WEBVTT - US Economic Outlook and Bond Signals 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:21.240 on Apple car Play or Android Auto with the Bloomberg 0:00:21.320 --> 0:00:24.880 Business App. Listen on demand wherever you get your podcasts, 0:00:25.280 --> 0:00:26.960 or watch us live on YouTube. 0:00:27.200 --> 0:00:30.320 David Steef joins his chief economist, Developed Market sitting. The 0:00:30.400 --> 0:00:33.920 Murray has just been outstanding over the recent a number 0:00:33.960 --> 0:00:35.880 of months. I want to get out to the FET 0:00:35.880 --> 0:00:38.120 and chat. Paul's been doing a little bit. I've been 0:00:38.320 --> 0:00:41.280 remiss on this. Are we at a Bank of England 0:00:41.360 --> 0:00:43.640 point where Worsh is alone? 0:00:44.280 --> 0:00:44.839 Good morning? 0:00:45.720 --> 0:00:48.519 I think I might characterize it a little bit differently, 0:00:48.600 --> 0:00:51.360 but a Bank of England analogy I think is actually 0:00:51.440 --> 0:00:53.920 very apt here in that you know, when the Bank 0:00:53.960 --> 0:00:58.200 of England votes, it's one person, one vote, and you 0:00:58.240 --> 0:01:01.200 know the governor, who's the equivalent of the FED Chair, 0:01:02.240 --> 0:01:06.360 has no enormous amount of power to dictate things. And 0:01:06.400 --> 0:01:08.880 that's very much in contrast to how the FED has 0:01:08.920 --> 0:01:11.360 worked for at least the past fifty years, where it's 0:01:11.360 --> 0:01:14.759 been I would say, a de facto dictatorship of the chair. 0:01:15.120 --> 0:01:18.920 And now we have Worsh presumably not only the most 0:01:19.000 --> 0:01:23.720 dubbish person of the nineteen member FOMC, but also with 0:01:23.880 --> 0:01:26.800 only a couple of others on the FED who are 0:01:26.840 --> 0:01:29.120 even I would say remotely dubbish at this point, and 0:01:29.160 --> 0:01:31.959 so he probably finds himself in a minority. 0:01:32.400 --> 0:01:36.240 Is there a dubvish framework going into this meeting, I'm 0:01:36.280 --> 0:01:37.680 not sure I can find it. 0:01:37.880 --> 0:01:42.400 Well, I think, you know, I think the dot plot 0:01:42.440 --> 0:01:46.800 is likely to show a number of dots that still 0:01:46.800 --> 0:01:50.680 have a cut or maybe even two appropriate for this year. 0:01:50.880 --> 0:01:54.000 And that's even with you know, under the assumption that 0:01:54.040 --> 0:01:58.559 Worsh chooses not to submit a dot, as has been reported. Now, 0:01:58.600 --> 0:01:59.800 it's going to be a scatterplot. 0:02:00.160 --> 0:02:00.400 Clear. 0:02:00.480 --> 0:02:02.640 I mean, we're gonna have plenty of dots for a 0:02:02.720 --> 0:02:03.520 hike this year. 0:02:03.920 --> 0:02:05.200 But I think there. 0:02:05.120 --> 0:02:08.399 Are still members of the FED who are looking for 0:02:08.440 --> 0:02:09.359 a cut later this year. 0:02:09.560 --> 0:02:13.320 If Governor Christophers was down there, yeah, she'd just go 0:02:13.440 --> 0:02:15.640 like this, I'm sorry, I'm not submitting a dot. 0:02:15.880 --> 0:02:16.720 No exactly. 0:02:17.120 --> 0:02:20.720 We're going to get some inflation data tomorrow, David. I mean, 0:02:20.960 --> 0:02:23.000 I'm just you know, looking at the Bloomberg terminal, the 0:02:23.080 --> 0:02:27.840 CPI headline four point two percent. That's not bueno. If 0:02:27.880 --> 0:02:30.639 you're the Fed here at all? Yeah, what's going on? 0:02:30.720 --> 0:02:34.960 I mean, you know, inflation appears to be actually rising 0:02:35.000 --> 0:02:36.880 now now we do actually see it in a more 0:02:37.280 --> 0:02:41.040 a fairly soft print tomorrow of point two and more 0:02:41.120 --> 0:02:42.639 risk of a point one than a point three. 