WEBVTT - Bloomberg Surveillance TV: May 10, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.439 with Lisa Bromwitz and am Marie Hordern. Join us each 0:00:18.520 --> 0:00:21.400 day for insight from the best in markets, economics, and 0:00:21.440 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.800 --> 0:00:27.440 are live on Bloomberg Television weekday mornings from six to 0:00:27.520 --> 0:00:31.040 nine am Eastern. Subscribe to the podcast on Apple, Spotify 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.520 --> 0:00:37.000 Bloomberg Terminal and the Bloomberg Business app. Ana Stagia joins 0:00:37.080 --> 0:00:39.319 us now for more, Anna Stagia, Can we start by 0:00:39.320 --> 0:00:41.440 talking about the setup going into next week with some 0:00:41.479 --> 0:00:44.760 big data points on deck, including CPI and retail sales. 0:00:44.800 --> 0:00:45.680 Can you walk us through that? 0:00:47.040 --> 0:00:47.320 Sure? 0:00:47.440 --> 0:00:49.319 Well, good morning, John, and first of all, I want 0:00:49.320 --> 0:00:53.440 to comment on those bad news conversation going into next week. 0:00:53.520 --> 0:00:56.160 I don't actually think we have much in terms of 0:00:56.200 --> 0:00:58.840 bad news. You know, we had slightly weaker G to 0:00:58.880 --> 0:01:01.040 Pree report, but if you look underneath the hood, we 0:01:01.120 --> 0:01:05.000 actually have a very strong core demand in the economy. 0:01:05.280 --> 0:01:07.800 When you look at the real time consumer data, it's 0:01:07.800 --> 0:01:11.000 actually improving from earlier in the year, and then if 0:01:11.000 --> 0:01:13.760 you look at the manufacturing SURVEYCE, maybe they disappoint a 0:01:13.840 --> 0:01:16.319 little bit on a one month basis, but I still 0:01:16.360 --> 0:01:18.559 look at the inventory levels and I think they're low 0:01:18.720 --> 0:01:21.959 enough to start to jump start a restocking cycle. So 0:01:22.000 --> 0:01:24.360 I think the setup going into next week, the CPI 0:01:24.480 --> 0:01:27.160 report next week, and then Nvidia the week after, I 0:01:27.160 --> 0:01:30.120 think the setup is fairly strong from the growth perspective. 0:01:30.600 --> 0:01:33.720 And you know, in terms of inflation, you know, we 0:01:33.720 --> 0:01:36.600 were waiting for the last mile of inflation. Guess what 0:01:36.800 --> 0:01:39.920 it's here, it's upon us. We've managed to go from 0:01:40.000 --> 0:01:43.160 five point eight percent CPI a year ago to now 0:01:43.160 --> 0:01:46.080 hopefully three point eight percent or below this year, So 0:01:46.120 --> 0:01:49.160 that's almost two percent points of improvement. And you know, 0:01:49.200 --> 0:01:51.440 if you look at the core PC metric, it's two 0:01:51.440 --> 0:01:54.720 point eight percent, so that's a two handle. So I 0:01:54.800 --> 0:01:57.520 think we are in that last mile and that's actually 0:01:57.600 --> 0:01:59.120 positive development and a sage. 0:01:59.200 --> 0:02:01.360 You sound like someone who would be very comfortable being 0:02:01.400 --> 0:02:03.320 a bull in this equity market right now we're past 0:02:03.360 --> 0:02:04.960 fifty two hundred. Can you keep buying? 0:02:06.520 --> 0:02:06.840 Yes? 0:02:07.240 --> 0:02:10.280 I can't. And obviously the risk reward was better when 0:02:10.320 --> 0:02:13.160 we were closer to five thousand, and that's why we 0:02:13.160 --> 0:02:16.240 were saying that we should be adding to allocations if 0:02:16.280 --> 0:02:18.680 you're underweight relative strategic ones. 0:02:18.880 --> 0:02:19.760 But still, if. 0:02:19.720 --> 0:02:22.120 I look ahead, and if I look at the current multiple, 0:02:22.200 --> 0:02:24.880 which I think can be sustained as long as this 0:02:24.919 --> 0:02:27.880 economic environment is sustained, and if I apply that to 0:02:27.960 --> 0:02:30.360 two hundred and seventy eight dollars in SMP five hundred 0:02:30.400 --> 0:02:33.880 earnings for next year, that gets me to an imply 0:02:33.960 --> 0:02:36.840 price target of fifty four hundred on the SMP. I 0:02:36.840 --> 0:02:39.519 think that's the base case scenario, and so I do 0:02:39.600 --> 0:02:42.440 think stocks are worth being in and we're staying for 0:02:43.080 --> 0:02:45.280 and you know, maybe the upside to fifty four hundred 0:02:45.400 --> 0:02:47.959 is not all that great, but that's for the SMP. 0:02:48.120 --> 0:02:51.040 And I think you can find pockets of opportunity within 0:02:51.080 --> 0:02:54.680 the market that should be able to outperform and stage. 0:02:54.680 --> 0:02:55.400 It's Jim Bianco. 0:02:55.400 --> 0:02:57.160 I want to ask you about the bond market. We 0:02:57.240 --> 0:02:59.440 started the year at the tenure yield at around three 0:02:59.480 --> 0:03:02.120 point nine percent. We got as high as four point 0:03:02.160 --> 0:03:04.320 seven percent a couple of weeks ago. We're around four 0:03:04.320 --> 0:03:07.360 and a half now. Set uptrend going to continue. Do 0:03:07.440 --> 0:03:09.440 you think or do you think we're kind of finding 0:03:09.480 --> 0:03:10.640 a high yield. 0:03:10.400 --> 0:03:10.880 For the year. 0:03:12.240 --> 0:03:14.000 Yeah, I think thanks for the question, Jim, and I 0:03:14.040 --> 0:03:18.040 think for now we have sufficiently priced in the new reality, 0:03:18.400 --> 0:03:22.480 which is growth that is remaining pretty robust, which is 0:03:22.520 --> 0:03:25.600 inflation expectations that have picked up, and of course the 0:03:25.600 --> 0:03:29.000 central bank policy which apparently may not have much in 0:03:29.080 --> 0:03:31.280 terms of rate cuts this year. So I think Jim 0:03:31.360 --> 0:03:35.040 Thatapp moved to four point seven that sufficiently reflected that. 0:03:35.280 --> 0:03:37.840 And when we look at the imply fair value in 0:03:37.920 --> 0:03:41.000 a ten year based on some of the models out there, 0:03:41.080 --> 0:03:43.720 relative to where the ten year is today, it is 0:03:43.800 --> 0:03:47.000 trading above some of those fair value models. So I 0:03:47.080 --> 0:03:51.520 do actually think that that's what gives me more optimism 0:03:51.720 --> 0:03:54.920 on the equity market, is if the tenure can pause 0:03:54.960 --> 0:03:59.360 around these current levels, then that's less drag on valuations 0:03:59.360 --> 0:04:00.160 for equities. 0:04:00.400 --> 0:04:02.480 Do you think that the FED is going to move 0:04:02.560 --> 0:04:05.320 this year and would that change your outlook a lot 0:04:05.400 --> 0:04:06.280 if they were to move. 0:04:07.920 --> 0:04:11.680 Look, I do think the FED will likely move once, 0:04:11.880 --> 0:04:14.560 maybe twice this year, and obviously that has to be 0:04:14.680 --> 0:04:18.360 later in the year. Look, the FED, I think realizes 0:04:18.480 --> 0:04:22.200 that they solve what they could solve, which is slowing 0:04:22.240 --> 0:04:25.479 down demand in the interest rates sensitive parts of the economy. 0:04:25.720 --> 0:04:29.120 What the FED cannot solve is the supply of labor 0:04:29.480 --> 0:04:31.800 and the supply of housing. And when you look at 0:04:31.839 --> 0:04:35.279 inflation today, what's really making it sticky. It's the fact 0:04:35.320 --> 0:04:37.760 that wages are still rising and the fact that there's 0:04:37.800 --> 0:04:41.479 a shortage of workers. And I'm in Miami this week 0:04:41.600 --> 0:04:44.039 and apparently the unemployment rate in Miami is one point 0:04:44.160 --> 0:04:47.640 nine percent. So talk about a lot of demand and 0:04:47.800 --> 0:04:51.320 lack of lack of labor. The FED can't really solve that. 0:04:51.720 --> 0:04:54.400 You know, the FED can't also solve the shortage of 0:04:54.480 --> 0:04:57.480 housing and the underbuilding that we've had in the economy 0:04:57.720 --> 0:05:00.440 of housing over the last ten years. They