WEBVTT - Surveillance: Inflation Hits Investor Confidence 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene, along 0:00:09.240 --> 0:00:13.080 with Jonathan Ferrell and Lisa Brownwitz Jay Leye. We bring 0:00:13.119 --> 0:00:17.159 you insight from the best and economics, finance, investment, and 0:00:17.280 --> 0:00:23.280 international relations. Find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg 0:00:23.360 --> 0:00:30.000 dot Com, and of course on the Bloomberg terminal. But 0:00:30.080 --> 0:00:32.120 I'm talking. They just told me what to do. It 0:00:32.200 --> 0:00:35.640 is joining us now market Field Assent Management Chairman and CEO. Michael. 0:00:35.680 --> 0:00:38.960 This from Deutsche Bank. Consumer inflation expectations have now clearly 0:00:38.960 --> 0:00:43.040 moved out of the low inflation ragime. This is important, Michael. 0:00:43.080 --> 0:00:46.000 I'm not talking about hyper inflation. I'm talking about finally 0:00:46.080 --> 0:00:49.400 breaking out of the low inflation ratime that really played 0:00:49.479 --> 0:00:52.680 much of the last decade. Do you think we have yes, 0:00:52.800 --> 0:00:55.520 I mean, straightforwardly, I think you have. I think it 0:00:55.640 --> 0:00:58.680 is really a very different environment to anything we saw 0:00:59.640 --> 0:01:02.120 treat COVID, and I think one of the big changes 0:01:02.240 --> 0:01:05.679 that that is going to represent is consumers now have 0:01:05.760 --> 0:01:08.840 an incentive to buy today rather than wait for tomorrow. 0:01:09.720 --> 0:01:12.960 And I think that itself will intensify consumer demand and 0:01:13.000 --> 0:01:17.039 exacerbate the process. Michael, you are somewhat pessimistic on stocks 0:01:17.040 --> 0:01:19.480 according to your latest note, how much more selling are 0:01:19.520 --> 0:01:23.640 you expecting and why I wasn't that pessimistic. I just 0:01:23.680 --> 0:01:26.640 don't think for sellings you know, totally done. I sort 0:01:26.640 --> 0:01:29.080 of say a worst case scenario. I think the index 0:01:29.160 --> 0:01:32.120 is test their two hundred days. UM. You might not 0:01:32.200 --> 0:01:33.960 need you might not need to go that that far. 0:01:34.080 --> 0:01:37.320 But I think what we're in is this process of realization. 0:01:37.920 --> 0:01:40.520 But the strong growth that we've had comes with persistent 0:01:40.600 --> 0:01:44.080 inflation attached. And more than it being good or bad 0:01:44.080 --> 0:01:46.600 for equities, you know, what it does is favor certain 0:01:46.640 --> 0:01:50.360 sectors and disfavor other sectors. So I mean, you know, 0:01:50.400 --> 0:01:53.680 you've said yourselves, you've had a very strong performance by financials, 0:01:53.680 --> 0:01:57.080 which are very yield curve sensitive. Energy has been you know, 0:01:57.640 --> 0:02:01.160 far more impressive than than financials. UM. I think you're 0:02:01.160 --> 0:02:04.240 gonna start to see materials follow suit once people get 0:02:04.240 --> 0:02:07.720 over their fears about about China. And the losers are 0:02:07.800 --> 0:02:12.399 a combination of very sensitive sectors such as utilities UM. 0:02:12.480 --> 0:02:14.880 And if you know, things do sort of proceed and 0:02:14.919 --> 0:02:17.480 you do start to get yields baking out. I think 0:02:17.520 --> 0:02:20.480 the danger event is that you start to chip away 0:02:21.200 --> 0:02:23.680 the attraction of the very high multiple portions of the 0:02:23.760 --> 0:02:26.320 US equity market. So as they say, it's it's video 0:02:26.720 --> 0:02:29.639 winners a loser scenario, um, you know, but that we 0:02:29.680 --> 0:02:31.880 see ahead of ours, I think it would favor certain 0:02:31.880 --> 0:02:36.160 indexes and hurt ours. Michael, you are expert across all 0:02:36.200 --> 0:02:40.280 that we do, equities, bonds, currencies, commodities fold in this 0:02:40.440 --> 0:02:45.760 commodity moment into the other asset classes in particularly equities. 