1 00:00:00,120 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,920 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:38,000 Speaker 2: Terminal and the Bloomberg Business App. Jake Piloski of TPW 10 00:00:38,040 --> 00:00:41,280 Speaker 2: with Stock's coming off their thirty ninth record high this year. 11 00:00:41,440 --> 00:00:43,720 Speaker 2: We'll catch up with Punam Goel of Bloomberg Intelligence as 12 00:00:43,840 --> 00:00:47,000 Speaker 2: Nike is attempted to stage a comeback, and Matt Hornback 13 00:00:47,000 --> 00:00:50,000 Speaker 2: of Morgan Stanley calling for a string of twenty five 14 00:00:50,080 --> 00:00:52,600 Speaker 2: basis point raid cuts. We begin with our top story, 15 00:00:52,640 --> 00:00:55,120 Speaker 2: Stock's coming off their thirty ninth all time high so 16 00:00:55,200 --> 00:00:58,320 Speaker 2: far this year. Jake Peloski of TPW writing, the Fed's 17 00:00:58,360 --> 00:01:01,720 Speaker 2: move is likely divorce. Even the iheard recession easters to 18 00:01:01,760 --> 00:01:03,920 Speaker 2: give up on that point of view, there is no 19 00:01:03,960 --> 00:01:07,360 Speaker 2: sign of recession. Anywhere. There is no major imbalance in 20 00:01:07,440 --> 00:01:11,680 Speaker 2: any part of the US global economy. Jay joins us 21 00:01:11,720 --> 00:01:14,080 Speaker 2: now for more Welcome to the program. I'm going to 22 00:01:14,080 --> 00:01:16,039 Speaker 2: repeat that line again. There is no sign of a 23 00:01:16,120 --> 00:01:21,720 Speaker 2: major imbalance in any part of the US global economy. Jay, China. 24 00:01:22,040 --> 00:01:24,959 Speaker 2: Discuss what's happening in the world. Second launch economy. 25 00:01:26,520 --> 00:01:29,520 Speaker 3: John, It's growing at almost five percent, which is more 26 00:01:29,600 --> 00:01:33,280 Speaker 3: than twice as much as the number one economy in 27 00:01:33,280 --> 00:01:35,440 Speaker 3: the world of the United States. And for all the 28 00:01:35,480 --> 00:01:38,920 Speaker 3: doom and gloom and China look, as an investor, the 29 00:01:39,040 --> 00:01:42,199 Speaker 3: question is what's in the price? And when you look 30 00:01:42,240 --> 00:01:46,600 Speaker 3: at China performs equity. 31 00:01:46,200 --> 00:01:47,760 Speaker 4: Wise, if you look at the valuation. 32 00:01:49,080 --> 00:01:52,080 Speaker 3: My point is one example is Ali Baba right, the 33 00:01:52,120 --> 00:01:56,720 Speaker 3: big tech SoC We're believers in a two tech stack thesis. 34 00:01:56,880 --> 00:02:00,840 Speaker 3: China walling off its stack, US walling off tech and 35 00:02:01,000 --> 00:02:03,720 Speaker 3: Ali Baba just announced that it now has the world's 36 00:02:03,800 --> 00:02:08,440 Speaker 3: leading large language model, open source large language model. 37 00:02:09,080 --> 00:02:12,040 Speaker 4: It's buying backstock at record levels. 38 00:02:12,520 --> 00:02:16,440 Speaker 3: It trades at a fraction of the valuation of its 39 00:02:16,560 --> 00:02:19,400 Speaker 3: US prs, and so to us, it's all in the price. 40 00:02:19,600 --> 00:02:22,720 Speaker 3: And just note that k Web was up four and 41 00:02:22,760 --> 00:02:25,280 Speaker 3: a half percent yesterday it broke back above its two 42 00:02:25,360 --> 00:02:28,960 Speaker 3: hundred day moving average, and it's emblematic of what we 43 00:02:29,080 --> 00:02:32,120 Speaker 3: want to do right here. You talked earlier in the 44 00:02:32,200 --> 00:02:34,359 Speaker 3: lead up that I don't really care about a lot 45 00:02:34,360 --> 00:02:36,840 Speaker 3: of what you and Lisa have been discussing. And you 46 00:02:36,880 --> 00:02:39,919 Speaker 3: know that's not quite true, but it's truly mostly. 47 00:02:40,440 --> 00:02:42,040 Speaker 2: Do you want to come back on this show again? 48 00:02:45,760 --> 00:02:48,480 Speaker 3: And I would just make you two points before we 49 00:02:48,600 --> 00:02:52,480 Speaker 3: talk about the investment opportunities that we see at TBW 50 00:02:52,600 --> 00:02:54,240 Speaker 3: Advisory Number one. 51 00:02:54,320 --> 00:02:57,200 Speaker 2: Jay, it's not a presentation, just a step at a time. 52 00:02:57,280 --> 00:02:58,880 Speaker 2: Let's just start with your views on China and then 53 00:02:58,919 --> 00:03:01,080 Speaker 2: Brama wants a follow up, Well on. 54 00:03:01,160 --> 00:03:05,280 Speaker 5: A second, Jay, Actually, when it comes to China, I 55 00:03:05,400 --> 00:03:07,840 Speaker 5: just have one word or one company to throw out 56 00:03:07,840 --> 00:03:10,480 Speaker 5: at you. Mercedes Benz, how do you understand that with 57 00:03:10,520 --> 00:03:14,800 Speaker 5: all of this optimism that you just expressed, Well, I. 58 00:03:14,800 --> 00:03:17,920 Speaker 3: Express optimism about the tech stack and Ali Baba, I 59 00:03:17,919 --> 00:03:21,120 Speaker 3: didn't say anything about auto companies. Look, we're big, but 60 00:03:21,280 --> 00:03:24,600 Speaker 3: you know we have a TPW twenty model portfolio which 61 00:03:24,680 --> 00:03:26,560 Speaker 3: is focused on future. 62 00:03:26,200 --> 00:03:27,639 Speaker 4: Innovation and climate. 63 00:03:27,960 --> 00:03:32,079 Speaker 3: So we're very focused on the China's leadership in Queen energy, 64 00:03:32,160 --> 00:03:36,520 Speaker 3: renewables and evs and the simple fact is that China 65 00:03:36,680 --> 00:03:40,720 Speaker 3: is eating the lunch of pretty much everyone but Tesla 66 00:03:41,320 --> 00:03:45,760 Speaker 3: in terms of EV production activities, sales, innovation, et cetera. 67 00:03:46,160 --> 00:03:49,840 Speaker 3: China is the world's innovator in queen energy, and the 68 00:03:49,880 --> 00:03:54,360 Speaker 3: European auto companies are just watching their market share in China, 69 00:03:54,400 --> 00:03:57,520 Speaker 3: which is a critical market for them, just simply disappear. 70 00:03:57,560 --> 00:04:00,560 Speaker 3: And it's not even Mercedes Benz, it's Volkswagen, which is 71 00:04:00,600 --> 00:04:04,800 Speaker 3: out talking about laying off thirty thousand employees in Germany 72 00:04:05,160 --> 00:04:08,160 Speaker 3: for the first time in its ninety year history. There's 73 00:04:08,200 --> 00:04:11,560 Speaker 3: a reason why Mario Dragi came out last week with 74 00:04:11,640 --> 00:04:15,320 Speaker 3: the European Competitiveness Report instead that Europe needs to be 75 00:04:15,360 --> 00:04:19,120 Speaker 3: more like what the US has been doing, public private partnership, 76 00:04:19,480 --> 00:04:25,400 Speaker 3: venture capital, innovation at scale, and the automakers are certainly 77 00:04:25,560 --> 00:04:29,159 Speaker 3: emblematic of that concern for Europe. 