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Speaker 3: So here's the latest this morning.
Speaker 2: The future of the Federal Reserve in focus as investors
Speaker 2: anticipated policy changes once former Fed Governor Kevin Walsh returns
Speaker 2: to the Central Bank, joining us now to discusses. Mark Short,
Speaker 2: the former chief of staff, the former Vice president, Mike Pence, Mike,
Speaker 2: welcome back to the program. Let's go through some of
Speaker 2: the details and some of the endorsements we've had over
Speaker 2: the past few days. Geta Gopinath, Mohammad Dalerian, the prim
Speaker 2: Mistry of Canada, Mark Carney, and the list goes on
Speaker 2: and on and on. Is Kevin Walsh a pretty conventional
Speaker 2: Republican pick to lead the Federal Reserve.
Speaker 4: Look, I think he is He's somebody who's been on
Speaker 4: the Reserve before, and I think that of the options,
Speaker 4: it's a pretty strong pick for the president. I know
Speaker 4: there's some people who question, you know, what these hearings
Speaker 4: are going to be like when he gets there because
Speaker 4: of positions he took against quantitative easying after the financial
Speaker 4: crisis and reconciling that with a very dubbish approach. Now.
Speaker 4: But look, if the Senate can confirm Tulsa Gavard and
Speaker 4: he and I and Christy Noman at DHS, I don't
Speaker 4: think it's going to be much of a challenge for
Speaker 4: them to confirm Kevin Warsh here to the Fed.
Speaker 5: Mark, you were in the room in Trump won when
Speaker 5: the debate was going on who Trump was going to pick,
Speaker 5: and he ultimately landed on Minuchin's pick of j Powell,
Speaker 5: which I know was not VP Mike Pence's choice. What
Speaker 5: do you think went behind this process why Kevin Walsh
Speaker 5: was picked and not the other Kevin.
Speaker 4: Well, Look, I think there were basically three finalists in
Speaker 4: the last go round. There's Jay Powell, there was Kevin
Speaker 4: Warrish and there's John Taylor, and I think that there
Speaker 4: were different camps aligned with each But the reality is
Speaker 4: that Steve Manuchin made the appeal to the president. Then
Speaker 4: when the President asked, he said who's going to keep
Speaker 4: rates lower? And Mnuchin was clear and saying it would
Speaker 4: be Jay Powell. And I think that's what the President
Speaker 4: was looking for. It was less of a question about
Speaker 4: sound monetary policy. It was a question of who's going
Speaker 4: to push for lower rates. And I mean there's an irony,
Speaker 4: of course now that the President is upset with j
Speaker 4: Powell for not having rates lower, But I have to
Speaker 4: believe that there's been you know, that same conversation is
Speaker 4: repeated itself this go round, and I think there's probably
Speaker 4: been assurances that wars is going to adopt the doublest
Speaker 4: approach here.
Speaker 5: But that's why it's so precarious, given the fact that
Speaker 5: when he was at the FED, he actually was calling
Speaker 5: for a hawkish, tighter monetary policy.
Speaker 6: Do you think his views have truly.
Speaker 5: Evolved or is he trying to be politically correct in
Speaker 5: the moment.
Speaker 6: To get a job.
Speaker 4: And I don't know that I can put myself in
Speaker 4: the issues and know that I think that I do
Speaker 4: you think he has certainly the credentials here? Again, as
Speaker 4: I said, of the options, I think there's probably a
Speaker 4: lot of comfort on the street and comfort in the
Speaker 4: Senate that this is where the president landed and he's gone.
Speaker 4: He is going to have to address the apparent change
Speaker 4: in position from where he was after the financial crisis
Speaker 4: to where he is today. But nonetheless, I think that
Speaker 4: he's going to have a term that's going to extend
Speaker 4: far beyond President Trump's term, and so he perhaps is
Speaker 4: playing a long game here too.
