WEBVTT - Surveillance: America Is Working, NEC's Kudlow Says 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.760 Bloomberg dot Com, and of course on the Bloomberg Right now. 0:00:27.880 --> 0:00:30.520 This is wonderful as well. Time. Julia Cardano with US 0:00:30.520 --> 0:00:34.040 with Mecal Policy Advises. Julia um I look at what 0:00:34.120 --> 0:00:37.919 John Farrell just said about global accommodation, all the rate 0:00:38.000 --> 0:00:42.680 cuts out there. What's the long term price of an 0:00:42.680 --> 0:00:46.800 accommodation by the Fed Central Bank. I refuse to believe 0:00:47.400 --> 0:00:51.320 that Chairman Powell cutty rates is a free lunch. What's 0:00:51.360 --> 0:00:56.200 the price out there? Well, actually, Tom, I think what 0:00:56.320 --> 0:00:59.360 the question for us right now is whether these rate 0:00:59.400 --> 0:01:03.600 cuts are just central banks moving to a new reality 0:01:03.840 --> 0:01:07.959 of lower neutral rate that comes with lower global slower 0:01:07.959 --> 0:01:11.640 global growth, or whether this is actual, you know, new 0:01:11.680 --> 0:01:14.360 accommodation that's going to spur growth. I think that's an 0:01:14.360 --> 0:01:18.200 open question because we've seen the global economy slow down 0:01:18.240 --> 0:01:21.720 pretty dramatically. We don't have the engine that we've come 0:01:21.760 --> 0:01:24.400 to rely on, that of China. China has been fueled 0:01:24.400 --> 0:01:27.720 by this massive credit growth in recent years. They don't 0:01:27.720 --> 0:01:30.000 want to go back down that road. They're being very 0:01:30.040 --> 0:01:33.480 disciplined about it, and growth is staying very low and 0:01:33.560 --> 0:01:37.560 likely to slow further. But truly, there's there's a difference 0:01:37.600 --> 0:01:40.880 between a rate like we have in the US and 0:01:41.160 --> 0:01:44.200 the negative rates in Europe. That's not adjusting to a 0:01:44.240 --> 0:01:49.760 new normal, that's just negative. What you mean in Europe? Yes, 0:01:50.000 --> 0:01:52.560 the negative rates in Europe? Yes, I mean that. I 0:01:52.600 --> 0:01:56.720 think actually they'll highlights those same structural problems. They don't 0:01:56.760 --> 0:02:00.240 have an engine of growth. Their demographics are slow, their 0:02:00.240 --> 0:02:03.920 productivity is low, So what's going to drive growth? And 0:02:03.960 --> 0:02:07.080 they've relied on They've turned to negative rates, and as 0:02:07.120 --> 0:02:10.280 we see, they're not particularly effective. Right, They're not a 0:02:10.360 --> 0:02:13.640 great engine of growth. So I think that their negative 0:02:13.680 --> 0:02:18.079 rates highlights that they're just sort of out of ammunition. So, Julie, 0:02:18.080 --> 0:02:19.880 are you leaning towards that? Then? If you had to 0:02:19.919 --> 0:02:21.960 make a decision on where this is coming, you leaning 0:02:22.000 --> 0:02:25.760 towards the idea that we are experiencing much lower neutral 0:02:25.840 --> 0:02:29.640 rights and these central banks adjusting to that reality. Yeah, 0:02:29.639 --> 0:02:32.120 I do think that. I mean, I think if I 0:02:32.160 --> 0:02:35.040 had to describe the current policy stance for the said 0:02:35.080 --> 0:02:39.399 it would be slightly accommodative, but not tremendously so despite 0:02:39.440 --> 0:02:41.400 the rate being so low. So I do think that 0:02:41.400 --> 0:02:45.480 a lot of this is the reality of lower neutral 0:02:45.560 --> 0:02:50.040 interest rates. So square that backdrop with a job's report 0:02:50.240 --> 0:02:52.760 that is likely to be quite good today. Uh, and 0:02:52.919 --> 0:02:55.240 the figures that we got out of ADP yesterday that 0:02:55.320 --> 0:02:59.359 point into such health in the labor market. How can 0:02:59.440 --> 0:03:02.840 that person is with this backdrop of weakness as you 0:03:02.919 --> 0:03:07.160 painted well, So I wouldn't say weakness, I just slow 0:03:07.200 --> 0:03:10.600 growth isn't necessarily weak if that's the reality. And again 0:03:10.639 --> 0:03:13.000 the job first of all, I don't want to say 0:03:13.240 --> 0:03:16.480 presume the conclusion of the jobs report. One thing we've 0:03:16.480 --> 0:03:21.160 been highlighting is the surprises in both directions in the 0:03:21.240 --> 0:03:24.240 jobs reports. This year has been about fifty percent bigger 0:03:24.240 --> 0:03:27.480 than the last five years. So you know, we may 0:03:27.520 --> 0:03:31.160 be surprised in one direction or another this morning. Um, 0:03:31.280 --> 0:03:34.320 but the but what we've seen is a healthy job market. 