WEBVTT - Surveillance: Fed Policy With Plosser 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily 0:00:13.960 --> 0:00:17.560 we bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.640 --> 0:00:27.880 bloomber dot com, and of course, on the Bloomberg Right Now. 0:00:28.240 --> 0:00:31.400 A delicate conversation when you are a member of the 0:00:31.440 --> 0:00:35.680 Federal Reserve system, as Charles Plosser was at the Philadelphia FED. 0:00:36.200 --> 0:00:39.920 You are delicate even in retirement about the FED. We 0:00:40.040 --> 0:00:43.760 asked Dr Plosser now not to be delicate. Charles Plosser, 0:00:44.000 --> 0:00:47.800 you invented real business cycle theory. Kindling and Prescott got 0:00:47.800 --> 0:00:51.559 the Nobel Prize, but you and Long came up with 0:00:51.600 --> 0:00:54.440 the phrase and came up with the theory. There is 0:00:54.520 --> 0:00:58.360 now a raging debate in your racket over the theoretical 0:00:58.480 --> 0:01:02.920 qualifications of miss Shelton to join the FED. Is a governor? 0:01:03.600 --> 0:01:06.720 Your theory has been criticized. Ben pretty gott a Nobel 0:01:06.800 --> 0:01:10.160 prize out of it with Kindlan and Prescott. Does Judy 0:01:10.240 --> 0:01:19.000 Shelton have a theory? Gee, Tom, I don't know. I 0:01:19.040 --> 0:01:23.600 think obviously she is very popular in some circles, uh, 0:01:23.880 --> 0:01:26.640 not so popular in others. But you know, I have 0:01:26.720 --> 0:01:28.840 to I have to say that. You know, during the 0:01:28.840 --> 0:01:33.640 course of the history, the Board of Governors has had 0:01:34.120 --> 0:01:39.160 many people of many different stripes and perspectives and on 0:01:39.280 --> 0:01:44.839 economics and macro economics. So I think that um uh, 0:01:44.880 --> 0:01:47.560 if you if you think Judy Sheldon is a great 0:01:47.600 --> 0:01:50.560 economist gonna be a great FED governor, then that's fine. 0:01:50.600 --> 0:01:53.960 If you think that's not the case, then my guess 0:01:54.040 --> 0:01:58.440 is she we'll have gros three little impact overall on 0:01:58.480 --> 0:02:03.080 the way policies proceed. So yeah, I think debates not 0:02:03.120 --> 0:02:05.600 a bad thing. So I tend to be a little 0:02:05.600 --> 0:02:11.880 more open minded about about the willingness of the institution 0:02:12.000 --> 0:02:17.200 to ah to respond to these sorts of episodes. So 0:02:17.240 --> 0:02:19.799 I you know, she wouldn't have been my first pick, 0:02:20.080 --> 0:02:24.000 But you know, I'm not sure the consequences are terribly 0:02:24.040 --> 0:02:26.600 serious one way or another. Dr plus are the real 0:02:26.639 --> 0:02:30.200 business cycle theory always is out a theory of exogynous shocks. 0:02:30.360 --> 0:02:34.200 You've been given your exogynous shock with a deficit. What 0:02:34.280 --> 0:02:39.560 will these trillion dollars of deficits due to our financial system? 0:02:40.000 --> 0:02:45.040 And is there a certitude that we will see inflation? Well, 0:02:45.080 --> 0:02:48.799 there's never a certain certain certain certain suit about anything 0:02:48.800 --> 0:02:53.160 in the future. But I do think that we've had 0:02:53.160 --> 0:02:55.880 a very serious shot to the system, probably due to 0:02:55.880 --> 0:02:59.200 the shutdown and the coronavirus UH. And I think that 0:02:59.440 --> 0:03:02.000 the large ets will have their own set of consequences. 0:03:02.000 --> 0:03:06.240 We were already in a situation where UH fiscal policy 0:03:06.560 --> 0:03:10.160 UH that being conducted in this country was not was 0:03:10.200 --> 0:03:13.360 not sustainable, and this is just kind of make matters 0:03:13.400 --> 0:03:16.920 even more challenging. So I think there's a real problem. 