could slowed 0:05:00.480 --> 0:05:02.719 the demand, and they have done that, but they can't 0:05:02.800 --> 0:05:06.400 quickly turn on the supply spicket. So I think having 0:05:06.440 --> 0:05:10.799 this realization is the reason why the FED will likely 0:05:10.880 --> 0:05:14.080 cut interest rates, because they've done a lot and certain 0:05:14.120 --> 0:05:17.680 parts of the economy, certain pockets are certainly feeling the strain, 0:05:17.960 --> 0:05:21.120 which is commercial real estate, especially in office and of 0:05:21.160 --> 0:05:23.680 course that relates to the regional banks as well. So 0:05:23.839 --> 0:05:26.760 I do think, you know, if inflation continues to be 0:05:27.400 --> 0:05:30.240 somewhere in the two to three percent range, as we 0:05:30.320 --> 0:05:32.040 move through the year, they should cut rates. 0:05:32.120 --> 0:05:34.359 Anastacia, you've been constructive for a while. You've had a 0:05:34.400 --> 0:05:36.360 bus to buy. I remember you called the pull back 0:05:36.400 --> 0:05:38.960 in April a better entry point. Clearly, based on the 0:05:39.040 --> 0:05:41.200 last few weeks, you've been right. Could you tell us 0:05:41.240 --> 0:05:44.279 how independent your market call is from your FED code. 0:05:46.279 --> 0:05:50.200 It's fairly independent, Jonathan. When we wrote the outlook for 0:05:50.279 --> 0:05:54.839 this year, we did expect rate cuts, but at the 0:05:54.880 --> 0:05:57.080 same time, we said, what if the FED doesn't cut 0:05:57.120 --> 0:06:00.040 interest rates? And the conclusion was, it is still the 0:06:00.279 --> 0:06:03.360 equity market that's worth staying in and worth being in. 0:06:03.839 --> 0:06:06.400 And the reason we said that was because of the 0:06:06.400 --> 0:06:09.720 growth resilience that we were expecting. You know, there's this 0:06:09.880 --> 0:06:14.640 notion of the US exceptionalism, of the US economic exceptionalism, 0:06:14.960 --> 0:06:18.200 and it is so true because this economy is not 0:06:18.240 --> 0:06:21.320 all that it interest rates sensitive. And in fact, when 0:06:21.360 --> 0:06:24.960 you look at the consumer, what we pay in terms 0:06:24.960 --> 0:06:28.360 of mortgage has not actually reset higher because only five 0:06:28.400 --> 0:06:31.640 percent of mortgages are a floating rate, and yet the 0:06:31.680 --> 0:06:34.479 amount of income that we earn by parking the cash 0:06:34.480 --> 0:06:37.800 that we had in a money market account is quite significant. 0:06:37.839 --> 0:06:41.560 It's a significant pickup. So this is why, you know, 0:06:42.360 --> 0:06:46.480 we thought that the consumer can handle five percent interest 0:06:46.560 --> 0:06:49.840 rates as they have supporting the economy. And that's why, 0:06:49.880 --> 0:06:53.000 even if the FAT doesn't cut rates, the economic backdrop 0:06:53.000 --> 0:06:57.600 should support equity valuations and equity earnings, of course. 0:06:57.440 --> 0:06:59.520 And so far it has. Anaesthice, you've been Great's got 0:06:59.560 --> 0:07:11.800 to catch up and a station there please to say 0:07:11.800 --> 0:07:14.840 that joining us now is nil data of renmac neil. 0:07:14.840 --> 0:07:16.480 I've been looking forward to. This was written a note 0:07:16.520 --> 0:07:19.640 of yours earlier this week. The labor market rebalancing has 0:07:19.720 --> 0:07:22.600 been achieved. Can you walk us through just how we've 0:07:22.600 --> 0:07:22.920 done that? 0:07:25.040 --> 0:07:29.320 Well, we've you know, job openings have come down, job openings, 0:07:29.320 --> 0:07:33.880 remember our measure of excess labor demand with very little 0:07:34.280 --> 0:07:37.000 upward movement in the unemployment. Right now, the unemployment rate 0:07:37.040 --> 0:07:41.160 has gone up, but you know it does look for 0:07:41.280 --> 0:07:43.760 the time being that the FED was kind of able 0:07:43.800 --> 0:07:50.200 to successfully, you know, trim excess labor demand without driving. 