WEBVTT - Tariffs, Retail Sales, and Inflation 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 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.200 us live on YouTube. 0:00:27.600 --> 0:00:29.200 Edward, your Denny needs no introduction. 0:00:29.480 --> 0:00:33.440 He is clearly one of the most philosophical and acute 0:00:33.560 --> 0:00:36.919 bulls out there. He speaks of the Roaring twenties and 0:00:37.040 --> 0:00:39.639 has been dead and we're thrilled to doctor Yodnny could 0:00:39.720 --> 0:00:44.159 join us for an extended conversation this morning. John Murphy, 0:00:44.200 --> 0:00:46.880 the giant of technical analysis, and a guy named Ed 0:00:46.960 --> 0:00:50.280 Hymen all agree like you that you have to meld 0:00:50.360 --> 0:00:54.240 things together. Talk to our audience that has missed the 0:00:54.360 --> 0:00:59.120 Yard Denny bullmarket of how you use economics to have 0:00:59.200 --> 0:01:01.760 the confidence to invest. 0:01:03.000 --> 0:01:05.720 Well, I think, first and foremost, you have to start 0:01:05.760 --> 0:01:08.640 with the data. I think a lot of economists and 0:01:08.680 --> 0:01:12.760 strategists sometimes start out with the conclusion of how they 0:01:12.880 --> 0:01:15.039 think things would fold, and then look for the data 0:01:15.040 --> 0:01:19.240 that will support it, especially the economists who tend to 0:01:19.280 --> 0:01:21.759 be on the pessimistic side about the US economy. 0:01:22.440 --> 0:01:24.720 I think the important thing is to be observant. 0:01:24.880 --> 0:01:28.560 And I've observed over the past three years that we've 0:01:28.560 --> 0:01:31.240 had the most widely anticipated recession of all times that 0:01:31.400 --> 0:01:32.080 never happened. 0:01:32.360 --> 0:01:33.200 It was a no show. 0:01:33.720 --> 0:01:36.000 And I think even now people aren't. It's kind of 0:01:36.000 --> 0:01:41.399 like Rodney Dangerfield. They're not giving the economy enough respect. 0:01:41.959 --> 0:01:43.120 It's amazingly resientied. 0:01:43.240 --> 0:01:46.040 And that's what percentage of the audience doesn't know who 0:01:46.240 --> 0:01:50.000 Rodney danger Fields, Right, you're taking himself un He was 0:01:50.040 --> 0:01:54.720 in Caddyshack. Believe it that Jar Denny, the economist James Kimmel, 0:01:54.800 --> 0:01:58.120 Jimmy Kimmel was going after Lawrence Cuddle over at Fox 0:01:58.160 --> 0:02:01.120 Biz last night. You and I i'mber Larry Cuddler at 0:02:01.120 --> 0:02:05.760 Paarsterns years ago, emphasizing the nominal statistic. Tell us what 0:02:05.880 --> 0:02:10.440 you glean right now from nominal GDP the idea of 0:02:10.480 --> 0:02:15.639 our real growth plus a very volatile inflation overlay. 0:02:17.120 --> 0:02:20.440 Well, I think right now, you know, like when you 0:02:20.800 --> 0:02:23.080 go over to Grandma's house and it's a long drive 0:02:23.080 --> 0:02:25.200 and the kids are in the back asking are we 0:02:25.280 --> 0:02:25.880 there yet? 0:02:26.240 --> 0:02:27.040 I think we're there. 0:02:27.040 --> 0:02:32.680 In terms of the so called nirvana norm for the economy, 0:02:33.160 --> 0:02:37.240 the dual mandate has been accomplished. We've got the unemployment 0:02:37.280 --> 0:02:40.680 rate at four percent, we've got real GDP rising up 0:02:40.800 --> 0:02:43.320 around three percent, and we got the inflation rate not 0:02:43.400 --> 0:02:46.600 quite a two percent, but somewhere around two and a 0:02:46.639 --> 0:02:49.679 half to three percent. And so the Fed has accomplished 0:02:50.040 --> 0:02:53.120 what it wants to do, which leads me to conclude 0:02:53.120 --> 0:02:55.680 that there's really no reason for the Fed to lower 0:02:55.720 --> 0:02:58.520 interest rates anymore. Indeed, I don't really think that there 0:02:58.560 --> 0:03:00.880 was much reason for them to lowered by one hundred 0:03:00.919 --> 0:03:03.920 basis points. And my friend, the friends the bond Vigelian, 0:03:04.000 --> 0:03:06.359 you seem to agree with me, because the BONDI rows 0:03:06.400 --> 0:03:09.040 one hundred basis points is the FED lowered the FED 0:03:09.040 --> 0:03:10.680 funds rate by one hundred basis points. 