WEBVTT - Businessweek Looks Ahead to 2023 0:00:01.840 --> 0:00:04.440 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:04.440 --> 0:00:06.800 Tim Stanevik. We're here every day bringing you the latest 0:00:06.840 --> 0:00:11.000 news from the world's of business in finance, cluff, technology, politics, economics, 0:00:11.039 --> 0:00:14.000 all harnessing the power of Business Week reporters and editors, 0:00:14.160 --> 0:00:17.000 not to mention our journalists and analyst in more than 0:00:17.040 --> 0:00:19.920 one and twenty countries. You can download Bloomberg Business Week 0:00:19.960 --> 0:00:22.840 on iTunes, SoundCloud, or Bloomberg dot com. You can also 0:00:22.880 --> 0:00:25.000 listen to our radio show at two pm Eastern Time 0:00:25.079 --> 0:00:28.159 on Bloomberg Radio or stream us live on YouTube and 0:00:28.240 --> 0:00:31.680 Bloomberg dot com. Well earlier this month, Bloomberg News came 0:00:31.680 --> 0:00:33.760 out with a story noting that muni bond sales this 0:00:33.840 --> 0:00:37.239 year down around nineteen percent at about three fifty one 0:00:37.320 --> 0:00:40.320 billion dollars. That's according to data compiled by a Bloomberg 0:00:40.680 --> 0:00:42.479 So with a look at the muni market and credit 0:00:42.520 --> 0:00:45.360 market overall, we welcome right now Yafa rat and your 0:00:45.360 --> 0:00:48.480 senior Managing director and head of municipal Credit at Hilltop Securities, 0:00:48.560 --> 0:00:52.360 joining us via zoom two. Not a great year for 0:00:52.479 --> 0:00:56.120 at least sales of munis. Yafa, what store, Well, we're 0:00:56.160 --> 0:00:59.720 super excited about three as the fixed income markets of 0:01:00.000 --> 0:01:05.840 finally yielding some interesting returns on attacks exempt basis. However, 0:01:06.120 --> 0:01:11.920 we also similarly encourage significant vigilance as you evaluate which 0:01:11.959 --> 0:01:16.280 potential securities you might want to be constructive on. There 0:01:16.280 --> 0:01:18.959 are going to be some mind fields out there as 0:01:18.959 --> 0:01:22.160 we head into well, let's talk about that here, because 0:01:22.240 --> 0:01:24.199 there did seem to be a little bit more enthusiasm 0:01:24.240 --> 0:01:27.400 in the munity space, particularly, I think because expectations and 0:01:28.800 --> 0:01:31.040 one was so dour for a lot of these cities 0:01:31.040 --> 0:01:32.640 and states, and then of course we saw that the 0:01:32.640 --> 0:01:35.360 pandemic actually helped a lot of these cities and states, 0:01:35.560 --> 0:01:37.240 if not get back into the black, and at least 0:01:37.240 --> 0:01:39.720 certainly our right size some of the issues here, what 0:01:39.840 --> 0:01:42.440 pulls people back into this market? What sort of wets 0:01:42.480 --> 0:01:46.960 investors appetite. So I do think that if we're heading 0:01:46.959 --> 0:01:51.320 into some sort of economic or any type of recessionary pressures, 0:01:51.440 --> 0:01:55.320 I do believe that we should be constructive on essential 0:01:55.360 --> 0:01:59.360 purpose revenue bonds, particularly waters who are power where in 0:01:59.480 --> 0:02:02.760 excess of I D percent of the transactions are rated 0:02:03.200 --> 0:02:05.800 A or higher. And if people are looking for more 0:02:05.880 --> 0:02:10.320 yieldy opportunities, uh, we would definitely be looking at charter 0:02:10.480 --> 0:02:14.000 schools where about two thirds of the ratings would be 0:02:14.080 --> 0:02:17.520 Chippleby or double B, and frankly, about a third of 0:02:17.560 --> 0:02:23.519 the market is not rated. What about thinking to please 0:02:23.560 --> 0:02:27.920 continue now, I was simply going to say that the 0:02:28.040 --> 0:02:31.639 rates um and the the risk adjusted rates right now 0:02:31.720 --> 0:02:34.519 are actually attractive for the first time in a number 0:02:34.560 --> 0:02:37.760 of years. What are you anticipating in terms of new issuance. 