Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Ferrell and Lisa Brownowitz Jaily. We bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg dot com,
Speaker 1: and of course, on the Bloomberg terminal. Let's see if
Speaker 1: Matt mainly of Miller Tayback is going to Fish. He
Speaker 1: is the chief market strategist over there and is joining
Speaker 1: us on this Tuesday morning. Matt, thank you so much
Speaker 1: for being here. First things first, fish fan, yes, no, uh,
Speaker 1: fish fan, but I will I will not be attending
Speaker 1: any of the concerts here this year. I'm afraid I
Speaker 1: won't be able to make it down. Let's say, okay, well,
Speaker 1: the attendance that matters is your attendance here on Surveillance
Speaker 1: this morning. So let's get to the actual pertinent market
Speaker 1: conversation we talked about. Matt was talking about how four
Speaker 1: thousand became the consensus. We may or may not actually
Speaker 1: reached that level this year, but obviously that was after
Speaker 1: expectations had to be dramatically reduced from what they were
Speaker 1: at the start of two what we expected this year
Speaker 1: would bring. Does that mean that expectations for three are
Speaker 1: also perhaps overly optimistic. Well, I mean, it's funny because
Speaker 1: one of the things is that that we have heard
Speaker 1: a lot of bearishness around the street in the last
Speaker 1: last couple of weeks, which is uh uh, you know,
Speaker 1: the sentiments She's changed dramatically. But you're right, even though
Speaker 1: people have become much more bearished, they're talking about things
Speaker 1: dipping further. They think, well, don't worry, by the end
Speaker 1: of the year, it'll be fine. Um, I'm a little
Speaker 1: concerned about that. I mean, I do think the worst,
Speaker 1: I mean, what won't happen by the end of the year.
Speaker 1: I have somewhere in the middle of the year. But
Speaker 1: the biggest problem I think that we face is that
Speaker 1: when whenever the market gets to an extremely overvalued level,
Speaker 1: like it did at the end of two thousand twenty
Speaker 1: one this time last year, the uh, the bear market
Speaker 1: always lasts longer than just a year or so. It's
Speaker 1: usually last eighteen months or even a little bit longer.
Speaker 1: That's number one. Number two is that the the evaluation levels.
Speaker 1: I mean again, when you get to extreme valuation levels,
Speaker 1: that we what we have. It takes a lot bigger
Speaker 1: decline for the market to get back in line with
Speaker 1: what what what would be a natural level of evaluations? Okay,
Speaker 1: and so much to reach the bottom. But I don't
Speaker 1: think that's the case. Yet. Give us a number, what
Speaker 1: is fair value in a world of now four and
Speaker 1: a half percent interest rates instead of zero? Well, that's
Speaker 1: the thing. I mean, we have, uh, well to give
Speaker 1: you a number at least thirty five d And that's
Speaker 1: a suming we don't have a recession. That's a suthing
Speaker 1: we don't get a decline uh and and and earnings
Speaker 1: in two thousand twenty two, and every bear markets and
Speaker 1: every recession since World War two has has given I'm sorry,
Speaker 1: every recession, not every bear market, but every recession since
Speaker 1: World War two has given a decline in earning. So
Speaker 1: if we have a decline in earnings that next year,
Speaker 1: that takes us again something below thirty I mean, people
Speaker 1: have to forget that. People have to remember I'm sorry
Speaker 1: that you that when you don't have zero interest rates
Speaker 1: and you don't have qu e uh, you don't have
Speaker 1: eighteen to twenty times forward earnings, you have something more
Speaker 1: like fifteen and sixteen times four durnings. That's the fair value.