0:02:42.760 --> 0:02:43.520 That's for core. 0:02:44.360 --> 0:02:47.840 But that that really is is not what the overall 0:02:47.840 --> 0:02:50.120 trend is the trend, especially when you look at the 0:02:50.240 --> 0:02:53.840 Fed's preferred measure of core PCE it's three point three 0:02:53.880 --> 0:02:56.440 percent on a year of a year basis, And in 0:02:56.520 --> 0:02:59.680 a couple of weeks when we get the print for May, 0:03:00.080 --> 0:03:03.200 we expect that year over year basis it to rise 0:03:03.240 --> 0:03:05.520 to three point four percent on a year over year basis. 0:03:05.560 --> 0:03:08.160 So too high and going in the wrong direction. 0:03:08.680 --> 0:03:12.160 So but the reality is there's nothing the FED can do, right, 0:03:12.240 --> 0:03:12.639 I mean. 0:03:12.800 --> 0:03:14.919 Well the Fed, I mean, the Fed could raise rates, 0:03:15.000 --> 0:03:19.519 and that would be the classics sort of move that 0:03:19.800 --> 0:03:21.880 a central bank is supposed to do when inflation is 0:03:21.919 --> 0:03:25.680 above target GDP is growing out or above trend, and 0:03:26.120 --> 0:03:29.959 unemployment is low and if anything set to fall a 0:03:29.960 --> 0:03:32.679 little bit, yep, So we don't think they will. 0:03:32.800 --> 0:03:37.520 But then inflation, I mean, I'll use the term, I 0:03:37.520 --> 0:03:39.560 don't care transitory, I mean, is it because of the 0:03:39.600 --> 0:03:41.560 war here, and if the war backs off, we got 0:03:42.240 --> 0:03:44.880 energy coming back down, maybe not the pre war levels, 0:03:44.880 --> 0:03:46.560 but certainly coming down. And there you go. 0:03:47.080 --> 0:03:48.800 I really think this is hard to say that this 0:03:48.880 --> 0:03:52.920 is transitory, especially when you look at core inflation, so 0:03:53.400 --> 0:03:57.720 headline inflation, which the FED doesn't concentrate as much on there. 0:03:57.800 --> 0:04:00.280 You can make a very good argument. But you know, 0:04:00.320 --> 0:04:03.880 when you look at how much the Straight of hor 0:04:03.920 --> 0:04:08.080 Mooz and the energy price bump is hitting core inflation, 0:04:08.680 --> 0:04:11.000 probably no more than a tenth of a percent or so, 0:04:11.000 --> 0:04:11.960 so that's pretty small. 0:04:12.160 --> 0:04:13.280 I think what we're seeing. 0:04:13.120 --> 0:04:16.320 Is a much more classic sort of econ one oh 0:04:16.360 --> 0:04:20.520 one overheating of the economy, where there's a huge amount 0:04:20.520 --> 0:04:25.279 of one could say, price insensitive demand from hyperscalers for 0:04:25.720 --> 0:04:30.719 everything chip related, and that is outstripping supply and therefore, 0:04:30.760 --> 0:04:33.880 with demand outstripping supply, prices arising. And I think it's 0:04:34.200 --> 0:04:37.600 it's really hard to make a case that this is Straight. 0:04:37.360 --> 0:04:38.200 Of hor Moves related. 0:04:38.240 --> 0:04:42.640 Again, and key thing here, inflation on a core basis 0:04:42.920 --> 0:04:45.760 would be at or very close to the level it 0:04:45.839 --> 0:04:48.679 is right now, even had the Straight of Horror Moves 0:04:49.080 --> 0:04:50.320 not ended up being closed. 0:04:50.279 --> 0:04:52.799 Do we think, Okay, that's really interesting. 0:04:52.839 --> 0:04:56.120 That's a bit. If I'm mister Warsh, I'm like, now 0:04:56.160 --> 0:04:56.760 what do I do? 0:04:58.080 --> 0:04:58.159 That? 0:04:58.279 --> 0:05:00.320 Just did an out of rear and for j Jimmy 0:05:00.400 --> 0:05:03.600 Taylor out of Stanford, one of my first first supporters, 0:05:04.040 --> 0:05:06.640 And we have this architecture of certitude of a two 0:05:06.640 --> 0:05:10.560 percent inflation? Where did that go? I mean we are 0:05:10.960 --> 0:05:16.280 miles from a trend line two point x percent statistic. 