0:02:45.880 --> 0:02:48.799 Do you believe in the commodities super rarely that we're 0:02:48.800 --> 0:02:52.600 beginning to see? And what does it mean for stocks? Yeah? 0:02:52.639 --> 0:02:58.440 I mean commodity equities look very cheap compared to commodity prices. Um. 0:02:58.480 --> 0:03:01.720 You know, energy equities are nowhere close to where they 0:03:01.760 --> 0:03:05.160 were in two thousand and fourteen, when when trude oil 0:03:05.240 --> 0:03:09.440 places were at current levels. Um. You know, if you 0:03:09.480 --> 0:03:12.680 look at the industrial medals, they again look very cheap. 0:03:13.000 --> 0:03:15.880 You know, have this collapse in iron or the the 0:03:15.960 --> 0:03:18.679 iron ore miners, you know, look look way cheap to 0:03:18.800 --> 0:03:21.760 iron or you know where where it is today. So 0:03:22.480 --> 0:03:25.119 you know, I think the market remains skeptical. I think 0:03:25.160 --> 0:03:30.079 it's viewed commodity equities as excellent trading vehicles. I think 0:03:30.160 --> 0:03:32.239 you know, betther to be large amounts of money have 0:03:32.360 --> 0:03:34.800 been happy to jump into commodities and then jump out 0:03:34.800 --> 0:03:37.520 of them. Um. You know what we haven't yet seen 0:03:37.680 --> 0:03:40.800 is is a sort of moveless, sort of heavy fundamental 0:03:40.880 --> 0:03:44.000 investors back into the commodity space. Now, there's a couple 0:03:44.040 --> 0:03:45.920 of very good recents of that. One is it's been 0:03:45.960 --> 0:03:48.760 a terrible place to be for a decade. And I 0:03:48.760 --> 0:03:50.680 think the other reason is is the E s G 0:03:50.840 --> 0:03:53.840 pressures for a lot of a lot of institutional managers 0:03:54.000 --> 0:03:58.600 on lead them to want to, you know, underplay investment 0:03:58.640 --> 0:04:01.240 in a lot of these areas. Are the over Michael, 0:04:01.280 --> 0:04:03.800 gotta leave it there, thank you, sir, Really good final point, 0:04:03.800 --> 0:04:12.760 Michael Shaw of market Field Asset Management. I know you 0:04:12.840 --> 0:04:16.360 many um an aluminum on the equity markets. Alicia Levine 0:04:16.440 --> 0:04:19.000 b and Y Melon joins us right now, Alicia, to 0:04:19.040 --> 0:04:21.159 the point out there right now, and this is really 0:04:21.160 --> 0:04:23.880 in the zeitgeis this morning. Do you buy on the 0:04:23.960 --> 0:04:26.880 rumor of banks doing better or do you sell on 0:04:26.920 --> 0:04:29.640 the news of their earnings tomorrow? What do you do 0:04:30.080 --> 0:04:33.960 with an overweight in banks? So I think that the 0:04:34.040 --> 0:04:36.880 market is set up for this particular quarter to be 0:04:37.160 --> 0:04:40.560 tilted more towards the reopening and cyclical. So I think 0:04:40.640 --> 0:04:43.680 here you buy the banks, but I think you have 0:04:43.800 --> 0:04:46.720 to be careful because we've already had a huge move 0:04:47.080 --> 0:04:50.560 both in energy and banks coming into the quarter. And 0:04:50.600 --> 0:04:53.159 the key issue, as you've been talking about, is the 0:04:53.279 --> 0:04:57.839 loan book, and we have seen anemic loan growth across 0:04:57.880 --> 0:05:00.800 the banks for for the last few weeks, actually for 0:05:00.839 --> 0:05:03.800 the last few quarters. When you think about it, households 0:05:03.839 --> 0:05:08.240 are still flushed with cash and businesses are flushed with cash. 0:05:08.720 --> 0:05:12.360 So where is that demand for loan loans coming from? 0:05:12.400 --> 0:05:14.560 That's really the next leg of growth here. So I 0:05:14.600 --> 0:05:18.560 would say be long, be strong, but be faded a 0:05:18.600 --> 0:05:21.080 little bit, only because we've had such a strong move here. 0:05:21.080 --> 0:05:23.159 I do think the quarter is going to be a 0:05:23.279 --> 0:05:25.960 higher yield and a cyclical plate for the quarter. I 0:05:26.000 --> 0:05:27.880 think we're set up for that Atlicia. Set me up 0:05:27.880 --> 0:05:30.000 for next year. Then you and I have been talking recently, 0:05:30.000 --> 0:05:33.159 and that's valuable to me because you're constructive next year. 0:05:33.279 --> 0:05:35.520 There's a distinction between the chop you expect into year 0:05:35.600 --> 0:05:38.280 end and what you're looking for through next year through 0:05:38.320 --> 0:05:42.200 its entirety th two. What's the difference here? So I 0:05:42.279 --> 0:05:44.400 think we have we have an issue here where we 0:05:44.440 --> 0:05:48.080 have to get through something of an air pocket, and 0:05:48.360 --> 0:05:51.040 the supply chains turned out to be stickier than expected. 