Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jailely. 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. What's so important
Speaker 1: here is the style of writing of peril. We're gonna
Speaker 1: get him on in a moment, but Lisa bob Wood
Speaker 1: fourteen bestsellers, there is a method to his madness and
Speaker 1: it really highlights the different dynamic that Mark's Washington, d C.
Speaker 1: And I'm talking about that with President Trump, which he
Speaker 1: talks about, but also going forward to the Puden administration
Speaker 1: and what they face going forward. There's a new frustration
Speaker 1: with the status quo. There's fusible urgency. But the division
Speaker 1: here lies in what sauls it. Do you grind away
Speaker 1: at sort of the old you know, the old establishments,
Speaker 1: or do you just sit down and say I'm not
Speaker 1: gonna move until it all comes down. Robert Costa out
Speaker 1: of Notre Dame Holding Court in Cambridge, where Dr Larrion
Speaker 1: is and with him is Bob Woodward, and they have
Speaker 1: teamed up for Peril. You've seen it out on all
Speaker 1: sorts of media. We're thrilled they could join us this morning.
Speaker 1: Bob Woodward, why did you pick Robert Costa? You could
Speaker 1: have picked anybody in politics. Why did you pick young Costa?
Speaker 1: Because young Costa is the best reporter I've ever seen
Speaker 1: and his work ethic makes mine look weak. Uh. He
Speaker 1: just threw himself into this years working at the Post.
Speaker 1: He understands the Republican Party, understands Washington. Uh, like no one. Uh.
Speaker 1: He taught me a great deal. And Uh it was
Speaker 1: you know one if I was saying to somebody, said,
Speaker 1: well who most of the work, and I said, actually,
Speaker 1: we each did six. Uh. It's the kind of partnership
Speaker 1: where everyone over performs. And uh, I think over performance
Speaker 1: for him is just the natural state. Well, congratulations on
Speaker 1: the book, and folks, again, this is Woodward and Consta
Speaker 1: and Bob Woodward with a courage at seventy eight to
Speaker 1: say I'm going to go out and find somebody to
Speaker 1: do this with me. Robert Constant, the immediacy of the
Speaker 1: book is stunning. You've done loads of interviews on the
Speaker 1: look back I don't want to do that. I want
Speaker 1: to talk about the future. And Robert Consta, you and
Speaker 1: your book by saying the peril remains, What do you
Speaker 1: mean by that? Well, I couldn't have a better reporting
Speaker 1: partner in Bob Woodward. He has taught me so much
Speaker 1: into that question about peril remains. Uh. That's a theme
Speaker 1: that runs throughout the book. And it's built not just
Speaker 1: it's not an opinion. It's based on reporting. And that's
Speaker 1: the Woodword method. Tell the story of American politics, American
Speaker 1: democracy through scenes. And you see the end of our book.
Speaker 1: President Trump's out there on the political campaign trail. He
Speaker 1: has a warlike cadence and some of these speeches saying
Speaker 1: we will never surrender, never give in. When it comes
Speaker 1: to conceding the election, he's demanding a comeback, you know,
Speaker 1: Robert Costa, I'm gonna look at what we see with
Speaker 1: Greg Grandin in the Great American Myth, looking at jackson
Speaker 1: Ian history and how it folds over to the GOP.
Speaker 1: Robert Costa, what kind of Republican party do you perceive
Speaker 1: in two thousand and twenty four a Republican party riven
Speaker 1: by divisions? You see in our books someone like Leader McConnell,
Speaker 1: the Senate Minority leader, wants to move on. But so
Speaker 1: many people inside the GOP, on Capitol Hill and beyond
Speaker 1: believe President Trump still has political capital and so his
Speaker 1: decision on will really dominate where this party goes at
Speaker 1: this point. But there's competition. Vice President Pen's a complicated
Speaker 1: political figure, as our book shows. He may want to
Speaker 1: have his own say, his own bid, and there are
Speaker 1: other stars out there, but President Trump he remains the
Speaker 1: the political force inside the GOP. There's a question right now, Bob,
Speaker 1: what of what the current administration is facing in terms
Speaker 1: of getting a Washington back to a semblance of what
Speaker 1: is considered or was considered normal. Considering all of your
Speaker 1: coverage backs in the Nixonian days, how dysfunctional is today's
Speaker 1: government based on some of the changes and the upheavals
Speaker 1: that we've seen over the past number of years. Well,
Speaker 1: that's an important question. I mean, it continues. Our point
Speaker 1: here is that Trump triggered a national security crisis that
Speaker 1: we didn't know about was a secret during the transition
Speaker 1: from Trump to Biden and uh As Costa says, look,
Speaker 1: everything is peril. And if we look at Biden right now.