0:05:16.560 --> 0:05:17.960 Yeah, we're I mean, this is going to be the 0:05:18.040 --> 0:05:20.000 sixth consecutive year with a what. 0:05:19.920 --> 0:05:22.800 Would Martin Feldstein say? You with the privilege you know 0:05:22.839 --> 0:05:26.320 I got, I knew Martin. Professor feltsay, well, we grieve 0:05:26.360 --> 0:05:30.200 his loss every day you worked the grind with Feldstein? 0:05:30.560 --> 0:05:31.400 What would he say? 0:05:31.480 --> 0:05:35.200 He certainly is missed, and I think he would almost 0:05:35.200 --> 0:05:39.120 certainly be calling for rate hikes at this point. And so, 0:05:39.480 --> 0:05:42.279 you know, I think the argument, the dubbish argument that 0:05:42.360 --> 0:05:44.960 Warsh and others who are doves will make is that 0:05:45.360 --> 0:05:50.159 they see disinflation coming because of the fading of the 0:05:50.200 --> 0:05:56.320 tariff effect, because of AI being disinflationary. But you know, 0:05:56.360 --> 0:05:59.440 we've heard these arguments a year after year now for 0:05:59.520 --> 0:06:03.640 six years. And where are we We're again well above 0:06:03.680 --> 0:06:06.479 target and if anything moving in the wrong direction on inflation. 0:06:07.440 --> 0:06:10.600 Paul, this is serious stuff. We're but numbed by it, Paul, 0:06:10.640 --> 0:06:13.680 and I Aron numb. Alexis is not numb because we 0:06:13.720 --> 0:06:15.960 have Tito's and Tang on this side of the studio. 0:06:16.120 --> 0:06:19.000 But I mean, this is serious stuff. 0:06:18.839 --> 0:06:23.320 Serious inflation, and I don't see it going anywhere. Labor market, 0:06:23.520 --> 0:06:24.880 what's your sense of the labor market. 0:06:24.960 --> 0:06:27.040 Labor market is in somewhat of a goldilock zone. 0:06:27.040 --> 0:06:30.920 So obviously we got a fantastic print just last week. 0:06:31.120 --> 0:06:35.800 Now, if we took that print just at face. 0:06:35.600 --> 0:06:37.640 Value, the NFP, I mean, it would actually look like 0:06:37.680 --> 0:06:39.960 the labor market might be overheating. A lot of that 0:06:40.000 --> 0:06:41.920 stuff was temporary, so we had a big bump in 0:06:41.960 --> 0:06:45.360 state and local that's that's probably just a statistical noise 0:06:45.400 --> 0:06:48.960 sort of thing. And then leisure and hospitality that may 0:06:49.040 --> 0:06:51.200 well have been related to the upcoming World Cup, so 0:06:51.240 --> 0:06:53.159 that's unlikely to be keep going. 0:06:53.960 --> 0:06:55.719 But still, you know, even taking those. 0:06:55.560 --> 0:06:57.479 Out, we're sort of right where we want to be 0:06:57.640 --> 0:07:01.599 at low hundred thousand sort of jobs. 0:07:01.640 --> 0:07:02.680 And yeah, are you. 0:07:02.640 --> 0:07:04.880 Going to be in the numurrors seats down low? Oh? Yes, 0:07:05.040 --> 0:07:06.640 Sun or are you going to be in the nu 0:07:06.680 --> 0:07:07.719 Mura box. 0:07:09.120 --> 0:07:09.920 To be determined? 0:07:10.400 --> 0:07:13.280 Yeah, David, thank you so on David Seed This with 0:07:13.360 --> 0:07:17.160 Namura can't say enough about his work, just exquisite research 0:07:17.240 --> 0:07:21.400 notes from Namua. Stay with us. More from Bloomberg Surveillance 0:07:21.440 --> 0:07:22.760 coming up after this. 0:07:30.040 --> 0:07:33.600 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:07:33.680 --> 0:07:36.880 weekday afternoons from seven to ten am Eastern Listen on 0:07:36.920 --> 0:07:40.320 Apple Karplay and Android Auto with the Bloomberg Business app, 0:07:40.520 --> 0:07:42.240 or watch us live on YouTube. 0:07:42.480 --> 0:07:45.800 Emrita send joins us from London. Imrit I'm just going 0:07:45.880 --> 0:07:48.800 to cut to the chase. A lot of people predicted 0:07:49.000 --> 0:07:53.560 a spike, a surge, a jump in Brent crude. There's 0:07:53.600 --> 0:07:57.680 a rationalization now of why that has not happened. Does 0:07:57.680 --> 0:08:00.280 our audience still need to get used to much higher 0:08:00.360 --> 0:08:02.240 oil prices. 