1
00:00:02,440 --> 00:00:08,640
Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

2
00:00:11,640 --> 00:00:15,440
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

3
00:00:15,480 --> 00:00:18,680
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day

4
00:00:18,720 --> 00:00:22,280
Speaker 2: for insight from the best in markets, economics, and geopolitics

5
00:00:22,440 --> 00:00:24,920
Speaker 2: from our global headquarters in New York City. We are

6
00:00:24,920 --> 00:00:27,680
Speaker 2: live on Bloomberg Television weekday mornings from six to nine

7
00:00:27,720 --> 00:00:31,280
Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or

8
00:00:31,320 --> 00:00:33,960
Speaker 2: anywhere else you listen, and as always on the Bloomberg

9
00:00:34,040 --> 00:00:37,159
Speaker 2: Terminal and the Bloomberg Business app. Beck let's talk about it,

10
00:00:37,159 --> 00:00:38,839
Speaker 2: and I want to refer to what you told us

11
00:00:38,880 --> 00:00:41,920
Speaker 2: coming into twenty twenty four. It's important to go back.

12
00:00:42,560 --> 00:00:44,800
Speaker 2: This market was priced for six or seven rad cuds.

13
00:00:44,920 --> 00:00:46,879
Speaker 2: You were saying that was nonsense. We wouldn't see ray

14
00:00:46,920 --> 00:00:50,000
Speaker 2: cuts until the second half of twenty twenty four. What

15
00:00:50,120 --> 00:00:52,519
Speaker 2: were you looking at that ultimately has played out in

16
00:00:52,520 --> 00:00:53,640
Speaker 2: the fashion you expected.

17
00:00:53,960 --> 00:00:56,200
Speaker 3: Good morning, It's so great to be here, John and Lisa.

18
00:00:57,080 --> 00:00:59,280
Speaker 3: So back when we were here in December and we

19
00:00:59,360 --> 00:01:02,720
Speaker 3: talked about the five or six rate cuts that were nonsense.

20
00:01:03,080 --> 00:01:06,160
Speaker 3: Don't think that word was used, but certainly we felt

21
00:01:06,200 --> 00:01:08,720
Speaker 3: that the market had priced in too many rate cuts.

22
00:01:08,920 --> 00:01:12,440
Speaker 3: The view there was that inflation would remain sticky, and

23
00:01:12,480 --> 00:01:16,240
Speaker 3: that's exactly what's played out. We've seen services inflation remained

24
00:01:16,360 --> 00:01:19,720
Speaker 3: very straight, sticky, still above five percent. We've seen shelter

25
00:01:19,840 --> 00:01:23,280
Speaker 3: inflation coming down, but not quite at where we would

26
00:01:23,319 --> 00:01:25,920
Speaker 3: have liked it to be. And then yesterday, I must

27
00:01:26,000 --> 00:01:30,560
Speaker 3: say it was very interesting to hear chair Powell sounds

28
00:01:30,600 --> 00:01:35,920
Speaker 3: so confident about the deceleration, you know, to your point earlier, Lisa,

29
00:01:36,000 --> 00:01:39,000
Speaker 3: he did say he's not gaining greater confidence, but he

30
00:01:39,120 --> 00:01:41,840
Speaker 3: still seems to be quite sure that this is just

31
00:01:41,920 --> 00:01:45,319
Speaker 3: a bump along the road. And for the most spot,

32
00:01:45,360 --> 00:01:47,840
Speaker 3: he's focusing on the deceleration that we got in the

33
00:01:47,840 --> 00:01:50,480
Speaker 3: second half of twenty twenty three and not so much

34
00:01:50,560 --> 00:01:53,120
Speaker 3: on the acceleration in the first two months of the year.

35
00:01:53,240 --> 00:01:55,520
Speaker 2: He's not lost confidence, and I think it's probably the headline,

36
00:01:55,520 --> 00:01:58,880
Speaker 2: particularly after we had upside surprises on inflation prints what

37
00:01:59,000 --> 00:02:01,400
Speaker 2: is in the inflation but right now beneath the surface

38
00:02:01,400 --> 00:02:03,960
Speaker 2: and all the detail that he can take confidence from.

39
00:02:04,720 --> 00:02:06,520
Speaker 3: So a couple of things that I was looking at

40
00:02:06,600 --> 00:02:09,280
Speaker 3: yesterday is for us to get to core PCE at

41
00:02:09,280 --> 00:02:11,760
Speaker 3: two point six percent, which is the revised core PCE,

42
00:02:12,400 --> 00:02:14,600
Speaker 3: and you know, we kind of know what this month's

43
00:02:14,680 --> 00:02:17,000
Speaker 3: data is going to be. Given the inputs on CPI

44
00:02:17,080 --> 00:02:20,760
Speaker 3: and ppe PPI, I think the rest of the year,

45
00:02:20,800 --> 00:02:23,880
Speaker 3: you'd have to be quite quite sure that you're going

46
00:02:23,919 --> 00:02:27,320
Speaker 3: to get PCE at point one six or point one seven.

47
00:02:27,720 --> 00:02:30,480
Speaker 3: So I guess that's one thing that they're relying on

48
00:02:30,520 --> 00:02:35,640
Speaker 3: that even if shelter inflation on CPI remains strong, that

49
00:02:35,680 --> 00:02:38,520
Speaker 3: it's PCE, which obviously we know has a lower weight

50
00:02:39,280 --> 00:02:41,480
Speaker 3: that saves them a little bit. So I think that's

51
00:02:41,480 --> 00:02:44,120
Speaker 3: one thing they're looking at. I also think that he

52
00:02:44,200 --> 00:02:46,640
Speaker 3: focused yesterday a little bit when he was asked pressed

53
00:02:46,720 --> 00:02:51,760
Speaker 3: on this question that non housing services they expect that

54
00:02:51,919 --> 00:02:55,040
Speaker 3: to decelerate, so again their super core measure that is

55
00:02:55,080 --> 00:02:59,040
Speaker 3: still at point four to seven, imagining that they expect

56
00:02:59,040 --> 00:03:01,800
Speaker 3: that to come down. The one positive thing that I

57
00:03:01,880 --> 00:03:06,400
Speaker 3: did see in this month's CPI print was, unlike the

58
00:03:06,480 --> 00:03:12,080
Speaker 3: January print, the February every single services sector did not reaccelerate.

59
00:03:12,320 --> 00:03:14,040
Speaker 3: We did see that in the jan print, which was

60
00:03:14,080 --> 00:03:16,240
Speaker 3: scary to me this time around, when you looked at

61
00:03:16,320 --> 00:03:20,359
Speaker 3: education and healthcare and medical services, all of those did

62
00:03:20,400 --> 00:03:22,400
Speaker 3: come back to Trent, So I think that is a

63
00:03:22,400 --> 00:03:26,200
Speaker 3: positive sign. And then finally, I mean Goods had that

64
00:03:26,320 --> 00:03:29,720
Speaker 3: aberration for U scars. I think that's something we can

65
00:03:29,760 --> 00:03:32,520
Speaker 3: see moderated based on Mannheim prices.

