Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.
Speaker 1: Along with my co host Lisa Bramowitz. Each day we
Speaker 1: bring you the most important, noteworthy, and useful interviews for
Speaker 1: you and your money, whether you're at the grocery store
Speaker 1: or the trading floor. Find the Bloomberg p m L
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. President
Speaker 1: Trump tweeting Google search results for Trump News shows only
Speaker 1: the viewing slash reporting of fake news media. In other words,
Speaker 1: they have it rigged for me and others so that
Speaker 1: almost all stories and news is bad. Fake CNN is
Speaker 1: prominent Republican conservative, and fair media is shut out. Illegal
Speaker 1: results on Trump News are from that give me a
Speaker 1: look him. I'm gonna keep reading it because it's all
Speaker 1: just seconds ago. And this address is our next discus Sushian,
Speaker 1: which is Google and Searches. Basically, it concludes with this
Speaker 1: is a very serious situation. Will be addressed. Shara Overday,
Speaker 1: Bloomberg Opinion technology columnists joining us now. Google Shares didn't
Speaker 1: initially respond much to President Trump's earlier comments on this,
Speaker 1: but then did after his economic advisor Larry Cutlos, the
Speaker 1: White House was examining this, what do you make of this? Well,
Speaker 1: there's a lot to unpack their I mean, look, the
Speaker 1: core of the president's tweet there is that he believes
Speaker 1: legitimate news sources, including CNN, are biased against him. Right,
Speaker 1: so his beef is really with CNN and with other
Speaker 1: legitimate news sources, not necessarily with Google. Although what he's
Speaker 1: pointing out right is that Google is surfacing legitimate news
Speaker 1: about him. Uh, and he doesn't like that. So look,
Speaker 1: I get it. But also the problem is that this
Speaker 1: is now Google problem. Well, Google actually released a statement
Speaker 1: talking about the algorithms that it has to generate these
Speaker 1: search results. How do they determine that? I mean it
Speaker 1: could there be even political motivation here. So the problem
Speaker 1: is that there is a germ of truth in what
Speaker 1: the president says, which is that the ways that Google
Speaker 1: and Facebook to surface news and information is by design
Speaker 1: a black box that we don't know, We on the
Speaker 1: outside don't exactly know how Google determines these ten blue
Speaker 1: links will appear higher than those ten blue links. And
Speaker 1: you know that again, the black box algorithms of those
Speaker 1: companies makes it more likely for people to believe, rightly
Speaker 1: or wrongly, that the information surface by Google or Facebook
Speaker 1: has some bias inherent in it, and it's algorithms are biased.
Speaker 1: The question is is it biased against conservative voices like
Speaker 1: the resident And I don't think that's the case. Sure,
Speaker 1: can search results be manipulated by third parties? I mean manipulated?
Speaker 1: Is um boy that it's a little bit of a
Speaker 1: skewed word. Look, they're legitimate ways, including search engine optimization
Speaker 1: tactics right, to make to make certain web links appear
Speaker 1: higher in Google search results, right, And we I mean
Speaker 1: that would not have anything to do with Google. That
Speaker 1: would have to do with third parties that, for whatever reason,
Speaker 1: they want a certain product or service that's listed higher,
Speaker 1: so that when you type in the name of let's
Speaker 1: say you want an air fair, then it will take
Speaker 1: you there. Right. So if you google, you know, running
Speaker 1: shoes Brooklyn. Right. There are companies that make sure that
Speaker 1: their websites are optimized at a certain and you can
Speaker 1: buy and you can buy keywords. All that's a different issue, right,
Speaker 1: that's more about paid ads on Google rather than surfacing
Speaker 1: content on their own. So yeah, there is some um
Speaker 1: ways to game the system, legitimate and illegitimate ways to
Speaker 1: game the system. But again, what the President is talking about,
Speaker 1: is UM is gaming the system for political reasons? And
Speaker 1: again I just don't think that's happening. But it's part
Speaker 1: of this broader complaints that we've heard more recently than
Speaker 1: than previous years about bias by US Internet companies against
Speaker 1: conservative voices or censorship or suppressing conservative points of view. Again,
Speaker 1: I think most of those are bogus UM and are
Speaker 1: are basically done for political reasons, but it has become
Speaker 1: impossible for the Internet companies to ignore. One question that
Speaker 1: I have is what can Congress or frankly, the President
Speaker 1: himself do. I don't know what Larry Cutlow is talking
Speaker 1: about UM in terms of what they could do to
Speaker 1: regulate search results. Some members of Congress have talked about
Speaker 1: cracking down on a aw that essentially protects Internet companies
Speaker 1: from legal liability from content posted by their users and
Speaker 1: UM that I think would be a real risk to
Speaker 1: Internet companies, Google and others. I just don't know what
Speaker 1: the odds are of that law changing. Well done, Thank
Speaker 1: you very much for enlightening us. As always, Shara over
Speaker 1: there are Bloomberg technology opinion writer knows everything about technology.
