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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg

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Speaker 1: Surveillance Podcast. I'm Tom Keene along with Paul Sweeney. Join

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Speaker 1: us each day for insight from the best in economics, finance, investment,

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Speaker 1: and international relations. You can also watch the show live

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Speaker 1: on YouTube. Visit the Bloomberg Podcast channel on YouTube to

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Speaker 1: see the show weekday mornings from seven to ten am

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Speaker 1: Eastern from our global headquarters in New York City. Subscribe

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Speaker 1: to the podcast on Apple, Spotify, or anywhere else you

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Speaker 1: listen and always I'm Bloomberg Radio, the Bloomberg Terminal, and

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Speaker 1: the Bloomberg Business App. Paul, why don't you bring in

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Speaker 1: this guy? Let me just say he's my Economist of

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Speaker 1: the Year last year. This is a guy who nailed

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Speaker 1: intelligent optimism. He not only would say I believe in

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Speaker 1: the system, I believe in the post pandemic environment, but

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Speaker 1: he said the American economic experiment is vital. That was

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Speaker 1: a courageous call eighteen months ago.

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Speaker 2: And Tom, we got some pretty good people booking guests

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Speaker 2: for us. It makes us look good. I mean we

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Speaker 2: had Ira Jersey, now Neil Dutter, Renaissance Macro Research Partners,

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Speaker 2: head of the US economic research over there, and Neil,

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Speaker 2: I'm going to ask you the question I asked Ira

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Speaker 2: Jersey here inflation. I mean, do we have to think

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Speaker 2: about it coming back into our economy or are some

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Speaker 2: of these recent CPI PPI data is just kind of

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Speaker 2: a don't worry about it's gonna be a little sticky

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Speaker 2: on on the way down from here. How concerned should

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Speaker 2: we be?

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Speaker 3: Well, I'm a little bit more concerned today than I

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Speaker 3: was maybe a month or two ago. You know, of course,

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Speaker 3: it's important to remember that, you know, we are coming

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Speaker 3: off a extended period where core inflation was generally coming

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Speaker 3: in below consensus forecasts. And you know, now we have

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Speaker 3: a month or so where you know, the inflation data

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Speaker 3: has generally been surprising to the upside. You know there'd

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Speaker 3: be some residual seasonality in the data. I mean we

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Speaker 3: saw this last January as well. But I think whenever

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Speaker 3: you get numbers like this, it's just important to go

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Speaker 3: back to first principles, right And you know, for the FED,

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Speaker 3: compensation growth equals inflation plus productivity. That's a fairly standard

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Speaker 3: sort of identity in macro And what do we know

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Speaker 3: about compensation growth? It's moderating if you look at the

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Speaker 3: last employment cost index, it ran about three and a

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Speaker 3: half percent at an annual rate. We know that productivity

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Speaker 3: is picking up, so I think generally the inflationary impulse

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Speaker 3: that's coming out of the labor markets are basically consistent

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Speaker 3: with two percent inflation. And at the same time, we

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Speaker 3: know that business and household inflation expectations are declining for

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Speaker 3: you know, in the short, medium, and longer run. So

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Speaker 3: I think that's encouraging for the FED. So January was

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Speaker 3: a bad month for inflation that pushed off the timing

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Speaker 3: of the first rate cut. But I think it's important

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Speaker 3: for people to understand what are we still talking about here.

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Speaker 3: We're talking about how much the economy is growing and

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Speaker 3: when the FED is going to start cutting rates.

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Speaker 2: So let's just go right to that, Neil. You know,

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Speaker 2: I think the FED fit chairman j pal did a

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Speaker 2: very good job communicating this that you know, in the

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Speaker 2: last time he spoke that, all right, March, March really

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Speaker 2: isn't in the cars cards, So the markets started discounting May.

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Speaker 2: Now it seems like they're the market's pushing this out

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Speaker 2: to June, and I guess a data point like today

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Speaker 2: would give more ammunition to the folks that are thinking

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Speaker 2: about a June cut.

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Speaker 3: Yeah, I think that that's probably right. I mean, you know,

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Speaker 3: June probably goes up a little bit. But you know, look,

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Speaker 3: I mean we could be back here in March or

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Speaker 3: April talking about downside surprises to core inflation. Uh, you know,

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Speaker 3: in the March data and so and that, and that

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Speaker 3: could then push the probabilities of May up. So again,

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Speaker 3: I think it's important. It's important for people to understand.

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Speaker 3: I think you know, what is the overarching state for

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Speaker 3: the year again, it's the economy is growing and the

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Speaker 3: feed is probably cutting. I think that's a reasonably good

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Speaker 3: backdrop for risk appetity.

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Speaker 4: Neil, in an hour.

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Speaker 1: Ago when you were in makeup to come on YouTube

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Speaker 1: Bloomberg podcast for US, you did a wonderful Renmec thing

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Speaker 1: out on Twitter, folks, I'll retweet it Renmec, Renaissance, macro Research.