66
00:03:32,720 --> 00:03:34,520
Speaker 1: So I understand why the front end of the yield

67
00:03:34,560 --> 00:03:37,280
Speaker 1: curve would rally m hm. As John was mentioning this earlier,

68
00:03:37,760 --> 00:03:40,440
Speaker 1: I have less of a clear sense of why you're

69
00:03:40,440 --> 00:03:42,840
Speaker 1: seeing such a rally in the tenure with yields now

70
00:03:42,840 --> 00:03:45,720
Speaker 1: at four point two percent, down from a high just

71
00:03:45,960 --> 00:03:47,600
Speaker 1: earlier this month, a couple of days ago, over three

72
00:03:47,680 --> 00:03:50,040
Speaker 1: and you've seen this come in around ten basis points

73
00:03:50,120 --> 00:03:52,840
Speaker 1: the past couple of trading sessions. Does this make sense

74
00:03:52,840 --> 00:03:54,560
Speaker 1: to you if the feed is basically saying that they're

75
00:03:54,600 --> 00:03:57,400
Speaker 1: okay with inflation running a little bit hotter for a

76
00:03:57,400 --> 00:03:58,400
Speaker 1: longer period of time.

77
00:03:58,920 --> 00:04:01,520
Speaker 3: Yeah, to your point, I definitely agree that the front

78
00:04:01,720 --> 00:04:04,360
Speaker 3: end makes sense. The rally that we saw made sense.

79
00:04:04,400 --> 00:04:06,760
Speaker 3: I think on the tenure, look, it's just range bound, right,

80
00:04:06,920 --> 00:04:09,600
Speaker 3: We've seen that four thirty one level a few times.

81
00:04:09,640 --> 00:04:12,520
Speaker 3: We got there, we're coming back off. I think between

82
00:04:12,560 --> 00:04:16,480
Speaker 3: now and the next important print, which most likely is

83
00:04:16,520 --> 00:04:18,760
Speaker 3: going to be the non farm payroll that we get

84
00:04:18,920 --> 00:04:20,880
Speaker 3: I think we trade in a little range of bound

85
00:04:20,880 --> 00:04:24,840
Speaker 3: fashion over the longer the medium period of time. Can

86
00:04:24,880 --> 00:04:27,839
Speaker 3: we see yield curves steepen from here? Absolutely, I think

87
00:04:27,880 --> 00:04:30,240
Speaker 3: that belly of the curve, looking at that three to

88
00:04:30,360 --> 00:04:32,440
Speaker 3: seven year part, maybe even just a pittle of five

89
00:04:32,520 --> 00:04:34,960
Speaker 3: year part, that's where you want to own fixed and come.

90
00:04:35,400 --> 00:04:37,440
Speaker 3: I don't think you quite need to get to the

91
00:04:37,440 --> 00:04:40,400
Speaker 3: tenure point. I think we can certainly see four thirty,

92
00:04:40,440 --> 00:04:44,240
Speaker 3: maybe even four a little bit higher than that, But

93
00:04:44,320 --> 00:04:45,720
Speaker 3: for now, I think it's range bound.

94
00:04:45,800 --> 00:04:47,360
Speaker 1: So this is why I think the gold rally is

95
00:04:47,400 --> 00:04:49,760
Speaker 1: actually quite interesting, sort of where do you get that

96
00:04:49,880 --> 00:04:53,839
Speaker 1: ballast if longer term treasuries don't have the same features

97
00:04:53,839 --> 00:04:56,200
Speaker 1: at a time where the Fed is willing to ease

98
00:04:56,320 --> 00:04:59,359
Speaker 1: even though inflation isn't back down to their target, is

99
00:04:59,400 --> 00:05:02,520
Speaker 1: there a sense that longer term bonds don't hold the

100
00:05:02,520 --> 00:05:04,440
Speaker 1: same kind of ballast that they used to just simply

101
00:05:04,480 --> 00:05:08,160
Speaker 1: because this is an economy that will tolerate higher inflation.

102
00:05:08,880 --> 00:05:11,240
Speaker 3: I think that there is a sense that it's not

103
00:05:11,360 --> 00:05:14,320
Speaker 3: just the inflation point, but the supply point. There is

104
00:05:14,360 --> 00:05:16,920
Speaker 3: a sense that when you have this much supply coming

105
00:05:16,960 --> 00:05:20,000
Speaker 3: to the markets and you have a yield curve that

106
00:05:20,160 --> 00:05:23,400
Speaker 3: is still not pricing in enough term premium. There is

107
00:05:23,440 --> 00:05:26,480
Speaker 3: a sense that you have better ballast in the value

108
00:05:26,520 --> 00:05:28,279
Speaker 3: of the curve, so I don't think it's about fixed

109
00:05:28,279 --> 00:05:31,280
Speaker 3: and CUM losing its ballast. We certainly have ballast here.

110
00:05:31,480 --> 00:05:33,240
Speaker 3: I think it's in the two to five year point

111
00:05:33,240 --> 00:05:36,560
Speaker 3: where you're much better off stepping out of cash or

112
00:05:36,600 --> 00:05:40,200
Speaker 3: just diversifying away from equities too, so you don't need

113
00:05:40,279 --> 00:05:43,000
Speaker 3: to step out into tens, twenties, thirties. Get it in

114
00:05:43,040 --> 00:05:44,680
Speaker 3: the five year, get it in the seven year, get

115
00:05:44,680 --> 00:05:48,279
Speaker 3: it in ig credit about six percent, get it in bank,

116
00:05:48,360 --> 00:05:50,960
Speaker 3: which is, you know, sort of getting you that income

117
00:05:51,320 --> 00:05:53,760
Speaker 3: in fixed income market. So I think that's kind of

118
00:05:53,839 --> 00:05:56,320
Speaker 3: what investors should be thinking about. And I want to

119
00:05:56,360 --> 00:05:59,360
Speaker 3: hit your point on gold. It's been interesting to see

120
00:05:59,400 --> 00:06:03,880
Speaker 3: how equities and gold are making all time highs and

121
00:06:03,960 --> 00:06:07,320
Speaker 3: I place a little bit of that in the inflation fear,

122
00:06:07,760 --> 00:06:10,320
Speaker 3: but tips haven't done as well. So I think the

123
00:06:10,360 --> 00:06:13,200
Speaker 3: way to play this might be an allocation into an

124
00:06:13,240 --> 00:06:16,919
Speaker 3: asset class that actually appreciates with CPI, which of course

125
00:06:17,000 --> 00:06:18,479
Speaker 3: is interesting link bonds, So just.

126
00:06:18,480 --> 00:06:20,320
Speaker 2: To cut through that again, you think the opportunity might

127
00:06:20,320 --> 00:06:22,400
Speaker 2: be in tips, more than what is already rally in,

128
00:06:22,400 --> 00:06:23,360
Speaker 2: which is stocks and gold.

129
00:06:24,120 --> 00:06:26,760
Speaker 3: Certainly, I think stocks can continue probably to do well,

130
00:06:26,880 --> 00:06:29,320
Speaker 3: high quality stocks. So I think we might see a

131
00:06:29,360 --> 00:06:32,880
Speaker 3: little bit of a small gap rally here, but what's

132
00:06:33,240 --> 00:06:35,240
Speaker 3: going to work for the medium term is up in

133
00:06:35,360 --> 00:06:38,559
Speaker 3: quality rally. And I think tips make a lot of sense.

134
00:06:38,600 --> 00:06:41,400
Speaker 3: Front end tips, something like SDIP make a lot of sense.

