WEBVTT - Lots More With Neil Dutta 0:00:00.080 --> 0:00:01.160 How is future proof? 0:00:01.600 --> 0:00:02.440 It was awesome. 0:00:02.680 --> 0:00:05.000 He had to quite the interview with Bill Gross. I 0:00:05.040 --> 0:00:07.360 was listening to it. I mean it was I feel 0:00:07.400 --> 0:00:09.200 like everyone's kind of known that he hates good luck. 0:00:09.360 --> 0:00:12.119 Yeah, I kind of love it. Like I saw a 0:00:12.119 --> 0:00:15.480 bunch of people talking about like this crazy old guy. 0:00:15.520 --> 0:00:17.239 I feel sorry for him, and I was like, I 0:00:17.239 --> 0:00:19.600 got the sense he's living his best life. He's just 0:00:19.640 --> 0:00:23.119 like on stage settling old scores because he can like 0:00:24.040 --> 0:00:26.279 to lose. Yeah, I did think it was funny. He 0:00:26.320 --> 0:00:29.160 went off on Peter Lynch though, like I've never did 0:00:29.200 --> 0:00:29.640 you hear that? 0:00:29.640 --> 0:00:29.840 Bet? 0:00:30.400 --> 0:00:33.000 He like made fun of Peter Lynch too, and it 0:00:33.120 --> 0:00:37.480 was like, I've never heard anyone take issue with Peter Lynch. 0:00:40.400 --> 0:00:47.440 I did a deadlift one two three, Jimmy, okay, uh barges. 0:00:47.600 --> 0:00:49.760 This isn't after school Special, except. 0:00:49.360 --> 0:00:51.920 I've decided I'm going to base my entire personality going 0:00:51.920 --> 0:00:55.160 forward on campaigning for a strategic pork reserve in the US. 0:00:55.280 --> 0:00:57.000 Where's the best in posta? 0:00:57.160 --> 0:00:59.680 These are the important question? Is that robots taking over 0:00:59.720 --> 0:00:59.960 the world. 0:01:00.240 --> 0:01:00.360 No. 0:01:00.440 --> 0:01:03.320 I think that like in a couple of years, the 0:01:03.400 --> 0:01:05.600 AI will do a really good job of making the 0:01:05.600 --> 0:01:09.080 odd lots podcast and people today, I don't really need 0:01:09.120 --> 0:01:11.720 to listen to Joe and Tracy anymore. We do have 0:01:12.720 --> 0:01:14.120 the perfect beast. 0:01:15.520 --> 0:01:18.480 Well, in the meantime, this is lots more an odd 0:01:18.480 --> 0:01:21.440 Lot spin off, and we do have the perfect guest. 0:01:21.720 --> 0:01:24.720 Neil Dutta hanging out with us in studio, Tracy. That 0:01:24.800 --> 0:01:26.280 was fun out in California, wasn't it? 0:01:26.640 --> 0:01:30.480 California is lovely. We should we should live there. No, 0:01:30.640 --> 0:01:32.320 it was a fun conference. So we were at the 0:01:32.440 --> 0:01:35.520 future Proof conference in Huntington Beach. I think there were 0:01:35.600 --> 0:01:39.760 three thousand people there, mostly financial advisors, and uh we 0:01:39.840 --> 0:01:41.400 did a live interview with Bill. 0:01:41.200 --> 0:01:44.680 Gross We Uh, I love going out to southern California. 0:01:44.720 --> 0:01:48.640 It's always fun when you can create controversy and rivalry 0:01:49.040 --> 0:01:53.600 between two asset managers bond managers who are like rivals 0:01:53.640 --> 0:01:55.880 and create drama. We created the drama at the event. 0:01:56.080 --> 0:01:58.240 Well, I feel like we didn't actually have to do 0:01:58.400 --> 0:02:01.000 much to create it. I'm I mean Bill kind of 0:02:01.080 --> 0:02:02.760 went off on his own. 0:02:02.600 --> 0:02:04.720 You do. Is there any reason to own a bond 0:02:04.800 --> 0:02:05.200 right now? 0:02:06.640 --> 0:02:11.480 Yeah? Absolutely? I mean it is fixed income, okay, so 0:02:11.560 --> 0:02:12.280 I would you could? 0:02:12.320 --> 0:02:14.320 You could get that. But Tracy gets that in her 0:02:14.320 --> 0:02:15.080 Marcus account. 0:02:15.320 --> 0:02:17.200 I mean, I just told my parents to buy a 0:02:17.240 --> 0:02:19.880 bunch of Treasury bills because it's the easiest. Really, yeah, 0:02:19.919 --> 0:02:23.080 why not? I mean it's just like clipping, uh five 0:02:23.120 --> 0:02:25.080 percent return a month after month. 