WEBVTT - CalSTRS Ailman: Concerned For Markets When Fed Money Flood Ends 0:00:00.800 --> 0:00:04.000 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.560 with essential market moving news. Find the Bloomberg Markets podcast 0:00:15.600 --> 0:00:18.479 called Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.239 at Bloomberg dot com slash podcast. And I want to 0:00:22.280 --> 0:00:25.040 get to Chris Ailman. He is the chief investment officer 0:00:25.040 --> 0:00:28.920 for Calisters. I think one of the most important investors 0:00:28.960 --> 0:00:33.160 in the US because, um this is the California State 0:00:33.200 --> 0:00:38.640 Teachers Retirement system. It's definitely not evil. It's an investment 0:00:38.680 --> 0:00:41.280 fund that wants to not only make returns but also 0:00:41.440 --> 0:00:45.280 do good. And it's great that they have Chris as 0:00:45.320 --> 0:00:48.319 a representative because he's such a good person. It's been 0:00:48.360 --> 0:00:50.160 so long Christ since I've talked to you, so I'm 0:00:50.240 --> 0:00:53.320 really excited to get your take on a number of things, 0:00:54.080 --> 0:00:57.800 the first of which is Biden's infrastructure plan. I was 0:00:57.840 --> 0:01:02.040 talking to a former World Bank economist, yester Day Exotic Waba, 0:01:02.080 --> 0:01:06.760 who was saying, UM pension fund plans like Calisters should 0:01:06.760 --> 0:01:12.960 really um be helping to invest in infrastructure because this 0:01:13.160 --> 0:01:17.959 is a great way for you know, teachers, firemen, police officers, 0:01:18.040 --> 0:01:21.160 kind of the salt of the earth of America to 0:01:21.760 --> 0:01:25.480 make returns. What do you think. Well, first, Matt, thank 0:01:25.520 --> 0:01:28.360 you for that kind introduction, and I would like to 0:01:28.360 --> 0:01:31.120 get together again again in Berlin. That was the last 0:01:31.200 --> 0:01:33.640 last time, uh And I have to note from your 0:01:33.640 --> 0:01:36.840 conversation last time, I think it's just you that Germany 0:01:36.880 --> 0:01:39.640 wants to track when you move around. That's everybody else 0:01:39.640 --> 0:01:43.120 has to pull out those cards. So, hey, we already 0:01:43.120 --> 0:01:46.360 do invest in infrastructure and in a big way. I'm 0:01:46.440 --> 0:01:48.720 long term patient capital. You hit it on the head. 0:01:48.720 --> 0:01:52.440 I need a long term, stable return. Infrastructure provides that. 0:01:53.160 --> 0:01:57.480 But in the USA, infrastructures primarily funded through municipal bonds, 0:01:57.840 --> 0:02:02.000 so it's I always say it's built by by municiples. 0:02:02.080 --> 0:02:05.720 The problem isn't maintaining it. UM. A lot of our 0:02:05.760 --> 0:02:10.360 infrastructure in the US is is around the energy supplotline, 0:02:10.480 --> 0:02:14.120 not drilling, but just moving energy. And then it's about 0:02:14.200 --> 0:02:19.720 solar and when UM. Our international infrastructure is definitely linked 0:02:19.800 --> 0:02:24.960 to green energy UM and very successful. So I agree. 0:02:25.360 --> 0:02:28.560 Um Biden's plan though, is pretty pretty huge and all 0:02:28.600 --> 0:02:30.880 of the map, so it's tough to figure out exactly 0:02:31.440 --> 0:02:34.440 where private capital can sit in and owning some of 0:02:34.480 --> 0:02:38.080 that infrastructure. All right, Chris, we'd love to get your 0:02:38.160 --> 0:02:41.400 thoughts on the markets here. The you know, the bulls 0:02:41.400 --> 0:02:45.280 have certainly had their way here since those March loads 0:02:45.320 --> 0:02:48.960 of a year ago. Here, lots of fiscal stimulus, lots 0:02:48.960 --> 0:02:52.040 of uh uh, you know, the fedback stopping this market. 