Speaker 1: Mark, I'd love your take on what we heard from
Speaker 1: Tom Tillis, the North Carolina Senator who seems to not
Speaker 1: care at all since he's not running for reelection and
Speaker 1: it is going to block the process until the DOJ
Speaker 1: lawsuit or complaint against the FED is lifted. Do you
Speaker 1: think that he has more popular support among sitting Republicans
Speaker 1: than he did maybe a couple of weeks ago, not
Speaker 1: just with this, but in general.
Speaker 6: He probably does.
Speaker 4: I think there are others who were applauding some of
Speaker 4: the positions he's taking, but feel they can't take the
Speaker 4: same because they'd be concerned about their own reelection options.
Speaker 4: But you know, I think that as it comes to
Speaker 4: you know, he's going to block this until the investigation
Speaker 4: is concluded.
Speaker 6: On Trump Powell.
Speaker 4: I think most people assume the investigation Droom Powell is
Speaker 4: less on the merits and more in effort to pressure
Speaker 4: the Fed to lower rates. And so at the end
Speaker 4: of the day, is the White House going to say
Speaker 4: we're going to continue investigation 're going to say, hey,
Speaker 4: we've got our own guy now to run the Fed,
Speaker 4: so let's pull back on the investigation. It seems like
Speaker 4: at the end of the day, it seems to me
Speaker 4: that this is not something that's going to continue in
Speaker 4: the next year, as potentially the President suggested, you know,
Speaker 4: on Air Force One the other night.
Speaker 6: It seems to me.
Speaker 4: They'll they'll definitely be in a desire to pull back
Speaker 4: on the investigation to allow this to move forward.
Speaker 1: I guess I was getting at something bigger, especially because
Speaker 1: we are in midterm year where we're going to be
Speaker 1: getting a government shutdown evidently every two weeks. And I'm
Speaker 1: just wondering, Mark, going forward, at what point you start
Speaker 1: to see Republicans look at either distancing themselves from President
Speaker 1: Trump's policies. Are you seeing any groundsful of the especially
Speaker 1: after the special election in Texas after the midterm outcomes.
Speaker 6: Are you seeing anything like that or.
Speaker 1: Is it sort of a case by case situation.
Speaker 4: I think it's more case by case, but I think
Speaker 4: it's going to continue to ramp up, I would say,
Speaker 4: over the course of the year.
Speaker 6: And it's not just taxes.
Speaker 4: I mean, there's been a series of special elections in
Speaker 4: deep red states of Mississippi and Georgia in which Republicans
Speaker 4: have been defeated, and so there's clearly a trend building
Speaker 4: at this point, and there's no doubt that other Senate
Speaker 4: Republicans are recognizing that. However, they also know that the
Speaker 4: president has enormous way over the base and particularly in primaries,
Speaker 4: and so I would look to see more Republican centers
Speaker 4: distance themselves after you get through primary season, but being
Speaker 4: reluctant to do so until they've secured their notation and
Speaker 4: then that's that's behind them. So yeah, till Us is
Speaker 4: a different position, don't I don't anticipate you can see
Speaker 4: too much more of that in the short term, but
Speaker 4: perhaps you know, toward the summer months, I think his
Speaker 4: members look toward the general election in November, and they're
Speaker 4: behind their primaries. That's when you begin to see more
Speaker 4: members begin did perhaps take positions similar.
Speaker 6: To Tillis Mark.
Speaker 5: On a final note on Kevin Warsh, the President spoke
Speaker 5: at a dinner over the weekend. I'm reading a quote
Speaker 5: Washington Post. Had someone in the room actually said to me,
Speaker 5: all of this is accurate.
Speaker 6: Quote.
Speaker 5: If he doesn't lower interest rates, I'm suing his ass off.
Speaker 5: And then the President says, I'm kidding.
Speaker 6: Mark.
Speaker 5: Do you think he's actually kidding or is Kevin Warsh
Speaker 5: potentially going to face the same fate as Jay Powe
Speaker 5: if he doesn't lower interest rates.
