Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Paul Sweeney along
Speaker 2: with Tom Keen. Join us each day for insight from
Speaker 2: the best in economics, geopolitics, finance, and investment. You can
Speaker 2: also watch the show live on YouTube. Visit the Bloomberg
Speaker 2: Podcast channel on YouTube to see the show weekday mornings
Speaker 2: from seven to ten Eastern Remark Global Headquarters at New
Speaker 2: York City. Subscribe to the podcast on Apple, Spotify, or
Speaker 2: anywhere else you listen, and as always on Bloomberg Radio,
Speaker 2: the Bloomberg Terminal, and the Bloomberg Business App. Let's check
Speaker 2: in with Zanne Saunders. We need some help here, chief
Speaker 2: investment strategist for Charles Schwab Lizan. I mean, I'm looking
Speaker 2: at the S and p NASDAC both up double digits
Speaker 2: this year. We had a real scare. I guess almost
Speaker 2: three weeks ago on that crazy Monday. Where do we
Speaker 2: go here? For the remainder of the year, We're all
Speaker 2: gonna be paying attention to fed Truman Pale today, Let's
Speaker 2: think a little bit beyond that. How are you feeling
Speaker 2: about these markets going forward?
Speaker 3: Well, you talk about the big scare, and it really
Speaker 3: was just concentrated in that one week, and in particular
Speaker 3: on August fifth, and that had a lot to do
Speaker 3: with the unwinding of the year Yan Carriy tret But
Speaker 3: even before that, the calm really was only on the surface.
Speaker 3: Even before the pullback that brought the Nasdaq into correction territory,
Speaker 3: you had had no more than a seven percent draw
Speaker 3: down in the Nasdaq, but the average member maximum draw
Speaker 3: down just here to date was negative forty percent. That's
Speaker 3: now negative forty three percent, alongside at the index level
Speaker 3: the Nasdaq being down thirteen percent. So there has already
Speaker 3: been a tremendous amount of churn and rotation and even
Speaker 3: turmoil under the surface, maybe more reflective of all of
Speaker 3: these uncertainties that were still dealing with and what you
Speaker 3: would pick up if you just looked at the index level.
Speaker 3: Jackson Hole is important. Obviously, the September FOMC meeting, we're
Speaker 3: thinking twenty five, not fifty, barring a more significant surprise
Speaker 3: in some combination of the PCE that's coming up and
Speaker 3: the jobs report. But at this point we're penciling in
Speaker 3: twenty five is the start point.
Speaker 4: The zan Tom's going to be so sorry that he
Speaker 4: missed you. I just got to say, if we see
Speaker 4: those cuts not in a recession, oh hello, not in
Speaker 4: a recession, does that change the leadership profile like no
Speaker 4: financial stay with tech? Does it change how you think
Speaker 4: about it?
Speaker 5: Yeah?
Speaker 3: What does tend to happen is if you look at
Speaker 3: past cycles and you see the FED operating more slowly,
Speaker 3: ostensibly because they're not combating a recession or a financial
Speaker 3: crisis or some combination thereof. Not only do you see
Speaker 3: milder maximum draw downs within say the six months or
Speaker 3: up to a year following the initial cut, you tend
Speaker 3: to see more of a cyclical bias in terms of
Speaker 3: what does well at the factor level, at the sector level.
Speaker 3: In contrast the fast cutting cycles where sensibly they are
Speaker 3: combating a recession and or financial crisis, like was the
Speaker 3: case when the FED started cutting in six we all
Speaker 3: know what was still ahead of us. That was those
Speaker 3: were backdrops where there were greater maximum drawdowns and more
Speaker 3: defensiveness in terms of factor and sector based leadership. So
Speaker 3: I actually say to people who are looking for or
Speaker 3: hoping for an aggressive FED, be careful what you wish for.
Speaker 3: It's the why behind the FED starts a cutting cycle
Speaker 3: and the level of aggressiveness that defines how markets behave.
Speaker 2: Lizanne, what did you learn from this earning cycle that
Speaker 2: we just pretty much closing up this week?
