WEBVTT - Surveillance: US Inflation Tops Estimates 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg's Surveillance Podcast. I'm Tom Keene, along 0:00:09.200 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.799 Find Bloomberg Surveillance on ample podcast, SoundCloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:29.680 and of course, on the Bloomberg Terminal. Jake Bryson standing 0:00:29.720 --> 0:00:32.519 by the chief economist iver at whilst faco. J just 0:00:32.560 --> 0:00:37.160 initially your reaction to a much much hotter CPI print, well, 0:00:37.200 --> 0:00:39.639 I think you know, Mike nailed it earlier. I mean, 0:00:39.640 --> 0:00:42.000 if you there's any doubt at all about seventy five, 0:00:42.680 --> 0:00:44.760 they're definitely going seventy five. And then you know, Lisa, 0:00:44.800 --> 0:00:46.960 I think you had a very good comment there as well. 0:00:47.200 --> 0:00:49.040 What does this mean about November. I mean we thought 0:00:49.080 --> 0:00:51.920 they would be stepping it back to November to fifty 0:00:51.920 --> 0:00:55.440 in November, and at this point you would say seventy 0:00:55.440 --> 0:00:57.800 five is certainly going to be on the table there 0:00:57.800 --> 0:01:01.560 in November. Jay, how do you take this data, this 0:01:01.840 --> 0:01:06.480 financialization shock over to the real economy. What does this 0:01:06.640 --> 0:01:12.520 eight thirty numbers signal about potential slowdown and economic growth? Well, 0:01:12.920 --> 0:01:15.680 you know, I think what you're looking at here is 0:01:15.880 --> 0:01:18.039 there's two things that's going on with the inflation right. 0:01:18.080 --> 0:01:21.000 One is that inflation is going to continue to eat 0:01:21.040 --> 0:01:23.800 into nominal income. And so what we've seen if you're 0:01:23.840 --> 0:01:27.280 looking at real disposable income year over year UM, at 0:01:27.319 --> 0:01:30.679 least in July it was down three point seven percent UM. 0:01:30.760 --> 0:01:33.959 And so you can't continue to have consumer spending grow 0:01:34.280 --> 0:01:37.240 if real income is contracting like that. So that that's 0:01:37.240 --> 0:01:39.520 the first problem with inflation. The second problem is it 0:01:39.600 --> 0:01:42.640 puts the FED into overdrive. And if they're in overdrive, 0:01:42.959 --> 0:01:44.919 sooner or later they're going to make a policy mistake. 0:01:44.920 --> 0:01:48.240 And if we're talking seventy five, as far as the 0:01:48.240 --> 0:01:50.680 eye can see, they're going to make that policy mistake 0:01:50.720 --> 0:01:53.000 and then potentially can put the economy into into recession, 0:01:53.000 --> 0:01:54.920 which is what we think is going to happen early 0:01:55.000 --> 0:02:01.320 next year. J Why did almost all forecasters get this wrong? Well, 0:02:01.360 --> 0:02:04.240 there's you know, there's there's a bunch of volatility on 0:02:04.280 --> 0:02:07.360 a month by month sort of basis. Here, Um, we 0:02:07.360 --> 0:02:11.079 were above consensus, but we weren't at zero point six. 0:02:11.480 --> 0:02:13.239 You know, I think that the big thing here that's 0:02:13.280 --> 0:02:15.839 really pushing a lot of this and this is why 0:02:15.840 --> 0:02:18.400 it's going to be hard to bring inflation down in 0:02:18.440 --> 0:02:20.880 the near term. Is the shelter component, you know, the 0:02:20.919 --> 0:02:23.000 way they treat shelter, the way they treat housing in 0:02:23.040 --> 0:02:25.440 here comes in with a long lag and we all 0:02:25.480 --> 0:02:28.200 know what's happened over the last year or so. Housing 0:02:28.240 --> 0:02:32.280 prices have exploded and it came into the CPI relatively slowly. 