0:02:52.200 --> 0:02:54.200 I guess I want to talk to them, a pro 0:02:54.440 --> 0:02:58.640 like yourself, where is the risk in this market? What 0:02:58.720 --> 0:03:01.320 could go wrong? Because the bull are really having their 0:03:01.360 --> 0:03:05.200 way here. You know, if you step back and you know, 0:03:05.480 --> 0:03:08.000 you guys know, I'm very long term oriented. We have 0:03:08.040 --> 0:03:10.960 a thirty year investment horizon. But look back at the 0:03:11.040 --> 0:03:15.000 last say, fifteen months. In essence, the bulls are saying 0:03:15.040 --> 0:03:18.799 that a pandemic, a global pandemic, is good for global 0:03:18.840 --> 0:03:22.640 stocks and good to the economy, And obviously that's nuts. 0:03:22.880 --> 0:03:25.440 It's what it's the Fed. It's just the said that 0:03:25.480 --> 0:03:29.399 the Fed flooded the market with money. Jamie Diamond thinks 0:03:29.440 --> 0:03:32.240 it's going to continue to be easy money that comes 0:03:32.240 --> 0:03:34.560 at a price. You know, we have not faced the 0:03:34.720 --> 0:03:38.600 huge deficits that basically the government financed the economy for 0:03:38.680 --> 0:03:40.680 the last year and a half pushed the market to 0:03:40.760 --> 0:03:43.880 an all time high. That's artificial. It's got to be 0:03:43.960 --> 0:03:45.880 paid back at some point. Doesn't mean we're gonna have 0:03:45.920 --> 0:03:50.080 a bear market in the next say even twelve months maybe, 0:03:50.400 --> 0:03:54.440 but everything is priced perfection. A pandemic cannot be good 0:03:54.480 --> 0:03:57.520 for stocks. Yeah, that's what the lesson we've been taught. 0:03:57.640 --> 0:04:00.920 So I'm concerned that that we're over priced and that 0:04:01.000 --> 0:04:03.680 we're gonna be chopping for a while. Lots of Fed 0:04:03.760 --> 0:04:06.960 keeps providing free money, We're gonna be fine, but at 0:04:07.000 --> 0:04:09.000 some point they are going to have to start to 0:04:09.040 --> 0:04:12.200 tighten back up. And even just like they did before 0:04:12.320 --> 0:04:14.720 after oh eight, where it's just moving back to about 0:04:14.760 --> 0:04:18.839 three what's considered a normal interest rate, it would be 0:04:18.960 --> 0:04:21.320 enough to slow this market down a ton, which it 0:04:21.400 --> 0:04:24.479 probably deserves. P ratios are at two high of a level. 0:04:25.000 --> 0:04:27.400 Don't we have to pay the piper at some point? Chris, 0:04:27.440 --> 0:04:31.640 I mean we've now put I think five trillion dollars 0:04:31.640 --> 0:04:34.440 of stimulus into the economy. Biden's got a two point 0:04:34.480 --> 0:04:37.039 to five trillion dollar plan out there, and we know 0:04:37.120 --> 0:04:40.920 there's part two coming, plus the Fed has I mean, 0:04:41.240 --> 0:04:44.120 I don't know how much many trillions in emergency measures 0:04:44.120 --> 0:04:46.880 since this started, like twelve trillion. We're looking at a 0:04:46.960 --> 0:04:52.080 balance sheet that's um continues to be inflated. Like, is 0:04:52.120 --> 0:04:54.960 it true that as long as we continue to pump 0:04:55.560 --> 0:04:58.159 um we're gonna be fine. As long as we don't stop, 0:04:58.320 --> 0:05:01.160 it's gonna be okay, that the magic money tree is 0:05:01.160 --> 0:05:05.440 gonna somehow save us. Well, Matt, you know that sounds 0:05:05.480 --> 0:05:10.760 just like modern monetary theory. That's that's Bernie Sanders economics, 0:05:10.839 --> 0:05:14.440 which is the the US is still the country of choice, 0:05:14.560 --> 0:05:17.640 the dollar is the currency of choice, or oil and 0:05:17.680 --> 0:05:20.760 all the major commodities, so we can just borrow money 0:05:20.839 --> 0:05:24.039 endlessly and never pay it back. I just don't believe 0:05:24.080 --> 0:05:27.640 that's true. I'm worried about not just future generations, but 0:05:28.040 --> 0:05:31.159 the recognition that that this debt and we've had some 0:05:31.920 --> 0:05:33.599 was just a month ago, that we had a couple 0:05:33.640 --> 0:05:36.479 of options that didn't go as well as people expected. 0:05:36.560 --> 0:05:39.400 So but when did when did the problems comes? Or 0:05:39.440 --> 0:05:43.560 what or what assets get get hit first? When the 0:05:43.600 --> 0:05:48.039 house of cards starts to fall. Well, I've been saying 0:05:48.040 --> 0:05:50.040 for a while you gotta pay attention to the bond market. 0:05:50.120 --> 0:05:53.640 That really is I think the barometer for the equity market. 