Speaker 3: So you know, the beat rate and the percent by
Speaker 3: which companies beat was about in line with recent averages,
Speaker 3: better than long term averages. However, the same cannot be
Speaker 3: set on the top line growth, So you had a
Speaker 3: below average beat rate on revenue growth, you had a
Speaker 3: below average percent by which companies beat. Not to mention
Speaker 3: the fact that third quarter estimates trend to down even
Speaker 3: though second quarter ended up being loftier than expected. Within
Speaker 3: the sort of AI theme, I think part of the
Speaker 3: reason why you went into correction mode for call it
Speaker 3: the Magnificent seven, et cetera, that group of megacap names,
Speaker 3: is because there was a lot more emphasis on the
Speaker 3: maybe the timing gap between the expenses associated with AI
Speaker 3: and the revenue generation associated with AI. The last thing
Speaker 3: I'd say is, I think there's increasing attention on the
Speaker 3: revenue side of the equation because revenues in general tend
Speaker 3: to correlate more with what decisions made about the labor
Speaker 3: market more so than bottom line growth. So I think
Speaker 3: those weren't focus in the second quarter will continue to
Speaker 3: be as we approach the end of the third quarter.
Speaker 4: Do you think Nvidia next week is going to be
Speaker 4: a market event or an in video event?
Speaker 3: Tell me what they report, it's, I mean, certainly going
Speaker 3: to be incredibly important to either affirm what has been
Speaker 3: valuation expansion, not just there, but in in the broader space.
Speaker 3: I don't cover the stock, I don't cover any individual stocks.
Speaker 3: I don't want to say it's make or break, but
Speaker 3: these days a name like that can be make or
Speaker 3: break in terms of the importance of that report as
Speaker 3: a feeder into the narratives that have sat behind where
Speaker 3: leadership has resided, where valuation expansion has been most robust,
Speaker 3: and the opposite.
Speaker 2: And so that kind of goes to I guess a
Speaker 2: question I ask a lot zandwich. Is it seems like
Speaker 2: for the longest time this market has been driven by
Speaker 2: technology and for good reason. I mean, and technology has
Speaker 2: been a leading driver of this market. Is that still
Speaker 2: the case?
Speaker 3: It's not recently? You know, so far this quarter, the
Speaker 3: Magnificent seven is underperforming the rest of the market. If
Speaker 3: you look at the past month or so, and you
Speaker 3: look at where fun flows have been concentrated in the
Speaker 3: ETF space, it's actually been in areas like utilities and
Speaker 3: in real estate. So I think it's that anticipation of
Speaker 3: a FED finally moving into cutting mode that is given
Speaker 3: a lift to those more sensitive areas, and you've commensurately
Speaker 3: seen outflows and tech. I don't know that that persists
Speaker 3: in any kind of linear way. I think what's been
Speaker 3: shown over the past month or two is that there's
Speaker 3: not only money looking for opportunities outside of the Magnificent seven,
Speaker 3: but there's also still a lot of interest in better
Speaker 3: entry points in some of those names. So I would
Speaker 3: expect more of a choppy pattern, but you clearly have
Speaker 3: seen a shift in leadership more toward those interest sensitive
Speaker 3: areas as we await the September FOMAC meeting.
Speaker 4: Yeah, and from that top that we hit in July,
Speaker 4: the socks the semi index is down like thirteen percent,
Speaker 4: so I mean they've definitely rolling over quite a bit.
Speaker 4: Last we question LEZAN is today going to be a
Speaker 4: market event?
Speaker 2: I doubt it.
Speaker 3: I think given the emphasis on data dependency and the
Speaker 3: fact that we still have PCE and the jobs report
Speaker 3: in front of us, Powell may touch on the BLS
Speaker 3: benchmark revisions, but I can't imagine he has the data
Speaker 3: that would suggest a significantly more dubbish shift than what's
Speaker 3: built into expectations. So status quo for the most.
Speaker 2: Part, Right, Lezanne, thank you so much for joining us.
Speaker 2: Always appreciate getting a few minutes of your time. Listen Sanders.
Speaker 2: She's a chief investment strategist for Charles Schwab. We've got
Speaker 2: the Democratic Convention done in the book, same for the Republicans.
Speaker 2: So now I guess both candidates hit the campaign trail
Speaker 2: and they go hard until early November and November five
Speaker 2: when we get this election going. Tita Fordham joins us.
Speaker 2: She's a founder and geopolitical strategist for Fordham Global Insight. Tina,
Speaker 2: what do you make of the week that the Democrats
Speaker 2: had in Chicago? What do your takeaways?
Speaker 6: Well, what our high energy event?
