel sorry for the daily news writers 0:10:39.760 --> 0:10:43.160 when you see major market reverses, because to watch them 0:10:43.200 --> 0:10:49.719 contort themselves to create a comfortable narrative, it's humorous. 0:10:49.520 --> 0:10:54.280 Right, It's all hindsight bias and narrative fallacy and storytelling. 0:10:54.640 --> 0:10:57.400 So one of the things I was surprised to learn 0:10:57.559 --> 0:11:01.360 as I was reading your background, and you say you 0:11:01.440 --> 0:11:08.840 build on the insights of Robert Prector's work in socioeconomics, socioonomics, socioonomics, 0:11:08.960 --> 0:11:12.080 I've always pronounced that wrong. So a long time ago 0:11:12.440 --> 0:11:17.200 I read Prector's perspectives and was very influenced by his 0:11:17.400 --> 0:11:21.440 concept of the long cycle. You come out of World 0:11:21.480 --> 0:11:24.840 War Two, all these gis are returning to the US. 0:11:24.920 --> 0:11:28.280 There's the GI bill sending him to college, where building 0:11:28.280 --> 0:11:31.760 out suburbia, the rise of car culture, the rise of 0:11:33.240 --> 0:11:36.520 just the middle class, and that cycle seems to go 0:11:36.640 --> 0:11:40.240 a long time and last a while. How did Prector's 0:11:40.480 --> 0:11:41.240 work affect you? 0:11:41.640 --> 0:11:46.000 So in twenty ten he did an interview for an 0:11:46.160 --> 0:11:50.600 organization called Minionville. Oh sure, Tod Harrison and I had 0:11:50.640 --> 0:11:55.319 been writing for Minionville, and I listened to Bob talk 0:11:55.880 --> 0:11:59.000 and he said something that I had not paid much 0:11:59.000 --> 0:12:03.600 attention to before or which was a reversal in causality, 0:12:04.080 --> 0:12:08.000 which is we tend to look at events causing us 0:12:08.440 --> 0:12:13.719 to change our feelings. Bob's recommendation and the foundation for 0:12:13.960 --> 0:12:19.320 socionomics is look at the mood before things happen. And 0:12:20.160 --> 0:12:25.120 suddenly it made so much sense to me that of 0:12:25.280 --> 0:12:28.080 course we act as we feel, and if I could 0:12:28.080 --> 0:12:34.160 then figure out what is consistent in those actions and 0:12:34.240 --> 0:12:38.520 connect them to feelings, then that might be something really useful, 0:12:39.360 --> 0:12:42.200 as whether it was in consulting or trading, to be 0:12:42.280 --> 0:12:47.040 able to connect preferences to the choices we make and 0:12:47.080 --> 0:12:47.880 how we feel. 0:12:48.120 --> 0:12:51.520 So how does one go about measuring mood? How can 0:12:51.559 --> 0:12:56.400 you measure the sentiment of the public. It's not especially uniform. 0:12:56.480 --> 0:12:59.920 It seems to fluctuate, and as we've learned, we can 0:13:00.080 --> 0:13:01.559 always trust what people say. 0:13:01.880 --> 0:13:07.640 Yeah, so I look at it very qualitatively, because mood 0:13:07.840 --> 0:13:11.959 is a feeling, and so the qualitative pieces matter more 0:13:12.000 --> 0:13:14.600 than the data to us data. We always have to 0:13:14.640 --> 0:13:19.280 interpret data, and so our feelings determine how we interpret. 0:13:19.360 --> 0:13:22.600 You know, sixty five degrees can feel both warm and cool. 0:13:22.920 --> 0:13:25.160 But what I try to do is to look at 0:13:25.400 --> 0:13:28.439 the stories, and stories are a great indicator of how 0:13:28.440 --> 0:13:31.679 we feel because our imagination of the future, the stories 0:13:31.720 --> 0:13:36.000 we tell perfectly mirror how we feel. Confidence is forward looking, 0:13:36.400 --> 0:13:39.640 and so my imagination of what's coming is going to 0:13:39.720 --> 0:13:44.920 be a reflection on my mood right now. And