0:07:50.000 --> 0:07:55.320 Up unemployment all that much. And I think what's. 0:07:55.160 --> 0:07:58.040 Important now, John, is that, yes, the e CI which 0:07:58.080 --> 0:08:01.400 you mentioned earlier did pop in the first port. But 0:08:01.560 --> 0:08:04.080 the underlying you know, sort of drivers of that data 0:08:04.720 --> 0:08:08.120 are the average hourly earnings for non supervisory workers, and 0:08:08.160 --> 0:08:10.480 we saw in April that that's cooling. Over the last 0:08:10.560 --> 0:08:14.480 three months, average hourly earnings growth for non supervisory workers 0:08:14.480 --> 0:08:17.560 are barely up three percent at an annual rate. And 0:08:17.680 --> 0:08:20.760 given the growth and productivity that we've seen, even if 0:08:20.760 --> 0:08:23.680 you assume it's like half that, so let's say one 0:08:23.760 --> 0:08:27.440 to one and a half percent productivity, you're talking about 0:08:28.360 --> 0:08:31.240 wage growth that is broadly consistent with the feds underlying 0:08:31.240 --> 0:08:33.880 inflation objectives, which is why unit labor costs I think 0:08:34.040 --> 0:08:34.800 have been cooling. 0:08:35.200 --> 0:08:36.800 So where's the inflation coming from? 0:08:36.880 --> 0:08:39.960 I mean that to me is the big story here 0:08:40.040 --> 0:08:42.920 is if you ask someone why did inflation perk up 0:08:42.960 --> 0:08:45.240 in the first quarter, they can't really point to a 0:08:45.280 --> 0:08:46.560 fundamental reason for that. 0:08:47.360 --> 0:08:49.480 Is it because expectations are perking back up? 0:08:49.520 --> 0:08:49.600 No? 0:08:49.840 --> 0:08:52.080 Is it because the labor markets are reheating. 0:08:52.200 --> 0:08:52.280 No? 0:08:52.559 --> 0:08:56.280 Is it because the dollars weakening, driving up, you know, 0:08:56.600 --> 0:08:59.040 pushing up the prices for imported consumer goods. No, the 0:08:59.080 --> 0:09:02.280 dollars generally stronger all year. So you can point to 0:09:02.360 --> 0:09:05.440 things like, well, look, financial services inflation picked up, and 0:09:05.480 --> 0:09:08.000 healthcare services and all motor vehicle insurance. Sort of the 0:09:08.040 --> 0:09:11.439 idiosyncratic factors I think it's important for people to kind 0:09:11.480 --> 0:09:14.520 of go to first principles here, and you know, this 0:09:14.640 --> 0:09:18.120 is why I think the case for weaker inflation is 0:09:18.160 --> 0:09:19.080 still quite strong. 0:09:19.400 --> 0:09:21.079 Well, two things to impact their First of you on 0:09:21.120 --> 0:09:22.719 the labor market. Let's just build on that for a 0:09:22.720 --> 0:09:24.520 little bit if we can kneil. So this is the 0:09:24.559 --> 0:09:26.920 line from City and Andrew Hanhorst and the team. They 0:09:26.920 --> 0:09:29.360 say evidence is building that the labor market is poised 0:09:29.640 --> 0:09:33.080 for sharp weakening. You use the word cooling. Can you 0:09:33.120 --> 0:09:36.400 help us understand the difference between a welcome calling in 0:09:36.440 --> 0:09:39.599 the labor market and a prospect of an unwelcome deterioration. 0:09:41.920 --> 0:09:44.280 Well, what you want to do is look for discontinuities 0:09:44.320 --> 0:09:46.959 in the data. That's that Alan Greenspan sort of line. 0:09:47.040 --> 0:09:48.760 Right when you have a bunch of two hundred thousand 0:09:48.840 --> 0:09:50.320 job numbers and then all of a sudden you have 0:09:50.360 --> 0:09:52.199 a fifty, then he should be worried. But if you're 0:09:52.240 --> 0:09:54.000 talking about where we are right now, I mean I 0:09:54.000 --> 0:09:57.240 don't really see much evidence for that. You know, you 0:09:57.280 --> 0:10:01.160 mentioned jobless claims, even if if you assume that number 0:10:01.200 --> 0:10:03.920 is legit, which it's not because it was mostly driven 0:10:03.960 --> 0:10:07.240 by one state, New York the break even level was 0:10:07.280 --> 0:10:09.040 still around two hundred and sixty thousand. 