Speaker 1: So do we need then to come down? I'm interested
Speaker 1: really in the in the uh, the pees, the valuations,
Speaker 1: because it's something I actually understand. So, um, you look
Speaker 1: at forward pees right and we're trading at seventeen three
Speaker 1: right now? Do we need to come down to fifteen
Speaker 1: before this bear market can end? Is that also something
Speaker 1: we've seen in every bear market exactly every single bear
Speaker 1: market since since basically since World War Two. It certainly
Speaker 1: over the last forty years you've seen at least fifteen
Speaker 1: times forward earnings, if not lower. I mean, but that's
Speaker 1: the very best we've note as fifteen times earnings. And
Speaker 1: again the the the But when you get to all
Speaker 1: these all time valuation levels, we certainly had it, uh
Speaker 1: you know, stream valuations in two thousand seven and in
Speaker 1: two thousand at the very beginning of two thousand. The
Speaker 1: problem is you get all this addition of level reach
Speaker 1: and so when the de risking process and the de
Speaker 1: leveraging process takes longer than just one year, and people
Speaker 1: like well Jesus come down so much, that's enough. It's like, actually,
Speaker 1: not until we get those valuation levels, because the the
Speaker 1: the the leverage gets so far to one side, it
Speaker 1: has to swing to the other one as people de leverage,
Speaker 1: and they have to I hate to say it, but
Speaker 1: they get forced selling. They sell even though they've reached
Speaker 1: fairly value. They sell because even when they don't have to,
Speaker 1: because they're getting margin calls and such. And that's why
Speaker 1: the market swings to the other action. It's not just
Speaker 1: a thing. There's a ra actual reason why we get
Speaker 1: a swing to the other extreme. And so we'll probably
Speaker 1: get something below fifteen times there before we actually bottom.
Speaker 1: So how long will it take? I always think of
Speaker 1: the age of de leveraging by Gary Shilling, which was
Speaker 1: a financial crisis thing right, took us a decade to
Speaker 1: get through that. Um, are we looking at that kind
Speaker 1: of leverage again or is it not nearly as serious?
Speaker 1: So we could be done with it in three the
Speaker 1: de leveraging that is well, I mean, it certainly could
Speaker 1: happen a bottom out in two twenty three, but I
Speaker 1: just think it happens at a lower level. I mean,
Speaker 1: what I guess the question is how much does does
Speaker 1: does the FED willing to to to let it the
Speaker 1: leveraging take place? I mean, when I always put back
Speaker 1: point back to its two thousand and eighteen you know,
Speaker 1: everybody says, well Jesus, stock markets started to crumble so
Speaker 1: bad that the FED was forced to pivot, But wasn't
Speaker 1: the stock market. They actually in the middle of December
Speaker 1: that year, right in the middle, they said, hey, the
Speaker 1: markets get down a lot, We don't care. We're gonna
Speaker 1: keep keep tightening. Then two to three weeks later, the
Speaker 1: fixed income market, the jump farm market, just imploded, and
Speaker 1: that's when they pivoted. So they're much more concerned that
Speaker 1: what's what's going on in the fixed income market. And
Speaker 1: right now, even though it's down quite a bit, it's
Speaker 1: still running fine. So we may get a pivot later
Speaker 1: on this year from the from the from the from
Speaker 1: the Federal Reserve where they actually start cutting rates. But
Speaker 1: that's gonna be happened when something, when the situation is
Speaker 1: gonna become much more dire than it is now. If
Speaker 1: we just have this slow grind lower, the Fed's gonna
Speaker 1: keep interest rates at high levels, even if they stopped
Speaker 1: cutting i'm sorry, stopped races in any kind of any
Speaker 1: kind of way. Not finally, well, none of us probably
Speaker 1: could have seen what the FED did this year coming
Speaker 1: at the start of it, we couldn't have seen the
Speaker 1: war in Ukraine, so many things. I think also many
Speaker 1: of us weren't anticipating that in two we would see
Speaker 1: essentially the full reopening of the Chinese economy. Many of
Speaker 1: us thought it was just something that was going to
Speaker 1: take much longer. If you have unleashing of commodity demand
Speaker 1: from China, how does that fuel back into those prices,
Speaker 1: and frankly the energy sector, which has already run so
Speaker 1: far this year, how much more upside could there be? Well?