0:05:54.240 --> 0:05:56.680 The equity market has a lot of sugar and stimulus 0:05:56.680 --> 0:05:58.600 in it right now because of that money and all 0:05:58.640 --> 0:06:01.839 the all the rob and hood traders at home. But 0:06:01.920 --> 0:06:03.880 they're gonna we're all gonna have to go back to work. 0:06:04.440 --> 0:06:07.520 And I think that if bonds continue to back up 0:06:07.760 --> 0:06:11.560 right now, it's a nice, you know, reset, But that's 0:06:11.560 --> 0:06:13.560 what you got to focus on, and then it's gonna 0:06:13.560 --> 0:06:18.599 be equities will soften. Um. Obviously certain commodities have gone 0:06:18.680 --> 0:06:20.600 up through the roof, but they're gonna fall back in 0:06:20.680 --> 0:06:24.080 their price range. UM. I would just be worried about 0:06:24.240 --> 0:06:28.159 not just US, but global equities, UH setting back and 0:06:28.160 --> 0:06:31.600 seeing a slower economy for a period. All right, going 0:06:31.640 --> 0:06:34.240 back to work, Chris, what are you guys doing at Cowsters? 0:06:34.360 --> 0:06:37.800 What's your plan? You know? I I was just talking 0:06:37.920 --> 0:06:42.200 to Tassima and the team. I'm basically telling my staff, 0:06:42.279 --> 0:06:46.440 let's let's work remote through the summer. Everybody plan on 0:06:46.560 --> 0:06:49.600 being back on Labor Day. That seems to be a 0:06:49.600 --> 0:06:52.360 common phrase. Even though the economy is gonna open up, 0:06:52.839 --> 0:06:55.680 this has been such a mental stress on everybody. You know, 0:06:55.720 --> 0:06:58.200 people need to take vacations. None of us have taken 0:06:58.240 --> 0:07:01.240 any vacations for a good year and have people need 0:07:01.279 --> 0:07:05.559 to get out, go somewhere, refresh, reset, and then come back. 0:07:06.440 --> 0:07:08.360 Remote worker is going to be with us, I think 0:07:08.400 --> 0:07:11.920 for most industries forever. Uh, it's but it's I'm really 0:07:11.960 --> 0:07:15.280 concerned about that hybrid world. Instead of the best of 0:07:15.320 --> 0:07:19.119 both worlds of being internal and remote, I'm worried about 0:07:19.120 --> 0:07:22.000 it being the worst of both worlds, that that meetings 0:07:22.600 --> 0:07:25.679 are not convenient and not effective when you have people 0:07:25.760 --> 0:07:29.160 out and in trying to figure out whether somebody's online, 0:07:29.400 --> 0:07:33.200 off or on travel or in the office. It's crazy, 0:07:33.240 --> 0:07:35.960 but we're gonna work through it. It's twenty two is 0:07:35.960 --> 0:07:38.440 going to be a real trust transition. You're trying to 0:07:38.480 --> 0:07:42.080 figure this all out. Interesting. Yeah, I think you're a representative. 0:07:42.360 --> 0:07:43.920 You know a lot of managers out there trying to 0:07:43.920 --> 0:07:46.520 figure out what's best for their team. And we'll see 0:07:46.520 --> 0:07:49.400 how this plays out. Chris Alman, thank you so much 0:07:49.480 --> 0:07:52.040 for joining us. We always appreciate chatting with you. We 0:07:52.120 --> 0:07:54.080 look forward to seeing you in our New York offices soon. 0:07:54.160 --> 0:07:58.440 Chris Alman, Chief investment officer for Calsters. They are the 0:07:58.480 --> 0:08:01.280 folks out in California managering the money for the teachers. 0:08:01.560 --> 0:08:03.480 Um it is a go to meeting if you're a 0:08:03.480 --> 0:08:05.200 cell side analyst. When you go at the California you 0:08:05.280 --> 0:08:11.160 got to see the folks at Cawsters. Now, UM, I 0:08:11.240 --> 0:08:14.520 mentioned JT is gonna like this story because you know, 0:08:14.680 --> 0:08:20.320 during the Great Financial Crisis he became uh internationally renowned 0:08:20.400 --> 0:08:22.640 for opening his four oh one case on air. And 0:08:23.280 --> 0:08:27.280 you know a lot of people got hit hard during 0:08:27.440 --> 0:08:32.439 the last couple of recessions, thrown out of the middle class. 