the 0:13:45.000 --> 0:13:47.240 media does a great job of letting me know what 0:13:47.280 --> 0:13:51.880 those stories are. Twitter and social media does a spectacular job. 0:13:52.160 --> 0:13:55.520 So does Google, I mean Google searches. I'm a big 0:13:55.600 --> 0:13:59.120 user of Google trends. It helps me to see what's 0:13:59.160 --> 0:14:01.680 the crowd interested, what are the stories we tell, and 0:14:01.720 --> 0:14:05.640 the word choices. So recently I see the word relentless 0:14:06.080 --> 0:14:09.199 being applied to the rise and interest rates as we're 0:14:09.679 --> 0:14:11.720 coming to an end of the third quarter of twenty 0:14:11.760 --> 0:14:15.000 twenty three. Well, relentless is a word that doesn't show 0:14:15.080 --> 0:14:21.320 up in stories until it's beginning to feel like something 0:14:21.400 --> 0:14:23.240 significant is about to happen. 0:14:23.120 --> 0:14:25.200 Right, And if we're going to be objective and put 0:14:25.240 --> 0:14:28.240 some numbers on it, as much as we all would 0:14:28.240 --> 0:14:33.040 prefer lower rates, we've had eighteen nineteen months of rising rates, 0:14:33.840 --> 0:14:36.960 and rates are now back to where they've averaged over 0:14:37.000 --> 0:14:42.360 the past fifty years. So if you're being bloodless about it, hey, 0:14:42.440 --> 0:14:46.320 rates have returned to normal fairly quickly, and yet it 0:14:46.360 --> 0:14:47.320 doesn't feel that way. 0:14:47.680 --> 0:14:49.840 But I can also look at the behavior of bond 0:14:49.880 --> 0:14:55.120 investors and look at the stampede that took place two 0:14:55.200 --> 0:14:59.800 years ago into negative yielding bonds and the stories that 0:15:00.080 --> 0:15:04.000 and along that, and the confidence that investors had. 0:15:04.120 --> 0:15:06.720 And meaning at the very peak of the bond bull 0:15:06.840 --> 0:15:08.880 market just before the reversal took place. 0:15:08.960 --> 0:15:12.400 Yeah, I mean you could. You could see this sense 0:15:12.440 --> 0:15:15.400 of permanence and power that that you know, nothing was 0:15:15.440 --> 0:15:17.880 going to be able to raise interest rates at that point, 0:15:18.680 --> 0:15:23.840 and so you had a story that perfectly aligned with 0:15:24.880 --> 0:15:31.280 negative interest negative yielding interest rates that was overlooked because 0:15:31.280 --> 0:15:34.760 of the the excitement that was happening in the markets 0:15:34.960 --> 0:15:36.800 and bond prices at record highs. 0:15:36.880 --> 0:15:40.960 So, so how do you tease out of these broad 0:15:41.120 --> 0:15:47.160 events in society? What what the underlying nugget of important 0:15:47.480 --> 0:15:50.400 signal is? Uh, you had a tweet that cracked me up. 0:15:50.440 --> 0:15:55.680 I want to share when confidence is low, cars are round. 0:15:56.440 --> 0:15:59.360 So I started to think about that, and you have 0:15:59.480 --> 0:16:04.960 some of these ugly old citrones and the qt VW beetle, 0:16:05.080 --> 0:16:08.360 and then later on the pacer there have been some 0:16:08.440 --> 0:16:13.000 pretty round and not necessarily beautiful cars over the years. 0:16:13.240 --> 0:16:14.160 What's the correlation? 0:16:14.360 --> 0:16:17.320 So I have to give credit to Mark Elishski, who 0:16:17.360 --> 0:16:21.320 works with Bob Prector on socioomis, because because Mark did 0:16:21.320 --> 0:16:26.600 this fabulous study that shows that cars are soft, they're round, 0:16:28.040 --> 0:16:33.160 their colors are bland, even though the woody. You know, 0:16:33.200 --> 0:16:38.160 if you think about sure, that's another low confidence indicator. 