Speaker 1: I think that can it can be more upside. I mean,
Speaker 1: as you say, with what China reopen, you see the
Speaker 1: commodities bouncing back, and that could continue, especially if the
Speaker 1: dollar continues to move lower. If there's one thing that
Speaker 1: we've been a good uh correlation or inverse correlation has
Speaker 1: been the dollar and over time has been the dollar
Speaker 1: and commodity prices, especially with oil and gold for that matter.
Speaker 1: But the thing is, though, is that you know, if
Speaker 1: you look at the way the valuations are are trading
Speaker 1: for the energy sector, it's still trading for for oil,
Speaker 1: trading out like sixties sixty five dollars UH, and it
Speaker 1: seems like, oh, pick wants to keep it at seventy
Speaker 1: dollars are higher, and now with the reopening of China,
Speaker 1: you know we could get you know, pushed back towards
Speaker 1: the hundred dollar level. That's gonna be bullish for these equities.
Speaker 1: They still have, believe it or not, they still have
Speaker 1: ways to go to play catch up to the price
Speaker 1: of oil, even though it's rallied, even though they've rallied
Speaker 1: so much this year. So I still I still remain
Speaker 1: bullish on the energy sector throughout most most of this year.
Speaker 1: All Right, Matt, thanks so much for joining us. Matt
Speaker 1: Mailli there of Miller tay Back, he has been bullish
Speaker 1: on the energy detector. And if you ever decide to
Speaker 1: cash out of some of those deals, we can buy
Speaker 1: some nosebleed seats at Madison Square Gardens and will stub
Speaker 1: down to the floor for the fifth show this New
Speaker 1: Year's even Let's get over to Julia Coronado. She is
Speaker 1: president at Macro Policy Perspectives, joining us from a very
Speaker 1: chili Austin, Texas this morning. Juliet, great to see you.
Speaker 1: We were speaking with Steve Sasnake of Interactive Brokers at
Speaker 1: the top of the hour and he was talking about
Speaker 1: markets now that are still fighting the Fed. How hard
Speaker 1: is the Fed going to have to fight back in
Speaker 1: the new year. Well, the Fed has sort of shifted
Speaker 1: its strategy. It's sort of signaled both hawkish stance at
Speaker 1: the December meeting in the sense that the consensus on
Speaker 1: the committee is higher race than the market is currently pricing.
Speaker 1: But they also sort of signaled a down shift in
Speaker 1: the pace, another down shift to twenty five basis points
Speaker 1: per meeting, and that allows them, i think, to both
Speaker 1: proceed with caution and feel their way to what is
Speaker 1: the right sort of restrictive degree of restriction to put
Speaker 1: in place, and also hold the threat of rate hikes
Speaker 1: over the market for longer. Share Powell has been frustrated
Speaker 1: by some of these rallies in the market, these undesirable
Speaker 1: rallies that ease financial conditions, when they're trying to slow
Speaker 1: the economy down by by holding a longer string of
Speaker 1: rate hikes over the market. I think that they hope
Speaker 1: to kind of prevent that relief rally that you're sort
Speaker 1: of alluding to, Uh, that that they can hold markets
Speaker 1: in check for a little bit longer and make sure
Speaker 1: that the economy really does cool down enough to cool
Speaker 1: those underlying inflation pressures. Well, on that note, Julie, if
Speaker 1: it really all is going to come down to the
Speaker 1: trajectory of inflation. I love the way that our team
Speaker 1: at Bloombrick Economics put it when they release their inflation
Speaker 1: outlook for three uh this morning, saying, the story of
Speaker 1: two was how fast inflation rose. The story of three
Speaker 1: will be how fast it falls. What is your expectation
Speaker 1: on that speed? Yeah, so I think it's going to
Speaker 1: really gather steam in the latter part of the year,
Speaker 1: and we sort of all know that there's these leading
Speaker 1: indicators of housing of rental inflation that have really rolled over,
Speaker 1: but we know it's a lag from the time that
Speaker 1: happens to when it feeds into the official inflation metrics
Speaker 1: that the FED is targeting, and that leg should should
Speaker 1: be kicking in sort of towards the latter part of three.