0:03:11.280 --> 0:03:13.360 So, ed, we did get that a little bit hotter 0:03:13.400 --> 0:03:16.440 than expected CPI inflation data a couple of days ago. 0:03:16.480 --> 0:03:19.000 Did that alter your view of maybe how this FED 0:03:19.560 --> 0:03:20.240 should proceed? 0:03:22.040 --> 0:03:22.280 Yeah? 0:03:22.320 --> 0:03:25.560 Well, you know, the way sometimes the way I look 0:03:25.600 --> 0:03:28.119 at these numbers is when they support my story, they're good. 0:03:28.120 --> 0:03:31.079 When they don't support my story, they're bad, or they're 0:03:31.080 --> 0:03:33.520 going to be revised. And I don't know that the 0:03:33.560 --> 0:03:36.600 CPI is going to be revised. But I think there 0:03:37.600 --> 0:03:40.440 are some funky things that happen at the beginning of 0:03:40.480 --> 0:03:42.600 the year. A lot of companies raise their prices. I 0:03:42.640 --> 0:03:47.040 know the data seasonally adjusted, but I'm not troubled by 0:03:47.080 --> 0:03:51.120 the inflation outlook. I think the important issue is productivity 0:03:51.680 --> 0:03:55.520 and unit labor costs as a result of that, and 0:03:55.560 --> 0:04:00.320 the productivity outlook has been productivity has been strong. I 0:04:00.360 --> 0:04:02.000 think it's going to get stronger and that's going to 0:04:02.040 --> 0:04:03.040 keep a lid on inflation. 0:04:03.920 --> 0:04:07.800 So what what's your view just in terms of taking 0:04:07.880 --> 0:04:12.160 risk here, ed we think about stocks, bonds, alternatives, Where 0:04:12.160 --> 0:04:15.400 do you see opportunities here given that economic backdrop, given 0:04:15.440 --> 0:04:16.880 that fedback drop. 0:04:18.680 --> 0:04:20.640 Well, you know, we've been bullish on the stock market 0:04:20.640 --> 0:04:23.400 since October of twenty twenty two, and there are a 0:04:23.440 --> 0:04:26.800 lot of opportunities back then, and now things are obviously 0:04:26.920 --> 0:04:32.680 much more expensive. I think from here on, I think 0:04:33.000 --> 0:04:36.480 maybe it's more like I hope that the rally in 0:04:36.600 --> 0:04:40.479 stocks continues based on earnings rather than valuation. If it 0:04:40.560 --> 0:04:43.400 keeps going up on valuation, we're faced with sort of 0:04:43.440 --> 0:04:49.920 like a nineteen nineties model of the stock market melting 0:04:50.000 --> 0:04:51.080 up and then melting down. 0:04:51.720 --> 0:04:53.840 But you know, that could just be a buying opportunity. 0:04:53.839 --> 0:04:56.880 It doesn't have to be a long term bear market, 0:04:56.920 --> 0:04:58.159 and I don't think it would be. 0:04:58.560 --> 0:05:01.360 Off the yard any over twenty two and good morning 0:05:01.400 --> 0:05:05.080 to the great technician Ralphia and Campora, Ralpha and Kompora 0:05:05.120 --> 0:05:08.680 who said the same thing. Up twenty one percent annualized 0:05:08.800 --> 0:05:12.320 since the your Denny call of October of two thousand 0:05:12.320 --> 0:05:13.560 and twenty two. 0:05:13.600 --> 0:05:14.479 We're on YouTube. 0:05:14.560 --> 0:05:18.640 Subscribe to Bloomberg Podcast, growing each and every day, learning 0:05:18.640 --> 0:05:21.440 as much as I can about this digital madness. Good 0:05:21.440 --> 0:05:24.960 morning to all of you outside America on YouTube. Just 0:05:25.040 --> 0:05:28.599 humbled by the international reach A special good morning today 0:05:28.640 --> 0:05:31.720 to ninety two nine FM Paul. 0:05:31.720 --> 0:05:33.320 I got to do this right now. 0:05:33.360 --> 0:05:37.000 It is the tweet of the day, fred Lynn Red 0:05:37.080 --> 0:05:40.760 Sox saying that Bregman of the Houston Astros coming to 0:05:40.800 --> 0:05:44.839 the Red Sox reminds him of Rico Petrocelli. 