Speaker 1: He's got immense problems with Afghanistan with the virus, and
Speaker 1: he's trying to work out some sort of legislation to
Speaker 1: get his program through, and he's running into some obstacles
Speaker 1: in his own party. In the Democratic Party, he's supposed
Speaker 1: to be the leader and say okay, everyone do this,
Speaker 1: but that's not the way Washington works. And Uh, maybe
Speaker 1: it's inevitable that people are going to be outliers. People
Speaker 1: uh the Senator Mansion, Senator uh sisma that they are
Speaker 1: going to just say we're not going to march to
Speaker 1: somebody else's vision, We've got our own, which really raises
Speaker 1: a question about this new dynamic, this new increasing frustration
Speaker 1: about a dysfunction of Washington, and how you go about
Speaker 1: handling it. And Bob, I just want to know if
Speaker 1: you think if there's any precedent in terms of a
Speaker 1: group to saying we are not going to work with
Speaker 1: the establishment, period, full stop, unless we get everything we want,
Speaker 1: which seems to be an increasing fringe on both sides
Speaker 1: of the aisle, both Democrats and Republicans. Well, there are
Speaker 1: presidents presidents. President Clinton had a hard time getting his
Speaker 1: plan through. It It was a squeaker until the end.
Speaker 1: So we are going to see. But the debate in Washington,
Speaker 1: as you well know, always one of them is about
Speaker 1: taxing and spending. How much spending? How much taxing? And uh,
Speaker 1: Biden has gone for the everything three point five trillion
Speaker 1: dollars is a big spending package. And uh, we're going
Speaker 1: to see. And if you talk to people, I mean,
Speaker 1: Costa knows this better than anyone. There's a lot of
Speaker 1: uncertainty out there, and there is a lot of peril,
Speaker 1: if I may use that phrase, about where this does
Speaker 1: does the Democratic Party come apart? On Bloombard Radio and
Speaker 1: Bloomberg Television worldwide, we welcome you, Robert Costa and Bob
Speaker 1: Woodward with us an effort of peril. Can't say enough
Speaker 1: about it once again after fourteen bestsellers, Bob Woodward on
Speaker 1: deep background, as they say, Robert Costa, page two oh
Speaker 1: one of Peril to me is everything about the future
Speaker 1: of the GOP. Mike Lee of Utah, born in Arizona,
Speaker 1: wants to sit at Barry Goldwater's desk. There was a
Speaker 1: time of peril in nine four I lived at as
Speaker 1: a kid. This peril here, how do you perceive it?
Speaker 1: Worked out across both parties. The Mike Lee example, the
Speaker 1: senator from Utah, is such a prism into the GOP
Speaker 1: right now. He was presented with the Eastman memo. Conservative
Speaker 1: lawyer Johnny Eastman presents this memo to Senator Lee based
Speaker 1: on our reporting about throwing out some electors on January six,
Speaker 1: about searching for altraing at electors that may be out
Speaker 1: there in the States, and Lee long story short finds
Speaker 1: this is not the case. He does a lot of
Speaker 1: reporting on his own to probe the Eastman memo, and
Speaker 1: he finds there's no such thing as alternate electors out there,
Speaker 1: but this memo and John Eastman, they were in the
Speaker 1: Oval office. Our book shows on January four, two days
Speaker 1: before the insurrection. This is not just some memo or
Speaker 1: some fantasy. This was something that was actively going on.
Speaker 1: Pay attention to what word always tells me, to the action,
Speaker 1: where what are people doing, and saying, I look, Robert Costa,
Speaker 1: and I can go to your time at Cambridge, where
Speaker 1: I believe you effort of the fractures career of Winston Churchill.
Speaker 1: Let's swing to the Democrats right now and look at
Speaker 1: their peril. I would suggest Robert Costa that these Democrats
Speaker 1: are remembered only by Bob Woodward in Washington, back pre Obama,
Speaker 1: back pre Clinton. Is this Francis Democratic Party now like
Speaker 1: way back or is it something new. There's a scene
Speaker 1: in the book where Biden looks up. President Biden looks
Speaker 1: up at a portrait of FDR and he says, this
Speaker 1: is a time for that kind of transformational change. What
Speaker 1: you really see in the Democratic Party in our reporting
Speaker 1: is while Biden won the presidency, Bernie Sanders and his
Speaker 1: progressive movement have one power. They are in alignment with Biden.