0:03:34.360 --> 0:03:37.160 We have seen job growth slow. We need to generate 0:03:37.160 --> 0:03:39.640 about a hundred to a hundred and fifteen thousand jobs 0:03:39.640 --> 0:03:44.080 a month to just absorb population growth, and we're somewhat 0:03:44.120 --> 0:03:48.000 above that. So we're not exactly roaring. The economy is fine, 0:03:48.200 --> 0:03:52.240 it's solid, it's healthy. Consumers are feeling pretty good because 0:03:52.280 --> 0:03:55.920 the job market is good. But we're not in boom times, 0:03:56.080 --> 0:03:58.800 nor are we seeing weakness. So I think we're we're 0:03:58.800 --> 0:04:03.720 seeing that kind of steady, moderate growth picture reflected in 0:04:03.760 --> 0:04:05.920 those jobs. Now, Julia, let me ask you a question 0:04:05.960 --> 0:04:08.680 that I know RBC's Tom Pauselli has been thinking about 0:04:08.680 --> 0:04:11.120 and talking to clients about as well, the risk of 0:04:11.160 --> 0:04:15.080 confusing signs of full employment with evidence that the cyclical 0:04:15.120 --> 0:04:17.680 peak in the labor market is behind us. What are 0:04:17.760 --> 0:04:22.880 the risks right now? So, so the risks of thinking 0:04:22.880 --> 0:04:25.200 that we're overheating, is that what you're asking, you know, 0:04:25.440 --> 0:04:28.680 The idea being that as GDP comes in in and 0:04:28.720 --> 0:04:32.240 around trend growth and pay rolls growth starts to desalarate. 0:04:32.480 --> 0:04:35.520 There's just the belief by some people that we're not 0:04:35.560 --> 0:04:39.400 returning to trend growth, that the deceleration of payrolls growth 0:04:39.839 --> 0:04:41.920 is evidence that we've had a cyclical peak in the 0:04:42.000 --> 0:04:44.960 labor market and we're rolling go over. Instead of sitting 0:04:44.960 --> 0:04:48.040 here and worry about recess, precisely, instead of sitting here 0:04:48.080 --> 0:04:50.320 and saying, you know what, quite we're quite constructive we're 0:04:50.360 --> 0:04:52.640 back at trend and what you are seeing is just 0:04:52.680 --> 0:04:56.360 the natural consequence of full employment. Payrolls growth will de salarate. 0:04:56.480 --> 0:05:00.000 Are we confusing one with the others. It's very easy 0:05:00.160 --> 0:05:03.000 to confuse. And of course you know, when you are 0:05:03.160 --> 0:05:07.239 at that trend growth, that means that policymakers, for example, 0:05:07.279 --> 0:05:09.440 don't have a lot of margin for error, which is 0:05:09.480 --> 0:05:13.279 why the FED moved preemptively. Uh. Now I think that 0:05:13.360 --> 0:05:16.120 they've been a little bit disciplines. They've now moved to 0:05:16.160 --> 0:05:18.080 the sidelines and they say, you know, we need to 0:05:18.120 --> 0:05:23.919 see more evidence of what you're suggesting actual weakness. Uh, 0:05:23.960 --> 0:05:27.159 to conclude that we need to do more. So, Um, 0:05:27.560 --> 0:05:30.479 it's easy to confuse. It's hard and real time to 0:05:30.600 --> 0:05:34.440 disentangle those two. We look at things like the speed 0:05:34.480 --> 0:05:37.640 of slowing. If we're slowing rapidly and in in a 0:05:37.720 --> 0:05:40.560 worrisome way, which isn't what we've seen. We've seen sort 0:05:40.600 --> 0:05:44.720 of a gradual moderation and growth through the year. Are 0:05:44.760 --> 0:05:47.400 we aggregating too much? I mean, we're gonna come out 0:05:47.480 --> 0:05:51.159 here in one of and in thirty thirty seven minutes 0:05:51.279 --> 0:05:54.560 and we're going to aggregate aggregate, aggregate. Can we get 0:05:54.560 --> 0:05:57.240 away with that? Game given the partitions of the American 0:05:57.320 --> 0:06:00.960 labor economy. Well, that's a great point, Tom. I mean, 0:06:01.360 --> 0:06:03.919 when we see the report this morning, it's likely to 0:06:04.000 --> 0:06:08.720 show a manufacturing sector that's still that is in recession. Um, 0:06:08.760 --> 0:06:12.840 that's probably going to lose some jobs. Uh, you know, 0:06:13.320 --> 0:06:17.880 abstracting from the GM strike effect. Um. But uh. And 0:06:17.880 --> 0:06:21.640 and meanwhile, all the service sector is humming along. And 0:06:21.680 --> 0:06:24.400 in fact, the health care sector is in sort of 0:06:24.400 --> 0:06:28.560 a secular growth strate give uh state given our aging economy. 