Speaker 4: Well, I think he would face the same fate if
Speaker 4: he didn't lower interest rates. But again, I think this
Speaker 4: process has played off for a while. It's pretty hard
Speaker 4: for me to see that the President would not have
Speaker 4: moved forward this nomination as he had pretty strong assurances
Speaker 4: that the Warsh was looking to lower rates when he
Speaker 4: got there, and so so yeah, I think he would.
Speaker 4: If he didn't, I think he would face.
Speaker 6: This pressure from the president.
Speaker 4: I think for president somebody who likes lower rates for
Speaker 4: lots of reasons. He made his resources in real estate.
Speaker 4: The president believes that it's better for exporting and for
Speaker 4: a manufacturing base if the dollar is depreciated, and I
Speaker 4: think he knows the impact on equity markets when rates
Speaker 4: are lower, and so I think he wants to continue
Speaker 4: to push for that agenda regardless of who the personnel
Speaker 4: are inside the FED.
Speaker 2: Stay with us more Bloomberg Surveillance coming up after this.
Speaker 2: Andrew Honjost of City says this the employment data is
Speaker 2: unlikely to maturely change the outlet for the labor market.
Speaker 2: We expect a solid one thirty five added in January
Speaker 2: and the unemployment rate remaining unchanged at four point four percent. Andrew,
Speaker 2: that puts you at the top end of the estimates
Speaker 2: for this coming Friday.
Speaker 3: Walk us through why.
Speaker 2: You're looking for that, but also looking for seventy five
Speaker 2: basis points have counts through the year.
Speaker 7: Yeah, top end of the estimates in terms of where
Speaker 7: that payrolls numbers.
Speaker 6: Are going to be.
Speaker 7: But it goes back to what so as talking about,
Speaker 7: what you're all talking about, which is what does this
Speaker 7: data really tell us about what's going on in the
Speaker 7: labor market.
Speaker 6: So we know we have these issues with the birth
Speaker 6: death model. I would actually.
Speaker 7: Agree with Steve Englander that if we get a big
Speaker 7: update to that birth death model, you could get a
Speaker 7: zero or negative number, and I think that's where the
Speaker 7: underlying pace of job growth is running somewhere right around zero.
Speaker 7: And that's what we had Governor Waller talking about in
Speaker 7: his descent from the Fed staying on hold last week.
Speaker 6: So it's a complex.
Speaker 7: Job market is a complicated situation and complicated data. But
Speaker 7: I would go back to that survey that the Conference
Speaker 7: Board puts out and they just ask people do you
Speaker 7: think jobs are plentiful or do you think jobs are
Speaker 7: hard to get? And month after month people are telling
Speaker 7: us jobs are becoming harder and harder to get. So
Speaker 7: I think it is a loosening labor market. Lots of
Speaker 7: statistical issues. Residual seasonality used to be something people would
Speaker 7: look at me very funny when I said, Now people
Speaker 7: are all.
Speaker 6: Familiar with it.
Speaker 7: Every year we get stronger jobs data at this time
Speaker 7: of year, building that into our forecast.
Speaker 6: That's why we have one hundred thirty five.
Speaker 3: What do you think, Braakie, what's the break even? Right?
Speaker 7: I think the break even rate with the way that
Speaker 7: the data are adjusted now, it seems like we can
Speaker 7: run about fifty thousand jobs per month and fifty thousand
Speaker 7: jobs per month as reported by payrolls is leading the
Speaker 7: unemployment rate to stay stable where it is, But there
Speaker 7: is a question about that fifty thousand should be subtracting
Speaker 7: something like sixty thousand from it because those payrolls numbers
Speaker 7: keeping overstated. We'll get more information about that today or
Speaker 7: on Friday when we get the new report. So that
Speaker 7: break even has slowed down. But again, I think the
Speaker 7: key thing here is do we call a job market
Speaker 7: strong if we have essentially zero increase in labor supply
Speaker 7: and zero hiring. I don't think that's a strong job
Speaker 7: labor market.
