WEBVTT - Surveillance: NYC Flooding With MTA's Lieber 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz. Daily we bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot com, 0:00:23.920 --> 0:00:29.720 and of course on the Bloomberg terminal. We're not gonna 0:00:29.760 --> 0:00:32.440 waste time now the statistics, but to be very serious, 0:00:32.760 --> 0:00:35.080 eight deaths are reported by the New York Times and 0:00:35.120 --> 0:00:40.159 other organizations here on building collapses over historic rain. With 0:00:40.240 --> 0:00:42.800 that note, we get immediately to someone with the largest 0:00:42.800 --> 0:00:45.680 headaches of the morning. The acting chairman, the chief executive 0:00:45.680 --> 0:00:50.360 officer of the MTA, Genna Liebert, joins us this morning, Jenna, 0:00:50.360 --> 0:00:54.720 where's your biggest headache at this time in the morning. Well, 0:00:54.800 --> 0:00:57.840 with that, the subway system is coming back. It's incredibly 0:00:57.880 --> 0:01:02.000 resilient and um we've got you know, operating service from 0:01:02.000 --> 0:01:05.000 most areas of the city. It's obviously got some limitations, 0:01:05.360 --> 0:01:09.200 but we're putting Humpty Dumpy back together again. And bravo 0:01:09.280 --> 0:01:13.000 to the cruise that that worked throughout the night to 0:01:13.120 --> 0:01:16.000 do it. There's there's one area in fourteenth ch area 0:01:16.000 --> 0:01:18.880 of West Side of Manhattan where there's the pumping is 0:01:18.920 --> 0:01:21.440 still going on in order for us to restore service 0:01:21.480 --> 0:01:24.600 to that very important line. Um, but we think that 0:01:24.640 --> 0:01:26.960 by you know, mid afternoon, we're gonna have most of 0:01:27.000 --> 0:01:30.520 the lines really back in full functioning for an evening commute. 0:01:30.520 --> 0:01:33.080 So that's exciting. So you're telling you're telling me that 0:01:33.160 --> 0:01:37.200 we will see an evening commute. Uh yeah, I mean, fortunately, 0:01:37.480 --> 0:01:40.480 a lot of people elected to work remotely or stay 0:01:40.480 --> 0:01:43.399 at home today, so a little lighter than usual. But 0:01:43.600 --> 0:01:45.520 we're we're we're gonna be able to move people on 0:01:45.560 --> 0:01:48.960 the subways and on the bus system, which performed heroically great. 0:01:49.000 --> 0:01:53.800 Bus drivers rescued tons of people, moved him home last night. Um. 0:01:53.840 --> 0:01:57.000 The commuter railroads is a little spotty, or Tom Metro 0:01:57.120 --> 0:02:00.120 North is really out of business today because in are 0:02:00.240 --> 0:02:03.560 there in mud slides and trees and so on. They 0:02:03.600 --> 0:02:07.240 had some hits on their electrical infrastructure. Long Island Railroad, however, 0:02:07.640 --> 0:02:11.680 really back in action. They are. They've got most branches operating. 0:02:11.960 --> 0:02:15.640 More Washington Bridge still struggling, but Long Island Railroad is 0:02:15.760 --> 0:02:18.720 is mostly in operation. And Lisa Joe Ryan just reporting 0:02:18.760 --> 0:02:22.239 the death count has moved from eight to nine. Traffic 0:02:22.320 --> 0:02:25.399 flood and that's the flash flood emergency warning that came 0:02:25.440 --> 0:02:28.200 out that really highlighted that to death could be imminent. 0:02:28.480 --> 0:02:31.480 I'm wondering, Jeno, this is the second time in a month, 0:02:31.720 --> 0:02:34.799 in two months rather that the subway system has faced 0:02:34.880 --> 0:02:37.960 flooding like this, this more extremely the last time. What 0:02:38.160 --> 0:02:42.000 is the mt A doing to prevent this from happening again. Well, 0:02:42.000 --> 0:02:46.720 after Superstorm Sandy, we invested a ton in coastal resiliency 0:02:46.840 --> 0:02:50.960 and are underwater uh tunnels, We've got eleven of them, 0:02:51.080 --> 0:02:54.040 all been rebuilt, the pumping infrastructure, upgrade and start, and 0:02:54.080 --> 0:02:58.040 they performed fabulously in this emergency. But what we're seeing 0:02:58.040 --> 0:02:59.919 now is in the air of climate change, with the 0:03:00.000 --> 0:03:04.000 extreme weather events, even the up the higher elevations are 0:03:04.040 --> 0:03:08.160 experiencing this flash flooding. So we're gonna attack that even more. 0:03:08.480 --> 0:03:11.240 The big problem is when the street drainage and the 0:03:11.360 --> 0:03:16.080 sewer infrastructure gets overwhelmed, gravity takes water into the subway system. 