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Speaker 1: It's to some goofy name at r E nmac llc.

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Speaker 1: There it is renmc llc. And Neilia said, sentiment matters.

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Speaker 1: Green Span agrees with you, and the sentiment right now

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Speaker 1: is a bull market. Basically, there's a bid to the

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Speaker 1: AI market. Even other things I guess are doing okay?

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Speaker 1: How does the sentiment get you out into twenty twenty

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Speaker 1: four right now? Is it a bull economy as well

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Speaker 1: as a bull market?

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Speaker 3: That's my view. I mean, I think when you look

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Speaker 3: at sentiment, what you have right now is a simultaneous

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Speaker 3: improvement in business and consumer confidence. So it kind of

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Speaker 3: reeks very you know of early cycle type dynamics in

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Speaker 3: the economy. Obviously, this has been a very unusual cycle

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Speaker 3: where you know, certain industries have kind of shut off

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Speaker 3: shut turned on at different times, and so you know,

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Speaker 3: traditional kind of business cycle rules haven't really worked out

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Speaker 3: that well. But right now, what it looks like is,

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Speaker 3: after a lengthy period, it seems to be you know,

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Speaker 3: we're kind of approaching something closer to normal. And you know, frankly,

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Speaker 3: the fact that corporate and consumer confidence is picking up

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Speaker 3: at the same time. I mean, that's going to be

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Speaker 3: good news I think for the economy, and you know,

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Speaker 3: with respect to corporate confidence, that's going to be good

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Speaker 3: news I think for business investment spending.

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Speaker 1: So where's your blended nominal GDP called twelve months forward?

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Speaker 1: Are you at five percent nominal or is it a

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Speaker 1: more normal three point four percent?

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Speaker 3: I love how you went out to the second decimal

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Speaker 3: place there.

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Speaker 1: Well, that's raady hunting. Okay, first, let me explain this

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Speaker 1: on television. We go to one decimal point on YouTube,

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Speaker 1: Bloomberg podcast two decibel points at least, I'm mateo screaming time,

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Speaker 1: go to three? Where are we?

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Speaker 3: So I guess you could say I'm at four point

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Speaker 3: seventy five to five point two five.

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Speaker 5: How's that look at?

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Speaker 1: That?

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Speaker 2: That's nice? I mean, that's a solid nominal.

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Speaker 5: One more question for his done this? All right?

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Speaker 2: So Neil, real quick here the labor market. That's another

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Speaker 2: pretty strong pillar in this economy. How do you think

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Speaker 2: about the US labor market going forward?

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Speaker 3: I think right now the main story is that labor

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Speaker 3: markets are sluggish relative to what we're seeing in the

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Speaker 3: in growth. I mean, so either you believe that we

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Speaker 3: have this sort of massive productivity boom in the first quarter,

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Speaker 3: or you know, you should expect hours to pick up

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Speaker 3: a little bit. You know. The truth is is that

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Speaker 3: aggregate hours work, so that's the sum product of jobs

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Speaker 3: in the work week. It's basically been flat for the

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Speaker 3: last three months or so, and during that time, the

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Speaker 3: economy has been growing, you know, at a reasonably solid case,

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Speaker 3: you know, something slightly about two percent to lengthen you know,

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Speaker 3: I think particularly in the manufacturing, So I say that's

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Speaker 3: probably something that will happen at inventory's restock.

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Speaker 1: Neil Dunet, thank you so much. Neils done it there

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Speaker 1: with Ren Mack. And again we'll get that really nice

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Speaker 1: sentiment displayed.

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Speaker 5: That he did. We'll put that on Twitter and try

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Speaker 5: to get the LinkedIn.

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Speaker 1: Shorting us now with Bessemwheer of course for years with

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Speaker 1: Bridgewater now part of the Bretonwoods Committee, we are thrilled

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Speaker 1: to get a brief from Rebecca Patterson.

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Speaker 5: Rebecca to begin, are we beyond the pandemic? Oh?

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Speaker 4: I love that question. I mean obviously no, because I

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Speaker 4: know what you're saying. We're never going to be on

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Speaker 4: the pandemic. It's just becoming a flu that's going to

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Speaker 4: have variations and it could come back in forms we

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Speaker 4: can't even imagine right now. So no, But from an

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Speaker 4: economic point of view, which is where I think you're

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Speaker 4: coming from, Tom, and it's the lack of electricity, it

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Speaker 4: makes me thinks more slowly. Yeah, I think we are.

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Speaker 4: I think we can say that now. Does that mean

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Speaker 4: everything is completely normalized again? No, right, But are we

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Speaker 4: back to really kind of business as usual from a

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Speaker 4: macro point of view, yes.

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Speaker 5: I can't say.

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Speaker 1: There's no one in my universe folks who shifted from

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Speaker 1: the quiet of Bestsemmer Trust over the cacophony of Bridgewater.

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Speaker 1: There's no one, and she lived to tell the tale.