78 00:04:29,440 --> 00:04:31,800 Speaker 2: So Jake, for people seduced by your view of the world, 79 00:04:31,839 --> 00:04:33,720 Speaker 2: I know it's a multi year view and a way 80 00:04:33,720 --> 00:04:36,880 Speaker 2: of expressing it is the commodity market iron ore off 81 00:04:36,880 --> 00:04:38,919 Speaker 2: the highs of the year, base metals copper off the 82 00:04:38,960 --> 00:04:40,760 Speaker 2: highs for the year. What kind of moves you're looking 83 00:04:40,800 --> 00:04:41,520 Speaker 2: for in commodities. 84 00:04:41,600 --> 00:04:45,280 Speaker 3: Ja, Yeah, John, you know, surprise hit the nail on 85 00:04:45,320 --> 00:04:47,279 Speaker 3: the head. That's where we want to focus right now. 86 00:04:47,480 --> 00:04:49,640 Speaker 3: I wanted to mention the two strengths. One is in 87 00:04:49,680 --> 00:04:53,040 Speaker 3: the global economy absorbing one of the most aggressive rate 88 00:04:53,120 --> 00:04:58,400 Speaker 3: heights cycles in modern history without a recession. That's something 89 00:04:58,400 --> 00:05:01,120 Speaker 3: we need to pay attention to. And likewise, in the 90 00:05:01,160 --> 00:05:04,880 Speaker 3: equity markets, particularly in the US, new all time highs, 91 00:05:04,880 --> 00:05:08,080 Speaker 3: as you noted it, thirty nine all time highs this year, 92 00:05:08,480 --> 00:05:13,000 Speaker 3: while tech, the leadership sector in the lead dog Na video, 93 00:05:13,520 --> 00:05:15,560 Speaker 3: is down twenty percent from its high. 94 00:05:16,320 --> 00:05:17,640 Speaker 4: We have to respect the. 95 00:05:17,680 --> 00:05:21,480 Speaker 3: Fact that trends are powerful and they are moving in 96 00:05:21,520 --> 00:05:24,760 Speaker 3: the right direction, both in the global economy and in 97 00:05:24,880 --> 00:05:26,320 Speaker 3: the risk asset markets. 98 00:05:26,480 --> 00:05:28,040 Speaker 4: So what do we want to do here? How do 99 00:05:28,080 --> 00:05:28,919 Speaker 4: we want to invest? 100 00:05:29,560 --> 00:05:32,080 Speaker 3: We want to sell the things that have done well 101 00:05:32,120 --> 00:05:34,279 Speaker 3: on the idea that there's going to be a recession, 102 00:05:34,720 --> 00:05:37,720 Speaker 3: because there's not. And so we don't like fixed income 103 00:05:38,200 --> 00:05:40,680 Speaker 3: Lisa talked about, you know, three point seven percent on 104 00:05:40,760 --> 00:05:44,479 Speaker 3: the tenure unattractive if the neutral rate is three percent. 105 00:05:45,000 --> 00:05:48,560 Speaker 3: We want to focus on a long the context of 106 00:05:48,600 --> 00:05:54,720 Speaker 3: a long cycle, sustainable soft landing equals sustainable equals our 107 00:05:54,760 --> 00:05:58,239 Speaker 3: global macro blue sky outlook, which we've talked about twenty 108 00:05:58,279 --> 00:06:01,599 Speaker 3: twenty three to twenty twenty seven. We're now focusing on that, 109 00:06:02,480 --> 00:06:06,280 Speaker 3: not the next quarter, not the next six months, the 110 00:06:06,320 --> 00:06:09,560 Speaker 3: next several years. We hit We believe we're in a setup, 111 00:06:09,880 --> 00:06:11,880 Speaker 3: and their commodities look really. 112 00:06:11,680 --> 00:06:12,520 Speaker 4: Really attractive. 113 00:06:12,880 --> 00:06:16,160 Speaker 3: Baa pointed out allocations to commodities are at a seven 114 00:06:16,240 --> 00:06:20,400 Speaker 3: year low. Hedge funds are their most short commodities they've 115 00:06:20,400 --> 00:06:23,840 Speaker 3: been in a decade, So there's a real opportunity there. 116 00:06:24,080 --> 00:06:27,440 Speaker 3: There's a real opportunity in buying the laggards, things like 117 00:06:27,600 --> 00:06:31,279 Speaker 3: small cap things like the non US markets, which are 118 00:06:31,600 --> 00:06:34,640 Speaker 3: still ten to fifteen percent off their highs. China is 119 00:06:34,720 --> 00:06:36,680 Speaker 3: forty percent off its I'm not going to say it's 120 00:06:36,720 --> 00:06:37,240 Speaker 3: going to go to a. 121 00:06:37,160 --> 00:06:40,240 Speaker 4: New high, but we want to be buying the laggards. 122 00:06:40,480 --> 00:06:43,200 Speaker 3: If this is going to be a long cycle, a 123 00:06:43,240 --> 00:06:47,559 Speaker 3: sustainable growth path, a fed cutting through twenty twenty six, 124 00:06:48,360 --> 00:06:50,680 Speaker 3: that's what investors need to be paying attention to. We 125 00:06:50,720 --> 00:06:54,840 Speaker 3: wrote a piece several weeks ago, zoom out not in Jay. 126 00:06:55,320 --> 00:06:57,520 Speaker 6: All of this leads me to question what your view 127 00:06:57,600 --> 00:06:59,719 Speaker 6: is and utility. It's one of the most loved areas 128 00:06:59,760 --> 00:07:01,400 Speaker 6: out there, And I know that sounds like a hyper 129 00:07:01,400 --> 00:07:05,880 Speaker 6: specific point with a lot of the calls you're making, 130 00:07:05,920 --> 00:07:08,200 Speaker 6: but it seems like it's a one two punch. They've 131 00:07:08,200 --> 00:07:12,040 Speaker 6: done really well just as a performance, but also they 132 00:07:12,040 --> 00:07:15,040 Speaker 6: would benefit as a bond proxy both of those reasons. 133 00:07:15,080 --> 00:07:17,240 Speaker 6: How much do you think that that very loved trade 134 00:07:17,840 --> 00:07:21,080 Speaker 6: is not going to do so well well? 135 00:07:21,640 --> 00:07:26,280 Speaker 3: Utilities that argue have done well in part because they're 136 00:07:26,400 --> 00:07:29,920 Speaker 3: viewed as a recession hedge, and in part because they 137 00:07:30,040 --> 00:07:32,840 Speaker 3: are viewed as being in one of the hot sectors, 138 00:07:32,880 --> 00:07:37,800 Speaker 3: which is power generation for the data center and data 139 00:07:37,920 --> 00:07:42,040 Speaker 3: centers and AI revolution, which we're big believers, and we 140 00:07:42,080 --> 00:07:46,480 Speaker 3: own an ETF called grid Grid as our way to 141 00:07:46,480 --> 00:07:49,400 Speaker 3: employ this, and grid just broke out and is at 142 00:07:49,720 --> 00:07:50,880 Speaker 3: a new all time high. 143 00:07:51,160 --> 00:07:53,080 Speaker 4: So that's the way we're playing it. 144 00:07:53,200 --> 00:07:55,680 Speaker 3: We don't really like the utilities at this point because 145 00:07:55,680 --> 00:07:59,160 Speaker 3: they've been pretty well exposed, and we don't think rates 146 00:07:59,160 --> 00:08:01,400 Speaker 3: are going lower, and we don't think there's going to 147 00:08:01,400 --> 00:08:04,440 Speaker 3: be a recession rates on the long end, not on 148 00:08:04,480 --> 00:08:08,400 Speaker 3: the short end obviously, So what we like is industrials, right. 