0:03:16.360 --> 0:03:19.240 The subways are not a submarine, and and and you 0:03:19.280 --> 0:03:22.120 know it's not gonna it's not gonna ever be perfectly dry, 0:03:22.200 --> 0:03:25.080 but we're going to start attacking these higher elevations as well. 0:03:25.280 --> 0:03:27.520 And general or looking and we're looking at a situation 0:03:27.720 --> 0:03:29.960 where this is likely to become more and more frequent, 0:03:29.960 --> 0:03:32.840 and these fortifications have to happen it quickly. Is the 0:03:33.000 --> 0:03:35.760 m t A sufficiently funded to make some of these 0:03:35.800 --> 0:03:38.120 adjustments at the same time that ridership is down, at 0:03:38.160 --> 0:03:40.000 the same time that the city is recovering from a 0:03:40.040 --> 0:03:43.119 pandemic and getting people and ridership back up to where 0:03:43.120 --> 0:03:45.960 we were before. Well, I mean, the first thing is 0:03:45.960 --> 0:03:47.920 that this has to be done in tando, as I said, 0:03:47.960 --> 0:03:50.840 with the City of New York, which controls the sewers 0:03:51.080 --> 0:03:54.320 and the street level drainage infrastructure. So that's part we have. 0:03:54.400 --> 0:03:56.720 We have to do this in partnership. We have a 0:03:56.760 --> 0:03:59.160 fifty billion dollar capital program that has a lot of 0:03:59.200 --> 0:04:03.320 resiliency investments in in our yards in some of the 0:04:03.360 --> 0:04:05.480 low lying areas. But I think that there are some 0:04:05.520 --> 0:04:07.560 things we can do in tandem with the city to 0:04:07.640 --> 0:04:10.360 deal with this flash flooding risk, which is you know, 0:04:10.800 --> 0:04:14.000 new to this era of climate check. One final question, 0:04:14.120 --> 0:04:15.880 jenn if we can, and it is a way I 0:04:15.920 --> 0:04:19.080 believe from this crisis and great respect. As you've mentioned 0:04:19.400 --> 0:04:22.680 to the bus drivers particularly, you've had a changing of 0:04:22.720 --> 0:04:26.599 the guard in Albany. Will you stay and support the 0:04:26.640 --> 0:04:30.320 new governor Kathy Hokel. Do you have any understanding of 0:04:30.360 --> 0:04:34.240 that relationship, the fractious relationship now with the m t 0:04:34.440 --> 0:04:38.000 A and the capital up the Hudson River. You know, 0:04:38.560 --> 0:04:40.919 I've had the opportunity to meet with Governor Hokel and 0:04:41.000 --> 0:04:42.880 talked to her. We've been in touch through the night 0:04:43.279 --> 0:04:45.919 on our teams have been working together. She is she 0:04:46.080 --> 0:04:49.719 was a local official before she was a congressman and official. 0:04:50.120 --> 0:04:53.360 She gets emergency management. She displayed that just a few 0:04:53.440 --> 0:04:56.280 days ago when she came down to Uh to the 0:04:56.320 --> 0:04:58.680 city after we had a hit on the m t 0:04:58.839 --> 0:05:03.120 A subway operation. Um so uh. You know, she's a good, 0:05:03.279 --> 0:05:05.400 great partner for the m t A and these kinds 0:05:05.400 --> 0:05:08.719 of emergency management issues and more broadly so we're we're 0:05:08.760 --> 0:05:11.720 looking forward to working with her very much. Generally, were 0:05:11.760 --> 0:05:13.479 toll to you and all of the m t A. 0:05:13.600 --> 0:05:16.159 Thank you so much. He's the acting chairman and chief 0:05:16.200 --> 0:05:27.280 executive officer as well. Stephen Roschudo is hugely qualified at 0:05:27.320 --> 0:05:30.320 MASSOO to talk about the American economy and Steve and 0:05:30.360 --> 0:05:33.600 I really want to take advantage of the encyclopedic knowledge 0:05:33.600 --> 0:05:36.360 and go where John Farrell was going, which is industry 0:05:36.400 --> 0:05:39.440 by industry, and to me, the supply dynamics seems to 0:05:39.480 --> 0:05:45.279 be colored by the American automobile industry. Discussed that how 0:05:45.279 --> 0:05:48.560 are autos right now for you an asterick an outlier? 