0:03:17.080 --> 0:03:21.799 We've got a real problem. I think that ah and 0:03:21.960 --> 0:03:24.600 and my real problem is is not is not just 0:03:24.720 --> 0:03:27.200 the fiscal policy, but how the FED response to that 0:03:27.240 --> 0:03:29.520 fiscal policy and the pressures they're going to be under 0:03:30.080 --> 0:03:36.280 to engage in UH butys policy and support supporting physical 0:03:36.320 --> 0:03:38.600 policy in ways it may be detrimental for the FED 0:03:38.640 --> 0:03:40.720 and for the account as a whole. What would be 0:03:40.760 --> 0:03:44.200 the best way for the FED to execute a lessoning 0:03:44.360 --> 0:03:49.160 of the balance sheet? Well, I think they're there a 0:03:49.200 --> 0:03:52.000 variety of views on that. My preference was would would 0:03:52.000 --> 0:03:54.400 be to let them just continue to run this thing off, 0:03:54.440 --> 0:03:57.440 to stop increasing the balance sheet. It seems like they 0:03:57.480 --> 0:03:59.840 increase the balancing a lot. In a financial crisis. They 0:04:00.000 --> 0:04:03.000 promist we would they promised exit and it never happened, 0:04:03.560 --> 0:04:07.160 and now it's fifty present, bigger than it was after 0:04:07.240 --> 0:04:12.480 the Great Crisis, the financial crisis. So um, I'm not 0:04:12.520 --> 0:04:14.760 sure where this is going. And I think they need 0:04:14.800 --> 0:04:19.560 to declare their independence and regained control of monetary policies. Uh. 0:04:19.760 --> 0:04:23.560 That's independent of the fiscal pressures that they're going to 0:04:23.640 --> 0:04:27.840 be under. Plus of Richard Fisher wants to punch. They 0:04:27.880 --> 0:04:29.919 just don't make them like you guys anymore on the 0:04:29.960 --> 0:04:32.320 fom C. Do you think we are suffering from groupthink 0:04:32.640 --> 0:04:36.400 at the Federal Reserve? Well, there's always a there's always 0:04:36.400 --> 0:04:40.240 a bit of that at any institution. Uh, And I 0:04:40.279 --> 0:04:44.480 am worried that there's not enough pushback on things. I mean, 0:04:44.520 --> 0:04:48.679 we we argued back in two thousand nine, ten eleven 0:04:48.720 --> 0:04:50.840 the problems that we were going to get into que 0:04:51.160 --> 0:04:53.120 and the dangers of the large ballot sheet and the 0:04:53.200 --> 0:04:56.360 risk of it being abused by the fiscal authorities, and 0:04:56.400 --> 0:04:59.320 the difficulty we were going to face and getting out 0:04:59.360 --> 0:05:03.760 of it, and nobody wanted to listen then. And now 0:05:03.800 --> 0:05:06.760 we're back in the same boat, except it's bigger and 0:05:06.800 --> 0:05:10.440 the risk are greater. And so I think that it 0:05:10.480 --> 0:05:16.080 would be wise upon the BED, particularly now, to be 0:05:16.200 --> 0:05:19.080 more articular about what the exit ramp books like from 0:05:19.120 --> 0:05:21.480 all this and how they're going to get out from 0:05:21.520 --> 0:05:26.520 under it. And the abuse of the BED for fiscal 0:05:26.520 --> 0:05:29.440 policy purposes is even larger now than it was then. 0:05:30.320 --> 0:05:33.720 And I'm not I'm afraid that you know, it's not 0:05:33.800 --> 0:05:36.120 looking good and I don't and I'm concerned the FED 0:05:36.160 --> 0:05:39.320 doesn't push back enough. Charlie. I'm interested in this word 0:05:39.560 --> 0:05:42.520 abuse because the Federal Reserve, a lot of people would 0:05:42.520 --> 0:05:45.719 consider they are enabling this deliberately. This is an objective 0:05:46.120 --> 0:05:48.640 to work with the Treasury, to work with fiscal authorities, 0:05:48.640 --> 0:05:51.839 and not just the FED, but globally and many economists, Charlie, 0:05:51.839 --> 0:05:54.599 considering that the optimal way of conducting policy right now. 0:05:54.960 --> 0:05:58.559 This is what abuse, these words, these phrases. This isn't good, Charlie. 0:05:58.560 --> 0:06:01.360 Why is it not good? Can communicate that really clearly. 0:06:01.720 --> 0:06:06.960 It's it's not good because the FED was granted independence 0:06:07.000 --> 0:06:09.880 in order to be able to conduct policy for the 0:06:09.960 --> 0:06:14.520 long run and to conduct policy independent of policy and 0:06:15.040 --> 0:06:19.080 partisan politics. And what we see now is when you 0:06:19.120 --> 0:06:24.920 lose that independence, when you become more susceptible to politicization, 0:06:25.680 --> 0:06:30.000 then the decisions will no longer necessarily be about the 0:06:30.040 --> 0:06:33.680 best interests of the economy. But whoever happens to have 0:06:33.960 --> 0:06:37.400 political power, either in Congress or the administration, Charlie, are 0:06:37.400 --> 0:06:40.080 we already there when it comes to asset price inflation? 