0:08:02.520 --> 0:08:05.520 Down the line? Yes, Tom agreed. I'm in New York 0:08:05.600 --> 0:08:08.520 right now, been seeing clients here and that's exactly the 0:08:08.600 --> 0:08:11.680 question everyone's asking, you know, why are we not higher? 0:08:11.720 --> 0:08:14.480 What have we missed? People are misconstruing this as a 0:08:14.520 --> 0:08:17.320 demand must be super weak, because if we've lost twelve 0:08:17.360 --> 0:08:19.800 million barrels for plus of production, then that's the only 0:08:19.840 --> 0:08:23.200 way to rationalize it. The reason is we have we 0:08:23.360 --> 0:08:26.600 had a really big buffer of oil, four hundred million 0:08:26.640 --> 0:08:29.160 barrels of stocks that we're still running down. And add 0:08:29.160 --> 0:08:32.559 to that four hundred million of SBR. So we did 0:08:32.679 --> 0:08:34.640 have and we still have that buffer. You know, we 0:08:34.720 --> 0:08:37.679 forget this time. I mean people were talking about us 0:08:37.679 --> 0:08:40.640 being at forty dollars right now. Remember for this year 0:08:41.200 --> 0:08:43.920 we were going to be three million barrels per oversupplied. 0:08:44.320 --> 0:08:48.120 So it's that overhang that we are running down. And 0:08:48.160 --> 0:08:52.360 that's what the market's almost forgotten about. Once that's true, yes, 0:08:52.400 --> 0:08:54.319 of course prices will be going higher. But then the 0:08:54.400 --> 0:08:55.920 question is how long does this gone for? 0:08:56.240 --> 0:08:59.200 Well with the energy aspects rigor do you have an 0:08:59.360 --> 0:09:03.960 xxis Paul wants to the week when the vest when 0:09:04.000 --> 0:09:05.599 the vestment becomes expensive. 0:09:07.120 --> 0:09:09.680 I'd say we still have a couple more weeks, right, 0:09:09.760 --> 0:09:12.720 It's more like weeks or months. It's in July that 0:09:12.880 --> 0:09:15.360 on our numbers we start to get like you know, 0:09:15.400 --> 0:09:18.880 critical levels between en July and end August, depending where 0:09:18.920 --> 0:09:20.360 you are, what buying and so on. 0:09:20.640 --> 0:09:23.120 Amrito, if we were to get an end to the 0:09:23.160 --> 0:09:26.839 hostilities today, do we have a sense of when the 0:09:27.200 --> 0:09:30.080 golf would be back up and running, and the oil 0:09:30.120 --> 0:09:32.440 would be free flowing, and we'd have it back to 0:09:32.640 --> 0:09:34.120 somewhat of a normalized market. 0:09:34.840 --> 0:09:37.160 That's actually the million dollar question. And I think the 0:09:37.200 --> 0:09:40.760 market there is getting very complacent. I've seen some reports 0:09:40.760 --> 0:09:42.600 that are it's going to be much quicker to recover. 0:09:43.000 --> 0:09:46.600 I was just in the Middle East and everyone there 0:09:46.720 --> 0:09:49.320 said that the damage to infrastructure has actually been a 0:09:49.320 --> 0:09:54.040 lot more than people have let on because for obvious reasons, right, 0:09:54.080 --> 0:09:56.640 and I think it's not an overnight thing. The tankers 0:09:56.640 --> 0:09:58.360 are in the wrong place. How the tankers are here 0:09:58.360 --> 0:10:02.320 in the US, they need to reapers tankers. The owners 0:10:02.360 --> 0:10:05.160 are still very cautious because of casualty. You know, despite 0:10:05.160 --> 0:10:08.000 the cease file, you still get these occasional ships being hit. 0:10:08.480 --> 0:10:12.439 Mines the other issue, and production is not a light switch. 0:10:12.440 --> 0:10:15.319 It takes a few months. Now some countries like Ua, 0:10:15.400 --> 0:10:18.640 even Iraq and Kuwait now are starting to kind of 0:10:18.720 --> 0:10:22.360 let some vessels. They're managing rather to get some vessels out. 0:10:22.400 --> 0:10:25.120 That means they are going back in there seeing what 0:10:25.240 --> 0:10:27.960 damage is so it won't be like too long. But 0:10:28.320 --> 0:10:30.400 you know, officially they've still come out and said months, 0:10:30.440 --> 0:10:32.240 not weeks, like it's going to be three four five 0:10:32.320 --> 0:10:35.600 months before production fully recovers, if not longer. 