0:08:32.480 --> 0:08:35.080 In the US, that's not as much of a concern, 0:08:35.120 --> 0:08:38.760 I think in the recovery from COVID, but worldwide it 0:08:38.920 --> 0:08:42.400 is huge. And in fact, we have an amazing story 0:08:42.440 --> 0:08:44.920 on the terminal. Millions are tumbling out of the middle 0:08:44.960 --> 0:08:48.280 class in an historic setback. And I don't just like 0:08:48.400 --> 0:08:51.760 this story because they said and historic, which we always should. 0:08:51.760 --> 0:08:55.440 It's not a historic setback. We should treat the h 0:08:55.520 --> 0:08:59.240 as a vowel there. Um. I read the story and 0:08:59.280 --> 0:09:01.320 I thought, well, it's no big deal, right, We're gonna 0:09:01.320 --> 0:09:04.160 bounce back next year or at least the year after. 0:09:04.200 --> 0:09:07.200 Everything will be fine. That's not the case. This is 0:09:07.240 --> 0:09:12.640 causing long term damage, that is changing a trend that 0:09:12.920 --> 0:09:16.040 hasn't changed for decades, and we're gonna bring in right now, 0:09:16.080 --> 0:09:19.559 Sean Donn, and senior trade and globalization reporter for Bloomberg 0:09:19.559 --> 0:09:23.120 to talk about it. He's part of the fantastic team 0:09:23.160 --> 0:09:26.200 that put this together. Sean, you know, I learned a 0:09:26.400 --> 0:09:29.440 ton reading this story. Um. First of all, that the 0:09:29.440 --> 0:09:32.559 middle class has been growing for decades since the nineties, 0:09:33.040 --> 0:09:37.440 and um, this last year was the first break of 0:09:37.480 --> 0:09:40.840 that trend we've seen, and it doesn't look like it's 0:09:40.880 --> 0:09:44.520 going to be repaired so quickly. Right. Yeah, Look, I 0:09:44.559 --> 0:09:47.720 mean that's the big question we have in front of us. 0:09:47.720 --> 0:09:50.400 We've got this unwinding of a big idea that has 0:09:50.440 --> 0:09:55.400 governed business decisions and investment decisions for decades. Now, that 0:09:55.480 --> 0:09:58.160 was this idea of you know, remember the bricks, uh, 0:09:58.400 --> 0:10:02.400 you know, Brazil, Indie, China, that these big emerging economies 0:10:02.960 --> 0:10:05.960 UH that surged onto the world scene in the last 0:10:06.000 --> 0:10:09.920 thirty forty years, and they brought with them a whole 0:10:10.040 --> 0:10:14.120 new set of consumers, this enormous middle class that has 0:10:14.160 --> 0:10:17.400 just been growing for the last thirty years. And last 0:10:17.480 --> 0:10:22.800 year the pandemic UH knocked that story on its side. 0:10:22.920 --> 0:10:26.040 And we now have a middle class that is shrunk. 0:10:26.280 --> 0:10:29.040 And we also have looking ahead, and the I m 0:10:29.120 --> 0:10:33.760 F has warned about this this week, really diverging paths 0:10:33.800 --> 0:10:36.640 in the global economy. We have the US and other 0:10:36.720 --> 0:10:42.280 advanced economies likely to recover very strongly from from the 0:10:42.280 --> 0:10:45.080 the economic hit they took in the pandemic, and a 0:10:45.160 --> 0:10:48.520 lot of developing economies that are gonna have a much 0:10:48.559 --> 0:10:51.240 slower path back. And who's that going to hurt. Well, 0:10:51.280 --> 0:10:52.920 that's going to hurt all of those people who have 0:10:53.040 --> 0:10:56.160 been hoping to, as we all do, to to find 0:10:56.640 --> 0:10:59.240 comfort and security in a middle class lot. Well. And 0:10:59.440 --> 0:11:02.720 if I can be a little bit superficial here, multinational 0:11:02.760 --> 0:11:06.200 corporations that have relied on this burgeoning middle class as 0:11:06.280 --> 0:11:11.080 the main pillar of their growth strategy, right absolutely, this 0:11:11.160 --> 0:11:14.880 is this is you know, of the world's consumers live 0:11:14.920 --> 0:11:17.440 outside of the United States. That's a mantra we've heard 0:11:17.760 --> 0:11:21.520 from CEOs for a long time. It's what was behind 0:11:21.720 --> 0:11:25.719 the trade policies of the last thirty years or so, 0:11:26.240 --> 0:11:30.600 and it's it's it's really a big bet that corporate America, 0:11:30.720 --> 0:11:33.360 and not just corporate America, you know, big multinationals in 0:11:33.400 --> 0:11:37.880 Europe and Japan and and and elsewhere have made on 0:11:38.160 --> 0:11:41.439 these