0:02:37.800 --> 0:02:40.040 Can you get kind of a good feel in terms 0:02:40.080 --> 0:02:42.200 of what kind of market environment it will be for 0:02:42.200 --> 0:02:46.000 for that, Yeah, that's a great question. And frankly, we 0:02:46.080 --> 0:02:50.320 know that new issue market volume last year was down 0:02:50.360 --> 0:02:55.840 close to twenty percent, and we've seen estimates for three 0:02:55.960 --> 0:02:59.079 ranging from a similar number about three fifty billion, two 0:02:59.200 --> 0:03:02.360 all the way up to five hundred billion. My instinct 0:03:02.440 --> 0:03:06.640 tells me it's probably be closer to two levels, maybe 0:03:06.680 --> 0:03:10.799 slightly higher. We'll see some new money opportunities we've learned 0:03:10.840 --> 0:03:15.279 how to structure high yield deals in the current environment, 0:03:15.760 --> 0:03:18.720 as well as there will be more refunding opportunities. So 0:03:18.840 --> 0:03:22.799 my guest is somewhere um slightly higher than yeah. But 0:03:22.880 --> 0:03:24.680 one of the interesting things I think coming off of 0:03:24.680 --> 0:03:26.959 the pandemic was that we realized we could kind of 0:03:27.000 --> 0:03:29.760 almost work for many of us work anywhere in the country, 0:03:29.760 --> 0:03:31.440 you had a lot of movement for the first time, 0:03:31.480 --> 0:03:34.280 you had a population that was stuck. You didn't see 0:03:34.280 --> 0:03:38.360 a lot of movement or mobility for decades finally moving around. 0:03:38.520 --> 0:03:41.200 How does that impact you think potentially where we see 0:03:41.240 --> 0:03:44.480 that new issuments are where the UNI market looks more interesting, 0:03:45.000 --> 0:03:49.680 the returns better because of some of those pandemic movements. Yeah, 0:03:49.720 --> 0:03:52.880 there's no doubt that that we've seen movements, particularly to 0:03:52.960 --> 0:03:57.200 the southeast, where people are quote unquote moving to Florida 0:03:57.880 --> 0:04:01.839 thirty forty years earlier than had been and originally anticipated. 0:04:02.000 --> 0:04:06.480 It's certainly a tax positive climate. And what happens as 0:04:06.480 --> 0:04:10.000 a result when you're seeing demographic shifts is you're seeing 0:04:10.080 --> 0:04:15.040 the need for more roads, more bridges, more schools, hospitals, 0:04:15.120 --> 0:04:18.680 and public service type building. So definitely we're going to 0:04:18.760 --> 0:04:22.240 expect to see additional volume in the states that are 0:04:22.400 --> 0:04:28.240 absorbing the demographic shift. Yeah, I'm wondering about opportunities. You 0:04:28.279 --> 0:04:31.320 talked about opportunities from the perspective of you know what 0:04:31.360 --> 0:04:34.320 we'll see next year, right talking about infrastructure projects, utilities, 0:04:34.520 --> 0:04:38.839 what are areas of concern areas to avoid, so I'm 0:04:38.880 --> 0:04:44.400 particularly sensitive about senior living, healthcare, and project finance. Let 0:04:44.440 --> 0:04:48.160 me unwrap a little bit the senior living issue. Frankly, 0:04:48.320 --> 0:04:52.440 senior living occupancy, which is your primary determinant of revenue, 0:04:52.839 --> 0:04:56.800 has not restored fully back to pre COVID levels. At 0:04:56.800 --> 0:05:02.480 the same time, senior living operators or deal with inflationary increases, 0:05:02.520 --> 0:05:06.080 particularly as it relates to labor and food, which together 0:05:06.120 --> 0:05:09.160 account for more than two thirds that they're operating budget. 0:05:09.360 --> 0:05:10.680 I guess I'm just surprised to hear that from a 0:05:10.680 --> 0:05:13.680 demographics perspective, because we hear so much about you know, 0:05:13.720 --> 0:05:17.960 older generations aging into the senior living homes, so it's 0:05:17.960 --> 0:05:22.799 surprising for me. Yeah, ten thousand baby boomers are aging 0:05:22.880 --> 0:05:26.120 into sixty five and older per day at this point. 