0:10:36.600 --> 0:10:38.200 Is there a sense in that part of the world 0:10:38.200 --> 0:10:41.440 in Marina that they need to de risk the straight 0:10:41.480 --> 0:10:43.920 up for moves. I don't know if it's through pipelines 0:10:44.040 --> 0:10:46.360 or other ways to get the crewed out of that 0:10:46.400 --> 0:10:50.120 region of the world. Is there any plan there to 0:10:50.240 --> 0:10:51.240 change how that works? 0:10:52.200 --> 0:10:55.319 Absolutely? That was probably one of the biggest points of conversation. 0:10:56.200 --> 0:10:58.240 And I think how the Arabia really stands out there 0:10:58.280 --> 0:11:02.040 right like they already had invested inspect kind of alternative capacity, 0:11:02.080 --> 0:11:03.800 and they've always said, look, we don't get paid for 0:11:03.840 --> 0:11:06.360 it until we do right. And I think the Kingdom 0:11:06.400 --> 0:11:08.840 is probably the least affected because of the East West pipeline. 0:11:09.080 --> 0:11:11.880 They are coming up with four pumping stations that makes 0:11:12.040 --> 0:11:14.959 the flow of that pipeline actually sustained at seven million 0:11:15.000 --> 0:11:17.600 barrels per day right now it's more like six. They're 0:11:17.640 --> 0:11:21.480 tweeting two gas lines gas pipelines to also flow crude. 0:11:21.800 --> 0:11:24.000 They're going to dredge the port so they can do more. 0:11:24.200 --> 0:11:27.280 Kuwait and Iraq a talking to them about new pipelines 0:11:27.280 --> 0:11:30.120 through Saudi Arabia. I think in two to three years time, 0:11:30.160 --> 0:11:33.560 that entire region will look different. You as also already 0:11:33.559 --> 0:11:34.880 got that second pipeline going. 0:11:35.840 --> 0:11:38.839 Yeah, absolutely, Amrida. One final question, and we know you've 0:11:38.840 --> 0:11:42.240 got to get off to Energy Aspect meetings this morning. 0:11:42.720 --> 0:11:45.920 Karg Island, Okay, I get it, it's a thousand miles 0:11:45.920 --> 0:11:48.840 some Israel and all that. But are we doing a 0:11:48.960 --> 0:11:52.240 sort of kind of like war because we don't want 0:11:52.280 --> 0:11:57.160 to easily take out this incredibly important important oil hub 0:11:57.520 --> 0:11:58.079 for Iran. 0:12:00.200 --> 0:12:02.959 Now you're asking why they haven't taken it out, I'll 0:12:02.960 --> 0:12:03.280 go with. 0:12:03.320 --> 0:12:09.040 That, or when or what's Amrita sent take on the 0:12:09.080 --> 0:12:13.000 importance of carg Island. It's super important. 0:12:13.440 --> 0:12:16.760 You know, we've actually we've actually just acquired a company 0:12:16.760 --> 0:12:19.440 called Chios and their satellite base and they're literally going 0:12:19.480 --> 0:12:21.960 through tank by tank. How much is there and carve 0:12:22.200 --> 0:12:25.440 is Iran's lifeline in terms of how much oil sits there. 0:12:25.840 --> 0:12:28.400 They have been managing to get oil down there because 0:12:28.440 --> 0:12:30.800 they're still getting shipped through the US blockade right. That's 0:12:30.800 --> 0:12:34.200 been amazing to watch. I think, Look, kinetic action is 0:12:34.240 --> 0:12:37.000 not something the US wants to do or anybody wants 0:12:37.000 --> 0:12:40.600 to do right now, because the Iranian IRGC in particular 0:12:40.640 --> 0:12:44.600 has shown their asymmetric powers damaging infrastructure in the region. 