WEBVTT - Markets, US Economy, And The Supply Chain (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.560 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.720 at Bloomberg dot com slash podcast. All right, let's go 0:00:21.760 --> 0:00:24.120 to a professional here. Let's switch gears. This is it's 0:00:24.160 --> 0:00:27.760 just ugly afterre Matt Stucky, senior portfolio manager for Northwestern Mutual, 0:00:27.840 --> 0:00:31.200 joins us. Matt. The concern this morning to talk this morning. 0:00:31.560 --> 0:00:35.080 The Wall Street chatter this morning is recession. What say you? 0:00:35.200 --> 0:00:38.440 Is that in your model? Well, it certainly in the 0:00:38.479 --> 0:00:41.920 distribution and at that section the distribution has been rising 0:00:41.960 --> 0:00:45.120 over the last few months. Um, growth is rapidly slowing, 0:00:45.400 --> 0:00:48.840 and the potential for a mild recession I think is 0:00:48.920 --> 0:00:51.640 pretty elevated here. Um, you know a couple of data 0:00:51.680 --> 0:00:54.400 points that you know, we would point to that are 0:00:54.400 --> 0:00:57.279 really starting to kind of shine out to us as 0:00:57.320 --> 0:01:00.880 you saw it the last quarter with orange reports from 0:01:01.000 --> 0:01:03.480 you know, the likes of Target and Walmart. We kind 0:01:03.480 --> 0:01:05.160 of wonder what else is going to be spilling over. 0:01:05.400 --> 0:01:07.679 And you know, first and foremost we think it's probably 0:01:07.720 --> 0:01:10.800 housing here just as a reflection of how quickly interest 0:01:10.880 --> 0:01:13.880 rates are rising and what that does to affordability. Um. 0:01:13.880 --> 0:01:17.040 But you what you've seen so far this quarter, which 0:01:17.040 --> 0:01:19.280 I think is really interesting, is just the percentage of 0:01:19.480 --> 0:01:22.520 increase of inventory that's out there in the existing home market, 0:01:23.560 --> 0:01:26.040 and that's being met with with a buyer that's starting 0:01:26.080 --> 0:01:30.280 to uh, really refine out what their what their budgets 0:01:30.280 --> 0:01:33.840 are with the higher interest rate environment, and um, you know, 0:01:33.959 --> 0:01:35.560 somewhat of a bias right going smar right now? So 0:01:35.640 --> 0:01:38.480 housing about a house without even thinking about my budget 0:01:38.760 --> 0:01:41.600 and about how terrified every day but hopefully locked in 0:01:41.680 --> 0:01:45.360 that interest rate exactly. I was like three, I'll pay 0:01:45.360 --> 0:01:50.480 whatever you want. Um. So we've had these um inventory 0:01:50.560 --> 0:01:54.760 build ups at Walmart, at Target, and I hear you 0:01:54.880 --> 0:01:57.360 now saying that we're seeing that in housing as well. 0:01:57.480 --> 0:01:59.600 Does that mean you think inflation is going to roll over? 0:02:02.080 --> 0:02:04.080 I do think that's going to roll over pretty quickly. 0:02:04.240 --> 0:02:06.200 And you know a couple of things, you know, certainly 0:02:06.280 --> 0:02:10.080 the durable goods, the story has been well discussed, and 0:02:10.320 --> 0:02:12.959 inventories they are potting up quickly, which you know inevitably 0:02:13.000 --> 0:02:16.639 leads to discounting that eventually find its way into uh 0:02:16.760 --> 0:02:20.640 inflation obviously. But um, you know, the housing story I 0:02:20.639 --> 0:02:23.120 think hasn't been really discussed much in terms of what 0:02:23.160 --> 0:02:26.000 it means in terms of overall inflation. UM. You know, 0:02:26.000 --> 0:02:28.079 this is it's a stickier part of the inflation story, 0:02:28.639 --> 0:02:31.120 and it moves with a lag and in terms of 0:02:31.160 --> 0:02:34.799 the way excuse me, it finds its way into inflation. UM. 0:02:35.040 --> 0:02:37.000 So you know for the third War, certainly, you know, 0:02:37.240 --> 0:02:40.320 I think it's got upward pressure for for PC as 0:02:40.320 --> 0:02:42.600 well cp I. But you know, as you move into 0:02:42.600 --> 0:02:45.360 the fourth quarter beyond, UM, you know, we don't really 0:02:45.520 --> 0:02:48.400 expect as much up