0:10:09.040 --> 0:10:09.720 If you look at the. 0:10:11.520 --> 0:10:14.160 Separations and hires data from Jolts, you can kind of 0:10:14.200 --> 0:10:17.800 back out what break even initial claims are. So you're 0:10:17.840 --> 0:10:20.520 still talking about continued jobs growth, you know, in a 0:10:20.520 --> 0:10:22.560 reign of one hundred and seventy five to two hundred thousand. 0:10:22.679 --> 0:10:25.080 So if you see one hundred and seventy five to 0:10:25.080 --> 0:10:28.559 two hundred thousand jobs and you know, slowing wage growth 0:10:28.600 --> 0:10:30.480 towards you know, let's say three and a half percent, 0:10:30.960 --> 0:10:34.800 that would be cooling. If you see significantly worse than that, 0:10:35.600 --> 0:10:39.199 then you'd be worried. But jobs are something that come 0:10:39.280 --> 0:10:42.559 out of growth, right, Jobs don't necessarily go into growth, 0:10:42.640 --> 0:10:45.920 and if the economy is growing, employment will follow. And 0:10:45.960 --> 0:10:48.760 we know that the economy is growing. You know, if 0:10:48.800 --> 0:10:51.000 you look at underlying domestic demand, I mean, it looks 0:10:51.040 --> 0:10:53.040 like it's close to three percent in the first half 0:10:53.040 --> 0:10:55.280 of the year, So I think that's that doesn't leave 0:10:55.320 --> 0:10:59.160 me that concerned about sort of discontinuities in a labor market. 0:10:59.200 --> 0:11:01.439 Well, neil to that point, and you know, earnings of 0:11:01.480 --> 0:11:04.199 backed up everything you've said. We've seen huge capex coming 0:11:04.200 --> 0:11:07.520 from companies to what could possibly drive a cooling? 0:11:07.559 --> 0:11:12.960 Then well, what could drive a cooling in the labor market? Well, 0:11:13.000 --> 0:11:15.520 I just think it's that turnovers is coming down. I mean, 0:11:15.559 --> 0:11:19.360 that's that's really what it is. You know, there's there's 0:11:19.400 --> 0:11:22.320 been a pick up in labor supply and there's been 0:11:22.360 --> 0:11:24.880 less turnover in the job market, and so I think 0:11:24.960 --> 0:11:26.960 those things basically. 0:11:26.440 --> 0:11:29.760 Tell you and come combined for you know, a moderation. 0:11:29.960 --> 0:11:30.480 I mean, we're. 0:11:30.360 --> 0:11:33.520 Basically hitting equilibrium now in the labor market, and I 0:11:33.520 --> 0:11:35.480 think that's that's the bigger story. 0:11:35.559 --> 0:11:38.720 And at the same time, I mean, the economy isn't 0:11:38.559 --> 0:11:41.800 getting away from the FED. Yes, you mentioned capex. 0:11:41.840 --> 0:11:43.959 Capex could be a big driver of growth this year, 0:11:44.000 --> 0:11:45.800 but there are other areas that will probably cool. 0:11:45.880 --> 0:11:47.800 I mean, for example, residential investment. 0:11:47.840 --> 0:11:50.360 I mean, that was a very strong area in Q one, 0:11:50.440 --> 0:11:52.400 but given the backup in rates that we've seen, it's 0:11:52.440 --> 0:11:55.040 unlikely that that repeats over the next couple of quarters. 0:11:55.640 --> 0:11:58.600 And you should see some rebalancing and consumer spending, right 0:11:58.640 --> 0:12:02.160 because a lot of the up movement in consumption and 0:12:02.200 --> 0:12:04.480 we have retail sales next week, a lot of that 0:12:04.520 --> 0:12:06.040 in the last two months has been driven by a 0:12:06.080 --> 0:12:09.040 decline of the savings rate, It's hard to see that lasting. 0:12:09.160 --> 0:12:11.960 So I'd expect a better sort of more balanced mix 0:12:12.040 --> 0:12:14.400 to growth going forward. So you know, I don't think 0:12:14.400 --> 0:12:16.680 growth is getting away from us. But you know, again, 0:12:16.840 --> 0:12:20.800 it's not something I'm lighting my hair on fire for. 0:12:21.040 --> 0:12:23.040 I mean, it's sort of you're talking about two and 0:12:23.080 --> 0:12:25.719 a half percent growth, steady job of growth, and an 0:12:25.720 --> 0:12:30.400 ongoing sort of disinflation trend given the improvement and supply conditions. 