0:06:28.640 --> 0:06:32.240 So there are different sub economies. We always have to 0:06:32.320 --> 0:06:34.799 keep that in mind when we're thinking about, for example, 0:06:34.880 --> 0:06:38.960 Jonathan's question, are we slowing in a broad based way? 0:06:39.000 --> 0:06:42.040 Are we driven by weakness in one sector? I think 0:06:42.080 --> 0:06:45.800 it's worrisome in the composition of of growth and hiring 0:06:45.880 --> 0:06:49.680 that the weakness is in in investment um and in 0:06:49.760 --> 0:06:54.320 sectors that have high productivity, whereas the resiliency is in 0:06:54.440 --> 0:06:59.040 sectors with relatively low productivity. That's not a great pattern 0:06:59.120 --> 0:07:01.280 in terms of thinking about the future. So I think 0:07:01.279 --> 0:07:05.200 the details do matter a lot um, But we have 0:07:05.400 --> 0:07:09.560 a gigantic service sector. It's what powers the economy, and 0:07:09.600 --> 0:07:13.160 it has given us a really solid base where we're 0:07:13.200 --> 0:07:15.880 an ocean liner of an economy. It's very hard to 0:07:16.040 --> 0:07:22.840 put an ocean liner of an economy was dancing ocean lining. 0:07:22.960 --> 0:07:25.920 I love the sort of the noir version of the 0:07:26.840 --> 0:07:28.920 of the ocean liner of an economy. I am thinking 0:07:28.960 --> 0:07:32.720 about that, this idea that slow growth could be positive 0:07:32.760 --> 0:07:35.040 and that we're chugging along and all of these nuances. 0:07:35.040 --> 0:07:38.200 And I was speaking with David Lafferty yesterday, chief market strategist. 0:07:38.200 --> 0:07:41.040 It takes this investment managers, and he was saying, honestly, 0:07:41.080 --> 0:07:45.040 I'm looking at a blank screen for outlook, my blinker blinking. 0:07:45.080 --> 0:07:47.640 I have nothing that interesting to say with this type 0:07:47.680 --> 0:07:49.680 of backdrop, because things are going to just sort of 0:07:49.920 --> 0:07:52.800 chug along. It's kind of a boring market now heading 0:07:52.800 --> 0:07:58.320 into Julia, be careful what you say. Though. Again, whenever 0:07:58.400 --> 0:08:00.520 we think it's going to be the most worrying, that's 0:08:00.560 --> 0:08:04.840 when something can, you know, blindside us. So UM, I 0:08:04.880 --> 0:08:07.960 wouldn't say a year where we're still going to be 0:08:08.240 --> 0:08:11.720 grappling with things like trade tensions between the US and 0:08:11.840 --> 0:08:16.600 China and now a US presidential election that is on 0:08:16.760 --> 0:08:21.679 the front burner and has consequences for different sectors. Um, 0:08:21.720 --> 0:08:23.560 I don't think that's going to be a boring year. 0:08:23.680 --> 0:08:27.040 I'm not too worried about being bored next year. Judaicarnada, 0:08:27.160 --> 0:08:30.440 great to get your thoughts macro policy perspectives, President and 0:08:30.640 --> 0:08:47.160 found it. Hey, it is is ny down to John. 0:08:47.200 --> 0:08:50.680 The jobs nevers crushing the Bloomberg wire, contrary to ordinary, 0:08:50.760 --> 0:08:53.679 A gain of more than a quarter million jobs in 0:08:53.760 --> 0:08:56.840 November Topping Wall Street forecast the prior month or Vice 0:08:56.960 --> 0:09:01.160 higher again November versus October. The unemployment eight down three 0:09:01.200 --> 0:09:04.120 point five percent, a half century low average. I really 0:09:04.160 --> 0:09:06.680 earnings meantime, well, they missed the mark up point two 0:09:06.720 --> 0:09:09.920 percent versus point three percent again. Change in non farm 0:09:09.960 --> 0:09:12.440 payrolls from the Labor Department a gain of two hundred 0:09:12.520 --> 0:09:16.760 sixty six thousand Topping forecasts the prior month October revised higher. 