0:05:26.440 --> 0:05:30.400 Completely agree with you the it's the funding paradigm that 0:05:30.480 --> 0:05:33.240 needs a little fixing right now. Your revenues are not 0:05:33.360 --> 0:05:36.320 growing at the same rate that your expenditures are growing, 0:05:36.400 --> 0:05:41.039 given pressures only on labor and food, and as a result, 0:05:41.080 --> 0:05:43.760 it's creating a whole lot of headline noise. In fact, 0:05:44.240 --> 0:05:46.719 half of the defaults in the muni market this year 0:05:46.800 --> 0:05:50.360 we're in the retirement sector alright, We're gonna leave it 0:05:50.400 --> 0:05:52.520 on that note. Yeah though, thank you so much. Yea A. Ratner, 0:05:52.600 --> 0:05:55.919 Senior Managing director and head of Municipal credit at Hilltop Securities, 0:05:56.200 --> 0:05:58.800 joining us on this last trading day of the year. 0:05:59.760 --> 0:06:01.760 So about when another chart when it comes to economic 0:06:01.800 --> 0:06:03.520 growth and talking about the way that we're thinking about 0:06:03.520 --> 0:06:06.320 economic growth in a post COVID environment and environment where 0:06:06.320 --> 0:06:10.039 interest rates are no longer at zero, where inflation is high, 0:06:10.200 --> 0:06:14.760 where pandemic recoveries are losing momentum. Check out this one. 0:06:14.880 --> 0:06:17.480 Global growth what close to six percent. We're looking at 0:06:17.480 --> 0:06:20.640 pretty anemic growth over the next few years globally sub 0:06:20.680 --> 0:06:24.680 three and projected that's that's normal. And I know there's 0:06:24.680 --> 0:06:26.560 gonna be a lot of hay made over these projections 0:06:26.560 --> 0:06:28.480 because I think you know, most of the projections are 0:06:28.640 --> 0:06:30.680 wrong three percent to two percent. We're not just about 0:06:30.720 --> 0:06:33.000 being wrong, but everyone's fretting because everybody sort of wants 0:06:33.000 --> 0:06:34.640 to put it back. You have that big spike up 0:06:34.640 --> 0:06:37.800 in You have a lot of distortions on these averages. 0:06:38.360 --> 0:06:40.800 But when you talk to older investors, people have been 0:06:40.800 --> 0:06:43.240 through multiple cycles, they'll tell you, look, if you can 0:06:43.279 --> 0:06:45.040 get two to three percent growth in the at least 0:06:45.080 --> 0:06:48.520 in the major economies for markets. That's how pretty darn good. 0:06:48.680 --> 0:06:51.320 Much better than a recession, right, much better than negative growth. 0:06:51.360 --> 0:06:54.320 And part of the problem is that growth gets certainly tainted. 0:06:54.480 --> 0:06:57.039 And it's a whole different story when you're dealing dealing 0:06:57.040 --> 0:06:59.680 also with high inflation rates right in terms of our 0:06:59.680 --> 0:07:02.360 purchase see power and what it ultimately means. But this 0:07:02.440 --> 0:07:06.080 is the question for three, do we get that soft landing, 0:07:06.240 --> 0:07:07.800 even if we get a little bit of growth, that's 0:07:07.880 --> 0:07:10.360 much better than any kind of recession. Any other charts 0:07:10.360 --> 0:07:14.320 out there, yep, interest rates? Interest rate? Did they go up? 0:07:15.000 --> 0:07:17.240 Did they go up? Yes? India just talked about what's 0:07:17.280 --> 0:07:19.720 going on in uh, you know, Latin America. I mean 0:07:19.720 --> 0:07:21.480 they have been on a tear. Here's a chart for 0:07:21.520 --> 0:07:25.160 you guys on radio. Again, no surprise, Central Bank benchmark 0:07:25.240 --> 0:07:27.720 rates broadcast on radio. Yeah, well this is a simulcast. Man, 0:07:27.800 --> 0:07:30.280 I'm not so glad you realized what day by Friday 0:07:30.280 --> 0:07:33.200 he gets anyway, when we do traffic and again to 0:07:33.320 --> 0:07:35.440 ignore the boys, let them do their things. But if 0:07:35.440 --> 0:07:37.800 you look at two for you guys on radio, it's 0:07:37.880 --> 0:07:39.920 just you know, a straight mountain up, if you will, 0:07:40.160 --> 0:07:42.280 in terms of what we've seen for global interest rates. 