new rising economies and these new consumers. One of 0:11:41.480 --> 0:11:43.640 the guys we talked to for the story is a 0:11:43.679 --> 0:11:47.080 guy called Rabbi Charmer. He's a great example, uh in 0:11:47.080 --> 0:11:50.120 India of this middle class. He's been saving up for 0:11:50.280 --> 0:11:54.199 years to buy himself at six thousand dollar Maruti Alto. 0:11:54.320 --> 0:11:56.760 It's this entry level car. It's made by a joint 0:11:56.880 --> 0:12:01.080 venture between Maruti and Indian company and is Uki, the 0:12:01.160 --> 0:12:04.920 Japanese maker. And you know what, Robby last year lost 0:12:04.960 --> 0:12:07.720 his job, he had to move cities. He's got a 0:12:07.800 --> 0:12:11.520 new job at lower pay. He's not gonna be buying 0:12:11.600 --> 0:12:14.959 that car. Instead, he's gonna be faring around his family 0:12:14.960 --> 0:12:18.000 on a motorcycle for the coming years. And he said 0:12:18.040 --> 0:12:20.720 to us, you know what, my life's been set back 0:12:20.760 --> 0:12:23.320 by three years, and all of the dreams I had 0:12:23.400 --> 0:12:26.240 beforehand feel out of reach. What are those dreams? Those 0:12:26.320 --> 0:12:29.160 dreams are A lot of them are are buying consumer goods. 0:12:29.200 --> 0:12:33.559 They're they're buying things that big multinational companies make. Sean, 0:12:33.640 --> 0:12:35.280 what are some of the countries or regions of the 0:12:35.280 --> 0:12:39.560 world that are seeing the biggest losses in their middle class. 0:12:39.559 --> 0:12:43.080 So we've it's really been concentrated in two areas. India 0:12:43.200 --> 0:12:47.080 is such an enormous uh population one point four billion 0:12:47.160 --> 0:12:50.240 people that the hit that we saw there meant that 0:12:50.320 --> 0:12:53.680 South Asia really led the way in terms of the 0:12:53.679 --> 0:12:56.840 reduction of its middle class. But we've also seen Sub 0:12:56.840 --> 0:12:59.680 Saharan Africa take a take a big hit. And that's 0:12:59.679 --> 0:13:03.040 interest thing because we know that the pandemic, the actual 0:13:03.120 --> 0:13:06.440 virus hasn't hit Africa as hard as it has some 0:13:06.559 --> 0:13:10.880 other regions, and yet the economic consequences have been there 0:13:10.880 --> 0:13:14.760 in a in a big way. I wonder if the 0:13:14.800 --> 0:13:17.720 rebound that we see, I mean, has anyone measured how 0:13:17.760 --> 0:13:20.640 long it's going to take an economy like that um 0:13:20.760 --> 0:13:23.480 to come back or do we just not know if 0:13:23.480 --> 0:13:28.360 they're going to get vaccines out in terms of heard immunity. Yeah, 0:13:28.400 --> 0:13:31.960 so look, I mean, vaccinations is the big question. Right. 0:13:32.000 --> 0:13:34.760 We know an economy like Brazil is still dealing with 0:13:35.080 --> 0:13:39.880 a huge outbreak. Have not got their handle on that. Uh, 0:13:39.920 --> 0:13:42.199 They're they're on a very different path from the US 0:13:42.360 --> 0:13:46.160 right now in terms of infections UH and vaccinations. And 0:13:46.200 --> 0:13:49.040 so the I m F kind of did the math 0:13:49.320 --> 0:13:52.439 and it figures that largely as a result of that 0:13:52.640 --> 0:13:55.800 slower recovery and emerging economies. The global economy is going 0:13:55.840 --> 0:13:59.560 to be about three percent smaller in are folks at 0:13:59.559 --> 0:14:03.000 Bloomberg Economics have also done some calculations, and you look 0:14:03.040 --> 0:14:06.079 at a place like India, it's gonna be five smaller 0:14:06.120 --> 0:14:10.480 than it would there. My friend Sean Donn and senior 0:14:10.520 --> 0:14:13.839 Trade and globalization reporter Bloomberg News with a fascinating story 0:14:13.880 --> 0:14:16.120 here about the global middle class and the risk to 0:14:16.280 --> 0:14:21.240 that from this pandemic. Maybe it's just because I have 0:14:21.320 --> 0:14:23.200 a Bloomberg turminol sitting in front of me, but it 0:14:23.240 --> 0:14:26.680 just seems like the day lugion information continues on a 0:14:26.760 --> 0:14:29.640 daily basis for investors to digest that. We have Fed 0:14:29.680 --> 0:14:32.760 minutes being released today at two pm Wall Street time, 0:14:32.840 --> 0:14:35.760 We've got a fiscal stimulus plan that Washington is debating. 