0:09:16.960 --> 0:09:20.560 Unemployment down down at three point five percent. I'm Niel 0:09:20.960 --> 0:09:23.000 Boomberg Radio. Let's go back to me, ord if any, 0:09:23.120 --> 0:09:26.440 thank you. Here's the price action. Just wow. Equities advanced 0:09:26.480 --> 0:09:29.880 futures higher by four tents of one percent, bonds decline, 0:09:30.080 --> 0:09:33.600 yields up by three basis points on a ten year 0:09:33.679 --> 0:09:36.000 now to one eighty five yelds were coming in just 0:09:36.040 --> 0:09:38.640 a little bit so big reversal, especially at the front end, 0:09:38.720 --> 0:09:41.720 yields up by five basis points to one sixty four 0:09:41.920 --> 0:09:45.600 and affirm a dollar a big payrolls print John Ferroll 0:09:45.640 --> 0:09:48.760 to the claims number in Carl Kadona way out front 0:09:48.760 --> 0:09:51.680 on that among others, I go to three decimal points 0:09:51.679 --> 0:09:54.000 on the rate and it's what I would call a 0:09:54.160 --> 0:09:57.680 good three point five percent to three decimals three point 0:09:57.720 --> 0:10:02.000 five three five, So it's no la statistical fluky flukiness 0:10:02.040 --> 0:10:04.000 that we got to three point five. You get to 0:10:04.080 --> 0:10:06.800 Jim Glassman of JP Morgan standing by for reaction to 0:10:06.880 --> 0:10:10.719 this one. Your thoughts, Jim. Pretty impressive And to keep 0:10:10.760 --> 0:10:13.520 in mind though, the settlement of the GM strike is 0:10:13.760 --> 0:10:17.640 driving allow this. You get manufacturing bounced back. We didn't 0:10:17.640 --> 0:10:21.679 know how much guys were actually on strike. Maybe another 0:10:21.720 --> 0:10:25.320 thirty thousand were indirectly affected. And I think this is 0:10:25.320 --> 0:10:28.520 a reminder that all the manufacturer data coming out and 0:10:28.800 --> 0:10:30.480 that we're going to see over the next several weeks 0:10:30.520 --> 0:10:33.000 is going to be showing this balance back from the 0:10:33.160 --> 0:10:36.439 GM strike. So pretty impressive. And I think the unemployment 0:10:36.559 --> 0:10:38.720 rate is the key to the whole thing, because we 0:10:38.760 --> 0:10:41.640 just don't know. I think job growth is slowing down 0:10:41.720 --> 0:10:44.800 very gradually. Not here, but I think for the year 0:10:44.800 --> 0:10:47.520 it is, and I think we're gonna see you just 0:10:47.520 --> 0:10:49.200 see his unemployment stay at three and a half. It's 0:10:49.240 --> 0:10:51.640 going to be a really good story. Jim Glassman, thank 0:10:51.679 --> 0:10:53.720 you so much for the time we treasure speaking to you, 0:10:53.800 --> 0:10:58.080 particularly today from Tucson, Arizona. Mr Glassman is with Dr Glassman, 0:10:58.080 --> 0:11:01.000 I should say it's with JP Moore, John. What is 0:11:01.040 --> 0:11:05.320 so distinctive here is the U six grim unemployment number 0:11:05.360 --> 0:11:08.640 comes into recent lows six point nine percent. That's not 0:11:08.840 --> 0:11:13.520 seven percent. And I also know media duration and average duration. 0:11:13.920 --> 0:11:16.960 Those are very very good statistics as well. There's a 0:11:17.200 --> 0:11:19.720 there's a solidity to the data. And look at the 0:11:19.800 --> 0:11:25.560 yields now out four base points vaulting out to a one. Also, 0:11:25.600 --> 0:11:28.600 we should say everyone talks about the trend line being important, 0:11:28.600 --> 0:11:32.800 not necessarily one number. The revisions also were positive, adding jobs, 0:11:32.800 --> 0:11:35.080 bringing the three month average to a ten month high 0:11:35.080 --> 0:11:38.040 of two and five thousand. This is key when you 0:11:38.120 --> 0:11:41.240 talk about the longer term implications. Let's get to the 0:11:41.240 --> 0:11:43.800 longer term implications in the market moves as well. Really 0:11:43.800 --> 0:11:45.480 placed to say that you want to us from PAGM 0:11:45.480 --> 0:11:47.760 it's Mike Collinsy dropped by to the studio to give 0:11:47.840 --> 0:11:50.680 us his thoughts. Mike, your initial response place, you know, 0:11:50.720 --> 0:11:53.520 it's the same story. The job market has not been 0:11:53.520 --> 0:11:56.880 the problem for this economy. Right, it is rock solid um, 0:11:57.160 --> 0:11:59.880 very robust um. But if you look through the numbers, 0:12:00.040 --> 0:12:02.599 see the same trend we've seen, which is one of 0:12:02.679 --> 0:12:05.280 the reasons we haven't seen a big spike in wage growth. 