0:07:42.400 --> 0:07:45.040 But I do wonder too as what yeah, well, I mean, 0:07:45.240 --> 0:07:46.680 I mean this chart really says it all. I mean, 0:07:46.720 --> 0:07:49.640 you talk about the end of what was effectively a 0:07:49.760 --> 0:07:51.920 zero bound world, and let's face it, really a negative 0:07:52.320 --> 0:07:54.720 yielding world when you consider that so many nations that 0:07:54.760 --> 0:07:57.080 were actually uh have negative sign in front of their 0:07:57.080 --> 0:07:59.720 benchmark rates. Here, that's it, easy money, it's over. But 0:07:59.800 --> 0:08:02.280 what's the anomaly? Like, keep that chart up, everybody on TV. 0:08:02.360 --> 0:08:05.920 You're going back to we know we had easy money 0:08:05.920 --> 0:08:09.960 for so luch. You put that chart out back before 0:08:10.000 --> 0:08:12.440 the financial crisis, and you get a better sense here 0:08:12.520 --> 0:08:14.960 of this house sort of things. I mean, if this 0:08:15.000 --> 0:08:16.880 is a that's what I was going to say, a 0:08:16.880 --> 0:08:19.680 reversion to a reversion to the man I want to hear. 0:08:20.000 --> 0:08:20.960 I have to say that I am I allowed to 0:08:20.960 --> 0:08:23.040 give opinions. I want to hear J. Powell and at 0:08:23.080 --> 0:08:25.560 least disclaimer, please for roomain talk a little bit more 0:08:25.600 --> 0:08:29.000 about the normalization a policy, because remember they did start 0:08:29.040 --> 0:08:31.440 to talk about that prior to the inflation really getting 0:08:31.440 --> 0:08:32.840 out of control and they had to pivot and just 0:08:32.880 --> 0:08:35.120 focus on inflation labor market. But there has been this 0:08:35.200 --> 0:08:36.840 sense and The FED did a lot of papers on this, 0:08:37.080 --> 0:08:39.800 saying you cannot stay at the zero bound forever and 0:08:39.800 --> 0:08:42.480 there has to be normalization. But the problem that you 0:08:42.520 --> 0:08:44.559 referred to earlier this week romane For anyone under the 0:08:44.600 --> 0:08:47.240 age of forty, they've they've never lived in an environment 0:08:47.400 --> 0:08:51.679 where we've essentially been adult says I have no friends 0:08:51.720 --> 0:08:54.840 under the age of I'm your friend. Are you under 0:08:55.880 --> 0:08:58.520 feel good for your age? Okay, we have a great 0:08:58.520 --> 0:09:01.000 guest to talk about. What is normal? Uh as we 0:09:01.280 --> 0:09:03.320 are in this final trading day or let's get to it. 0:09:03.360 --> 0:09:05.840 Let's bring in Caleb brun Sheese, an economic analyst at 0:09:05.840 --> 0:09:10.160 the Decision Intelligence Company Morning consult She joins us from Washington, 0:09:10.240 --> 0:09:12.120 d C. Kayla, it is good to have you here 0:09:12.160 --> 0:09:16.120 with us. What is normal in a world where, for 0:09:16.160 --> 0:09:18.800 a decade or so prior to the pandemic, everybody was 0:09:18.880 --> 0:09:23.040 used to very low rates, easy money, a very different environment. 0:09:23.320 --> 0:09:25.839 Was that abnormal, as Metty would say, versus what we're 0:09:25.840 --> 0:09:30.520 seeing today? So good afternoon, Thank you for having me. 0:09:30.559 --> 0:09:33.240 And that is a great question and I think a 0:09:33.280 --> 0:09:36.880 difficult one to answer. Um. Definitely, we had settled into 0:09:36.880 --> 0:09:39.839 what felt like a period of normalcy pre pandemic, and 0:09:40.320 --> 0:09:42.760 what we've been experiencing since the start of the pandemic 0:09:42.840 --> 0:09:46.440 is definitely not normal um. As you can see from 0:09:46.520 --> 0:09:49.800 two what what what what we've seen with inflation. I 0:09:49.840 --> 0:09:52.559 do think in some ways may bring about a bit 0:09:52.559 --> 0:09:55.880 of a rebalancing. Some of these crazier dynamics that we've 0:09:55.880 --> 0:09:59.040 seen lately may um start to reshuffle a little bit. 0:09:59.080 --> 0:10:01.000 Maybe some of the the stories that have been going 0:10:01.240 --> 0:10:04.719 above trend in this recovery are now starting to normalize 0:10:04.720 --> 0:10:07.040 a little bit, and some others may still be catching up. 0:10:07.400 --> 0:10:09.559 So I think potentially this could be a year like that. 0:10:09.840 --> 0:10:11.839 I am curious, Kayla about when we talk about trends, 0:10:11.840 --> 0:10:13.240 because there are a lot of people that sort of 0:10:13.559 --> 0:10:15.920 are looking or at least hoping for some degree of 0:10:15.960 --> 0:10:18.560 being reversion, at least when it comes to certain asset classes. 