149 00:08:08,440 --> 00:08:10,360 Speaker 3: I think one of the surprises in the next couple 150 00:08:10,400 --> 00:08:14,080 Speaker 3: of months is that the ism for manufacturing is going 151 00:08:14,120 --> 00:08:16,440 Speaker 3: to break back up above fifty, and you look at 152 00:08:16,440 --> 00:08:17,080 Speaker 3: what's leaving. 153 00:08:17,160 --> 00:08:19,360 Speaker 4: I made the point about markets at all time. 154 00:08:19,200 --> 00:08:24,840 Speaker 3: Highs, while tech is still well off its all time high, Industrials, financials, 155 00:08:25,240 --> 00:08:29,440 Speaker 3: real estate. There are multiple sectors that are breaking out. 156 00:08:29,920 --> 00:08:31,880 Speaker 3: And one of the things we like, in addition to 157 00:08:32,520 --> 00:08:36,520 Speaker 3: industrials we just added a position is in consumer discretionary. 158 00:08:36,880 --> 00:08:40,320 Speaker 3: You talked about FedEx, Amazon is very attractive. 159 00:08:40,440 --> 00:08:42,320 Speaker 4: Tests is very interesting here. 160 00:08:42,920 --> 00:08:47,600 Speaker 3: They make up forty percent of XLI, the consumer discretionary 161 00:08:47,880 --> 00:08:51,280 Speaker 3: ETF and that's an example of where we're moving to 162 00:08:51,840 --> 00:08:53,240 Speaker 3: as opposed to where we've been. 163 00:08:53,600 --> 00:08:56,160 Speaker 2: This was Jake Pilowski's TED Talk, brought to you by 164 00:08:56,200 --> 00:08:58,720 Speaker 2: tpwj's good to see you as always your good friends. 165 00:08:58,720 --> 00:09:11,480 Speaker 2: You're welcome back, Anton, appreciate it. Let's talk about rates. 166 00:09:11,559 --> 00:09:14,240 Speaker 2: The ray Cut euphoria is failing as Marcus begin to 167 00:09:14,280 --> 00:09:17,439 Speaker 2: wander about underlying economic weakness. Forronica Clark of City saying 168 00:09:17,640 --> 00:09:20,400 Speaker 2: powpaired a fifty basis point ray cup with an emphasis 169 00:09:20,480 --> 00:09:23,200 Speaker 2: on the low level of the unemployment rate and confidence 170 00:09:23,200 --> 00:09:25,680 Speaker 2: on the path ahead. We disagree with the view that 171 00:09:25,720 --> 00:09:29,080 Speaker 2: recession risk is not elevated. A continued rise in unemployment 172 00:09:29,280 --> 00:09:32,520 Speaker 2: will likely have them cutting faster than their dots. Imply 173 00:09:32,679 --> 00:09:34,800 Speaker 2: Forronica joint Us. Now for more Forronica Carnic. 174 00:09:34,880 --> 00:09:35,360 Speaker 7: Good morning. 175 00:09:35,440 --> 00:09:37,080 Speaker 2: This is not going to be a therapy session. 176 00:09:37,160 --> 00:09:37,679 Speaker 4: Don't worry. 177 00:09:37,679 --> 00:09:39,120 Speaker 2: I'm not going to make it. That won't insult you 178 00:09:39,160 --> 00:09:40,440 Speaker 2: with that, But I do want to talk about how 179 00:09:40,480 --> 00:09:42,960 Speaker 2: you and the team thought about this on Wednesday, and 180 00:09:43,000 --> 00:09:44,720 Speaker 2: for our audience who might not be familiar with the 181 00:09:44,720 --> 00:09:46,960 Speaker 2: work that you and Andrew do. You were out front 182 00:09:46,960 --> 00:09:49,439 Speaker 2: on the fifty basis point call. You said it was 183 00:09:49,520 --> 00:09:52,079 Speaker 2: data dependent. The data came out, the data wasn't bad, 184 00:09:52,120 --> 00:09:54,640 Speaker 2: and you changed the caller twenty five. What were you 185 00:09:54,679 --> 00:09:56,199 Speaker 2: thinking when that dropped on Wednesday. 186 00:09:56,400 --> 00:09:58,880 Speaker 7: Yeah, it's been a crazy couple of weeks. We did 187 00:09:58,960 --> 00:10:01,440 Speaker 7: change our base case for Wednesday back to a twenty 188 00:10:01,440 --> 00:10:04,000 Speaker 7: five basis point cut after we saw CPI a week 189 00:10:04,000 --> 00:10:07,959 Speaker 7: ago stronger, you know details, stronger shelter inflation. Again, we 190 00:10:07,960 --> 00:10:11,000 Speaker 7: were thinking maybe that was the easier compromise for the 191 00:10:11,040 --> 00:10:14,160 Speaker 7: Hawks who are still concerned about inflation. But I think it, 192 00:10:14,360 --> 00:10:15,960 Speaker 7: you know, on Wednesday, of course, when we got the 193 00:10:15,960 --> 00:10:18,839 Speaker 7: fifty basis point cut, it is is definitely justifiable based 194 00:10:18,840 --> 00:10:21,679 Speaker 7: on the weakening of the labor market. And we did 195 00:10:21,760 --> 00:10:24,000 Speaker 7: learn that, you know, FED officials are kind of dismissive 196 00:10:24,000 --> 00:10:27,080 Speaker 7: of stronger CPI. You know, Chair Powell was very dismissive 197 00:10:27,120 --> 00:10:29,920 Speaker 7: of that stronger shelter reading, just expecting that that will 198 00:10:29,920 --> 00:10:31,600 Speaker 7: slow and it is really the labor market. 199 00:10:31,760 --> 00:10:33,600 Speaker 2: It's an important lesson for SILVI. So talk to us 200 00:10:33,640 --> 00:10:35,640 Speaker 2: about what you'll be looking for between nine to m seven. 201 00:10:35,760 --> 00:10:37,760 Speaker 2: What will guide the automate coal for you and the team. 202 00:10:37,920 --> 00:10:40,719 Speaker 7: Right, well, we'll have two monthly employment reports, so that's 203 00:10:40,720 --> 00:10:43,839 Speaker 7: of course perils and the unemployment rate. Those were really 204 00:10:43,880 --> 00:10:46,520 Speaker 7: the most important of course watching you know, all the 205 00:10:46,559 --> 00:10:49,600 Speaker 7: labor market data, you know, weekly initial jobless claims. But 206 00:10:49,679 --> 00:10:52,400 Speaker 7: we do think this is a weakening labor market. We've 207 00:10:52,400 --> 00:10:54,960 Speaker 7: seen that more pronounced in the last three or four months. 208 00:10:55,400 --> 00:10:57,160 Speaker 7: Of course, that's what got us to the fifty basis 209 00:10:57,160 --> 00:10:59,760 Speaker 7: point cut this week. I think that trend will continue. 