0:12:30.440 --> 0:12:30.600 Yeah. 0:12:30.679 --> 0:12:34.720 Right, But again, your words that you're using neil normalized, 0:12:35.040 --> 0:12:38.600 more balance, getting back to averages. Is that a good 0:12:38.679 --> 0:12:40.000 enough reason for the Fed to cut? 0:12:42.280 --> 0:12:46.120 Absolutely, because ultimately they believe that they control inflation. 0:12:46.280 --> 0:12:47.760 So if inflation slows more. 0:12:47.720 --> 0:12:50.920 Quickly than they think over the next several months, then 0:12:50.960 --> 0:12:53.160 they should be cutting because they wouldn't want to tolerate 0:12:53.240 --> 0:12:58.480 an even higher rate of real rates. So you have 0:12:58.520 --> 0:13:00.439 to kind of recalibrate policy just to. 0:13:00.400 --> 0:13:03.000 Stay even should So his will what do you think 0:13:03.000 --> 0:13:03.480 they will do? 0:13:04.760 --> 0:13:07.200 I think they will cut. They will cut. 0:13:07.960 --> 0:13:09.880 At the end of the year, we will still be 0:13:09.960 --> 0:13:12.960 talking about how much is the economy growing and how 0:13:12.960 --> 0:13:14.640 many times has the Fed been cutting. 0:13:16.520 --> 0:13:18.840 I think the case for cuts is still quite strong. 0:13:19.360 --> 0:13:21.120 I think. I put it to you this way. I 0:13:21.160 --> 0:13:22.480 think they go at least once. 0:13:23.000 --> 0:13:25.120 I think two is a good baseline, and I think 0:13:25.120 --> 0:13:27.640 there's an option for three if we're right about how 0:13:27.720 --> 0:13:29.920 quickly inflation slows over the next two quarters. 0:13:29.920 --> 0:13:31.880 I think there's an argument that that's basically what we're 0:13:31.880 --> 0:13:34.120 hearing from Fed officials as well. Neil, Now, can you 0:13:34.120 --> 0:13:36.120 help me with something I'm wrestling with? And that's this 0:13:36.200 --> 0:13:39.600 supply side story in the labor market. Tons has been said, 0:13:39.880 --> 0:13:42.319 tons have been said about the amount of immigration that's 0:13:42.360 --> 0:13:44.720 coming across the southern border. How that's allowed us to 0:13:44.760 --> 0:13:48.480 have this really strong payrolls growth without the corresponding pickup 0:13:48.720 --> 0:13:51.920 in wages. Noil, based on basic communication we've had over 0:13:51.960 --> 0:13:55.000 the last week or so, apparently border encounters have dropped 0:13:55.160 --> 0:13:57.719 and dropped by quite a bit. How can we sort 0:13:57.720 --> 0:13:59.600 of anticipate the data in the months to come based 0:13:59.640 --> 0:13:59.920 on that? 0:14:00.120 --> 0:14:03.360 If it's so, I mean, I don't think that. 0:14:03.480 --> 0:14:06.199 I think that that's sort of the immigration story is 0:14:06.280 --> 0:14:07.640 kind of a rationale. 0:14:07.160 --> 0:14:08.480 That people are working back to. 0:14:08.640 --> 0:14:11.400 It's like, oh, why why has the labor market slopes 0:14:11.720 --> 0:14:13.560 cooled off a bit? Well, you know, here's this big 0:14:13.600 --> 0:14:16.319 pick up in labor force growth. I'm not so sure 0:14:16.360 --> 0:14:17.520 that's the case. 0:14:17.559 --> 0:14:19.400 I mean, I think, you know, unit. 0:14:19.280 --> 0:14:22.080 Labor costs have moderated because you know, people are getting 0:14:22.080 --> 0:14:23.960 a little bit more productive in the jobs that they're 0:14:24.120 --> 0:14:26.920 they're in. So we've seen a picking up of labor 0:14:27.000 --> 0:14:30.200 of labor productivity. So I think that's a that's a 0:14:30.200 --> 0:14:32.800 more important driver. And to your point, I mean, I'm 0:14:32.800 --> 0:14:35.360 not entirely convinced yet that this is like a big, 0:14:36.440 --> 0:14:38.440 you know, secular increase in immigration. 