0:02:32.280 --> 0:02:34.760 It's coming in with a vengeance. Now. The problem is 0:02:34.800 --> 0:02:37.160 it's going to continue to come in UM as well, 0:02:37.440 --> 0:02:39.679 and so that's going to keep the CPI inflation rate 0:02:39.800 --> 0:02:44.120 elevated for the foreseeable future. And many FUNE officials have 0:02:44.320 --> 0:02:46.480 given us the impression that what they wanted was two 0:02:46.600 --> 0:02:51.080 or three softer inflation reports to rethink the trajectory of 0:02:51.160 --> 0:02:54.320 right hikes at Leasta mentioned and you alluded to it. 0:02:54.639 --> 0:02:57.360 Do you think this really disrupts their ability to say 0:02:57.400 --> 0:03:01.359 in November that we need to go a different direction. Well, yeah, 0:03:01.560 --> 0:03:03.720 I think, Well, obviously we've got a lot of data 0:03:03.800 --> 0:03:06.359 coming out between here in November, so you know, we'll 0:03:06.400 --> 0:03:08.519 we'll see, right but you know, if they want to 0:03:08.520 --> 0:03:11.320 see two or three soft prints in a row, we've 0:03:11.320 --> 0:03:14.280 just set reset the clock back to zero right now. 0:03:14.440 --> 0:03:17.079 And so UM you know, seventy five. Obviously it's on 0:03:17.160 --> 0:03:19.720 the table. I think in November we'll see what happens 0:03:19.720 --> 0:03:21.880 to the real economy that we know. We'll have you know, 0:03:21.919 --> 0:03:25.880 two more UM employment reports between now and then. That'll 0:03:25.919 --> 0:03:28.239 be key. UM. So if you do see slowing in 0:03:28.280 --> 0:03:31.079 the real economy, maybe it backs off. But right now 0:03:31.120 --> 0:03:32.960 we haven't seen a lot of tremendous amount of slowing 0:03:32.960 --> 0:03:36.280 in the real economy, and that keeps these supersized rate 0:03:36.360 --> 0:03:39.800 hikes in play. Jay, can you tell me where you 0:03:39.840 --> 0:03:43.520 expect to see unemployment by year end? And at the moment, 0:03:43.560 --> 0:03:45.360 this fat as you know, it's very very focused on 0:03:45.400 --> 0:03:47.440 the one side of the man date bringing inflation lower. 0:03:47.680 --> 0:03:49.840 We're all trying to work out whether the two sides 0:03:49.880 --> 0:03:52.080 of the mandate come into more conflict as we get 0:03:52.120 --> 0:03:55.360 closer to year end. So our our view, m John 0:03:55.440 --> 0:03:57.160 is at the end of the year, you're looking at 0:03:57.160 --> 0:04:00.240 an unemployment rates are around three seven or so. So 0:04:00.280 --> 0:04:02.720 I think that's still a very very tight labor market. Now, 0:04:02.800 --> 0:04:05.360 as we go into early next year and as we 0:04:05.440 --> 0:04:08.960 see uh, you know, the deceleration and then contraction and 0:04:09.000 --> 0:04:11.800 economic activity, I think that's when you see the unemployment 0:04:11.840 --> 0:04:13.720 rates start to move. But if we're still at three 0:04:13.800 --> 0:04:17.159 seven or to say we're still below four percent, you know, 0:04:17.160 --> 0:04:18.880 we still have a three handle at the end of 0:04:18.920 --> 0:04:21.479 this year. I don't think the Fed is slowing down 0:04:21.520 --> 0:04:26.120 at that point. What does this say J about the 0:04:26.160 --> 0:04:30.880 inertial force of supposed disinflation. I think we're talking about 0:04:30.880 --> 0:04:35.080 getting to five or four percent inflation out there. But 0:04:35.160 --> 0:04:38.640 do we blow that up today and say simply our 0:04:38.720 --> 0:04:41.880 path is to get to seven or six point nine 0:04:41.920 --> 0:04:45.160 percent inflation? Well, Tom, I do believe that you are 0:04:45.200 --> 0:04:48.440 going to continue to see So our view that inflation 0:04:48.480 --> 0:04:51.719 starts to recede next year is predicated on our view 0:04:51.760 --> 0:04:53.839 that you do have a recession. If you do have 0:04:53.880 --> 0:04:56.719 a recession, then what you do see is goods prices 0:04:56.720 --> 0:05:00.479 will definitely start to decelerate as well service prices as well. 0:05:00.960 --> 0:05:03.040 You know. The good thing, if there's anything that that's 0:05:03.120 --> 0:05:06.640 good here, is that we have not seen inflation expectations 0:05:06.680 --> 0:05:10.040 become quote unmoored. That's a that's a word that the 0:05:10.040 --> 0:05:13.839 Federal uses all the time, um, and so that's a 0:05:13.880 --> 0:05:17.760 good thing because if that does become unmoored, then that 0:05:17.960 --> 0:05:21.200 creates it's it's its own