0:06:40.080 --> 0:06:44.240 You've got FED officials that have been pretty sanguine about Yeah, 0:06:44.279 --> 0:06:48.120 I'm worried that we we The FED is enabling this, 0:06:48.320 --> 0:06:53.920 maybe not intentionally, but indirectly they are enabling the ability 0:06:54.160 --> 0:06:58.120 of of of this thing to go on and encouraging 0:06:58.920 --> 0:07:02.599 uh expectations from the marketplace in other parts of the 0:07:02.600 --> 0:07:06.200 economy that the FED is the restuer, not just a 0:07:06.320 --> 0:07:09.760 last resort but a first resort. And Congress has used 0:07:09.760 --> 0:07:13.240 the beds balance sheet to fund the Transportation Bill, and 0:07:13.280 --> 0:07:16.760 in two thousands fifteen they used to do in this 0:07:16.920 --> 0:07:20.600 crisis to have the FED to lending on behalf of 0:07:20.680 --> 0:07:24.080 the treasury instead of having the Treasury do it. They 0:07:24.160 --> 0:07:26.960 have you know, they funded into the super Financed Protection 0:07:26.960 --> 0:07:29.720 Agency out of the FED budget, but with no authority 0:07:29.800 --> 0:07:33.640 by the FED. So they are examples of how the 0:07:33.680 --> 0:07:37.520 fiscal authorities are abusing the Fed's balance sheet, and the 0:07:37.600 --> 0:07:41.040 FED has allowed this to happen without much pushback. They're 0:07:41.080 --> 0:07:44.560 operating regime of this large ballot sheet and their unwillingness 0:07:44.560 --> 0:07:48.000 to shrink it. And there the expectations they've set up 0:07:48.000 --> 0:07:53.600 with the financial markets of backing failures and polatility is 0:07:53.640 --> 0:07:58.480 all part of the play here too, as part of 0:07:58.480 --> 0:08:03.480 the actions that are supporting and encouraging um. This lack 0:08:03.520 --> 0:08:08.840 of independence I think dangerous from a philosophical perspective. People 0:08:08.880 --> 0:08:11.280 talk about the dangers of a FED or a central 0:08:11.280 --> 0:08:15.520 bank not being politically independent. From an economic perspective, what 0:08:15.640 --> 0:08:18.480 are the negative consequences from the fact that the FED 0:08:18.680 --> 0:08:21.080 has taken the actions that it has, to your view, 0:08:21.560 --> 0:08:24.400 perhaps too much in tandem with the Treasury Department and 0:08:24.440 --> 0:08:29.600 the U S administration. One of the dangers the dangers 0:08:29.640 --> 0:08:33.920 are losing control both inflation and political independence. I mean, 0:08:34.000 --> 0:08:41.160 look what the history of of central banking and politic 0:08:41.600 --> 0:08:43.920 is not a is not a pretty one. That those 0:08:44.000 --> 0:08:47.360 countries where central banks have become arms of the political 0:08:47.480 --> 0:08:52.040 or administrative authorities and used the substitute for sound fiscal 0:08:52.080 --> 0:08:57.520 policies and encourage money creation is the history is terrible. 0:08:57.640 --> 0:09:00.920 I mean, the empirical evidence is this waught with hyper 0:09:00.960 --> 0:09:04.160 inflations with Zimbabwe or Germany. You just go down the 0:09:04.240 --> 0:09:08.440 list Argentina. I mean, you just go down the list 0:09:08.480 --> 0:09:12.199 and see what happened when the central banks become pawns 0:09:12.280 --> 0:09:15.800 of the political authorities. But Charles, we did not see that. 0:09:15.880 --> 0:09:18.160 Let's be clear here, they're coming out of the crisis, 0:09:18.520 --> 0:09:21.760 many look for higher inflation and it didn't occur. Did 0:09:21.800 --> 0:09:24.920 it just go over on the balance sheet side to assets. 