pressure from the happening part of 0:02:48.400 --> 0:02:51.560 the equation as it relates to inflation. UM. So you know, 0:02:51.760 --> 0:02:55.239 between the backup of inventories as well as consumer spending 0:02:55.240 --> 0:02:58.800 shifting away from durable goods and you know pressure coming 0:02:58.840 --> 0:03:02.840 off for um, for housing as we moved throughout this year, 0:03:03.160 --> 0:03:05.600 you do think that there is the potential for inflation 0:03:05.680 --> 0:03:08.040 to to move lower throughout the rest of this year 0:03:08.080 --> 0:03:10.839 and into and it's it's a it's starting to show 0:03:10.919 --> 0:03:13.120 up in terms of what the bond markets expecting the 0:03:13.120 --> 0:03:17.160 Federal Reserve to do you did you didn't notice that, um, 0:03:17.400 --> 0:03:20.440 first quarter traders are certain to price in Fed Reserve cuts, 0:03:20.919 --> 0:03:22.560 which is just you know, obviously a pivot by the 0:03:22.560 --> 0:03:25.880 feder Reserve from a ratching up of interest rates and so, UM, 0:03:26.000 --> 0:03:27.920 it's starting to fall on a line where you know, 0:03:27.960 --> 0:03:30.480 the peak of inflationary pressures in the rear view mirror. Here. 0:03:31.280 --> 0:03:33.600 All right, man, we got the earnings coming up starting 0:03:33.600 --> 0:03:35.600 in about a week or so, the big banks will 0:03:35.640 --> 0:03:37.920 kick it off in earnest here. What are you looking 0:03:37.920 --> 0:03:43.440 for this earning season? You know, UM, it's it's great 0:03:43.440 --> 0:03:45.960 that we get to have banks start things up because 0:03:45.960 --> 0:03:48.680 they touched so many fastest of the economy, from the 0:03:48.680 --> 0:03:51.920 consumer and credit conditions there to what business spending is 0:03:51.960 --> 0:03:54.760 looking like. UM, as well as you know M and 0:03:54.800 --> 0:03:57.760 A activity. A couple of things that really we watch 0:03:57.800 --> 0:04:00.560 out for obviously is is consumer press sure and in 0:04:00.600 --> 0:04:03.480 the form of delinquencies. You would expect those to normalise 0:04:03.760 --> 0:04:07.800 as inflationary pressures have started to strain consumer pujects. UM. 0:04:08.280 --> 0:04:10.760 You know, credit credit performance throughout the last couple of 0:04:10.800 --> 0:04:14.160 years such as been absolutely fantastic. UM. You would expect 0:04:14.200 --> 0:04:16.719 that to normalize would still be pretty healthy here because 0:04:16.760 --> 0:04:20.000 consumers and aggregates still have two trillion worth of access 0:04:20.040 --> 0:04:22.960 liquidity that they didn't have before the pandemic. UM that 0:04:23.000 --> 0:04:26.520 really helps credit performance for for banks UM. You know, 0:04:26.640 --> 0:04:31.560 on the on the expense side, UM, we are wondering 0:04:31.560 --> 0:04:33.520 whether or not you know, banks you could be able 0:04:33.560 --> 0:04:37.680 to start to defend margins UM you know as as 0:04:37.880 --> 0:04:41.240 UM and transition from UH back to more of an 0:04:41.240 --> 0:04:45.480 operating leverage scenario that you know we saw pre pandemic. 0:04:45.640 --> 0:04:48.080 You know, UH, operating leverages been going in the wrong 0:04:48.120 --> 0:04:50.440 direction for the last couple of years and and you know, 0:04:50.480 --> 0:04:53.480 maybe this quarter with rising UH that interesting income as 0:04:53.520 --> 0:04:56.400 well as you know, continued healthy credit performance, operating leverage 0:04:56.480 --> 0:05:00.160 can continue, can continue to be a good out of 0:05:00.160 --> 0:05:01.400 the story. In said of Nago that we've seen the 0:05:01.440 --> 0:05:03.080 last couple of you. By the way, I'm wondering, do 0:05:03.080 --> 0:05:06.480 you have products at Northwestern that you sell the people 0:05:06.520 --> 0:05:08.719 who are just worried about inflation. All they want to 0:05:08.720 --> 0:05:11.560 do is be inflation like a tips thing or or 0:05:11.560 --> 0:05:15.400 an insurance product. Well not, I don't really think we 0:05:15.440 --> 0:05:18.600 have one on the insurance side, but