dynamic as well, people start 0:05:21.279 --> 0:05:25.080 to pull forward their expenditures, which pushes up inflation. They 0:05:25.040 --> 0:05:28.520 asked for higher and higher wage increases as well. Fortunately 0:05:28.520 --> 0:05:30.800 we haven't seen become unmoored. But if you continue to 0:05:30.839 --> 0:05:33.400 start to see, you know, continuously prints like this, then 0:05:33.400 --> 0:05:36.200 you do start to worry about that happening for all 0:05:36.200 --> 0:05:38.920 of you. On Bloomberg Radio, Bloomberg Television, Dr J Bryson 0:05:38.960 --> 0:05:42.680 whether this as well as Fargo here a stunning inflation report, John, 0:05:42.720 --> 0:05:47.760 Is that the right word? Stunning? Surprise? Tom, stunning inflation report. 0:05:47.880 --> 0:05:51.000 Futures turn around and I'm doing the math in my head, John, 0:05:51.080 --> 0:05:54.400 help me out here. Two point five percent flip flop 0:05:54.800 --> 0:06:01.919 and what we see and the disrupts the idea that 0:06:02.000 --> 0:06:04.920 this fed came back away anytime, Saint Thomas, a bit 0:06:04.920 --> 0:06:06.880 of all, I'll go with this disruption, or just to 0:06:06.920 --> 0:06:08.440 say that we got to rip up the script and 0:06:08.480 --> 0:06:10.320 come up with a whole new dialogue. We do that 0:06:10.360 --> 0:06:14.960 with Michael mcugh's dives into the inflation report a little more. Michael, 0:06:15.160 --> 0:06:19.360 what is the distinction between service dynamic and goods dynamic? Well, 0:06:19.480 --> 0:06:21.480 right now it looks like services are starting to pick 0:06:21.560 --> 0:06:25.720 up some speed. Here theres is less energy rise by 0:06:25.880 --> 0:06:29.240 six tenths of eight percent. That's after four tenths last month, 0:06:29.240 --> 0:06:32.800 and now services are up six point one percent over 0:06:32.960 --> 0:06:36.240 the year. So we are seeing service prices start to rise, 0:06:36.279 --> 0:06:38.560 and you can see it in a number of areas. Interestingly, 0:06:38.760 --> 0:06:42.240 education tuition, college tuition. It's time for kids to go 0:06:42.279 --> 0:06:44.280 back to school, and that was up half a percent, 0:06:44.640 --> 0:06:49.159 a fairly strong increase for that category, so yeah, you 0:06:49.200 --> 0:06:53.800 would know something about that, tom. We're also seeing uh, 0:06:54.160 --> 0:06:57.000 motor vehicle insurance up one point three percent, that's been 0:06:57.040 --> 0:07:01.239 an ongoing issue, and airline fares four point six percent, 0:07:01.279 --> 0:07:04.080 but they had fallen seven point eight percent the month before, 0:07:04.440 --> 0:07:06.800 so we're losing a little of the benefit from that, 0:07:06.920 --> 0:07:10.400 so you are seeing services rise. Uh. There was one 0:07:10.400 --> 0:07:12.480 thing I did want to mention. Somebody asked me this 0:07:12.520 --> 0:07:16.240 morning if we could mention this because it matters to 0:07:16.360 --> 0:07:20.400 senior citizens. The consumer price index for urban wage earners 0:07:20.720 --> 0:07:23.320 was up eight point seven percent. We'll have to see 0:07:23.320 --> 0:07:26.720 what the net the average numbers come out to be 0:07:27.520 --> 0:07:30.320 once September's numbers come in, but that will lead into 0:07:30.400 --> 0:07:33.120 the Social Security cola, and if you're looking at an 0:07:33.160 --> 0:07:37.120 eight point seven percent, that's gonna be pretty big from London, 0:07:37.160 --> 0:07:39.160 which is looking at me. I'm in London and the 0:07:39.280 --> 0:07:42.040 keys looking at me. My mcate is going ahead for me, said, 0:07:42.040 --> 0:07:43.560 it's right to have you write that down for us. 0:07:43.560 --> 0:07:47.040 Alongside Jake Bryson of wilst Foggo. I'm gonna totally avoid that. 0:07:47.160 --> 0:07:54.600 I'm focused on this market. This is brutal and again 0:07:54.600 --> 0:07:57.040 I'm gonna watch the bond space. You're gonna see a 0:07:57.120 --> 0:08:01.840 breakthrough of the total return aggregates of Bloomberg price lower. 