Speaker 5: There wasn't a lot there for investors or business leaders
Speaker 5: to really grab on to, but that wasn't the point
Speaker 5: of this exercise. It was an interesting kind of romp
Speaker 5: through Democratic Party leaders from the past, with the Obamas
Speaker 5: and the Clinton's.
Speaker 6: The future with Buddhajdge and AOC.
Speaker 5: And then Harris's acceptance speech last night, so you know,
Speaker 5: quite an endeavor.
Speaker 4: It was truly historic, honestly, I mean even my ten
Speaker 4: year old daughter asked to watch her speech. Yeah, like
Speaker 4: maybe maybe she was also trying to stay up later,
Speaker 4: but she genuinely seemed to want to watch her acceptance speech.
Speaker 4: It was definitely an historic moment. As Paul pointed out
Speaker 4: earlier Tina, she also Kamala Harris moved away a little
Speaker 4: bit from some of the leftter policies that we've seen
Speaker 4: for the Democratic Party, particularly in climate What does that
Speaker 4: tell you about where she's headed and what her messaging
Speaker 4: and policy will be over the next three months.
Speaker 6: If she wants to win, she has to move to
Speaker 6: the center.
Speaker 5: What we saw last night and the messaging that was
Speaker 5: coming through this past week at the DNC was a
Speaker 5: clear shift away from the Bernie Sanders, the hard left,
Speaker 5: and from candidate Harris from twenty twenty right.
Speaker 6: She has walked back a.
Speaker 5: Number of those positions, a bit of economic populism in
Speaker 5: the little that we've seen on that front, but she
Speaker 5: was very much campaigning on being a president for all Americans,
Speaker 5: for the middle class, and also not othering herself by
Speaker 5: talking about gender or race. That's a big contrast compared
Speaker 5: to Hillary Clinton's approach.
Speaker 2: Tina, what do you expect the strategy to be from
Speaker 2: former President Donald Trump? Here over the next three months?
Speaker 6: He is going to have to catch up a lot
Speaker 6: quicker than we've seen so far.
Speaker 5: Democrats are playing offense, which is something they haven't necessarily
Speaker 5: done well. They're not historically a terribly disciplined party, which
Speaker 5: is why I think these last few days have been
Speaker 5: so effective. In September, the rubber hits the road with
Speaker 5: the polling, we'll see if there's been a convention bounce.
Speaker 5: But Trump is on the defensive and none of his
Speaker 5: lines of attack seem to have.
Speaker 6: Really stuck just yet.
Speaker 5: The debate on September tenth is going to be where
Speaker 5: all of this comes into focus, and I think it's
Speaker 5: going to be a tough night for Donald Trump.
Speaker 4: What do you think? What do you think Independence and
Speaker 4: modern Republicans are making of this race right now?
Speaker 5: Well, we're just starting to see that data coming in.
Speaker 5: Frank Luntz, the Polster, has talked about some of his
Speaker 5: focus groups where there is some evidence that Independence are
Speaker 5: moving toward Harris. Harris is still struggling though, with non
Speaker 5: college educated voters and.
Speaker 6: A number of men. But it's really early days.
Speaker 5: Remember that, you know, most people have a life and
Speaker 5: aren't political junkies who are glued to political conventions, let
Speaker 5: alone and watching them in the middle of the night
Speaker 5: as I am here in London, So it will take
Speaker 5: time to filter through. Americans don't tend to really pay
Speaker 5: attention to elections until September or October. Of course, Trump
Speaker 5: is a known quantity and Biden was a known quantity.
Speaker 5: But this past week has been Kamala Harris really introducing
Speaker 5: herself to the American people and Tim Walls alongside her,
Speaker 5: and we need to wait and see what the reception
Speaker 5: has been.
Speaker 2: Tina, how do we get to the point where these
Speaker 2: elections come down to six or seven swing states and
Speaker 2: that it? How do we get here?
Speaker 6: Well, we've been in this place for quite a while now.
Speaker 5: This is the fifth US election that I've covered as
Speaker 5: a professional political analyst. Was ever thus, as long as
Speaker 5: I can remember that these swing states hold so much sway,
Speaker 5: be careful saying that ten times fast, and it means
Speaker 5: that we're gonna be on a knife edge right going
Speaker 5: into this campaign. Harris can take nothing for granted, and
Speaker 5: Trump can't make any missteps the fundraising, the.