0:05:45.600 --> 0:05:49.120 That's almost as important as the next question to Ed yard. 0:05:48.880 --> 0:05:53.800 Denning exactly so, Ed, we think about this equity market, 0:05:53.800 --> 0:05:55.640 and I guess that the FED is going to be 0:05:55.680 --> 0:05:57.760 more or less on the sidelines, maybe give us one 0:05:57.839 --> 0:06:02.120 or two cuts. Earnings have to be front and center. Yes, 0:06:02.200 --> 0:06:04.719 what's your view of this? Earning power of this market 0:06:04.800 --> 0:06:05.159 right here. 0:06:06.200 --> 0:06:08.279 I think the power is there. 0:06:09.160 --> 0:06:12.320 For the past three years, because we didn't think there 0:06:12.320 --> 0:06:15.360 would be an economy wide recession, we were among the 0:06:15.440 --> 0:06:20.000 highest forecasters for earnings, and indeed for this year, I 0:06:20.000 --> 0:06:21.839 think we're at the top with two hundred and eighty 0:06:21.839 --> 0:06:24.760 five dollars a share for the S and P five hundred, 0:06:24.800 --> 0:06:26.960 and then next year three hundred and twenty dollars a share, 0:06:27.480 --> 0:06:30.680 and then by twenty twenty nine four hundred dollars a year. 0:06:30.880 --> 0:06:34.960 So those kind of numbers at the current valuations can 0:06:35.000 --> 0:06:37.880 get us to seven thousand this year, eight thousand next 0:06:37.960 --> 0:06:39.680 year on the S and P five hundred and ten 0:06:39.720 --> 0:06:43.920 thousand by twenty twenty nine. So it's I think it's 0:06:43.920 --> 0:06:46.200 going to be earnings driven, and it's going to be 0:06:46.240 --> 0:06:50.400 a technology driven and productivity driven. 0:06:50.520 --> 0:06:52.720 And if we get a boom like that, and you're 0:06:52.760 --> 0:06:55.039 pretty lonely on that, I mean, the character of going 0:06:55.080 --> 0:06:58.320 out to twenty twenty seven, eight and nine is a 0:06:58.360 --> 0:06:59.600 lonely stance right now. 0:06:59.640 --> 0:07:01.640 A lot of people's long term is one year. 0:07:02.320 --> 0:07:06.240 And if we get this ed Yard Denny, do business 0:07:06.360 --> 0:07:09.520 practices get sloppy. I had a wonderful talk once with 0:07:09.640 --> 0:07:13.840 Robert crandall the giant of American airlines. Do people get 0:07:14.600 --> 0:07:19.560 goofy and misspend capex et cetera, et cetera as we 0:07:19.920 --> 0:07:23.560 go up the yard Denny Bull Market, Well, that's the 0:07:23.560 --> 0:07:25.480 beauty of American capitalism, right. 0:07:25.520 --> 0:07:30.520 There's a tremendous amount of money available for venture capital 0:07:30.600 --> 0:07:33.920 for startups, and it's kind of like throwing spaghetti on 0:07:33.960 --> 0:07:35.600 the wall. And I think a lot of these venture 0:07:35.600 --> 0:07:38.800 funds that's exactly what they do. They invest in a 0:07:38.840 --> 0:07:42.160 lot of these startups. They provide the capital they need 0:07:42.200 --> 0:07:47.880 to come up with their innovations, and some succeed, some fail. 0:07:47.960 --> 0:07:50.800 We always hear about the ones that succeed. We never 0:07:50.840 --> 0:07:53.160 hear about the ones that fail. But that's the nature of. 0:07:55.400 --> 0:07:59.720 You know, the the that's the nature of capitalism. 0:08:01.080 --> 0:08:07.920 Can tariffs, reciprocal tariffs trump economics can derail the Ardny 0:08:08.120 --> 0:08:08.720 Bull market? 0:08:10.480 --> 0:08:13.680 Well, you know a lot of people think so. But 0:08:14.560 --> 0:08:17.960 I'm very happy that they're using the word reciprocal rather 0:08:18.040 --> 0:08:21.680 than retaliatory. Retaliatory is what the Smooth Holly tariff was. 0:08:22.200 --> 0:08:25.280 In June of nineteen thirty, we raised our tariffs without 0:08:26.040 --> 0:08:29.000 any concerns about the impact in other countries and other 0:08:29.040 --> 0:08:34.080 countries retaliated, and we had a world depression. And then 0:08:34.400 --> 0:08:38.120 to get out of that, we passed the Congress passed 0:08:38.400 --> 0:08:44.040 the Reciprocal Tariff Act, which basically the basic theme of 0:08:44.040 --> 0:08:48.240 that was, please take this power out of our hands. 