0:08:02.280 --> 0:08:06.240 We have never seen this before. Devid Kelly joins us 0:08:06.240 --> 0:08:08.320 now to talk about this, the chief global strategist at 0:08:08.360 --> 0:08:11.680 JP Morgan Asset Management, David. We've given everyone the opportunity 0:08:11.720 --> 0:08:13.800 to respond to the data. So far, it's about an 0:08:13.840 --> 0:08:18.040 hour old. Now your response to it. No, it's it's 0:08:18.040 --> 0:08:20.480 a little warmer than expected. But I'm not going to 0:08:20.600 --> 0:08:22.760 call one tenth of a percent of an increase in 0:08:22.800 --> 0:08:26.240 prices a hot inflation report. What's happening is it's cooling. 0:08:26.880 --> 0:08:29.120 There's just a few hot spots there. There are problems 0:08:29.480 --> 0:08:31.400 getting all of inflation to come down, but the cooling 0:08:31.440 --> 0:08:35.160 trend is there. I think markets overreacting to this. UH 0:08:35.280 --> 0:08:39.199 In particular, there's a big chunk of inflation. The CPI 0:08:39.400 --> 0:08:43.439 thirty is in shelter and that's up seven tenths of percent, 0:08:43.520 --> 0:08:46.080 and that's really what's driving a lot of the underlying 0:08:46.760 --> 0:08:49.000 um you know, resilience of inflation here. But a lot 0:08:49.000 --> 0:08:51.079 of that is you know, owner's equivalent rent. It's a 0:08:51.200 --> 0:08:55.520 very you know, almost a mythical concept because nobody actually 0:08:55.559 --> 0:08:57.960 pays owner's equivalent rends. So there are parts of inflation 0:08:57.960 --> 0:08:59.720 hanging on. But I think I think it's really important 0:08:59.760 --> 0:09:02.599 direct ignize the economy is cooling here, uh, and a 0:09:02.640 --> 0:09:05.480 lot of the things that pushed up inflation are cooling 0:09:05.520 --> 0:09:08.520 off also, So we shouldn't, you know, we shouldn't get 0:09:08.600 --> 0:09:10.480 messed up by by the fact that it was a 0:09:10.520 --> 0:09:13.559 little higher than consensus here. The big story here is 0:09:13.600 --> 0:09:18.760 inflation is actually coming down, David. That is convenient for 0:09:18.840 --> 0:09:21.200 a lot of the bulls. And yet the story that 0:09:21.280 --> 0:09:24.000 people are seeing right now is that the hope was, 0:09:24.320 --> 0:09:26.840 we would say, a much faster disinflation that would get 0:09:26.840 --> 0:09:29.959 the Fed not perhaps a raising rates as much as 0:09:29.960 --> 0:09:32.280 they were saying, how can you lean against this? What 0:09:32.400 --> 0:09:37.960 parts of the market are most overreacting from your perspective, Well, 0:09:37.960 --> 0:09:41.200 you mentioned financials, and I think what's going on is 0:09:42.080 --> 0:09:43.880 people are assuming that this will make the FED a 0:09:43.880 --> 0:09:45.600 bit more hole Chris, and I think that's true. I mean, 0:09:45.640 --> 0:09:48.920 I think that the FED will now have more of 0:09:49.000 --> 0:09:51.439 reason to go seventy five basis points next week, and 0:09:51.480 --> 0:09:53.199 I think that's what they'll do. I think the ECB 0:09:53.679 --> 0:09:55.360 obviously just did that. I think the Bank of England 0:09:55.400 --> 0:09:58.160 will do the same. But I think the FED will 0:09:58.240 --> 0:10:01.400 also leave the door open to a more increase in November, 0:10:01.440 --> 0:10:04.880 maybe fifty basis points, maybe basis points in December, because 0:10:04.920 --> 0:10:08.000 what they are going to see is inflation continuing actually 0:10:08.040 --> 0:10:10.240 to cool, because that's actually what's going on. I think 0:10:10.240 --> 0:10:12.760 we'll get about two tents percent in the September read 0:10:13.280 --> 0:10:15.880 energy prices are going to be down month over month 0:10:15.920 --> 0:10:19.520 in September. Also, I think we'll see the airline fairs 0:10:19.559 --> 0:10:21.800 come down a bit more. I think lodging will come 0:10:21.840 --> 0:10:23.199 down a bit more. We've got a big increase in 0:10:23.240 --> 0:10:25.320 tobacco prices, no reason why we get that two months 0:10:25.320 --> 0:10:27.840 in a row. So I just think we're over reacting 0:10:27.840 --> 0:10:30.240 to this. Yes, it wasn't good news on inflation, it 0:10:30.320 --> 0:10:32.760 was worse than expected, but the big trend here is 0:10:33.080 --> 0:10:35.920 coming down. I think financials are over reacting. I have 0:10:36.000 --> 0:10:38.640 no problem with the tenure treasury up near three fifty. 