0:05:51.080 --> 0:05:54.880 Inflation higher than expected, and growth came down faster than expected. 0:05:55.360 --> 0:05:57.359 But if you look at the estimates, the estimates are 0:05:57.400 --> 0:06:02.240 actually rising for because the demand is still there. So 0:06:02.279 --> 0:06:05.000 this is still a supply shock to the extent that 0:06:05.200 --> 0:06:08.680 this is still a supply shock and not a buyer's 0:06:08.839 --> 0:06:12.719 strike on on the demand side, growth can be higher 0:06:12.720 --> 0:06:16.240 in two and earnings also, what do we have to 0:06:16.279 --> 0:06:18.520 do to get there? We're sitting on the hundred day 0:06:18.520 --> 0:06:21.640 moving average. We're probably going lower from here. You can 0:06:21.640 --> 0:06:24.039 see how the markets closed for the last few days. 0:06:24.440 --> 0:06:28.000 It just can't rise. We still have overhead on resistance 0:06:28.000 --> 0:06:31.360 above us, so we're probably gonna have to test lower. However, 0:06:31.520 --> 0:06:34.000 I think earning season is going to give us a 0:06:34.080 --> 0:06:36.880 really good clue of where we're going on some of 0:06:36.920 --> 0:06:39.919 these supply issues, which is creating the inflation. So the 0:06:39.920 --> 0:06:43.200 two sectors we worry about are the industrials and retail 0:06:43.440 --> 0:06:47.000 because that's where the companies are not able to pass 0:06:47.120 --> 0:06:50.640 along price as easily. Some of the reason why some 0:06:50.680 --> 0:06:53.280 of these sectors have been stickier and not moving higher. 0:06:53.920 --> 0:06:57.520 If we get through earning season with any comments such 0:06:57.560 --> 0:07:00.400 as in the last two weeks of September saw an 0:07:00.480 --> 0:07:03.120 easing of these issues, then if we're off to the races, 0:07:03.360 --> 0:07:05.680 but we have to hear it well, Alicia, if you 0:07:05.800 --> 0:07:08.680 do believe that this will eventually pass, that we will 0:07:08.720 --> 0:07:12.600 see stronger growth in two Do you buy those retail 0:07:12.680 --> 0:07:16.920 and industrial names when they sell off after reporting stickier 0:07:16.920 --> 0:07:20.040 than some people had expected supply chain issues for this year, 0:07:20.280 --> 0:07:23.960 but perhaps not next. Yeah, I would. I would definitely 0:07:24.000 --> 0:07:26.960 buy because we're still constructive on the reopening and Europe 0:07:27.040 --> 0:07:31.240 is behind us more of a stagflation problem there, but 0:07:31.360 --> 0:07:34.920 on a tactical trade the reopening should work in Europe 0:07:34.960 --> 0:07:37.560 as well, and you can you can do some trades 0:07:37.920 --> 0:07:39.840 in Europe as well to add to sort of the 0:07:39.920 --> 0:07:43.080 value tail. But overall, we don't think you should be 0:07:43.160 --> 0:07:46.240 tilted one way or the other and more of a barbell. 0:07:46.320 --> 0:07:48.440 I hate that we're barbell. Everybody uses it. But the 0:07:48.480 --> 0:07:50.600 truth of the matter is this year the market didn't 0:07:50.640 --> 0:07:54.720 reward you for being overweight value or cyclicals. It really 0:07:54.800 --> 0:07:57.360 was a monthly or even quarterly story. And I think 0:07:57.360 --> 0:07:59.680 as we move into the second quarter of next year, 0:08:00.200 --> 0:08:04.840 those supply chain issues are going to lessen commodity price 0:08:04.920 --> 0:08:08.760 spikes come down, and when that happens, you're going to 0:08:08.800 --> 0:08:11.160 see something of a flattening of the yield curve and 0:08:11.200 --> 0:08:13.960 you're going to see increase in growth and you're going 0:08:13.960 --> 0:08:16.640 to see a lowering of the inflation. So you want 0:08:16.640 --> 0:08:19.119 to be prepared for that. So you have a short 0:08:19.200 --> 0:08:22.800 term where inflation is moving higher, inflation expectations are moving higher. 