certainly side portfolios 0:05:18.600 --> 0:05:22.440 that we manage UM of you know, public securities. You know, 0:05:22.480 --> 0:05:25.039 we do from time, from time to time build up 0:05:25.560 --> 0:05:28.520 UM inflation protection in their portfolios in the form of tips. 0:05:28.760 --> 0:05:31.279 We took a pretty big step into a TIPS position 0:05:31.920 --> 0:05:36.239 UH in April. We actually exited out earlier out earlier 0:05:36.600 --> 0:05:39.760 in two is we thought we were past the point 0:05:39.760 --> 0:05:42.320 of peak inflation. UM. You know, we we tipped at 0:05:42.360 --> 0:05:44.440 maybe a couple of a few weeks to early because 0:05:44.480 --> 0:05:48.240 in the Russia, Russia Ukraine flare up did occur, unfortunately. 0:05:48.400 --> 0:05:51.960 But you know, even since even since um, you know, 0:05:52.200 --> 0:05:55.960 Russian dated Ukraine, you've seen one year UH inflation break 0:05:56.040 --> 0:05:59.600 evens moved from UM over six percent back down to 0:05:59.640 --> 0:06:02.240 four and app all right, man, we're gonna to have 0:06:02.320 --> 0:06:03.840 to leave it there because of time. But but we'll 0:06:03.880 --> 0:06:06.120 get you back and we'll check in on that. Matt Stucky, 0:06:06.200 --> 0:06:12.800 senior portfolio manager in Northwestern Neutral. Now let me bring 0:06:12.880 --> 0:06:16.480 in my friend Gary Schilling, who's had a long and 0:06:16.760 --> 0:06:22.920 storied career, starting in Fremont, Ohio, then going on to Amherst, 0:06:23.040 --> 0:06:27.080 which is almost as good as Williams and Wesleyan before 0:06:28.240 --> 0:06:33.800 landing at Stanford UM, the Federal Reserve and Mary Lynch etcetera, 0:06:34.720 --> 0:06:38.240 and so forth. Gary, great to have you on the program. Um. 0:06:38.839 --> 0:06:40.760 I was hoping, first of all, we could talk about 0:06:40.760 --> 0:06:43.200 a comparison between the kind of inflation that we're having 0:06:43.680 --> 0:06:46.240 now and the kind of inflation that we had in 0:06:46.360 --> 0:06:49.400 the seventies. A buddy of mine, Neil Grossman and and 0:06:49.520 --> 0:06:54.159 Bill Dudley also have said that the way they're measured 0:06:54.279 --> 0:06:57.160 is different. But if we measured inflation now like we did, 0:06:57.240 --> 0:07:01.240 then it could seem just as bad. What do you think, Well, 0:07:01.360 --> 0:07:04.720 it is a different type of inflation. It's more it's 0:07:04.760 --> 0:07:10.440 more supply. It's more weakness and supply and over abundance 0:07:10.480 --> 0:07:13.160 of demand. But it's a little of both. And the 0:07:13.240 --> 0:07:16.679 way they come together as pushed as push up prices. 0:07:16.800 --> 0:07:19.320 But it makes it a lot coverer for the Fed 0:07:19.400 --> 0:07:21.960 to deal with because the Fed. You know, look what 0:07:22.120 --> 0:07:23.720 what can the Fed do? They can raise the lower 0:07:23.760 --> 0:07:26.880 interest rates, they can buy and sell securities and that's it, 0:07:27.640 --> 0:07:31.840 and that's very good for controlling demand. Um. You know, 0:07:31.920 --> 0:07:35.320 they pull on the string constrict demand. They push on 0:07:35.400 --> 0:07:38.040 the string, not much happens, but they can't do very 0:07:38.120 --> 0:07:41.280 much on the supply side. So the FED is dealing 0:07:41.400 --> 0:07:45.680 with instruments. They're not really appropriate to the current situation, 0:07:46.360 --> 0:07:50.360 but they were so far behind the inflation curve that 0:07:50.480 --> 0:07:53.680 I think they felt just just to preserve their credibility, 0:07:53.760 --> 0:07:56.120 they had to do something. So they are hot and 0:07:56.200 --> 0:07:58.680 heavy at raising rates. And when they go on these 0:07:58.800 --> 0:08:02.200 rate raising campaigns, more times than not, you end up 0:08:02.240 --> 0:08:05.120 with a recession their virgin soft landings in the entire 0:08:05.200 --> 0:08:07.840 post or a period that brings up something that that 0:08:07.960 --> 0:08:09.880 you and I were talking about this weekend, and I 0:08:10.040 --> 0:08:13.840 was really taken to task