0:10:38.679 --> 0:10:41.640 I think that's that's okay. But I think the assumption 0:10:41.679 --> 0:10:43.679 that somehow we're not dealing with invasion or is going 0:10:43.720 --> 0:10:47.080 to get worse, I think it's just wrong. What about 0:10:47.080 --> 0:10:49.040 big tech, Dave? I mean, David, We're looking right now 0:10:49.080 --> 0:10:52.000 at three point one percent decline on the NASDAC and 0:10:52.000 --> 0:10:54.840 it's been a knee jerk whipsaw lower and it has 0:10:54.880 --> 0:10:59.240 had legs. Do you push against that? Not not necessary. 0:10:59.280 --> 0:11:01.280 I think you have to go stock by stock because 0:11:01.520 --> 0:11:03.319 the the issue is there were a number of things 0:11:03.360 --> 0:11:06.160 that were overvalued based if you ever assumed a normal 0:11:06.280 --> 0:11:08.120 level of real interest rates, and we are getting back 0:11:08.160 --> 0:11:10.760 to a more normal level of real interest rates, and 0:11:10.840 --> 0:11:16.040 that is negative for UH for large cap growth stocks, 0:11:16.120 --> 0:11:19.200 which you know, which you were standing at very high valuation. 0:11:19.320 --> 0:11:21.800 So I do get that, and I don't you know, 0:11:21.840 --> 0:11:24.080 I don't. I think it's really more of a return 0:11:24.120 --> 0:11:26.199 to rationality and a lot of the pricing and markets 0:11:26.200 --> 0:11:29.959 and that's no harm. But overall, I you know, I'm 0:11:30.000 --> 0:11:32.400 actually a politive on the equity market, and I'm glad 0:11:32.400 --> 0:11:34.680 to see so many people bearish, because I think that 0:11:34.679 --> 0:11:37.000 that sets us up to do a bit better over 0:11:37.000 --> 0:11:40.400 the next few months. David Kelly, what do you see 0:11:40.559 --> 0:11:44.520 among corporate earnings? Were really before the gaming of what 0:11:44.559 --> 0:11:47.200 corporate earnings are doing. But let's get out front with you. 0:11:47.559 --> 0:11:53.520 How are corporations adapting to America's inflation? Well, it is, 0:11:53.640 --> 0:11:55.800 it is difficult. And you know, last year we had 0:11:55.800 --> 0:11:58.480 a spectacular year for earnings. This year, it would be 0:11:58.520 --> 0:12:00.760 lucky if we get to get out with the or 0:12:00.800 --> 0:12:03.400 in the year with a positive and operating earnings year 0:12:03.400 --> 0:12:06.360 over year. I think it could be negative next year. Yeah, 0:12:06.360 --> 0:12:08.959 I think we're going to see inflations or an earning squeeze. 0:12:08.960 --> 0:12:11.240 I mean, I mean, the reality is you've got this 0:12:11.320 --> 0:12:14.680 growth in wages that is real. Companies can either pass 0:12:14.760 --> 0:12:16.439 it on or not, and I think they're gonna find 0:12:16.440 --> 0:12:18.199 it's hard to pass it on. And I think that's 0:12:18.240 --> 0:12:21.240 going to squeeze margins next year. So I do think 0:12:21.240 --> 0:12:22.800 that's whether we have a recession or not, we could 0:12:22.880 --> 0:12:26.360 end up with negative earnings growth next year. David, Like 0:12:26.440 --> 0:12:29.240 everyone out there on my cell phone, I have a 0:12:29.280 --> 0:12:33.600 real estate dump of whatever geography. I'm looking at doesn't 0:12:33.720 --> 0:12:37.080 everybody go out today and mark down the price of 0:12:37.160 --> 0:12:42.400 their house for sale. Um. Yes, and it takes a 0:12:42.440 --> 0:12:44.520 long long time for that market to clear. But the 0:12:44.559 --> 0:12:47.960 but the reality is the average mortgage payment on a 0:12:48.000 --> 0:12:50.640 new home has gone up by sixty percent in the 0:12:50.720 --> 0:12:53.320 last year, and and that really that one. I do 0:12:53.400 --> 0:12:55.440 really blame the Federal Reserve for they kept great so 0:12:55.559 --> 0:12:58.720 low for so long that it caused it prices and 0:12:58.760 --> 