0:08:22.840 --> 0:08:25.120 You have to get through it. But we think by 0:08:25.160 --> 0:08:28.160 the second quarter these supply issues will start to come down. 0:08:28.640 --> 0:08:34.160 And again, commodity price spikes don't last. So Alicia just quickly, 0:08:34.280 --> 0:08:36.959 if I wanted a call option on a better supply 0:08:37.040 --> 0:08:39.720 side story, what do I want to be doing? Kids 0:08:39.800 --> 0:08:42.360 it through industrials? How do I get that? Where do 0:08:42.400 --> 0:08:45.600 I get that exposure? You can do it through industrials. 0:08:45.600 --> 0:08:47.520 But again I would wait to get through this earning 0:08:47.559 --> 0:08:49.960 seasons because look, it's not it's not it's not a 0:08:50.000 --> 0:08:51.959 short bet, right, it could go either way. You need 0:08:52.000 --> 0:08:56.320 to hear some sort of language that they expect a 0:08:56.360 --> 0:08:59.679 better day going forward. But also I would look at 0:08:59.720 --> 0:09:03.560 some of growth sectors, in particular the more value areas 0:09:03.640 --> 0:09:05.760 of tech where they can earn through it. In the end, 0:09:05.800 --> 0:09:08.679 we like companies that can earn, that can earn through 0:09:08.720 --> 0:09:12.600 this and not be such price takers. It's a stock 0:09:12.640 --> 0:09:15.800 pickers market, as we've talked about, and that means you 0:09:15.840 --> 0:09:18.439 have to really do the fundamental analysis on where the 0:09:18.440 --> 0:09:21.600 supply chains are and how companies can pass price on. 0:09:21.840 --> 0:09:24.360 So I'd look at growth sectors. I'd like it, look 0:09:24.400 --> 0:09:27.240 at companies that can earn through this, and I'd also 0:09:27.280 --> 0:09:30.480 add healthcare here as a bit of a defensive play. 0:09:30.640 --> 0:09:34.760 In fact, we're not right and yeah, I gotta run. 0:09:34.960 --> 0:09:36.960 Sorry cloaks, take in produce a get some my oron 0:09:37.040 --> 0:09:42.600 screams which we have to go. Alicia Levigne almost bullied. Yeah, 0:09:42.920 --> 0:09:52.400 just you know it's abuse right now. We will dive 0:09:52.960 --> 0:09:55.720 into CPI. We can do that with Thomas Purcelli RBC 0:09:55.880 --> 0:10:00.400 Capital Markets usually on the linkage of labor to the economy. 0:10:00.440 --> 0:10:05.960 Today we go price Tom Percelly, which inflation series should 0:10:05.960 --> 0:10:11.000 our listeners and viewers pay attention to. I don't think 0:10:11.000 --> 0:10:13.640 there's any one. I think that it's good to actually 0:10:13.760 --> 0:10:16.480 use all the metrics that are out there. So whether 0:10:16.559 --> 0:10:21.160 it's UM CPI headline, core PC headline, core. I think 0:10:21.160 --> 0:10:23.199 that the role um you know, that's how you sort 0:10:23.240 --> 0:10:25.200 of get this mosaic of what what is happening, because 0:10:25.200 --> 0:10:28.600 they're all constructed slightly different. But as as you and 0:10:28.640 --> 0:10:31.720 I have talked about many times over the years, you know, 0:10:31.800 --> 0:10:35.040 I do like to break down inflation into two components, 0:10:35.320 --> 0:10:37.800 goods and services. I think you got a really great 0:10:37.800 --> 0:10:41.360 sense for what's happening from an underlying flation dynamic perspective. 0:10:41.600 --> 0:10:43.400 And I think, as we all appreciate right now, goods 0:10:43.440 --> 0:10:47.040 prices UM are incredibly elevated, which has been the case 0:10:47.440 --> 0:10:49.679 for a number of months. Service part of it has 0:10:49.720 --> 0:10:52.560 really lacked um uh and and you know, in fairness, 0:10:52.840 --> 0:10:54.720 we thought that it would actually be sort of really 0:10:54.720 --> 0:10:57.440 turning up in earnest sort of right around now. UM. 0:10:57.480 --> 0:10:59.720 But again it's it's it's not for a host of reasons, 0:10:59.720 --> 0:11:01.199 not the east of which is you know, I think 0:11:01.240 --> 0:11:04.079 delta really got in the way of of seeing this shift. 