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Speaker 1: Let's go conservative first, Rebecca, quiet money, three or five

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Speaker 1: year return money. How do they participate in this bull market?

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Speaker 4: Well, you know, it was interesting yesterday we got data

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Speaker 4: from ICI just showing fun flows and what struck me

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Speaker 4: is that two things. One, in the week through February fourteenth,

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Speaker 4: we saw forty three billion dollars leaving money markets, and

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Speaker 4: obviously not all of that's going to equities, but it

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Speaker 4: is redeployed, and I think a lot of that is

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Speaker 4: to your point, the slower money, right, money that's being reallocated.

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Speaker 4: We're going to put a little more risk in the market,

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Speaker 4: whether that's equities, maybe we're going to go out the

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Speaker 4: curve on bonds. But the other data point from that

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Speaker 4: report that was striking was the amount still in money markets,

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Speaker 4: which is around six trillion with a T and obviously

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Speaker 4: not all of that will leave, but as we get

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Speaker 4: closer to the point where the Feds lowering interest rates

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Speaker 4: and those money markets are looking less attractive. I think

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Speaker 4: that's going to be an ongoing support for markets. Maybe

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Speaker 4: it's not the everything rally to the same degree we

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Speaker 4: saw late last year, but it is an important measure

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Speaker 4: of support that can keep equities going from here. Globally,

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Speaker 4: but I think particularly in the US.

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Speaker 2: You know, Rebecca, I was kind of a time and

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Speaker 2: place where that's sixty forty portfolio kind of made a

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Speaker 2: lot of sense to me. Sixty percent stocks, forty percent bonds,

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Speaker 2: and then boy, you know, twenty twenty two came along

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Speaker 2: and just got crushed because you couldn't there's no place

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Speaker 2: to hide a fixed income. A litt bit of better

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Speaker 2: performance last year in fixed income thanks to November December,

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Speaker 2: but this year we're just kind of back into the soup.

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Speaker 2: How do you think about fixing come into a balanced

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Speaker 2: longer term portfolio.

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Speaker 4: Yeah, I still think bonds and I'm talking about treasuries,

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Speaker 4: high quality corporates have a role in a longer term portfolio.

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Speaker 4: I appreciate the point on the last few years performance.

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Speaker 4: I think the last fews were the exception, not the rule,

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Speaker 4: but in the short term. If we look over the

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Speaker 4: next six months, a lot's going to depend on what's

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Speaker 4: happening at the short end. How quickly the Fed does

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Speaker 4: decide to lower rates. Obviously that's going to feed through

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Speaker 4: the whole curve longer term. While there might be a

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Speaker 4: higher settling rate for yields, right if we have some

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Speaker 4: of these structural inflation forces that push up inflation, push

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Speaker 4: up the Fed's neutral rate, it's so called our star.

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Speaker 4: You know, we might be looking at slightly higher rates

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Speaker 4: for yields, but at the same time, if they're stable,

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Speaker 4: you can still make good money off them. We don't

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Speaker 4: need yields to come down constantly like we had over

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Speaker 4: the last few decades, which was lovely to make money

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Speaker 4: and bonds and to use them as a diversifire.

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Speaker 1: Rebecca Pattison with us, of course, with a good brief

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Speaker 1: here into March into the rest of two thousand and

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Speaker 1: twenty four, we're on YouTube Bloomberg Podcast. Thank you for

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Speaker 1: signing up. I'm out in the chat there. I'm learning

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Speaker 1: a lot about Aruba. The chat's fired up about Aruba

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Speaker 1: that in a moment Apple car play, I don't think

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Speaker 1: they have Apple CarPlay in a room.

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Speaker 5: I'm not sure, don't think so. Apple car play with

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Speaker 5: us is well, Rebecca.

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Speaker 1: Our complex derivative strategies like interest rate parody, and I

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Speaker 1: do not want you to talk about Bridgewater portfolios. That's unfair.

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Speaker 1: But our complex derivative strategies by sophisticates now a way

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Speaker 1: to create alpha or is it just a plain old

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Speaker 1: vanilla buy it and own it market?

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Speaker 4: I think that risk parody strategies trying to equate the

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Speaker 4: risk in bonds and stocks and have a portfolio that

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Speaker 4: can do well in different environments. Again, the last few years,

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Speaker 4: with that rise in bond yields, I think that tested

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Speaker 4: those strategies. But if you look at them over the

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Speaker 4: last thirty forty years, they have performed very well. And

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Speaker 4: so and it's important to remember, you know, when we're

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Speaker 4: talking about this, I think what you're getting at, Tom

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Speaker 4: really is having some leverage in bond markets. But these strategies, remember,

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Speaker 4: aren't just about bonds using leverage. It's also about equities

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Speaker 4: and commodities and credit and emerging market assets. So you're

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Speaker 4: really looking at a pretty diversified portfolio here, and all

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Speaker 4: those components are going to perform differently at different points.