this morning, um by claiming 0:08:13.880 --> 0:08:17.520 that we're in a recession already. The Atlanta Fed GDP 0:08:17.720 --> 0:08:22.000 now tracker says the second quarter contraction was two point 0:08:22.080 --> 0:08:24.600 one percent, and of course we had a one point 0:08:24.640 --> 0:08:28.559 six percent contraction in Q one. John Riding said, Miller, 0:08:28.600 --> 0:08:30.800 you don't know you're talking about And you basically told 0:08:30.840 --> 0:08:34.520 me the same thing, Um, how will how will we 0:08:34.720 --> 0:08:37.760 know when we're in a recession? We'll know when they 0:08:38.120 --> 0:08:42.520 Nastural Bureau of Economic Research, a private research organization that 0:08:42.960 --> 0:08:46.720 really first uh first mapped out business cycles and started 0:08:46.800 --> 0:08:48.679 them back in the ninet thirties. When they say so, 0:08:49.200 --> 0:08:52.880 no administration, Republican or Democrat, would ever want to declare 0:08:52.880 --> 0:08:55.560 a recession. Oh no, no, they leave that to somebody 0:08:55.600 --> 0:08:58.360 else and v R. And the thing is that they 0:08:58.480 --> 0:09:01.160 wait until they get all the visions and all the 0:09:01.640 --> 0:09:04.440 late data in and and there are times when they 0:09:04.520 --> 0:09:08.319 don't declare that they passed the peak of business and 0:09:08.400 --> 0:09:11.520 intercession until the whole thing is over. And so it's 0:09:11.600 --> 0:09:14.079 it's it's very difficult. I mean, you can't to say 0:09:14.120 --> 0:09:16.800 you're in recession. Yeah, I think we're probably either in 0:09:16.960 --> 0:09:19.559 or close to it. That's what I started talking about 0:09:19.679 --> 0:09:24.199 earlier this year. But again, it's all over, including the 0:09:24.320 --> 0:09:28.600 shop for the time it becomes official. So, Gary, if 0:09:28.679 --> 0:09:30.760 we are already in a recession or close to one, 0:09:30.960 --> 0:09:34.520 do you have any sense, based upon your experience, how 0:09:34.640 --> 0:09:37.520 deep it maybe, how long it may be. Do you 0:09:37.559 --> 0:09:41.680 have any feelings at that point? I think it could 0:09:41.760 --> 0:09:45.720 be deep now, not like the oh seven oh nine 0:09:46.280 --> 0:09:49.679 when you have the collaps and sub prime mortgages, and 0:09:49.960 --> 0:09:53.000 and not like the two thousand, which was the COVID 0:09:53.640 --> 0:09:56.480 in terms of depth. But you've got a lot of 0:09:56.600 --> 0:09:59.599 speculation out there, and that's that's what happens, you know, 0:10:00.040 --> 0:10:02.959 what really happens. What's the guts of recessions? It's the 0:10:03.040 --> 0:10:09.720 correction of accesses, accesses and inventories, accesses and speculation heavy 0:10:09.920 --> 0:10:14.360 financial positions. And we've had so much very reserved for 0:10:14.880 --> 0:10:20.000 largest really since two thousand eight reaction to the financial crisis, 0:10:20.480 --> 0:10:24.319 that there's there's, there's no doubt, an awful lot of speculation. 0:10:24.400 --> 0:10:27.000 That's we see it coming out of the woodwork every day. 0:10:27.040 --> 0:10:29.480 You see the sp A c is collapsing, you see 0:10:29.559 --> 0:10:33.520 crypto collapsing. These things that people fall were perfectly safe, 0:10:33.840 --> 0:10:36.640 but you find out there's a lot of speculation. And 0:10:36.760 --> 0:10:39.319 one of the things that we always see is that 0:10:39.640 --> 0:10:42.080 everybody ends up on the same side of the same 0:10:42.160 --> 0:10:45.200 trade at the same time. So when one goes bad, 0:10:45.840 --> 0:10:48.520 traders have to cut back their positions and other things 0:10:48.559 --> 0:10:52.800 they are totally unrelated, oftentimes in order to survive. So 0:10:52.960 --> 0:10:55.560 I think it could be, it could be deep blank, 0:10:56.559 --> 0:10:59.120 it'll it'll run into next year. I wouldn't I wouldn't 0:10:59.120 --> 0:11:01.719 try to put an exact pinpoint the timing, but it 0:11:01.800 --> 0:11:04.880 could very well last three or four quarters, which isn't 0:11:04.880 --> 0:11:07.959 all