0:12:05.480 --> 0:12:07.960 And even the wage numbers here, the monthly wage games 0:12:07.960 --> 0:12:10.559 are actually a little bit lighter than expected because it's 0:12:10.559 --> 0:12:15.240 all services. It's leisure jobs, it's business services, it's hospitality, 0:12:15.679 --> 0:12:19.040 it's a lot of second average hourly earnings climbed three 0:12:19.040 --> 0:12:22.400 point one percent from a year earlier. That exceeded projections 0:12:22.400 --> 0:12:25.079 of three percent, right, Right, The monthly number was a 0:12:25.760 --> 0:12:28.000 light but right, so we're running at three percent year 0:12:28.040 --> 0:12:30.160 over year and that's been where we that's where we've been, 0:12:30.640 --> 0:12:32.800 so that's not a change. But three percent based on 0:12:32.920 --> 0:12:36.040 historical expectations is arguably a little bit light. Right. If 0:12:36.040 --> 0:12:39.080 inflation is to you're talking about one percent real wage growth, 0:12:39.120 --> 0:12:43.400 which doesn't really pay the bills. So, um, the labor 0:12:43.440 --> 0:12:46.720 market is not the problem, right, it's the the manufacturing 0:12:46.760 --> 0:12:49.440 Chector in an international sector and you're still seeing weakness 0:12:49.480 --> 0:12:52.120 in Europe. We had that yesterday. China is not out 0:12:52.160 --> 0:12:54.800 of the woods yet. Um. You know, there's there's seems 0:12:54.840 --> 0:12:56.800 like on a manufacturing side globally you've got a good 0:12:56.880 --> 0:12:58.440 number and then a bad number. A good number and 0:12:58.440 --> 0:13:00.480 a bad numbers. So we're kind of bouncing around the box. 0:13:00.520 --> 0:13:02.679 Talk about it, Mike, the consensus cool gun into next year. 0:13:02.720 --> 0:13:03.880 You know what it is is by the rest of 0:13:03.880 --> 0:13:05.840 the world. We've heard it from Bank alfter bank after 0:13:05.880 --> 0:13:08.319 bank alfter bank. The date to this week, the labor 0:13:08.360 --> 0:13:11.760 market in America rock solid, the dates US where German 0:13:11.800 --> 0:13:14.440 industrial production Reminder, as you say, they were not out 0:13:14.480 --> 0:13:16.880 of woods yet. When you think about that consensus cool 0:13:16.880 --> 0:13:18.880 gun into next year, what does Mike Collins stand on 0:13:18.880 --> 0:13:21.760 that debate? Yeah, I mean, you know, I'm a general 0:13:21.800 --> 0:13:24.920 contrarian and a deep value investor, and if you look 0:13:24.960 --> 0:13:30.400 at the relationships in valuations globally in equities, for sure, um, 0:13:30.440 --> 0:13:34.880 it would certainly tilt you to outside the US. But 0:13:35.080 --> 0:13:38.760 you know, the US economy is clearly the bright spot 0:13:38.800 --> 0:13:41.720 in the world right now, and we expect that to continue. 0:13:41.920 --> 0:13:44.000 Right The FED, I think has done a great job. 0:13:44.040 --> 0:13:45.959 I give them a lot of credit for pivoting when 0:13:46.000 --> 0:13:48.720 they did, for cutting three times, getting that funds rate 0:13:48.760 --> 0:13:50.520 back to what I think is probably closer to a 0:13:50.559 --> 0:13:52.880 neutral rate at least in the near term, and so 0:13:52.920 --> 0:13:55.720 we're actually poised to continue to do okay in the US. 0:13:55.840 --> 0:13:57.880 That's actually I'm glad you were up the FED because 0:13:57.880 --> 0:14:00.400 I'm watching the yield curve right now and it's kind 0:14:00.440 --> 0:14:03.960 of struggling to find whether or not it's deepening or flattening. 