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Speaker 4: In time. If you hold it for a while, right,

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Speaker 4: the correlations go to one for everything in moments of distress,

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Speaker 4: but over the longer term in different economic environments. I

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Speaker 4: think having that diversification and using some derivatives to get there,

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Speaker 4: I think can be a successful strategy.

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Speaker 1: Getting afterthought to empty the dishwasher is a correlation to one.

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Speaker 5: It doesn't happened yet.

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Speaker 2: So, Rebecca, how do you think about investment opportunities maybe

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Speaker 2: outside the US. It's just kind of this economic exceptionalism

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Speaker 2: of the US relative to say Europe and Asia, certainly China.

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Speaker 2: I'm wondering are there opportunities outside of the US From

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Speaker 2: an investment perspective.

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Speaker 4: I think there will continue to be opportunities outside the

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Speaker 4: US as investors are squeamish about China and looking for

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Speaker 4: other emerging markets to get diversification. We've seen capital going

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Speaker 4: to places like Mexico, India, to a degree Indonesia. I

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Speaker 4: think that's likely to continue barring some material negative change

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Speaker 4: in their economic outlook. China is trying to get a

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Speaker 4: little bottom in right now in their stock market thanks

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Speaker 4: to the so called National Team government entities buying. I

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Speaker 4: am very wary of going there, thinking that you've got

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Speaker 4: a sustainable rally ahead of US. Japan has been the winner.

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Speaker 4: I mean Japan if you hedged out your currency risk

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Speaker 4: of fifteen percent year to date, so blowing away the

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Speaker 4: United States. And I think those flows could continue. But

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Speaker 4: I would be a little more cautious from here, not

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Speaker 4: just because we've had an insane rally for the last

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Speaker 4: month and a half, but when you think about what's

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Speaker 4: driven this, big part of it has been strong economies overseas,

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Speaker 4: China's slowing, Europe slowing, the US probably this year relatively speaking, slowing,

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Speaker 4: and a big driver has been the yen. Yen above

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Speaker 4: one point fifty against the dollar. How much further can

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Speaker 4: the yen go, not just because of possible intervention to

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Speaker 4: push back from Japan, but also a shift in their

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Speaker 4: monetary policy, and most likely the Fed's not raising rates again.

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Speaker 4: So I think from here the Japan rally is likely

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Speaker 4: to slow. And the question is, if you're not in

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Speaker 4: it yet, do you want to put money in it?

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Speaker 4: Maybe you get some diversification, but I think the return

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Speaker 4: profile from here looks relatively more limited.

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Speaker 1: Important Commissary, we'll get Rebecca Patterson on you to extend

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Speaker 1: this conversation, particularly paul a jump condition stronger yen would

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Speaker 1: maybe upset the apple Cart. Rebecca Patterson for years with

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Speaker 1: best Summer in Bridgewater with the Brettonwoods Committee. Thank you,

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Speaker 1: stever shudos wanted in the door. We're gonna go wonky

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Speaker 1: on you right now, folks. And this is like the

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Speaker 1: brain tease for the Friday before President's Day weekend.

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Speaker 5: Ambiguity.

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Speaker 1: Okay, it's owned by Douglas North of Washington University's Saint Louis.

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Speaker 1: He won the Nobel Prize for it, and that's sort

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Speaker 1: of an institutional economics thing. But to me, ambiguity is

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Speaker 1: if something moves, it can go this way or that way.

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Speaker 1: And that's where we are right now with interest rates,

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Speaker 1: in that something's moved in that rates are higher, inflation's

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Speaker 1: higher or that, and there's this worry we're all gonna

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Speaker 1: die if the Fed doesn't.

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Speaker 5: Cut interest rates in March.

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Speaker 1: But the ambiguity is if rates move higher, that's sign

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Speaker 1: of a strong economy and they can't cut rates well

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Speaker 1: because it's a strong economy.

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Speaker 6: You're right in indicating the fact that the economy is

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Speaker 6: doing better than anybody anticipates. And I think that's a

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Speaker 6: critical component here, and the reason why it's doing is

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Speaker 6: the economy is much less sensitive to short term interest

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Speaker 6: rates and it's ever been before because nobody really borrows

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Speaker 6: at the front end of the curve anymore, even banks.

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Speaker 6: Banks are not involved in making long term loans anymore.

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Speaker 6: Everything is then securitized. They do a lot of thirty

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Speaker 6: day revolvers, and everything gets put into the securities securitized

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Speaker 6: product market and redistributed and atomized and split around the

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Speaker 6: investor community. So the reality is the very front end

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Speaker 6: of the curve doesn't have the bang it used to

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Speaker 6: for the economy.

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Speaker 5: Paul got it in.

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Speaker 1: I know you want to dive in here seriously, but

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Speaker 1: I gotta go there. You said securitized. My theory is

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Speaker 1: the financialization of a system has made most of the

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Speaker 1: gains of the stimulus in the finance boom coming out

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Speaker 1: of COVID go to the halves have knots or flat

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Speaker 1: on our back.

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Speaker 5: Is that close?