0:02:25.120 --> 0:02:27.320 And you know, Bill Gross disagrees with you. 0:02:27.840 --> 0:02:29.680 Well, I'm not saying rates can't go higher, but if 0:02:29.680 --> 0:02:32.799 you're not a sophisticated investor, yes, there's probably reasons to own, 0:02:33.320 --> 0:02:34.600 you know, treasury. 0:02:35.080 --> 0:02:38.200 You know, Bill Gross started his career clipping. He told 0:02:38.240 --> 0:02:40.720 us the story when we interviewed him, and he was 0:02:40.800 --> 0:02:43.119 hired at Pimpko in nineteen seventy one and that part 0:02:43.160 --> 0:02:46.280 of his new part of his job was to literally 0:02:46.320 --> 0:02:49.239 go down to the vault that Pimpko had every I 0:02:49.240 --> 0:02:51.880 don't know how often he went down there and clip 0:02:51.960 --> 0:02:55.520 the physical coupons off of paper bonds that they had, 0:02:55.639 --> 0:02:57.400 and he was that was part of his job, was like, 0:02:57.440 --> 0:02:58.280 go do that clipping. 0:02:58.720 --> 0:03:00.280 Well, he's clearly older than we are. 0:03:01.360 --> 0:03:03.079 Well he was also talking about how he used to 0:03:03.120 --> 0:03:07.880 trade on Quotron machines instead of Bloomberg terminals. So yes, absolutely, 0:03:08.120 --> 0:03:09.600 but it was a it was a fun interview. 0:03:09.800 --> 0:03:12.440 But wait, why not just I'm sorry, I'm hung upbout this. 0:03:12.480 --> 0:03:14.520 Why not just like okay, yes, I get that you 0:03:14.520 --> 0:03:16.680 can earn like five percent somewhere, but like you can 0:03:16.800 --> 0:03:19.560 can't you earn like four percent like basically risk free 0:03:19.560 --> 0:03:21.919 at this like with no duration or anything like. 0:03:22.000 --> 0:03:24.079 Four and a half percent in Marcus and like a, 0:03:24.480 --> 0:03:24.920 you're right. 0:03:24.840 --> 0:03:27.560 And like yeah, just can't cash? Yeah, what's wrong with that? 0:03:28.240 --> 0:03:30.840 Well? Five is more than four. And my parents have 0:03:30.840 --> 0:03:32.919 no need for the money right now, Okay, all right, 0:03:33.200 --> 0:03:34.880 And I mean they're not trying to trade for the 0:03:35.640 --> 0:03:37.920 you know, to get you know, to actually make money 0:03:37.920 --> 0:03:38.760 on the bond itself. 0:03:38.840 --> 0:03:48.680 So all right, all right, well let's talk. Okay, we 0:03:48.720 --> 0:03:50.520 don't know, no one knows your rates are going. So 0:03:50.680 --> 0:03:53.400 we got an inflation a CPI print this week. You've 0:03:53.400 --> 0:03:56.520 been saying, Neil for a while that inflation we haven't 0:03:56.520 --> 0:03:58.560 defeated it yet, that either we have a recession and 0:03:58.640 --> 0:04:00.280 we don't have a recession that's going to pick backup. 0:04:00.680 --> 0:04:02.360 Is this the first sign of it? Did we sort 0:04:02.360 --> 0:04:04.440 of like bottom out on the inflation front? 0:04:04.920 --> 0:04:08.360 I mean, some of the progress is definitely stalling. I mean, 0:04:08.400 --> 0:04:10.680 for me, it's just if you don't believe that there's 0:04:10.720 --> 0:04:13.520 a recession it's hard to believe that inflation has been resolved. 0:04:13.560 --> 0:04:15.440 To me, it's really that that's sort of how I 0:04:15.480 --> 0:04:19.000 think about it. I know others may disagree, but I 0:04:19.040 --> 0:04:21.400 think demand is still pretty strong and you saw that 0:04:21.440 --> 0:04:23.080 with retail sales today also. 0:04:23.040 --> 0:04:25.800 So wait, isn't the consensus on CPI that it was 0:04:25.880 --> 0:04:29.120 mostly gas prices because I remember when gas started going 0:04:29.200 --> 0:04:31.240 up in I guess it would have been July or 0:04:31.279 --> 0:04:34.520 early August. O Mayor Sharif, who's been on this podcast 0:04:34.520 --> 0:04:37.760 a number of times now, basically said yeah, and he said, like, 0:04:37.839 --> 0:04:41.120 this is gonna mean CPI coming in in August at 0:04:41.160 --> 0:04:44.000 like three point five or three point six percent ended 0:04:44.080 --> 0:04:46.479 up at three point seven year on year, But it 0:04:46.520 --> 0:04:47.919 seems like it was someonet expected. 