Speaker 6: The appearances, the messaging.
Speaker 5: I'd argue that Trump needs to come up with some
Speaker 5: other messages. What happens with our f K Junior stepping
Speaker 5: aside and potentially, you know, casting his support for Trump.
Speaker 5: We're talking about splitting the difference on one point five,
Speaker 5: you know, percentage points, but that's how close it's going
Speaker 5: to be.
Speaker 4: Yeah, there was a John Oliver piece on our f
Speaker 4: K Junior saying like we can write them off as
Speaker 4: like being crazy or whatever, but he actually has a
Speaker 4: lot of votes, and a lot of them are in
Speaker 4: swing states, and their percentage of they're very small percentages,
Speaker 4: like let's say one percent, but that could, as Tina
Speaker 4: just pointed out, swing the election. On that point, when
Speaker 4: do you think we're going to get more policy from
Speaker 4: Kamala Harris? That then CEOs in Wall Street can kind
Speaker 4: of understand her a little bit better. And when is
Speaker 4: she going to sit down with a journalist she.
Speaker 5: Promised to to dis interviews at the end of the month.
Speaker 5: I mean, let's remember what a world when in timing
Speaker 5: this has been I'd say she used the convention exactly
Speaker 5: the right way, which is unify the party. Democrats are
Speaker 5: not very disciplined, and we didn't see you know, kind
Speaker 5: of eruptions into protests of pragaza and the things that
Speaker 5: were feared. How many columns did we all read about
Speaker 5: whether this would be a replay of nineteen sixty eight Chicago.
Speaker 4: Many of many of them, Tina, Yes.
Speaker 5: Many, many, many, and nothing like that transpired. So you
Speaker 5: know that box is ticked, the party is united behind
Speaker 5: her and in mainstream message. The next stage, I would argue,
Speaker 5: is more detail on policies. We see both Harris and
Speaker 5: Trump being pretty heterodox in their economic policies in their
Speaker 5: different ways. How much Harris will provide detail, You know,
Speaker 5: there's not a lot of upside for candidates in doing that,
Speaker 5: as much as of course corporate leaders, business leaders, investors
Speaker 5: are looking for more detail. Providing that is likely to
Speaker 5: see her lose votes, and so it's going to be
Speaker 5: very careful balancing act.
Speaker 6: I do think she'll say more.
Speaker 5: She's already walked back the kind of poor reception that
Speaker 5: the price gouging on goods saw.
Speaker 6: Her policy on that didn't land very well.
Speaker 5: But right right now, she's got to make sure people
Speaker 5: know her and feel safe with her. I mean, well,
Speaker 5: if I can carry ongoing just for a moment in
Speaker 5: our business.
Speaker 6: We talked to global investors.
Speaker 5: Especially here in Europe, and the remarks that she made
Speaker 5: on the US not abdicating its global authority is actually
Speaker 5: the number one question that we have from international business.
Speaker 5: Is the US going to remain part of the global
Speaker 5: security architecture? So that was quite an important point for
Speaker 5: an international business audience.
Speaker 2: Tina, what role, if any, do you expect President Biden
Speaker 2: to play in this campaign?
Speaker 4: Good question.
Speaker 5: I suspect it will be a subdued role, and again
Speaker 5: we need to see how the numbers evolve.
Speaker 6: He was treated as a conquering hero. A lot of
Speaker 6: love for Joe Biden at the convention. It's not clear
Speaker 6: necessarily whether he would be an.
Speaker 5: Asset on the campaign trail or for fundraising. I mean,
Speaker 5: Harris's fundraising numbers have been through the roof. She's out
Speaker 5: fund raising Trump by you know, a couple of times over.
Speaker 5: But what Biden can do with his time, you know, yes,
Speaker 5: he's lame doc until January twentieth, twenty twenty five, might
Speaker 5: be quite interesting to watch. So for example, the fact
Speaker 5: that he's not campaigning, might free him up to do
Speaker 5: more on the Middle East.
Speaker 6: I think we haven't heard the last from Joe Biden.
Speaker 2: Hi very good, Tina, Thank you so much for joining us.
Speaker 2: Tina Fordham joining us here, founder and geopolitical strategist for
Speaker 2: Fordham Global Insight. We have the FED. They're in Jackson Hole,
Speaker 2: FED Chairman J Powell, A lot of economists out there
Speaker 2: is a whole world looking at Jackson Hold head aches.