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Speaker 6: Well, I mean there is a certain degree of that.

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Speaker 6: I mean, the big thing that's hurt the lower income households,

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Speaker 6: which you're getting at, is the upward movement and inflation

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Speaker 6: that really eroded away.

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Speaker 2: They're purchasing power.

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Speaker 6: The wealth effect is always going to gravitate up the

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Speaker 6: income chain. But the real real damage that was done

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Speaker 6: to lower income households was basically the rise in inflation,

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Speaker 6: which even though we're talking about inflation rates coming down

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Speaker 6: from nine percent to three percent type environment OG, that's great,

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Speaker 6: the reality is prices haven't gone down, right, So these

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Speaker 6: people still have the sticker shock when they go to

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Speaker 6: the grocery store. And that's the end result problem. Their

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Speaker 6: wages haven't kept up with it. Real discretionary income in

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Speaker 6: this country has actually dropped.

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Speaker 2: So that's exactly right. And that's if I'm a politician,

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Speaker 2: if I'm the Biden administration, that's the tough cell I have.

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Speaker 2: You know, I have a tough argument to make out there,

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Speaker 2: because prices still are higher for a lot of folks,

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Speaker 2: for a lot of items. That being said, if I'm

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Speaker 2: the Federal Reserve, I'm kicking back here. We need to

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Speaker 2: rush for a rate cut here, do I No, they

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Speaker 2: never really needed to rush. I mean, we had a

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Speaker 2: tight labor market number one, which is what they want

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Speaker 2: to say because they want to try to maximize social

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Speaker 2: welfare to take the politics out of it. They want

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Speaker 2: to maximize social welfare, give them the credit that they

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Speaker 2: probably deserve.

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Speaker 6: That's number one. Number two, the inflation story is still

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Speaker 6: not back to target, and it doesn't show any sign

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Speaker 6: of quickly getting back to target. So why would you

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Speaker 6: do anything the apple.

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Speaker 1: Cart dovetail your work with dominic constant, I mean constant

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Speaker 1: you know's taken off the next five days.

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Speaker 5: It's like a a Ruber or whatever.

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Speaker 1: Ra shudos work in here, but dovetail the two of

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Speaker 1: you or constum said, look, they got super restrictive faster

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Speaker 1: than they thought.

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Speaker 5: Are we still super restrictive?

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Speaker 6: No, we're not super restrictive. And the reason for that

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Speaker 6: really comes down to the fact that short term rates

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Speaker 6: are not being transmitted into the financial sector the way

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Speaker 6: they used to be. That's really the critical piece of

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Speaker 6: the equation. Take take a look at the average household

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Speaker 6: into average household, they've financed most of their debt into very,

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Speaker 6: very long duration liabilities. You look at their debt servicing costs,

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Speaker 6: there's still at exceptionally low levels, lowest levels we've seen

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Speaker 6: since the FED began publishing the data in seventy nine.

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Speaker 6: I know where I was in seventy nine. I'm looking

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Speaker 6: around the room, I don't think Lisa remembers anything about

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Speaker 6: financial markets to Bob Marley, Yeah, So the reality is,

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Speaker 6: you know, seventy nine is a long time ago. And

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Speaker 6: then when you look at the level of household short

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Speaker 6: term debt, okay, it's at exceptionally low levels. Their duration

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Speaker 6: structure is very, very long. So the net result it

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Speaker 6: is not having the effect that you would have on

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Speaker 6: the household sector. The corporate sector is even worse. Their

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Speaker 6: debt service burdens back in the nineteen seventy two nineteen

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Speaker 6: seventy three area. I know where I was there again too, Tom,

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Speaker 6: do you remember where you were? I. So the reality

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Speaker 6: of the situation is these are incredible performances. And when

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Speaker 6: you look at you talk to a CFO of any

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Speaker 6: company in this country, and you talk to them about,

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Speaker 6: you know, their debt servicing costs and the impact that

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Speaker 6: the higher rates are having now on their ability to

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Speaker 6: raise money. The answer is very very little impact because

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Speaker 6: most of their debt is long duration, it's at very

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Speaker 6: very low yield levels, and on average, corporate America is.

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Speaker 5: Actually paying down debt. You've talked about this eight times.

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Speaker 5: What is tech doing?

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Speaker 2: Because like a free lunch exactly even the big tech

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Speaker 2: comes coming into the bond market and borrowing. So, Steve,

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Speaker 2: one of the stories we were talking about earlier today

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Speaker 2: was when do we start worrying about the national debt

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Speaker 2: and the deficits? We just have a story. The interest

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Speaker 2: on our debt is now going to be greater than

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Speaker 2: defense spending this year. I mean, is this now? I've

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Speaker 2: heard this my entire lifetime, and we just keet kicking

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Speaker 2: the can down the road. I'm looking for something to

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Speaker 2: derail this economy?

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Speaker 5: Is that something?

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Speaker 3: You know?