0:04:49.720 --> 0:04:52.800 Well. I mean, I think for me, what's interesting about 0:04:52.839 --> 0:04:56.599 this is that when you look at core goods, right, 0:04:56.720 --> 0:05:00.000 like things you know, like furniture, and that's actually gone 0:05:00.000 --> 0:05:03.720 going back up, excluding cars, right. So I think that's 0:05:03.760 --> 0:05:06.240 interesting because to me, that was sort of the linchpin 0:05:06.360 --> 0:05:09.200 for a lot of the weaker inflation story. That kind 0:05:09.240 --> 0:05:12.160 of people hadn't going into the year and that's going away. 0:05:12.160 --> 0:05:13.560 And I think part of the reason why it's going 0:05:13.600 --> 0:05:17.760 away is that supplier delivery times are no longer. I 0:05:17.760 --> 0:05:20.160 mean it's taking longer for factories to move product out 0:05:20.200 --> 0:05:22.320 the door. So the supply chain issue isn't improving. And 0:05:22.400 --> 0:05:27.040 if that's the case, then I think one area of 0:05:27.080 --> 0:05:29.520 disinflationary pressure is going away. And so I think that 0:05:29.560 --> 0:05:32.000 there's probably some upside to core goods prices between now 0:05:32.040 --> 0:05:34.040 and the end of the year. There's also some upside 0:05:34.040 --> 0:05:36.159 to food prices. 0:05:36.200 --> 0:05:38.800 I think, Joe, I have a pet theory that a 0:05:38.839 --> 0:05:41.360 lot of the strong consumption is just down to like 0:05:41.560 --> 0:05:44.839 economic nihilism where people are just like, screw it, I 0:05:44.839 --> 0:05:46.560 don't need to save any more. That's you're just going 0:05:46.640 --> 0:05:49.000 to spend everything, go out, go to restaurants. 0:05:49.400 --> 0:05:51.920 Right, there's really if that's true, that's really bad because 0:05:52.000 --> 0:05:56.800 isn't that like the sort of like classic precursor to hyperinflation, 0:05:56.920 --> 0:05:58.440 like people just go out and the like, oh, I 0:05:58.480 --> 0:06:00.280 have a little cash, so I can like go out 0:06:00.279 --> 0:06:02.440 and buy TVs like I seem to recall like reading 0:06:02.440 --> 0:06:05.960 stories about that before, like episodes of like Russian hyperinflation. 0:06:06.040 --> 0:06:08.080 I hope you're wrong. I hope that's not what all 0:06:08.120 --> 0:06:08.560 this concern. 0:06:08.720 --> 0:06:10.960 I think there's a natural limit to how many TVs 0:06:11.000 --> 0:06:12.840 you can actually go out and buy. But I do 0:06:12.920 --> 0:06:16.200 think the like psychological impulse behind a lot of the 0:06:16.240 --> 0:06:20.359 spending hasn't necessarily been appreciated by a lot of economists. 0:06:20.400 --> 0:06:22.400 Let's put it that way, Neil, didn't you write something 0:06:22.400 --> 0:06:23.640 about savings. 0:06:24.000 --> 0:06:25.920 Yeah, I mean I think that to me, there's nothing 0:06:25.920 --> 0:06:28.200 inherently wrong with the savings right where it is. I mean, 0:06:28.240 --> 0:06:30.600 it's certainly lower than it was a few months ago. 0:06:30.800 --> 0:06:33.080 But if you think about, you know, the period from 0:06:33.240 --> 0:06:36.679 let's say the early nineteen eighties through two thousand and seven, 0:06:36.760 --> 0:06:40.600 I mean, there was a fairly notable inverse relationship between 0:06:40.839 --> 0:06:43.360 your assets relative to your income and savings. 