0:09:25.200 --> 0:09:28.680 Did we just simply move the dynamics of price over 0:09:28.720 --> 0:09:33.760 to asset inflation. Well? Perhaps, But really what happened was 0:09:33.880 --> 0:09:36.520 when the FED people said, the FRED pretty money. But 0:09:36.600 --> 0:09:39.080 mostly what it did was put reserves in the banking 0:09:39.120 --> 0:09:42.760 system that sat there. Part of the problem and the puzzle, 0:09:42.960 --> 0:09:44.800 I think, and one of the things that I think 0:09:44.920 --> 0:09:49.480 is problematic for the future is that money supply growth, 0:09:49.520 --> 0:09:54.319 money in circulation. After the Great Financial Crisis, all that 0:09:54.400 --> 0:09:56.880 stuff that FED printed sat in the banks. It didn't 0:09:56.880 --> 0:09:59.520 circulate very much, so there was no big increase in 0:09:59.520 --> 0:10:02.120 the money. I think that's an interesting puzzle. May have 0:10:02.160 --> 0:10:04.599 to do with interest on reserves and other things. That 0:10:04.840 --> 0:10:07.200 hasn't answered this question yet. But if you look at 0:10:07.240 --> 0:10:10.640 what's happened in the last three months, unlike the Great 0:10:10.679 --> 0:10:13.920 Financial Crisis when the bed blew up its ballacy, in 0:10:13.960 --> 0:10:18.079 this episode, there's been a huge increase in money. I 0:10:18.120 --> 0:10:19.600 don't know whether it's going to lead to a different 0:10:19.600 --> 0:10:23.280 outcome or not. It depends on what the Fed does. 0:10:23.440 --> 0:10:28.079 But I think that, um, that's part of the puzzle 0:10:28.679 --> 0:10:30.800 and part of the thing that the Dead's not really 0:10:30.840 --> 0:10:34.720 hasn't really addressed in its review of what their new 0:10:34.760 --> 0:10:37.240 strategy has been to be. I mean, they've tried, after 0:10:37.360 --> 0:10:42.120 much criticism, they tried to get inflation up to or 0:10:42.240 --> 0:10:45.200 claim they were because the zero interest rates for what 0:10:45.400 --> 0:10:49.280 seven years almost and inflation didn't rise. So now they're 0:10:49.280 --> 0:10:52.160 talking about a new strategy where they're gonna plan on 0:10:52.280 --> 0:10:54.600 overshooting inflated well, I mean they haven't even be able 0:10:54.640 --> 0:10:57.640 to get it too with zero interest rates for seven years, 0:10:57.679 --> 0:11:01.200 So what's wrong? That's the elephant in the room here 0:11:01.760 --> 0:11:04.760 that the Fed needs to address, not some refined view 0:11:04.880 --> 0:11:10.760 of inflation averaging versus in place of targeting or whatever. 0:11:10.920 --> 0:11:13.960 I think they need a more fundamental thing about what 0:11:14.120 --> 0:11:16.920 their policies. Maybe it's like I said, the interest wrong 0:11:16.960 --> 0:11:21.120 reserves or a large balance sheet, all those things impact 0:11:21.400 --> 0:11:27.600 how the how monetary policy works for that Chairman, Pal's 0:11:27.640 --> 0:11:29.959 happy you're not on that f o MC today. As 0:11:30.000 --> 0:11:32.480 that mating begins, childs, we've gotta leave it there. It's 0:11:32.520 --> 0:11:35.040 fantastic to catch up. This always fortunate to speak to 0:11:35.080 --> 0:11:37.840 your child's plus to that the former Philadelphia Fed president. 0:11:40.760 --> 0:11:44.000 Right now, let's jump start this discussion and do it 0:11:44.040 --> 0:11:47.959 through the prism of experience of Tobias Levkovic at City Group. 0:11:47.960 --> 0:11:50.320 It helps. He was a sell side analyst. He knows 0:11:50.320 --> 0:11:53.800 the granularity of corporations and of course the bigger view 0:11:54.200 --> 0:11:57.360 at City Group on the stock market. Tobias, have you 0:11:57.440 --> 0:12:00.679 changed your view in the last number of days? On 0:12:00.720 --> 0:12:03.120 the last number of days, we think the market and 0:12:03.120 --> 0:12:05.959 we have thought the market was a bit ahead of itself, Um, 0:12:06.040 --> 0:12:09.280 in the sense that the expectations were powerful recovery on 0:12:09.320 --> 0:12:12.120 earnings without kind of bumps along the way back to 0:12:12.200 --> 0:12:15.440 some degree by quote unquote the power put um. I 0:12:15.480 --> 0:12:18.680 was looking to your private conversation about the bond market, Um, 0:12:18.720 --> 0:12:20.920 and the bond mark is actually something that two different messages. 0:12:20.960 --> 0:12:22.360 If you all you did was look at the U 0:12:22.400 --> 0:12:25.800 S tenure yield, you would say it is disbelieving. If 0:12:25.840 --> 0:12:28.079 you like in the recovery. But if you were looking 0:12:28.080 --> 0:12:31.400 at the US tenure break evens, they continue to move higher. 