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Speaker 6: You got to remember the desire of people to buy

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Speaker 6: toward the willingness of people to buy treasury debt comes

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Speaker 6: down to a question of where do you want to

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Speaker 6: have your money invested? Okay, and when you look around

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Speaker 6: the world, do you want to be in the UK?

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Speaker 6: Do you want to be in Europe? Do you want

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Speaker 6: to be in China? Maybe you're a little bit more

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Speaker 6: comfortable with Japan given the currency story, than you've ever

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Speaker 6: been since nineteen ninety, but three hours beyond that, we're

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Speaker 6: not really knowing what's actually going to happen there. So

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Speaker 6: where else are you going to put the money?

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Speaker 5: Yep? Yep?

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Speaker 6: So the reality is this is what's happening with a

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Speaker 6: lot of America. And then when you think about it,

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Speaker 6: Japan runs four hundred and fifty percent debt to GDP,

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Speaker 6: China is running it over three hundred percent debt to GDPAY.

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Speaker 6: We and the rest of the industrialized world are runing

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Speaker 6: around two fifty.

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Speaker 1: I got thirty seconds. Is it just as simple as

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Speaker 1: Joe Stiglitz says, All we need to do is keep

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Speaker 1: the growth rate going to pay for the fiscal idiocy

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Speaker 1: Olivia Blanchard's books on.

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Speaker 6: This, Well, we are at the point now where it's

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Speaker 6: hard to grow out of this deficit. Right, at some

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Speaker 6: point we're going to have to that's the crux. At

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Speaker 6: some point we tackle, but we don't have to tackle

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Speaker 6: at all. What they're going to do eventually, which I

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Speaker 6: hate to say this on radio and say it anywhere

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Speaker 6: on TV, is the fact that I think what they're

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Speaker 6: eventually going to do is lift the cap on Social

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Speaker 6: Security taxes.

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Speaker 2: Now you're at my age, I'm trying to listen to

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Speaker 2: people when they talk about this stuff.

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Speaker 6: Right, because you want to make sure you're retirement income

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Speaker 6: is there, and they're.

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Speaker 5: Politically they're gonna punt that out a decade.

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Speaker 6: Well, we thought we thought they would do that with Medicare.

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Speaker 6: They did it quicker than we thought. I don't think

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Speaker 6: anybody on Capitol Hill right now has any interest whatsoever

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Speaker 6: and dealing with the deficit. Neither the Democratic, neither candidate

439
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Speaker 6: we're probably gonna Democrat, has any interesting DOLLI you're a star.

440
00:22:18,160 --> 00:22:22,879
Speaker 1: Out on carpool and on bloom Bloomberg podcasts, out on YouTube, Michael,

441
00:22:22,960 --> 00:22:25,000
Speaker 1: thank you. There's somebody out there called It's me. I

442
00:22:25,040 --> 00:22:27,240
Speaker 1: never trust that. I mean, who says it's me?

443
00:22:27,400 --> 00:22:28,359
Speaker 5: Is there? Handle?

444
00:22:28,480 --> 00:22:31,600
Speaker 1: And they're like, Steve is great more jamming. So by

445
00:22:31,720 --> 00:22:37,120
Speaker 1: public acclaim of the chat stream on YouTube Bloomberg podcasts,

446
00:22:37,720 --> 00:22:40,720
Speaker 1: you know, we're going back to seventy two with Steve shootout.

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00:22:52,119 --> 00:22:55,200
Speaker 1: Today's four day weekend front page headlines with Lisa, what do.

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00:22:55,119 --> 00:22:58,679
Speaker 7: You got relations? Starting with the Wall Street Journal. This

449
00:22:58,720 --> 00:23:00,679
Speaker 7: one stuck out to me because says the US government

450
00:23:00,760 --> 00:23:04,560
Speaker 7: will soon spend more on interest payments than defense. The

451
00:23:04,680 --> 00:23:07,840
Speaker 7: reason treasury yields sprung to multi year highs. It's putting

452
00:23:07,840 --> 00:23:10,480
Speaker 7: pressure on the budget. So this is the Congressional Budget

453
00:23:10,520 --> 00:23:13,400
Speaker 7: Office latest estimate. Here's what it shows. The US government

454
00:23:13,400 --> 00:23:16,480
Speaker 7: expected to pay an additional one point one trillion dollars

455
00:23:16,520 --> 00:23:19,760
Speaker 7: in interest over the coming decade, so that means those

456
00:23:19,800 --> 00:23:22,760
Speaker 7: costs are on track to surpass defends this year. One

457
00:23:22,760 --> 00:23:25,320
Speaker 7: of the government expenses in the budget comes right below

458
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Speaker 7: Social Security and Medicare. So it's really starting to worry.

459
00:23:28,760 --> 00:23:29,399
Speaker 7: Wall straight at this.

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00:23:29,560 --> 00:23:32,359
Speaker 5: We have a jewel of a resource for those of

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00:23:32,440 --> 00:23:34,480
Speaker 5: you ands in English as well. It's not fancy.