0:10:18.720 --> 0:10:21.200 And I'm wondering if there has been so much damage 0:10:21.760 --> 0:10:24.599 from the pandemic, from inflation and from the fits and 0:10:24.640 --> 0:10:27.760 the central banks fight against it, that it's almost impossible 0:10:27.760 --> 0:10:28.959 for us to go back to that, at least not 0:10:29.000 --> 0:10:33.560 in the short term. It varies a lot depending on 0:10:33.600 --> 0:10:37.280 which market you'd be talking about. Take housing, for example, 0:10:37.920 --> 0:10:41.000 Right now, we've had this very dramatic collapse, but that's 0:10:41.040 --> 0:10:43.560 coming up against many years of kind of chronic under 0:10:43.600 --> 0:10:46.360 supply that we've sort of seen since the last housing collapse. 0:10:46.960 --> 0:10:49.480 Uh So, in that case, even though we are seeing 0:10:49.480 --> 0:10:52.800 this very dramatic correction, I do think that there's sort 0:10:52.800 --> 0:10:56.280 of a floor there that's going to present values from 0:10:56.320 --> 0:10:59.400 falling too much because it's up against this long term, 0:10:59.440 --> 0:11:02.400 longer term trend of chronic undersupply. So it varies a 0:11:02.400 --> 0:11:04.880 lot from market to market, but you know, it's different 0:11:04.920 --> 0:11:07.280 with labor markets. To there are certain industries that still 0:11:07.320 --> 0:11:09.200 have some room to grow, to recover to their pre 0:11:09.280 --> 0:11:12.720 pandemic level, which are constituting some of the growth. Okay, 0:11:12.840 --> 0:11:15.560 that's exactly where I want to go. Is the labor market. 0:11:15.880 --> 0:11:18.439 One area of frustration I think for J. Powell has 0:11:18.440 --> 0:11:21.480 been the resilience of the labor market. He mentioned several 0:11:21.559 --> 0:11:25.000 times this year that it's unsustainably hot. When will we 0:11:25.040 --> 0:11:27.880 start to see some sort of cracks when it comes 0:11:27.920 --> 0:11:31.760 to labor in this country? And are those cracks can 0:11:31.800 --> 0:11:33.400 actually get so big that they're going to start to 0:11:33.400 --> 0:11:36.760 be a concern where we do see widespread jobs just argue, 0:11:36.840 --> 0:11:38.880 is it his frustration or is it also some of 0:11:38.920 --> 0:11:41.000 his saving grace because it allows him to keep you 0:11:41.000 --> 0:11:43.280 know what I mean, doesn't fall on apart. That is 0:11:44.120 --> 0:11:45.559 a really good point. I mean, and I don't want 0:11:45.559 --> 0:11:48.120 to be you know, looked at somebody who's like cheering 0:11:48.160 --> 0:11:51.200 for job losses here, but he's called the job market 0:11:51.240 --> 0:11:54.880 unsustainably hot several times this year. Yeah, And I think 0:11:54.920 --> 0:11:56.920 a lot of the concern with that comes from the 0:11:56.960 --> 0:11:59.000 wage games that come along with it when we still 0:11:59.000 --> 0:12:02.239 have labor force nticipation below where it was pre pandemic 0:12:02.559 --> 0:12:04.560 um and certain of these sectors, a lot of a 0:12:04.559 --> 0:12:06.280 lot of them tend to be sort of lower paying 0:12:06.320 --> 0:12:09.960 services sectors like leader and hospitality, health services, things like 0:12:09.960 --> 0:12:11.760 that that lost a lot of jobs in the pandemic 0:12:11.800 --> 0:12:14.000 and are still growing. Those are the ones that are 0:12:14.000 --> 0:12:17.160 still contributing to jobs games the most um and where 0:12:17.200 --> 0:12:19.920 we're seeing a little bit stronger wage games. And the 0:12:19.920 --> 0:12:22.800 concern with that is that those wage games stick into 0:12:22.800 --> 0:12:26.280 that services component because it's a cost input for services 0:12:26.360 --> 0:12:29.960 and keeps inflation elevated. So that's kind of a concern 0:12:30.040 --> 0:12:32.000 with that. We to the start of your question that 0:12:32.120 --> 0:12:34.840 we have started to see definitely some cooling in the 0:12:34.920 --> 0:12:38.320 labor market. But I think because these sectors that are 0:12:38.360 --> 0:12:42.920 still growing are bigger ones, I think it's UM not 0:12:43.040 --> 0:12:44.960 making it show up at the top line as much. 0:12:46.040 --> 0:12:48.559 And that's an interesting point. And I and the focus Carol, 0:12:48.600 --> 0:12:52.400 I think on wages, I understand why. But