Speaker 1: Sanders made the decision in April and May of to
Speaker 1: work with Biden rather than against him. And you see
Speaker 1: Biden moving to the left on his one point nine
Speaker 1: trillion dollar rescue plan, which we detail in the book,
Speaker 1: and even now on this massive plan he's proposing, and
Speaker 1: that's currently on the rocks on Capitol Hill. Biden is
Speaker 1: not moving towards the center and trying to be the
Speaker 1: guy cutting a deal with Mitch McConnell. And that dynamic continues.
Speaker 1: He wants to have a progressive legacy, even though he's
Speaker 1: known as moderate. Joe Biden from Delaware, Bob but just
Speaker 1: taking a step back when you look at all of the
Speaker 1: the reporting that you did for peril, what's your big
Speaker 1: takeaway in the new nature of the United States democracy
Speaker 1: in this new very fractus era. Well, then it's being
Speaker 1: tested and stretched by both parties. And I remember talking
Speaker 1: with President Trump when he was in office in nineteen,
Speaker 1: going into the Oval office and saying that the old
Speaker 1: order in both parties, Republican and Democratic, uh, is changing,
Speaker 1: is evaporating. Uh and uh he just he said yes,
Speaker 1: And I said, it looks like you seized history's clock
Speaker 1: in sixteen. And he just jumped in his chair behind
Speaker 1: the resolute desk, saying, yes, I'll do it again, talking
Speaker 1: about coming up. And of course he didn't. He lost.
Speaker 1: But the big Trump theme now is the election was stolen.
Speaker 1: We dug into this as much as you can, and
Speaker 1: we found these memos in this documentation that the biggest
Speaker 1: Trump supporters realized there was no stolen election. What is
Speaker 1: Trump running on essentially his campaign is, well, they stole
Speaker 1: it in though there's no evidence, and uh, somehow I
Speaker 1: can run in four and and get it back. What
Speaker 1: the average voter sits and looks at all of this,
Speaker 1: what does it mean to them, who's going to offer
Speaker 1: a better life and a better program? That should be
Speaker 1: the issue. Maybe that will surface in all of this.
Speaker 1: We have to continue on this, folks, with another one
Speaker 1: hour conversation with Robert Costan Bob Wooder. It is peril,
Speaker 1: highly readable. It's a classic Woodward shocking, deep background effect.
Speaker 1: It opens with General Miley, I might point out as well,
Speaker 1: and of course it is a look past as Woodward
Speaker 1: and cost to look to the future of our nation's politics.
Speaker 1: Jordan Rochester that joins us next tomorrow G ten fex strategist.
Speaker 1: He will be there for Spurs Villa this weekend. I'm
Speaker 1: not sure what that's got to do when it comes
Speaker 1: to pandas or anything. Jordan, Hello, great to have you
Speaker 1: with us. Good morning everyone. Let's start with sterling. Jordan's
Speaker 1: that has become really, really unpredictable, hard to trade. And
Speaker 1: I know you're scratching your head and I've read you
Speaker 1: know earlier this week you've been really transparent, open, honest,
Speaker 1: you didn't have a clue either. What are people saying
Speaker 1: to you? John? I think it's we've gone back to
Speaker 1: the old ways of looking at the pounds, even though
Speaker 1: it's not Brexit. We're not talking about trees made a
Speaker 1: given the press conference, Boris Johnson doing this, none of
Speaker 1: that Houses of Parliament stuff. But we're looking at Stirling
Speaker 1: with an inflation premium view. What's that about. We got
Speaker 1: this fuel crisis, petrol people are struggling to get petrol
Speaker 1: in their cars. The UK is highly exposed to this
Speaker 1: gas crisis that's taking place in European energy markets. Was
Speaker 1: seeing the price of energy in the UK, just like
Speaker 1: the rest of your spiraling quite a lot higher. But
Speaker 1: the one thing that has really made it really difficult
Speaker 1: for us or john is we priced in banking and
Speaker 1: rate hikes, re rate hikes, price for next year, the
Speaker 1: pounds law. So it tells me we've got to adopt
Speaker 1: the old sort of framework, which is keep an eye
Speaker 1: out for UK inflation expectations. If they keep rising, if
Speaker 1: energy prices keep rising, that's gonna weigh on the pound. Jordan,
Speaker 1: I'm going to ask a question, and I need to
Speaker 1: be a little bit open about this because I'll get
Speaker 1: a lot of hate mail. This is not my view.