Speaker 1: Can you have a strong economy though, if you don't
Speaker 1: have a strong labor market. I mean this has been
Speaker 1: sort of a feature of the entire market for a while.
Speaker 1: The labor market has been sluggish at best, and yet
Speaker 1: the economy has continued to grow pretty dramatically. So at
Speaker 1: what point does that become a hamper potentially to any
Speaker 1: kind of their acceleration.
Speaker 6: Yeah, I think eventually it does.
Speaker 7: Mean there's growth, and then there's whether it's broad based
Speaker 7: growth or fairly focused growth. And to the extent that
Speaker 7: we're getting growth from things that are AI related software
Speaker 7: and data centers. A lot of those kinds of areas
Speaker 7: of investment spending don't actually generate a lot of new jobs,
Speaker 7: and so that eventually becomes an issue for the economy.
Speaker 7: In the short term, you run strong growth and you
Speaker 7: can have weaker labor market. I think that's what we're
Speaker 7: seeing right now. But eventually people don't have the wage
Speaker 7: income to purchase. And if you look at consumer spending,
Speaker 7: it's holding up, but it's holding up because the savings
Speaker 7: rate keeps going down. People are saving less and less
Speaker 7: because their incomes aren't tracking with that consumption.
Speaker 6: So eventually it's an issue for the economy.
Speaker 8: You still think that.
Speaker 1: The FED is on track to cut by seventy five
Speaker 1: basis points this year, even with Kevin worsh potentially being
Speaker 1: the FED share Why not more given some of the
Speaker 1: proclamations that we've heard from certainly President Trump as well
Speaker 1: as Kevin Walsh, and considering the weakness that you see
Speaker 1: in the labor market, I think.
Speaker 7: The risks are that we do end up with more
Speaker 7: cuts than seventy five basis points rather than less cuts
Speaker 7: than seventy five basis points. The reason I think seventy
Speaker 7: five makes sense as a base case is although the
Speaker 7: labor market is softening and loosening, it's happening very gradually.
Speaker 7: So if we just project out that gradual loosening of
Speaker 7: the labor market, the unemployment rate will move up just
Speaker 7: a bit this year, Inflation will come down a bit
Speaker 7: this year, and that would mean that the Fed should
Speaker 7: just ease policy rates by a bit this year back
Speaker 7: to something closer to neutral, which fifty seventy five basis
Speaker 7: points lower be neutral.
Speaker 6: I think that should be the base case.
Speaker 7: The market has about fifty I have about seventy five.
Speaker 6: But what's the risk.
Speaker 7: The risk is that when you're in an environment where
Speaker 7: hiring is so weak, if there's any pickup in layoffs,
Speaker 7: that unemployment rate is going to shoot up and then
Speaker 7: we'll get more cuts.
Speaker 5: Well, you haven't changed your expectation even though we have
Speaker 5: a new nomination for the FED. So do you think
Speaker 5: Kevin Walsh is going to be data dependent?
Speaker 6: Given what you're.
Speaker 8: Basing this off?
Speaker 3: Is the data that you expect to come out?
Speaker 7: It's I mean, it's not just Kevin Warsh And I
Speaker 7: think that's an important point that it's the committee as
Speaker 7: a whole.
Speaker 6: That committee has been data dependent.
Speaker 7: I do expect Kevin Warsh as an individual to be
Speaker 7: data dependent as well, So depending on where that inflation
Speaker 7: data comes in in the second half, and I think
Speaker 7: that's really important and probably underemphasized. A lot of focus
Speaker 7: on the labor market right now, and that's appropriate, But
Speaker 7: those inflation numbers, I think by the second half are
Speaker 7: going to look closer to two percent inflation. And that's
Speaker 7: not just going to give Kevin Warreh's ability to cut
Speaker 7: interest rates. I think that will give a lot of
Speaker 7: members of the committee the confidence that they can bring
Speaker 7: right slower.