Speaker 1: In the first half of the year, they're going to
Speaker 1: be dealing with stickiness, those second round effects from higher
Speaker 1: wages and higher prices and the pipeline that sometimes ripple
Speaker 1: through into services. So they've kind of broken inflation into
Speaker 1: three buckets. The goods inflation that was disrupted by the pandemic.
Speaker 1: Rental housing inflation the single biggest component of core inflation,
Speaker 1: and then sort of all other services inflation. And that's
Speaker 1: really where they're taking the temperature of the labor market,
Speaker 1: of consumer price sensitivity. Uh, that really hasn't it's sort
Speaker 1: of stabilized at a high rate. Uh. They'd like to
Speaker 1: see that come down, and that that probably is going
Speaker 1: to take some time. Isn't the third bucket the hardest, Julie.
Speaker 1: I mean, from my understanding, services is the hardest uh,
Speaker 1: piece of inflation for the FED to effect because you know,
Speaker 1: with goods um certainly with something like you know, car
Speaker 1: sales or home sales, they can easily raise rates and
Speaker 1: limit the number of buyers who can afford to come in.
Speaker 1: In terms of services, do they have to just cause
Speaker 1: real economic pain to bring those prices down? Do they
Speaker 1: have to you know, knock mom and dad out of
Speaker 1: work today to put people on the unemployment line in
Speaker 1: order to get services inflation down? You know that there
Speaker 1: that's one possible outcome. We don't really know for sure,
Speaker 1: but I will say this, the pandemic disrupted services inflation
Speaker 1: as well as goods inflation. Think about hotel rates, airfares.
Speaker 1: They've done a lot of busting and booming through the
Speaker 1: various opening closing waves um and we've seen that. Actually,
Speaker 1: one of the key tests here is that when will
Speaker 1: consumers become more price sensitive like they were before the pandemic.
Speaker 1: For the pandemic, it was notorious that there was no
Speaker 1: pricing power. Consumers were budget conscious, they wanted deals, and
Speaker 1: then that all went away when all they could buy
Speaker 1: was good in the in the lockdowns during the pandemic.
Speaker 1: Now and then reopening, there was this sort of revenge
Speaker 1: travel idea. Uh, now we're sort of settling into a
Speaker 1: more normal consumer. I think we saw that this holiday season.
Speaker 1: Consumers do want deals. They are aware of the limitations
Speaker 1: of this boom that we've been in in the last
Speaker 1: year and a half. They're more aware that there are
Speaker 1: clouds on the economic horizon, and they're responding accordingly with
Speaker 1: being price sensitive. And that's really key to cooling inflation
Speaker 1: without a deep recession, is that consumers start demanding deals
Speaker 1: again and that companies are going to have to you know,
Speaker 1: meet them in the middle. But they haven't had to
Speaker 1: think about these passed through of of of car costs
Speaker 1: that you just mentioned unimaginable a couple of years that
Speaker 1: consumers would simply accept a fifty percent increase and used
Speaker 1: car prices. Uh So. But consumers now they've got a
Speaker 1: broader basket of goods and services they can spend on.
Speaker 1: We saw that with air affairs, Matt. We saw that
Speaker 1: somewhere around the fall, consumers started canceling trips if they
Speaker 1: couldn't find the right airfairs. They were deal hunting, uh
Speaker 1: and airlines had to respond accordingly. So I think we're
Speaker 1: getting back into a more normal zone of consumer price sensitivity,
Speaker 1: and that's that's really key because that would allow the
Speaker 1: Fed to cool that services inflation without a very deep recession.