Speaker 1: Have you got a new iPhone yet? Still still the
Speaker 1: old one, all right, it will take up a collection
Speaker 1: for you. Thanks very much for being with us. The
Speaker 1: SMP five hundred is of about eight and a half
Speaker 1: percent so far this year. Jim Paulson is the chief
Speaker 1: investment strategist wore the youthhol Group. They're based in Minneapolis.
Speaker 1: They help to manage more than one and a half
Speaker 1: billion dollars. Jim Paulson always a pleasure to hear what
Speaker 1: you've got to say about investing. And I'm wondering, what
Speaker 1: is this term called capacity challenge? You talk about the
Speaker 1: bull market is now capacity challenge? What does that mean? Well,
Speaker 1: one of the things PIM that I always think about is,
Speaker 1: you know, just the question we get lost and is
Speaker 1: there a lot of downside risk in this market or not?
Speaker 1: But I think an equal important question is just how
Speaker 1: much potential is left in this bull market, whether it's
Speaker 1: you know, whether it goes up for first uh several
Speaker 1: more years or not. Just how much upside is there?
Speaker 1: And I think it comes down to how much capacity
Speaker 1: does this bull market have left to improve things that
Speaker 1: will make the market go higher. And if you just
Speaker 1: look at some of the central things, if you think
Speaker 1: about p monibles, or valuation. You know they're right now.
Speaker 1: The trailing p motibles the eighties, second percentile of post
Speaker 1: war history. It could move up, but not a lot.
Speaker 1: Bond yields they don't have much room or interest rates
Speaker 1: in general to move lower anymore. They're kind of spent
Speaker 1: on that. Regard the unemployment rate below four percent, it's
Speaker 1: not like we could push that a lot lower, at
Speaker 1: least not without issues like overheating and other costs and
Speaker 1: interest rate pressures. Profit margins are record highs for the
Speaker 1: SMP five. Not a lot of room there, which means
Speaker 1: probably at best earnings grow at sales even and it
Speaker 1: could be worse at margin new road. And then finally confidence.
Speaker 1: We just reported consumer confidence today and it went up
Speaker 1: almost to post war highs. To think about what to
Speaker 1: get potential on this market? What lever are you going
Speaker 1: to push at this point or improve to get the
Speaker 1: market to continue to go higher? Alright, So given that,
Speaker 1: how are you allocating well? You know, at least what
Speaker 1: well we're doing is I think there's the other The
Speaker 1: other big issue is recession, and if we don't have recession,
Speaker 1: then the likelihood of a bear market is not great.
Speaker 1: We have had bear markets without recessions, but not frequently.
Speaker 1: I don't see the elements of recession right now, so
Speaker 1: I don't think i'd exit the stock market per se.
Speaker 1: But what I would do is diversify today in a
Speaker 1: much bigger way than I have up till now. And
Speaker 1: I'll just throw out a few things that you might
Speaker 1: want to consider. In that regard, I certainly would overrate
Speaker 1: the international markets relative to the United States. I think
Speaker 1: most of the risk UH and excess and over optimism
Speaker 1: and stretched values are in the domestic marketplace. I'd look
Speaker 1: to the international markets, both developed and emerging in a
Speaker 1: bigger way, that have been already beat up pretty solidly
Speaker 1: and under owned and our better values. I'd also raised
Speaker 1: a little cash. If the FED is gonna pay you
Speaker 1: two percent now finally to have that asset. And if
Speaker 1: we hit an air pocket of panic, you have some
Speaker 1: dry powder to buy someone else's what someone else wants
Speaker 1: to give away. I'd look to add a commodity e
Speaker 1: t f UH in lieu of equity exposure of from
Speaker 1: here at a three unemployment rate. If we continue to
Speaker 1: grow in this recovery, I think we're going to continue
Speaker 1: to disascerbate inflation pressure and commodities might outperform stocks. In
Speaker 1: the balance, I'd allocate some to a hedge fund. Uh.