0:14:04.120 --> 0:14:07.040 On this news you're seeing two year yields increased just 0:14:07.120 --> 0:14:10.080 a touch more than ten year yields. Here, What is 0:14:10.120 --> 0:14:13.080 the risk that the federal take data like this and 0:14:13.280 --> 0:14:16.679 stop cutting rates or even hike them? Uh and sire 0:14:16.760 --> 0:14:19.760 me the growth. Yeah, so they've definitely stopped cutting for now. 0:14:19.760 --> 0:14:22.800 They are on perma hold for the time being, and 0:14:22.800 --> 0:14:26.440 this number solidifies that um as as everybody I think 0:14:26.520 --> 0:14:29.640 is in consensus view now, the hurdle rate hike is 0:14:29.720 --> 0:14:32.680 really really high. I mean, they talk about this symmetrical 0:14:32.880 --> 0:14:35.040 inflation target. What that means is they want to see 0:14:35.040 --> 0:14:38.760 inflation core pc E well above two before they even 0:14:38.800 --> 0:14:41.120 think about hiking. And that thing is like one five, 0:14:41.240 --> 0:14:43.640 one six, right now. There's a long way to go 0:14:43.760 --> 0:14:46.760 before that thing gets gets above too, So I don't 0:14:46.800 --> 0:14:48.720 see the risk as being in a hike hike in 0:14:48.760 --> 0:14:51.240 the next six months. Your view on credit at the moment, Mike, 0:14:51.280 --> 0:14:54.160 has been fascinating, extremely bifurcated. What we've seen is the 0:14:54.160 --> 0:14:56.160 spread between the top end of high yield and the 0:14:56.160 --> 0:14:58.520 bottom end of high yield really start to move out. 0:14:58.680 --> 0:15:01.600 It's been an upping quality right in high yield. You 0:15:01.640 --> 0:15:05.160 started to think about rotating the other way anytimes. Absolutely, 0:15:05.200 --> 0:15:07.040 Just just yesterday in our trade room, we had a 0:15:07.040 --> 0:15:11.000 big discussion about this. You're seeing actually that relationship. It 0:15:11.080 --> 0:15:13.120 looks like it's starting to turn the other way again. 0:15:13.160 --> 0:15:15.960 There's been so much pessimism in the high old market. 0:15:16.000 --> 0:15:17.720 A lot of it's in the energy sector, of course, 0:15:17.760 --> 0:15:20.480 and you've got some maybe positive news about OPEC cutting 0:15:20.480 --> 0:15:23.280 production a little bit, maybe bolsters oil prices, but there's 0:15:23.320 --> 0:15:25.840 so much negativity, there's so many default so much default 0:15:25.920 --> 0:15:28.320 risk and recessions priced into that tail of the high 0:15:28.360 --> 0:15:30.920 old market that there I think there is an opportunity 0:15:30.920 --> 0:15:32.120 if you believe like we do, that you're not going 0:15:32.200 --> 0:15:34.160 to be in a recession in two thousand twenty. There's 0:15:34.240 --> 0:15:36.560 value there. I'm itching to get in and ask you 0:15:36.600 --> 0:15:39.320 more about this. This is a really important question. We're 0:15:39.320 --> 0:15:41.640 talking about the triple cs, the bottom of the junk 0:15:41.680 --> 0:15:44.680 bond market that has really lacked the broader credit market. 0:15:44.680 --> 0:15:48.200 Through through nineteen, we've had gains of fifteen percent for 0:15:48.240 --> 0:15:52.000 corporate credit. Triple cs just really haven't been there in 0:15:52.000 --> 0:15:55.760 the last few months. You're talking about buying triple cs. 0:15:55.800 --> 0:15:58.680 Some of these really really beaten down credits, right, But 0:15:58.720 --> 0:16:02.080 it's about it's about perception in psychology and valuation, right, 0:16:02.120 --> 0:16:04.600 and all those things are pointing in one direction right now, 0:16:05.080 --> 0:16:07.200 and we tend to like to go the other way there. 0:16:07.440 --> 0:16:10.720 And again, if the default probability priced in is in 0:16:10.720 --> 0:16:12.160 that basket and you're only going to get a ten 0:16:12.160 --> 0:16:14.640 percent to fault right in that basket, there's value. But 0:16:14.680 --> 0:16:16.800 obviously you have to pick your spots. I mean, credit 0:16:16.840 --> 0:16:20.000 selection is powamount in that space without a doubt. What 0:16:20.000 --> 0:16:23.080 would you say to push back that they were cheap 0:16:23.160 --> 0:16:26.520 earlier this year? Uh, they might be less cheap now, 0:16:27.080 --> 0:16:30.640 what's changed fundamentally to mean that the risk is so 0:16:30.760 --> 0:16:33.120 much lower going into the bottom of the bottom When 0:16:33.120 --> 0:16:35.880 we see the default rate actually taking up in certain sectors. 