0:11:04.120 --> 0:11:05.520 I mean, we had long thought that there would be 0:11:05.559 --> 0:11:09.679 this good spending shift or spending away from goods to services. 0:11:09.920 --> 0:11:12.840 It hasn't really materialized, um in large part because because 0:11:12.880 --> 0:11:15.480 of delta um and, and there's obviously other factors. I 0:11:15.480 --> 0:11:17.040 mean I think there are supplied controls even in the 0:11:17.040 --> 0:11:19.080 service space, but those are the right ways I think 0:11:19.080 --> 0:11:22.040 of thinking about inflation. To your bigger question, is real 0:11:22.240 --> 0:11:26.200 estate a good or a service? Yeah, so it's going 0:11:26.240 --> 0:11:28.720 to show up in in services, right, so you know, 0:11:28.760 --> 0:11:32.640 in fact it's it's the single biggest component of of 0:11:32.720 --> 0:11:35.880 services and cp I. Uh. And that is one area 0:11:35.880 --> 0:11:38.439 where again we've we've been talking about this for for 0:11:38.559 --> 0:11:41.200 months and months that you would see this this this 0:11:41.280 --> 0:11:44.679 sort of floor put underneath inflation because of real estate, right, 0:11:44.679 --> 0:11:46.840 because of all of the sort of price games that 0:11:46.880 --> 0:11:50.560 we've seen that ultimately bleed into rentals. Um, that would 0:11:50.840 --> 0:11:53.040 put a floor underneath inflation in and look, it's it's 0:11:53.040 --> 0:11:55.400 been more or less happening um. And I think again 0:11:55.440 --> 0:11:56.840 that will take a little bit more time for that 0:11:56.920 --> 0:11:59.560 to really start to um uh sort of feed through 0:11:59.800 --> 0:12:02.280 so or of feeds into price games that we see 0:12:02.360 --> 0:12:04.760 from an inflation perspective feed into the rental component with 0:12:04.800 --> 0:12:07.040 a bit of a lag. Um. So it's something that 0:12:07.120 --> 0:12:09.720 will persist, we think, for many months to come. How 0:12:09.720 --> 0:12:11.839 concerned are you about the idea of a high cp 0:12:11.960 --> 0:12:13.960 I print in a low retail print, this sort of 0:12:14.440 --> 0:12:18.280 combo reading into this whole stag inflationary debate in a 0:12:18.360 --> 0:12:23.000 bad way. Yeah. Yeah, Look, I'm I'm you know, I 0:12:23.040 --> 0:12:25.280 don't know famous least words writing. I don't want to 0:12:25.320 --> 0:12:27.160 just say, I don't want to outright dismiss it, but 0:12:27.200 --> 0:12:30.000 I but I sort of do like the stag flat. 0:12:30.320 --> 0:12:34.280 The stagflation part of this conversation to me is um 0:12:34.360 --> 0:12:37.640 a tricky one. I believe in the flation part of it, 0:12:37.760 --> 0:12:39.839 right because again we've been talking about there'll be more 0:12:39.880 --> 0:12:43.360 persistent inflation than than was appreciated. It's the stag part 0:12:43.600 --> 0:12:45.280 of of it that I have a hard time with. 0:12:45.480 --> 0:12:48.400 The consumers in such fantastic shape right now. Uh you know, 0:12:48.440 --> 0:12:50.800 they're they're sitting on a mountain of cash. Uh. You know, 0:12:50.840 --> 0:12:53.439 you can look at it through the lens of excess saving, 0:12:53.480 --> 0:12:55.679 you can look at it through the lens of um, 0:12:55.920 --> 0:12:58.720 you know, liquid assets, um. But by really almost any measure, 0:12:58.920 --> 0:13:02.560 the consumers looking in really fine shape. So so my 0:13:02.600 --> 0:13:06.400 word of caution is defined stagflation more precisely because if 0:13:06.400 --> 0:13:08.520 you're just talking about growth going from six percent, which 0:13:08.520 --> 0:13:10.440 is roughly what we're gonna have this year, you know, 0:13:10.520 --> 0:13:12.280 down to like three or four percent, which was what 0:13:12.320 --> 0:13:15.959 we expect next year? Is that stagg Is that really 0:13:16.760 --> 0:13:21.400 growth stagnating wildly above potential growth? So um, So I 0:13:21.840 --> 0:13:23.360 have a hard time with that part of it. And 0:13:23.640 --> 0:13:25.600 that's all fair, right, And you sort of put aside 0:13:25.760 --> 0:13:28.200 the controversy over the word and how it's being used, 0:13:28.360 --> 0:13:30.320 And there is this conundrum. You said that the consumers 0:13:30.360 --> 0:13:32.000 are in such a good place, they have so much 0:13:32.000 --> 0:13:35.160 money to spend, and yet consumer sentiment has been declining 0:13:35.200 --> 0:13:37.400 and pretty steadily, and this has raised some concerns and 0:13:37.440 --> 0:13:39.760 the likes of Danny blanche Flower who says this is 0:13:39.760 --> 0:13:42.520 one of the most predictive elements of recession about eighteen 0:13:42.520 --> 0:13:45.280 months before no one else is really talking about recession. 