210 00:10:59,800 --> 00:11:02,080 Speaker 7: I think we'll see more weakness in those two employment 211 00:11:02,120 --> 00:11:04,040 Speaker 7: reports and it's another fifty in November. 212 00:11:04,400 --> 00:11:06,319 Speaker 6: This to me is a really important point that you 213 00:11:06,360 --> 00:11:08,160 Speaker 6: think that it's going to be just as aggressive going 214 00:11:08,200 --> 00:11:10,880 Speaker 6: forward because of the weakness that we see. There's been 215 00:11:10,880 --> 00:11:15,360 Speaker 6: a real question around just how well this transmission mechanism 216 00:11:15,440 --> 00:11:18,439 Speaker 6: of the FED policy can actually help support the economy. 217 00:11:18,480 --> 00:11:21,600 Speaker 6: Do you think that, given the reaction to this latest 218 00:11:21,600 --> 00:11:24,120 Speaker 6: FED meeting, that will help stave off some of the 219 00:11:24,160 --> 00:11:25,760 Speaker 6: weakness that you're expecting to see. 220 00:11:26,200 --> 00:11:26,600 Speaker 2: I don't know. 221 00:11:26,640 --> 00:11:28,760 Speaker 7: I mean a couple of months ago, the narrative was 222 00:11:28,800 --> 00:11:31,280 Speaker 7: that the economy is so strong and the FED doesn't 223 00:11:31,280 --> 00:11:33,960 Speaker 7: have to cut because of that, And now we're saying 224 00:11:33,960 --> 00:11:35,960 Speaker 7: the economy is strong because the Fed is cutting. But 225 00:11:36,000 --> 00:11:38,440 Speaker 7: what's changed in that period is the labor market data 226 00:11:38,440 --> 00:11:40,640 Speaker 7: have weakened, and it just seems like that trend will 227 00:11:40,679 --> 00:11:44,680 Speaker 7: will continue. These things are really hard to prevent. Once 228 00:11:44,720 --> 00:11:47,760 Speaker 7: you do get raised substantially lower back to neutral, I 229 00:11:47,800 --> 00:11:50,400 Speaker 7: think that, or maybe even a bit below neutral, I 230 00:11:50,400 --> 00:11:53,400 Speaker 7: think that can you restimulate things. But we're still a 231 00:11:53,400 --> 00:11:54,520 Speaker 7: long ways from that right now. 232 00:11:54,720 --> 00:11:56,760 Speaker 6: Pauled out of it a VBS earlier, So they don't 233 00:11:56,760 --> 00:11:58,800 Speaker 6: know anything that you don't know, So don't stop thinking that. 234 00:11:58,880 --> 00:12:02,440 Speaker 6: It's not like there's some kind of sort of feeling 235 00:12:02,640 --> 00:12:06,600 Speaker 6: underneath this fear of recession on the FED committee. How 236 00:12:06,640 --> 00:12:08,480 Speaker 6: much do you think that that's true? 237 00:12:09,320 --> 00:12:11,120 Speaker 7: I think there may be a bit or at least 238 00:12:11,160 --> 00:12:13,480 Speaker 7: maybe Powell is a bit more worried than he's letting on. 239 00:12:13,640 --> 00:12:15,760 Speaker 7: I mean, we are all looking at the same data, 240 00:12:16,240 --> 00:12:18,920 Speaker 7: and he is looking at you know, falling hiring rates 241 00:12:18,960 --> 00:12:22,520 Speaker 7: like we are. You know, maybe some early signs that 242 00:12:22,559 --> 00:12:26,160 Speaker 7: there are actually a pickup in layoffs. The transitions for 243 00:12:26,200 --> 00:12:28,320 Speaker 7: the last couple of months of people moving from employed 244 00:12:28,320 --> 00:12:31,400 Speaker 7: to unemployed have actually increased, the highest since twenty sixteen. 245 00:12:32,080 --> 00:12:35,360 Speaker 7: And I think he's worried that once you do see large, 246 00:12:35,760 --> 00:12:38,040 Speaker 7: clear signs of layoffs, that's when it's too late. You 247 00:12:38,080 --> 00:12:38,840 Speaker 7: want to get ahead of that. 248 00:12:38,880 --> 00:12:40,920 Speaker 2: I'm going to take this conversation to the edge of ridiculous. 249 00:12:40,960 --> 00:12:42,840 Speaker 2: But there were times I'm going to read the body language, 250 00:12:42,880 --> 00:12:45,120 Speaker 2: now forgive me. There were times in that news conference 251 00:12:45,120 --> 00:12:47,440 Speaker 2: where it found a little bit performative, it found a 252 00:12:47,440 --> 00:12:50,200 Speaker 2: little bit false. The confidence things are great, Things are great, 253 00:12:50,240 --> 00:12:52,960 Speaker 2: Ignore the fifty the size of it. This is a recalibration. 254 00:12:53,040 --> 00:12:55,240 Speaker 2: Things are good. Okay, do not feel the same thing. 255 00:12:55,320 --> 00:12:57,160 Speaker 6: Yeah, No, I felt the exact same thing, because there 256 00:12:57,240 --> 00:12:59,920 Speaker 6: was you know, in previous times, in previous news conference. 257 00:13:00,120 --> 00:13:04,959 Speaker 6: Is he was less practiced, he fumbled more, he didn't 258 00:13:04,960 --> 00:13:07,400 Speaker 6: seem to have the same kind of I don't know, 259 00:13:07,800 --> 00:13:10,120 Speaker 6: polish in the same kind of way. This was someone 260 00:13:10,160 --> 00:13:11,880 Speaker 6: who is acting as a lawyer, which was the reason 261 00:13:11,920 --> 00:13:14,760 Speaker 6: why that Kit Juke's comment was so interesting earlier this week. 262 00:13:14,920 --> 00:13:15,719 Speaker 8: This was someone who was. 263 00:13:15,679 --> 00:13:19,480 Speaker 6: Making a case more than say, delivering a message. That 264 00:13:19,760 --> 00:13:20,800 Speaker 6: was his true message. 265 00:13:20,800 --> 00:13:22,920 Speaker 2: It felt like a performance. Let's get back to race, 266 00:13:23,040 --> 00:13:24,920 Speaker 2: Let's make a park there. Just let's get it out. 267 00:13:25,120 --> 00:13:26,839 Speaker 2: It's out there now, Okay, let's get back to race. 268 00:13:26,880 --> 00:13:29,080 Speaker 2: At least when I were talking about this earlier about 269 00:13:29,120 --> 00:13:31,720 Speaker 2: whether how you view the rate cut path implied by 270 00:13:31,720 --> 00:13:33,679 Speaker 2: the dot plot from here, whether that's a sailing or 271 00:13:33,720 --> 00:13:36,319 Speaker 2: a flaw for interest rates. So Matt Hornback Morgan Stanley 272 00:13:36,320 --> 00:13:38,480 Speaker 2: framed it better than I could. He said, if they're wrong, 273 00:13:38,720 --> 00:13:41,080 Speaker 2: how are they wrong? And I think what you're ultimately 274 00:13:41,120 --> 00:13:43,600 Speaker 2: saying is we should consider that ceiling for rates because 275 00:13:43,600 --> 00:13:46,400 Speaker 2: they're going to get back to neutral quicker than they think. 276 00:13:46,559 --> 00:13:46,719 Speaker 7: Right. 