0:13:02.160 now we can't deal with sure. I don't think there's 0:13:02.240 --> 0:13:04.880 enough enough people to buy homes when you push them. 0:13:05.000 --> 0:13:07.960 The average mortgage rate or average mortgage payment up by 0:13:07.960 --> 0:13:11.160 sixty percent in the year, John, I think this is 0:13:11.200 --> 0:13:14.839 just absolutely profound. I can't say enough about sector to 0:13:14.960 --> 0:13:19.520 sector in inflation, the different elasticities are out there on 0:13:19.640 --> 0:13:23.920 homeownership and how it redounds over to rent, multi family nationwide, 0:13:24.160 --> 0:13:27.320 every region is different. Guess what this report is a 0:13:27.400 --> 0:13:30.680 game change. Core inflation came in after than expected, and 0:13:30.720 --> 0:13:33.640 shout is one of the most stickiest part of the 0:13:33.760 --> 0:13:36.320 report when it comes to inflation. And David, I appreciate 0:13:36.360 --> 0:13:39.160 what you're saying that things might be getting better, perhaps 0:13:39.360 --> 0:13:41.520 not worse, but when you think about what the Fed 0:13:41.559 --> 0:13:43.720 will do not what they should do. David, can you 0:13:43.720 --> 0:13:45.640 talk to me about what you expect they will do. 0:13:45.720 --> 0:13:48.280 They've laid out their reaction function, They've they've told us 0:13:48.280 --> 0:13:51.200 how they respond to incoming information. Tell us what you 0:13:51.240 --> 0:13:54.000 think that means for what they will do. Well, I 0:13:54.240 --> 0:13:56.440 think what they'll do is they'll go seventy five basis 0:13:56.480 --> 0:13:58.960 points next week. But I do think that in the 0:13:59.120 --> 0:14:02.520 press conference and perhaps in the statement, they will acknowledge 0:14:02.559 --> 0:14:05.880 the fact that inflation has cooled somewhat. But but they 0:14:05.880 --> 0:14:07.640 will say, you know, two data points are not good 0:14:07.760 --> 0:14:10.320 enough to to to call it a trend yet, so 0:14:10.360 --> 0:14:12.960 they'll have some caution there, but they'll put enough doubt 0:14:13.040 --> 0:14:15.120 in there to give them the space to only go 0:14:15.200 --> 0:14:19.000 fifty basis points in in November. So I think I 0:14:19.000 --> 0:14:20.720 think they want to set set it up that way. 0:14:20.760 --> 0:14:23.040 They want to they want to put in a hawk 0:14:23.080 --> 0:14:26.360 ish move, but give themselves the opportunity then to put 0:14:26.400 --> 0:14:28.880 in a more dubsh language without being labeled as being 0:14:29.280 --> 0:14:32.320 soft and inflation. But you know, again I would focus 0:14:32.320 --> 0:14:34.600 on you know this shelter thing. Yeah, it's it's a 0:14:34.640 --> 0:14:38.600 long lagging problem problem in inflation. But if you think 0:14:38.640 --> 0:14:41.040 about it, how does higher interest rates help deal with 0:14:41.040 --> 0:14:43.440 the shelter inflation problem. I mean, if it stops people 0:14:43.440 --> 0:14:45.480 from building houses, how are you going to bring down rents? 0:14:46.440 --> 0:14:49.360 So it's probably, you know, the very the one thing 0:14:49.400 --> 0:14:51.680 that that they're most worried about it, or the one 0:14:51.680 --> 0:14:53.680 thing that's keeping inflation high, is the thing that that 0:14:53.720 --> 0:14:56.280 they can fix the least by pushing up interest rates. 0:14:56.800 --> 0:15:00.000 There you go, Den Kelly objecting more an asset management. 0:15:10.200 --> 0:15:12.000 The message is a little cloudier and markets s t 0:15:12.320 --> 0:15:14.320 x c IO of flow Bank joining us. Now. We 0:15:14.440 --> 0:15:19.120 are seeing NAZAC down two point nine percent, a reset 0:15:19.840 --> 0:15:23.200 of the idea of a disinflationary tilts that we thought 0:15:23.200 --> 0:15:26.040 would take hold but didn't. Are you rethinking any of 0:15:26.040 --> 0:15:30.200 your positions today? Well, it was never going to be 0:15:30.360 --> 0:15:33.840 a straight line down. We have a number of inflation 0:15:34.160 --> 0:15:39.440 data points that are still showing that disinflation is happening. Clearly, 