Speaker 1: They don't make much sense that the market's going to
Speaker 1: go up a year. But a hedge fund that can
Speaker 1: give you mid the upper single digit returns without the
Speaker 1: downside risk of the stock market, I think makes good sense.
Speaker 1: Now in the balance of this recovery, I'd add a
Speaker 1: little gold. Um, it's been beat up, and if there
Speaker 1: is any panic along the way here between now in
Speaker 1: the end goal to be UH, probably do pretty well.
Speaker 1: The sector exposures, I'd barbell my exposure. From here, I'd
Speaker 1: still own some cyclical sectors merely in place and beneficiaries
Speaker 1: like energy and industrials and materials financials, but I also
Speaker 1: barbell that with traditional defensive sectors, whether it be low
Speaker 1: vall or or dividend aristocrats or the utilities and staples
Speaker 1: UM and LOU. From here, and then finally, i'd look
Speaker 1: to defang my portfolio. If you if you've owned some
Speaker 1: of the most popular faying stocks, UM, I would congratulate yourself,
Speaker 1: pat yourself in the back, and then let someone else
Speaker 1: own them. From here, it might still own some technology,
Speaker 1: but I'd look to do that away from those overpopularized,
Speaker 1: over owned names. That that leaves you in this market
Speaker 1: if it continues to climb, but it gives you a
Speaker 1: completely different risk profile on the downside. Uh, should the
Speaker 1: market that's getting old come apart at some point, Jim Paulson,
Speaker 1: It certainly sounds like you're preparing for something that is
Speaker 1: not good with the just of gold adding to cash
Speaker 1: by a hedge fund lock in some low price commodities. Right, Well,
Speaker 1: I think the Yeah, I really think PIM that the
Speaker 1: what I'm struggling with. I think the bulk could last
Speaker 1: a while, but I don't think it's upside it's going
Speaker 1: to be that great. I think it's going to deliver
Speaker 1: buy and hold SMP probably delivers mid single digit returns
Speaker 1: and the balance of this recovery at best and um
Speaker 1: So if that's the case, there's other assets now that
Speaker 1: have very competitive profiles to that type of return profile,
Speaker 1: and they offer those without the risk that you're exposed
Speaker 1: to late in a bowl market. In in just long only,
Speaker 1: this is actually a really important point. What is the
Speaker 1: return target that is reasonable for investors to go after
Speaker 1: in order to sort of figure out what could be
Speaker 1: potentially valuable to hold to own. I there's a lot
Speaker 1: of things that I look at, you know, uh, Lisa,
Speaker 1: Like if you look historically from four percent unemployment rates
Speaker 1: or less, what's the return of the market. If you
Speaker 1: look at p mobibles where they are historically, what's the
Speaker 1: return of the market going forward. If you look at
Speaker 1: where interramarket correlations are today that are low, what's the
Speaker 1: turn of the market. And a lot of those things
Speaker 1: when you come when you deal with them, come up
Speaker 1: around on average like five percent buy and hold total returns.