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00:23:35,040 --> 00:23:39,920
Speaker 1: The Congressional Budget Office, the CBO can answer your fears

463
00:23:40,720 --> 00:23:41,159
Speaker 1: about this.

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00:23:41,320 --> 00:23:43,600
Speaker 5: I have a real fear about this. We knew this

465
00:23:43,640 --> 00:23:46,800
Speaker 5: would have happened, it is happening. What's it mean? Mia

466
00:23:46,880 --> 00:23:49,840
Speaker 5: McGinnis and others are brilliant at it. But we have a.

467
00:23:49,840 --> 00:23:53,480
Speaker 1: National treasure in the Congressional Budget Office which will try

468
00:23:53,520 --> 00:23:54,800
Speaker 1: to explain.

469
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Speaker 5: The level of fear we should have. I don't know.

470
00:23:57,440 --> 00:23:58,880
Speaker 5: Do you think it's an election issue?

471
00:23:59,400 --> 00:24:01,760
Speaker 2: I don't. I think so. It's nice, I don't think so,

472
00:24:01,840 --> 00:24:04,840
Speaker 2: but it should be. But it's you know, this has

473
00:24:04,840 --> 00:24:07,399
Speaker 2: been an issue just the deficit the nation that my

474
00:24:07,520 --> 00:24:10,320
Speaker 2: entire lifetime, I don't know when to be.

475
00:24:10,440 --> 00:24:12,879
Speaker 7: Something like the pandemic sparked a little bit more of

476
00:24:12,880 --> 00:24:14,040
Speaker 7: it because this set the rates.

477
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Speaker 2: Sure, yeah, yeah, I mean, I mean that just gets

478
00:24:16,760 --> 00:24:19,639
Speaker 2: your attention when the interest on our debt is bigger

479
00:24:19,640 --> 00:24:20,159
Speaker 2: than defense.

480
00:24:20,240 --> 00:24:23,240
Speaker 7: So there you go next, all right, New York Times,

481
00:24:23,280 --> 00:24:27,080
Speaker 7: the New School is selling its presidential residence in Manhattan

482
00:24:27,080 --> 00:24:29,760
Speaker 7: for twenty million dollars. So this goes to show you

483
00:24:29,800 --> 00:24:32,760
Speaker 7: how much these schools are struggling right now. Okay, it's

484
00:24:32,800 --> 00:24:35,840
Speaker 7: a nineteenth century brick townhouse in thew in Greenwich Village.

485
00:24:35,880 --> 00:24:36,320
Speaker 5: It's nice.

486
00:24:36,359 --> 00:24:39,720
Speaker 7: The interim president currently lives there. They have school functions there.

487
00:24:39,920 --> 00:24:41,800
Speaker 7: It's been a part of the school for four decades.

488
00:24:41,960 --> 00:24:44,439
Speaker 7: So the New School purchase it for nine hundred and

489
00:24:44,520 --> 00:24:47,560
Speaker 7: ninety thousand dollars back in nineteen eighty four. So they

490
00:24:47,600 --> 00:24:50,520
Speaker 7: made some upgrades and now it's going for twenty million dollars.

491
00:24:50,840 --> 00:24:54,240
Speaker 2: I tell the schools that don't have an endowment to

492
00:24:54,359 --> 00:24:56,400
Speaker 2: fund them are really really this is.

493
00:24:56,320 --> 00:24:57,800
Speaker 7: What they're turning to their real estate.

494
00:24:58,760 --> 00:25:01,480
Speaker 5: It's a huge deal. I don't know where this goes.

495
00:25:01,480 --> 00:25:03,720
Speaker 1: I've been looking at the United Kingdom schools and they're

496
00:25:03,760 --> 00:25:07,320
Speaker 1: basically broke. I mean, there's no nice way to put it.

497
00:25:07,720 --> 00:25:10,360
Speaker 1: The formula doesn't work. And Paul, do you think we've

498
00:25:10,400 --> 00:25:12,919
Speaker 1: reached a tuition peak where people are just even the

499
00:25:12,960 --> 00:25:14,560
Speaker 1: fancy people that listen to Bloomberg.

500
00:25:14,760 --> 00:25:16,960
Speaker 2: I think I think we're getting there. It's definitely much more.

501
00:25:16,960 --> 00:25:20,080
Speaker 2: In a conversation, I just would say, and I'm on

502
00:25:20,119 --> 00:25:21,840
Speaker 2: the board of the Business school a Duke university, I

503
00:25:21,920 --> 00:25:24,720
Speaker 2: think the economic model of higher education in this country

504
00:25:24,800 --> 00:25:29,000
Speaker 2: is absolutely broken, faulty. You have to go in there,

505
00:25:29,640 --> 00:25:32,960
Speaker 2: I think, and just cut cost because you're charging eighty

506
00:25:32,960 --> 00:25:36,080
Speaker 2: four thousand dollars a year intuition rememboard, come on, please,

507
00:25:36,320 --> 00:25:40,000
Speaker 2: and and that only covers maybe fifty to sixty percent

508
00:25:40,040 --> 00:25:43,440
Speaker 2: of the cost for a student. Something that cost structure's wrong,

509
00:25:43,640 --> 00:25:44,240
Speaker 2: totally wrong.