Speaker 1: Before everyone starts sending me hate mail. Is this trading
Speaker 1: like an m currency now? Jordan's yeah, it's the question
Speaker 1: you always get asked. It's trading like can developed currency
Speaker 1: that's having an inflation problem um and emerging markets typically
Speaker 1: have higher rates of inflation. So yes, in that respect,
Speaker 1: it's trading like in the end currency because we're focusing
Speaker 1: on that inflation metrics. But it's still one of the
Speaker 1: reserve currencies of the world outside the dollar, So we're
Speaker 1: not going to go too far and say it's untradeable,
Speaker 1: and you can definitely trade it. It's just very unpredictable
Speaker 1: during time. King, good morning to you as well. Is
Speaker 1: this such regime shift? Jim Bollard talks about a regime shift.
Speaker 1: We finally have a sum no dollar giving us a
Speaker 1: big figure move kind of millieon for Q four. Is
Speaker 1: it a time to make big figures? I think this
Speaker 1: time we've had months now of your A dollar, for example,
Speaker 1: being in a very tight range throughout the summer, and
Speaker 1: I think as folks have gone back to the office
Speaker 1: and we've gone back to work in September, it's kind
Speaker 1: of woken everybody up to the risks that we're building
Speaker 1: up over that summer period, and you're A dollar has
Speaker 1: been in a range and we've had leverage. So the
Speaker 1: headphonding community have been short the Euro, but not the
Speaker 1: real money community. Tom. So what I've been saying to
Speaker 1: clients is I think euro is having its end moment.
Speaker 1: You think backs to Q one this year when US
Speaker 1: rates moved higher after Georgia Senate rate results. The real
Speaker 1: money community through in the towel and all their dollar
Speaker 1: shorts against the end, they went long all the end.
Speaker 1: They didn't do the same neuro The European reopening story
Speaker 1: was still very attractive, and we had et F flows
Speaker 1: into Europe, but that's for the FX that hasn't worked.
Speaker 1: And now we've broken below one sixteen, which is the
Speaker 1: line the sand for me. I think this is regime changed, Tom,
Speaker 1: and we're looking for one four seen in the euro
Speaker 1: against the dollar. All right, that's the short term, But Jordan,
Speaker 1: you do see the Euro going back to versus the dollar.
Speaker 1: I believe. I believe that that was your car. Can
Speaker 1: you talk about the path to get there and how
Speaker 1: the ECB responds to some of the inflationary inputs, even
Speaker 1: though they call them transitory. Absolutely, Yeah, the dollar view
Speaker 1: is still predicated on a global recovery. But right now
Speaker 1: we're going through a slowdown data. The surveys are all
Speaker 1: slowing down, So that's why we're talking about dollar strength
Speaker 1: right here and now. If we get into the sort
Speaker 1: of Q one next year, we'll have hopefully of pricing
Speaker 1: quite a lot of that slow down, and then we'll
Speaker 1: start to focus on the positives again. The European mobility
Speaker 1: data is fantastic. The returns of work in Europe has
Speaker 1: been much stronger than it actually has been in the US,
Speaker 1: according to the Google Apple data and every other statistics
Speaker 1: we look at for So that means maybe there's a
Speaker 1: European performance story next year. And also by December we
Speaker 1: might have got the German coalition to announce the policies
Speaker 1: they will actually do. Whichever coalition is actually formed, maybe
Speaker 1: the market focuses on those growth numbers and could boost
Speaker 1: euro again. But fully e c B. They've got the
Speaker 1: same situation for the UK. Energy prices are going up.
Speaker 1: They're actually nearly double more important for European inflation. Nine
Speaker 1: and a half per cent of inflation basket in euro
Speaker 1: is energy, so energy costs rising is a big deal
Speaker 1: for their actual inflation forecast. But they'll be able to
Speaker 1: rest on the fact they've had a decade of low inflation,
Speaker 1: so the idea of them raising rates next year or
Speaker 1: the year after it is very low. But for markets,
Speaker 1: what will be looking at. There's already one rate hYP
Speaker 1: price into the ECB by that's the end of it.
Speaker 1: So do we see the re spe raise rates three
Speaker 1: years away? I have to I have to really raise
Speaker 1: a question about this because central bankers have broadly said
Speaker 1: that energy prices are not something that they look at
Speaker 1: for core inflation. That isn't going to necessarily bleed into
Speaker 1: their view in terms of whether to raise rates, since
Speaker 1: it has factors that go beyond monetary policy. Why is
Speaker 1: this time different? This time is different because we've just
Speaker 1: had a record fiscal stimulus in Europe and the US,
Speaker 1: and also we're having massive supply chain problems, so it
Speaker 1: isn't going to be just energy. It's gonna be a
Speaker 1: lot of other parts of the CPI basket are going up.