0:14:35.760 --> 0:14:39.120 We've got earnings starting next week. There's never a shortage 0:14:39.160 --> 0:14:41.560 of data for the market to digest. But fortunately, our 0:14:41.560 --> 0:14:44.160 next guest can help us pass through all of that. 0:14:44.240 --> 0:14:47.920 Danielle Di Martino, Booth CEO and Director of Intelligence at 0:14:48.000 --> 0:14:51.920 Quill Intelligence, also a former advisor at the Dallas Federal 0:14:52.000 --> 0:14:55.400 Reserve and a Bloomberg Opinion contributor. If that's not enough, 0:14:55.440 --> 0:14:58.920 She's also the author of Fed Up and Insiders Take 0:14:58.960 --> 0:15:02.280 on why the Federal Reserve is bad for America. Danielle, 0:15:02.280 --> 0:15:05.240 thanks so much for Journeys taking some time out talking 0:15:05.240 --> 0:15:07.480 about the Feeder Reserve. We're gonna get those minutes today. 0:15:07.560 --> 0:15:11.760 Anything we should be looking out for. I think you're 0:15:11.760 --> 0:15:15.520 gonna see the word transient and transitory um kind of 0:15:15.560 --> 0:15:20.240 extrapolated through thess dot com. You're gonna see it whacked 0:15:20.280 --> 0:15:24.160 six ways to Sunday. They're gonna emphasize and doubly emphasize 0:15:24.200 --> 0:15:27.400 their patients. Uh, there's never any such thing as coincidence 0:15:27.400 --> 0:15:30.040 with Fetch surveys. There was a fresh FETCH survey out 0:15:30.120 --> 0:15:34.800 today that shows that of the stimulus checks are are 0:15:34.840 --> 0:15:37.640 being spent, the remainders is being used to pay down 0:15:37.640 --> 0:15:41.400 debts or saved. So the FET's gonna take note of this. 0:15:41.440 --> 0:15:43.480 They're gonna take note of the fact. The Bank of America. 0:15:43.920 --> 0:15:45.640 Michelle Meyer, a good friend of mine who's I'm sure 0:15:45.680 --> 0:15:48.160 a guest on your show many times. She showed that 0:15:48.360 --> 0:15:52.680 the check recipients spending peaked on day six. That would 0:15:52.680 --> 0:15:57.000 be Marche when is when recipients spending peaked after those 0:15:57.000 --> 0:16:00.440 direct depositive deposits hit their accounts on March the seventeen, 0:16:00.960 --> 0:16:05.320 So we're gonna see a monstrous retail sales figure in March. 0:16:05.480 --> 0:16:07.440 It's gonna come down in April, it's gonna come down 0:16:07.480 --> 0:16:09.920 in May, and by then we'll be starting to talk 0:16:09.920 --> 0:16:13.160 about that September the six fis school cliff and all 0:16:13.160 --> 0:16:17.280 these unemployment insurance benefits that will be expiring. Then that's 0:16:17.320 --> 0:16:20.120 going to give the FED pause and more reason to say, 0:16:20.160 --> 0:16:23.080 you know what, We've still got very high permanent unemployment. 0:16:23.200 --> 0:16:25.320 It's the same level as it was during the crisis. 0:16:25.480 --> 0:16:27.600 We're gonna have to be patient here, and I think 0:16:27.640 --> 0:16:30.880 you'll see a lot of patient talk in those minutes today. 0:16:30.920 --> 0:16:35.160 So I think it was Novgrats on Bloomberg yesterday who 0:16:35.440 --> 0:16:38.200 was saying, it'll be interesting to see if the FED 0:16:38.240 --> 0:16:43.320 can stand pat um through you know, Jackson Hole next year. 0:16:43.840 --> 0:16:47.760 Of course, these inflation numbers are gonna look transitory, but 0:16:48.240 --> 0:16:50.800 um aren't we going to see the kind of growth 0:16:50.880 --> 0:16:57.960 that will push real inflation through? You know, that's a 0:16:58.000 --> 0:17:02.200 big unknown at this point. We we just we can't 0:17:02.240 --> 0:17:06.560 say there are many unfilled job positions in this country, 0:17:06.600 --> 0:17:09.080 but right now the vast majority of them are low 0:17:09.119 --> 0:17:12.680 paying positions. So in this coming month, you're gonna see 0:17:12.720 --> 0:17:15.600 complete perversity in the data. If you don't get an 0:17:15.600 --> 0:17:19.600 o point four