277 00:13:46,800 --> 00:13:46,959 Speaker 5: Yeah. 278 00:13:47,000 --> 00:13:47,520 Speaker 8: Absolutely. 279 00:13:47,559 --> 00:13:50,320 Speaker 7: The last couple, you know, summary of Economic productions has 280 00:13:50,320 --> 00:13:52,880 Speaker 7: almost felt like a marketing to market. This is where 281 00:13:52,920 --> 00:13:55,600 Speaker 7: the market already is in terms of rate cuts. It's 282 00:13:55,640 --> 00:13:57,920 Speaker 7: also a marking to market in terms of the unemployment rate. 283 00:13:57,960 --> 00:14:01,480 Speaker 7: Obviously they had to raise that this week. And we're always, 284 00:14:01,559 --> 00:14:04,760 Speaker 7: of course you first and foremost, basing our FED view 285 00:14:04,760 --> 00:14:06,720 Speaker 7: on where we think the data are headed. And we 286 00:14:06,720 --> 00:14:08,320 Speaker 7: don't think the data are going to evolve in a 287 00:14:08,360 --> 00:14:10,280 Speaker 7: way that's consistent with that SEP, and they're going to 288 00:14:10,360 --> 00:14:10,840 Speaker 7: have to do more. 289 00:14:11,280 --> 00:14:13,240 Speaker 6: How much do you think that the reaction function of 290 00:14:13,240 --> 00:14:15,440 Speaker 6: the FED is biased toward bigger cuts? I mean, how 291 00:14:15,480 --> 00:14:17,280 Speaker 6: much do you think that that's what this signaled, rather 292 00:14:17,320 --> 00:14:20,200 Speaker 6: than they wanted to start big and then move gradually. 293 00:14:20,600 --> 00:14:22,560 Speaker 7: I think I think it's a pretty low bar to 294 00:14:22,600 --> 00:14:25,840 Speaker 7: get some more larger cuts. Just we are very far 295 00:14:25,880 --> 00:14:28,560 Speaker 7: from neutral. Paul has said a number of times that 296 00:14:29,000 --> 00:14:31,840 Speaker 7: there's ample room to be cutting if if something goes wrong, 297 00:14:32,400 --> 00:14:34,440 Speaker 7: and you do want to quickly get back to neutral 298 00:14:34,520 --> 00:14:36,560 Speaker 7: in a in a weakening labor market, not get back 299 00:14:36,600 --> 00:14:37,720 Speaker 7: to neutral a year from now. 300 00:14:38,000 --> 00:14:40,880 Speaker 2: So media adults did this for this year and next year. 301 00:14:41,000 --> 00:14:43,520 Speaker 2: The long dot did this came out just to touch 302 00:14:43,560 --> 00:14:44,920 Speaker 2: How are you thinking about that long dot? 303 00:14:45,040 --> 00:14:45,280 Speaker 8: Yeah? 304 00:14:45,280 --> 00:14:47,800 Speaker 7: That is it is interesting. I do think there is 305 00:14:47,920 --> 00:14:50,120 Speaker 7: that sense in which you know, maybe neutral way it's 306 00:14:50,120 --> 00:14:53,080 Speaker 7: at least nominally are a bit higher. We wouldn't disagree 307 00:14:53,120 --> 00:14:56,000 Speaker 7: with that, so sure, Yeah, three three and a half percent. 308 00:14:56,040 --> 00:14:59,080 Speaker 7: I think that's probably fair. We essentially have them getting 309 00:14:59,080 --> 00:15:02,760 Speaker 7: back to there, like a three percent kind of terminal rate, 310 00:15:03,000 --> 00:15:05,680 Speaker 7: and I think that's fair. I would worry that, you know, 311 00:15:05,720 --> 00:15:08,000 Speaker 7: even if that is a neutral rate, maybe they have 312 00:15:08,040 --> 00:15:09,160 Speaker 7: to get a bit below neutral. 313 00:15:09,200 --> 00:15:12,200 Speaker 2: Even poltonovany VPS came out and said, what did the 314 00:15:12,240 --> 00:15:14,520 Speaker 2: high rates achieve? Not a whole lot? What the low 315 00:15:14,640 --> 00:15:16,800 Speaker 2: rates achieve? Even if you go back to below neutral? 316 00:15:16,840 --> 00:15:18,880 Speaker 2: What are we stimulating? Yeah, part of the economics. 317 00:15:18,920 --> 00:15:20,880 Speaker 7: I mean, I think high rates did achieve, you know, 318 00:15:21,160 --> 00:15:23,880 Speaker 7: bringing inflation down. I think, you know, mession contributes in 319 00:15:23,880 --> 00:15:26,720 Speaker 7: the sense in that way. Yeah, we saw housing slowing. 320 00:15:26,760 --> 00:15:29,840 Speaker 7: We should see shelter inflation slowing at some point because 321 00:15:29,840 --> 00:15:33,960 Speaker 7: of that, demand of courses is much weaker. But of course, 322 00:15:34,040 --> 00:15:35,800 Speaker 7: you know that also means that there has been this 323 00:15:35,840 --> 00:15:39,840 Speaker 7: increase in non employment. You would expect lower rates to eventually, 324 00:15:39,880 --> 00:15:43,240 Speaker 7: you know, restimulate sectors like manufacturing or housing. But it 325 00:15:43,280 --> 00:15:44,920 Speaker 7: will probably take a couple of quarters to see that. 326 00:15:45,200 --> 00:15:47,080 Speaker 2: What did po rents the fantasy? 327 00:15:47,080 --> 00:15:48,160 Speaker 6: I fan to see who we are? 328 00:15:48,280 --> 00:15:49,600 Speaker 2: Yeah, yeah, I love that. 329 00:15:49,640 --> 00:15:52,880 Speaker 6: I love the small rants, the sort of small frustrations. 330 00:15:53,000 --> 00:15:55,600 Speaker 2: Everyone who didn't go with the fifty exactly got something to, 331 00:15:55,640 --> 00:15:58,400 Speaker 2: you know, get annoyed about. It's great, Veronica, can we 332 00:15:58,440 --> 00:16:01,480 Speaker 2: finish on housing at the price shelter? We've had so 333 00:16:01,520 --> 00:16:04,160 Speaker 2: many different views on this that ultimately, if you unlock 334 00:16:04,200 --> 00:16:08,040 Speaker 2: all that inventory, that supply prices actually might go down 335 00:16:08,120 --> 00:16:10,120 Speaker 2: as interest rates get cut. How are you thinking about 336 00:16:10,120 --> 00:16:12,480 Speaker 2: the forces this channel for interest rights to work in 337 00:16:12,480 --> 00:16:13,200 Speaker 2: the housing marketing. 338 00:16:13,400 --> 00:16:16,200 Speaker 7: Yeah, I think that is true eventually, but we're still 339 00:16:16,240 --> 00:16:18,400 Speaker 7: a long way before we maybe get some kind of 340 00:16:18,400 --> 00:16:21,680 Speaker 7: of supply response. I think we have seen rates coming down. 341 00:16:21,720 --> 00:16:24,640 Speaker 7: Of course, mortgage rates have come down. We're watching, you know, 342 00:16:24,640 --> 00:16:28,200 Speaker 7: the weekly data on mortgage applications filed for home purchases. 