Speaker 1: I think that's what we're looking at now in the
Speaker 1: public US marketplace, particularly among large guest times, and with
Speaker 1: the potential that ultimately a bear comes in, there's downside
Speaker 1: risk if that that's kind of the profile. You don't
Speaker 1: necessarily want to be completely out of it. What if
Speaker 1: it goes on for another three years? Okay? But on
Speaker 1: the other hand, I think there's other things to Pim's point, commodities, cash,
Speaker 1: hedge funds, other things that can match that return if
Speaker 1: not do better and don't have near the risk profile
Speaker 1: at the end of it. Jim Paulson, thank you so
Speaker 1: much for being with us. Jim Paulson is chief investments
Speaker 1: tragist at the louth Old Group, overseeing about one and
Speaker 1: a half billion dollars from Minneapolis. Our next guest says
Speaker 1: that President Donald Trump doesn't understand how much NAFTA has
Speaker 1: enriched the United States, Mexico and Canada. Joano Sarah is
Speaker 1: a columnist for Bloomberg Opinion, and you can follow Joe
Speaker 1: on Twitter at no Sarah b v. All Right, Jana
Speaker 1: Sarah tell us why the president doesn't understand what NAFTA
Speaker 1: has done. First of all, you can now follow me
Speaker 1: on Opinion. Underscore, Joe, I switched, Okay, I was asked
Speaker 1: to switch my handle. Is that like, we're no longer
Speaker 1: calling it NAFTA, We're calling it something, the US Mexico
Speaker 1: Trade Agreement that maybe Canada will be allowed to be
Speaker 1: part of or not, depending on how nicely they negotiate
Speaker 1: with US. Yeah. Yeah, that's gonna happen. Sure. Um I
Speaker 1: I started thinking about this a while back when I
Speaker 1: was in South Texas. And if you go to South Texas,
Speaker 1: if you go to McCallan or El Paso or any
Speaker 1: any of the towns on the border, what you see
Speaker 1: is prosperity. You really do in a way that did
Speaker 1: not exist when I lived in Texas in the nineteen
Speaker 1: eighties before and NAFTA past. And if you ask anybody there,
Speaker 1: they will very specifically say this is due to NAFTA.
Speaker 1: And if you look at the trade statistics, you know, um,
Speaker 1: trading is dramatically increased between the three countries. And when
Speaker 1: trade increases, jobs increase, and so um, you know, the
Speaker 1: idea that NAFTA is the worst deal ever or whatever
Speaker 1: it is the President says, is just bologny. Okay, fair enough.
Speaker 1: There have been some jobs though, that have been lost
Speaker 1: as a result of NAFTA in the US, in terms
Speaker 1: of say, car companies that have decided to build cars
Speaker 1: in Mexico rather than the US because labor is cheaper there.
Speaker 1: So let's say, yes, net net, there have been more
Speaker 1: jobs that created than lost. Couldn't you make the argument
Speaker 1: that it could be tweaked to be better so that
Speaker 1: there was a more significant benefit for the United States?
Speaker 1: Uh I. My own belief is that, um, the real
Speaker 1: crime here was outside of the sphere of NAFTA in
Speaker 1: the UH in the in the way that the United
Speaker 1: States with the government just kind of ignored the people
Speaker 1: who lost their jobs, there was no retraining, there wasn't
Speaker 1: a whole lot of economic benefits. UM. And I think that, know, yes,
Speaker 1: maybe it could be tweaked to make it a little
Speaker 1: better for the United States. Maybe they have this new
Speaker 1: thing in it that says a certain percentage of the
Speaker 1: content has to be made by workers making sixteen dollars
Speaker 1: an hour, which is double what UM the day rate
Speaker 1: is in Mexico. So maybe that will be something that
Speaker 1: that does that. UM. On the other hand, you know,
Speaker 1: the NAFTA has created these complex supply chains that if
Speaker 1: you try to muck with them, you're gonna really wreck
Speaker 1: the entire system in which the way cars are built.
Speaker 1: Uh and many other things too. Uh. One of the
Speaker 1: things about low tariffs is they allow for you know, uh,
Speaker 1: factories to be put on both sides of the border,
Speaker 1: and parts uh and various other things to go back
Speaker 1: and forth across the border as they as they make
Speaker 1: the parts and as they make the car, and and
Speaker 1: all of this is a net good and a job creator.
Speaker 1: John O. Sarah, Is this just politics? Well, some would
Speaker 1: say it's a diversion tactic for the president given what's
Speaker 1: been happening in the last few days. That's that's one
Speaker 1: thing as as worth noting that the deal with Mexico
Speaker 1: isn't even completed. I mean it's not even done yet
Speaker 1: and they declaring victory um. And and third, there's the
Speaker 1: whole Canada aspect of it, which is that you know,
Speaker 1: how are you really going to have a NAFTA if
Speaker 1: you don't have Canada in it. It's it's kind of ridiculous.
Speaker 1: I want to home in on something that you're talking about,
Speaker 1: where what the jobs that were lost there was some
Speaker 1: sort of lack of action on the part of if
Speaker 1: not the government and somebody else in terms of retraining
Speaker 1: some of these employees. Which regions are you talking about?