0:12:44.920 --> 0:12:47.400 And you know they are the kind of people. They 0:12:47.440 --> 0:12:49.440 really believe in Scott Shreth. If they can't have it, 0:12:49.480 --> 0:12:51.760 nobody else can have it. And I think there is 0:12:52.040 --> 0:12:55.560 some real risks to again kind of restarting kinetic action, 0:12:55.600 --> 0:12:57.880 and that's why the US is backed off. 0:12:58.360 --> 0:13:01.120 Amrita. So and thank you, thank you, k appreciate it. 0:13:01.120 --> 0:13:03.640 Look forward to speaking to you way more often into 0:13:03.640 --> 0:13:07.640 two thousand and twenty seven. Brilliant research with energy aspects. 0:13:08.120 --> 0:13:11.440 The minutia of what she does is just really really 0:13:12.080 --> 0:13:17.040 uncommonly good. Stay with us. More from Bloomberg Surveillance coming 0:13:17.120 --> 0:13:18.120 up after this. 0:13:25.360 --> 0:13:28.959 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:13:29.040 --> 0:13:32.200 weekday afternoons from seven to ten am Eastern Listen on 0:13:32.280 --> 0:13:35.640 Apple Karplay and Android Auto with the Bloomberg Business app, 0:13:35.840 --> 0:13:37.240 or watch us live on. 0:13:37.120 --> 0:13:41.120 YouTube Pleazanne Saunders joins, so should we try it around 0:13:41.120 --> 0:13:45.360 Bloomberg Money Friday twelve, It's is okay, it's okay, so 0:13:45.400 --> 0:13:48.000 we said, let's get her back. So Lizene Saunders here 0:13:48.040 --> 0:13:51.400 and I hate it. It's now midyear review. We're in 0:13:51.480 --> 0:13:55.320 God's name to twenty twenty six. Go there we are. 0:13:55.440 --> 0:13:59.040 How do you write a midyear review given the noise 0:13:59.080 --> 0:13:59.520 out there? 0:14:00.080 --> 0:14:03.240 Well, we always start with a right, what did we 0:14:03.320 --> 0:14:06.319 say for the full year? And what did we get right? 0:14:06.360 --> 0:14:08.520 What did we get wrong? And as you guys know, 0:14:08.679 --> 0:14:11.520 Kevin and I work on it together. He kind of 0:14:11.520 --> 0:14:14.920 tackles the economic side and I tackle the market side. 0:14:15.080 --> 0:14:18.400 You know, sometimes it's frustrating because in this instance, you know, 0:14:18.440 --> 0:14:20.800 we like to put them out before the end of June, 0:14:21.280 --> 0:14:23.800 and I think one of the missing links that would 0:14:23.800 --> 0:14:26.640 otherwise be in a report like this would be about 0:14:26.640 --> 0:14:29.800 FED policy, especially under a new FED share, but we 0:14:29.920 --> 0:14:34.000 had to get them out beforehand, so you just sort 0:14:34.000 --> 0:14:35.880 of take stock of the year so far. And we're 0:14:35.920 --> 0:14:38.720 not market timers, so we're we're not out there trying 0:14:38.760 --> 0:14:41.840 to time inflection points in the market, but just share 0:14:41.920 --> 0:14:45.120 some perspective, and we think the macro environment looks decent. 0:14:45.640 --> 0:14:47.880 Neither side of the Fed's mandate is suggesting they should 0:14:47.880 --> 0:14:51.000 be even considering easing policy here, and I think that's 0:14:51.040 --> 0:14:53.360 the right stance. But I think that's going to be 0:14:53.400 --> 0:14:55.480 the most fascinating thing is this first meeting and what 0:14:56.040 --> 0:14:58.320 worsh has to say about how he's going to think 0:14:58.320 --> 0:14:59.280 about running the FED. 0:15:00.280 --> 0:15:02.520 The good news is that earnings are driving this market. 0:15:02.680 --> 0:15:05.280 Maybe the less good part of it is it's kind 0:15:05.320 --> 0:15:08.080 of concentrated here. We get that concentration risk that's come 0:15:08.120 --> 0:15:10.320 back into the marketplace. How do you guys think about that? 0:15:10.400 --> 0:15:13.840 Yeah, well, we've written and spoken about concentration within the 0:15:13.840 --> 0:15:18.200 market in terms of performance. But you're right, Paul, there's 0:15:18.240 --> 0:15:21.560 a lot of concentration within the earning story. Now, the 0:15:21.680 --> 0:15:25.080 AI story and the infrastructure component of that has broadened 0:15:25.120 --> 0:15:29.920 out into areas like materials and industrials, but. 0:15:31.600 --> 0:15:34.360 You still have a relatively. 