343 00:16:28,240 --> 00:16:30,480 Speaker 7: That really hasn't picked up at all. I think the 344 00:16:30,520 --> 00:16:33,440 Speaker 7: issue is that, yes, lower rates will stimulate demand for housing, 345 00:16:33,720 --> 00:16:36,120 Speaker 7: but now we also have the issue of a weakening 346 00:16:36,200 --> 00:16:39,560 Speaker 7: labor market and weakening consumer health offsetting that, and that 347 00:16:39,680 --> 00:16:41,880 Speaker 7: might be the more overwhelming driver in the next couple 348 00:16:41,920 --> 00:16:42,280 Speaker 7: of quarters. 349 00:16:42,280 --> 00:16:45,240 Speaker 2: It's a final question. Next move twenty five fifty fifty 350 00:16:45,400 --> 00:16:49,000 Speaker 2: fifty doesn't change it the city, it's going to see 351 00:16:49,000 --> 00:17:01,200 Speaker 2: it joining us now and please to say Tom Becker 352 00:17:01,520 --> 00:17:02,640 Speaker 2: of Black Rock, Tom, Good. 353 00:17:02,480 --> 00:17:03,720 Speaker 8: Morning, morning, it's going to see. 354 00:17:04,040 --> 00:17:05,760 Speaker 2: I feel like this narrative has gone back and forth 355 00:17:05,760 --> 00:17:07,680 Speaker 2: for the best part of two years. Heard landing self 356 00:17:07,720 --> 00:17:11,400 Speaker 2: heartblanding self, no lending, heartblanding self lending. What is it now? 357 00:17:11,960 --> 00:17:14,560 Speaker 1: So we've got a bit of a different view than 358 00:17:14,720 --> 00:17:17,840 Speaker 1: kind of Veronica's view there. So we're still in the 359 00:17:17,880 --> 00:17:21,520 Speaker 1: no lending camp. So this economy to us has been 360 00:17:21,840 --> 00:17:25,439 Speaker 1: a five to six percent nominal economy pretty consistently for 361 00:17:25,480 --> 00:17:28,199 Speaker 1: two years now, and so some quarters it looks like 362 00:17:28,200 --> 00:17:31,200 Speaker 1: inflation's a little too hot, then another quarter growths a 363 00:17:31,240 --> 00:17:33,520 Speaker 1: little bit hotter. But you've been trading off with this 364 00:17:33,600 --> 00:17:38,680 Speaker 1: economy kind of operating in this notably higher nominal kind 365 00:17:38,720 --> 00:17:41,200 Speaker 1: of range than it was a pre pandemic. We think 366 00:17:41,240 --> 00:17:44,879 Speaker 1: that's set to continue. The economy is much less interest 367 00:17:44,960 --> 00:17:46,840 Speaker 1: rate sensitive than it was pre pandemic. 368 00:17:47,359 --> 00:17:48,760 Speaker 8: People termed up their mortgages. 369 00:17:49,320 --> 00:17:52,720 Speaker 1: A lot of the spending that we're seeing in industrials 370 00:17:52,840 --> 00:17:55,080 Speaker 1: is coming from kind of a guns and butter two 371 00:17:55,080 --> 00:17:57,280 Speaker 1: point zero what we're calling kind of you know, this 372 00:17:57,320 --> 00:18:02,680 Speaker 1: fiscal policy reindustrialization on shoring, near shoring. That stuff is 373 00:18:02,760 --> 00:18:06,440 Speaker 1: driving kind of interest rate insensitive spending back into the economy, 374 00:18:07,080 --> 00:18:09,320 Speaker 1: and we think the consumer is actually really well set 375 00:18:09,400 --> 00:18:12,520 Speaker 1: up here. They've got household balance sheets in really good 376 00:18:12,560 --> 00:18:16,359 Speaker 1: shape in terms of wealth. They're earning much stronger wage 377 00:18:16,359 --> 00:18:18,679 Speaker 1: growth than they were kind of pre pandemic. This is 378 00:18:18,680 --> 00:18:22,520 Speaker 1: like nineteen nineties cy wage growth, and so that sets 379 00:18:22,520 --> 00:18:26,040 Speaker 1: them up really well with interest income coming back into 380 00:18:26,200 --> 00:18:29,399 Speaker 1: their flow. And we think inflation is settling now in 381 00:18:29,440 --> 00:18:32,960 Speaker 1: a two point five to three percent range. FED seems 382 00:18:33,000 --> 00:18:35,200 Speaker 1: okay with that here, but that's kind of a no 383 00:18:35,400 --> 00:18:36,640 Speaker 1: landing outlook from our persent. 384 00:18:36,720 --> 00:18:39,040 Speaker 2: And I think at one point the interest right sensitivity 385 00:18:39,280 --> 00:18:41,960 Speaker 2: is that symmetrical or asymmetrical. If we weren't sensitive on 386 00:18:42,000 --> 00:18:43,600 Speaker 2: the way up, are we sensitive on the way down? 387 00:18:44,200 --> 00:18:46,600 Speaker 1: So I think if you just look at when people 388 00:18:46,800 --> 00:18:49,480 Speaker 1: urn how much time people had to turn out debt, 389 00:18:49,480 --> 00:18:53,600 Speaker 1: both corporate treasures households, they had all of twenty twenty 390 00:18:53,640 --> 00:18:56,719 Speaker 1: all of twenty twenty one. That debt is still pretty 391 00:18:56,760 --> 00:18:59,040 Speaker 1: fixed rate for a number of years here. So we 392 00:18:59,080 --> 00:19:01,760 Speaker 1: don't think there's a lot of sensitivity for a lot 393 00:19:01,760 --> 00:19:04,160 Speaker 1: of the spending. And that's kind of how the economies 394 00:19:04,200 --> 00:19:05,000 Speaker 1: behave the last. 395 00:19:04,840 --> 00:19:05,440 Speaker 8: Couple of years. 396 00:19:06,840 --> 00:19:09,080 Speaker 1: So we think that's kind of set to continue their 397 00:19:09,160 --> 00:19:12,119 Speaker 1: pockets of weakness, and I think, you know, a fifty 398 00:19:12,119 --> 00:19:14,680 Speaker 1: point basis cut definitely is going to you know, bolster 399 00:19:14,840 --> 00:19:16,800 Speaker 1: those parts of the economy that had been a little 400 00:19:16,840 --> 00:19:19,600 Speaker 1: bit more. But overall, the economy is performing like it 401 00:19:19,600 --> 00:19:22,960 Speaker 1: doesn't really get impacted by kind of these these swings 402 00:19:22,960 --> 00:19:24,040 Speaker 1: and rates we've had the last. 403 00:19:23,840 --> 00:19:24,320 Speaker 8: Couple of years. 404 00:19:24,359 --> 00:19:26,200 Speaker 6: I want to put that on a real no landing 405 00:19:26,280 --> 00:19:28,840 Speaker 6: hard lighting, soft linking, soft lighting, hard landing party. I 406 00:19:28,880 --> 00:19:31,000 Speaker 6: think that was as so many last I mean, it 407 00:19:31,040 --> 00:19:34,280 Speaker 6: was really absolutely perfect. It kind of brought back, you know, flashes. 408 00:19:34,640 --> 00:19:38,159 Speaker 6: This idea of the no landing is a US specific story. 409 00:19:38,480 --> 00:19:40,960 Speaker 6: I don't think that Germany is feeling no landing right now. 410 00:19:41,440 --> 00:19:43,480 Speaker 6: How do you sort of play the idea that the 411 00:19:43,600 --> 00:19:48,280 Speaker 6: US has been the dominant overweight for so long, continues 412 00:19:48,320 --> 00:19:50,359 Speaker 6: to look like it's probably the strongest economy on a 413 00:19:50,400 --> 00:19:54,000 Speaker 6: relative basis, yet is still at pretty high valuations. 