Speaker 1: And the main thing for me is look at those
Speaker 1: consumer inflation expectations. They're not falling, they're rising. They're rising slowly,
Speaker 1: but over time, as energy prices feed through to people's budgets,
Speaker 1: when they see the price of their electricity bills, when
Speaker 1: they start to go to the shop and see food
Speaker 1: and clothing going up, They'll start to think, maybe inflation
Speaker 1: is higher than to present, to raise my inflation expectation,
Speaker 1: and that sort of feed through perhaps two wages. I'm
Speaker 1: not talking about a wage spiral. I'm not talking about
Speaker 1: inflationary spiral. But we are talking about the direction is
Speaker 1: probably higher inflation expectations, not lower, and that's something central
Speaker 1: banks respond to. I got one prediction from you, then
Speaker 1: you're a dollar looking for one fourteen. Let's get a
Speaker 1: second spurs Villa Sunday afternoon. You'll be there, Jordan, What
Speaker 1: are you looking for? If we get anything, just anything
Speaker 1: close to the shock result of one nil against Man,
Speaker 1: you all be happy, absolutely happy. We're talking about how
Speaker 1: many beaver Town bread beverages are you gonna have? At
Speaker 1: least a couple, at least a couple, for sure. Can't
Speaker 1: drink comment a stands though, anymore, can you? Jordan? Really,
Speaker 1: I didn't know that that to change. To bring the
Speaker 1: base back into the stands, you have to except halftime.
Speaker 1: You have to drink really quickly and then come back out,
Speaker 1: which is what you see. The stands are still slightly
Speaker 1: empty until about forty minute so much every day about it. Janda,
Speaker 1: thank you. Joanna Rochester there fourteen eurox strategist. Right now,
Speaker 1: we consider Washington, and we do it with someone who
Speaker 1: is steeped and I mean steeped and what infrastructure can do.
Speaker 1: Captain Clark is the Assistant Speaker of the House, but
Speaker 1: far more she represents the fifth district of the Commonwealth
Speaker 1: of Massachusetts and is adjacent to the most successful infrastructure
Speaker 1: project ever done. Karatin Clark. I stood in Boston and
Speaker 1: abject awe and looked across the torn down Southeast Expressway
Speaker 1: at the north end I had never ever, ever seen
Speaker 1: in my life. Can we bring that infrastructure success to
Speaker 1: the rest of America. We are going to do just that,
Speaker 1: and that project, the Big Dig, shows what we can
Speaker 1: do not only create good jobs, improve our roads and bridges,
Speaker 1: but also reconnect communities. And we've seen that play out
Speaker 1: over and over again that communities, especially communities of color
Speaker 1: and low income communities have been cut off. And so
Speaker 1: our Infrastructure Plan plans to do that physically and also
Speaker 1: help those who have been cut off by lack of
Speaker 1: opportunity to be part of a royal economy that we're
Speaker 1: going to build Congressman. I'll go with that. I think
Speaker 1: that's very very good idea. But do you do it
Speaker 1: linked to a social program or is today's action going
Speaker 1: to be you and Speaker Pelosi are gonna delink infrastructure
Speaker 1: and future big digs from a social agenda. We this
Speaker 1: is all about building a great economy getting people back
Speaker 1: to work. So these are always part of one build
Speaker 1: back better agenda. There's roads, there's bridges, there's broadband, there's
Speaker 1: getting the let out of our water, and there is
Speaker 1: making investments to have the workforce of the future. We know,
Speaker 1: whether you are Warren Buffett or the local restaurants that
Speaker 1: I recently held a round table with, childcare is a
Speaker 1: huge barrier for getting people back to work. Is about
Speaker 1: the economy. Look, the nation's in crisis. Even if you
Speaker 1: were playing baseball last night and that double play you
Speaker 1: went into was terrible, terthy Clark. I want to know
Speaker 1: right now you mentioned bad water. Dan Kildee Flint, Michigan,
Speaker 1: his lived bad water. He's got to go out for
Speaker 1: you and Speaker Pelosi and count the votes today. Can
Speaker 1: you count the votes attaching this infrastructure bill to a
Speaker 1: three point five trillion dollar social agenda? Of liberals. This
Speaker 1: is the agenda of the American people. This is the
Speaker 1: agenda of American business. Do we want a full recovery
Speaker 1: or do we not? These are absolutely on parallel tracks,
Speaker 1: and they are the President's agenda, built from his conversations
Speaker 1: throughout this country. So whether you're in rural America and
Speaker 1: you can't find childcare, or you need to get the
Speaker 1: lead out of the water in our urban cities or
Speaker 1: in our suburbs, this is all part of how we
Speaker 1: addressed this moment of economic, racial and climate justice. And
Speaker 1: this woman, do you think that there will be actually
Speaker 1: a vote today in the House of Representatives on the