Speaker 4: Do you think I don't know? I mean I think
Speaker 4: that all the economists are looking at it. Do I
Speaker 4: think my mom is tuning in? I highly doubt that.
Speaker 2: Yeah, But if I'm an economist sitting in London.
Speaker 7: I'm probably you're into it.
Speaker 2: If I'm a professor of economics, say the London Business School,
Speaker 2: like doctor Funny and Starve Rokova is, she's probably paying
Speaker 2: attention to Jackson Hall. Doctor Stvakova, thanks so much for
Speaker 2: joining us. I think I'm getting your name right with
Speaker 2: a little help. What are you looking for from FED
Speaker 2: Chairman J Powell today? Is you try to frame out
Speaker 2: what it means for the global economy.
Speaker 8: Thank you so much for having me.
Speaker 9: Always a pleasure to be here, so I.
Speaker 8: Don't believe it's going to be a speech in which
Speaker 8: power we will want.
Speaker 10: To store financial markets by surprising them in either direction.
Speaker 10: So we have the elections around the corner, and he
Speaker 10: wouldn't want to appe overly political, even more so given
Speaker 10: Trumps threats to the FED independence. So it might be
Speaker 10: one of those instances where Powell essentially puts much more
Speaker 10: weight on average market expectations than normal. So the average
Speaker 10: expectations at twenty five basis points, so if he says anything,
Speaker 10: probably will.
Speaker 8: Because it's done with just twenty five basis points.
Speaker 9: Now this brings me to forecasts.
Speaker 10: What are we going to learn if anything, in terms
Speaker 10: of forecasts for guidance GDP grow of inflation. Again, unfortunately,
Speaker 10: I don't think he's going to review that much on
Speaker 10: the one hand, and he do not want effectively to
Speaker 10: make markets revise their expectations in terms of the policy
Speaker 10: rate path up or down in order to not generate
Speaker 10: massive movements. But at the same time, there is a
Speaker 10: lot of concertainty of pots coming forward. Right, so we
Speaker 10: have elections, we have two candidates with quite different policies
Speaker 10: on the agenda, so it is hard for the FED
Speaker 10: as well as anyone else to forecast what is going
Speaker 10: to happen over the next year. Now he has to
Speaker 10: talk about something, right, So if you want to avoid
Speaker 10: expressing a concrete view on where the economy is headed,
Speaker 10: what do you talk about?
Speaker 8: So my prior and my guess is that he's going.
Speaker 10: To try to essentially focus on insights related to the
Speaker 10: topic of this year Jackson's COPE conference, which is reassessing
Speaker 10: the effectiveness and transmission of MOUNTI policy.
Speaker 9: So he can touch upon many issues.
Speaker 10: But my prior is that there should be hopefully something
Speaker 10: on the fiscal monitary policy and access, especially in times
Speaker 10: that fiscal.
Speaker 9: Policy going forward will continue playing a central stage for
Speaker 9: the FED optimal montary policy debates.
Speaker 10: So if don't get intuition on okay, what is the
Speaker 10: forecast for you know, any commitments on the policy rate,
Speaker 10: then might understand a little bit better what would be
Speaker 10: the trade off the fact we will keep a close
Speaker 10: eye on going forward.
Speaker 4: Funny, when you take a look at the at the
Speaker 4: balancing between inflation and the labor data, it does seem
Speaker 4: like there are still many FED officials who are genuinely
Speaker 4: worried about the inflationary trajectory that we need to continue
Speaker 4: to see more data to know the disinflation is taking hold.
Speaker 4: On the other hand, we clearly see some members who
Speaker 4: are willing to cut in July that are worried that
Speaker 4: a little move in the labor market data can translate
Speaker 4: into a big move into the unemployment rate. Where do
Speaker 4: you think that Ja Powell is going to tread that line?
Speaker 6: Again?
Speaker 1: I think twenty five basis points is nothing in terms
Speaker 1: of real effects on the economy, right, So I think
Speaker 1: he is going to try, really try to position himself
Speaker 1: in terms of not moving markets before the elections.
Speaker 10: So consensus expectations of twenty five basis points, is he
Speaker 10: going to come and do something drastic relatively what markets expect,
Speaker 10: endangering potential swings because, for example, if the cut is higher,
Speaker 10: trumping Video is going to blame him. You know, if
Speaker 10: there is no cut, you might Ria is going in
Speaker 10: the other direction. So I think they're just going to wait.