0:08:48.240 --> 0:08:51.680 We're too dangerous with tariffs. Let the president do it. Well, 0:08:51.800 --> 0:08:54.480 you know, the president's doing it again right now. And 0:08:54.559 --> 0:08:57.079 I think the fact that they're calling it reciprocal, and 0:08:57.360 --> 0:09:00.920 the President said it yesterday said look, we're just going 0:09:01.000 --> 0:09:03.400 to be fair and we're going to match their tariffs 0:09:03.640 --> 0:09:05.559 and if they want to talk about it to lower it, 0:09:06.000 --> 0:09:07.720 we'll do that. So I think this is all going 0:09:07.760 --> 0:09:11.200 to lead to lower tariffs, not higher tariffs, when all 0:09:11.240 --> 0:09:12.000 of a sudden. 0:09:11.720 --> 0:09:13.200 Done, and it could be pretty quick. 0:09:13.240 --> 0:09:16.560 I mean, you see how more leaders are coming to 0:09:16.600 --> 0:09:19.640 the White House to say, let's talk about these things 0:09:19.640 --> 0:09:20.880 before you slap them on. 0:09:21.880 --> 0:09:24.080 Yeah, let's switch gears a little bit to the fixed 0:09:24.080 --> 0:09:26.360 income space here. Where do you see opportunities? I mean, 0:09:26.559 --> 0:09:28.120 you know a lot of folks that can be pretty 0:09:28.120 --> 0:09:30.360 happy with a two year treasury at four point three percent. 0:09:30.840 --> 0:09:32.760 Is that kind of where they should be or should 0:09:32.760 --> 0:09:33.760 they take some credit risk? 0:09:34.040 --> 0:09:34.800 How do you think that fixed. 0:09:34.800 --> 0:09:37.920 That's yeah, that's our view is that the ten years 0:09:37.920 --> 0:09:40.640 should be four and a half percent plus minus twenty 0:09:40.640 --> 0:09:41.680 five basis points. 0:09:41.679 --> 0:09:42.640 As you mentioned. 0:09:42.280 --> 0:09:46.800 Before, that's normal and it's normal, and since it's where 0:09:47.240 --> 0:09:51.800 bond yields were before the Great Financial Crisis, before the 0:09:51.840 --> 0:09:55.800 Central Bank started to rig manipulate the bond yield and 0:09:55.840 --> 0:09:58.920 bring it close to zero, I think it's great that 0:09:58.960 --> 0:10:02.000 the US economy is demonstrated that it can live with 0:10:02.040 --> 0:10:05.600 these interest rates because they're fair. They're fair to investors 0:10:05.920 --> 0:10:07.560 who don't want to take a lot of risk and 0:10:08.440 --> 0:10:13.120 want to have something that's safe but getting a decent return. 0:10:13.280 --> 0:10:16.400 So I think the opportunity from the bond market they're 0:10:16.400 --> 0:10:20.280 probably in the corporate area, because corporations run their their 0:10:20.280 --> 0:10:24.800 finances better than the US government, as the Dose Committee 0:10:25.800 --> 0:10:27.360 has demonstrated. 0:10:27.400 --> 0:10:28.120 Edgiar Denny. 0:10:28.480 --> 0:10:32.200 Next week, folks, and this is anticipated around Robert Shiftman's schedule, 0:10:32.679 --> 0:10:35.840 we are going to have Robert Schiffman of Bloomberg Intelligence 0:10:36.000 --> 0:10:40.079 in for an extended conversation on the lack of debt 0:10:40.760 --> 0:10:42.959 of the mag seven I. 0:10:42.880 --> 0:10:46.839 Mean, Edgiar Denny. You know, forget about Madigliani and the rest. 0:10:46.880 --> 0:10:51.520 The bottom line here is there is ample room to 0:10:52.320 --> 0:10:54.760 use debt for whatever cap. 0:10:54.720 --> 0:10:57.079 X or to diminish equity. 0:10:57.520 --> 0:10:59.520 I mean, we can issue a lot of debt out 0:10:59.520 --> 0:11:04.280 there in this American juggernaut economy, can't we. 0:11:04.280 --> 0:11:08.559 Well, the US government certainly has done that, and everybody, 0:11:08.559 --> 0:11:12.320 including the bomb vigilantis, are hoping that the Doge boys 0:11:12.880 --> 0:11:13.840 are successful. 