Speaker 1: billion dollar bipartisan plan. We are working every day to
Speaker 1: make sure that we have a path to get to
Speaker 1: the vote. And I can tell you this about the
Speaker 1: Democratic Caucus. We are united in behind this Build Back
Speaker 1: Better agenda because we know that this is what our
Speaker 1: economy needs to meet this moment a great challenge. But Congresswoman,
Speaker 1: what happens if that vote is not held today because
Speaker 1: there are not enough votes to get on board and
Speaker 1: to agree on the build Back Better part of the
Speaker 1: whole package. The two part issue that the Democrats would
Speaker 1: like to pass what I know for sure is that
Speaker 1: we are going to pass both parts of these Whether
Speaker 1: if we can do that today, that's what we're working
Speaker 1: every minute of today to make sure happens. But if
Speaker 1: it doesn't, that doesn't mean this is over. This is
Speaker 1: a commitment. This is why the American people sent Joe
Speaker 1: Biden to Washington, why we have the majorities and there
Speaker 1: is a deep unity around making sure that we rebuild
Speaker 1: this economy, we address the urgency of climate change, and
Speaker 1: we make these critical investments in the American people so
Speaker 1: they can get back to work. To be clear here,
Speaker 1: then you don't think today is an important day. Today,
Speaker 1: it's a critical day, toote. I'm just trying to find
Speaker 1: out commerce room, because you know how this works. We
Speaker 1: have these long conversations. You read the script. We got
Speaker 1: a way, and I'm still not sure if there's a
Speaker 1: vote today, well, we're still in negotiations. We want to
Speaker 1: get to yes. Everybody does. And that is what the
Speaker 1: White House is working at. That is what leadership is
Speaker 1: working at. That's what our whole caucus is working at.
Speaker 1: But whether that vote happens today, and I hope it does,
Speaker 1: this is not over. If we haven't reached that point
Speaker 1: in our negotiations. Our commitment is to getting this entire agenda,
Speaker 1: and that will happen. That is our you know, that
Speaker 1: is what is happening because we are committed to the
Speaker 1: American people and meeting this moment a great challenge with
Speaker 1: one of great progress. But we also have a deadline
Speaker 1: today of keeping government open and I we will also
Speaker 1: deliver on that. We will not allow a government shutdown,
Speaker 1: and we are going to take up you know, go
Speaker 1: back and make sure that, as your opening said, we
Speaker 1: deal with this issue of the debt ceiling. It is
Speaker 1: a primary responsibility. We have already accrued the debt. The
Speaker 1: spending is in our past. This is about moving forward,
Speaker 1: and Democrats are going to ensure that we protect the
Speaker 1: full faith and credit of the United States. Have a
Speaker 1: feeling will be talking about us again. Representative Catherine Clark,
Speaker 1: the assistant speak for the House of Representatives, congresswoman, thank
Speaker 1: you so much, Thank you very much. Michelle was talking
Speaker 1: about Christmas in September. Let's get that, Solmes in September.
Speaker 1: You want to do Christmas in September's Christmas in September?
Speaker 1: Right now. Michelle Meyer was just the Bank of American
Speaker 1: of course, they've got a granularity which she helped invent
Speaker 1: out of Boston University in housing and in the American
Speaker 1: consumer discuss Christmas in September, really, Michelle, Um, Yeah, you know,
Speaker 1: it's not obviously quite Christmas in September, but the idea
Speaker 1: is that we are seeing evidence that consumers are spending
Speaker 1: earlier this holiday step in Um. And you know, when
Speaker 1: you look holistically at the the aggregated Bank America card data,
Speaker 1: September showed some real momentum. And part of that is
Speaker 1: this broadening of spender cross goods in particularly an area
Speaker 1: of light cooling in electronics, things that are most sensitive
Speaker 1: to holiday sales, which could be a function of this
Speaker 1: full forward of holiday spending. But you're also seeing this
Speaker 1: this kind of mini re engagement on the easier side too,
Speaker 1: which has been super encouraging. So the car data we've
Speaker 1: been following has been really quite positive for the consumer
Speaker 1: and make me feel pretty encouraged as we head into
Speaker 1: the next quarter. Yeah, everybody knows we're just pulling forward
Speaker 1: from December twenty three when I begin my shopping. Great,
Speaker 1: have you adjusted your GDP? View our theme today? On
Speaker 1: September thirty, no visibility. Q four no visibility Q one
Speaker 1: give us some visibility. Yeah, well, I think we're seeing
Speaker 1: just that with our high frequency data that we're setting up,
Speaker 1: which should be a better que for UM. So Q
Speaker 1: three GDP is coming in right around four percent, give
Speaker 1: or take a you know, a few tents here UM.