Speaker 8: I don't think the current data necessitates any you know,
Speaker 8: particularly big movements.
Speaker 10: Twenty five basis points cut is perfectly reasonable based on.
Speaker 8: The data that we have right now.
Speaker 9: It's what markets expect.
Speaker 10: It's pretty much safe to stick to that and just
Speaker 10: wait and see the data coming ahead, and of course
Speaker 10: the outcome.
Speaker 9: Of the elections.
Speaker 10: Now, one thing that's very interesting is and usually when
Speaker 10: we have elections, right this is this works in economics.
Speaker 9: It's uncertainty shock.
Speaker 10: And you know the before Biden and the moment Mawa,
Speaker 10: Harris and Trump.
Speaker 8: They have very different policies in terms of fiscal policies.
Speaker 9: But also regulatary policies.
Speaker 10: So you would expect that, you know, forums are going
Speaker 10: to postpone investment waiting in order to see who is
Speaker 10: going to get elected, put the inter generating Organization, which
Speaker 10: would have made the FED cut sooner. But we don't
Speaker 10: see that in the investment numbers, and that is something
Speaker 10: quite interesting. I mean, corporate tax proposals are very differently
Speaker 10: across the two campaigns. That for me is a bit
Speaker 10: puzzling that we don't see much action on the investment
Speaker 10: numbers in the US in terms of you know, essentially
Speaker 10: people delaying.
Speaker 8: Investment in order to see the resolution of the uncertainty
Speaker 8: of the elections.
Speaker 2: So, Professor, I guess one of the rests that some
Speaker 2: investors have here in the US is that this federal
Speaker 2: reserve is already behind the curve that in fact, we
Speaker 2: are already in a recession or dangerously close to one.
Speaker 2: Do you think that argument has merit?
Speaker 10: No, I would disagree in the sense that so first
Speaker 10: of all, I don't think that the lacks that big
Speaker 10: in terms of how quickly multi policy can impact the
Speaker 10: real economy. So the perspective of the FED is probably yes,
Speaker 10: if we try, if we start to see, you know,
Speaker 10: a sequence of announcements of mutful news that May is
Speaker 10: concerned about reization, we can act quickly enough to offset that.
Speaker 8: So I don't think preemptive actions and needed.
Speaker 10: Particularly if you think about the outcome of the elections
Speaker 10: on both sides of the two campaigns.
Speaker 8: So like if you take, of course, on Kamala Harris
Speaker 8: following what.
Speaker 10: Biden is doing, fiscal policy is based passionary, which generates inflation.
Speaker 8: Right, So at the same time, Trump might increase sanctions.
Speaker 10: And tariffs, which is going to increase the private import goods.
Speaker 9: Which also my generate information. So rushing to.
Speaker 10: Cut now and having to increase after, I think it's
Speaker 10: more dangerous for the fact, based on you know, they
Speaker 10: don't know what's coming in terms of physical policies which
Speaker 10: clearly are going to.
Speaker 9: Fit into multi policy or regulatary policies.
Speaker 10: So it's much more dangerous to have a lot of
Speaker 10: butts now and then to have to justify increases because
Speaker 10: this is going to increase even further stock market voltility
Speaker 10: and bond voltility. And we've seen how voatile essentially asset
Speaker 10: prices are to even a single anatos, Right, So I
Speaker 10: think the courses of.
Speaker 4: This volatility at the moment before I let you go.
Speaker 4: You also do a lot of work on the Russian economy,
Speaker 4: and the IM published a forecast back in April the
Speaker 4: Russian economy will grow by three point two percent this year,
Speaker 4: really contrary to many others beliefs. What do you think
Speaker 4: about that resilience of the Russian economy.
Speaker 8: Well, so the higher growth is associated also with high
Speaker 8: inflation because of fiscal expansion, right, So essentially they're investing.
Speaker 10: In the military, which not surprisingly is fitting into inflation
Speaker 10: and higher growth. But what's interesting on the Russian front
Speaker 10: is the recent expansion on the sanctions from the US side,
Speaker 10: So the secondary essentially sanctions where now Chinese banks, Turkish banks,
Speaker 10: India banks are not willing to facilitate trade between Russia
Speaker 10: and China. Russia and Turkey, et cetera, because they're going
Speaker 10: to lose access to effectively the US dollar market. Right,
Speaker 10: so now we expect that these things are going to bite.