0:11:13.920 --> 0:11:19.600 Do I detect a new phrase from thernetty continue, Well, 0:11:19.600 --> 0:11:23.720 it's it's the shootout in Doge City, right, So I 0:11:23.760 --> 0:11:25.200 can play with this one for a while. 0:11:26.360 --> 0:11:31.080 But yeah, I think where there is a capacity to 0:11:31.120 --> 0:11:34.200 borrow more but there's no need to borrow more is 0:11:34.240 --> 0:11:36.440 in the household sector. In the business sector, it's the 0:11:36.480 --> 0:11:39.920 government that's on the wrong course. And if the government 0:11:40.080 --> 0:11:44.120 kind of gets rained in, that crowds out less private 0:11:44.160 --> 0:11:48.120 sector and investments. But look at the Magnificent seven. They 0:11:48.120 --> 0:11:50.440 don't have to borrow money. They just generate a tremendous 0:11:50.480 --> 0:11:55.080 amount of cash flow corporate cash Corporate cash flow is 0:11:55.080 --> 0:11:58.640 at an all time record high, and so companies are 0:11:59.080 --> 0:12:02.520 cash rich, and they are investing in technology. 0:12:02.880 --> 0:12:05.160 And this is a great way to start a Friday 0:12:05.200 --> 0:12:07.520 here into a weekend of a bull market. Edwards, your 0:12:07.600 --> 0:12:11.600 Denny of your Denny research. I can't say enough about it. 0:12:11.640 --> 0:12:13.760 We protect the copyright of all. I guess get is 0:12:13.880 --> 0:12:18.160 wonderful readable research at Yard Denny. I can't say enough 0:12:18.200 --> 0:12:20.160 about the value of that. 0:12:24.600 --> 0:12:28.160 You're listening to the Bloomberg Surveillance Podcast. Catch US Live 0:12:28.240 --> 0:12:31.400 weekday afternoons from seven to ten am Eastern. Listen on 0:12:31.480 --> 0:12:35.120 Applecarplay and Android Auto with the Bloomberg Business app, or 0:12:35.280 --> 0:12:37.040 watch US live on YouTube. 0:12:37.720 --> 0:12:41.000 Jay Hatfield with US right now with the Infrastructure Capital Management, 0:12:41.000 --> 0:12:43.319 will go to Lisa for the retail report and then 0:12:43.360 --> 0:12:46.840 talk retail sales the state of the economy with mister Hatfield. 0:12:46.960 --> 0:12:49.560 I gotta go Jay to what you're looking at now. 0:12:49.960 --> 0:12:52.680 It's something Paul's alluded to because he keeps watching for 0:12:52.720 --> 0:12:55.920 West Texas Intermediate with a sixty nine print. We're not 0:12:56.040 --> 0:13:01.160 there yet, but nobody's modeling out not to be dramatic 0:13:01.160 --> 0:13:05.480 a collapse in hydrocarbons, but just the bid falls away. 0:13:06.360 --> 0:13:08.200 When and how does that happen? 0:13:09.440 --> 0:13:13.280 Well, I guess one point where we have superior data 0:13:13.440 --> 0:13:16.680 is that the notion that Trump is going to be 0:13:16.679 --> 0:13:19.840 able to get the US producer to produce dramatically more 0:13:20.000 --> 0:13:24.520 is probably incorrect. They continue to be focused on capital return, 0:13:24.679 --> 0:13:27.760 return on invested CAPITALI saw Chevron laying people off. 0:13:28.040 --> 0:13:31.199 More than that CUGE. We're just doing a huge. 0:13:30.920 --> 0:13:35.800 Reason, right, So it wasn't really surprisingly partly because they're 0:13:35.840 --> 0:13:39.640 just ineffective managers. Wasn't really constraining that Biden wasn't really 0:13:39.679 --> 0:13:44.040 constraining US production. Is constraining US exports of natural gas, 0:13:44.040 --> 0:13:48.840 but not oil. And we gather water in the Permian 0:13:49.320 --> 0:13:51.000 and our indication is not like they're not going to 0:13:51.000 --> 0:13:53.920 produce more. They're just going to follow their normal paths. 