0:13:45.360 --> 0:13:48.560 But how much can you really dismiss consumer sentiment which 0:13:48.559 --> 0:13:52.240 seems to be on a downward trend? Yes, Lisa, what 0:13:52.320 --> 0:13:55.280 I would suggest is in this and you have better 0:13:55.320 --> 0:13:58.160 access to this than me, look at that, Look at 0:13:58.160 --> 0:14:01.679 the languor um confidence measure, right, it actually comes out 0:14:01.720 --> 0:14:03.400 on your Bloomberg is the only place I've ever seen. 0:14:03.440 --> 0:14:05.800 And I think actually Bloomberg may have sort of been 0:14:05.840 --> 0:14:07.560 involved with it at one point, but I think they've 0:14:07.600 --> 0:14:10.480 they've since um um push it off to this, this 0:14:10.559 --> 0:14:13.440 other company Langer. If you look at so again, this 0:14:13.520 --> 0:14:15.480 is what we're talking about inflation measures. I think you 0:14:15.520 --> 0:14:18.600 can look at different confidence measures too. Um. So if 0:14:18.640 --> 0:14:20.800 you look at the University of Michigan, the University of 0:14:20.800 --> 0:14:24.120 Michigan measure is really going to be more influenced by 0:14:24.240 --> 0:14:27.600 things like prices, and so that's down much more prices 0:14:27.600 --> 0:14:30.000 are elevated. People are obviously really feeling the pinch of that. 0:14:30.240 --> 0:14:32.480 If you look at the Conference Boards measure, the Conference 0:14:32.480 --> 0:14:35.280 Boards measure is sort of hanging in there a bit better. Again, 0:14:35.320 --> 0:14:37.400 it's also down a bit, there's no question about that, 0:14:37.600 --> 0:14:40.520 but that's more focused on labor um, so that's remained 0:14:40.520 --> 0:14:42.280 a little bit more buoyant. And then you have something 0:14:42.320 --> 0:14:45.280 like the languor measure um, which is actually done pretty 0:14:45.320 --> 0:14:49.280 well over the course of the last several weeks and months. 0:14:49.280 --> 0:14:52.320 So again it's you know, which measure of of of 0:14:52.360 --> 0:14:54.400 confidence do you really want to look at. I think 0:14:54.400 --> 0:14:56.240 that they're all sort of telling you a story of Look, 0:14:56.280 --> 0:14:58.640 there is some caution out there, there's no question about that. 0:14:58.840 --> 0:15:03.680 I think prices are certainly eroding some element of confidence. 0:15:03.720 --> 0:15:06.640 I think the consumers lack of ability to really go 0:15:06.760 --> 0:15:09.360 out and buy what they want because of lack of inventory. 0:15:09.520 --> 0:15:11.560 I think that's certainly hurting. But if you think about 0:15:11.560 --> 0:15:14.080 the labor backdrop, which is ultimately what is one of 0:15:14.080 --> 0:15:17.400 the key drivers from a confidence perspective, it continues to 0:15:17.400 --> 0:15:20.040 perform pretty pretty well. The words stan inflation, I think 0:15:20.160 --> 0:15:23.119 is just a massive distraction right now, investors an economistic 0:15:23.560 --> 0:15:26.720 they're speaking past each because Tom, you can easily just 0:15:26.840 --> 0:15:29.440 prove that it's not stagflation. I think what market participants 0:15:29.440 --> 0:15:32.080 are looking at, and you know from daddy conversations, they're 0:15:32.080 --> 0:15:34.280 focused on the balance of risks around growth, the balance 0:15:34.320 --> 0:15:36.840 of risk around inflation. They see upside risk to inflation 0:15:36.840 --> 0:15:38.880 and downside risk to growth. And so I guess my 0:15:38.960 --> 0:15:41.200 question is to you next year, how those balance of 0:15:41.280 --> 0:15:44.400 risks evolve as the year grows older. Next year, what 0:15:44.440 --> 0:15:47.880 are you looking for? Yes, so we're looking for slower growth. 