Speaker 10: I mean, they are discussions that Russia is looking into
Speaker 10: bartered transactions with China.
Speaker 8: Essentially, we give you oil.
Speaker 10: You give us inputs for our military production that it's
Speaker 10: not so easy to implement, granted that a lot of
Speaker 10: the producers are private. Having said that, the Chinese government
Speaker 10: can potentially facilitated transaction.
Speaker 8: So we will wait and see how binding and restrictive.
Speaker 9: Essentially, these new.
Speaker 10: Round of sanctions are moreover now the door can be
Speaker 10: treated only at s so there are a lot of
Speaker 10: interesting developments there. So hopefully they will have a bigger
Speaker 10: bite than what we've seen so far. I mean, the
Speaker 10: robo hasn't appreciated as much as we would like it
Speaker 10: in order to factor in the severity of the sanctions.
Speaker 2: All right, doctor, thank you so much for joining us.
Speaker 2: Really appreciate getting some of your time here today. Doctor
Speaker 2: Vania stuff Rakeva, President of Economics at the London Business School.
Speaker 2: If there's any ever any place in a world where
Speaker 2: you could probably lose the suit and bow tie, it
Speaker 2: would be Jackson holwayan totally. However, Tom's chosen not to
Speaker 2: do that, so he is in full Tom Keen regalia.
Speaker 2: Tom Keen. He is a host of Bloomberg Surveillance on
Speaker 2: radio on YouTube. Tom, give us a sense of kind
Speaker 2: of how your stay has been out there. What are
Speaker 2: you hearing from all those smart economists out there.
Speaker 7: It's a really interesting year here. I think two or
Speaker 7: three weeks ago, Alex and Paul this was maybe a
Speaker 7: non event or at least something more subdued, and now
Speaker 7: it's taken on a renewed urgency. The world of economics, finance,
Speaker 7: and investment. It is going to stop for the Powell
Speaker 7: speech this morning. And where do you see it. You
Speaker 7: see it in the data check that Lisa Mateo just
Speaker 7: gave us. We still got real rates range bound, the
Speaker 7: two year yields four percent. But that equity market just says,
Speaker 7: screams soft landing ready to go. A lot of the
Speaker 7: interest today paragraph to paragraph in the speech will be
Speaker 7: how Chairman Powell frames the path to that hope for
Speaker 7: soft landing.
Speaker 4: I have heard, and I have it on good authority,
Speaker 4: that Tom Keen is the only one wearing a suit.
Speaker 4: But maybe maybe this changes by the end of the day, Tom,
Speaker 4: is there any feeling on the ground as to where
Speaker 4: the FED is leaning more? Is it the inflation concerns
Speaker 4: or the labor concerns.
Speaker 7: They've got a dual mandate, as we all know, and
Speaker 7: that dual mandate goes back and forth. I would say,
Speaker 7: typically it is an inflation guess on the ISLM theory.
Speaker 7: It's on the LM curve. Recently we've really come over
Speaker 7: to a look at the real economy. What's going on
Speaker 7: with GDP. The unspoken here, and frankly, part of the
Speaker 7: research papers that will be given is the mystery of
Speaker 7: the new technology and the productivity and what it's doing
Speaker 7: to the economy and the labor force. And the immediate thing, Paul,
Speaker 7: the absolute immediate emotion here was that stunning eight hundred
Speaker 7: thousand job revision that we saw a few days ago.
Speaker 7: Was that because of technology or was that because of
Speaker 7: a cratering economy?
Speaker 9: Tom?
Speaker 2: To what extent are the folks out there in jacksonvill
Speaker 2: Are they paying attention to what has been happening in
Speaker 2: Chicago over the past few days with the Democratic National Convention.
Speaker 7: A little bit, I would have everyone go to gregyp
Speaker 7: the wonderful Greg Up writing in the Wall Street Journal,
Speaker 7: who sort of summed up the non economics of our
Speaker 7: political moment. I would say they're really not focused on
Speaker 7: Milwaukee or Chicago, but very much they're focused on November fifth.
Speaker 7: There will be an election I would like to see today.