0:06:43.440 --> 0:06:46.599 Right, So when assets go up in value, the savings grow. 0:06:46.520 --> 0:06:49.440 Downtown, which makes sense, right, because people are looking at 0:06:49.960 --> 0:06:52.400 rising wealth as sort of a low risk form of 0:06:52.800 --> 0:06:56.000 income and so you know, you feel better about things, 0:06:56.040 --> 0:06:59.239 you don't need to save as much. The financial crisis 0:06:59.279 --> 0:07:01.640 period kind of up ended that, right, So we went 0:07:01.640 --> 0:07:04.560 through a you know, nearly decade long period where the 0:07:04.600 --> 0:07:07.200 savings rate rose. By the time we got I mean, 0:07:07.240 --> 0:07:09.479 even before the pandemic, I think the savings rate was 0:07:09.480 --> 0:07:14.480 like eight or nine percent, right, and so there's no 0:07:14.560 --> 0:07:17.240 reason for that to happen again. And I think that's 0:07:17.280 --> 0:07:19.160 something that's not well appreciated by people. 0:07:19.200 --> 0:07:21.120 And again talk about this little more so. All right, 0:07:21.160 --> 0:07:22.840 I just pulled up the chart on the terminal, and 0:07:23.240 --> 0:07:24.720 I hadn't really looked at this chart in law. 0:07:24.840 --> 0:07:27.080 So we had been wait, what's the tickers? 0:07:27.120 --> 0:07:31.400 How PID sps? It was personal disas at least the 0:07:31.440 --> 0:07:34.440 savings rate is a percentage of disposable income. That's the start, 0:07:34.520 --> 0:07:39.440 that's measure looking. So I hadn't realized January twenty twenty 0:07:39.480 --> 0:07:41.680 we were at nine point one on that Today were 0:07:41.720 --> 0:07:43.520 at three point five percent. So we go back. What 0:07:43.520 --> 0:07:45.240 does that tell you that nine point one that we 0:07:45.280 --> 0:07:45.880 had pre. 0:07:45.880 --> 0:07:50.280 COVID there was sort of a maybe more caution, okay, 0:07:50.440 --> 0:07:54.440 maybe balance sheet repair. It could have just also been fluky. 0:07:54.600 --> 0:07:56.080 You know, we had maybe a couple of months a 0:07:56.080 --> 0:08:00.120 week of consumer spending and we you know, before of 0:08:00.120 --> 0:08:02.560 the pandemic. But at any rate, I mean to me, 0:08:02.640 --> 0:08:04.240 I think the bigger stories that the trend and the 0:08:04.240 --> 0:08:06.520 savings right over that entire period was a function of 0:08:06.840 --> 0:08:08.640 continued household balance sheet adjustment. 0:08:08.720 --> 0:08:11.920 All right, So right now, going back to the present, tent. 0:08:12.120 --> 0:08:15.280 What's your what's the FED going to do the next 0:08:15.280 --> 0:08:17.360 few meetings? Pause and pause in September? 0:08:17.440 --> 0:08:20.600 Right, Yeah, I don't think they're going to do anything 0:08:20.760 --> 0:08:23.120 at least until December if they do anything. 0:08:23.440 --> 0:08:25.960 So nothing in November and then maybe a hike in 0:08:26.000 --> 0:08:26.760 de maybe. 0:08:27.200 --> 0:08:29.600 Yeah. I mean, I think part of me feels now 0:08:29.720 --> 0:08:36.600 increasingly that they'll just keep pushing back on cuts because well, 0:08:36.679 --> 0:08:38.400 I mean that that could be considered like a de 0:08:38.480 --> 0:08:41.240 facto tightening and if the market expects cuts next year 0:08:41.280 --> 0:08:44.120 and I think is still right, well, pushing back the cuts, 0:08:44.480 --> 0:08:46.600 it's basically pushing back against the other they're cutting, So 0:08:46.600 --> 0:08:49.920 they just keep an extended on hold policy, like you know. 0:08:50.440 --> 0:08:51.840 The thing is at this point, I feel like if 0:08:51.880 --> 0:08:53.480 they're I mean, because we're talking right, and now you 0:08:53.520 --> 0:08:56.160 saw the journal article like fine tuning, they're using these 0:08:56.000 --> 0:08:58.240 these words, right, so if you're going to hike, like 0:08:58.240 --> 0:09:01.080 what's the point of hiking once more? Right, So, if 0:09:01.080 --> 0:09:02.880 you're gonna hike, it has to be at least a 0:09:02.920 --> 0:09:05.560 few you know, like I mean, I mean, it's very 0:09:05.640 --> 0:09:08.480 rare to see the FED do like an abort like yeah, 0:09:08.640 --> 0:09:11.240 mission right, I mean, maybe in the mid nineties that happened, right, 0:09:11.240 --> 0:09:12.680 They hiked and then they kind of just left it 0:09:12.679 --> 0:09:14.600 there and they never did anything again, and then the 0:09:14.600 --> 0:09:17.400 next move was cuts it after the lt TCM thing. 