135
00:06:41,440 --> 00:06:43,640
Speaker 2: So that's fixed income. You touched on stocks. Let's just

136
00:06:43,640 --> 00:06:46,039
Speaker 2: finish on our creative weekend. What is it about small

137
00:06:46,040 --> 00:06:48,160
Speaker 2: caps that you would like at the moment? Really big

138
00:06:48,240 --> 00:06:50,039
Speaker 2: out performance yesterday continues this morning.

139
00:06:50,120 --> 00:06:52,200
Speaker 3: Oh, I was going to say that we don't think

140
00:06:52,279 --> 00:06:54,600
Speaker 3: that small caps is going to be the output even

141
00:06:54,600 --> 00:06:57,719
Speaker 3: though it did well yesterday for the longer period of time,

142
00:06:57,800 --> 00:07:00,279
Speaker 3: you know, over the the next three to six monthstually

143
00:07:00,760 --> 00:07:04,320
Speaker 3: large gap and quality that has done well, that has

144
00:07:04,360 --> 00:07:06,920
Speaker 3: the earnings growth, that's going to continue to do well.

145
00:07:06,920 --> 00:07:09,680
Speaker 3: I think the small gap is more of a rebound

146
00:07:09,680 --> 00:07:11,800
Speaker 3: trade that's happening at the back of a dubbish fed,

147
00:07:11,880 --> 00:07:13,720
Speaker 3: but I doubt how long it will last.

148
00:07:13,840 --> 00:07:16,240
Speaker 2: That rebound continues this morning by three quarters of one

149
00:07:16,240 --> 00:07:18,840
Speaker 2: percent on the russo Ghaghi love it as always Gagi

150
00:07:18,920 --> 00:07:31,560
Speaker 2: Chandry a black rock. Richard Burnst state of Richard burst

151
00:07:31,560 --> 00:07:34,720
Speaker 2: in advice, is not expecting any reductions this year, even

152
00:07:34,800 --> 00:07:38,680
Speaker 2: suggesting there's a chance of a hike Richard, and plays

153
00:07:38,760 --> 00:07:40,680
Speaker 2: to say is with this around the table, Richard, good

154
00:07:40,680 --> 00:07:41,080
Speaker 2: morning to you.

155
00:07:41,160 --> 00:07:41,760
Speaker 4: Good morning, John.

156
00:07:41,840 --> 00:07:43,480
Speaker 2: Let's start at a press conference. What did you make

157
00:07:43,480 --> 00:07:44,560
Speaker 2: of that just yesterday?

158
00:07:45,200 --> 00:07:48,880
Speaker 4: I have the unfortunate view of kind of viewing him

159
00:07:49,080 --> 00:07:53,000
Speaker 4: as a bartender still pouring drinks. I think we haven't

160
00:07:53,040 --> 00:07:56,560
Speaker 4: heard last call yet. And as you said, that's causing

161
00:07:56,640 --> 00:07:59,760
Speaker 4: speculative assets to go up. And that's the natural reaction

162
00:07:59,840 --> 00:08:02,080
Speaker 4: that should go on when the FED is going to

163
00:08:02,080 --> 00:08:05,200
Speaker 4: provide a lot of liquidity in an already liquid environment.

164
00:08:05,520 --> 00:08:10,160
Speaker 2: So what's the onset? Keep drinking, keep drinking, I suppose.

165
00:08:10,240 --> 00:08:13,280
Speaker 4: I guess my confusion is that there's as you said,

166
00:08:13,320 --> 00:08:15,920
Speaker 4: everything's going up. It seems to me that we should

167
00:08:15,920 --> 00:08:19,120
Speaker 4: be seeing the cyclical sort of pro inflation side doing

168
00:08:19,240 --> 00:08:21,480
Speaker 4: much better, and I'm not sure that's actually happening. And

169
00:08:21,520 --> 00:08:24,320
Speaker 4: so I think there's still very much a speculative fervor

170
00:08:24,360 --> 00:08:27,400
Speaker 4: within the market, whether it's a magnificent seven, whether it's cryptocurrencies,

171
00:08:27,640 --> 00:08:30,880
Speaker 4: anything like that. I think that's kind of the warning

172
00:08:30,920 --> 00:08:34,199
Speaker 4: sign out there. But the more economically sensitive stuff should

173
00:08:34,200 --> 00:08:34,720
Speaker 4: be doing well.

174
00:08:34,920 --> 00:08:35,079
Speaker 5: Well.

175
00:08:35,400 --> 00:08:37,480
Speaker 1: You point to some of the more speculative stuff and

176
00:08:37,520 --> 00:08:40,240
Speaker 1: they say magnificent seven, fabulous five if you want to

177
00:08:40,240 --> 00:08:43,319
Speaker 1: take out Apple and Tesla. I am curious though about

178
00:08:43,480 --> 00:08:46,600
Speaker 1: why that is speculative if the earnings are there, And

179
00:08:46,640 --> 00:08:50,520
Speaker 1: that's basically the justification that everyone comes on the show gives.

180
00:08:50,520 --> 00:08:53,960
Speaker 4: Right, I think it's not that they're bad companies. Right,

181
00:08:54,000 --> 00:08:55,720
Speaker 4: there's always this notion that we have to worry that

182
00:08:55,800 --> 00:08:59,000
Speaker 4: somehow these are bad companies. They're not bad companies. The

183
00:08:59,080 --> 00:09:02,360
Speaker 4: question is are they you nique companies? And I don't

184
00:09:02,360 --> 00:09:05,320
Speaker 4: think they are. Right in the latest reporting period, we

185
00:09:05,440 --> 00:09:07,600
Speaker 4: have just for the S and P five hundred, one

186
00:09:07,720 --> 00:09:11,640
Speaker 4: hundred and fifty companies growing earnings twenty five percent or more. Right,

187
00:09:11,720 --> 00:09:14,120
Speaker 4: So what's and that only three of the Magnificent seven

188
00:09:14,160 --> 00:09:17,720
Speaker 4: passed that screen. So there's clearly a lot of choice

189
00:09:17,720 --> 00:09:20,880
Speaker 4: out there. Why would anybody focus on the Magnificent seven?

190
00:09:20,920 --> 00:09:23,840
Speaker 4: And history says then when profit cycles traf and you

191
00:09:23,880 --> 00:09:26,760
Speaker 4: start getting this broadening of the earnings base, that the

192
00:09:26,800 --> 00:09:30,520
Speaker 4: market starts broadening. And that's kind of happening in fits

193
00:09:30,520 --> 00:09:31,840
Speaker 4: and starts, but is not happening.

194
00:09:31,920 --> 00:09:33,800
Speaker 1: The theory that we hear from a lot of strategists

195
00:09:33,880 --> 00:09:35,599
Speaker 1: is that if the FED were to cut rates, that

196
00:09:35,640 --> 00:09:38,440
Speaker 1: would actually allow the broadening out. It would allow some

197
00:09:38,480 --> 00:09:41,200
Speaker 1: of the other four hundred and ninety five stocks to

198
00:09:41,559 --> 00:09:44,120
Speaker 1: really gain some momentum, just because those are the most

199
00:09:44,120 --> 00:09:48,160
Speaker 1: affected by high interest rates. Why do you disagree?