0:15:48.240 --> 0:15:50.560 And Jonathan, I think that you've framed it the right way. 0:15:50.600 --> 0:15:54.040 I just forget about these words, right like transitory and 0:15:54.040 --> 0:15:56.000 and stagna. I mean, this is all these words are 0:15:56.000 --> 0:15:58.440 a massive distraction. And so what I would simply say 0:15:58.520 --> 0:16:01.360 is if you're if you're, if you're sort of question 0:16:01.400 --> 0:16:03.480 is simply is growth going to slow next year? The 0:16:03.480 --> 0:16:05.520 answer to that is a resounding yes. I mean, you 0:16:05.560 --> 0:16:08.200 cannot maintain six percent growth. But I think where you're 0:16:08.240 --> 0:16:10.040 going from and where you're going to is critical to 0:16:10.080 --> 0:16:12.160 the conversation. So if you're going to remain north of 0:16:12.200 --> 0:16:14.360 potential growth, which is what we expect, I mean, look, 0:16:14.480 --> 0:16:16.480 I know that you know some uh, there was some 0:16:16.560 --> 0:16:19.000 big down grade of growth or I haven't seen. Just 0:16:19.040 --> 0:16:20.840 someone send me a message at it on it. I 0:16:21.240 --> 0:16:23.040 don't care who downgrades growth. I don't want to know 0:16:23.080 --> 0:16:25.120 where it's going from and where it's going to. Our 0:16:25.200 --> 0:16:27.960 growth is we're looking for just about slightly us than 0:16:28.000 --> 0:16:30.320 four percent growth. I mean, you know, I don't know what. 0:16:30.480 --> 0:16:31.640 I don't know what more to say about that. That That 0:16:31.800 --> 0:16:36.280 is just slowing from what we're witnessing this year next year, 0:16:36.400 --> 0:16:38.840 Is your vector moved down from four percent to something 0:16:38.880 --> 0:16:42.160 lower something your potential? We haven't really yeah, no, we 0:16:42.200 --> 0:16:44.160 haven't really moved our numbers all that much. I mean, look, 0:16:44.160 --> 0:16:46.640 we're always sort of fine tuning our estimates, but we 0:16:46.640 --> 0:16:48.800 haven't made some like wholesale adjustment. I mean we know, 0:16:49.160 --> 0:16:51.120 you know, these are all tents or two on either 0:16:51.200 --> 0:16:54.080 side of what has been our baseline. So no, it's 0:16:54.080 --> 0:16:55.640 not like we're looking for some you know, sort of 0:16:55.680 --> 0:16:57.880 materials slowing. And again, I think it's really hard to 0:16:57.920 --> 0:17:00.120 make the case. Look you have I'll say one more time, 0:17:00.160 --> 0:17:02.440 the consumer setting all that cash. That's great, um, But 0:17:02.480 --> 0:17:03.680 I think you have to keep in mind too, if 0:17:03.720 --> 0:17:06.040 you look at sort of the state of the consumer 0:17:06.040 --> 0:17:08.800 balance sheet, it's in pristine shape. So when when people 0:17:08.840 --> 0:17:10.679 go knocking on the door of banks which are going 0:17:10.720 --> 0:17:12.040 to do ultimate right, because if you look at the 0:17:12.080 --> 0:17:15.440 loans depository issue in the United States, it's it's it's collapsed. 0:17:15.680 --> 0:17:17.320 But at some point people are going to go knocking 0:17:17.320 --> 0:17:18.720 on those doors and guess where they're going to and 0:17:18.720 --> 0:17:20.720 guess what banks are going to find people with really 0:17:20.760 --> 0:17:22.960 really good balance sheets. Right. So I think that that's 0:17:23.000 --> 0:17:25.120 another leg of the conversation, and I think it's being 0:17:25.119 --> 0:17:28.720 completely missed an old the noise of stagnation and transitory 0:17:28.760 --> 0:17:31.480 and all this other nonsense that I think do distract 0:17:31.520 --> 0:17:33.879 I think Jonathan hit the nail on the head. So Tom, 0:17:33.960 --> 0:17:36.879 we are getting a number of analysts coming out including 0:17:36.880 --> 0:17:40.399 Golden Sacks, is Jon Hattias and downgrading the expectation, and 0:17:40.440 --> 0:17:43.320 we're hearing increasingly. The input data shows that some of 0:17:43.359 --> 0:17:46.640 the supply chain disruptions have lasted longer. Why has that 0:17:46.760 --> 0:17:51.679 not materially changed your view? Well, we we expected that 0:17:51.680 --> 0:17:53.520 they would linger for longer. I mean, that's the thing. 