0:09:17.800 --> 0:09:20.400 So that's sort of how I'm thinking about it. But 0:09:20.440 --> 0:09:26.160 I think the risk to them doing this is it's 0:09:26.200 --> 0:09:29.240 happening at potentially a time of cyclical momentum in the economy, 0:09:29.320 --> 0:09:31.840 and that to me is what kind of kind of 0:09:31.880 --> 0:09:32.440 concerns me. 0:09:32.600 --> 0:09:35.720 You mentioned that there are these maybe that the momentum 0:09:35.760 --> 0:09:39.160 on disinflation has stalled. So like big picture, and look, 0:09:39.160 --> 0:09:41.680 there's always gonna be month to month noise, but big picture, 0:09:41.720 --> 0:09:43.880 if you just sort of zoom out, it still looks 0:09:43.920 --> 0:09:50.360 like various measures CPI, PPI, PCE, quit rates, things like that. 0:09:50.400 --> 0:09:53.080 It's still basically seems like lines are trending down. 0:09:54.160 --> 0:09:58.600 But what are you doing technical analysis? Economic? I mean, 0:09:58.640 --> 0:09:59.080 it's just. 0:09:59.440 --> 0:10:02.200 I'm just saying, like, no, no, what I'm more saying, 0:10:02.200 --> 0:10:05.120 it's like it's just like zoom ountain look big picture, 0:10:05.320 --> 0:10:08.560 Like yes, like I get things month to month that 0:10:08.600 --> 0:10:10.760 we could say like oh like stripbout gasoline, et cetera, 0:10:10.840 --> 0:10:14.680 it still looks like most lines, especially you know, I know, 0:10:14.840 --> 0:10:18.320 like one of the theses of like persistent inflation is 0:10:18.360 --> 0:10:20.360 going to be the wage growth and the labor market's 0:10:20.360 --> 0:10:22.520 still robust. But even that's like, don't you. 0:10:22.480 --> 0:10:24.840 Find it amazing that the folks that were like that 0:10:24.880 --> 0:10:26.760 are now talking about the quits rate as this sort 0:10:26.800 --> 0:10:29.960 of magic like and at wage inflation indicator. During the 0:10:29.960 --> 0:10:32.080 twenty tens, they were the ones that were propping up 0:10:32.120 --> 0:10:34.160 the prime age employment rate as the as the best 0:10:34.200 --> 0:10:36.959 measure for wages, and that number is actually still going 0:10:37.040 --> 0:10:39.760 up because the labor markets are in fact still tightening. 0:10:39.800 --> 0:10:42.320 I've always been a quits rate fan anyway, No, I 0:10:42.320 --> 0:10:43.720 always have been. 0:10:43.280 --> 0:10:46.559 But but I what if the quits rates going down 0:10:46.800 --> 0:10:49.080 because people are getting paid more in the jobs that 0:10:49.120 --> 0:10:52.600 they have. Is it more or less likely that someone 0:10:53.280 --> 0:10:55.560 at at UPS is going to quit their job after 0:10:55.600 --> 0:10:58.040 striking a deal, after the union struck a deal with 0:10:58.240 --> 0:11:01.040 the company? Is more Is it going to be more 0:11:01.160 --> 0:11:04.440 or less likely that for GM, you know, the folks 0:11:04.520 --> 0:11:06.640 that make jeep vehicles, Are they going to be more 0:11:06.720 --> 0:11:08.560 or less likely to quit their job and in the 0:11:08.600 --> 0:11:11.679 next couple of in the next couple of months. So 0:11:11.760 --> 0:11:14.040 I wonder a little bit about that. I mean so, 0:11:15.240 --> 0:11:17.880 but to me, isn't it it's a confidence game, right, 0:11:17.920 --> 0:11:21.480 I mean ultimately, and I think that's how policy works too. 0:11:21.520 --> 0:11:23.120 I mean, this is something that Waller was talking about, 0:11:23.200 --> 0:11:27.559 is expectations. Right, Businesses, I hate to tell you, no 0:11:27.640 --> 0:11:30.319 longer think there's going to be a recession. And if 0:11:30.360 --> 0:11:33.640 they think that, then they're going to be