200
00:09:48,360 --> 00:09:51,720
Speaker 4: I don't disagree with that. I think where my confusion

201
00:09:51,840 --> 00:09:54,839
Speaker 4: is more that why would the Fed want to spur

202
00:09:55,320 --> 00:09:58,600
Speaker 4: a speculative aspect to the stock market and to the

203
00:09:58,600 --> 00:10:04,320
Speaker 4: financial markets period? Right, cryptocurrencies, Because ultimately bubbles or very

204
00:10:04,320 --> 00:10:06,840
Speaker 4: speculative period if you don't like the word bubble, bubbles

205
00:10:06,840 --> 00:10:08,719
Speaker 4: are inherently inflationary.

206
00:10:08,440 --> 00:10:10,080
Speaker 2: Left the word bubble, I'm right?

207
00:10:10,120 --> 00:10:11,599
Speaker 5: Oh yeah, okay, okay.

208
00:10:11,600 --> 00:10:16,200
Speaker 4: And they're inherently inflationary because you misallocate capital within the economy, right,

209
00:10:16,360 --> 00:10:18,880
Speaker 4: You allocate capital things you don't need, and you don't

210
00:10:18,920 --> 00:10:21,880
Speaker 4: allocate capital things you do need, so ultimately you spur inflation.

211
00:10:22,559 --> 00:10:25,280
Speaker 4: And I don't think the FED has thought that one.

212
00:10:25,320 --> 00:10:28,319
Speaker 2: For where are the signs of euphoria right now? How

213
00:10:28,320 --> 00:10:30,400
Speaker 2: do you identify that in stocks of the moment?

214
00:10:30,679 --> 00:10:34,720
Speaker 4: I think if you look at just stocks for a second,

215
00:10:35,000 --> 00:10:37,240
Speaker 4: if you look at the magnificent seven effect in environment

216
00:10:37,240 --> 00:10:39,280
Speaker 4: where one hundred and fifty companies are growing earnings twenty

217
00:10:39,320 --> 00:10:41,640
Speaker 4: five percent or more, that I would argue that to you.

218
00:10:41,679 --> 00:10:43,080
Speaker 4: For you, that was the tech bubble. By the way,

219
00:10:43,080 --> 00:10:45,600
Speaker 4: in nine nine two thousand, the profit cycle was accelerating

220
00:10:45,600 --> 00:10:48,600
Speaker 4: the United States, but nobody cared. Everybody just wanted tech. Today,

221
00:10:48,640 --> 00:10:51,240
Speaker 4: the profit cycles accelerating, nobody cares. They want seven stocks.

222
00:10:51,559 --> 00:10:53,160
Speaker 4: So I was in the stock market, I would say

223
00:10:53,160 --> 00:10:54,439
Speaker 4: that's the place where you see it the most.

224
00:10:54,559 --> 00:10:57,000
Speaker 1: When you talk about how they're fueling a bubble or

225
00:10:57,000 --> 00:11:00,480
Speaker 1: some kind of speculative fervor, there is a question of

226
00:11:00,640 --> 00:11:04,160
Speaker 1: whether their policy matters at all with respect to inflation. Right,

227
00:11:04,360 --> 00:11:07,360
Speaker 1: this idea that what's spurring the speculative bubble is not

228
00:11:07,400 --> 00:11:10,640
Speaker 1: Fed policy at all, it's something else, maybe fiscal, and

229
00:11:10,679 --> 00:11:13,080
Speaker 1: that the FED is trying to respond to what they

230
00:11:13,120 --> 00:11:16,640
Speaker 1: can control, commercial real estate, some of these other aspects

231
00:11:17,000 --> 00:11:18,520
Speaker 1: which have felt the bite of it.

232
00:11:18,800 --> 00:11:21,840
Speaker 4: Yeah, I think the key word and what you said

233
00:11:21,880 --> 00:11:23,680
Speaker 4: there that I think is most iportant is the word

234
00:11:23,720 --> 00:11:27,040
Speaker 4: respond That a lot of investors believe that the FED

235
00:11:27,080 --> 00:11:30,600
Speaker 4: is somehow a leading indicator. The FED is a lagging indicator,

236
00:11:30,640 --> 00:11:33,000
Speaker 4: always has been, maybe with it, maybe not the vulgar FED,

237
00:11:33,080 --> 00:11:35,480
Speaker 4: but every FED has been a lagging indicator. You think

238
00:11:35,480 --> 00:11:37,120
Speaker 4: about what they look at. They look at inflation and

239
00:11:37,200 --> 00:11:41,400
Speaker 4: unemployment to lagging indicators, and they respond to lagging indicators.

240
00:11:41,720 --> 00:11:45,600
Speaker 4: So that's the thing that I think presents the opportunity

241
00:11:45,679 --> 00:11:49,520
Speaker 4: right now is that you've got leading indicators that are

242
00:11:49,559 --> 00:11:52,079
Speaker 4: starting to get stronger, so building permits the other day

243
00:11:52,120 --> 00:11:54,640
Speaker 4: a leading indicator of the economy getting stronger, but the

244
00:11:54,640 --> 00:11:57,480
Speaker 4: FED is still reacting to the lagging indicators. I think

245
00:11:57,600 --> 00:12:01,000
Speaker 4: that presents a tremendous investment opportunity because it says that

246
00:12:01,040 --> 00:12:03,920
Speaker 4: we're likely to have more growth rather than less when

247
00:12:03,920 --> 00:12:05,920
Speaker 4: the leading indicators are heating up and the FED is

248
00:12:05,920 --> 00:12:08,880
Speaker 4: going to ease. That's that to me, says you're gonna

249
00:12:08,880 --> 00:12:11,640
Speaker 4: see more growth raather than less, and that calls for cyclicals.

250
00:12:11,880 --> 00:12:14,640
Speaker 2: This isn't just a tactical coal from you. We've been

251
00:12:14,640 --> 00:12:16,480
Speaker 2: talking for a while about this. This is a long

252
00:12:16,600 --> 00:12:19,160
Speaker 2: term coal, a change of regime. If you will, can

253
00:12:19,200 --> 00:12:19,920
Speaker 2: you just explain that.

254
00:12:20,280 --> 00:12:22,040
Speaker 4: Journal I think I think on top of what we're

255
00:12:22,040 --> 00:12:24,640
Speaker 4: seeing with monetary policy and everything else. You've got the

256
00:12:24,679 --> 00:12:28,440
Speaker 4: secular backdrop of globalization contracting, and I think that is

257
00:12:28,600 --> 00:12:30,960
Speaker 4: the long term story. I know, all the excitement about

258
00:12:30,960 --> 00:12:34,040
Speaker 4: AI and everything else, I think contracting globalization is the

259
00:12:34,080 --> 00:12:36,800
Speaker 4: real story because the United States is now in the

260
00:12:36,880 --> 00:12:41,040
Speaker 4: unfortunate position of having a massive trade deficit as globalization contracts.

261
00:12:41,280 --> 00:12:44,360
Speaker 4: That is a really bad combination, and it means that

262
00:12:44,440 --> 00:12:46,800
Speaker 4: the United States is going to have to rebuild our

263
00:12:46,800 --> 00:12:52,160
Speaker 4: own capital stock. You know, people call this reshoring, near shoring, friends, shoring, infrastructure.