Speaker 1: What about people waiting because consumers go back to their
Speaker 1: old bargain hunting ways, Julia, You know a lot of
Speaker 1: people in the housing market currently are on the sidelines
Speaker 1: because they're looking at six seven percent, eight percent mortgages.
Speaker 1: Maybe a lot of people, you know, I want to
Speaker 1: buy um this year. Next year, I want to buy
Speaker 1: the last Dodge Challenger Hellcat. They'll never make one again,
Speaker 1: I think the fifteenth year then building that gigantic muscle
Speaker 1: car and they'll never build one again. But Chrysler right
Speaker 1: now is offering me seven point to nine percent. I'm
Speaker 1: not going to finance at that rate if I wait
Speaker 1: till the end of three. Are those borrowing costs gonna
Speaker 1: come back down by the end of twenty three? But
Speaker 1: remember we have to go through the soft pat or
Speaker 1: recession first before we get to that relief. The rates
Speaker 1: are high right now to cause the pain that you're describing,
Speaker 1: to cause the reaction of you know what, I'm not
Speaker 1: going to buy this car because rates are too high.
Speaker 1: I'm not going to buy this house because rates are
Speaker 1: too high. That is the demand cooling the FED is
Speaker 1: looking for, and we are seeing it. We have seen,
Speaker 1: despite better production of new cars, more better availability, car
Speaker 1: sales have been kind of languishing still because the right
Speaker 1: rates of financing a car loan have shot up oh much.
Speaker 1: Consumers are looking at a big jump in payments uh
Speaker 1: for for a new car or or any car, and
Speaker 1: so they're responding accordingly. We're seeing used car prices fall
Speaker 1: pretty consistently in the last few months after soaring in
Speaker 1: the last couple of years, and we first saw some
Speaker 1: softness in new car pricing in the last inflation report.
Speaker 1: We would expect that to follow through into the first
Speaker 1: half of the year. Some actual discounts on M S
Speaker 1: R P imagine that if you will, all right, Julia
Speaker 1: Coronado of Macro Policy Perspectives, thank you so much for
Speaker 1: joining us. Let's bring in Dr Bakti Hansatti. She's Associate
Speaker 1: professor of Emergency Medicine at Johns Hopkins. Great to see you.
Speaker 1: It has been a while since we've spoken. If we
Speaker 1: could just think about China in particular in terms of
Speaker 1: the remaining COVID story, What is your expectation for what
Speaker 1: is going to happen there given the vaccination rates that
Speaker 1: they have, even now that there's been practically an entire
Speaker 1: removal of restrictions, When could China reach a peak in cases?
Speaker 1: I think it's really hard to say onto your question
Speaker 1: when can they reach a peak? Because we just don't
Speaker 1: have accurate reporting data from the National Health Commission UM
Speaker 1: side is trying to stop reporting cases. We're relied on
Speaker 1: the China CDC, who traditionally does monthly reporting um and
Speaker 1: we have not seen numbers coming out of China. So
Speaker 1: when can they heat get a peak? I honestly don't know,
Speaker 1: but what we're seeing is that it's been a rapid
Speaker 1: surge similar to the delta and the omicron waves in
Speaker 1: most countries. When we went through delta and omicron, we
Speaker 1: sort of peak at six weeks. So I'm praying for
Speaker 1: them that this is fast and rapid and resolve soon.