0:16:36.000 --> 0:16:38.200 I mean, you've had not only the FED cutting three times, 0:16:38.200 --> 0:16:41.440 You've had dozens of rate cuts all around the world. Right, 0:16:41.560 --> 0:16:44.360 Monetary policy has been super stimulative, and now you're finally 0:16:44.360 --> 0:16:47.200 seeing signs of of potential fiscal policy. You had some 0:16:47.280 --> 0:16:49.920 in Japan, you you may have more in the US 0:16:49.960 --> 0:16:52.040 regardless of who wins the election next year, and in 0:16:52.440 --> 0:16:54.520 Europe you might see more. So I feel like you've 0:16:54.520 --> 0:16:58.640 seen a bottoming in global economic data for the time being. 0:16:58.640 --> 0:17:01.640 I think default risk or sushion risk has has moderated 0:17:01.680 --> 0:17:05.440 for next year, and and everybody's off sides in that space. Tom, 0:17:05.640 --> 0:17:08.240 is this time now to go out of triple leverage 0:17:08.280 --> 0:17:16.160 cash and into the year. This is a stunning report. 0:17:16.280 --> 0:17:21.480 It completely refutes the gloom crew. Does the FED respond 0:17:21.520 --> 0:17:23.520 to it or do they do what they genetically do, 0:17:23.600 --> 0:17:26.919 which is just by time they buy time? They are 0:17:27.040 --> 0:17:29.840 on hold indefinitely right now. I mean, you would need 0:17:29.880 --> 0:17:31.960 to see five or ten of these reports. You need 0:17:32.000 --> 0:17:34.040 to see the stock market up another twenty percent. You 0:17:34.040 --> 0:17:36.600 need to see inflation above two Is that feasible? You're 0:17:36.640 --> 0:17:39.320 a bond guy, I'm gonna ask you that is dividend 0:17:39.359 --> 0:17:42.680 growth a proxy for the yield the coupon I can't 0:17:42.720 --> 0:17:45.280 get Let me extend that forward here in the time 0:17:45.280 --> 0:17:47.679 we've got, We're gonna keep you through the hour. This 0:17:47.720 --> 0:17:51.280 is so important, Michael. Do you shift with this report 0:17:51.400 --> 0:17:54.400 from a two thousand and twenty view of clipping up 0:17:54.440 --> 0:17:57.919 coupon two back to back years a total return pop 0:17:58.720 --> 0:18:01.680 you know, in ah in and fixed income. I don't 0:18:01.680 --> 0:18:04.080 think you're gonna see anywhere near the total returns we 0:18:04.119 --> 0:18:06.320 had this year. But can I look for any kind 0:18:06.359 --> 0:18:08.959 of game with coupon? You can? You can clip your 0:18:08.960 --> 0:18:11.440 coupon in two thousand twenty, I think, I think the 0:18:11.480 --> 0:18:13.280 long end of the curve, and we've even seen it today, 0:18:13.320 --> 0:18:17.800 the thirty years barely moving today. It's a bear flatten 0:18:17.880 --> 0:18:20.359 or the front end is bear in the bear flatteners. 0:18:20.560 --> 0:18:23.600 So the two year note is rising in yield today 0:18:23.880 --> 0:18:26.480 because the markets before this number, it was actually pricing 0:18:26.520 --> 0:18:29.679 in a small probability of a cut next year, and 0:18:29.720 --> 0:18:31.520 that's being taken out of the mark. Can you stay 0:18:31.560 --> 0:18:34.840 with us, He's coming to TV with me, He's going 0:18:34.880 --> 0:18:36.800 to TV with you. He has a few more minutes. 0:18:37.560 --> 0:18:42.000 I'm going to let you have about ninety more seconds worked. 0:18:42.680 --> 0:18:44.879 I've got I've forgot worked. That's good to do. Michael 0:18:44.880 --> 0:18:47.000 Collins was a PGM, and we thank him for being 0:18:47.000 --> 0:19:02.560 with this. We areing. Uh, the gains get extended as 0:19:02.640 --> 0:19:06.120 the US markets open on the heels of that blockbuster jobs. 0:19:06.160 --> 0:19:08.800 There are two hundred and sixties six thousand jobs added 0:19:09.359 --> 0:19:12.800 well passed expectations joining US now. Tiffany Wilding pimpco U 0:19:12.880 --> 0:19:15.320 S economists. Tiffany, can you use as a sense of 0:19:15.600 --> 0:19:17.720 just how big of a surprise this was to the 0:19:17.800 --> 0:19:20.679 upside when it comes to the job's numbers. Yeah, well, 0:19:20.720 --> 0:19:23.840 thanks for having me. Well, I think, you know, interestingly, 0:19:23.960 --> 0:19:26.680 the so Bloomberg obviously has a panel of economists. I 0:19:26.680 --> 0:19:29.320 think there's maybe a hundred and seventy eight economists on 0:19:29.359 --> 0:19:33.159 that panel. Um that that has that that present forecasts 0:19:33.240 --> 0:19:36.119 for each employment report, and and this report was above 0:19:36.400 --> 0:19:39.760 every one of those economists forecasts on the underlying panel. 