Speaker 3: What's the source of that? What's driving us back to two.
Speaker 7: Shelter cooling is where we have the most confidence. I
Speaker 7: think a lot of economists have that in their forecast.
Speaker 7: Now we just have so many indicators. It's a soft
Speaker 7: housing sector. The housing sector is soft right now. Prices
Speaker 7: are soft, rents are soft. But this loosening labor market
Speaker 7: should also give us confidence that inflation will come down further.
Speaker 6: And then finally, that.
Speaker 7: Tariff boost that we think is about fifty basis points
Speaker 7: in CPI and PCE right now, that should be dissipating
Speaker 7: by this.
Speaker 2: So let's just cover the shouts of story, because when
Speaker 2: people like you you explain the shout story, it sounds
Speaker 2: so intuitive, it sounds like common sense.
Speaker 3: Okay, you've put it that way.
Speaker 2: I can see where it's going to be several months
Speaker 2: out in the official data. Why do Federal Reserve officials
Speaker 2: not share the confidence you have about the disinflatory tail
Speaker 2: winds that are already coming down the pipeline.
Speaker 7: I think there's a difference between different Fed officials, and
Speaker 7: different officials will be different places on this where I
Speaker 7: am and maybe some of the more dubbish officials are saying, yeah,
Speaker 7: we basically can forecast this thing six months to a
Speaker 7: year in advance.
Speaker 6: We know that it's going to cool down.
Speaker 7: I think there are other Fed officials that maybe also
Speaker 7: kind of know that we can forecast that, but think
Speaker 7: that the way they should behave is if we can,
Speaker 7: because they think it's important to take a strong stand
Speaker 7: against inflation.
Speaker 6: You see three percent right.
Speaker 7: Now, and they think we're supposed to react to that
Speaker 7: three percent, not the forecast of where we're going. I
Speaker 7: react to the forecast, I think other Fed officials do.
Speaker 7: I think that's a difference of opinion in terms of
Speaker 7: how you conduct monetary policy.
Speaker 1: So in other words, this is about appearances. This is
Speaker 1: about appearing hard on inflation, even if they'll come down
Speaker 1: on the same side as the doves. In other words,
Speaker 1: do you agree with Kevin Walsh that people should just
Speaker 1: talk less and not really give forward guns.
Speaker 7: I think well, I do think forward guidance is We're
Speaker 7: probably overly used to forward guidance because we were in
Speaker 7: these strange scenarios where you had to give guidance about
Speaker 7: keeping policy rates at the lower bound for a long
Speaker 7: period of time. So we should be moving away from that.
Speaker 7: In terms of this, you know, is it kind of
Speaker 7: you know, optics talking about inflation. It's hard to make
Speaker 7: an argument that three percent inflation is a lot worse
Speaker 7: for the economy than two percent inflation. The target is
Speaker 7: two percent, so there is an optics reason that you
Speaker 7: want to be at two percent.
Speaker 6: If central banks were to do it over.
Speaker 7: Again, I think most economists would say, probably we should
Speaker 7: have had a range of inflation that would have been acceptable.
Speaker 7: So I do think it's a lot about optics right now.
Speaker 1: This is fascinating, especially because the person who is likely
Speaker 1: to come into be the next FED chair is an
Speaker 1: inflation hawk at least traditionally more than a decade ago,
Speaker 1: and people are saying people.
Speaker 8: Can change in that time.
Speaker 1: Do you think that he is also potentially going to
Speaker 1: accept three percent is a new two percent, to be
Speaker 1: more dubvish in the approach because it hasn't been a problem,
Speaker 1: and frankly, if people were to come back, that might
Speaker 1: be the more appropriate target.
Speaker 6: Yeah.