those that 0:12:52.480 --> 0:12:55.240 wage growth spiral, if you call it that, you know 0:12:55.960 --> 0:12:57.840 that's also fueled, of course, a lot of the consumer 0:12:57.880 --> 0:13:00.200 spending as well. And last time I check, that's little, 0:13:00.280 --> 0:13:02.920 huge component of this economy. Yeah. Huge, Well, and let's 0:13:02.920 --> 0:13:04.160 go to it because you know, one of the things 0:13:04.200 --> 0:13:06.320 when we were planning on our planning call this morning, 0:13:06.400 --> 0:13:08.400 kalas you know, Romaine was pointing out, you guys have 0:13:08.600 --> 0:13:11.200 so much important data. What are you seeing when it 0:13:11.240 --> 0:13:16.360 comes to consumer spending? That is the backbone of our economy. Absolutely, 0:13:16.360 --> 0:13:18.640 and that's really the area that I actually spend the 0:13:18.640 --> 0:13:21.120 most of my time watching UM and I'm definitely keeping 0:13:21.120 --> 0:13:24.199 a close eye on it. At the start of UH, 0:13:24.320 --> 0:13:28.560 my big concern is that consumer budgets are just starting 0:13:28.559 --> 0:13:31.480 off in a much weaker position than they did in 0:13:31.520 --> 0:13:35.600 two UM. We've see in our surveys that we collect 0:13:35.600 --> 0:13:38.600 from among consumers that there's a it's been rising all 0:13:38.679 --> 0:13:41.160 year the share who are saying that their monthly expenses 0:13:41.600 --> 0:13:44.800 total more than their incomes, so they've been working away 0:13:44.840 --> 0:13:48.000 at their savings. Debt debt levels have been increasing and 0:13:48.000 --> 0:13:50.720 getting more expensive with interest rates, so all of those 0:13:50.760 --> 0:13:53.319 factors I think are making the consumer a bit weaker. 0:13:53.720 --> 0:13:56.680 What's been surprising is how resilient spending has been so far. 0:13:56.920 --> 0:14:00.319 But um, the question now is kind of our income 0:14:00.400 --> 0:14:02.640 is going to close the gap enough with inflation to 0:14:02.720 --> 0:14:06.000 kind of allow them to keep spending or you know, 0:14:06.000 --> 0:14:08.960 we're seeing more price sensitivity. The holidays were a big 0:14:09.000 --> 0:14:11.240 toll on many, so are they going to be able 0:14:11.240 --> 0:14:14.559 to sustain positible growth in Well, I'm curious, Kayla, when 0:14:14.559 --> 0:14:16.360 you look at the data that we've gotten so far, 0:14:16.440 --> 0:14:18.840 and I'm particularly talking about some of the ratios with 0:14:18.840 --> 0:14:23.000 regards to credit balances, debt servicing, household debt servicing, and 0:14:23.040 --> 0:14:25.360 things like that. Here, have any of those ratios given 0:14:25.400 --> 0:14:27.840 you concern? Because when you point those out to certain 0:14:27.840 --> 0:14:30.160 people and you say this could be bad, they say, well, 0:14:30.480 --> 0:14:32.680 you have to compare to you know, the financial crisis 0:14:32.680 --> 0:14:35.240 and other sort of recessionary periods that we went through, 0:14:35.360 --> 0:14:37.040 and they say, well, it's not bad. When you stack 0:14:37.080 --> 0:14:40.440 it up against that. Yeah, I agree with that, and 0:14:40.480 --> 0:14:44.280 I think that certainly was what helped us throughout two. 0:14:45.320 --> 0:14:47.600 We've kind of only just gotten back to you know, 0:14:47.720 --> 0:14:52.040 pre pandemic debt levels UM or debt utilization as a 0:14:52.080 --> 0:14:55.520 share of income. But what worries me is that, you know, 0:14:55.600 --> 0:14:58.280 you think about how what the consumers used to spend. 