0:12:31.559 --> 0:12:34.280 So there is an expectation for something happening, at least 0:12:34.280 --> 0:12:36.440 in the pricing side. Are you seeing that in the 0:12:36.480 --> 0:12:39.280 equity space. I mean, I'm looking at revenue shortfalls at 0:12:39.280 --> 0:12:42.280 three revenue shortfalls at McDonald's. I mean, are you just 0:12:42.360 --> 0:12:46.599 baking that into your two thousand? Yeah? We are. We 0:12:46.640 --> 0:12:48.440 having to look. We're we're looking for earnings to this 0:12:48.520 --> 0:12:51.040 year in the one five range and then one fifty 0:12:51.080 --> 0:12:53.600 next year. Consensus for next year is one sixty four, 0:12:54.040 --> 0:12:56.160 and a survey we did in late June is over 0:12:56.640 --> 0:13:01.280 forty institutions suggested that seventy of them believe that one 0:13:01.360 --> 0:13:03.600 sixty four is too high. On the other end, people 0:13:03.720 --> 0:13:06.760 heart chasing momentum because they need to perform. So certain 0:13:06.760 --> 0:13:10.320 stalks are carrying further. They're jumping in even if they 0:13:10.320 --> 0:13:12.880 don't necessarily like it um, but they feel they have 0:13:13.000 --> 0:13:14.920 to be. To quote in New York Claudo, you've gotta 0:13:14.920 --> 0:13:16.520 be in it to win it. It's about what do 0:13:16.520 --> 0:13:18.640 you think of the argument that, because we've got narrow breadth, 0:13:18.679 --> 0:13:21.000 this is a fragile rally. Do you agree with that, 0:13:21.800 --> 0:13:24.760 not directly. Um, Look, there are some large cap tech 0:13:24.840 --> 0:13:27.480 names that are clearly leading the market in the sense 0:13:27.480 --> 0:13:31.280 that people wanted secular growth with bulletproof balance sheets and 0:13:31.400 --> 0:13:33.960 pre cast flew generation the kind of a defensive trade. 0:13:34.320 --> 0:13:37.280 But for example of the second quarter, A hundred twenty 0:13:37.360 --> 0:13:40.120 six names in the SMP five beat the SMP five 0:13:40.160 --> 0:13:43.280 hundred by more than ten percentage points. So it's not 0:13:43.360 --> 0:13:45.600 like only five names did well. A D twenty one 0:13:45.600 --> 0:13:48.120 did poorly, and I think that's kind of missed in 0:13:48.160 --> 0:13:50.840 the what I would call the narrative out there. Well, 0:13:50.880 --> 0:13:53.680 let's add to the narrative big tech turningsis Thursday. What's 0:13:53.720 --> 0:13:57.360 the data bias Lefkovitch guide at this point, Well, I 0:13:57.400 --> 0:14:01.640 think people are looking for the actually some disappointment because 0:14:01.720 --> 0:14:05.119 the expectations are high. The work from home the construct 0:14:05.160 --> 0:14:08.840 has generated some particular business trends that it really accelerated 0:14:08.880 --> 0:14:12.240 trends that we're going before. So the idea of online 0:14:12.240 --> 0:14:14.680 shopping versus in store shopping has been a trend for 0:14:14.720 --> 0:14:17.199 a while, but we've probably moved it forward two years 0:14:17.240 --> 0:14:21.480 because the pandemic, telehealth, the same thing, cloud computing, all 0:14:21.520 --> 0:14:25.120 these things were ready very much moving along. All we've 0:14:25.120 --> 0:14:28.840 really done is supercharge that that's beat to bias. In meantime, 0:14:28.960 --> 0:14:30.520 one of the big stories of the past week has 0:14:30.520 --> 0:14:32.720 been the weaker dollar, the dollar following to the weakest 0:14:32.760 --> 0:14:38.000 according versus it's a competitor currencies since two thousand eighteen. 0:14:38.080 --> 0:14:41.360 How does this factor intro equity strategy. So it's actually 0:14:41.440 --> 0:14:44.360 quite importantly. So if I look at um a budget 0:14:44.400 --> 0:14:48.280 deficits percent of GDP, it's pretty been pretty good lead 0:14:48.320 --> 0:14:51.720 indicator for many years now for the dollar, and it 0:14:51.800 --> 0:14:54.880 was suggesting the weakness are ready prior even to the pandemic. 0:14:55.120 --> 0:14:57.400 But I think as the pandemic occurred, people went for 0:14:57.440 --> 0:14:59.320 the safety of the dollar. They rent for the safety 0:14:59.320 --> 0:15:02.560 of treasuries. UM, the beliefing, hey, this is the economy 0:15:02.560 --> 0:15:05.080 in the world. Um, they're going to have significant support 0:15:05.120 --> 0:15:08.600 systems of the fiscal or or monetary stimulus, and there's 0:15:08.600 --> 0:15:12.320 a place to hide. As we're starting to reopen the economy. 