264
00:12:52,280 --> 00:12:54,000
Speaker 4: You know, there's so many words for this, but it's

265
00:12:54,000 --> 00:12:56,160
Speaker 4: all the same theme that we have to rebuild the

266
00:12:56,240 --> 00:12:58,720
Speaker 4: United States capital stock. I think that is the most

267
00:12:58,760 --> 00:13:00,240
Speaker 4: important story out there now.

268
00:13:00,320 --> 00:13:01,600
Speaker 2: So what do you think is going to work this

269
00:13:01,679 --> 00:13:04,240
Speaker 2: time in this site core that didn't work last time

270
00:13:04,360 --> 00:13:05,679
Speaker 2: in a previous decade.

271
00:13:05,960 --> 00:13:10,160
Speaker 4: I think small cap stocks, in particular, the area that

272
00:13:10,200 --> 00:13:12,160
Speaker 4: I think that people aren't paying any attention to, which

273
00:13:12,160 --> 00:13:15,280
Speaker 4: I don't understand as small and MidCap industrial stocks. Small

274
00:13:15,280 --> 00:13:17,199
Speaker 4: and mid cap industrial stocks have outperformed the S and

275
00:13:17,200 --> 00:13:19,360
Speaker 4: P five hundred over the last decade, even though small

276
00:13:19,360 --> 00:13:22,520
Speaker 4: caps have not. Small and MidCap industrials have, which I

277
00:13:22,520 --> 00:13:25,800
Speaker 4: think is the beginning sign of this kind of deglobalization

278
00:13:25,960 --> 00:13:27,480
Speaker 4: rebuilding the American capital stock.

279
00:13:27,520 --> 00:13:29,520
Speaker 1: Would you push back against people who say that bigger

280
00:13:29,559 --> 00:13:32,520
Speaker 1: companies are better equipped to actually handle some of the

281
00:13:32,600 --> 00:13:35,439
Speaker 1: volatility that we're seeing in inflation and just the global backdrop.

282
00:13:36,679 --> 00:13:39,559
Speaker 4: I find the love of large companies very interesting. When

283
00:13:39,559 --> 00:13:42,200
Speaker 4: I started my career, which was too long ago to

284
00:13:42,240 --> 00:13:44,360
Speaker 4: talk about now I hate talking about because it just

285
00:13:44,400 --> 00:13:48,120
Speaker 4: as I'm old. But when I started, senior analysts followed

286
00:13:48,160 --> 00:13:51,719
Speaker 4: small companies because in the late seventies early eighties, it

287
00:13:51,800 --> 00:13:55,280
Speaker 4: was a massive small camp rally and small comps were

288
00:13:55,280 --> 00:13:58,400
Speaker 4: considered sexy, and so senior analysts followed small camp companies,

289
00:13:58,679 --> 00:14:01,320
Speaker 4: and the big companies that were and that we're boring,

290
00:14:01,760 --> 00:14:04,319
Speaker 4: we're followed by junior analysts because there was no excitement there.

291
00:14:04,679 --> 00:14:06,880
Speaker 4: And as you go through the eighties and into the

292
00:14:06,960 --> 00:14:09,680
Speaker 4: nineties and the investment banking cycle starts picking up, you

293
00:14:09,720 --> 00:14:12,920
Speaker 4: find that starts switching. And so now you have everybody

294
00:14:13,000 --> 00:14:15,920
Speaker 4: loving large caps saying small capsure no place to be,

295
00:14:16,559 --> 00:14:18,679
Speaker 4: and I think we've gone one hundred and eighty degrees.

296
00:14:19,080 --> 00:14:21,040
Speaker 4: I think it's an amazing thing to see when I

297
00:14:21,080 --> 00:14:24,640
Speaker 4: think the opportunities are. So the way I describe to

298
00:14:24,640 --> 00:14:27,120
Speaker 4: people is are there really only seven growth stories in

299
00:14:27,160 --> 00:14:29,480
Speaker 4: the entire world? Are there only seven growth stories in

300
00:14:29,480 --> 00:14:30,640
Speaker 4: the entire US economy?

301
00:14:30,640 --> 00:14:31,120
Speaker 2: Of course not.

302
00:14:31,440 --> 00:14:33,800
Speaker 4: There has to be a lot more. That's where the

303
00:14:33,800 --> 00:14:34,560
Speaker 4: opportunity is.

304
00:14:34,640 --> 00:14:37,040
Speaker 2: What if there only seven growth stories people care about?

305
00:14:37,080 --> 00:14:38,920
Speaker 2: It doesn't matter how much you talk about it, it

306
00:14:38,960 --> 00:14:41,720
Speaker 2: doesn't change things. Well, money's gone passive, the way we

307
00:14:41,760 --> 00:14:44,240
Speaker 2: invest has changed, and the winners just keep on winning.

308
00:14:44,360 --> 00:14:45,160
Speaker 2: How do you change that?

309
00:14:45,240 --> 00:14:47,120
Speaker 4: So, John, that's kind of the argument that people say, Well,

310
00:14:47,200 --> 00:14:48,720
Speaker 4: value investing ever come back?

311
00:14:49,280 --> 00:14:49,600
Speaker 3: Right?

312
00:14:49,680 --> 00:14:52,480
Speaker 4: And my point is that everything in life is centered

313
00:14:52,520 --> 00:14:55,680
Speaker 4: around Everything we do is centered on value. If I

314
00:14:55,760 --> 00:14:58,040
Speaker 4: tried to sell you a Volkswagen for a Bentley price,

315
00:14:58,040 --> 00:14:58,960
Speaker 4: you would not buy it.

316
00:14:59,360 --> 00:14:59,480
Speaker 6: Right.

317
00:14:59,600 --> 00:15:02,680
Speaker 4: We all understand value, but for some reason there's periods

318
00:15:02,680 --> 00:15:04,640
Speaker 4: in the stock market where people say it doesn't matter.

319
00:15:05,040 --> 00:15:08,160
Speaker 4: I think this presents a tremendous opportunity for value. Given

320
00:15:08,200 --> 00:15:10,120
Speaker 4: that nobody cares about it anymore.

321
00:15:09,880 --> 00:15:11,960
Speaker 2: You're gonna be sticking with us. We'll continue this conversation.

322
00:15:12,080 --> 00:15:25,560
Speaker 2: Richard Vanstein, that of Ape advises. Stephanie Roth of wolf

323
00:15:25,640 --> 00:15:27,600
Speaker 2: Race sets joins us. Now for more, Stephanie, we need

324
00:15:27,640 --> 00:15:29,440
Speaker 2: to begin that good morning to you need to start

325
00:15:29,480 --> 00:15:31,760
Speaker 2: with those projections. What jumped off the page for you

326
00:15:32,000 --> 00:15:34,640
Speaker 2: when you open that document yesterday, by far.

327
00:15:34,640 --> 00:15:36,920
Speaker 5: Was the GDP number. I mean, seeing that jump by

328
00:15:37,080 --> 00:15:40,840
Speaker 5: seventy basis points in combination with inflation bumping by twenty

329
00:15:40,880 --> 00:15:43,760
Speaker 5: basis points and the median dot being unchanged, that just

330
00:15:43,800 --> 00:15:47,840
Speaker 5: tells you that we're seeing one a supply side dynamic

331
00:15:47,880 --> 00:15:49,800
Speaker 5: in terms of GDP that's not going to bring too

332
00:15:49,840 --> 00:15:53,680
Speaker 5: much inflation. And by the way, the inflation upward revision

333
00:15:53,760 --> 00:15:55,360
Speaker 5: was kind of just a marked market and that's what

334
00:15:55,360 --> 00:15:56,320
Speaker 5: Powers said yesterday.