Speaker 7: I'm not suggesting, and I don't think that Kevin Warsh
Speaker 7: is going to say that three percent should be the
Speaker 7: new two percent, that we should be changing the target
Speaker 7: right now and we've just overshot for multiple years. But
Speaker 7: I do think this idea that we can't be hyper
Speaker 7: sensitive to his inflation off by a tenth of a
Speaker 7: percentage point here or there. I think the more you
Speaker 7: kind of immerse yourself in this data and understand what
Speaker 7: the data are and all the issues and producing it
Speaker 7: and the different choices that we make, it's hard to
Speaker 7: get really excited about being off by a few basis points.
Speaker 7: So I'd like to see the move in that direction.
Speaker 7: Then possibly they will.
Speaker 2: To your point, though, Manjow, I think there's a realization
Speaker 2: on the committee that they can shank the events they influence,
Speaker 2: and they can basically sit here and say, you know what,
Speaker 2: we can shank the events we anticipate by saying things
Speaker 2: like I'm not worried about inflation could actually contribute to inflation.
Speaker 2: Is that ultimately what you get and gain?
Speaker 6: Yeah?
Speaker 7: I think that that's exactly the concern. The reason I
Speaker 7: would be less concerned about that now is because we
Speaker 7: have all of these indications that we're not in an
Speaker 7: environment where we have a bunch of upside around inflation.
Speaker 7: And it is actually the opposite of where we were
Speaker 7: when FED officials were saying they weren't that concerned about
Speaker 7: inflation when everything was supposed to be transferred.
Speaker 6: We had a tight.
Speaker 7: Labor market, we had wages that were accelerating, prices that
Speaker 7: were accelerating all over the place. All of those things
Speaker 7: are decelerating now, So I think you can be a
Speaker 7: lot more confident that we're going to get inflation lower.
Speaker 3: Stay with us, mulplinbeg Savanna's coming up off to this.
Speaker 2: Join us Natsky City. The conversation Henrita triced upon us.
Speaker 2: Henriettes are welcome. Can we find an off rampay?
Speaker 8: I think we can find an off ramp.
Speaker 9: For now, we have until Tuesday, As the Speaker suggested,
Speaker 9: I'm not going to try to move things forward tonight
Speaker 9: around four or five six o'clock, I would say for investors,
Speaker 9: and you brought up the BLS data, that's huge. There's
Speaker 9: also the IRS funding that lapses, and it's tax filing
Speaker 9: season now. But when I travel around and talk to investors,
Speaker 9: one of the questions I get a lot is what's
Speaker 9: happening with the President's two thousand dollars rebate check?
Speaker 8: Are we going to get that for the tariffs?
Speaker 9: And I would encourage folks to think about the fact
Speaker 9: that we just ate all of January up on this conversation.
Speaker 9: It fell apart of the last minute, and now we
Speaker 9: need to spend all of February basically dealing with the
Speaker 9: same government funding bills and then a DHS package, and
Speaker 9: then while the State of the Union, it's basically already
Speaker 9: March and it's only February second. So for the investment community,
Speaker 9: it's really focused on what will not get done because
Speaker 9: we're not doing this, We're not getting a second reconciliation bill,
Speaker 9: we're not getting movement on other items that the President
Speaker 9: talks about quite a lot.
Speaker 5: Well, it seems like Leader Chuck Schumer, Senator from New York,
Speaker 5: cut a deal at the White House, but it doesn't
Speaker 5: seem like Minority Leader Jakeem Jeffries in the House was
Speaker 5: privy to that. How big of a gap right now
Speaker 5: is it between the Senate leaders for the Democratic and
Speaker 5: the House leader from the Democratic Party.
Speaker 9: Yeah, there definitely is a gap, and you can tell
Speaker 9: because there's not a vote for the rule. As Speaker
Speaker 9: Johnson laid out, I think the disconnect between Jeffries and
Speaker 9: Schumer is unfortunate.
Speaker 8: It will ultimately be bridged.
Speaker 9: You saw the guys right behind Jeffries, Jim Cliburn and
Speaker 9: Standi Hoyer saying that they're going to provide the votes
Speaker 9: for this package and encouraging their members to vote yes.