let unusual. Could the sell off in stocks and 0:11:08.120 --> 0:11:13.599 indeed bonds gary which have you know, collapsed relative to 0:11:13.720 --> 0:11:17.200 history in the first half, could it be a paradigm shift, 0:11:17.440 --> 0:11:22.040 because you famously called the shift back in the day 0:11:22.320 --> 0:11:26.760 when you know, before people owned tangible assets and eventually 0:11:27.480 --> 0:11:30.640 started investing in things like stocks and bonds. Could we 0:11:30.679 --> 0:11:37.240 see that turnaround? Uh? Yeah, we probably probably could. I 0:11:37.400 --> 0:11:41.600 think you've had a lot of speculation in commodities. Um, 0:11:41.880 --> 0:11:44.000 I don't. I don't. There isn't anything that's really going 0:11:44.040 --> 0:11:48.520 to drive global global growth. There's no big forces on 0:11:48.640 --> 0:11:51.199 the horizon. And I think we're going to be in 0:11:51.240 --> 0:11:54.360 a low inflationary environment. And the key driver of that 0:11:54.559 --> 0:11:57.959 is we're in the next I supply world. You've got Asia, 0:11:58.640 --> 0:12:02.839 huge producers, very weak consumers, and unless we had all 0:12:02.880 --> 0:12:07.040 out protection as you've got a surplus of of supply 0:12:07.200 --> 0:12:10.480 or demand that the savings but they talk about, and 0:12:10.600 --> 0:12:13.960 I think that's going to keep downward pressure on on inflation. 0:12:14.160 --> 0:12:17.160 So uh yeah, I think you've probably got slow growth 0:12:17.720 --> 0:12:23.960 of low inflation, if not even deflation as we look ahead. Garry, 0:12:24.240 --> 0:12:26.120 give us your sense of the consumer here. I was 0:12:26.160 --> 0:12:28.160 down at the Jersey Shore this weekend. People were out 0:12:28.200 --> 0:12:30.920 and about spending money, having a good time. Are you 0:12:31.040 --> 0:12:35.640 confident that the consumer can kind of power through here? Uh? Well, 0:12:35.720 --> 0:12:37.280 if you look at if you look at what's going on, 0:12:37.480 --> 0:12:40.480 people are pining back or article to wellstry journal the 0:12:40.600 --> 0:12:43.200 day you probably saw to that effect that people are 0:12:43.600 --> 0:12:49.080 taking fewer trips, even the libraries. So consumers, consumers are 0:12:49.240 --> 0:12:52.000 you know they're there are two thirds of of GDP 0:12:52.240 --> 0:12:55.800 consumers spending and people have been affected. I mean it's 0:12:55.800 --> 0:12:58.560 you know, they call it demand destruction if it cast 0:12:58.640 --> 0:13:01.600 you cast of I bucks of down and to fill 0:13:01.720 --> 0:13:05.480 the tank unless you've got a big shirt plus of 0:13:05.920 --> 0:13:08.760 of saving and a lot of people have been saving more, 0:13:08.840 --> 0:13:12.120 they're really scared. So I just don't think that there's 0:13:12.160 --> 0:13:14.520 gonna be a lot of spending. You know, it's it's 0:13:14.600 --> 0:13:17.679 a it's if it's it's cut back in one area 0:13:17.800 --> 0:13:21.720 that they've got up accommodate others. So do you still 0:13:21.760 --> 0:13:24.000 have that Volvo? Gary? You had? You had like a 0:13:24.840 --> 0:13:29.319 a brown two forty station wagon from the eighties. Now, 0:13:29.520 --> 0:13:34.640 wait a minute, two thousand one board explorer. I drive 0:13:34.720 --> 0:13:39.320 him till they dropped? Man? Okay, has some one Ford explore? 0:13:39.360 --> 0:13:43.640 All right? Gary? Great stuff as always. Gary Shilling, President 0:13:43.760 --> 0:13:49.160 of a. Gary Shilling and Company, UH PhD in economics 0:13:49.400 --> 0:13:53.839 from Stanford BS in physics from Amherst College back in 0:13:53.920 --> 0:13:56.400 the day. He's seen a thing or two. He's seen 0:13:56.440 --> 0:13:59.400 a cycle or two on Wall Street over his career. 