335
00:15:56,520 --> 00:15:58,640
Speaker 2: So directionally it feels like a contradiction, but when you

336
00:15:58,640 --> 00:16:00,680
Speaker 2: go into the details like that, you don't think it

337
00:16:00,720 --> 00:16:01,520
Speaker 2: is a big contradiction.

338
00:16:01,960 --> 00:16:03,440
Speaker 5: Well, I think it tells you something a little bit

339
00:16:03,480 --> 00:16:06,120
Speaker 5: about the reaction function. It's maybe shifted to some extent,

340
00:16:06,160 --> 00:16:08,840
Speaker 5: and that well, maybe they can see slightly higher inflation

341
00:16:09,000 --> 00:16:11,040
Speaker 5: and they'll be okay with it because they see the

342
00:16:11,880 --> 00:16:15,440
Speaker 5: path coming down and they're not worried about strong growth anymore.

343
00:16:15,720 --> 00:16:17,920
Speaker 5: Last year, that was something that they were legitimately concerned

344
00:16:17,920 --> 00:16:19,880
Speaker 5: about strong growth would bring inflation, and now they see

345
00:16:19,880 --> 00:16:22,640
Speaker 5: strong growth as not necessarily inflationary because that's coming from

346
00:16:22,680 --> 00:16:23,960
Speaker 5: the supply side of the economy.

347
00:16:24,320 --> 00:16:26,640
Speaker 1: So what's inflationary and how much control do they have

348
00:16:26,720 --> 00:16:27,160
Speaker 1: over it.

349
00:16:27,920 --> 00:16:31,240
Speaker 5: Inflationary could still be the labor market. If that labor

350
00:16:31,280 --> 00:16:34,200
Speaker 5: supply doesn't actually come through, then that's where you could

351
00:16:34,520 --> 00:16:37,000
Speaker 5: run into some challenges. If you continue to see really

352
00:16:37,040 --> 00:16:40,480
Speaker 5: strong payrolls growth and the labor supply doesn't come through,

353
00:16:40,760 --> 00:16:43,520
Speaker 5: then that becomes a challenge. But the trends in terms

354
00:16:43,760 --> 00:16:45,880
Speaker 5: of immigration is looking a lot stronger if you look

355
00:16:45,920 --> 00:16:49,240
Speaker 5: at the recent CBO projections, there could be a lot

356
00:16:49,280 --> 00:16:51,680
Speaker 5: more labor supply coming from immigration that could really help.

357
00:16:51,920 --> 00:16:54,520
Speaker 1: I guess I'm struggling to understand whether the Fed is

358
00:16:54,560 --> 00:16:57,720
Speaker 1: had any influence over inflation at all, because essentially, if

359
00:16:57,720 --> 00:16:59,560
Speaker 1: what we're saying is that it comes from other factors

360
00:16:59,560 --> 00:17:01,640
Speaker 1: that are un related to interest rates, so that doesn't

361
00:17:01,640 --> 00:17:03,200
Speaker 1: really matter if you move them up or if you

362
00:17:03,240 --> 00:17:05,320
Speaker 1: move them down, then what are we even talking about

363
00:17:05,320 --> 00:17:07,119
Speaker 1: with the FED care Like, what is their role in

364
00:17:07,160 --> 00:17:09,840
Speaker 1: bringing down inflation If the inflation that we're looking at

365
00:17:10,240 --> 00:17:11,920
Speaker 1: is not related to their policy?

366
00:17:12,560 --> 00:17:14,600
Speaker 5: I mean, some of it was transitory, and you had

367
00:17:14,600 --> 00:17:18,159
Speaker 5: this conversation up here before. Is that they just had

368
00:17:18,400 --> 00:17:20,280
Speaker 5: they had to in terms of risk management, they had

369
00:17:20,280 --> 00:17:22,720
Speaker 5: to raise rates aggressively because in case that wasn't true,

370
00:17:22,920 --> 00:17:24,400
Speaker 5: they would have been had a real problem. That would

371
00:17:24,400 --> 00:17:26,440
Speaker 5: have been nineteen seventy style inflation. So they would have

372
00:17:26,480 --> 00:17:28,440
Speaker 5: had a real problem on their hands. So it's hard

373
00:17:28,560 --> 00:17:31,480
Speaker 5: to disentangle what was transitory and what was driven by

374
00:17:31,960 --> 00:17:34,840
Speaker 5: FED policy. Was probably a combination of both, but the

375
00:17:34,880 --> 00:17:37,479
Speaker 5: transitory factor seemed to be perhaps some of the more

376
00:17:37,520 --> 00:17:38,240
Speaker 5: important ones here.

377
00:17:38,280 --> 00:17:40,720
Speaker 2: This just raised an important question though, when the chairman

378
00:17:40,800 --> 00:17:43,720
Speaker 2: is asked and when FED officials aroused, are we sufficiently restrictive?

379
00:17:44,000 --> 00:17:45,840
Speaker 2: And they point to the labor market as evidence that

380
00:17:45,840 --> 00:17:48,280
Speaker 2: they are? Are they right to point the labor market

381
00:17:48,280 --> 00:17:50,560
Speaker 2: as evidence that they are sufficiently restrictive.

382
00:17:51,320 --> 00:17:53,880
Speaker 5: Well, that's a tough one, I mean, and Pwell talked

383
00:17:53,880 --> 00:17:55,360
Speaker 5: about his models and it was, you know.

384
00:17:55,560 --> 00:17:57,440
Speaker 2: A very big we could sit here in all degree,

385
00:17:57,480 --> 00:18:00,320
Speaker 2: there is a massive supply site dynamics taking place now

386
00:18:00,560 --> 00:18:02,920
Speaker 2: that is leading to changes in the labor market. How

387
00:18:02,960 --> 00:18:05,119
Speaker 2: can we draw a dot edline all the way back

388
00:18:05,160 --> 00:18:06,520
Speaker 2: to the federal Reserve based on that?

389
00:18:07,320 --> 00:18:09,200
Speaker 5: I mean, I think that's a tough one. It's probably

390
00:18:09,200 --> 00:18:12,600
Speaker 5: a combination of the labor supply or the labor market

391
00:18:12,640 --> 00:18:16,320
Speaker 5: just coming back into better balance, partially because companies who

392
00:18:16,359 --> 00:18:19,359
Speaker 5: have had excess demand for labor kind of satisfied that

393
00:18:19,400 --> 00:18:21,439
Speaker 5: and productivity picked up. So a lot of it was

394
00:18:21,640 --> 00:18:24,240
Speaker 5: a little bit of luck and a little bit of

395
00:18:24,040 --> 00:18:25,640
Speaker 5: some of the hikes doing their job.