Speaker 1: We also do know that China has high vaccination rates,
Speaker 1: so over ninety two of individuals fully vaccinated, and we
Speaker 1: have also heard that Chinese have access to all anti
Speaker 1: virals that will decrease hospitalizations and depths. So you know,
Speaker 1: they are similar to the US in that there is
Speaker 1: innate immune protection available to individuals, and that we know
Speaker 1: that they're likely sick with the newer variants which have
Speaker 1: a much much more much more transmissible and so much
Speaker 1: more likely to peak early. So this newer variant, it's
Speaker 1: not delta, it's not O macron. Do we have a
Speaker 1: new name for it? And what else do we know
Speaker 1: about it? Besides the transmissibility. We have lumbas and lettas,
Speaker 1: so we have moved away from names. We have be
Speaker 1: A one point one, B A five b A five
Speaker 1: point one is cute, so we know in trans and transmissive,
Speaker 1: I know, right, but we run out of names A
Speaker 1: long time ago. So we know that in terms of transmissibility,
Speaker 1: within two to three days of individuals come in contact
Speaker 1: on this COVID positive that they'll be symptomatic. We know
Speaker 1: that at five days, individuals will get sicker, requiring hospitalization
Speaker 1: and needing therapeutic treatment. We know that as quickly as
Speaker 1: it comes on, it goes off, So individuals are most
Speaker 1: likely to be symptom free within ten days. I don't
Speaker 1: want to wear a mask. Do we have to wear
Speaker 1: masks again? I don't think I'm going to. It defends
Speaker 1: who you are, right, I don't know you. But if
Speaker 1: I did know you, and I knew you were immun compromise,
Speaker 1: Oh you had a disease that made you vulnerable to
Speaker 1: getting really really sick from COVID, or you're an individual
Speaker 1: in whom the oral anti virals were unavailable, I would
Speaker 1: say where a mosque um. I will say, though wearing
Speaker 1: a mosque is tough, we are exhausted as a nation.
Speaker 1: M that you need to assess your own risk, and
Speaker 1: every American has agency to make those decisions. I was
Speaker 1: speaking with Matt earlier about how so many people I
Speaker 1: know are sick right now. Some of them are COVID positive.
Speaker 1: It seems like I know more COVID positive people than
Speaker 1: I have in probably a year. But there are also
Speaker 1: a number of people who are just ill, whether that's
Speaker 1: the flu or sinus infections. I myself feel like I
Speaker 1: have been getting sick way more often than I ever
Speaker 1: did pre pandemic. I'm just wondering, like long term health ramifications,
Speaker 1: if people are getting more sick, whether because that we've
Speaker 1: suppressed our immune systems by wearing masks and not interacting
Speaker 1: with people and we're getting just are we going to
Speaker 1: be more sick more often, especially now that COVID is
Speaker 1: probably going to be circulating in the population some time
Speaker 1: to come as a seasonal virus. Maybe Doc, you can
Speaker 1: solve something that an argument that we have at the
Speaker 1: Miller household. My wife wears masks all the time and constantly,
Speaker 1: uh what do you call this? No? Not what She's
Speaker 1: using hand sanitizer all the time right, like it's an addiction.
Speaker 1: I never use it and don't wear masks. I never
Speaker 1: get sick, and she constantly does. Have have people who
Speaker 1: are overprotective of their immune systems allowed them to weaken
Speaker 1: so that they get sick so much? Or is this
Speaker 1: just coincidence and coincidence in my anecdotal um home life.
Speaker 1: So again the easy clounces here and I in my house,
Speaker 1: so we joke I've had more viruses and pumpkin spice lattees.