0:05:48.839 --> 0:05:52.600 Are they part of the American economy? Well, they are 0:05:52.720 --> 0:05:55.160 part of the American economy. They're an important component of 0:05:55.160 --> 0:05:59.000 the American economy. They have been declining in value as 0:05:59.000 --> 0:06:01.920 a percentage of your roll economy for years as his 0:06:02.000 --> 0:06:04.839 whole most of manufacturing. But you have to remember the 0:06:04.839 --> 0:06:07.880 automobile industry is a pervasive product. I mean when you 0:06:07.920 --> 0:06:11.920 consider all the components going into them, whether it be glass, steel, 0:06:12.320 --> 0:06:17.920 electronic components, rubber components, plastic, leather, vinyl, I mean, it's 0:06:17.960 --> 0:06:21.200 a huge supply chain that's involved when you're talking about 0:06:21.240 --> 0:06:25.080 building automobiles, and therefore it's multiplier in terms of the economy. 0:06:25.160 --> 0:06:27.440 Is still very very important. And when you see a 0:06:27.520 --> 0:06:30.799 retail sales numbers and autos like we did yesterday afternoon 0:06:31.200 --> 0:06:34.159 of a big drop down in sales to about thirteen 0:06:34.160 --> 0:06:38.000 point one million units from about fourteen point eight million units, 0:06:38.279 --> 0:06:40.520 you really get the sense that this is where the 0:06:40.560 --> 0:06:43.359 economy is losing some of its momentum, and it is 0:06:43.400 --> 0:06:45.919 related to the supply chain, because this is what's really 0:06:45.960 --> 0:06:49.000 happening in terms of the auto space. Stephen, Shooto, slow 0:06:49.080 --> 0:06:51.320 news day. Let us make some news right now. Are 0:06:51.320 --> 0:06:55.640 you going to reduce your Q three GDP statistic? Now? 0:06:55.680 --> 0:06:57.359 I mean, I don't. I don't get into that game 0:06:57.400 --> 0:07:00.200 of trying to, you know, fine tune it one. We 0:07:00.279 --> 0:07:02.920 have all the data, the key source data coming out 0:07:02.960 --> 0:07:05.520 because still lots of moving parts in there. I mean, 0:07:05.560 --> 0:07:07.480 I go back to the days when a couple of 0:07:07.480 --> 0:07:10.120 people from the Bureau of Labor Statistics who did these 0:07:10.120 --> 0:07:13.800 components were caught for insider trading, trying to change trade 0:07:13.800 --> 0:07:20.000 on the GDP number. And John does that. John trades 0:07:20.040 --> 0:07:22.760 off the GDP number we see him doing and in 0:07:22.880 --> 0:07:25.200 that result is they made absolutely no money because they 0:07:25.240 --> 0:07:29.840 couldn't figure out what the numbers were. Because all right, 0:07:29.960 --> 0:07:32.760 and that's and that's really the key issue they You know, 0:07:32.840 --> 0:07:35.239 unless you know the trade and you know the inventory numbers, 0:07:35.640 --> 0:07:38.320 it's really really hard to peg down the GDP number 0:07:38.320 --> 0:07:41.000 on a key source state of related basis. That's the 0:07:41.040 --> 0:07:43.000 direction matters. And I want to go back to that 0:07:43.040 --> 0:07:45.920 Morgan Stanley call ellen Zentner, where they downgraded the third 0:07:45.960 --> 0:07:48.440 quarter GDP to two point nine percent from six and 0:07:48.480 --> 0:07:51.760 a half percent previously. David Smith from Regent's Bank said, 0:07:51.800 --> 0:07:54.520 this is actually significant, and the reason why is because 0:07:54.520 --> 0:07:57.440 there isn't necessarily a material impact on the full year GDP, 0:07:58.160 --> 0:08:01.240 but there isn't a mark up in the GDP for 0:08:01.360 --> 0:08:04.640 Q four. This is not to laid growth. This is 0:08:04.800 --> 0:08:07.680 lost growth, and I wonder how much that is starting 0:08:07.680 --> 0:08:11.640 to factor into people's assessment of this recovery. I think 0:08:11.680 --> 0:08:14.240 you're a percent correct, and I think that's the real 0:08:14.400 --> 0:08:17.880 key factor there is that this is not going to 0:08:17.920 --> 0:08:19.680 be growth that's going to be reversed back. When I 0:08:19.720 --> 0:08:22.280 look at the numbers that they've just put out UH 0:08:22.320 --> 0:08:24.760 and they look at the big drop that