0:13:59.440 --> 0:14:05.959 We appreciate getting a few minutes. The discussion today is 0:14:06.000 --> 0:14:08.280 all about recession, so we need to check on the read. 0:14:08.360 --> 0:14:12.240 Pickard U s economy reporter for Bloomberg News, plus Ryan Guest, 0:14:12.720 --> 0:14:17.480 CEO at Arrow Clean, discusses how her company is trying 0:14:17.559 --> 0:14:21.640 to disrupt the cleaning and disinfectant market in a sustainable way. 0:14:21.680 --> 0:14:23.800 That should be interesting, but coming up, let's check in 0:14:23.880 --> 0:14:26.080 with Greg Jared first get a Bloomberg Business Flash. Greg 0:14:26.480 --> 0:14:30.600 stocks have tumbled as recession fears gripped the market's outweighing 0:14:30.640 --> 0:14:35.480 optimism over the possibility that US China talks will have 0:14:35.840 --> 0:14:38.160 tariff reductions. As a result, the S and P five 0:14:39.040 --> 0:14:41.440 is now down two percent, down seventy five dollars down 0:14:41.480 --> 0:14:45.119 two point two percent, down seventy five, and the nasdacs 0:14:45.160 --> 0:14:48.600 down just over one down a hundred eleven thirty four. 0:14:48.720 --> 0:14:51.320 The tenure is up twenty one thirty seconds, with the 0:14:51.360 --> 0:14:55.040 yield at two point eight percent. West Texas intermediate crude 0:14:55.240 --> 0:14:58.120 is down below a hundred dollars for the first time 0:14:58.680 --> 0:15:02.080 in a long time. Uh, down eight point three at 0:15:02.880 --> 0:15:05.560 forty one a barrel. Comics gold is down at one 0:15:05.600 --> 0:15:12.160 point nine at seventeen sixty six dollar the euro a 0:15:12.240 --> 0:15:15.240 dollar to forty three in the British founded dollar nineteen twelve. 0:15:15.960 --> 0:15:18.240 How many people hold up your hands, honky your horns, 0:15:18.240 --> 0:15:20.880 flash your lights or whatever. How many think that gasoline 0:15:20.960 --> 0:15:22.760 is going to go back down to where it was 0:15:23.440 --> 0:15:29.160 when oil was last at? No way? Why not? Because 0:15:29.240 --> 0:15:31.920 they've already raised prices. They don't cut them now. You 0:15:32.000 --> 0:15:33.840 know how hard it is to get that long pole 0:15:33.960 --> 0:15:36.440 out there and move those numbers around. Paul, Okay, that 0:15:36.760 --> 0:15:40.560 explains it. Actually, I just I saw a great meme 0:15:40.720 --> 0:15:46.560 over the weekend with people President Biden blames for gas prices, right, 0:15:46.600 --> 0:15:50.800 and it's putin crossed out oil producers, crossed out, gas 0:15:50.840 --> 0:15:54.560 station owners, crossed out the guy who puts the numbers 0:15:54.560 --> 0:15:58.080 on the side that's next. I think it's just a commodity. 0:15:58.160 --> 0:15:59.960 That's kind of how I play it, all right, Greig Jared, 0:16:00.000 --> 0:16:02.120 thanks so much for that. We appreciate it. All right. 0:16:02.160 --> 0:16:05.000 Let's check in with read a pick or u s 0:16:05.080 --> 0:16:07.920 economy reporter and editor for Bloomberg News, and read It's 0:16:07.960 --> 0:16:10.360 a great time to touch base with you, because, boy, 0:16:10.400 --> 0:16:13.320 the narrative in the market today after the July four 0:16:13.440 --> 0:16:17.080 long weekend is recession. That seems to be spooking the market. 0:16:17.800 --> 0:16:20.760 What do you what is your reporting showing? Absolutely so 0:16:20.960 --> 0:16:23.000 thank you for having me. So we had a story 0:16:23.040 --> 0:16:27.560 out today based on Bloomberg Economics model and they now 0:16:27.680 --> 0:16:31.080 see a chance of recession within the next twelve months 0:16:31.320 --> 0:16:34.600 at thirty eight percent. So that's a big increase from 0:16:34.640 --> 0:16:36.560 what they were expecting just a couple of months ago, 0:16:36.760 --> 0:16:40.440 where this same model was showing zero percent UM. And 0:16:40.520 --> 0:16:42.880 then of course if we look further on that time 0:16:42.960 --> 0:16:47.960 horizon UM by the start of they, like a lot 0:16:48.040 --> 0:16:51.880 of other economists on Wall Street UM, expect a recession. UM. 0:16:51.960 --> 0:16:54.440 There's about a three and four chance of a recession 0:16:54.520 --> 0:16:58.120 by the start of so you know, in terms of 0:16:58.200 --> 0:17:01.600 the markets, yeah, they're looking at the picture where recession 0:17:01.640 --> 0:17:05.760 odds are growing. It's looking increasingly likely that we could 0:17:05.840 --> 0:17:10.359 have a second straight quarter where GDP declines UM and 0:17:11.000 --> 0:17:14.399 the Fed, you know, is messaging that they are determined 0:17:14.480 --> 0:17:18.240 to crush inflation. So you know how much they would 0:17:18.280 --> 0:17:21.200 come to the rescue if things go down to downhill? 