0:15:33.800 --> 0:15:38.160 Small handful of names that sit behind the huge surge 0:15:38.840 --> 0:15:42.640 in what were first quarter earnings, which contributed to a 0:15:42.680 --> 0:15:46.200 big jump in full year earnings. We were before reporting 0:15:46.200 --> 0:15:48.880 season started, we were in the teens in terms of 0:15:49.000 --> 0:15:52.320 estimates for calendar year twenty twenty six, and that's up 0:15:52.360 --> 0:15:56.480 to twenty five percent right now. So the bar has 0:15:56.520 --> 0:15:57.040 set high. 0:15:57.200 --> 0:15:59.800 We got a massive Dow Jones Industrial average draw down 0:15:59.840 --> 0:16:02.760 of one point sixty six percent from the record. Hi, 0:16:03.080 --> 0:16:07.600 you've got a piercing single sentence that three percent of 0:16:07.760 --> 0:16:11.120 SMP five hundred are hitting fifty two week highs. Have 0:16:11.160 --> 0:16:15.400 you ever seen this before? No, so discuss this is 0:16:15.480 --> 0:16:17.360 really this is the key question for me. 0:16:18.080 --> 0:16:21.720 And by the way, it's it's only about twenty percent 0:16:22.040 --> 0:16:26.120 of SMP constituents that are outperforming the index itself over 0:16:26.160 --> 0:16:29.440 the past couple of months. Now in the past week 0:16:29.640 --> 0:16:34.760 there's been a little bit of breath improvement, but we 0:16:34.840 --> 0:16:38.280 do have an incredible concentration in terms of performance. The 0:16:38.320 --> 0:16:40.520 one thing I wanted to point out though, when we 0:16:40.640 --> 0:16:45.800 discuss the megacaps and their contribution to a cap weighted 0:16:45.840 --> 0:16:49.080 index like the S and P five hundred, an example 0:16:49.160 --> 0:16:54.200 would be in Nvidia, which I think is still the 0:16:54.240 --> 0:16:58.720 fifth largest contributor to S and P five hundred returns, 0:16:59.240 --> 0:17:01.680 but it's not even ranked in the top one hundredth 0:17:01.880 --> 0:17:04.400 within the S and P in terms of price performance. 0:17:04.440 --> 0:17:08.480 And that's an important message for individual investors because I 0:17:08.480 --> 0:17:11.640 think sometimes they feel that they have to be in 0:17:11.760 --> 0:17:14.960 say a cohort like the Magnificent seven, But there's a 0:17:14.960 --> 0:17:19.600 big difference between contribution to return and actual price performance. 0:17:19.640 --> 0:17:23.399 So there's one hundred plus stocks performing better than the 0:17:23.400 --> 0:17:26.600 alphabets and the NVIDIAs of the world. They're just large 0:17:26.600 --> 0:17:29.720 contributors by virtue of the multiplier of their cap size. 0:17:30.320 --> 0:17:34.320 So I mean, what are your schwab I mean you 0:17:34.400 --> 0:17:36.359 and Kevin, you're on the road all the time talking 0:17:36.400 --> 0:17:39.119 to your schwap clients. What's the big issue today? 0:17:39.119 --> 0:17:40.399 What's there? Is it? 0:17:40.480 --> 0:17:40.880 Fomo? 0:17:41.119 --> 0:17:42.399 Is it? You know? 0:17:42.480 --> 0:17:45.560 I don't understand AI, what's the big issue that you get? 0:17:45.880 --> 0:17:47.240 Some of it is age dependent. 0:17:47.840 --> 0:17:51.000 I think the FOMO is more prevalent among the younger investors. 0:17:52.480 --> 0:17:56.040 I would say that then, lately, a lot of questions 0:17:56.080 --> 0:17:59.199 on the IPOs okay, and you know much to your 0:17:59.280 --> 0:18:01.960 chagarn there, and it's not something I can talk about 0:18:01.960 --> 0:18:05.400 with any kind of specificity. I would say for our 0:18:05.480 --> 0:18:11.119 more seasoned investors, still the number one question that we 0:18:11.200 --> 0:18:13.160 get is on debt and depicite. 