they're anticipating 0:08:24.760 --> 0:08:27.320 in Q three and then the bounce back they're anticipating 0:08:27.360 --> 0:08:29.560 in Q four, I'm not so sure you're gonna get 0:08:29.560 --> 0:08:31.720 that bounce back in Q four. There's a lot of 0:08:31.720 --> 0:08:33.880 people who keep on talking about pent up demand in 0:08:33.920 --> 0:08:36.920 this economy. There isn't really any pent up demand in 0:08:36.920 --> 0:08:40.160 this economy, so you might wind up seeing marking down 0:08:40.240 --> 0:08:44.760 third quarter GDP. Really marking down the year number in particular, 0:08:44.760 --> 0:08:48.360 and getting people to really look at their two estimates 0:08:48.679 --> 0:08:51.280 and begin to realize that those numbers are much too high. 0:08:51.280 --> 0:08:55.360 We're still much lower than the consensus on twenty two numbers. 0:08:55.400 --> 0:08:57.440 We're in the three and a half percent area, and 0:08:57.480 --> 0:08:59.800 most people are substantially harder than that, and that's where 0:08:59.800 --> 0:09:02.079 we think the risk is from the kind of losses 0:09:02.120 --> 0:09:04.559 that you're talking about here for the third quarter. Meanwhile, 0:09:04.559 --> 0:09:07.319 we're looking at a labor economy that still hasn't recovered, 0:09:07.320 --> 0:09:09.720 and we're looking at millions of people still out of work. 0:09:10.080 --> 0:09:12.880 The why, though, behind it is less and less clear 0:09:13.000 --> 0:09:15.760 as a lot of the economy reopens. What are you 0:09:15.840 --> 0:09:18.920 hoping to find out from Friday's from tomorrow's jobs report 0:09:18.960 --> 0:09:23.040 to understand more the trajectory of what's keeping people away 0:09:23.080 --> 0:09:25.760 from filling all those jobs, a record number of them 0:09:25.880 --> 0:09:28.760 that need to be filled. Well, I think what you're 0:09:28.760 --> 0:09:31.480 going to discover is is what's true about most of 0:09:31.480 --> 0:09:34.439 these jobs is that people are looking for a specific 0:09:34.679 --> 0:09:37.679 qualified person to fill a job. If you're going to 0:09:37.720 --> 0:09:40.320 be in a work from home environment for a lot 0:09:40.360 --> 0:09:41.880 of these jobs, and I'm not saying a lot of 0:09:41.880 --> 0:09:43.880 the service jobs are work from home will have the jobs, 0:09:43.880 --> 0:09:46.840 but outside the service component, you're looking for a person 0:09:46.880 --> 0:09:49.640 who is plugged compab. You put them in and they 0:09:49.679 --> 0:09:53.000 start working s a paid not in an environment when 0:09:53.000 --> 0:09:55.360 you're working home where it's easy to train somebody and 0:09:55.480 --> 0:09:58.200 bring them on board. So the net result is I 0:09:58.200 --> 0:10:00.440 think this work from home environment is one of the 0:10:00.520 --> 0:10:04.439 factors that is limiting the ability to find that specific 0:10:04.520 --> 0:10:08.160 worker that we want because those workers are rarer. In 0:10:08.200 --> 0:10:10.840 an environment where people are working in offices, there is 0:10:10.840 --> 0:10:14.240 the ability to train get people up to speed. Now 0:10:14.280 --> 0:10:16.559 we have less and less of that as an opportunity. 0:10:16.679 --> 0:10:20.160 So therefore you really need to find that unique person 0:10:20.480 --> 0:10:22.640 and that becomes harder and hard to do. It's finding 0:10:22.679 --> 0:10:25.600 a needle in a haystack. Steve, what's the dynamic on 0:10:25.720 --> 0:10:28.439 service sector right now? We mentioned earlier that the GIGA 0:10:28.559 --> 0:10:33.559 texts are out twenty two of Standard and poors. What's 0:10:33.559 --> 0:10:38.400 that mean for our service sector versus good sector. What 0:10:38.520 --> 0:10:41.600 it really comes down to is we're driving everything from 0:10:41.640 --> 0:10:44.680 a productivity standpoint. I know, you look at the productivity 0:10:44.760 --> 0:10:46.640 numbers here in the unit labor cost numbers, and you 0:10:46.720 --> 0:10:49.600 talked about the uptick in the unit labor cost numbers 0:10:49.600 --> 0:10:52.520 that we've had here. The reality is, when you're looking 0:10:52.559 --> 0:10:55.200 at the productivity