396
00:18:25,880 --> 00:18:29,040
Speaker 1: Some people were talking about the awkwardness of basically the

397
00:18:29,080 --> 00:18:32,480
Speaker 1: FED fighting fiscal stimulus and that that was kind of

398
00:18:32,520 --> 00:18:34,679
Speaker 1: going to be where we were this year, And it

399
00:18:34,720 --> 00:18:38,240
Speaker 1: seems as though everyone's talking about spending that's still coming

400
00:18:38,280 --> 00:18:40,439
Speaker 1: back into the market or coming into the market from

401
00:18:40,480 --> 00:18:43,280
Speaker 1: the federal government and a FED that's okay with that

402
00:18:43,320 --> 00:18:45,520
Speaker 1: and doesn't see that as inflationary and doesn't see the

403
00:18:45,520 --> 00:18:50,880
Speaker 1: need to really offset that with materially higher rates for longer.

404
00:18:51,400 --> 00:18:54,439
Speaker 1: Does that ring true to you that basically they're on

405
00:18:54,480 --> 00:18:58,399
Speaker 1: the same page with trying to stimulate not suppress.

406
00:18:58,200 --> 00:18:59,400
Speaker 3: I mean to some extent.

407
00:18:59,440 --> 00:19:01,600
Speaker 5: And last here was a good indication we still had

408
00:19:01,640 --> 00:19:04,600
Speaker 5: a decently strong fiscal and pull certainly more so than

409
00:19:04,640 --> 00:19:07,320
Speaker 5: people expected, partially related to play retention credits and all

410
00:19:07,400 --> 00:19:09,560
Speaker 5: kinds of you know, funky things happening under the surface

411
00:19:09,600 --> 00:19:12,560
Speaker 5: that weren't necessarily expected. The chip spending, which which the

412
00:19:12,600 --> 00:19:15,560
Speaker 5: take up was really quite strong. So yeah, those two

413
00:19:15,600 --> 00:19:17,719
Speaker 5: are in conflict to some extent. But as long as

414
00:19:17,760 --> 00:19:21,320
Speaker 5: inflation is coming back down towards two percent, like that's

415
00:19:21,400 --> 00:19:22,040
Speaker 5: kind of okay.

416
00:19:22,240 --> 00:19:25,040
Speaker 1: So how much are you upgrading your growth expectations just

417
00:19:25,119 --> 00:19:27,480
Speaker 1: generally for the United States if this is basically the

418
00:19:27,520 --> 00:19:29,600
Speaker 1: reaction function and the reality that we're in.

419
00:19:30,320 --> 00:19:32,439
Speaker 5: I mean, we were at two point four percent for

420
00:19:32,480 --> 00:19:35,080
Speaker 5: this year and we've been expecting free cuts, So for us,

421
00:19:35,080 --> 00:19:37,120
Speaker 5: we haven't had to change it. That said, from where

422
00:19:37,160 --> 00:19:40,639
Speaker 5: we were six months ago before Powell pivoted, we were

423
00:19:40,800 --> 00:19:42,840
Speaker 5: looking at one and a half percent GDP growth. So

424
00:19:42,880 --> 00:19:46,520
Speaker 5: we kind of made that similar type of adjustment in

425
00:19:46,600 --> 00:19:49,200
Speaker 5: anticipation of the FED being able to be dubbished for longer,

426
00:19:49,640 --> 00:19:52,640
Speaker 5: partially because our expectation is inflation should come back down

427
00:19:52,640 --> 00:19:54,639
Speaker 5: towards two percent with growth still being okay.

428
00:19:54,760 --> 00:19:57,000
Speaker 2: Well, the chairman says we're committed to getting inflation back

429
00:19:57,040 --> 00:19:59,359
Speaker 2: to talk. It is he less committed now that mightbe

430
00:19:59,480 --> 00:20:02,040
Speaker 2: was a company back in August twenty twenty two.

431
00:20:03,280 --> 00:20:05,160
Speaker 5: No, I think he's still just as committed. I think

432
00:20:05,160 --> 00:20:08,040
Speaker 5: he's just convinced that inflation is on the right path.

433
00:20:08,359 --> 00:20:10,679
Speaker 5: And to be fair, he talked about the seasonal problems

434
00:20:10,720 --> 00:20:12,919
Speaker 5: and I very much agree with that. I mean, if

435
00:20:12,960 --> 00:20:15,119
Speaker 5: you look back to core PC inflation in November, it

436
00:20:15,160 --> 00:20:18,080
Speaker 5: was up nine basis points in December's fourteen basis points.

437
00:20:18,280 --> 00:20:20,240
Speaker 5: That wasn't the trend either, and he highlighted that.

438
00:20:20,320 --> 00:20:22,320
Speaker 2: And that's fair, Mi McKay. Is not why you can

439
00:20:22,320 --> 00:20:25,240
Speaker 2: call this a bump in the route. Destination has not changed.

440
00:20:25,320 --> 00:20:28,200
Speaker 6: This is what they've predicted all along. The only question

441
00:20:28,320 --> 00:20:30,000
Speaker 6: is are they going to be right about the fact

442
00:20:30,000 --> 00:20:33,080
Speaker 6: that it was transitory and then things start to fall

443
00:20:33,119 --> 00:20:36,720
Speaker 6: back down again. There are some categories that are surprising

444
00:20:37,000 --> 00:20:40,280
Speaker 6: used cars surprised this last time. And we have no

445
00:20:40,320 --> 00:20:42,560
Speaker 6: idea what will happen with energy the way it's been

446
00:20:42,600 --> 00:20:46,240
Speaker 6: bouncing around. But their view is we're going to get

447
00:20:46,680 --> 00:20:48,280
Speaker 6: sort of a natural disinflation.

448
00:20:49,520 --> 00:20:52,840
Speaker 2: To continue the tea word agtrovites people.

449
00:20:53,520 --> 00:20:54,280
Speaker 6: I didn't use that.

450
00:20:55,119 --> 00:20:56,760
Speaker 2: You kind of did, think you did.

451
00:20:56,800 --> 00:20:58,320
Speaker 1: A presitory that's what we're talking about.

452
00:20:58,760 --> 00:21:02,760
Speaker 2: They're still still watching the cool belief of this feder reserve. Ultimately,

453
00:21:02,800 --> 00:21:04,560
Speaker 2: it's just a word that that's scad of using.

454
00:21:05,320 --> 00:21:11,000
Speaker 6: Well, they got pilloried for using it. We were just

455
00:21:11,040 --> 00:21:14,919
Speaker 6: coming out of the pandemic, and they weren't totally wrong.

456
00:21:15,400 --> 00:21:18,159
Speaker 6: It was a question of timing. What is the definition

457
00:21:18,400 --> 00:21:20,879
Speaker 6: of transitory? But a lot of things that went up

458
00:21:20,880 --> 00:21:24,480
Speaker 6: in price because the supply wasn't there now have come

459
00:21:24,520 --> 00:21:26,920
Speaker 6: down in price because supply chains have normalized.

460
00:21:27,119 --> 00:21:30,560
Speaker 1: Sephanie, what's not transitory? What are the aspects you're watching

461
00:21:30,960 --> 00:21:33,880
Speaker 1: that give you some pause with respect to the steady

462
00:21:34,160 --> 00:21:34,720
Speaker 1: pace down?

463
00:21:35,720 --> 00:21:36,720
Speaker 3: I mean of some of the.