0:14:58.360 --> 0:15:01.560 They have incomes, they have savings, they have debt uh 0:15:01.600 --> 0:15:03.720 and and where we are now is they've worked their 0:15:03.760 --> 0:15:06.560 way through the savings through their savings to a larger 0:15:06.560 --> 0:15:08.520 degree than they did at the start of last year. 0:15:09.320 --> 0:15:12.200 Incomes are still not keeping up with prices. If that changes, 0:15:12.240 --> 0:15:14.480 that could help, But for now, purchasing power is going 0:15:14.520 --> 0:15:17.400 down UM. And then debt levels is that final piece 0:15:17.440 --> 0:15:19.960 which has not been a big concern in twenty two. 0:15:20.240 --> 0:15:22.440 I'd say we're kind of back to neutral now it 0:15:22.520 --> 0:15:25.160 could be a bigger piece in Can we just mention 0:15:25.200 --> 0:15:27.120 for our radio and it was an incredible chart, let's 0:15:27.120 --> 0:15:29.400 throw it up again for TV. It was inflation adjusted 0:15:29.400 --> 0:15:33.360 wages falling for nineteen months. So we saw that individuals, 0:15:33.520 --> 0:15:35.920 you know, based on the inflation picture for a long time, 0:15:36.160 --> 0:15:38.080 we're doing okay based on what they were being paid. 0:15:38.120 --> 0:15:41.720 But the last nineteen months that's not been the case. 0:15:41.720 --> 0:15:43.680 And this is a brutal chart. And and and I know 0:15:43.800 --> 0:15:45.360 that a lot of the data we get we don't 0:15:45.360 --> 0:15:48.000 it doesn't have that the luxury of being inflation adjusted. Obviously, 0:15:48.040 --> 0:15:49.800 you can kind of do the map yourself here, but 0:15:49.840 --> 0:15:51.680 I think if you see more of these charts on 0:15:51.680 --> 0:15:54.880 an inflation adjusted basis, it would cause a little bit 0:15:54.880 --> 0:15:56.840 more concerned I think out there. Yeah, I think so too. 0:15:56.840 --> 0:15:59.880 But if if if inflation does indeed come down then 0:16:00.160 --> 0:16:03.280 and we you know, sort of purchasing power essentially increases, 0:16:03.760 --> 0:16:05.560 then we could start to see a difference that that 0:16:05.600 --> 0:16:07.200 could be if you know, if it's the key that 0:16:07.240 --> 0:16:08.800 could be, and what's the lack of time? And when 0:16:08.840 --> 0:16:11.200 we talk about just the psychology of these markets and 0:16:11.320 --> 0:16:13.720 and more important psychology of the consumers. It's not just 0:16:13.720 --> 0:16:15.520 whether they have the capacity to do things, that's how 0:16:15.560 --> 0:16:21.080 they feel. Right, I'm still here, I mean, I mean, 0:16:21.120 --> 0:16:22.680 in all series is I mean, I don't remember who 0:16:22.680 --> 0:16:24.440 said it, but I remember I don't remember years ago, 0:16:24.560 --> 0:16:26.680 was you know one of the some political Kennedy was 0:16:26.680 --> 0:16:29.160 talking about how the economy really is a feeling for 0:16:29.200 --> 0:16:31.680 most people. They're not looking at charts like that. That's 0:16:31.680 --> 0:16:33.360 how they feel. And if they feel things are bad, 0:16:33.400 --> 0:16:37.920 it's going to be bad. I'd say we certainly saw 0:16:37.960 --> 0:16:41.480 that with our index of consumer sentiment this year UM, 0:16:41.560 --> 0:16:45.480 which is interesting because it's been it was way down. 0:16:45.560 --> 0:16:47.480 It came down below you know what it got to 0:16:47.600 --> 0:16:51.640 in in the height of when everything was going crazy. UM. 0:16:51.880 --> 0:16:54.360 Our index of consumers enement had been recovering, but it's 0:16:54.400 --> 0:16:58.320 been like really down all year UM as inflation went up. 0:16:58.320 --> 0:17:00.160 And I think that chart that you just showed, I 0:17:00.240 --> 0:17:03.720 agree that was a great chart showing inflation adjusted wages 0:17:04.320 --> 0:17:08.280 UM that that declining purchasing power. Consumers are feeling that, 0:17:08.440 --> 0:17:11.560 and because of other forces, it hasn't necessarily showed up 0:17:11.600 --> 0:17:14.200 in in certain parts of the economy, like the labor market, 0:17:14.240 --> 0:17:18.480 like consumers spending to some extent UM. But absolutely that's 0:17:18.520 --> 0:17:21.720 reflective of what consumers are feeling. It's the power of 0:17:21.720 --> 0:17:23.840 the Bloomberg Kala. Yeah. You know, if somebody was running 0:17:23.840 --> 0:17:25.879 from your point out morning console, they have some a 0:17:25.880 --> 0:17:28.720 lot of great data to I'm just saying, you're running 0:17:28.720 --> 0:17:31.320 for office. That's the kind of chart you show, right, Yeah, exactly. 