Speaker 7: I'm not sure we'll see it, but it would be
Speaker 7: good to see a sentence or to reaffirming the Fed
Speaker 7: independence that's been there really since nineteen fifty one, tested
Speaker 7: by Truman, tested by LBJ. To see a reaffirmation of that,
Speaker 7: as we saw in the Powell press conference wouldn't be
Speaker 7: a surprise.
Speaker 4: So Tom, I also, I don't know if you heard
Speaker 4: it earlier. I had a dream that you were in
Speaker 4: last night that you were like, Hey, Alex, should I
Speaker 4: go to the million dollar Cowboy bar before my hits
Speaker 4: on Friday? And I was like, I don't know, Tom,
Speaker 4: how do you feel about that? And You're like, I
Speaker 4: don't know, And then eventually you wound up going did
Speaker 4: that happen?
Speaker 10: Now?
Speaker 7: The romance of it, and this is true almost every year,
Speaker 7: is we need to get back from Monday Morning. Paul
Speaker 7: and I got to do the Monday Morning Show, which
Speaker 7: means you get on the airplane and go. So this
Speaker 7: year we are a million dollar cowboy bar free very Oh.
Speaker 4: Okay, so my dream was a total misnomer.
Speaker 7: Thanks.
Speaker 4: That's highly disturbing. I have actual another real question for you, though,
Speaker 4: How much is a conversation about Japan and the Bank
Speaker 4: of Japan showing up this year in the conversations.
Speaker 7: It's a really important question, Alex, made more so by
Speaker 7: the inflation report. Inflation won't go away in Japan, and
Speaker 7: that puts a pressure on them to bring those fiction
Speaker 7: of an interest rates higher. They need to go higher
Speaker 7: in interest rates, of course, which means all of their
Speaker 7: fixed income prices go down. Japan has not overtly discussed,
Speaker 7: but it's on everyone's mind. Is not so much being
Speaker 7: a dysfunctional theory, but to be kind, being an original theory.
Speaker 7: I see the sun just coming out here at Jackson Hall.
Speaker 7: When we're done with this, I'm going to turn around
Speaker 7: and look where the deer in the antelope play exactly.
Speaker 2: We were just actually talking about that here in New York.
Speaker 2: Ti'm I said, boy, it's stark out there in Jackson
Speaker 2: Hall for six twenty in the morning. Tom, is there
Speaker 2: talk out there about the I guess the economic exceptionalism
Speaker 2: of the US versus other parts of the world, because
Speaker 2: I'm guessing there are folks out there from other parts
Speaker 2: of the world.
Speaker 4: There is.
Speaker 7: It's written about Ambrose Evans. Pritchard had a sharp essay
Speaker 7: in the Telegraph in the last twenty four hours asking
Speaker 7: what does the world when the American exceptionalism ends? And
Speaker 7: that's one of the worries about recession and GDP slowdown
Speaker 7: and the rest. What I would suggest is, and particularly
Speaker 7: you know, you come out to Wyoming, You come into
Speaker 7: the airport here, Alex and there's forty seven golf streams
Speaker 7: lined up. You know, the prosperity of the West, the
Speaker 7: prosperity of technology is substantial in America. It's in your
Speaker 7: face in Wyoming. And there's a real understanding that we
Speaker 7: lead it that you just had on Dan Ives at
Speaker 7: webbush lifting up as in Vidia estimate, and of course
Speaker 7: at Vidia I believe it's August twenty eighth. Maybe I
Speaker 7: don't think in Nvidia is more important than Chairman Paul's speech,
Speaker 7: but maybe it's close.
Speaker 2: Yeah, all right, we'll see. Yeah, we're gonna be all
Speaker 2: locked in on that next week. Tom King, Thanks so
Speaker 2: much for joining us. Appreciate your reporting out there. Tom Tompkin,
Speaker 2: Bloomerg Surveillance. This is the Bloomberg Surveillance Podcast, bringing you
Speaker 2: the best economics, geopolitics, finance, and investment. You can also
Speaker 2: watch the show live on YouTube. Visit the Bloomberg Podcast
Speaker 2: channel on YouTube to see the show weekday mornings from
Speaker 2: seven to ten Eastern from our global headquarters in New
Speaker 2: York City. Subscribe to the podcast on Apple, Spotify, or
Speaker 2: anywhere else you listen, and as always on Bloomberg Radio,
Speaker 2: the Bloomberg Terminal, and The Bloomberg Business Apple