0:15:39.960 --> 0:15:43.280 the core print for today was not fantastic, and we're 0:15:43.280 --> 0:15:46.520 seeing the disappointment in markets, especially because we had that 0:15:46.600 --> 0:15:49.960 expectations in the last couple of days that really ramped 0:15:50.040 --> 0:15:54.360 up and boosted markets. From a positioning perspective. We still 0:15:54.400 --> 0:15:57.680 have PPI tomorrow, we have the Michigan numbers coming up 0:15:57.680 --> 0:16:01.600 at the end of the week. We had inflation expectations 0:16:01.680 --> 0:16:03.880 in the last couple of days showing us that those 0:16:04.040 --> 0:16:08.280 have come down quite sharply as well. So I think 0:16:08.280 --> 0:16:11.680 the disinflation trend is going to continue, but for today 0:16:11.800 --> 0:16:14.840 it's definitely going to be ugly. John, we're getting in 0:16:14.880 --> 0:16:17.200 those numbers right now. Peter book fire has one of 0:16:17.240 --> 0:16:23.239 the isolated incidents. Health insurance up year over year. Services 0:16:23.520 --> 0:16:27.440 services is the distinction, without a doubt. With that in mind, 0:16:27.840 --> 0:16:31.440 got this tug of war between financial conditions and what 0:16:31.600 --> 0:16:33.600 is handling with the date and how the fetters responding 0:16:33.640 --> 0:16:35.800 to it, and investors who are hoping all of this 0:16:35.880 --> 0:16:38.960 goes away and next year at smooth sailing. What's your 0:16:39.000 --> 0:16:41.400 message to people that's still doubt the resolve of this 0:16:41.440 --> 0:16:46.040 federal reserve. Well, there wasn't going to be a pivot, 0:16:46.200 --> 0:16:49.360 and there clearly isn't going to be a pivot anytime soon. 0:16:49.480 --> 0:16:54.040 I think Jackson Hole dispelled that idea completely. Anything that 0:16:54.440 --> 0:16:57.320 anything close to a pivot would just mean we're going 0:16:57.360 --> 0:17:00.200 to stop hiking, and that you know, happens at some 0:17:00.280 --> 0:17:03.920 point in and how many more percentage they get in 0:17:04.040 --> 0:17:06.920 before that uh, that number is going up of course 0:17:06.960 --> 0:17:10.520 for the with the November expectations rising as well, but 0:17:10.720 --> 0:17:15.480 the Fed isn't going to blink. Inflation is gradually coming 0:17:15.520 --> 0:17:20.040 down lower than anyone would like, but the result is 0:17:20.080 --> 0:17:23.879 going to be very firm. Ste Where do I hide? 0:17:24.600 --> 0:17:28.280 Just as simple as my head is standing, this report 0:17:28.400 --> 0:17:32.320 wasn't what I expected. Where do I hide? To drag 0:17:32.400 --> 0:17:36.840 myself into two thousand three? So I think it's a 0:17:36.840 --> 0:17:39.760 bit too early to say that the entire end of 0:17:39.800 --> 0:17:42.360 the year is going to be bad. I think at 0:17:42.440 --> 0:17:45.600 some point we are going to have some improvement in markets. 0:17:46.040 --> 0:17:48.679 For the time being, it feels really like the dollar 0:17:48.920 --> 0:17:51.000 is a great place to hide. The switch Frank. You 0:17:51.000 --> 0:17:54.320 were talking earlier about the Swiss National Bank coming in 0:17:54.359 --> 0:17:57.800 with those hikes, so switch Frank probably is another place 0:17:57.800 --> 0:18:00.760 to hide. But you're you know, you're making something in cash, 0:18:00.840 --> 0:18:03.280 and I think a lot of a lot of investors 0:18:03.280 --> 0:18:05.520 are going to be happy to sit in cash and 0:18:05.560 --> 0:18:09.280 wait for the picture to improve, hopefully over the next 0:18:09.280 --> 0:18:12.480 couple of weeks. ST. Thank you ST to act a 0:18:12.600 --> 0:18:19.080 flo bank right now. It's a good oil we do this. 0:18:19.600 --> 0:18:23.200 Regina Mayor, Global Head of Energy and KPMG steeped in 0:18:23.320 --> 0:18:26.960 all the game the theory of her Rice University, Regina. 