Speaker 1: But I'm the mom with young kids. I have a
Speaker 1: five year old and a two year old, right, and
Speaker 1: they're bringing stuff from home. So I think what's really
Speaker 1: going on here is, yes, we have not been as
Speaker 1: exposed in the last two years um as we should
Speaker 1: have been to common household colds two different entraviruses, coronaviruses
Speaker 1: and colds. Also, however, if you look at the current
Speaker 1: strains of RSP and flu, they are more virulent than
Speaker 1: they have been previously. This happens with the flu. Every
Speaker 1: five to seven years, you get a flu variant that
Speaker 1: is more aggressive than previous. So I think it's a
Speaker 1: combination of two. Right, last year we weren't exposed. We
Speaker 1: don't have any animate community. On top of that, we
Speaker 1: have a flu in an RSB season that is also
Speaker 1: hitting us really hard. Are we about to become a
Speaker 1: nation that's constantly sick? I don't think so. Um, does
Speaker 1: your wife of a week immune system compared to you
Speaker 1: probably not. She's probably just exposed. Maybe she's at home
Speaker 1: looking after kids. Maybe she's out there doing things in
Speaker 1: the community, see going grocery shopping. Um, and you are
Speaker 1: in the studio and you're more protected. I think it
Speaker 1: all depends on what our lives look like and what
Speaker 1: our exposures are and thus what we are likely to
Speaker 1: be inflicted with. All right, Doc, thanks so much for
Speaker 1: joining us. Pleasure talking to you again, although hopefully it's
Speaker 1: not too often, right because um, when we're all healthier,
Speaker 1: we see we see you less often. Dr Vaki Hans
Speaker 1: Hottie there of Johns Hopkins talking to us about this
Speaker 1: wave that we're seeing, and it's I don't think it's anecdotal, right,
Speaker 1: We have the data to backup that we really do
Speaker 1: see it coming back in a pretty serious way, and
Speaker 1: hopefully it's just more transmissible and not as that as fatal.
Speaker 1: Let's talk about what to expect in terms of policy
Speaker 1: in this divided Congress that we will see sworn to
Speaker 1: kick off three. Isaac Boltanski joins US policy research director
Speaker 1: at b T I G. And Isaac, you've looked deeply
Speaker 1: into what's happening in terms of the legislative agenda for
Speaker 1: next year, even before we're finished with the legislative agenda
Speaker 1: for two Do we finish everything here? Does the Congress
Speaker 1: just call it quits and start afresh? Um, what are
Speaker 1: you concerned about business that hasn't been done yet? Well,
Speaker 1: this was actually a very busy Congress, and despite all
Speaker 1: of the headline volatility that all of us had to
Speaker 1: live through, they actually accomplished a fair amount, from the
Speaker 1: infrastructure bill to the i r A to this massive
Speaker 1: one point seven trillion dollars spending bill that just came through.
Speaker 1: And look, we're still coming through that document. And it
Speaker 1: reminds me Matt of old saying that Campbell is just
Speaker 1: a horse that's gone through the legislative process. There are
Speaker 1: lots of things that are crammed in there that we're
Speaker 1: still figure ring out. But that is the last and
Speaker 1: final part of business of this Congress, and they get
Speaker 1: to start again next year, and it's gonna be materially
Speaker 1: different next year given the composition, which is what I
Speaker 1: think we're all now focused on. So next year, I mean,
Speaker 1: there are a number of smaller issues. I'm focused on.
Speaker 1: What's going to happen with cannabis and the safe Banking Act,
Speaker 1: maybe bigger for a lot of people in this state.
Speaker 1: What's going to happen with the state and local tax deduction?
Speaker 1: Will we get that back at any point? But there's
Speaker 1: also the crypto regulation we have to look forward to,
Speaker 1: other financial industry regulation, energy policy that we have to
Speaker 1: focus on. Are we going to be able to drill more?
Speaker 1: Is this administration will be more friendly to that sector
Speaker 1: as we need more stock? What are you most focused on,
Speaker 1: Isaac fore? Yeah, Look, I think with a divided government,
Speaker 1: we're not going to have these big, massive legislative vehicles
Speaker 1: that we've seen over the past two years. So it
Speaker 1: is going to be the equivalent of a legislative grab
Speaker 1: that what can be attached to the Appropriations bill in
Speaker 1: the fall on page nine hundred, right, And so here's
Speaker 1: how I think about it. On the energy side, we
Speaker 1: are still optimistic that we will get some degree of
Speaker 1: permitting reform in the first quarter UM. It remains to
Speaker 1: be seen exactly what shape that legislation takes, but there
Speaker 1: is clearly enough political will for that, and that's something
Speaker 1: that I'm optimistic about. I also think that we should
Speaker 1: expect some crypto legislation now here. I don't think you're
Speaker 1: going to get the massive comprehensive bill that some want. Instead,
Speaker 1: I think it's going to be more narrowly targeted to
Speaker 1: stable coins because that's something that Congress understands, kind of
Speaker 1: like a money market fund, kind of like a deposit account.