414 00:19:54,440 --> 00:19:57,560 Speaker 1: Yeah, sure, so I think you picked on the poster 415 00:19:57,680 --> 00:20:01,280 Speaker 1: child of kind of the weak man of Europe. If 416 00:20:01,280 --> 00:20:04,119 Speaker 1: we look broadly across Europe, the perferey is booming. Perfecy 417 00:20:04,119 --> 00:20:07,040 Speaker 1: hasn't looked this good in decades. So look at Italy, 418 00:20:07,080 --> 00:20:11,800 Speaker 1: look at Spain, They're doing great. Canada lagging a little 419 00:20:11,800 --> 00:20:15,280 Speaker 1: bit more. Canada's more interest rates sensitive, Germany is more 420 00:20:15,440 --> 00:20:18,520 Speaker 1: Russia and China sensitive. So you definitely have economies that 421 00:20:18,880 --> 00:20:21,760 Speaker 1: are a little bit weaker, but their nominal growth is 422 00:20:21,840 --> 00:20:24,800 Speaker 1: higher too, their wage growth is higher too, And so 423 00:20:25,840 --> 00:20:29,040 Speaker 1: you've got developed markets with all time tight labor markets. 424 00:20:29,760 --> 00:20:32,360 Speaker 1: We think the US labor market's much tighter than kind 425 00:20:32,400 --> 00:20:36,720 Speaker 1: of you know, maybe this recent rise in unemployment, you know, bigets, 426 00:20:36,920 --> 00:20:39,640 Speaker 1: but you've got kind of Japan kind of firing on 427 00:20:39,680 --> 00:20:45,760 Speaker 1: all cylinders, strong CPI data overnight. In the totality, we 428 00:20:45,800 --> 00:20:49,000 Speaker 1: think Europe looks pretty robust, and the valuations there in 429 00:20:49,000 --> 00:20:53,400 Speaker 1: the positioning are light, and so we're a macro tactical team. 430 00:20:53,720 --> 00:20:56,840 Speaker 1: We look for kind of opportunities where the narrative is negative, 431 00:20:56,840 --> 00:20:59,760 Speaker 1: where people are focusing on Germany but maybe missing that 432 00:20:59,800 --> 00:21:02,159 Speaker 1: the periphery and the rest of Europe look better, and 433 00:21:02,200 --> 00:21:04,840 Speaker 1: so over the summer and then more recently we've been 434 00:21:04,880 --> 00:21:07,320 Speaker 1: stepping into kind of tactical lungs outside the US. 435 00:21:07,520 --> 00:21:09,400 Speaker 8: So I agree with you completely. 436 00:21:09,520 --> 00:21:12,800 Speaker 1: So like the US does look well held overbought. Every 437 00:21:12,840 --> 00:21:15,440 Speaker 1: time people kind of step out and go into foreign markets, 438 00:21:15,440 --> 00:21:19,320 Speaker 1: there's a French election, or there's like the kind of 439 00:21:19,359 --> 00:21:21,919 Speaker 1: the Bungled press conference and the boj so like, let 440 00:21:21,960 --> 00:21:23,119 Speaker 1: me just go back to the US. 441 00:21:23,440 --> 00:21:24,840 Speaker 8: We think that that kind. 442 00:21:24,720 --> 00:21:27,520 Speaker 1: Of that creates opportunity and creates kind of pockets of 443 00:21:28,200 --> 00:21:30,160 Speaker 1: you know, good pricing for us to kind of step 444 00:21:30,160 --> 00:21:33,160 Speaker 1: into these strong global companies and strong industries. 445 00:21:33,359 --> 00:21:35,359 Speaker 6: No one's listening. Is it just that you look to 446 00:21:35,400 --> 00:21:37,399 Speaker 6: go to places that you actually want to go to. 447 00:21:37,640 --> 00:21:38,919 Speaker 6: It's sort of our fun to go to. 448 00:21:39,040 --> 00:21:40,080 Speaker 5: I feel like that's part of it. 449 00:21:40,119 --> 00:21:42,760 Speaker 6: I've been to Japan ten times. I've been to Greece 450 00:21:43,119 --> 00:21:45,720 Speaker 6: check out their beaches and then invested, you know, I mean, 451 00:21:45,720 --> 00:21:47,120 Speaker 6: is that basically what people are doing. 452 00:21:47,800 --> 00:21:50,960 Speaker 1: I think Americans have been spending in those places. So 453 00:21:51,480 --> 00:21:54,479 Speaker 1: we just did a podcast on Taylor swift Era's effect 454 00:21:54,480 --> 00:21:57,000 Speaker 1: in Europe and so much that you've got kind of 455 00:21:57,000 --> 00:21:59,960 Speaker 1: countries like Sweden where they had all time high month 456 00:22:00,200 --> 00:22:03,360 Speaker 1: month services inflation just because she did three shows in Sockholm. 457 00:22:03,560 --> 00:22:04,480 Speaker 8: So and that's a. 458 00:22:04,440 --> 00:22:06,280 Speaker 1: Lot of Americans flying over because they're like, oh, it's 459 00:22:06,320 --> 00:22:09,200 Speaker 1: cheaper than going the meadow lands, and so I think 460 00:22:09,240 --> 00:22:14,560 Speaker 1: that there is this People are spending differently. People are 461 00:22:14,560 --> 00:22:17,520 Speaker 1: not behaving like they think their jobs are in danger. 462 00:22:17,800 --> 00:22:21,720 Speaker 1: And I think the income this late last labor market report, 463 00:22:21,880 --> 00:22:25,080 Speaker 1: you can say, oh, look the trend job, the kind 464 00:22:25,080 --> 00:22:26,159 Speaker 1: of the creation of jobs a. 465 00:22:26,160 --> 00:22:26,879 Speaker 8: Little bit lower. 466 00:22:27,240 --> 00:22:30,480 Speaker 1: Hours are up, wages are up, and so that's money 467 00:22:30,480 --> 00:22:32,639 Speaker 1: in people's pockets that they're spending. And I think in 468 00:22:32,680 --> 00:22:36,880 Speaker 1: these foreign markets, nominal incomes are higher, so unemployment rates 469 00:22:36,880 --> 00:22:38,680 Speaker 1: are low, and people are making more than they were 470 00:22:38,680 --> 00:22:40,600 Speaker 1: in the last decade. We think they're kind of going 471 00:22:40,640 --> 00:22:43,479 Speaker 1: to start spending it more and savings rates can come 472 00:22:43,520 --> 00:22:45,639 Speaker 1: down in Europe and they can kind of unlock a 473 00:22:45,680 --> 00:22:47,440 Speaker 1: consumer that they haven't had for years. 474 00:22:47,560 --> 00:22:48,960 Speaker 2: I had a great line the other day, and it 475 00:22:49,000 --> 00:22:51,399 Speaker 2: was borderline insulting. It was don't invest in countries with 476 00:22:51,480 --> 00:22:54,399 Speaker 2: grain and the flag. And Italy was part of that story. 