Speaker 8: So I think a lot of this also is to
Speaker 8: do with what we.
Speaker 9: Went through back in the original shutdown, which is really
Speaker 9: propping up potential Speaker Jeffries in advance of the next
Speaker 9: interm election cycle, giving him an opportunity to really stake
Speaker 9: the ground, get more recognition leadership from the conference on
Speaker 9: the House side. And I think that's what this is
Speaker 9: really functionally about.
Speaker 5: Okay, so Speaker Johnson can find the two hundred and
Speaker 5: eighteen votes and we get back to the government operating
Speaker 5: as normal, and we get the BLS data on Friday.
Speaker 5: They still need to figure out the DHS funding. They're
Speaker 5: going to have two weeks to do that. Do you
Speaker 5: see a deal for that new bill potentially that has
Speaker 5: to be drafted.
Speaker 9: Man, I mean, they don't even agree on whether or
Speaker 9: not I should be wearing masks or have name ideas.
Speaker 9: You know, in the weak of the shooting in Minnesota,
Speaker 9: that was just a really immediate thing that Democrats gravitated to.
Speaker 9: I think you see it out in the ether as well.
Speaker 9: If you talk to folks in Minnesota or anywhere else
Speaker 9: in the world where ice has been inserted into these cities,
Speaker 9: they talk about the masks, and they talk about IDs
Speaker 9: a lot, and video cameras as well. Getting early messages
Speaker 9: that Speaker Johnson's not going to agree to those three
Speaker 9: components suggests that we're in for a very rocky ride
Speaker 9: of the next two weeks. I'd be shocked if we
Speaker 9: were able to pull it off without having this bleed
Speaker 9: into you another two weeks.
Speaker 1: Henry, I have to say none of us I'd excited
Speaker 1: about talking about a government shutdown pretty much. You can
Speaker 1: just feel the pall of exhausted and fall over the
Speaker 1: conversation as soon as you say the two words government shutdown.
Speaker 8: I just wonder if.
Speaker 1: We're moving to a phase we can stop this kind
Speaker 1: of pinata or the sort of this kicking the can
Speaker 1: down the road.
Speaker 6: We're always talking about this.
Speaker 1: Maybe it's two weeks, maybe it's one month, maybe it's
Speaker 1: two months. Are we going to get out of this
Speaker 1: or is this the path of travel for the foreseeable future.
Speaker 9: I think welcome to a interim election year. Look at
Speaker 9: some of the special elections that just took place. There's
Speaker 9: one in Texas where the swing was thirty one points
Speaker 9: away from Donald Trump. And I think what Democrats learned
Speaker 9: in October is that as long as they can steer
Speaker 9: the message, they're winning elections. So I don't see a
Speaker 9: reason why this would necessarily stop. The goodness for investors
Speaker 9: is that once we get BLS donal with, it will
Speaker 9: be done with all the way through September thirtieth, So
Speaker 9: we could talk about DHS, but it won't necessarily be
Speaker 9: you know, hey, what we get the employment report? Hey,
Speaker 9: is the IRS going to be able to process refund
Speaker 9: checks and investors can sort of tune out a little
Speaker 9: bit the immigration narrative in an election year.
Speaker 8: I mean, come on, that's that's the tale as old
Speaker 8: as time.
Speaker 6: Now.
Speaker 1: There's a sense also that maybe President Trump is looking
Speaker 1: for more concessions when it comes to not just getting
Speaker 1: the budget through, but also getting his new FED chair
Speaker 1: picked through, and there is a potential for or maybe
Speaker 1: the lawsuit to be dropped against fedcher J. Powell about
Speaker 1: the renovations. I'm just wondering how realistic you see that
Speaker 1: process in being stymide, whether you do see a potential
Speaker 1: path to get Kevin Warrish as the FED chair by may.
Speaker 9: You know, I've been working with Senator Tillis's staff for
Speaker 9: a really long time now.