Speaker 1: They can get their arms around that. Beyond that, I
Speaker 1: think I'm mostly going to be focused on how does
Speaker 1: Congress interact with, you know, the regulatory state here in
Speaker 1: d C and the We have some acronyms that I
Speaker 1: think are going to play a big role in such
Speaker 1: as FTC, cfpb UM. A lot of these regulatory entities
Speaker 1: are going to get far more active, which is going
Speaker 1: to have real repercussions for the market. Okay, so those
Speaker 1: are a lot of very specific policy areas, Isaac. If
Speaker 1: we can talk about just macro economic policy for a second.
Speaker 1: Matt and I were talking about the dynamics between monetary
Speaker 1: and fiscal policy, how both were so common in data,
Speaker 1: there was so much stimulus a few years ago. Obviously
Speaker 1: this is a very different story now, and when you
Speaker 1: have a Republican House, the likelihood of getting any further
Speaker 1: fiscal spending through is probably pretty small. So if we
Speaker 1: do indeed get a US recession next year, what would
Speaker 1: you expect the reaction from Washington, d C to look like?
Speaker 1: I think I think it's gonna sound like crickets, Gaily,
Speaker 1: I really do. I think you know. I'm I'm a
Speaker 1: fan of that saying that history doesn't repeat itself, but
Speaker 1: it often rhymes. And the last time that we had
Speaker 1: a Republican House and a Democrat in the White House
Speaker 1: was then time period. And during that time period, we
Speaker 1: had legislative law jam, fiscal brakesmanship, fights over the debt ceiling,
Speaker 1: and what passed for fiscal austerity here in d C
Speaker 1: was something called the Budget Control Act, which had mandatory sequestration.
Speaker 1: And so look, just as we have talked about the
Speaker 1: FED put disappearing, I firmly believe that the Fiscal Congressional
Speaker 1: put expires the minute the new Congress is sworn in
Speaker 1: in a couple of days. Well, speaking of who's getting
Speaker 1: sworn in in a couple of days, I do want
Speaker 1: to get your take, Isaac on one of those elected congressman,
Speaker 1: in particular George Santos, the Republican here in New York
Speaker 1: who has now admitted essentially to embellishing his resume, about
Speaker 1: his college degree, about working at two major Wall Street
Speaker 1: first left something out as well, right, there were many
Speaker 1: based and he was previously married. There's just a lot
Speaker 1: of different points of contention here. Yet he says he
Speaker 1: still plans to take the oath of office on January three.
Speaker 1: I'm just wondering what your reaction to these revelations is
Speaker 1: it shot being It's disappointing, and it's not at all surprising.
Speaker 1: I think as we've wintled away what what the truth
Speaker 1: is when it comes to our political discourse, these things
Speaker 1: are going to continue to happen. I'd be interested to
Speaker 1: see if he actually makes it um. I think that
Speaker 1: part of the strategy now is to just hope that
Speaker 1: the story dies down over the next few days. I
Speaker 1: struggled to see that happening. But once he gets into Congress,
Speaker 1: I would tell you I think that it's gonna be
Speaker 1: very difficult for him to actually legislate effectively because he
Speaker 1: will carry a degree of toxicity with him from these stories.
Speaker 1: But this is, in a lot of ways the new normal,
Speaker 1: given where our political discourse is. He uttered the words
Speaker 1: I am not a criminal in an interview with The Post.
Speaker 1: Those are never good words to have to say, Isaac,
Speaker 1: thanks so much for joining us. Isaac Boltanski B T
Speaker 1: I G. Talking to us about what to expect for
Speaker 1: three out of Washington, d C. Thanks very much. This
Speaker 1: is the Bloomberg Surveillance Podcast. Thanks for listening. Join us
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