0:17:31.320 --> 0:17:34.000 Hey Caleb Brun, Thanks so much for joining us this 0:17:34.040 --> 0:17:36.520 afternoon and really appreciate your time. Cayler Brune is economic 0:17:36.560 --> 0:17:39.760 analysts at morning consults. We're going to continue to look 0:17:39.760 --> 0:17:42.680 ahead here any recent big changes in Washington as well, 0:17:42.960 --> 0:17:45.560 awesome departures out of the Biden administration we're learning today, 0:17:45.600 --> 0:17:48.920 and of course a new Congress coming in in January three. 0:17:49.000 --> 0:17:51.199 So a big set up here for investors as we 0:17:51.280 --> 0:17:55.399 move out of two into Please to say, joining us 0:17:55.480 --> 0:17:56.840 right now to talk a little bit more about this 0:17:56.920 --> 0:17:59.600 is Bryce Stode, old friend of the program, joining us 0:17:59.600 --> 0:18:01.320 here on the stay as a senior vice president we 0:18:01.320 --> 0:18:04.200 should point out, and senior portfolio manager over at SIT 0:18:04.520 --> 0:18:08.760 Investment Associates. Uh, all right, let's get right to it. Bryce, 0:18:10.160 --> 0:18:11.840 you go back to the beginning of this year and 0:18:11.880 --> 0:18:14.080 you look at some of your worst fears, some of 0:18:14.119 --> 0:18:17.399 your worst predictions here, did the markets actually meet that? 0:18:17.520 --> 0:18:19.320 Did they come in higher than that or lower than that? 0:18:20.480 --> 0:18:23.640 It was incredibly difficult. A year in twenty two, we 0:18:23.640 --> 0:18:27.760 were very pessimistic. We saw the Fed is way way 0:18:27.920 --> 0:18:30.199 way behind the curve. You know, just just over a 0:18:30.280 --> 0:18:33.200 year ago their twelve month forecast for FED funds was 0:18:33.280 --> 0:18:36.119 less than one percent. I mean we we knew they 0:18:36.119 --> 0:18:38.679 were going to have to pivot them, but not to 0:18:39.000 --> 0:18:41.679 this degree. No, we we thought it could be the 0:18:41.760 --> 0:18:45.720 worst bond market in history, which we're thinking maybe down 0:18:45.800 --> 0:18:49.680 five percent, not not thirteen to fifteen percent. And it's 0:18:49.760 --> 0:18:54.840 just an incredibly terrible year because you know, the FED 0:18:54.960 --> 0:18:57.880 was so far behind the curve that by the time 0:18:57.920 --> 0:19:01.360 they did try to catch you up, it was just 0:19:01.600 --> 0:19:05.320 so extreme that in such a short period of time 0:19:05.359 --> 0:19:08.160 that just really blew everyone away, and so that obviously 0:19:08.160 --> 0:19:12.320 bled over to the stock market and caused the combined 0:19:12.720 --> 0:19:17.879 market stocks and bonds to just be shockingly bad. That 0:19:18.080 --> 0:19:21.040 having said that, it does set up for a much 0:19:21.080 --> 0:19:24.760 better the FED can't raise rates another four percent. You know, 0:19:24.920 --> 0:19:28.800 there's so many things that are you know, saying from 0:19:28.800 --> 0:19:33.840 the afterlife you watch me, you know I could do that. Well, 0:19:34.320 --> 0:19:36.639 there is that, And as a as a bond person, 0:19:36.720 --> 0:19:39.000 you know, we're just naturally paranoid. We're always thinking about 0:19:39.000 --> 0:19:41.600 the downside. So it's been kind of strange lately to 0:19:41.680 --> 0:19:45.119 have this sense of optimism. Fore, I'm like, what was that. 0:19:45.200 --> 0:19:47.679 I forgot what it felt like to be optimistic as 0:19:47.720 --> 0:19:50.000 a bond RS. The one thing I would say is, yeah, 0:19:50.040 --> 0:19:52.119 I hear you. I mean it felt so miserable to 0:19:52.160 --> 0:19:54.760 see both the stock and bond market just take a 0:19:54.760 --> 0:19:57.520 big hit to see that correlation. You know, that's not 0:19:57.560 --> 0:20:00.639 what's supposed to happen. Having said that, you know, what 0:20:00.800 --> 0:20:02.440 is it that gives you certainty that you feel like 0:20:02.480 --> 0:20:06.680 you can start to predict at this point? Well, I 0:20:06.720 --> 0:20:09.639 think inflation being at ten percent in twenty two is 0:20:09.680 --> 0:20:13.080 just just horrific, and twenty three people are equivalent about 0:20:13.080 --> 0:20:16.440 it being somewhere between two and four. I'm like, hey, 0:20:16.600 --> 0:20:19.320 you can buy investment great bonds at five. You will. 0:20:20.240 --> 0:20:24.399