0:13:53.920 --> 0:13:57.560 So that's not really a good bear case for oil. 0:13:57.679 --> 0:14:01.080 But what we observe, and I think it's most people agree, 0:14:01.720 --> 0:14:05.400 is that this administration is tremendous influence with particularly the 0:14:05.400 --> 0:14:08.840 Saudi's given that they've sold arms they used to be 0:14:08.960 --> 0:14:12.679 supporting the war with the Huties, and Trump is good 0:14:12.760 --> 0:14:16.200 at using his influence. So we believe that even if 0:14:16.240 --> 0:14:21.200 there's very strong Uranian restrictions on production, or even Russian 0:14:21.240 --> 0:14:24.400 because they're trying to resolve the war, that if oil 0:14:24.440 --> 0:14:28.520 prices go to eighty then he would call literally call 0:14:28.600 --> 0:14:30.880 OPEC and say produce more. And we saw that actually 0:14:31.400 --> 0:14:34.760 happen during the pandemic, so we I mean, there's always 0:14:34.760 --> 0:14:37.040 a range with oil, because we could see sixty, which 0:14:37.120 --> 0:14:38.960 could see eighty, But we just made a simple and 0:14:39.000 --> 0:14:41.600 said seventy. We were at eighty, so we think it's 0:14:42.880 --> 0:14:46.080 capped and all. That's important too, because everybody wants to 0:14:46.120 --> 0:14:49.160 talk about the inflationary impacts of Trump policies, but nobody 0:14:49.200 --> 0:14:52.000 wants to talk about any of the deflationary effects. Last 0:14:52.000 --> 0:14:54.440 point is just the dollars ultra strong. That matters for 0:14:54.440 --> 0:14:57.000 a while, so these but it's a very one sided 0:14:57.040 --> 0:14:59.840 conversation about inflation in our opinion. 0:15:00.000 --> 0:15:02.040 All right, I don't want to stay on that topic. 0:15:02.280 --> 0:15:04.720 You have in your notes here which is very clear 0:15:05.040 --> 0:15:08.400 inflation is always caused by excessive money supply growth as 0:15:08.400 --> 0:15:12.760 occurred during the pandemic, and never by tariffs and deportation. 0:15:13.800 --> 0:15:15.200 Talk to us about that, because I think a lot 0:15:15.200 --> 0:15:19.960 of the concern about tariffs and about deportations is that 0:15:20.000 --> 0:15:21.320 they will effect be inflation. 0:15:22.720 --> 0:15:25.320 Well, the first thing that it's strange that nobody's really 0:15:25.320 --> 0:15:27.960 pointed out is it's almost like we had the perfect 0:15:28.040 --> 0:15:34.720 experiment to prove monetary theory. Seventy five percent increase in 0:15:34.760 --> 0:15:37.880 the money spy, which netted down to sixty thirty eight 0:15:37.960 --> 0:15:42.920 percent nominal GDP twenty two percent inflation. So it worked perfectly. 0:15:43.400 --> 0:15:47.680 So the excess monetary growth translated inflation basically got Biden fired. 0:15:48.240 --> 0:15:51.640 So thank you, Chair Powell. But that worked perfectly. But 0:15:51.680 --> 0:15:54.760 nobody seems to care like that. Milton Friedman, you know, 0:15:54.800 --> 0:15:56.240 would be dancing in the streets. 0:15:56.560 --> 0:16:01.000 Is Chair Paul going to get Trump fired? Yeh possibly? Yes? 0:16:01.080 --> 0:16:02.440 How what will be that problem? 0:16:02.520 --> 0:16:06.200 We have ultra tight monetary policy right now. The thing 0:16:06.240 --> 0:16:09.880 to look at is monetary supply. Money supplied growth. It's 0:16:10.000 --> 0:16:14.640 negative three so that implies deflation. In fact, we'll see 0:16:14.680 --> 0:16:16.880 about retail sales is a lagging indicator. But we think 0:16:16.920 --> 0:16:18.280 the economy is slowing. 0:16:19.560 --> 0:16:22.960 This morning with a blistering note on tightening off the 0:16:23.240 --> 0:16:24.760 Fed balance sheet as well. 0:16:24.840 --> 0:16:29.960 Right, so the key dynamics everybody debates is monetary policy tight. 0:16:30.200 --> 0:16:32.960 When you're shrinking that I supply three percent, that's extremely tight. 