more likely 0:11:33.679 --> 0:11:36.240 to post job openings, They're going to be more likely 0:11:36.400 --> 0:11:40.959 to higher so hiring rates and opening rates probably pick up, 0:11:41.720 --> 0:11:46.040 and that probably means stronger employment. And so yes, I 0:11:46.120 --> 0:11:48.480 agree with you that that there has been improvement in 0:11:48.520 --> 0:11:51.280 a lot of these metrics that you're pointing to, right, 0:11:51.360 --> 0:11:54.640 I mean the quids. But if you had to ask me, 0:11:54.880 --> 0:11:57.520 are these measures going to be higher or lower than 0:11:57.559 --> 0:12:00.280 they are right now? I would say higher? And to 0:12:00.320 --> 0:12:03.360 me that's I mean, we'll keep the FED awake. I think. 0:12:03.520 --> 0:12:06.120 Well, the other thing that's happening is, you know, you 0:12:06.200 --> 0:12:10.559 mentioned the UAW strike and we are getting like close 0:12:10.640 --> 0:12:14.000 to that. It's sort of like triggering and I guess 0:12:14.240 --> 0:12:17.240 I guess from a production perspective, it feels like we 0:12:17.280 --> 0:12:21.400 could get into another situation where supply chains start to 0:12:21.440 --> 0:12:25.120 be affected, which could also maybe start to impact inflation. 0:12:25.800 --> 0:12:28.160 It's a negative supply shock. Right. I mean that's one 0:12:28.200 --> 0:12:31.120 of the way. I mean, I don't think we're anything 0:12:31.120 --> 0:12:33.520 close to the seventies obviously, but one of the ways 0:12:33.520 --> 0:12:36.520 that happened was basically you had these sort of persistent 0:12:36.600 --> 0:12:39.080 supply shocks you had. I mean, it was just bad luck, 0:12:39.320 --> 0:13:07.160 I mean, on top of bad policy. 0:12:54.160 --> 0:12:57.679 Neil, I posted in our discord, I think you've hung 0:12:57.720 --> 0:12:59.080 out in there a couple of depths, right, I posted 0:12:59.080 --> 0:13:02.160 in their discord. Have any questions for Neil? And from 0:13:02.240 --> 0:13:07.800 JG fifty three? Does rising long bond yields? Like how 0:13:07.840 --> 0:13:10.040 far can that go? And at what point does that 0:13:10.080 --> 0:13:12.840 like really start to impair acid valuations in another area? 0:13:12.920 --> 0:13:15.280 I think we're pretty I mean four and three quarters 0:13:15.280 --> 0:13:17.800 were sort of hitting the ceiling, and I think the 0:13:17.800 --> 0:13:18.640 market's kind. 0:13:18.440 --> 0:13:20.600 Of figuring it out, but I think we're close. Our 0:13:20.640 --> 0:13:23.040 market strategist Jeff to Graph, you know, he runs this 0:13:23.080 --> 0:13:25.480 thing called a yield impact model, but basically he looks 0:13:25.480 --> 0:13:28.760 at the probability that a certain level of interest rate 0:13:28.800 --> 0:13:31.360 starts to negatively affect the stock market, and you know, 0:13:31.880 --> 0:13:34.199 it gets worse the higher, you know, after four and 0:13:34.200 --> 0:13:37.280 a half percent, So we're right there. To me, when 0:13:37.320 --> 0:13:40.240 I think about equities this year. Right, the easy money 0:13:40.240 --> 0:13:42.960 I think has largely been made because the big upturn 0:13:43.000 --> 0:13:46.920 for stocks was basically pricing out the recession probability, right 0:13:46.960 --> 0:13:49.520 and now. Right, So if you think about the market 0:13:49.600 --> 0:13:52.040 as kind of or the economy as sort of like 0:13:52.080 --> 0:13:55.400 a four potential scenarios, right, you can have your your 0:13:55.400 --> 0:13:57.839 deflationary bus which is sort of the classic recession. You 0:13:57.880 --> 0:13:59.920 can have stackflation, you can have soft lending, you can 0:14:00.120 --> 0:14:03.000 an inflationary boom. Right. What you have the most or 0:14:03.040 --> 0:14:04.719 what I have the most conviction on, is that we 0:14:04.760 --> 0:14:07.200 won't have recession. Right. So now I think the markets 0:14:07.240 --> 0:14:09.240 have kind of come to that view, and so you 0:14:09.280 --> 0:14:12.400 have to if you're thinking about probabilities. Okay, so then 0:14:13.000 --> 0:14:15.880 my odds of a negative you know, growth scenario have 0:14:15.960 --> 0:14:18.839 come down. So where do you allocate this now? I mean, 0:14:18.920 --> 0:14:21.560 is it stats off landing? Is it inflationary boom? And 0:14:21.600 --> 0:14:23.360 I think the markets are kind of gyrating back and 0:14:23.400 --> 0:14:24.800 forth between those two scenarios. 