environment of the economy and the increased 0:10:55.200 --> 0:10:58.120 productivity that has been pushed into the economy as a 0:10:58.160 --> 0:11:01.760 result of the COVID nineteen environment, it's understandable while you're 0:11:01.760 --> 0:11:04.080 seeing what you're seeing in terms of the growth related 0:11:04.720 --> 0:11:07.320 portions of the economy, in particular in the tech space, 0:11:07.360 --> 0:11:10.560 because we're relying more and more on that technology in 0:11:10.600 --> 0:11:12.840 this work from home environment. As you look at more 0:11:12.880 --> 0:11:15.760 and more companies who are sitting there saying we're delaying 0:11:15.920 --> 0:11:19.720 openings or making it easier for people not to come 0:11:19.760 --> 0:11:23.280 back to the office after labor day or in October, 0:11:23.960 --> 0:11:25.840 the net result is you're going to demand more and 0:11:25.880 --> 0:11:28.079 more on this type of technology, and that's going to 0:11:28.160 --> 0:11:30.960 continue to drive the demand up for that product. And 0:11:31.000 --> 0:11:32.920 so I think it just very hits, very very much 0:11:33.000 --> 0:11:36.000 with the changes in the underlying dynamic that are unfolding 0:11:36.040 --> 0:11:38.960 as a result of the COVID nineteen mitigation strategy. Meanwhile, 0:11:39.160 --> 0:11:41.679 throughout the show this morning, we've been talking about mitigation 0:11:41.840 --> 0:11:44.800 efforts to some of these storms that are historic. We 0:11:44.800 --> 0:11:47.640 saw what happened with Hurricane Ida over in Louisiana. In 0:11:47.679 --> 0:11:51.920 New York City, the weather system actually issued its first 0:11:51.960 --> 0:11:56.240 ever emergency flash fast flood emergency warning, not the fast 0:11:56.240 --> 0:11:59.840 flood fast flash flood excuse me of warning, but emergency war. 0:12:00.320 --> 0:12:03.200 Trying to look at how people are possibly going to die. 0:12:03.320 --> 0:12:06.960 What is the impact on GDP, on growth, on the 0:12:07.040 --> 0:12:09.839 resumption of people back into their jobs as a result 0:12:09.920 --> 0:12:12.160 of some of these storms. You know, I will tell 0:12:12.160 --> 0:12:13.960 you when we go back and look and trying to 0:12:14.080 --> 0:12:18.960 ascertain the impact of any particular storm. Um, you know, 0:12:19.000 --> 0:12:20.760 you can go back and you look at Katrini, you 0:12:20.800 --> 0:12:23.080 can look at Sandy, and those were much much bigger 0:12:23.080 --> 0:12:26.200 in magnitude. I'm not arguing that the suffering going on 0:12:26.320 --> 0:12:28.960 by people right now isn't real and isn't important. It is, 0:12:29.400 --> 0:12:32.080 but the magnitude of it in terms of the population, 0:12:32.160 --> 0:12:35.640 the breath of the economy involved in that are substantially greater. 0:12:35.679 --> 0:12:38.280 I don't expect to see much of a real statistical 0:12:38.320 --> 0:12:41.200 impact at the macro level. At the micro level, to 0:12:41.240 --> 0:12:43.720 a certain extent, you wind up seeing a lot of 0:12:43.760 --> 0:12:47.280 the expense expenses that have come to recover from that 0:12:47.559 --> 0:12:50.400 wind up driving the economy back to fill that void. 0:12:50.520 --> 0:12:53.320 Very very quickly, which is why statistically we don't see 0:12:53.360 --> 0:12:55.440 it on a quarterly basis. You'll see it in some 0:12:55.520 --> 0:12:57.600 of the regional monthly numbers, but you won't see it 0:12:57.600 --> 0:12:59.960 in the quarterly data. Stave good ahead from you at 0:13:00.000 --> 0:13:02.880 don't try g d pet The message from statehot the 0:13:04.400 --> 0:13:14.160 chief US Economists just springing Steve chevaron and continue this conversation, 0:13:14.240 --> 0:13:16.400 so con federate to them. I support folio. I managed 0:13:16.440 --> 0:13:18.880 to join just now, Steve, let's build on this. Do 0:13:18.920 --> 0:13:23.160 you think we can get infrastructure down down at day's sake? Oh? Yeah, 0:13:23.200 --> 0:13:24.760 I think. Look, I think the BI part is an 0:13:24.760 --> 0:13:28.040 infrastructure bill. You know, there's certainly a clear path for that. 0:13:28.080 --> 0:13:30.680 I think when