0:16:38.320 --> 0:16:40.120 And then you go to the other extreme and you 0:16:40.160 --> 0:16:42.160 have chrome, very. 0:16:42.320 --> 0:16:47.520 Angulag war e type just long, beautiful. 0:16:47.000 --> 0:16:51.200 Wide, you know, big engines. You know, you look at 0:16:51.200 --> 0:16:54.680 the Hummer, that was a classic, you know, that would 0:16:54.680 --> 0:16:57.040 be an indicator of of huge. 0:16:56.760 --> 0:16:59.320 Sentiment, really really interesting. You know what. 0:17:00.200 --> 0:17:02.800 The Mayback is one of my favorite indicators because it 0:17:03.160 --> 0:17:08.120 sort of comes and goes at these extraordinary moments in history. 0:17:08.600 --> 0:17:11.680 Is that how you think about cars like the Hummer 0:17:11.840 --> 0:17:15.600 or the Maybach as just votes of confidence as to 0:17:15.640 --> 0:17:16.360 the near future. 0:17:16.840 --> 0:17:21.000 Yeah, you know the Phaeton from Volkswagen. Again I recall 0:17:21.119 --> 0:17:22.440 terribly timed. 0:17:22.280 --> 0:17:25.359 B twelve big long seven series competitor. 0:17:26.119 --> 0:17:30.359 You know, the car companies want to deliver uber luxury 0:17:30.400 --> 0:17:33.639 to everybody at the top. I mean I spend a 0:17:33.680 --> 0:17:36.600 lot of time looking at LVMH because I think there's 0:17:36.720 --> 0:17:40.720 no better real time indicator for the financial elite. 0:17:41.520 --> 0:17:47.200 People give me grief because I track Rolex and Protect 0:17:47.280 --> 0:17:50.960 prices and Ferrari and Porsche prices. There are a bunch 0:17:50.960 --> 0:17:53.560 of services that track that. It's like, why are you 0:17:53.600 --> 0:17:56.639 so obsessed on watchers and cars. No, I'm obsessed with 0:17:56.680 --> 0:17:59.600 what the top one or ten percent does because what 0:17:59.640 --> 0:18:01.640 they do is going to trickle down to the rest 0:18:01.640 --> 0:18:03.879 of I don't mean trickle down in Oregan sense, but 0:18:04.560 --> 0:18:07.040 their behavior has a huge impact on the rest of 0:18:07.160 --> 0:18:09.720 the economy. Absolutely, talk about that a little bit. 0:18:09.840 --> 0:18:13.800 Yeah, So there are indicators to me to all levels 0:18:13.840 --> 0:18:16.119 of the economy. So if I want to look at 0:18:16.160 --> 0:18:20.720 the upper middle class, I'll look at a Carnival cruise line. 0:18:21.320 --> 0:18:26.560 Because travel requires us to plan, to have again a 0:18:26.840 --> 0:18:29.600 strong imagination of the future. We're going to admit some 0:18:29.680 --> 0:18:32.920 money we're committing. It's not an insignificant amount of money, 0:18:33.400 --> 0:18:35.959 and so that that becomes a great bell weather for 0:18:36.040 --> 0:18:39.200 me in terms of how how are those that are 0:18:39.240 --> 0:18:41.800 not you know, the one percent, but those that are 0:18:42.080 --> 0:18:43.639 doing well, how are they faring? 0:18:44.320 --> 0:18:48.120 So I'm glad you mentioned carnival cruise lines because there's 0:18:48.160 --> 0:18:51.480 something that's been perplexing me and I don't want to 0:18:51.600 --> 0:18:55.320 just dumb it down to explain it, but sometimes dumbing 0:18:55.320 --> 0:18:58.240 it down does explain it. On the one hand, when 0:18:58.280 --> 0:19:02.520 we look at sentiment measures of the US population never 0:19:02.600 --> 0:19:05.520 been more negative, worse than nine to eleven, worse than 0:19:05.560 --> 0:19:09.600 the financial crisis, worse than the pandemic. People are super negative. 