0:14:24.920 --> 0:14:26.160 Where do you land on that? 0:14:27.120 --> 0:14:28.560 I think we're in an inflationary boom? 0:14:29.760 --> 0:14:33.240 Tracy, Can I say, I you know what, I think 0:14:33.240 --> 0:14:36.280 people should pay a little more attention to than they are. No, No, 0:14:36.280 --> 0:14:40.520 it's not a controversial one. Actually, the unemployment rate, it 0:14:40.560 --> 0:14:42.960 ticked up to three three point eight percent last month, 0:14:43.080 --> 0:14:46.360 and a lot of people sort of dismissed it based on, oh, 0:14:46.360 --> 0:14:48.520 it had to do with more people in the labor force. 0:14:49.080 --> 0:14:51.200 But on the other hand, like it is the highest 0:14:51.400 --> 0:14:54.520 now since February twenty twenty two, so it's like the 0:14:54.600 --> 0:14:57.560 highest in over a year and a half. Like this way, 0:14:57.560 --> 0:14:59.680 I go back to some of these labor market indicators, 0:14:59.720 --> 0:15:02.360 and they're not terrible clearly, and we're still adding jobs 0:15:02.400 --> 0:15:05.560 and initial clean but like you know, Neil said job 0:15:05.600 --> 0:15:09.720 openings down, quit rates, I think maybe I said it down. 0:15:10.200 --> 0:15:12.600 Unemployment rate up to three point eight percent, Like it 0:15:12.640 --> 0:15:13.800 seems like something is happening. 0:15:14.120 --> 0:15:16.840 Sure, But to Neil's point, if we have entered a 0:15:16.880 --> 0:15:20.120 period where it seems like recession is firmly off the table, 0:15:20.160 --> 0:15:22.800 then it feels like that gets reversed pretty quick, especially 0:15:22.800 --> 0:15:25.760 given that a lot of companies were already kind of 0:15:25.840 --> 0:15:29.880 focused on being caught flat footed in an expansionary scenario. 0:15:29.920 --> 0:15:32.240 We've talked about this, right, Yeah, Like a lot of 0:15:32.280 --> 0:15:35.960 the survey data they're talking about like, well, we want 0:15:36.000 --> 0:15:38.280 to hold onto people or we want to hire additional 0:15:38.280 --> 0:15:42.520 people because we're worried about after the recession, yeah, and 0:15:42.680 --> 0:15:46.040 expanding our capabilities, and then the recession never materialized, and 0:15:46.120 --> 0:15:48.880 so it feels like there's more upside than downside of 0:15:48.920 --> 0:15:49.400 the Yeah. 0:15:49.400 --> 0:15:51.680 I love reading the comments like on like the Dallas 0:15:51.680 --> 0:15:54.120 FED manufacturing report or some of the ism, and that 0:15:54.200 --> 0:15:56.400 has been a thing that pops up, which is that basically, 0:15:57.120 --> 0:16:00.160 either managers don't believe that a recession is coming, or 0:16:00.760 --> 0:16:03.280 they see a recession as an opportunity to gain market 0:16:03.280 --> 0:16:06.120 share from their competitors or gain employees from their competitors, 0:16:06.240 --> 0:16:08.520 in which case, if everyone has that mentality, it's hard 0:16:08.560 --> 0:16:09.640 to see how you get a recession. 0:16:10.000 --> 0:16:12.160 Well, I want to ask Neil about something else you've 0:16:12.160 --> 0:16:15.080 been writing about, which is the potential for a FED 0:16:15.200 --> 0:16:19.080 policy error. And I've really only seen two people talking 0:16:19.120 --> 0:16:22.600 about this, and you're coming at it from polar opposite side. 0:16:22.640 --> 0:16:25.960 So I've seen Victor Schwetz talk about the Fed's gonna 0:16:26.000 --> 0:16:28.240 hike into a recession and there's going to be an 0:16:28.280 --> 0:16:31.160 error in that form. But you're talking about they're gonna 0:16:31.560 --> 0:16:35.840 basically pause while inflation is still booming, and that's going 0:16:35.920 --> 0:16:36.560 to be an error. 