0:15:12.320 --> 0:15:14.800 And even with these kind of awful lumps in terms 0:15:14.840 --> 0:15:17.760 of outbreaks, UM, it's unlikely we're gonna shut down the 0:15:17.760 --> 0:15:19.960 economy the same way we did March A from and 0:15:20.000 --> 0:15:23.640 me again, it's just too expensive. UM. From an economic perspective, 0:15:23.680 --> 0:15:26.000 too many job losses and not to mention some of 0:15:26.000 --> 0:15:27.640 the social ills that come out of in terms of 0:15:27.680 --> 0:15:30.760 mental health, domestic confused, things like that. So it's unlikely 0:15:30.800 --> 0:15:34.760 you'll see that kind of stupdown. You may see sporadic 0:15:34.800 --> 0:15:37.560 ones or regionally focused ones, but not in entire countries. 0:15:37.960 --> 0:15:40.920 And in that sense, um, you're looking at environment where 0:15:40.920 --> 0:15:43.240 the dollar doesn't have to be at safe haven when 0:15:43.280 --> 0:15:47.920 that pulls back. Historically, emerging markets of perform in the US. Historically, 0:15:48.520 --> 0:15:51.240 certain groups that are even though they have large international 0:15:51.720 --> 0:15:55.440 sales like pharma or semifectors, actually don't do as well 0:15:55.840 --> 0:15:57.640 um with a week in dollar. And then there are 0:15:57.640 --> 0:16:02.320 other ones that do particularly well, more commodity orient energy, materials, etcetera. Um, 0:16:02.360 --> 0:16:05.120 So there are you know, aspects to the dollars that 0:16:05.160 --> 0:16:07.760 are quite important. So in other words, is this the 0:16:07.760 --> 0:16:09.800 playbook that you're going to the idea that we're going 0:16:09.840 --> 0:16:11.520 to have a week or dollar going forth it will 0:16:11.520 --> 0:16:14.680 continue to weekend given the fact that given the parameters 0:16:14.680 --> 0:16:16.200 that you just laid out, and that people should be 0:16:16.200 --> 0:16:20.920 going into merging markets and staying away from the multinationals 0:16:20.920 --> 0:16:24.080 not necessarily Again, I said multinationals like and take advantage 0:16:24.080 --> 0:16:25.840 and take a look at semi knectors, take a look 0:16:25.840 --> 0:16:30.440 at Farmer their multinationally have large exposure to international sales 0:16:30.480 --> 0:16:33.560 that they actually do poorly when the dollar weekends. Um, 0:16:33.640 --> 0:16:35.440 and they do better when the dollar strength, which is 0:16:35.480 --> 0:16:38.240 not consistent with kind of the intuitivelopment of what it 0:16:38.280 --> 0:16:41.280 does think of an international sales with the dollar weekends 0:16:41.320 --> 0:16:44.640 will actually translate to higher remedies in the US if 0:16:44.640 --> 0:16:47.320 they don't trade that way. Um we can. Every real's 0:16:47.400 --> 0:16:50.800 entitled to their misperceptions, but um, we actually look it 0:16:50.880 --> 0:16:55.920 happen stocks straight tobias away from Fortress Corbett. Your thoughts 0:16:55.920 --> 0:17:00.760 on the big banks, Um, Look, they're they're an area 0:17:00.800 --> 0:17:03.960 that investors have disliked for a while. Um. Initially it 0:17:04.040 --> 0:17:06.600 was the shape that yel curve concerns about credit loss 0:17:06.640 --> 0:17:09.120 provisions in in kind of a bad economy. But they're 0:17:09.119 --> 0:17:12.320 willing to trade up some other cyclicals around that. So 0:17:12.480 --> 0:17:15.440 you know, we wonder if there's something even more um 0:17:15.480 --> 0:17:18.840 disturbing an investor's mindsets. Maybe this acceleration I talked about 0:17:18.880 --> 0:17:22.280 and trends pushes more towards fintech. But but I think 0:17:22.359 --> 0:17:26.400 the stocks themselves look very very attractively valued right now 0:17:26.440 --> 0:17:30.000 in the banks. Um the you know, again, if if 0:17:30.000 --> 0:17:32.399 the world isn't as awful as everybody thinks them, the 0:17:32.440 --> 0:17:36.760 credit lost provisions of an over provisioned um and you know, 0:17:36.800 --> 0:17:39.720 there still is business activity out there, either