Speaker 1: And it is this part of what we're seeing with
Speaker 1: persistently high underemployment rates among white working age men in particular.
Speaker 1: I think that's exactly right. I think the reasons we're
Speaker 1: talking about is is, you know, the northeast, the Michigan's,
Speaker 1: the Indiana's, uh, the Pennsylvania's, that that part of the
Speaker 1: country swing states. Yeah, swing states with with white men
Speaker 1: who vote for Donald Trump, which is also really telling
Speaker 1: because it's right ahead of the midterm elections, which makes
Speaker 1: me wonder how much trying to come to some agreement
Speaker 1: or trying to say things are going to be better
Speaker 1: in particular for for carmakers or people who have those jobs.
Speaker 1: How much is that playing exactly to the mid term
Speaker 1: election conversation. I think it's I think it's part of it,
Speaker 1: but I don't think it's all of it, because you know,
Speaker 1: three months from now, there will be no effective change,
Speaker 1: nothing will have changed. It's it's too it's too stun
Speaker 1: it's too quick. But I'm sure that's part of I'm
Speaker 1: sure that's part of the way he's thinking about it.
Speaker 1: Best case scenario, do you think that nothing changes except
Speaker 1: for a name and President Trump can declare victory, but
Speaker 1: the trades, that the supply chains just continue as they were.
Speaker 1: That is the best case scenario. The worst case scenarios
Speaker 1: is that this constant bullying of Canada forces Canada to
Speaker 1: act in a in a drastic way. Uh that causes
Speaker 1: some of this to fall apart. Like what that can
Speaker 1: the Canada that they don't have an agreement, that that
Speaker 1: maybe NAFTA goes away, maybe he does. Maybe the president
Speaker 1: does throw NAFTA out the window. Um, which would be
Speaker 1: a terrible thing, terrible for the economy and terrible for
Speaker 1: the three nations. More terrible for Canada than the United States. Probably, Yeah, probably,
Speaker 1: it's a smaller economy, it's more dependent on the United States. Yeah. Absolutely,
Speaker 1: every everybody's back into a corner here. Canada's back into
Speaker 1: the corner of the United States is back into the corner.
Speaker 1: We'll hold on a second. Let's take a step back,
Speaker 1: because President Trump can't do this on his own. He
Speaker 1: needs Congress to step up behind him and actually uh
Speaker 1: ratify something, so you know, he could say whatever he wants.
Speaker 1: But it doesn't seem like Congress is necessarily on board here,
Speaker 1: especially considering the fact that Congress is probably going to
Speaker 1: change in composition following this fall. Uh. That's true. But
Speaker 1: it's hard to know how the Democratic Congress would react
Speaker 1: to um to a new nafter or we changed nafter.
Speaker 1: And second of all, um, I may be wrong about this,
Speaker 1: and I could I could well be wrong about this.
Speaker 1: But but doesn't the president have you would need to
Speaker 1: aggregate the agreement without Congress? Uh huh, there's a question.
Speaker 1: I think that they need six months though, to even
Speaker 1: take it up and and to decide, so, I mean,
Speaker 1: I don't know a good question. I think good question.
Speaker 1: I don't know. There are some steps he could take
Speaker 1: by himself, but my understanding is for any substantive change
Speaker 1: in the agreement, it really does have to be signed
Speaker 1: off by Congress. Am I wrong on that? I believe.
Speaker 1: I'm sure that's right for any new trade agreement. There's
Speaker 1: one other factor here, which is that if they don't
Speaker 1: have an agreement by this Friday, and this is what
Speaker 1: makes it so ridiculous. If they don't have an agreement
Speaker 1: by this Friday, the six month time span bumps into
Speaker 1: the new Mexican president's tenure, and who knows what he's
Speaker 1: gonna want. Who knows if he's going to say I
Speaker 1: want this exactly the way it is, or if he's
Speaker 1: going to have his own series of changes. What happened
Speaker 1: on Monday. It's really kind of inexplicable, not in terms
Speaker 1: of the politics of it, but in terms of the
Speaker 1: the implications. And you can just ask you in the
Speaker 1: details of all of this. When you talk about let's say, automobiles, right,
Speaker 1: SUVs and crossover vehicles are what Detroit really wants to sell,
Speaker 1: but those are made in the United States. That's my
Speaker 1: point that all of this consternation and challenge between let's
Speaker 1: say the United States and Canada, the United States and Mexico.