0:16:38.160 --> 0:16:40.680 Yeah, I mean where's the evidence that they're hiking into 0:16:40.680 --> 0:16:43.960 a slowdown? They're pausing right now. I mean, no one's 0:16:43.960 --> 0:16:45.760 talking about them. I mean, so that's I mean, it's 0:16:45.760 --> 0:16:47.800 just wrong. It's just that is not correct. I mean 0:16:47.800 --> 0:16:50.480 we've had some version of that argument for so many quarters. 0:16:50.520 --> 0:16:52.360 Now I feel like, oh, they're hiking into a slowdown. 0:16:52.360 --> 0:16:54.640 I mean that that was something that people are saying 0:16:56.200 --> 0:16:58.920 late in twenty twenty two, right, I mean, I think 0:16:58.960 --> 0:17:03.120 I believe so. To me, we're making very I mean, 0:17:03.600 --> 0:17:05.520 job growth is slong. But I mean if you think 0:17:05.560 --> 0:17:07.840 about like potential, what is potential, what is break you? 0:17:07.880 --> 0:17:10.120 And it's around like what like one hundred thousand maybe 0:17:10.160 --> 0:17:12.879 a little bit more, and we're still still well above that. 0:17:12.920 --> 0:17:15.359 I mean, household employment is still reasonably strong. I mean 0:17:15.440 --> 0:17:17.320 that's been running like over two hundred thousand in the 0:17:17.400 --> 0:17:20.720 last few months. I saw something in the journal where 0:17:20.800 --> 0:17:22.879 one commentator was saying, oh, you know, this is like 0:17:22.920 --> 0:17:25.399 the classic FED where they're putting too much weight on 0:17:25.480 --> 0:17:28.679 lagging indicators, and now they're setting policy to lagging indicators 0:17:28.720 --> 0:17:34.159 like inflation. But they are paying a lot of attention 0:17:34.200 --> 0:17:36.560 to inflation and a lot of attention to the labor market. 0:17:36.560 --> 0:17:39.800 But that's exactly why that's wrong, is because they are 0:17:39.880 --> 0:17:42.480 lagging indicators. Yeah they have slow, that doesn't mean they 0:17:42.520 --> 0:17:43.040 will slow. 0:17:43.359 --> 0:17:47.879 Yeah. So for listeners, for listeners that don't know. One 0:17:47.920 --> 0:17:50.280 of the great things about following Neil and being on 0:17:50.280 --> 0:17:54.840 his distribution list is that he's not afraid to criticize 0:17:54.920 --> 0:17:57.359 the people who have been calling for a recession for 0:17:57.440 --> 0:17:59.159 like basically the past twelve months. 0:17:59.280 --> 0:18:01.159 Who's your Jeff good Luck? Yeah? 0:18:01.200 --> 0:18:02.359 Do you want to take a shot. 0:18:02.119 --> 0:18:06.199 At I don't like to name names with my peers 0:18:06.200 --> 0:18:08.879 on Wall Street. I always if I've worked them, I 0:18:08.920 --> 0:18:12.200 always try to prop them up or very speak highly 0:18:12.240 --> 0:18:15.280 of them. But I don't need to say anything. I mean, 0:18:15.560 --> 0:18:18.560 everyone knows who they are. I mean, they come on 0:18:18.600 --> 0:18:21.000 your program, they come on this chat, they come on 0:18:21.000 --> 0:18:25.680 Bloomberg TV, and they talk very confidently about recession. And 0:18:25.720 --> 0:18:27.240 you know, and I've talked to Joe about this many 0:18:27.280 --> 0:18:31.560 times offline, but there is a cottage industry that is 0:18:31.720 --> 0:18:34.760 just doom and gloom, right. I mean, think about the 0:18:34.800 --> 0:18:38.080 people that were like talking about the weekly Red Book 0:18:38.119 --> 0:18:41.480 sales index over the last like six months, because it's 0:18:41.480 --> 0:18:44.600 been going down and down and down, and now it's 0:18:44.600 --> 0:18:46.720