0:16:33.080 --> 0:16:35.120 Okay, let's do this, Cha Hatfield with us. We're going 0:16:35.160 --> 0:16:38.280 to come back. He's with infrastructure at Capital Management. We're 0:16:38.280 --> 0:16:41.280 going to stagger to retail sales report out of Friday 0:16:41.520 --> 0:16:44.360 with Valentine, one hundred and fourteen percent are work from 0:16:44.360 --> 0:16:47.320 home today future is a negative seven to features in 0:16:47.440 --> 0:16:50.720 negative one oh five. The vics fifteen point two three. 0:16:50.800 --> 0:16:53.720 Don't really know what to make of it all other 0:16:53.840 --> 0:16:56.000 than here we are with the yields where they are 0:16:56.000 --> 0:16:59.400 in retail sales matters. There's a number of lines of 0:16:59.440 --> 0:17:01.640 retail sales else in that control group is what I 0:17:01.720 --> 0:17:02.360 focus on. 0:17:02.920 --> 0:17:04.520 So let's look at that. 0:17:04.880 --> 0:17:07.399 And this is for January month over month retail sales. 0:17:07.400 --> 0:17:08.159 The survey was for. 0:17:09.680 --> 0:17:11.919 A decrease of two tens of percent. Came in a 0:17:11.960 --> 0:17:14.240 decrease of nine tenths of a percent. So you see 0:17:14.240 --> 0:17:17.200 the difference there. When you take autos and gas out 0:17:17.200 --> 0:17:19.800 of the picture, it goes down to about down a 0:17:19.840 --> 0:17:22.280 half a percent. And then we want to hit import 0:17:22.280 --> 0:17:25.040 prices because we've been talking about that so much with tariffs. 0:17:25.280 --> 0:17:27.639 The expectation was for an increase of four tens percent 0:17:27.680 --> 0:17:30.600 increase about three tenths of a percent. Now let's see 0:17:30.600 --> 0:17:32.560 the reaction on Wall Street, a little bit of a dip. 0:17:32.600 --> 0:17:34.639 We have NAZAC futures down to tenth of a percent, 0:17:34.680 --> 0:17:37.159 twenty six points down. Futures down now two tenths of 0:17:37.160 --> 0:17:39.000 a percent, s and P future still down about a 0:17:39.040 --> 0:17:41.160 tenth of a percent. Moving on to the bond space, 0:17:41.160 --> 0:17:42.719 we have the two year yield at four point two 0:17:42.960 --> 0:17:46.080 seven percent, that's off about three basis points. A ten 0:17:46.160 --> 0:17:48.360 year yield four point five zero percent, and that's down 0:17:48.400 --> 0:17:49.880 about two basis points. 0:17:49.920 --> 0:17:51.920 Tom, Lisa, thanks so much. 0:17:51.960 --> 0:17:55.520 Shield's come in, as Lisa mentioned, and the ten year 0:17:55.720 --> 0:17:58.679 really yield two point zero five percent is in a 0:17:58.720 --> 0:18:01.520 little bit nowhere near the ninety nine level. That's really 0:18:01.560 --> 0:18:05.120 my demarcation, but to four digits two point zero four 0:18:05.240 --> 0:18:09.119 seven zero and a ten year real yield dollars showing 0:18:09.160 --> 0:18:12.240 further weakness and dx y one O eight one oh 0:18:12.280 --> 0:18:16.520 seven now one oh six point seventy four, So sort 0:18:16.520 --> 0:18:17.800 of quiescent field. 0:18:17.520 --> 0:18:19.679 There, although the revisions went up. So it's sort of 0:18:20.480 --> 0:18:22.160 a soup to say. 0:18:23.160 --> 0:18:26.399 The least our economic indicators and all that Lisa Matteo 0:18:26.520 --> 0:18:30.520 does on economics, it's brought to you by Oppenheimer. Oppenheimer 0:18:30.600 --> 0:18:34.560 focuses the power of their thinking on you, creating customized 0:18:34.600 --> 0:18:37.600 plans to help achieve their goals. Put the power of 0:18:37.680 --> 0:18:44.399 Oppenheimer thinking into you're investing, wealth management, capital markets, investment banking. 0:18:44.480 --> 0:18:48.399 Paul so Jay looking at the retail sales again, weaker 0:18:48.440 --> 0:18:50.760 than expected. Here, talk to us about your. 0:18:50.720 --> 0:18:52.040 View of the FED here. 0:18:52.119 --> 0:18:55.320 I mean there's a concern that the FED is chronically 0:18:55.359 --> 0:18:59.200 behind the curve because they look at historical data helping 0:18:59.200 --> 0:19:00.520 of a problem is is that for you? 0:19:01.280 --> 0:19:04.320 That's an enormous problem the FED, Well, they really have 0:19:04.400 --> 0:19:05.919 three problems, but that's the biggest. 