0:19:10.040 --> 0:19:13.959 And yet at the same time we have record boat 0:19:14.040 --> 0:19:17.560 sails pleasure craft. I don't mean like Carnival Corps line. 0:19:17.680 --> 0:19:21.000 I mean twenty twenty five thirty forty foot boats. If 0:19:21.040 --> 0:19:23.240 you're gonna go out and buy a boat, you're spending 0:19:23.240 --> 0:19:25.560 a lot of money. The boat is the cheapest part 0:19:25.640 --> 0:19:29.840 of boating, slip, the winter rising, the maintenance, They're just 0:19:30.160 --> 0:19:33.480 boating is not a cheap hobby. I don't understand why 0:19:33.560 --> 0:19:37.119 so many people are saying they're negative and yet so 0:19:37.160 --> 0:19:39.720 many people are going out and buying boats. Or are 0:19:39.760 --> 0:19:42.119 these just two different demographic cohorts. 0:19:42.240 --> 0:19:45.480 So I think there are multiple demographic cohorts, and I 0:19:45.520 --> 0:19:46.960 wouldn't discount that today. 0:19:47.040 --> 0:19:49.600 I bet this is a big overlap though that's my sense. 0:19:49.880 --> 0:19:53.600 When I see the like the Maga Armadas, everything is 0:19:53.680 --> 0:19:58.040 terrible with the Maga signs on their boats. It can't 0:19:58.040 --> 0:19:59.880 be that bad if you're in a forty foot yacht 0:20:00.040 --> 0:20:00.760 on the lake. 0:20:01.000 --> 0:20:04.639 Yeah, and gallup. And you know, the University of Michigan, 0:20:04.680 --> 0:20:09.760 everybody's looked at the political impact on sentiment surveys. 0:20:10.240 --> 0:20:12.240 A lot of it's just partisans. It's partisan. 0:20:12.440 --> 0:20:15.399 And in fairness that this has been the case for 0:20:15.520 --> 0:20:16.639 quite a while, I. 0:20:16.640 --> 0:20:18.399 Mean, but it's gotten much much worse. 0:20:18.440 --> 0:20:21.520 It's gotten far worse. You know, the last time the 0:20:21.560 --> 0:20:26.639 parties felt the same was really the Great Financial Crisis. 0:20:26.800 --> 0:20:29.240 Coming out of that, you saw recovery on the part 0:20:29.240 --> 0:20:33.800 of Democrats, but no recovery whatsoever among Republicans. 0:20:33.240 --> 0:20:35.440 Which in terms of sentiment, in terms of. 0:20:35.400 --> 0:20:39.400 Sentiment, and so you know when people talk about, well, 0:20:39.400 --> 0:20:42.199 where did Donald Trump come from? When you look at 0:20:42.320 --> 0:20:47.479 consumer sentiment by political category, it becomes very evident what 0:20:47.640 --> 0:20:50.640 was behind that. You know, eight years of of Republicans 0:20:50.680 --> 0:20:54.000 feeling the same way they felt the weekend Lehman Brothers collapsed. 0:20:54.359 --> 0:20:56.960 So let's talk about that for a second. Chris, I've 0:20:57.000 --> 0:20:59.679 heard this and I just don't get it. When Lehman 0:20:59.720 --> 0:21:03.000 collected and I'm not a believer that Lehman caused the 0:21:03.040 --> 0:21:07.240 financial crisis, it was merely the first trailer in the 0:21:07.280 --> 0:21:11.040 trailer park that the tornado took, but everybody had eaten 0:21:11.040 --> 0:21:14.400 the same bad food at the buffet. To mix metaphors, 0:21:15.000 --> 0:21:19.080 there were genuine moments of terror, Like I was in 0:21:19.119 --> 0:21:25.040 New York City. People were very frightened. I remember the 0:21:25.080 --> 0:21:28.600 head of my firm saying, you gotta stop spiking the 0:21:28.600 --> 0:21:31.840 football because there's blood in the streets and everybody's really 0:21:32.760 --> 0:21:36.000 not doing well. And that was a moment of like 0:21:36.600 --> 0:21:40.920 just genuine financial panic, which by the way, kept going 0:21:40.960 --> 0:21:44.200 for another six months until the market made their lows 0:21:44.280 --> 0:21:46.840 in March of two thousand and nine. That was September 0:21:47.240 --> 0:21:49.520 of two thousand and eight. And then you look around 0:21:49.560 --> 0:21:52.679 today and listen, nobody is