Speaker 1: But Q four it looks like, you know, our baseline
Speaker 1: forecast has been for six percent growth and I'm holding
Speaker 1: to that number, and the data that we're tracking, the
Speaker 1: hybriduency data that's in flexing higher UM, suggests we could
Speaker 1: very much succeed on that forecast for six percent. So
Speaker 1: I think the demand is there. The indications are that
Speaker 1: we're seeing this reengagement in the economy start, which is
Speaker 1: really encouraging. As the cases come down, the real question
Speaker 1: will be on the supply side. You know, how much
Speaker 1: capacity is there to realize the strength that we're now
Speaker 1: seeing on on demand. And the flip side of that
Speaker 1: is higher prices, which we're seeing in a whole range
Speaker 1: of places right And I'm wondering, you know, the sort
Speaker 1: of stickiness here that we're looking at going forward and
Speaker 1: the disinflationary kind of trend that people were talking about
Speaker 1: before and people are spending more for the same amount
Speaker 1: of stuff. What's your view on how that's affecting consumer
Speaker 1: sentiment and their willingness to spend. Yeah, I mean that's
Speaker 1: exactly right. There's all this demand out there and there's
Speaker 1: limited supplies and unfortunately the supply chain issues have gotten worse,
Speaker 1: not better. Um So that's a real concern. And what
Speaker 1: that means is that there will be you know, higher
Speaker 1: prices that ready is being and they will continue. And
Speaker 1: if people are buying early in the holiday season, it
Speaker 1: means that you probably don't have the same level of
Speaker 1: discounting that you've had em prior holiday seasons, especially environment
Speaker 1: low inventories. So what does that mean, Well, consumers are
Speaker 1: taking notice right look at the University of Michigan survey.
Speaker 1: You know, people are more discouraged because prices are high
Speaker 1: and they can't get some of the items that are
Speaker 1: looking to purchase. Um So when you when you consider
Speaker 1: adding up for GDP, you know you're looking at in
Speaker 1: real terms, inflation adjusted terms, so you could get this
Speaker 1: bigger divide where nominal really you know, accelerates into the
Speaker 1: fourth quarter, but real GDP maybe struggles a bit more.
Speaker 1: So that's something that we're keeping an eye off. While
Speaker 1: when we think about the supply streams, your specialty is
Speaker 1: the housing market. That's where you made your name, and
Speaker 1: we're watching the housing market actually embody this inflationary push,
Speaker 1: possibly more than any other. The idea of twenty year
Speaker 1: over year gains month after month after month. How does
Speaker 1: this factor into discretionary spending to inflation more broadly at
Speaker 1: a time when J. Powell says a lot of this
Speaker 1: is just transitory and supply chain related, well, look, I mean,
Speaker 1: I think housing is a perfect his study of this
Speaker 1: imbalance between demand and supply in the market where demand
Speaker 1: has just you know, climbs higher in the housing market
Speaker 1: in a very constrained environment. Now builders are responding, that's good,
Speaker 1: inventories picking up. Look at the new home sales report,
Speaker 1: the months apply figure there is now touching around six
Speaker 1: months UM. So that's that's quite good. We're making progress.
Speaker 1: But we're not at a point yet where home prices
Speaker 1: they're starting to cool. We're not at a point yet
Speaker 1: where you've kind of lost on with the frenzy in
Speaker 1: the market. Still there. When you look at the number
Speaker 1: of days in the market for sale and these homes
Speaker 1: things are moving quickly. There's also a lot more cash buyers,
Speaker 1: there's a lot more investors in the market. Um So,
Speaker 1: so what does this mean broadly, Well, it does fuel
Speaker 1: this kind of inflation sentiment. It's one of the factors
Speaker 1: that you want to think about when you're considering inflation
Speaker 1: expectations and how people perceive the the the inflationary environment.