large corporations, 0:17:39.760 --> 0:17:42.679 the need to borrow money. The credit card businesses is 0:17:42.840 --> 0:17:45.760 you know, are generally doing well as people are buying 0:17:45.800 --> 0:17:48.960 things online using their cards, either debit or credit. So 0:17:49.000 --> 0:17:50.679 it's kind of hard to to kind of get a 0:17:50.760 --> 0:17:55.040 sense that things are awful awful in banks. There is 0:17:55.119 --> 0:17:58.199 some concern. I believe that the elections, maybe um, if 0:17:58.200 --> 0:18:01.199 the Democrats take um, the Senate as well as the 0:18:01.200 --> 0:18:03.879 White House, and maybe there'll be some more kind of 0:18:04.240 --> 0:18:07.439 big bashing. But um, you know these are these are 0:18:07.480 --> 0:18:10.400 more speculation than anything. Kind of really at this point, 0:18:10.960 --> 0:18:17.359 great to catch up with these Lekevich that city. Chris 0:18:17.400 --> 0:18:20.679 Krueger is a Cowen and he has a reputation for 0:18:20.800 --> 0:18:24.520 exquisite layout of the detail. He did that in June 0:18:24.560 --> 0:18:28.160 for Cowen of the many previous trillion dollars of stimulus. 0:18:28.280 --> 0:18:30.600 I'm sure you'll do it again in August. Chris Kruger 0:18:30.680 --> 0:18:34.000 joins us. Now, Chris, what is the detail you're most 0:18:34.080 --> 0:18:38.720 focused on as we staggered as some kind of agreement. Yeah, well, 0:18:39.280 --> 0:18:41.080 good morning, thanks for having me back. I mean, I 0:18:41.119 --> 0:18:43.560 think that the big question here, the crux of this 0:18:43.680 --> 0:18:47.200 Phase four bill is going to be the expiring six 0:18:47.320 --> 0:18:52.960 hundred dollar weekly unemployment insurance payments, which which ended last 0:18:53.320 --> 0:18:56.600 which ended this this weekend. The House Democrats want to 0:18:56.640 --> 0:19:01.240 extend that for six months at six dollars. The Republican 0:19:01.320 --> 0:19:04.719 plan from last night would take that six hundred dollars 0:19:04.760 --> 0:19:08.280 down to two hundred dollars through September and then basically 0:19:08.480 --> 0:19:10.639 kick it to the states for the states to figure 0:19:10.680 --> 0:19:15.120 out how to cap it at previous wages. I mean, 0:19:15.119 --> 0:19:18.040 I think there's there's no real surprise from the bid 0:19:18.040 --> 0:19:22.280 ask where we are. Uh The House Democrats put up 0:19:22.320 --> 0:19:26.040 over three trillion dollars over two months ago, and I 0:19:26.080 --> 0:19:28.719 think it will be one of the great political what ifs. 0:19:28.880 --> 0:19:32.720 You know, why President Trump and the Republicans didn't sort 0:19:32.720 --> 0:19:37.400 of embrace a three trillion dollar stimulus two months ago, 0:19:37.480 --> 0:19:41.600 whereas now we're we're steering off of fiscal cliff for 0:19:41.680 --> 0:19:45.399 over twenty million Americans, and we're probably somewhere in the 0:19:45.480 --> 0:19:48.600 trillion to one and a half trillion dollar ballpark, Chris, 0:19:48.600 --> 0:19:51.919 from an economic perspective, let alone a political one, is 0:19:51.960 --> 0:19:54.960 there any argument that you believe in that you think 0:19:55.040 --> 0:20:00.520 is legitimate against having a six hundred dollar unemployment benefit continue, 0:20:00.640 --> 0:20:05.320 the enhanced unemployment benefit continue for the next couple of months. Well, 0:20:05.359 --> 0:20:08.879 the real pushback has been from UH a number of 0:20:08.880 --> 0:20:12.639 White House advisors and Senate Republicans. If you recall, Phase 0:20:12.720 --> 0:20:16.240 three in March almost fell apart over the six hundred 0:20:16.320 --> 0:20:21.760 dollar weekly supplemental various studies have shown that, you know, 0:20:21.880 --> 0:20:25.080 as much as five five out of the six folks 0:20:25.760 --> 0:20:31.560 are getting effectively a raised from their previous salary from 0:20:31.600 --> 0:20:36.040 from January. This is really, though, the key um, the 0:20:36.359 --> 0:20:40.639 key controversy with the bill. Republicans will get the liability shield, 0:20:40.720 --> 0:20:43.919 Democrats will get some chunk of money to go to 0:20:44.520 --> 0:20:49.440 states