0:18:13.720 --> 0:18:15.399 Really without a doubt. 0:18:15.520 --> 0:18:17.560 But you and I have been in the market soon 0:18:17.560 --> 0:18:19.600 amount of time. It's never been an issue as long 0:18:19.600 --> 0:18:21.719 as people keep showing up to the Fed and our 0:18:21.840 --> 0:18:22.840 trade free and behind our debt. 0:18:23.160 --> 0:18:25.840 For whatever reason, I think the investor class cares deeply 0:18:25.880 --> 0:18:29.800 about this subject. I think the average constituent maybe cares 0:18:29.800 --> 0:18:32.000 about it in the abstract, but they don't tend to vote. 0:18:31.800 --> 0:18:32.359 Based on it. 0:18:32.880 --> 0:18:35.760 So as a result, something that those in Washington on 0:18:35.800 --> 0:18:38.960 both sides of the aisle just continue to play nice 0:18:38.960 --> 0:18:40.640 with the kick the can down the road? 0:18:40.920 --> 0:18:44.080 Can I sink you sure? There's all these fossil eggs 0:18:44.119 --> 0:18:46.520 out there. And I saw Springsteen the other day and 0:18:46.520 --> 0:18:49.280 he's just absolutely phenomenal. He did not mail it in 0:18:49.760 --> 0:18:54.240 never September of nineteen eighty. Ready, forty six years ago 0:18:54.480 --> 0:18:57.600 we lost John Bonham and they have the courage to 0:18:57.640 --> 0:19:00.520 say it's just never going to be the same. I mean, 0:19:00.560 --> 0:19:04.639 they really led Zeppelin, Lizanne's you should see her living them. 0:19:04.680 --> 0:19:09.240 The merchis the collector. I'm some unbelievable player. They have 0:19:09.359 --> 0:19:11.399 the courage then to just say, we're not going to 0:19:11.480 --> 0:19:11.919 fake it. 0:19:12.040 --> 0:19:15.480 That's right, and you know, but what's also interesting is 0:19:15.480 --> 0:19:18.360 the unwillingness, at least on Robert Plant's part, to do 0:19:18.520 --> 0:19:22.040 some sort of get back together because John bottom Son 0:19:22.119 --> 0:19:26.639 Jason is an extraordinary drummer. And they did it the 0:19:26.640 --> 0:19:30.200 one time at O two and two thousand and seven 0:19:30.720 --> 0:19:31.479 tribute Costs. 0:19:31.480 --> 0:19:34.119 They sold their catalog like a lot of other I 0:19:34.720 --> 0:19:35.480 don't believe. 0:19:35.880 --> 0:19:42.520 Trust be the underwriter. Yeah yeah, okay, but then Rush 0:19:42.600 --> 0:19:45.679 comes out with Anika. Now, so they're just starting a 0:19:45.720 --> 0:19:49.840 brand new tour with Neil Perth dying. They they're trying 0:19:49.880 --> 0:19:52.040 to do it. It's very cool what's going on out there. 0:19:52.080 --> 0:19:54.360 And they got the Stones still doing it. 0:19:53.960 --> 0:19:56.120 Ye are we seeing the Stones this summer? I don't 0:19:56.160 --> 0:19:56.359 even know. 0:19:56.400 --> 0:19:58.439 Are they I don't know if they're I've seen them 0:19:58.440 --> 0:19:59.720 so many times, but I. 0:19:59.640 --> 0:20:02.159 Mean, it's that's the only way, well, one of the 0:20:02.160 --> 0:20:04.159 few ways left for these folks to make money. 0:20:04.320 --> 0:20:07.000 My biggest my biggest agony of this, sitting on a 0:20:07.000 --> 0:20:10.040 bed at Rochester is to do detechnology looking at Steroay 0:20:10.080 --> 0:20:12.720 to Heaven and that album and saying, what is this is? 0:20:12.800 --> 0:20:16.360 Jimmy Page just didn't go forward like Robert Plant did 0:20:16.520 --> 0:20:21.040 with Alison Kraus, right and all that, and that's so? 0:20:21.600 --> 0:20:23.120 Is that a good segurity? What do you doing? 0:20:23.200 --> 0:20:27.680 I like that to do that sec that won't show 0:20:27.800 --> 0:20:28.800 up right exactly. 0:20:29.680 --> 0:20:31.280 Well, thank you so much for coming in. But the 0:20:32.160 --> 0:20:35.480 do you have a vision into twenty seven? I don't. 0:20:35.800 --> 0:20:40.160 I don't, No, I think not, other than I think 0:20:40.240 --> 0:20:43.840