0:17:21.359 --> 0:17:23.800 Is is not super clear. No, well, they can't do 0:17:23.920 --> 0:17:27.000 it right now. Um. The worst thing that could happen 0:17:27.119 --> 0:17:30.479 for the Fed's credibility is that they don't raise as 0:17:30.600 --> 0:17:35.080 much as we expect and then inflation rises even higher. Right. So, 0:17:35.920 --> 0:17:39.240 but you mentioned something interesting the the fact that we 0:17:39.359 --> 0:17:43.400 have two quarters of you know, back to back contraction. 0:17:44.119 --> 0:17:49.119 I know a recession does not uh make but for 0:17:49.480 --> 0:17:52.840 simplistic people like me, that's a general rule of thumb, right, 0:17:52.880 --> 0:17:56.480 And the Atlanta Fed UM GDP now forecast shows a 0:17:56.520 --> 0:17:59.639 contraction in Q two of two point one percent, right, 0:17:59.800 --> 0:18:02.200 and it is a general rule of them. So here 0:18:02.240 --> 0:18:04.359 in the US is different than other countries, and that 0:18:04.840 --> 0:18:08.040 we all look to a group of academics at the 0:18:08.240 --> 0:18:11.360 National Bureau of Economic Research who makes the official call 0:18:11.440 --> 0:18:14.000 on these types of things. Um. But what's tricky about 0:18:14.119 --> 0:18:17.200 right now when we're looking at these two quarters is 0:18:17.400 --> 0:18:20.320 you know, in the first quarter, a big part of 0:18:20.440 --> 0:18:24.080 that decline UM. What weighed on that number in the 0:18:24.160 --> 0:18:29.119 GDP accounting was that you had imports surge. So you 0:18:29.240 --> 0:18:34.000 actually saw an underlying measure of demand that economist tend 0:18:34.080 --> 0:18:36.359 to look at. UM. You actually saw that quite strong 0:18:36.520 --> 0:18:39.719 consumer spending UM wasn't as strong as we were all 0:18:39.800 --> 0:18:42.399 thought it would be UM after some recent revisions, but 0:18:42.560 --> 0:18:45.280 it's still held up UM. But the second quarter is 0:18:45.320 --> 0:18:48.440 looking UM kind of increasingly scary from the fact that 0:18:48.960 --> 0:18:53.720 we finally just saw real spending or inflation ingested spending 0:18:53.880 --> 0:18:56.159 fall for the first time this year in May. So 0:18:56.480 --> 0:18:58.760 it's not quite clear what's going to happen in June 0:18:58.880 --> 0:19:01.200 and whether that was more of a blip in the 0:19:01.280 --> 0:19:04.160 month or whether this is the start of a sustained 0:19:04.320 --> 0:19:07.920 downward trend and inflation adjusted spending. So read does that 0:19:07.960 --> 0:19:11.720 Bloomberg Economics Research note that they have an opinion at 0:19:11.760 --> 0:19:14.960 as to maybe how deep this recession, maybe if in 0:19:15.040 --> 0:19:17.240 fact we do vol into recession, is it's something that 0:19:17.320 --> 0:19:20.320 could be multi quarters? What are they saying? So I 0:19:20.440 --> 0:19:23.800 haven't talked to Bloomberg Economics specifically about this, but in 0:19:24.000 --> 0:19:27.360 terms of other economists that I've spoken with, the general 0:19:27.760 --> 0:19:31.720 kind of description word that I hear is mild or modest, 0:19:32.200 --> 0:19:35.720 But in terms of the length people differ. So I've 0:19:35.760 --> 0:19:38.760 had some economists say that they see this being a 0:19:39.080 --> 0:19:42.800 kind of two quarter thing, very short UM, and then 0:19:42.920 --> 0:19:45.880 others who kind of note the fact that the FED 0:19:46.560 --> 0:19:49.159 is in a situation where they really need to hit 0:19:49.240 --> 0:19:52.520 inflation and hit inflation hard, so they might not offer 0:19:53.000 --> 0:19:56.160 the kind of support monetary policy support that we're used 0:19:56.200 --> 0:19:59.080 to seeing in downturns. And as a result, while it 0:19:59.200 --> 0:20:01.800 might be