you start thinking about the three and 0:13:30.679 --> 0:13:33.880 a half trillion dollar kind of softer infrastructure plan, I 0:13:33.880 --> 0:13:36.400 think there's a lot more uncertainty there, and there's still 0:13:36.440 --> 0:13:38.800 a battle between the progressives and the model. But I 0:13:38.840 --> 0:13:41.440 think we've got a pretty clear track over the course 0:13:41.440 --> 0:13:43.280 of the next several months for at least that by 0:13:43.360 --> 0:13:46.880 partisan one trillion dollar bill. You know, I would say, though, John, 0:13:46.960 --> 0:13:49.800 I I could go a little while without one of 0:13:49.800 --> 0:13:52.319 these five hundred year events between you know, once in 0:13:52.520 --> 0:13:55.200 every five hundred year plague. You know, once in every 0:13:55.200 --> 0:13:57.120 five d years storm. I think we've had our fill 0:13:57.200 --> 0:13:59.000 for a while. Let let's let's just calm down for 0:13:59.040 --> 0:14:02.240 a while. It's carried over Steve to your great abilities 0:14:02.280 --> 0:14:05.840 to asset allocate. How do you sset allocate into a 0:14:05.920 --> 0:14:11.440 once every five hundred years fiscal stimulus? Yeah, I mean, look, 0:14:11.480 --> 0:14:13.840 and it's even been a little bit more complicated because 0:14:13.840 --> 0:14:17.079 I think the way you you historically would allocate into 0:14:17.120 --> 0:14:19.480 a stimulus or a large stimulus as you want to 0:14:19.480 --> 0:14:22.040 be long in terms of cyclicals, you want to be 0:14:22.120 --> 0:14:24.360 short on duration on the bond side. And that's been 0:14:24.400 --> 0:14:26.480 the way that we've been positioned for the better part, 0:14:27.080 --> 0:14:30.320 you know, the last almost year. However, that really hasn't 0:14:30.360 --> 0:14:33.920 worked since since since May, and and that's been because 0:14:34.440 --> 0:14:36.920 you know, you've had this resurgence of covid um and 0:14:36.920 --> 0:14:38.960 and that's kind of put a damper on some of 0:14:39.080 --> 0:14:42.840 those animal spirits. With those hospitalizations starting to peak, uh 0:14:42.920 --> 0:14:45.040 and renewed spending likely to come, we think that that 0:14:45.120 --> 0:14:47.800 trade can reassert itself, but you've had to have been 0:14:47.800 --> 0:14:49.760 patient with it because it really hasn't worked over the 0:14:49.840 --> 0:14:51.880 last couple of months. What's that is most important to you. 0:14:51.880 --> 0:14:53.920 And I'm thinking about this as you talk about some 0:14:53.960 --> 0:14:56.720 of the biblical types of events that we've had and 0:14:56.760 --> 0:14:58.960 the idea that we've seen that reflected in some sentiment 0:14:59.000 --> 0:15:01.040 surveys that have been coming off recently. I mean, what 0:15:01.280 --> 0:15:07.280 catches your attention and makes you rethink perhaps a bullish outlook, Well, 0:15:08.240 --> 0:15:10.800 you know, consumer confidence coming down a little bit. I 0:15:10.800 --> 0:15:13.880 think it is something to watch. It did that last 0:15:13.960 --> 0:15:15.600 year going into the fall, so that was a little 0:15:15.600 --> 0:15:17.920 bit of a head fake. But you know, confidence is important. 0:15:18.000 --> 0:15:20.520 It's the middle syllable of economy, so we are watching 0:15:20.520 --> 0:15:23.440 that closely. I think we're likely to get more certainty 0:15:23.600 --> 0:15:26.280 and confidence over the course of the next couple of months, 0:15:26.320 --> 0:15:28.440 and I think it really starts with tomorrow's jobs report. 0:15:28.920 --> 0:15:31.600 If that job's report is at least reasonable, I think 0:15:31.640 --> 0:15:34.360 that clears the way for the FED to maybe announced 0:15:34.360 --> 0:15:36.680 taper as soon as September, and then we know the 0:15:36.720 --> 0:15:38.160 rules of the game, you know, at least for the 0:15:38.200 --> 0:15:40.800 next let's call it six or nine months. So that's 0:15:40.800 --> 0:15:43.200 the thing I'm really watching state just quickly. This is 0:15:43.240 --> 0:15:46.280 a line from Bill Gross his quote a ready out 0:15:46.280 --> 0:15:47.920 for you, and he's probably had better be dumb with 0:15:48.000 --> 0:15:50.760 digit plus arrass that could join the garbage truck. Are 0:15:50.800 --> 0:15:54.800 you expecting decent ernings cross, Steve, absolutely, we had. We 0:15:54.840 --> 0:15:59.520 had UH record margins in the second quarter. Earning's estimates 0:15:59.520 --> 0:16:01.800 are moving. Are companies are able to pass on price 0:16:01.840 --> 0:16:04.040 and the price that they took? You know, they're not 0:16:04.080 --> 0:16:07.800 giving back. So I think companies are navigating these once 0:16:07.840 --> 0:16:11.320 in a five year events, you know, extra extraordinarily. Well. 0:16:11.320 --> 0:16:13.680 I think they'll continue to do so, Steve got ahead 0:16:13.720 --> 0:16:16.000 from you, Steve Cheffer and federate today and put Filio 0:16:16.080 --> 0:16:25.760 manager Pausania and Tom Keane with a lovely David Rosenberg 0:16:25.840 --> 0:16:30.520 this morning with the Dow up a hundred and seventeen points, David, 0:16:30.800 --> 0:16:36.280 you are the best I know it parsing inflation of 0:16:36.320 --> 0:16:42.520 our audience worldwide says this is serious inflation. Why does 0:16:42.560 --> 0:16:48.720 the FEDS say no, it's not. I think the FED 0:16:48.840 --> 0:16:53.320 is telling you that we do have UH an inflation 0:16:53.400 --> 0:16:58.320 burst that's caused by all the distortions in and around 0:16:59.240 --> 0:17:03.600 the pandemic, which clearly hasn't gone away, and the supplied 0:17:03.840 --> 0:17:07.159 chain issues, and they were fasturbated, of course by the 0:17:07.200 --> 0:17:11.399 gargantean fiscal stimulus we had back in the second quarter. 0:17:11.760 --> 0:17:15.159 What the Feds telling you is that they don't believe 0:17:15.400 --> 0:17:18.359 that it's going to be a permanent situation. And I 0:17:18.359 --> 0:17:20.960 think it's probably probably the most important thing Powell said 0:17:21.760 --> 0:17:25.920 on Friday was the risk of making a policy mistake. Uh, 0:17:25.960 --> 0:17:29.600 you know, not by falling behind the proverbial curve that 0:17:29.680 --> 0:17:32.040 a lot of people are talking about. Uh, you know, 0:17:32.119 --> 0:17:34.480 keeping in mind that what the said does today has 0:17:34.520 --> 0:17:38.120 its maim an impact at least a year down the road. Um. 0:17:38.200 --> 0:17:40.359 And if they're prevailing view was that this is a 0:17:40.400 --> 0:17:45.879 temporary inflationary situation. Uh, they're not going to start to 0:17:46.359 --> 0:17:51.440 tighten policy disturbed demand growth if they believe that inflation 0:17:51.600 --> 0:17:54.680 is going to And I think that's really it's it's 0:17:54.680 --> 0:17:58.240 really the state not inflation here. It's really is a 0:17:58.320 --> 0:18:01.320 temporary or permanent that's the debate. Well, my inflation is 0:18:01.359 --> 0:18:04.080 add to buy impair of glasses yesterday for afterthought, and 0:18:04.119 --> 0:18:07.840 it was painful. David, Are we seeing incomes go up 0:18:07.880 --> 0:18:11.639 to match the inflation and the prices going up? No? 0:18:11.840 --> 0:18:14.480 In fact, you know when you're taking a look for example, 0:18:14.840 --> 0:18:18.000 and then we'll get a fresh number tomorrow obviously, Uh, 0:18:18.560 --> 0:18:23.879 real hourly and weekly earnings and real terms are actually declining. 0:18:24.800 --> 0:18:27.320 And so what's happening against that backdrop, which nobody talks 0:18:27.320 --> 0:18:30.400 about because everybody's got inflation on the brain, is they're 0:18:30.400 --> 0:18:33.679 not talking about what's happened in real economic activity. And 0:18:33.720 --> 0:18:35.720 you know, we have we have a consensus that is 0:18:35.760 --> 0:18:39.000 stubbornly near seven percent growth for the third quarter. I 0:18:39.040 --> 0:18:41.400 don't know how you get there when you have real 0:18:41.400 --> 0:18:45.960 consumer spending already built into the third quarter that's actually flat. 0:18:46.960 --> 0:18:49.960 Uh so so real. So this is what's different really 0:18:50.000 --> 0:18:54.959 about the nineteen seventies when you had radical unionization, pretty well, 0:18:55.000 --> 0:18:57.520 everybody had a cola clause, so you were fully