0:18:26.960 --> 0:18:29.160 I want to focus on the game theory right now 0:18:29.800 --> 0:18:33.200 of President Biden. In one chart I just saw in passing, 0:18:33.680 --> 0:18:37.879 which is our so called strategic oil reserve, and the 0:18:37.960 --> 0:18:41.679 proper scientific word for this is the volume we have 0:18:41.840 --> 0:18:48.439 in reserve is truly cratered. What does that mean for America? Well, 0:18:48.560 --> 0:18:50.720 I just think we've probably reached a tipping point where 0:18:50.760 --> 0:18:53.840 it's time to focus on refilling the strategic control and 0:18:53.960 --> 0:18:57.520 reserve because it is an all time low um and 0:18:57.560 --> 0:18:59.360 I think we're sort of out of the woods from 0:18:59.400 --> 0:19:03.159 a US energy price pressure that was driving inflation and 0:19:03.200 --> 0:19:06.400 the things that I know the politicians were worried about 0:19:06.440 --> 0:19:08.440 coming into the mid terms, and that was the price 0:19:08.440 --> 0:19:11.040 at the pump. We see gasoline prices in the US 0:19:11.400 --> 0:19:14.719 consistently go down and down and down. So I believe 0:19:15.160 --> 0:19:18.000 if anybody was taking my advice, it's time to start 0:19:18.040 --> 0:19:22.879 focusing on on restocking our spr and getting it a 0:19:22.920 --> 0:19:26.480 little above where where it is today. Can you get 0:19:26.520 --> 0:19:29.199 out the kufil a US or slide rules at KPMG 0:19:29.359 --> 0:19:31.399 and tell me how much a gallon of gas is 0:19:31.440 --> 0:19:35.040 gonna go up, as President Biden, your restocks a reserve 0:19:35.080 --> 0:19:37.920 are we're going up twenty cents a gallon? Fifty two 0:19:37.920 --> 0:19:42.040 cents a gallon? What's that statistic? Now? Actually, I think 0:19:42.040 --> 0:19:44.399 we're out of the woods on gas prices, Tom, I 0:19:44.400 --> 0:19:47.439 mean I think that you know, we've done with summer 0:19:47.520 --> 0:19:51.240 driving season. We've got quite a lot of stock or 0:19:51.280 --> 0:19:54.600 fineries are up and running again. I'm less worried about 0:19:54.600 --> 0:19:57.960 what that would do immediately to gas prices. I will 0:19:58.000 --> 0:20:01.440 say that what the administration did with regard to releasing 0:20:02.359 --> 0:20:05.720 fuel from the spr was one of the key things 0:20:05.800 --> 0:20:09.360 that the energy industry will say made a material difference 0:20:09.680 --> 0:20:12.440 in the summer peak season and when we set gasoline 0:20:12.480 --> 0:20:16.000 prices at their peak in June, Regina. That's a story 0:20:16.000 --> 0:20:18.400 over in the United States. You're in Portugal right now, 0:20:18.400 --> 0:20:21.000 in Lisbon, and we're in London, and the focus very 0:20:21.080 --> 0:20:23.080 much as on energy, and it's a very different and 0:20:23.160 --> 0:20:27.240 multi pronged concern because it's not all gasoline or crude, 0:20:27.280 --> 0:20:29.879 it's natural gas, it's uh, it's it's some of the 0:20:29.960 --> 0:20:34.040 issues of nuclear energy. Over in France, from your perspective, 0:20:34.440 --> 0:20:37.280 is the plan that's coming to shape from the European 0:20:37.400 --> 0:20:41.359 Union of trying to cap demand will also providing up 0:20:41.440 --> 0:20:45.280 profits from the energy companies two households. Does this make sense? 0:20:45.280 --> 0:20:48.400 Does it feel feasible to you? At least? I think 0:20:48.400 --> 0:20:51.399 that he's already made quite a bit of progress. So 0:20:51.440 --> 0:20:54.760 we have seen European gas prices draw more at a 0:20:54.840 --> 0:20:58.679 seven week low UM and it's off its peak on August. 0:20:59.600 --> 0:21:03.080 It's still eight times higher than normal, but there are 0:21:03.119 --> 0:21:08.440 bright spots. Gas storage is at right now and it's 0:21:08.480 --> 0:21:10.560 slightly above where they would have expected to be for 0:21:10.600 --> 0:21:13.679 the five year average. The countries have been working on 0:21:13.880 --> 0:21:16.919 securing as much supply as possible. Now they're looking at 0:21:16.960 --> 0:21:22.000 packages to reduce demand and to cap what that would 0:21:22.000 --> 0:21:25.280 do to household income. It's gonna cost a lot of money. 0:21:25.280 --> 0:21:28.680 There's gotta be national budgets are going to be strained, 0:21:28.760 --> 0:21:30.840