Speaker 1: You've got Ford announcing they're not even gonna make sedans
Speaker 1: except for the Mustang. Right, So, I mean sedans are
Speaker 1: being made in the American South by non union American labor.
Speaker 1: Trucks and SUVs are being made in Detroit because they
Speaker 1: can make a profit paying uh, you know, sixty and eighteen,
Speaker 1: and Americans and in Kansas City, and and American sedans
Speaker 1: are being made in Mexico. I mean it's pretty simple, right.
Speaker 1: I just want to give people a sense of how
Speaker 1: the new nafter and I put nafter in quotes because
Speaker 1: Resident Trump would like to change the name of it,
Speaker 1: how it would differ from the old one. Probably the
Speaker 1: biggest has to do with the auto industry, as we
Speaker 1: were just talking about, which would require that of car
Speaker 1: content be made in the US or Mexico under the
Speaker 1: current agreement, that is a minimum of sixty two point
Speaker 1: five percent. Also, to Joe's point, it's the sixteen dollars
Speaker 1: per hour wages for workers who are working on these autos.
Speaker 1: So definitely, UM, definitely a focus here on the auto industry,
Speaker 1: and I wonder how it's playing in the auto industry.
Speaker 1: I wonder how Detroit is looking at this, given the
Speaker 1: fact that they look to be the vain subject here right, Well,
Speaker 1: Detroit does not really want to mess with NAFTA the
Speaker 1: way it is. They just don't. And uh, you know
Speaker 1: the idea that that that that the president is going
Speaker 1: to insist that a certain number of workers make sixteen
Speaker 1: an hour, that that that's going to stick in their
Speaker 1: crawl and anything that mocks up their supply chain. They
Speaker 1: spent years creating these supply chains, um, and anything that
Speaker 1: mocks up the supply chain they will not be happy with. Alright.
Speaker 1: I don't know, Sarah, Thank you so much. Always a
Speaker 1: pleasure having you on. It's always a pleasure to be
Speaker 1: on the Pim and Lisa show. Jo't know. Sarah is
Speaker 1: Bloomberg opinion columnist writing on All Things. All things. Consumers
Speaker 1: are really confident right now, that is according to a
Speaker 1: whole host of consumer confidence measures. But what does it
Speaker 1: say about the economy going forward? Joining us now is
Speaker 1: Lynn Franco, Director of Economic Indicators at the Conference Board,
Speaker 1: as well as their own Lenava, senior US economist at
Speaker 1: Bloomberg Economics, Lena, let's start with you. We do have
Speaker 1: a new Conference Board Consumer Confidence Index out. What do
Speaker 1: we know. We know that consumers continue to sort of
Speaker 1: ride this confidence high, so to speak. So we've had
Speaker 1: extremely long, strong levels now for for more than a year,
Speaker 1: and I think what this is telling us is that
Speaker 1: we're going to expect sort of a strong second half
Speaker 1: with growth around three and a half percent. This is
Speaker 1: the best level since October of two thousand, absolutely, and
Speaker 1: it's coming on both fronts. They're telling us a that
Speaker 1: present situation has improved both in terms of business conditions
Speaker 1: and employment, which are two key pillars of confidence, and
Speaker 1: expectations of well have rebounded as well after back to
Speaker 1: back monthly losses there So looking ahead, consumers expect more
Speaker 1: solid growth. All right, So Elena, come on in here.
Speaker 1: What does it tell you about the sort of where
Speaker 1: we are in the credit cycle or where we are
Speaker 1: in the economic cycle that consumer confidence is so high?
Speaker 1: Absolutely so for But first of all, Conference Board um
Speaker 1: survey directly asks questions about the labor market and and
Speaker 1: such strengths that we are seeing in the Conference Board
Speaker 1: survey today really reflects the state of the labor market
Speaker 1: right now. That it is strong. The unemployment rate is falling,
Speaker 1: so and that's what we should expect, like strong growth
Speaker 1: in payils like next week with that's what we expect
Speaker 1: in terms of economic cycle. We look at different kinds
Speaker 1: of indicators, the Conference Board Survey the Michigan Survey, and
Speaker 1: there's a big discrepancy between the two. The gap is widening.