a old recession, it could very well be 0:20:01.960 --> 0:20:05.040 a long recession. Um. But I think it is important 0:20:05.119 --> 0:20:07.800 to keep in mind, whether you know, even if this 0:20:07.960 --> 0:20:11.680 is a quote unquote mild recession, recessions are painful, and 0:20:12.160 --> 0:20:15.560 even a mild recession would still likely mean you know, 0:20:16.200 --> 0:20:20.560 possibly hundreds of thousands of people losing their jobs. All right, interesting, Matt, 0:20:20.600 --> 0:20:24.159 Do you know what the Cavalier Cavalier Daily is? Is 0:20:24.240 --> 0:20:29.720 that a Cleveland, Ohio newspaper? Student newspaper? No, it is 0:20:29.800 --> 0:20:34.479 the student newspaper at the University of Virginia. Read Pickard 0:20:34.560 --> 0:20:36.920 was a reporter there. It is a very high quality 0:20:37.320 --> 0:20:39.280 student publication. How long were you a reporter at the 0:20:39.400 --> 0:20:43.200 Cavalier Daily. I was years ago now, but I was 0:20:43.280 --> 0:20:45.840 a reporter for four years. It's a it's a heck 0:20:45.920 --> 0:20:48.320 of a student paper. Are they the Cavaliers? I thought 0:20:48.320 --> 0:20:51.520 they were like the who's who it's read? You can 0:20:51.600 --> 0:20:53.560 explain it. Yeah, It's it's kind of like Auburn is 0:20:53.600 --> 0:20:56.880 the same way where people people yell wah who waf 0:20:57.000 --> 0:21:00.400 But um, the actual mascot is A is a cavalier. 0:21:00.600 --> 0:21:03.600 So at football games and satch there um is A 0:21:04.359 --> 0:21:06.560 is a mascot of a guy with a sword and 0:21:06.640 --> 0:21:08.639 a hat with a feather in it. And I can't 0:21:08.680 --> 0:21:11.080 not know that because we have like half of the 0:21:11.160 --> 0:21:14.120 people at Bloomberg came from uv A. Right, Well, it's 0:21:14.240 --> 0:21:16.960 even worse than that thing from the University of Carolina 0:21:17.119 --> 0:21:22.000 Danny Berger. Um Kaylee lines and the list goes on 0:21:22.160 --> 0:21:25.000 and on and on. I know there's more, you know, 0:21:25.200 --> 0:21:27.879 uv A people, a ton of North Carolina people, and 0:21:28.040 --> 0:21:32.000 painfully few dude people here, so we're vastly outnumbered. Well, 0:21:32.040 --> 0:21:35.000 I'm the only one from Antioch College and anti colleges 0:21:35.040 --> 0:21:38.320 in Ohio. Right it is Antioch College, Yellow Springs, Ohio 0:21:38.560 --> 0:21:41.480 when they're the fighting. Uh, we have had no football 0:21:41.560 --> 0:21:46.680 team since. The only intercollegiate sport we've had that I 0:21:46.840 --> 0:21:50.560 know of is women's rugby. Nice. I'm sure you exceled 0:21:50.560 --> 0:21:52.080 there a right. Read Thanks so much for joining us. 0:21:52.119 --> 0:21:55.240 Read Pickard us economy reporter and editor for Bloomberg News, 0:21:55.320 --> 0:22:02.200 former reporter at the Daily Cavalier The Cavalier Daily. I 0:22:02.240 --> 0:22:05.400 guess during the pandemic we all became I guess experts 0:22:05.440 --> 0:22:09.680 at cleaning stuff and disinfecting stuff. Our next guest has 0:22:10.119 --> 0:22:13.639 an angle on that. Rain guest CEO of a company 0:22:13.720 --> 0:22:17.000 called arrow Clean. Rain, thanks so much for joining us here. 0:22:17.440 --> 0:22:18.680 I love for you just to give us, you know, 0:22:18.760 --> 0:22:20.960 kind of a thirty overview of what you guys do 0:22:21.720 --> 0:22:25.840 at Aero Clean. Well, nice to chat with you guys 0:22:25.920 --> 0:22:29.160 this morning. Things for having me, uh So at Aero Clean, 0:22:29.240 --> 0:22:32.960 we actually have a patented device that gives people the 0:22:33.040 --> 0:22:36.879 power to produce their own cleaning and disinfecting products on site. 0:22:37.520 --> 0:22:41.360 So it actually just circumvents the whole supply chain completely. 0:22:42.840 --> 0:22:45.520 So I mean I would think that during the pandemic, 0:22:46.240 --> 0:22:51.480 as people were searching for again, cleaning solutions, disinfecting solutions, 0:22:52.359 --> 0:22:53.960 your business got impact. A little bit of talk to 0:22:54.040 --> 0:22:57.480