510
00:25:44,400 --> 00:25:46,960
Speaker 5: It's it's something I don't know what it is. You

511
00:25:47,040 --> 00:25:49,160
Speaker 5: got to have a duke basketball team or you can't get.

512
00:25:49,080 --> 00:25:52,399
Speaker 3: Them all right.

513
00:25:52,520 --> 00:25:55,879
Speaker 7: Financial Times saying there's gloomy times for the financial sector.

514
00:25:55,920 --> 00:25:58,240
Speaker 7: We've heard about it. You know the bonuses. They did

515
00:25:58,280 --> 00:26:01,200
Speaker 7: an annual bonus survey. They found a fifty eight percent

516
00:26:01,240 --> 00:26:03,840
Speaker 7: of more than twenty six hundred respondents they expect their

517
00:26:03,880 --> 00:26:06,880
Speaker 7: twenty twenty four payout to be lower or about the same.

518
00:26:07,000 --> 00:26:09,879
Speaker 7: But the real question here is is what they're doing

519
00:26:09,920 --> 00:26:12,360
Speaker 7: with that bonus. So a lot more saying they're using

520
00:26:12,359 --> 00:26:15,080
Speaker 7: the bulk of it to actually pay down mortgages other

521
00:26:15,200 --> 00:26:19,840
Speaker 7: debts because they're anticipating, you know, lower bonuses. They also

522
00:26:19,920 --> 00:26:22,280
Speaker 7: say that they're not getting paid as much, so they

523
00:26:22,280 --> 00:26:24,320
Speaker 7: have to use that bonus in order to do that.

524
00:26:24,359 --> 00:26:27,760
Speaker 7: Some are investing, you know, increasing their pension contributions. But

525
00:26:27,840 --> 00:26:30,200
Speaker 7: that's a big thing. They say. The expenses are rising,

526
00:26:30,280 --> 00:26:33,720
Speaker 7: childcare is getting more expensive. They're some paycheck to paycheck,

527
00:26:34,600 --> 00:26:35,600
Speaker 7: there's that much.

528
00:26:35,840 --> 00:26:37,800
Speaker 2: I mean, that's what Matt Miller would say. So he

529
00:26:37,800 --> 00:26:39,960
Speaker 2: has a couple of young ones right now, and coming

530
00:26:39,960 --> 00:26:43,320
Speaker 2: back from Germany where that childcare was paid for and

531
00:26:43,520 --> 00:26:47,119
Speaker 2: high quality childcare, he comes back here and you know,

532
00:26:47,480 --> 00:26:49,640
Speaker 2: it's just it's a huge issue for young families, young

533
00:26:49,680 --> 00:26:52,200
Speaker 2: young parents, more and more of an issue.

534
00:26:52,200 --> 00:26:54,200
Speaker 7: Oh sure, you're wondering if it's enough. You know, some

535
00:26:54,200 --> 00:26:57,720
Speaker 7: some people, just the moms or dads stay home because

536
00:26:57,840 --> 00:26:59,160
Speaker 7: it's cheap to stay home.

537
00:26:59,680 --> 00:27:02,760
Speaker 1: Chunk caught us all this, right, I think people that

538
00:27:02,840 --> 00:27:04,200
Speaker 1: were conveniently ignorant.

539
00:27:04,240 --> 00:27:05,280
Speaker 5: Why are you looking at me?

540
00:27:07,200 --> 00:27:09,159
Speaker 1: We all learned in the pandemic that this is like

541
00:27:09,440 --> 00:27:11,919
Speaker 1: the number one issue, and I assume we'll go.

542
00:27:11,960 --> 00:27:14,720
Speaker 2: I don't know what companies don't have, and I know

543
00:27:14,760 --> 00:27:16,560
Speaker 2: there's a reason. I just don't know the reason why

544
00:27:16,600 --> 00:27:22,120
Speaker 2: companies don't as part of their benefits package. Yep, very

545
00:27:22,119 --> 00:27:22,800
Speaker 2: s percentage.

546
00:27:22,840 --> 00:27:24,800
Speaker 5: You know we'll have to see it at least. I'm tallo.

547
00:27:24,880 --> 00:27:26,760
Speaker 5: Thank you so much.

548
00:27:27,359 --> 00:27:30,560
Speaker 1: This is the Bloomberg Surveillance Podcast, bringing you the best

549
00:27:30,560 --> 00:27:35,359
Speaker 1: in economics, finance, investment, and international relations. You can also

550
00:27:35,440 --> 00:27:39,480
Speaker 1: watch the show live on YouTube. Visit the Bloomberg Podcast

551
00:27:39,600 --> 00:27:43,640
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552
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553
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554
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555
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