0:14:38.520 --> 0:14:40.200 I mean, it could just be so sort of one 0:14:40.240 --> 0:14:42.120 off dynamics related to the. 0:14:43.560 --> 0:14:45.560 You know, to the opening up of the visa approval 0:14:45.600 --> 0:14:47.640 process following the pandemic, right, so you had a lot 0:14:47.680 --> 0:14:49.480 of people that were kind of on the sidelines, then 0:14:49.480 --> 0:14:53.560 they got their visas finally approved as things reopened and 0:14:53.560 --> 0:14:57.000 and that, and that may well slow down. So again, 0:14:57.080 --> 0:15:01.400 I mean it's something closer to equilibrium. But I think 0:15:01.480 --> 0:15:04.640 that people are getting more productive in their roles, right, 0:15:04.720 --> 0:15:07.240 And I think that's what's important. You aren't seeing quits 0:15:07.280 --> 0:15:11.080 go up as much, and that means that people are 0:15:11.080 --> 0:15:14.000 staying in their jobs longer. And if they're staying in 0:15:14.040 --> 0:15:17.680 their jobs longer, presumably they'll get more productive in those roles. 0:15:18.080 --> 0:15:20.400 No one of the things that people use that that 0:15:20.480 --> 0:15:22.840 immigration piece to say this is an argument that calm 0:15:22.880 --> 0:15:25.520 pickering uses basically to say that we are in for 0:15:25.520 --> 0:15:27.960 an inflation spike next year if we get Trump in 0:15:28.000 --> 0:15:30.400 the White House, because you get more curtailed flow of immigrants. 0:15:30.440 --> 0:15:32.840 Given what you're saying, given again this idea of what 0:15:32.840 --> 0:15:34.760 we're seeing as normalization, it was from some of the 0:15:34.840 --> 0:15:38.600 visa processes opening up. Is that not as relevant of 0:15:38.640 --> 0:15:39.240 a fear. 0:15:40.800 --> 0:15:44.000 Well, Shuretz, I mean, I think worrying about inflation if 0:15:44.000 --> 0:15:46.000 you have I mean, if you know with respect to 0:15:46.040 --> 0:15:48.040 the election, I think you know who knows what the 0:15:48.080 --> 0:15:48.720 outcome is. 0:15:48.680 --> 0:15:49.120 Going to be. 0:15:49.960 --> 0:15:52.520 But I do think it's fair to say that if 0:15:53.480 --> 0:15:56.840 Trump were to win, former President Trump or to win, 0:15:57.480 --> 0:16:00.000 then there's a probably there's a higher. 0:15:59.760 --> 0:16:02.000 Likely good then that you have a unified government. 0:16:02.240 --> 0:16:04.640 And we know that whenever you have a new unified 0:16:04.680 --> 0:16:07.480 government coming out of the elections, they're always going to 0:16:07.480 --> 0:16:08.000 do something. 0:16:08.040 --> 0:16:09.720 It's not like they're going to get into office and. 0:16:09.680 --> 0:16:12.800 Say, hey, everyone, we're going to raise the retirement age 0:16:13.000 --> 0:16:16.520 and cut spending. They're going to want to do something 0:16:16.520 --> 0:16:20.600 that makes people feel good and whether that's uh, you know, 0:16:20.680 --> 0:16:23.200 I think they'll probably lead with something like that tax 0:16:23.280 --> 0:16:27.320 cut spending that'll be inflationary, so you know, to the 0:16:27.400 --> 0:16:32.840 extent that there's a restrictive immigration policy that comes about it, 0:16:33.320 --> 0:16:34.040 it'll add. 0:16:33.800 --> 0:16:36.960 To that even more interested. Neil enjoyed this. Thank you, sir. 0:16:37.000 --> 0:16:38.520 I know you've got thoughts on Gucci. Will do that 0:16:38.520 --> 0:16:51.360 another time. No, DA's a Renmac No, thank you. Oliver 0:16:51.480 --> 0:16:54.440 Shannon TV Cowen joined us. Now for more, Oliver, Let's 0:16:54.480 --> 0:16:55.760 get into that and then we can get to what 0:16:55.800 --> 0:16:58.080 you love, which is luxury sert. Don't worry, we will 0:16:58.120 --> 0:17:00.000 get to that topic in just a moment. Let's look 0:17:00.080 --> 0:17:02.320 add to home Depot and Walmart. What you and the 0:17:02.320 --> 0:17:03.760 team looking for next week. 0:17:04.560 --> 0:17:08.080 We're excited about Walmart, that's our pick. We're more cautious 0:17:08.119 --> 0:17:12.680 and optimistic on target. Walmart is a needs retailer, being 0:17:12.880 --> 0:17:15.800 sixty percent grocery, very helpful in terms of traffic. 