0:19:40.080 --> 0:19:42.080 So that doesn't happen very frequently. I think I can 0:19:42.119 --> 0:19:44.399 only remember, you know, maybe one other time within the 0:19:44.480 --> 0:19:46.960 last several years that that's happened. So, I mean, certainly 0:19:47.000 --> 0:19:49.639 this isn't an important report, you know. Um, you know, 0:19:50.040 --> 0:19:52.440 I think there's some some interesting things going on underlying 0:19:52.440 --> 0:19:55.760 the report as well. Um, you know, obviously you had 0:19:55.800 --> 0:19:59.399 some noise because we had a strike at GM plants 0:19:59.440 --> 0:20:02.320 that um you know, that happened in October. That was resolved, 0:20:02.359 --> 0:20:05.040 so people came back to work in November. But even 0:20:05.040 --> 0:20:09.000 if you exclude those around forty to fifty workers that 0:20:09.040 --> 0:20:10.760 were coming back to work, this is still a very 0:20:10.800 --> 0:20:14.480 strong report. Yes, it really was, Tiffany, And I think 0:20:14.480 --> 0:20:16.639 the markets are reflecting that. What is your sense that's 0:20:16.680 --> 0:20:20.000 really driving this? Are these what types of jobs are 0:20:20.119 --> 0:20:24.760 being created at this late stage in the cycle. Yeah, 0:20:24.880 --> 0:20:26.639 I mean so kind of you know, again, we like 0:20:26.720 --> 0:20:29.200 to look at um, you know, any any given report 0:20:29.200 --> 0:20:30.679 obviously as noisy as we like to look at the 0:20:30.680 --> 0:20:34.000 given trends. So what you're seeing is an interesting bifurcation 0:20:34.080 --> 0:20:38.960 I think in in services versus good sector jobs. You know, 0:20:39.000 --> 0:20:42.000 so excluding the kind of the GM you know, sort 0:20:42.000 --> 0:20:44.960 of one off factors if you will, goods, uh, good 0:20:45.040 --> 0:20:48.000 sector employment has actually been decelerating this year, and that's 0:20:48.000 --> 0:20:51.479 you know, manufacturing, construction, other sectors that are related to that, 0:20:51.560 --> 0:20:54.720 like trade and transport. But on the other side, services, 0:20:54.800 --> 0:20:57.600 which looked earlier in the year like it was decelerating 0:20:57.680 --> 0:21:00.679 has actually picked up more recently, um. And and this 0:21:00.760 --> 0:21:03.880 report healthcare has was really strong. Health care sector has 0:21:03.880 --> 0:21:05.920 been really strong, you know. And I think the important 0:21:05.960 --> 0:21:08.520 thing to remember about the services sector is that that's 0:21:08.520 --> 0:21:11.200 a sector that really economists look at in the employment 0:21:11.200 --> 0:21:14.160 report because most of the other economic data that we get, 0:21:14.160 --> 0:21:16.840 at least high frequency economic data is really geared towards 0:21:16.880 --> 0:21:19.000 the good side of the US economy, you know, So 0:21:19.080 --> 0:21:21.080 we tend to get service sector data, you know, with 0:21:21.119 --> 0:21:23.600 the lag other than the employment report, you know. So 0:21:23.640 --> 0:21:26.239 it's really good news to see service sector hiring UM 0:21:26.280 --> 0:21:28.680 kind of pick up after dipping earlier this year. Michael 0:21:28.720 --> 0:21:30.840 Collins from Pigeon was in here earlier, and he was 0:21:30.880 --> 0:21:35.200 talking about how the type of jobs getting added leaves 0:21:35.359 --> 0:21:37.880 something to be desired because the job gains have really 0:21:37.880 --> 0:21:40.760 been made on the lower paying end of the spectrum. 0:21:41.000 --> 0:21:42.640