thrilled with the state of 0:21:53.240 --> 0:21:56.520 Nobody likes either of the two leading candidates, Biden or Trump, 0:21:56.920 --> 0:22:00.600 to record negatives. You have all sorts of problems in 0:22:00.640 --> 0:22:03.720 the country, but can you really compare the state of 0:22:03.760 --> 0:22:09.040 the economy and three point something percent unemployment to unemployment 0:22:09.080 --> 0:22:12.439 over ten percent. People are concerned the ATM isn't going 0:22:12.480 --> 0:22:15.800 to work. How is that comparable to what's going on today? 0:22:15.960 --> 0:22:20.200 It isn't if you measure it in terms of economic conditions. 0:22:21.080 --> 0:22:26.639 But confidence is about vulnerability, relative vulnerability, and I think 0:22:26.760 --> 0:22:31.879 that there are a lot of Americans who feel especially vulnerable. 0:22:32.359 --> 0:22:36.760 They feel culturally vulnerable, they feel religiously vulnerable, they feel 0:22:37.760 --> 0:22:42.800 in terms of issues of gender, and so I think 0:22:42.880 --> 0:22:48.199 that what a lot of our quote unquote economic confidence 0:22:48.200 --> 0:22:53.639 indicators are picking up is vulnerability that is far more 0:22:53.960 --> 0:22:59.840 fundamental to people's lives. And I think one of them 0:22:59.880 --> 0:23:04.879 is stakes the economists have been making is they're attributing 0:23:05.040 --> 0:23:11.560 too much of these indicators to economic connections rather than 0:23:11.920 --> 0:23:15.119 to the social and political connections that we're seeing that 0:23:15.240 --> 0:23:17.040 are quite profound. 0:23:17.680 --> 0:23:23.760 So let's stay with that theme of political disenfranchisement and 0:23:25.160 --> 0:23:29.240 fear and nervousness about changes in society. When I look 0:23:29.280 --> 0:23:34.240 around at the sociological and demographic changes that have been 0:23:34.800 --> 0:23:39.760 taking place recently, they're the end of product of trends 0:23:39.800 --> 0:23:42.919 that have been around for decades. So the US has 0:23:43.000 --> 0:23:46.520 becoming increasingly diverse. Right, you and I are a bunch of 0:23:46.560 --> 0:23:50.199 old white males. We used to be the dominant majority. 0:23:50.240 --> 0:23:53.199 Then now we're a plurality, and eventually we're going to 0:23:53.200 --> 0:23:55.800 be a large minority. That trend has been in place 0:23:56.600 --> 0:24:00.000 for decades. The country kind of swings back and forth 0:24:00.320 --> 0:24:03.680 between the left and the right. I think what's happened 0:24:03.760 --> 0:24:07.359 is the younger generations have always been more progressive, but 0:24:07.520 --> 0:24:11.600 now the younger generations are you know, the sixties and seventies. 0:24:11.640 --> 0:24:16.959 Generations from those decades are in their forties, fifties, sixties, seventies, 0:24:17.359 --> 0:24:20.960 and very often are in charge of organizations. Isn't a 0:24:21.040 --> 0:24:24.120 lot of what's going on just the culmination of things 0:24:24.119 --> 0:24:26.560 that are a long time coming. And I'm not saying 0:24:26.640 --> 0:24:30.400 people shouldn't be unaware of it. It just seems funny that, 0:24:30.800 --> 0:24:34.320 you know, post pandemic. Okay, now it's here and we 0:24:34.320 --> 0:24:35.400 all need to freak out. 0:24:35.720 --> 0:24:40.199 Yeah. I look at the roots of this as having 0:24:40.440 --> 0:24:47.040 been sown in a comparable tumultuous time in the late 0:24:47.119 --> 0:24:49.320 nineteen sixties, early seventies. 0:24:49.000 --> 0:24:49.880 Half a century ago. 0:24:49.960 --> 0:24:53.840 Yeah, and so you had, I mean, think about the 0:24:54.119 --> 0:24:59.600