477 00:22:54,440 --> 00:22:56,520 Speaker 2: For a long time in Europe. The white people view 478 00:22:56,560 --> 00:22:58,800 Speaker 2: Europe was that Germany is strong and Italy's wake, and 479 00:22:58,840 --> 00:23:01,880 Speaker 2: it's the complete opposite it now on the continent, when 480 00:23:01,920 --> 00:23:03,919 Speaker 2: you look to take that exposure you alluded to it 481 00:23:04,000 --> 00:23:05,920 Speaker 2: just to touch. We used to talk about it through 482 00:23:06,240 --> 00:23:08,480 Speaker 2: the currency, but now the currency is hound backed by 483 00:23:08,560 --> 00:23:10,600 Speaker 2: developments in China, what's happening in Germany. How do you 484 00:23:10,640 --> 00:23:13,040 Speaker 2: take that exposure? If you just want to get exposure 485 00:23:13,080 --> 00:23:16,120 Speaker 2: to Italy specifically, Yeah, so you can. 486 00:23:16,000 --> 00:23:17,679 Speaker 8: Buy the index. That's what we do. 487 00:23:17,720 --> 00:23:20,080 Speaker 1: We buy the local index, the foot cy mid get 488 00:23:20,080 --> 00:23:23,159 Speaker 1: exposure to kind of the broad set of Italian companies. 489 00:23:23,400 --> 00:23:25,359 Speaker 1: You've got banks in there, they're doing well, it's spreads 490 00:23:25,400 --> 00:23:26,960 Speaker 1: coming in, but you've got a lot of kind of 491 00:23:26,960 --> 00:23:30,439 Speaker 1: services based companies that aren't exposed to kind of Russian 492 00:23:30,480 --> 00:23:32,240 Speaker 1: gas or to Chinese exports. 493 00:23:32,800 --> 00:23:34,040 Speaker 8: So that's the way we do it there. 494 00:23:34,560 --> 00:23:37,760 Speaker 1: Since we're top down macro investors, we focus on that 495 00:23:37,800 --> 00:23:40,080 Speaker 1: country dimension. So we're going in the local you know, 496 00:23:40,119 --> 00:23:44,440 Speaker 1: we separate the currency bet from from the local equity 497 00:23:44,480 --> 00:23:48,639 Speaker 1: market bet, and so we can be underweight dollars, but 498 00:23:48,680 --> 00:23:52,040 Speaker 1: we can also be kind of long a foreign kind 499 00:23:52,080 --> 00:23:53,400 Speaker 1: of you know, local equity. 500 00:23:53,480 --> 00:23:55,280 Speaker 2: I've got a question on a on the Bloomberg terminal 501 00:23:55,280 --> 00:23:56,920 Speaker 2: from the Bloombag subscriber. I think a lot of people 502 00:23:57,000 --> 00:23:58,960 Speaker 2: might have a similar question. You keep referring to high 503 00:23:58,960 --> 00:24:00,800 Speaker 2: normal with GDP. Of course, high prices have been a 504 00:24:00,800 --> 00:24:03,480 Speaker 2: big factor in that. If you think things going to 505 00:24:03,520 --> 00:24:05,480 Speaker 2: hold up at these kind of levels. What's your routlook 506 00:24:05,520 --> 00:24:07,919 Speaker 2: for inflation? At least it's been talking about steeper curves 507 00:24:07,960 --> 00:24:10,520 Speaker 2: and gold breaking out as well. What's your outlook for inflation? 508 00:24:10,880 --> 00:24:13,640 Speaker 8: We think we've settled in this new higher range. Three 509 00:24:14,680 --> 00:24:15,440 Speaker 8: three is a new two. 510 00:24:16,600 --> 00:24:18,320 Speaker 1: I think two and a half to three here because 511 00:24:18,320 --> 00:24:20,360 Speaker 1: we've had kind of a bit of a weakening after 512 00:24:20,400 --> 00:24:23,600 Speaker 1: a strong Q one. But we think services inflation is 513 00:24:23,600 --> 00:24:29,080 Speaker 1: going to really underpin higher inflation rates. You've got consumers 514 00:24:29,080 --> 00:24:31,760 Speaker 1: consuming in a services based economy, but you've also got 515 00:24:31,800 --> 00:24:34,760 Speaker 1: a lot of structural changes. Insurance markets are kind of 516 00:24:34,960 --> 00:24:39,240 Speaker 1: a multi year repricing to kind of higher nominal valuations. 517 00:24:39,400 --> 00:24:42,200 Speaker 1: Insurance rates in California going up twenty five thirty forty 518 00:24:42,200 --> 00:24:46,399 Speaker 1: percent for households, and that feeds through into the economy. 519 00:24:46,480 --> 00:24:48,520 Speaker 1: Restaurants have to raise their prices to deal with that. 520 00:24:48,760 --> 00:24:50,840 Speaker 1: And so I think there are these slower moving effects 521 00:24:50,880 --> 00:24:53,480 Speaker 1: that are underappreciated as people focused month on month, or 522 00:24:53,640 --> 00:24:56,280 Speaker 1: you know, was it jet fuel this month? Was it, oh, 523 00:24:56,359 --> 00:24:58,880 Speaker 1: we are this it's like, but if you look at 524 00:24:58,880 --> 00:25:02,760 Speaker 1: that slower moving kind of dynamic of sticky services inflation. 525 00:25:02,480 --> 00:25:03,679 Speaker 8: It's not just the US. 526 00:25:03,960 --> 00:25:07,479 Speaker 1: It's happening across all these developed markets, tight labor markets, 527 00:25:07,480 --> 00:25:10,840 Speaker 1: people spending more of their wage growth, and that's feeding 528 00:25:10,880 --> 00:25:13,880 Speaker 1: through the kind of sticky services inflation. So China can 529 00:25:13,920 --> 00:25:16,760 Speaker 1: bring down goods inflation for a few quarters like it 530 00:25:16,800 --> 00:25:19,040 Speaker 1: has and then you're like, oh, you know, false dawn, 531 00:25:19,320 --> 00:25:22,000 Speaker 1: you know we've landed. But I think then it bounces 532 00:25:22,040 --> 00:25:26,280 Speaker 1: back up if you get a surprise stimulus program, Drogy, 533 00:25:26,359 --> 00:25:28,840 Speaker 1: I think a call to arms for fiscal In Europe, 534 00:25:29,400 --> 00:25:32,560 Speaker 1: they always react too slow, but I think in Europe 535 00:25:32,840 --> 00:25:35,359 Speaker 1: you should think they're going forward. There might be some 536 00:25:35,440 --> 00:25:38,760 Speaker 1: fiscal there might be another kind of upward surprise there. 537 00:25:39,040 --> 00:25:41,240 Speaker 2: This was one of the sharpest conversations we've had this week. 538 00:25:41,320 --> 00:25:42,240 Speaker 2: Appreciate perspective. 539 00:25:42,280 --> 00:25:42,800 Speaker 8: Come back soon. 540 00:25:43,720 --> 00:25:47,280 Speaker 2: This is the Bloomberg Seventans podcast, bringing you the best 541 00:25:47,280 --> 00:25:50,399 Speaker 2: in markets, economics, an giet politics. You can watch the 542 00:25:50,400 --> 00:25:53,399 Speaker 2: show live on Bloomberg TV weekday mornings from six am 543 00:25:53,560 --> 00:25:56,719 Speaker 2: to nine am Eastern. Subscribe to the podcast on Apple, 544 00:25:56,960 --> 00:25:59,840 Speaker 2: Spotify or anywhere else you listen, and as always on 545 00:25:59,840 --> 00:26:02,280 Speaker 2: the Live bug terminal and look Bloomberg Business out 546 00:26:06,320 --> 00:26:06,760 Speaker 6: Mm hmm.