0:17:16.080 --> 0:17:17.560 They're also managing. 0:17:17.160 --> 0:17:19.840 Well through this tough time where the consumer really is 0:17:19.920 --> 0:17:22.840 looking for value, very sensitive to price. 0:17:23.359 --> 0:17:24.880 So we're excited about Walmart. 0:17:24.920 --> 0:17:28.679 In addition, Walmart as a technology company, don't forget about 0:17:28.880 --> 0:17:32.520 digital advertising in the marketplace model, and Walmart's getting a 0:17:32.600 --> 0:17:36.679 higher household income customer. For example, you can buy Apple 0:17:36.760 --> 0:17:40.119 Macintosh on the marketplace on the website, as well as 0:17:40.320 --> 0:17:42.240 fragrances like Burberry Goddess. 0:17:42.440 --> 0:17:44.280 So the whole flywheel is working. 0:17:44.680 --> 0:17:47.080 Let's sit on Walmart and let's talk about price and 0:17:47.119 --> 0:17:49.840 pricing power. We've heard from various executives over the last 0:17:49.840 --> 0:17:52.199 few months and maybe they're losing some and that we're 0:17:52.240 --> 0:17:56.000 starting to see some disinflation perhaps even deflation in certain places. 0:17:56.160 --> 0:17:57.639 What do you make of that? What would you expect 0:17:57.640 --> 0:17:58.760 to hear next week? 0:18:00.080 --> 0:18:01.280 That is definitely happening. 0:18:01.320 --> 0:18:03.400 What we have with this new consumer is a consumer 0:18:03.440 --> 0:18:07.439 who's not necessarily very loyal and doesn't want to overpay 0:18:07.560 --> 0:18:11.520 for national brands. What consumers are doing is what we 0:18:11.640 --> 0:18:16.920 call customized moderation value hacking, creating down to private label 0:18:17.040 --> 0:18:19.560 when they want to or need to, and trading up 0:18:19.640 --> 0:18:22.879 very selectively. So that will continue to be a big issue. 0:18:22.880 --> 0:18:26.240 The bottom line is Walmart wants every day low prices. 0:18:26.520 --> 0:18:29.760 They want suppliers to offer low prices too, so that 0:18:29.840 --> 0:18:32.680 the consumer has more money to spend on non food 0:18:32.760 --> 0:18:36.080 and discretionary items. That's still a work in progress in 0:18:36.160 --> 0:18:39.040 terms of the consumer. What's good about the consumer is 0:18:39.080 --> 0:18:42.800 that there's low unemployment and they're still spending power given 0:18:42.840 --> 0:18:45.920 six hundred and seventy billion on the sidelines. What's bad 0:18:45.960 --> 0:18:49.520 about the consumer is that it's still bifurcated with pressure 0:18:49.640 --> 0:18:52.560 at the middle and lower end, in part due to inflation. 0:18:53.280 --> 0:18:57.439 As we look, fundamentally, inflation is getting less bad. However, 0:18:57.560 --> 0:19:01.840 consumer confidence and what the consumer feels is still fairly volatile, 0:19:02.200 --> 0:19:04.919 So mixed signals here. But racing is a hot topic 0:19:04.960 --> 0:19:07.879 because everybody wants low prices oliver. 0:19:07.960 --> 0:19:10.680 Then do you expect, with some of those headwinds you're 0:19:10.720 --> 0:19:13.120 talking about, for it no longer to have the case 0:19:13.160 --> 0:19:16.800 shape that at some point, maybe not the upper echelons 0:19:16.800 --> 0:19:18.919 who will always continue to spend, but for it not 0:19:19.040 --> 0:19:22.000 to just be the lowest end consumer that starts to 0:19:22.000 --> 0:19:23.120 get more price conscious. 0:19:24.600 --> 0:19:27.800 Yeah, I think everybody's getting somewhat priced conscious. We see 0:19:27.960 --> 0:19:31.439 this value hacking consumer, this do it yourself consumer, So 0:19:31.560 --> 0:19:34.800