0:19:06.000 --> 0:19:07.000 Okay, so as. 0:19:06.840 --> 0:19:09.920 You know, because I was I believe leading to charge 0:19:09.920 --> 0:19:15.040 on this, but you and okay, so in early twenty one, 0:19:15.640 --> 0:19:18.080 because we of course do look at oil that matters, 0:19:18.359 --> 0:19:22.600 and we look at other indicators of housing costs like 0:19:23.160 --> 0:19:25.640 housing prices, but now we use just market rents. Because 0:19:25.640 --> 0:19:27.280 there's this thing called the Internet and you can see it. 0:19:28.000 --> 0:19:31.080 Maybe the BLS should start using that. But so the 0:19:31.160 --> 0:19:33.880 FED seems to know this, but then they're so slavishly 0:19:33.920 --> 0:19:36.880 focused on this two percent like it's some it came 0:19:36.920 --> 0:19:40.399 down in a tablet from God. But when you we 0:19:40.520 --> 0:19:44.720 actually publish on our website which they don't read that, 0:19:45.119 --> 0:19:48.879 if you adjust that to market, then core PC guys 0:19:48.920 --> 0:19:51.520 like two point one. In core CPI is like one 0:19:51.560 --> 0:19:56.280 point nine. So they should be really concerned about having 0:19:56.440 --> 0:19:59.920 ultra tight monetary policy and just continuing to cut it. 0:20:00.200 --> 0:20:02.439 Meeting I don't have to do an emergency cut. But 0:20:02.480 --> 0:20:04.880 they're completely off that page. They've driven the ten year 0:20:05.000 --> 0:20:08.520 up one hundred basis points and risked a recession in 0:20:08.560 --> 0:20:09.359 the housing market. 0:20:09.720 --> 0:20:12.679 When you were at you Kill Davis, did they teach 0:20:12.760 --> 0:20:16.160 the biblical fed they was said about tablets. 0:20:16.800 --> 0:20:18.080 Well, they actually did. 0:20:18.240 --> 0:20:19.960 And I think that's the big advantage because it was 0:20:20.000 --> 0:20:23.119 forty five short years ago, and monitorism used to be 0:20:23.200 --> 0:20:27.120 more popular now Keynesianism. You know, it's obviously most universities 0:20:27.160 --> 0:20:29.960 are liberal and if you're knsy and it's wonderful because 0:20:30.000 --> 0:20:33.080 all government spending is great. So I don't even hear 0:20:33.119 --> 0:20:33.919 any monitorisms. 0:20:34.200 --> 0:20:38.239 So what my monitorism is out of vogue? What is 0:20:38.280 --> 0:20:42.119 the part of monitorism that our listeners and viewers should 0:20:42.160 --> 0:20:42.919 pay attention to. 0:20:43.320 --> 0:20:46.640 Well, I've looked at the monetary base every week. That's 0:20:46.680 --> 0:20:49.959 a M. I learned that from you. Actually, I used 0:20:49.960 --> 0:20:51.879 to think it's better to call M zero or MO, 0:20:52.960 --> 0:20:54.920 so it comes out every weeks. That's an advantage over 0:20:54.960 --> 0:20:58.200 one M one. And if you just follow that indicator, 0:20:58.200 --> 0:21:00.680 you'll never miss a big cycle except the pandemic. Things 0:21:00.720 --> 0:21:03.800 like the pandemic. So in other words, you know, we 0:21:03.800 --> 0:21:05.840 were on saying, well it might spy went up seventy 0:21:05.840 --> 0:21:08.920 five percent. Do we need to be geniuses that that 0:21:09.000 --> 0:21:10.919 we're going to have inflation? Do we really think it's 0:21:10.960 --> 0:21:15.440 transitory or now or a better example, great financial crisis. 0:21:15.480 --> 0:21:18.320 We had zero percent monetary growth for four years before 0:21:18.600 --> 0:21:22.080 the economy blew up. Now we have three percent negative. 0:21:22.560 --> 0:21:24.800 So we would have said before as I guess I 0:21:24.840 --> 0:21:28.440 did that, Oh we think retail sales lags, but. 0:21:28.440 --> 0:21:29.040