Speaker 8: They have very high conviction.
Speaker 9: I do not think he is messing around When he
Speaker 9: says I want this case drops and it will block
Speaker 9: all other nominees and all other considerations at the FED,
Speaker 9: you should take that very seriously. So he's going to
Speaker 9: need to get that concern addressed. We have many months
Speaker 9: before we actually need to replace Ja Powell, and they're
Speaker 9: going to probably take all of those months.
Speaker 8: The President will have to capitulate.
Speaker 9: We saw the market's respond sufficiently to give him a
Speaker 9: message that he needs to drop this lawsuit. Jay Powell
Speaker 9: delivered a very forceful rebuttal to that in real time,
Speaker 9: as we all saw from that video. I would take
Speaker 9: that incredibly seriously. I don't think Speaker Senator Tillis is
Speaker 9: going to get rolled on this in any way, shape
Speaker 9: or form. He's just getting louder if anything else. I
Speaker 9: think they will need.
Speaker 8: To address that. It'll probably take some time.
Speaker 5: And he made that point when he joined us on
Speaker 5: Friday Henrietta. But once the DOJ investigation does get wrapped up,
Speaker 5: and once likely Kevin worsh gets through his Senate Banking Committee,
Speaker 5: how does he play on the floor. Do you think
Speaker 5: Democrats vote for him as FED chair?
Speaker 8: I think so.
Speaker 9: I think you'll have a lot of aisle crossing. I
Speaker 9: think that is generally the direction of travel here. With
Speaker 9: this particular nominee, you probably would have seen much fewer votes,
Speaker 9: maybe even a fifty to fifty split on a Kevin.
Speaker 8: Hassett, for example.
Speaker 9: But judging by the temperature of what I picked up
Speaker 9: this weekend from staff on the Democratic side, there are
Speaker 9: going to be some lingering questions. There's a lot of
Speaker 9: random stuff in there. But as somebody who's already been
Speaker 9: in a similar position, has already gone through these approval processes,
Speaker 9: I think that he's on a path to getting back
Speaker 9: person support.
Speaker 5: Right in two thousand and sixty, he had a voice
Speaker 5: vote and he pretty much sailed through unanimously to join
Speaker 5: the FED. And Henriette, I just wanted to end on
Speaker 5: this point because you sort of mentioned it earlier, what
Speaker 5: went on in Texas over the weekend. I know it's
Speaker 5: just a state a state Senate seat, but how this
Speaker 5: Democrat won in a plus seventeen Trump district when he
Speaker 5: was outspent and outraised money wise. Is this a harbinger
Speaker 5: do you think for the midterm? So is this just
Speaker 5: a special election?
Speaker 9: It is a special election, but those the midterm cycle
Speaker 9: and this pre pre mid term that we're in right now,
Speaker 9: we've been in since November, is highly predictive of electoral outcomes.
Speaker 9: And one of the things that I've been concerned about
Speaker 9: for Republicans all year is their effort to redistrict.
Speaker 8: Redistricting is all.
Speaker 9: Fine and well, you do not do that in a
Speaker 9: waveyear because Dems have already wiped away the potential advantage.
Speaker 9: I think it's one seat here or there that you
Speaker 9: might see any kind of plus up versus what was
Speaker 9: happening when we started this year.
Speaker 8: Now you're looking at a wave election.
Speaker 9: They've diluted their districts so they're not solid red anymore.
Speaker 9: They tried to eat into some of the blue spots.
Speaker 9: You're getting a plus thirty one in the DEM favor
Speaker 9: trajectory in a state seat in Texas.
Speaker 8: You got a problem.
Speaker 9: So the primaries I think are really fascinating to watch
Speaker 9: right now, between Cornyn and Paxton, for example, how that's
Speaker 9: going to play out and what it's setting up for
Speaker 9: the general I think is going to be really exciting
Speaker 9: for anybody who cares about elections to watch.
Speaker 8: Those are big swings we're talking about.
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