Speaker 1: So that is a little bit concerning in terms of
Speaker 1: the economic cycle because usually the Conference Board picks towards
Speaker 1: the end of economic cycle, whereas the Michigan survey reflects
Speaker 1: economic growth trends in general. But I think as long
Speaker 1: as we have income growth and that's what is flashing
Speaker 1: really green in each and every survey, so we should
Speaker 1: expect business cycle to continue. What about consumers spending? And
Speaker 1: first of all, I just want to congratulate you and
Speaker 1: welcome you on your return from maternity, leading wishes and
Speaker 1: congratulations so cute. In addition to your family, and I'm
Speaker 1: sure that that is causing some expenditures not only on
Speaker 1: your part, but on the part of members of your family.
Speaker 1: And and to that point, looking at the survey, if
Speaker 1: you're in the automobile business, get ready people say that
Speaker 1: they're going to buy a new car. Same thing with homes,
Speaker 1: major appliances and carpeting. Everyone seems to be out there
Speaker 1: buying everything went up in and the conference Board survey
Speaker 1: plans to buy within six months. Uh. That is a
Speaker 1: very positive development. And again we look at different kinds
Speaker 1: of surveys. In the Michigan survey, UH, the conditions to
Speaker 1: buy actually deteriorated slightly. So as economists we have to
Speaker 1: look at a wide array of different service In fact,
Speaker 1: there's and this is one to watch for sure, because
Speaker 1: as prices go higher, people might find uh it less
Speaker 1: affordable to buy stuff. So Lynn, come on and here
Speaker 1: I'm interested in this idea. It's a very strong labor market.
Speaker 1: People are feeling confident as a result of that, and
Speaker 1: yet real wages once you strip out inflation, I've actually
Speaker 1: declined over the past year. How do you square these
Speaker 1: two things? Well, I think the fact that strong labor
Speaker 1: market growth has also led to more employed consumers and
Speaker 1: hence more consumers that can spend. As Yelena pointed out, Um,
Speaker 1: you know, projections are for the labor market to remain
Speaker 1: relatively strong for the remainder of the year. Our income
Speaker 1: expectations are actually up so consumers are pretty positive about
Speaker 1: their earning potential, and I think this strong confidence level
Speaker 1: reflects a willingness to spend. However, you know, if prices
Speaker 1: begin to rise and inflation begins to rear its head,
Speaker 1: then we you know, consumers ability to purchase items diminishes
Speaker 1: a little bit. But for right now, it looks like
Speaker 1: we're on very strong footing both in terms of confidence,
Speaker 1: in terms of spending and in terms of economic growth
Speaker 1: for the remainder of the year. All right, so more
Speaker 1: of the same, uh, more of the same. And while
Speaker 1: I know it's you know, ninety plus degrees out there,
Speaker 1: it's not too soon to start thinking about the holiday season.
Speaker 1: And if we continue in this confident mode, with this
Speaker 1: ability to spend, in a willingness to spend, it could
Speaker 1: shape up to be a good season for retailers. Alright, then, well,
Speaker 1: it has been a good season for retailers throughout the years,
Speaker 1: so that wouldn't be new. I still have to wonder
Speaker 1: at what point our wage is going to increase more
Speaker 1: than inflation, Lynna, just in thirty seconds, do you have
Speaker 1: thought on that. I think we're going to continue to
Speaker 1: see pressure by this tight labor market and we should
Speaker 1: begin to see hopefully some wage increases uh in the
Speaker 1: coming months. Do you agree with that? Elena, Absolutely, it's
Speaker 1: just more gradual. Uh. And there's a lot of non
Speaker 1: wage compensation like benefits and things like that, so that's
Speaker 1: another factor. All right, Thank you very much, much appreciated,
Speaker 1: of course, Elena seta senior US economist for Bloomberg Economics
Speaker 1: and Lynn Franco, Director of Economic Indicators for the Conference Board.
Speaker 1: And that consumer confidence certainly indicated by the performance today
Speaker 1: of the shares of Tiffany. Yeah. Although you nailed it
Speaker 1: with when you have kids, that's when your money flies
Speaker 1: out the window. And so I think that the low
Speaker 1: birth rate might have to do with uh, you know,
Speaker 1: if people start to have babies, that money gets fun,
Speaker 1: say soccer. Thanks for listening to the Bloomberg P and
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