and municipalities. The six hundred dollar unemployment UH fiscal 0:20:49.480 --> 0:20:53.040 cliff is the real is the real question, Chris, is 0:20:53.040 --> 0:20:55.639 an interim bill at this point dead on arrival? Do 0:20:55.640 --> 0:20:59.560 you see any prospect for that down in Washington? It 0:20:59.680 --> 0:21:02.960 could happen, right sort of. The old saying is whenever 0:21:03.040 --> 0:21:05.760 Washington finds itself on the edge of a fiscal cliff, 0:21:05.840 --> 0:21:10.040 they tend to build more land. UM, so perhaps doing 0:21:10.080 --> 0:21:14.720 an extension of the six hundred dollar weekly payments maybe 0:21:14.760 --> 0:21:20.080 through September that because you will have another cliff when 0:21:20.080 --> 0:21:23.320 the fiscal year begins on October one, Right, you'll have 0:21:23.440 --> 0:21:25.760 to pass some kind of bill to keep the government 0:21:25.760 --> 0:21:28.840 from shutting down. So maybe tying it to that. But 0:21:28.960 --> 0:21:33.320 that's gonna be that's gonna come under intense pressure from UH. 0:21:33.400 --> 0:21:36.920 You know a number of fiscal hawks who have all 0:21:36.960 --> 0:21:41.240 of a sudden return to Washington after two years of hibernation. 0:21:41.440 --> 0:21:44.600 How does being a fiscal huwk poll in America at 0:21:44.640 --> 0:21:48.760 the moment, Chris amongst some of these constituencies, you know, 0:21:48.880 --> 0:21:51.960 I've I've, like I said earlier, I think that that 0:21:52.400 --> 0:21:54.320 you know, it's going to be one of the great 0:21:54.359 --> 0:21:59.120 political what ifs on that Heroes package over three trillion 0:21:59.200 --> 0:22:04.440 dollars from UH that the House Democrats sponsored over and 0:22:04.640 --> 0:22:07.360 past over two months ago. I think it's it's it's 0:22:07.440 --> 0:22:13.119 quite regional, you see, but candidly, the the the Senate 0:22:13.160 --> 0:22:16.040 Republicans who are most vocal on this are not running 0:22:16.080 --> 0:22:19.760 for reelection, right, they have staggered terms, so that maybe 0:22:19.800 --> 0:22:22.560 answers your question. This is the question, and I want 0:22:22.560 --> 0:22:24.560 to sort of double down on what John was talking about, 0:22:24.600 --> 0:22:28.600 this idea of what political benefit is they're going against 0:22:28.640 --> 0:22:32.399 some sort of big fiscal stimulus at this point, how 0:22:32.680 --> 0:22:37.160 is the idea of an ongoing enhanced unemployment benefit polling 0:22:37.520 --> 0:22:43.960 among Republicans? I haven't seen specific polling relative to Republicans. 0:22:43.960 --> 0:22:47.560 I mean there is a real belief among Senate Republicans though, 0:22:47.680 --> 0:22:52.160 that this extension of the six hundred dollars is keeping 0:22:52.880 --> 0:22:57.320 um is keeping the economy back, meaning that people would 0:22:57.400 --> 0:23:00.359 rather stay at home and collect the six hundred dollars 0:23:00.960 --> 0:23:04.440 on top of their state payments as opposed to going 0:23:04.480 --> 0:23:08.359 back into the workforce and looking for jobs. Chris, what 0:23:08.440 --> 0:23:11.080 are you going to look for today in the next 0:23:11.119 --> 0:23:15.280 twenty four hours in Washington? The whole cable media frenzy, 0:23:15.359 --> 0:23:18.920 the newspaper frenzy, et cetera. What is Chris Krueger most 0:23:19.000 --> 0:23:22.280 focused on? Well, I mean it is a bit of 0:23:22.480 --> 0:23:24.560 a crazed week here. I mean you you have the 0:23:24.640 --> 0:23:28.320 ongoing funeral of of of the late John Lewis, you 0:23:28.359 --> 0:23:31.000 have the big tech hearing tomorrow, You obviously have the 0:23:31.040 --> 0:23:35.760 FED as well. So I don't expect much on Phase 0:23:35.840 --> 0:23:41.080 four today. The primary negotiators, though, are pretty much the 0:23:41.119 --> 0:23:44.320 same from Phase three, with the exception of now Mark Meadows, 0:23:44.359 --> 0:23:47.639 the White House Chief of Staff is sort of a 0:23:47.760 --> 0:23:50.880 co head along with the Treasury Secretary. But then it's 0:23:50.960 --> 0:23:57.040 you know, the the the actors we've seen before, McConnell, Pelosi, Schumer, Um. 0:23:57.200 --> 0:24:00.000