percent increase in average hourly earnings. When 0:17:19.640 --> 0:17:22.240 we get the April labor report, you're gonna see a 0:17:22.280 --> 0:17:25.400 negative print on your over year income. That that makes 0:17:25.400 --> 0:17:28.639 your head swell when you think of the base effects 0:17:28.720 --> 0:17:30.159 that that are going to cause us to see for 0:17:30.200 --> 0:17:33.439 the next three months, huge prints for consumer Price Index 0:17:33.800 --> 0:17:37.560 north of the feds f two percent target. I think 0:17:37.600 --> 0:17:41.320 we have to keep in in mind SED thinking they're 0:17:41.359 --> 0:17:44.399 looking back at two thousand eleven when cp I printed 0:17:44.400 --> 0:17:48.200 it three and back then they said it was transitory. 0:17:48.240 --> 0:17:50.840 You know what CPI year over year by two thou 0:17:51.040 --> 0:17:53.560 fifteen was o point seven percent year over year. So 0:17:53.800 --> 0:17:55.920 they're gonna look back and pat themselves on the back 0:17:55.960 --> 0:17:59.040 in retrospect and say, we're not going to let the 0:17:59.359 --> 0:18:03.080 markets hustle us into a rate hike because we know 0:18:03.160 --> 0:18:08.560 what transient looks like from recent history. All right, danielle Um, 0:18:08.760 --> 0:18:11.600 that's the FED. Let's talk about fiscal stimius. A lot 0:18:11.880 --> 0:18:15.600 of money has been thrown at this pandemic problem by 0:18:15.640 --> 0:18:19.080 the US government. You know, call me old school, but 0:18:19.960 --> 0:18:22.560 doesn't somebody have to pay for this? How should we 0:18:23.040 --> 0:18:25.600 think about that? And is that a worry for you? 0:18:26.960 --> 0:18:31.639 You are too young to be a funny dutty. The 0:18:32.480 --> 0:18:34.480 bills actually come due? Is that? What is that? What 0:18:34.560 --> 0:18:36.480 shows up? That's kind of what I'm asking. Yeah, he's 0:18:36.520 --> 0:18:40.560 a dad, it's in his nature. If you're an individual, 0:18:40.600 --> 0:18:44.320 if you're a corporation, bills actually matter. Uh. The assumption 0:18:44.440 --> 0:18:48.399 that the bills don't matter is a very slippery slope. 0:18:48.960 --> 0:18:51.440 Just because we've gotten away with this for as long 0:18:51.480 --> 0:18:54.960 as we have doesn't mean that it's a perpetual environment 0:18:54.960 --> 0:18:57.520 that we're going to be in. You know, we ignore 0:18:57.680 --> 0:19:00.320 the fact that China is busily rolling out a central 0:19:00.359 --> 0:19:03.639 bank digital currency and looking towards life after the dollar. 0:19:04.119 --> 0:19:06.480 These are things that we want to wholly disregard. What 0:19:06.520 --> 0:19:10.520 we can't. And if there's another incident, if there's another 0:19:10.560 --> 0:19:14.160 disruption in the markets that prompts the said to move, 0:19:14.880 --> 0:19:17.760 many are saying that it's going to go. It's going 0:19:17.800 --> 0:19:20.280 to force them to go in the direction of some 0:19:20.359 --> 0:19:23.560 kind of a digital currency too, to to deliver money 0:19:23.600 --> 0:19:27.480 directly to the people. Think of Ben Bernanke helicopter vengit helicopter. 0:19:27.600 --> 0:19:29.879 I still have that tie I gotta tie from. I 0:19:29.880 --> 0:19:32.679 think it was Van Eck with Ben Bernankey and super 0:19:32.720 --> 0:19:36.520 Mario hanging out a helicopter dropping um buckets of money. 0:19:36.560 --> 0:19:37.560 And of course it would be cool or if it 0:19:37.560 --> 0:19:41.760 were digital. But I wonder, you know, Danielle, markets really 0:19:41.840 --> 0:19:45.440 don't care. I mean, everyone's still willing to lend money 0:19:45.520 --> 0:19:48.359 to the US federal government with the debt to GDP 0:19:48.560 --> 0:19:51.920 ratio of like one thirty right now, um for ten 0:19:52.040 --> 0:19:54.600 years at one point six percent. I mean, even with 0:19:54.680 --> 0:19:57.040 the gain and rates, even if we see that go 0:19:57.119 --> 0:19:59.960 to two percent, it still tells me people are will 0:20:00.000 --> 0:20:03.520 going to accept a nothing return basically less than nothing 0:20:03.600 --> 0:20:06.880 if you look at real yields. So they must feel comfortable. 