0:17:53.560 --> 0:17:57.160 It's like, maybe so I look, we had a pretty 0:17:57.160 --> 0:17:58.920 good call on this, I think for a while now. 0:17:59.000 --> 0:18:01.119 And so again you could to our research anyway you 0:18:01.119 --> 0:18:02.439 want to read it. I mean, we've been saying that 0:18:02.480 --> 0:18:05.080 these issues would linger for longer, so we we never 0:18:05.119 --> 0:18:07.560 really had so we we had it built into our numbers, 0:18:07.560 --> 0:18:09.080 so we never really had to take down our numbers 0:18:09.080 --> 0:18:11.720 in any material way. I mean, it's that's as simple 0:18:11.720 --> 0:18:13.919 as that. You know. For those of you on radio, 0:18:14.040 --> 0:18:17.639 we have Thomas Purcelli today from the offices of RBC 0:18:18.280 --> 0:18:23.439 and John I mean, I'm sorry, this is a Percelli different. 0:18:23.760 --> 0:18:27.640 This is a PERSONI focused without the distractions of children 0:18:28.040 --> 0:18:32.800 and or dog. I mean, yes, I am back in 0:18:32.840 --> 0:18:34.960 the office. It feels, it feels good to be here. 0:18:34.960 --> 0:18:36.919 For you didn't bring the children with the dog with 0:18:37.000 --> 0:18:39.679 you to the office. I didn't and my kids have 0:18:39.760 --> 0:18:41.800 been very upset by this. And actually I think the 0:18:41.880 --> 0:18:44.199 dog is actually taking it worse because you walk in 0:18:44.280 --> 0:18:46.239 and like he looks like a little down, like no 0:18:46.240 --> 0:18:50.280 one's around all day now, Tom, you know a freedom 0:18:50.480 --> 0:18:53.360 as he cashed out that long masknack position. So that's 0:18:53.359 --> 0:18:59.919 what matters a kids. The dog is suffering. Hello pressed 0:19:00.000 --> 0:19:03.119 and who is still long Banessa kid stains. Thank you 0:19:03.119 --> 0:19:04.960 great to have that energy on the writing flowback in 0:19:04.960 --> 0:19:08.160 New York City with humble study that of obvious Canada markets. 0:19:13.320 --> 0:19:15.320 What I want to do right now is a little 0:19:15.359 --> 0:19:18.119 bit of a window into the adult nous of the 0:19:18.160 --> 0:19:21.640 pros we talked to on COVID. We asked media questions, 0:19:21.680 --> 0:19:24.760 they're Germaine to what you believe or worried about it 0:19:24.920 --> 0:19:29.040 that on this terrible pandemic. I'm much adulge is it 0:19:29.160 --> 0:19:32.360 v A Pittsburgh among other hospitals with the Johns Hopkins 0:19:32.359 --> 0:19:35.560 Center for Health Security, and back in October, he and 0:19:35.600 --> 0:19:39.680 a team of people went into the trenches of antibiotic 0:19:39.720 --> 0:19:44.600 consumption wrapped around no sacomial infection, which is infection in 0:19:44.680 --> 0:19:49.080 a hospital and the overlay of that on a viral pandemic. 0:19:49.680 --> 0:19:52.680 We never talked about this stuff. I'm at Dolgia thinks 0:19:52.720 --> 0:19:55.760 about it and publishes on a pro level. I'm sure 0:19:55.760 --> 0:20:00.000 our our, our our hospitals gonna get back to north 0:20:00.000 --> 0:20:03.800 normal or does the linkage of virus and bacteria, I mean, 0:20:03.840 --> 0:20:09.040 our hospitals are forever changed. Hospitals are probably forever changed. 0:20:09.080 --> 0:20:12.520 Because of COVID nineteen. We've not seen an infectious disease 0:20:12.560 --> 0:20:16.800 outbreak really impinge hospital capacity for this long, probably since 0:20:16.880 --> 0:20:20.760 since night, and now hospitals have really reconfigured themselves to 0:20:20.800 --> 0:20:23.200 be able to deal with COVID plus, so COVID plus 0:20:23.280 --> 0:20:26.320 heart attacks, COVID plus strokes, COVID plus all the other 0:20:26.640 --> 0:20:29.400 bacterial infections that we see. So there is been really 0:20:29.440 --> 0:20:32.880 a reconfiguration of how hospitals are. Everything from personal protective 0:20:32.880 --> 0:20:36.280 equipment to visiting hours, all of that has been changed, 0:20:36.320 --> 0:20:38.440