protected 0:18:57.520 --> 0:19:00.159 against inflation. That's how you got the weights priced by all. 0:19:01.000 --> 0:19:04.600 That's not going to exist today. Uh, And so I 0:19:04.640 --> 0:19:06.720 think that what's going to happen here is that you 0:19:06.720 --> 0:19:10.840 know what what what prices companies want to impose on 0:19:11.040 --> 0:19:14.720 the consuming public. Uh, those price increases won't be able 0:19:14.720 --> 0:19:18.520 to stick so long as wages lagged behind. And really 0:19:18.560 --> 0:19:21.520 that's exactly what's happening. And Paul, the real economy issue 0:19:21.560 --> 0:19:24.480 here is so true. And that Paul, you know you're 0:19:24.520 --> 0:19:27.040 better at this than I am. There's essentially two economies 0:19:27.040 --> 0:19:30.359 out there, there's everything else and there's the giga text, 0:19:30.720 --> 0:19:33.359 and it's like two separate worlds, two separate worlds. The 0:19:33.400 --> 0:19:36.200 real folks are seeing inflation at there. And and David 0:19:36.320 --> 0:19:38.399 is interesting when we get the job's report tomorrow of 0:19:38.520 --> 0:19:41.280 interesting to again, just a lot of numbers to part 0:19:41.560 --> 0:19:45.439 and we talk about wage inflation. UM. Even pre pandemic, 0:19:45.440 --> 0:19:48.280 when we were at quote unquote full employment or thereabouts, 0:19:48.600 --> 0:19:50.960 we only had you know, wage inflation of three three 0:19:50.960 --> 0:19:53.680 and a half percent. Is there something structural in this 0:19:53.760 --> 0:19:57.320 economy here in terms of the job makeup that just 0:19:57.600 --> 0:20:03.040 doesn't allow for meaningful inflation and in terms of wages. Well, uh, 0:20:03.119 --> 0:20:06.240 I think that again, that's something that Powell talked about 0:20:06.280 --> 0:20:08.840 on Friday, and I'm glad he did, which talked about, 0:20:09.359 --> 0:20:11.880 you know, the secular forces at play that are still 0:20:11.960 --> 0:20:15.919 very disinflationary. And look when you go back to the 0:20:16.000 --> 0:20:18.440 last cycle, and you go back to two thousand and ten, 0:20:18.440 --> 0:20:23.119 two thousand eleven, we had early cycle uh inflationary pressures 0:20:23.320 --> 0:20:25.680 um and the same people are saying the same thing. 0:20:25.760 --> 0:20:29.760 The FED didn't start the snug policy till two and fifteen, UH, 0:20:29.800 --> 0:20:33.280 and so you know, we've had the situation where you know, 0:20:33.320 --> 0:20:36.640 we have the pandemic. Uh, the incoming data have been 0:20:36.680 --> 0:20:40.760 six times more volatile than they've been historically. And that 0:20:41.000 --> 0:20:42.440 tells me that you have to take a grain of 0:20:42.520 --> 0:20:47.080 sault in both directions. Um. But yeah, I would say that, UM, 0:20:47.320 --> 0:20:49.680 that is still I think one of the big differences 0:20:49.720 --> 0:20:53.960 between now uh and the nineteen seventies is you don't 0:20:53.960 --> 0:20:58.200 have a labor market that is as protected through unionization 0:20:58.400 --> 0:21:02.440 antro coal of pauses today that we had back then. Look, 0:21:02.480 --> 0:21:05.040 there's there's no doubt that there's been shortages in some 0:21:05.160 --> 0:21:09.360 critical sectors. Um. You know critical well, I guess mostly leisure, hospitality, 0:21:09.359 --> 0:21:14.280 and retail. Um. That's not a predominant share of of 0:21:14.359 --> 0:21:17.639 the labor market. But companies have been competing with the 0:21:17.680 --> 0:21:21.879 government for employment because you know, you've been paid in 0:21:21.920 --> 0:21:24.600 these sectors, you know, not to go to work. So 0:21:24.680 --> 0:21:27.720 let's I say, let's let's keep it open mind. Uh. 0:21:27.760 --> 0:21:31.280 You know, we're we're already pretty well on the precipice 0:21:31.320 --> 0:21:35.840 of seeing uh, you know, these generous extended federal benefits 0:21:36.000 --> 0:21:39.160 roll off, uh, and we'll start to see I think 0:21:39.200 --> 0:21:42.280 greater competition for the job openings out there. And the 0:21:42.320 --> 0:21:44.560 one thing we know about competition is that it tends 0:21:44.600 --> 0:21:47.800