Speaker 1: But then also just more on a nuanced view, right,
Speaker 1: it does ultimately impact the rental market, which ultimately impacts
Speaker 1: owners equivalent rent and now starting to show through very
Speaker 1: clearly in the hyperguency data. So we should anticipate that
Speaker 1: owners equivalent rent moves up into net year even if
Speaker 1: some of these more transitory factors that have been boosting
Speaker 1: inflation waiting. That's great, dear Michelle Myron or Wheelhouse when
Speaker 1: we first met our zillion years ago a lot, you know, Michelle,
Speaker 1: I want to talk here about transitory and it's what
Speaker 1: everybody's talking about in these two Americas, and one of
Speaker 1: them is in America flat on its back. Is a
Speaker 1: negative real wage here to stay? Or is a negative
Speaker 1: real wage transitory? Well, right now, it's particularly painful in
Speaker 1: a year of a year basis because you've seen these
Speaker 1: extraordinary games and inflation. But when you look forward, I
Speaker 1: think the wage environment is quite positive, particularly for the
Speaker 1: lower income consumer that's gonna be a lot more sensitive
Speaker 1: to moves and inflation. So I think, you know, given
Speaker 1: the incredible demand for workers that we've been saying, particularly
Speaker 1: in the lower income part of the population, wages have
Speaker 1: been rising and I would expect that to continue. Now.
Speaker 1: Of course, yes, you have to consider the case of
Speaker 1: wage increase is relative to the peace of underlying inflations
Speaker 1: and back out that real wage number. And right now
Speaker 1: it is a bit more problematic. But I think into
Speaker 1: next year you get some cooling in some of these
Speaker 1: components where inflation has just been extraordinarily high, and meanwhile
Speaker 1: we just continue to creep up, and I think that's
Speaker 1: a favorable backdrop. I look where you know, I look
Speaker 1: where we are, Michelle. I've got to interrupt the train
Speaker 1: of thought here when we see young go out through
Speaker 1: one twelve onto one thirteen dovetail Bank of America Foreign
Speaker 1: exchange analysis into your Great American economic view, How does
Speaker 1: strong dollar change your calculus? Look, I mean, the strong
Speaker 1: dollar presumably is a function the fact that it's a
Speaker 1: strong economy. So I would argue that the dollar strength
Speaker 1: that we've seen has not been unwarranted um or unsupported
Speaker 1: by the fundamentals in the U S economy. Um so.
Speaker 1: But yeah, of course, when you have you think about
Speaker 1: the effets moves, do you think about the balance of trade,
Speaker 1: you think about the cost of goods, and all of
Speaker 1: those things are obviously going to be impacted negatively when
Speaker 1: you have a strengthening in the dollar. But I would
Speaker 1: argue very much with our effect JADG just believe that
Speaker 1: the movement the dollar is justified and given what you're
Speaker 1: seeing in the US accom So before we let you go, Michelle,
Speaker 1: we've heard a lot of FED speak over the past
Speaker 1: couple of days. It will continue today, Uh Fetcher J.
Speaker 1: Powell on the hill? Is there anything that he has
Speaker 1: said over the past couple of sessions that we've heard
Speaker 1: from him that's been of interest? So, you know, you
Speaker 1: kind of always have to read between the lines. And
Speaker 1: I think that there's been a real emphasis on the
Speaker 1: supply side of the economy because it seems like there's
Speaker 1: this discussion within the FED over whether or not all
Speaker 1: this demand side policy are accommodated monetary policy that stimulates
Speaker 1: the demand side is the right prescription if you're really
Speaker 1: facing a bigger supply side shock. So they're trying to
Speaker 1: figure out how permanent the supply side issues are UM,
Speaker 1: and one of the ways to gage that, frankly, is
Speaker 1: just to go back to inflation. What you talked about before, Lesta,
Speaker 1: particularly long run inflation expectations UM. The extent to which
Speaker 1: long run inflation expectations move up will tell the fact
Speaker 1: that they have a more permanent constrain the supply side,
Speaker 1: and that will prompt them to pivot when it comes
Speaker 1: to Douvich monitor policy. They're not seeing it yet, but
Speaker 1: they're obviously very very very keen to focus on this
Speaker 1: topic and looking at it very carefully, which makes a
Speaker 1: lot of them. Michelle, Happy Christmas to you the family. Thanks.
Speaker 1: I love that. Thank you dragging her kids out to
Speaker 1: see Santa pretending that it's fifth from Thanks America. That
Speaker 1: the wonderful. This is the Bloomberg Surveillance Podcast. Thanks for listening.
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