464
00:21:37,119 --> 00:21:40,159
Speaker 5: Service sector inflation is still running kind of hot, and

465
00:21:40,480 --> 00:21:42,800
Speaker 5: I still believe maybe the transitory is not the right word,

466
00:21:42,800 --> 00:21:45,160
Speaker 5: because it's probably a function of the labor market having

467
00:21:45,200 --> 00:21:48,359
Speaker 5: been strong. It's just a lagged effect of that. So

468
00:21:48,359 --> 00:21:50,600
Speaker 5: I would say that's not necessarily transitory. It's real inflation

469
00:21:50,640 --> 00:21:53,879
Speaker 5: that's happened. People are really traveling, And there are some

470
00:21:54,680 --> 00:21:58,200
Speaker 5: areas within the service sector where you're continuing to see

471
00:21:58,359 --> 00:22:02,240
Speaker 5: fairly firm inflation prints. But that as the labor market

472
00:22:02,240 --> 00:22:04,440
Speaker 5: has cool that should continue to slow down. But that's

473
00:22:04,440 --> 00:22:06,760
Speaker 5: something that I'm keeping probably the closest eye on. And

474
00:22:06,880 --> 00:22:08,959
Speaker 5: people were talking about the super core inflation, and for

475
00:22:09,000 --> 00:22:11,040
Speaker 5: some reason they've stopped talking about it, But I still

476
00:22:11,080 --> 00:22:13,120
Speaker 5: think that that's important. That's kind of what we're talking

477
00:22:13,160 --> 00:22:13,640
Speaker 5: about here.

478
00:22:13,920 --> 00:22:17,439
Speaker 1: Meanwhile, I keep going back to Rick Readers' concepts around

479
00:22:17,840 --> 00:22:20,720
Speaker 1: inflation and how it really isn't driven by Chair Powell.

480
00:22:21,040 --> 00:22:23,639
Speaker 1: He says, in part is driven by Taylor Swift and

481
00:22:23,680 --> 00:22:25,280
Speaker 1: the fact that we've been able to see some of

482
00:22:25,280 --> 00:22:27,800
Speaker 1: these potential things. He didn't actually so that I'm putting words

483
00:22:27,800 --> 00:22:30,520
Speaker 1: in his mouth, but he did talk about how there

484
00:22:30,560 --> 00:22:33,359
Speaker 1: are some independent of the FED kinds of trends like

485
00:22:33,480 --> 00:22:36,280
Speaker 1: the era's tour or you know, the message.

486
00:22:36,280 --> 00:22:38,280
Speaker 2: Message from Rick now just to say what is prime

487
00:22:38,520 --> 00:22:39,840
Speaker 2: So looking apen, he just.

488
00:22:40,040 --> 00:22:41,040
Speaker 4: Used all of those things.

489
00:22:41,080 --> 00:22:44,439
Speaker 1: I mean, how much is the discretionary spending of consumers

490
00:22:44,440 --> 00:22:46,240
Speaker 1: that it's still kind of a concern that they can

491
00:22:46,240 --> 00:22:48,080
Speaker 1: shell out ten thousand dollars for a ticket.

492
00:22:48,359 --> 00:22:50,240
Speaker 5: Yeah, I mean, I think that that's the story that

493
00:22:50,240 --> 00:22:52,000
Speaker 5: we've had over the past couple of years, is people

494
00:22:52,000 --> 00:22:53,840
Speaker 5: have had a lot of discretionary income. Some of that

495
00:22:53,960 --> 00:22:57,040
Speaker 5: was this excess cash that was saved up from the pandemic,

496
00:22:57,080 --> 00:22:59,880
Speaker 5: and that's largely worked its way through Now it's only

497
00:23:00,000 --> 00:23:02,480
Speaker 5: sitting in the top incomeerners. And you know that that's

498
00:23:02,520 --> 00:23:04,600
Speaker 5: that's they're probably not going to not going to spend

499
00:23:04,640 --> 00:23:07,119
Speaker 5: it to that same extent. But now that you're starting

500
00:23:07,119 --> 00:23:09,640
Speaker 5: to see these things normalize, excess cash has slowed down.

501
00:23:09,640 --> 00:23:11,680
Speaker 5: Now we're looking in an environment where GDP growth should

502
00:23:11,680 --> 00:23:13,840
Speaker 5: actually trend something like like two percent, which is what

503
00:23:13,920 --> 00:23:14,840
Speaker 5: the Fed's looking for.

504
00:23:14,920 --> 00:23:17,720
Speaker 2: They're going on the Icon of the Seas, apparently to

505
00:23:17,760 --> 00:23:20,240
Speaker 2: listen to theirs. Can't believe Sebastian Page went on the

506
00:23:20,440 --> 00:23:20,960
Speaker 2: Icon of the Sea.

507
00:23:21,160 --> 00:23:22,160
Speaker 3: He was he was.

508
00:23:22,280 --> 00:23:24,480
Speaker 1: Sort of proud of it, and then very much backed away.

509
00:23:24,520 --> 00:23:26,040
Speaker 1: That's the pedal against.

510
00:23:26,240 --> 00:23:28,440
Speaker 2: Seeing the ship that cruise liner. I kind of the

511
00:23:28,480 --> 00:23:31,200
Speaker 2: seas three blocks touch a cruise, would you know? I

512
00:23:31,280 --> 00:23:33,000
Speaker 2: saw that face look perfect?

513
00:23:33,119 --> 00:23:35,080
Speaker 1: How many adults they are doing it for themselves versus

514
00:23:35,080 --> 00:23:36,960
Speaker 1: their kids. I mean, ultimately, if you can get a

515
00:23:37,040 --> 00:23:39,360
Speaker 1: vacation where you don't have to actually cater to anyone

516
00:23:39,640 --> 00:23:40,240
Speaker 1: and they can.

517
00:23:40,119 --> 00:23:45,520
Speaker 2: Just love it. Tom's gone on a cruise, sok Is

518
00:23:45,720 --> 00:23:49,320
Speaker 2: loughing gift time of his life in Touch of Me yesterday,

519
00:23:49,520 --> 00:23:50,560
Speaker 2: absolutely loving.

520
00:23:50,680 --> 00:23:51,800
Speaker 1: Does he like the water slide?

521
00:23:52,160 --> 00:23:53,800
Speaker 2: I'm not sure he went on the water slide.

522
00:23:53,920 --> 00:23:55,000
Speaker 1: Okay, good, we'll ask him.

523
00:23:55,200 --> 00:23:59,439
Speaker 2: It's live like, there's just some things that no one

524
00:23:59,480 --> 00:24:02,520
Speaker 2: needs to say. Stephanie thank you, Thank you very much,

525
00:24:02,720 --> 00:24:07,680
Speaker 2: Stephanie rothbare Wolf Research. This is the Bloomberg Surveillance podcast,

526
00:24:07,800 --> 00:24:11,399
Speaker 2: bringing you the best in markets, economics, and gio politics.

527
00:24:11,640 --> 00:24:14,120
Speaker 2: You can watch the show live on Bloomberg TV weekday

528
00:24:14,160 --> 00:24:17,359
Speaker 2: mornings from six am to nine am Eastern. Subscribe to

529
00:24:17,400 --> 00:24:20,639
Speaker 2: the podcast on Apple, Spotify, or anywhere else you listen,

530
00:24:20,920 --> 00:24:23,520
Speaker 2: and as always on the Bloomberg Terminal and the Bloomberg

531
00:24:23,520 --> 00:24:24,080
Speaker 2: Business Out