0:20:06.920 --> 0:20:10.720 Investors must be totally complacent about trillions and trillions and 0:20:10.800 --> 0:20:15.720 trillions of dollars in stimulus. Well, I think the complacency 0:20:16.040 --> 0:20:18.040 is more a game of chicken. They're like, wait a minute, 0:20:18.080 --> 0:20:21.359 this is nothing as magna. You know, nothing of of 0:20:21.400 --> 0:20:23.920 the magnitude of the loss of reserve currency status is 0:20:23.920 --> 0:20:27.640 going to happen overnight. People know that, and they're banking 0:20:27.680 --> 0:20:30.160 on it, and they're banking on US treasuries being money 0:20:30.200 --> 0:20:33.560 good and being the you know, the most attractive horse 0:20:33.600 --> 0:20:38.040 in the glue factory for multiple years to come. And 0:20:38.080 --> 0:20:40.800 that's that's kind of how investors see it. As long 0:20:40.920 --> 0:20:43.880 as none of the wheels fall off, as none as there. 0:20:44.080 --> 0:20:47.320 As long as there's not a disruptive, high rapid move 0:20:47.480 --> 0:20:49.560 in rates that makes the NASDEC fall out of debt. 0:20:49.560 --> 0:20:52.000 You know, that episode is ancient history as far as 0:20:52.040 --> 0:20:55.640 investors are concerned with the NASDEC pressing into all time 0:20:55.720 --> 0:20:59.960 highs following the down the ns and p Alright thirty seconds, Daniel, 0:21:00.119 --> 0:21:05.200 what's your biggest worry? My greatest concern is jump on yield. 0:21:05.320 --> 0:21:08.560 Right now, they're at their lowest jump on spreads. Excuse me, 0:21:08.680 --> 0:21:11.320 there at the lowest since June of two thousand seven. 0:21:11.720 --> 0:21:15.560 So the rubber band has been stretched extremely tight, and 0:21:15.560 --> 0:21:18.960 we're not paying close enough attention to Corporate America's balance 0:21:19.000 --> 0:21:21.720 sheets which have not been repaired. Yeah, and so many 0:21:21.760 --> 0:21:24.160 investors that we talked to, um, that's one of their 0:21:24.280 --> 0:21:27.040 favorite investments right now because they'll do anything for a return, 0:21:27.200 --> 0:21:32.000 right UM. So junk bonds still look good. Um. And 0:21:32.040 --> 0:21:34.360 if you have a giant fund, they're willing to let 0:21:34.400 --> 0:21:37.960 you take massive leverage with their balance sheets right now. So, um, 0:21:37.960 --> 0:21:40.679 it's it's pretty insane out there. Daniel, great to have 0:21:40.760 --> 0:21:43.120 you on the program. Always good to get your insight 0:21:43.200 --> 0:21:46.320 really important to us. Daniel DeMartino Booth is the CEO 0:21:46.640 --> 0:21:50.679 and director of Quill Intelligence. Formerly an advisor at the 0:21:50.800 --> 0:21:58.679 Dallas Federal Reserve Movie he joins US equity analyst for 0:21:59.080 --> 0:22:02.520 c f R A research and before we get into 0:22:02.680 --> 0:22:06.360 the cruise ships, um, Paul Sweeney says, you're the best 0:22:06.440 --> 0:22:08.560 dressed analysts. So I never thought I would ask this 0:22:08.640 --> 0:22:12.800 of a guest, but what are you wearing? That's guys, 0:22:12.840 --> 0:22:16.359 good oneing to you. Um. You know, we we try to, um, 0:22:16.640 --> 0:22:18.920 you know, do the best we can. But I really 0:22:18.920 --> 0:22:22.360 appreciate those compliments from from my Matt. See the thing 0:22:22.480 --> 0:22:24.919 is here. Tune is the only one I know that 0:22:24.960 --> 0:22:27.639 can give Tom Keane a run for his money in 0:22:27.760 --> 0:22:30.280 terms of wearing the boat tie. He sports a sporty 0:22:30.280 --> 0:22:33.040 boat tie every time I see him out there on 0:22:33.240 --> 0:22:35.880 Wall Street in the trenches. Tuna, again, thanks so much 0:22:35.880 --> 0:22:37.840 for joining us here talk to us about Carnival. They 0:22:37.840 --> 0:22:41.879 put out some really interesting guidance about bookings. People are 0:22:41.920 --> 0:22:44.879 going to go back on those cruise ships, aren't they. Yes. Indeed, 0:22:44.920 --> 0:22:47.639 Paul um as I was kind of Parson through the 0:22:47.800 --> 0:22:50.920