1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,680 --> 00:00:15,480 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,520 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,760 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,960 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,319 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:38,280 Speaker 2: Terminal and the Bloomberg Business app. CPI coming in below expectations, 10 00:00:38,360 --> 00:00:40,720 Speaker 2: trade us adding to bets for two more rate cuts 11 00:00:40,720 --> 00:00:44,120 Speaker 2: this year, including one next Wednesday. David Kelly of JP 12 00:00:44,200 --> 00:00:46,680 Speaker 2: Morgan Assen Management joins us. Now for more, David, let's 13 00:00:46,680 --> 00:00:49,760 Speaker 2: start with the inflation data. Is three the new two? 14 00:00:50,200 --> 00:00:51,960 Speaker 2: And is it going to stop this feder reserve from 15 00:00:52,040 --> 00:00:53,280 Speaker 2: cunning interest rates? 16 00:00:53,840 --> 00:00:56,400 Speaker 3: Well, I think the Fed's going to keep on cutting rates. 17 00:00:56,960 --> 00:00:59,120 Speaker 3: It's generally a better than expected to report. But I 18 00:00:59,120 --> 00:01:01,040 Speaker 3: think what a really show is we have a K 19 00:01:01,200 --> 00:01:05,080 Speaker 3: shaped economy, and it's sort of a K shaped CPI report. 20 00:01:05,560 --> 00:01:08,240 Speaker 3: The thing that really jumped out of me is first 21 00:01:08,240 --> 00:01:11,240 Speaker 3: of all rental costs coming down. There's you know, we've 22 00:01:11,240 --> 00:01:15,080 Speaker 3: got a big change in demographics here and rents are 23 00:01:15,400 --> 00:01:17,920 Speaker 3: rental inflation is just going away. You also saw US 24 00:01:18,080 --> 00:01:21,760 Speaker 3: vehicle prices full. I thought that was pretty interesting. And 25 00:01:21,800 --> 00:01:24,360 Speaker 3: then the big thing here is core goods prices outside 26 00:01:24,360 --> 00:01:26,160 Speaker 3: of food and energy. That's the stuff that should be 27 00:01:26,240 --> 00:01:29,360 Speaker 3: hit by tariffs. But that's only up two tens of 28 00:01:29,480 --> 00:01:32,560 Speaker 3: percent of one and a half percent year over year. 29 00:01:33,000 --> 00:01:37,240 Speaker 3: It is clear that mainstream retailers don't believe they can 30 00:01:37,319 --> 00:01:40,080 Speaker 3: pass on the tariff increases right now, and that's what's 31 00:01:40,160 --> 00:01:43,199 Speaker 3: making this inflation rate a little bit tamer than people feared. 32 00:01:43,440 --> 00:01:46,039 Speaker 4: David doesn't's just justify what the market's already sussed out, 33 00:01:46,040 --> 00:01:48,920 Speaker 4: which is that inflation fears were overblown earlier this year. 34 00:01:49,120 --> 00:01:52,120 Speaker 4: The Fed can keep cutting and potentially below three percent 35 00:01:52,480 --> 00:01:54,440 Speaker 4: by the end of next year, and that it's not 36 00:01:54,480 --> 00:01:56,680 Speaker 4: going to cause a huge inflation problem. 37 00:01:57,560 --> 00:02:00,280 Speaker 3: Well, I never thought we had a long term inflation problem. 38 00:02:00,320 --> 00:02:02,280 Speaker 3: But I think it is still early days on the 39 00:02:02,280 --> 00:02:04,960 Speaker 3: tariff effects. So what's going to happen is right now 40 00:02:06,040 --> 00:02:09,120 Speaker 3: retailers feel like they can't pass on the price increases. 41 00:02:09,480 --> 00:02:12,800 Speaker 5: But early next year you're going to have this refund bonanza. 42 00:02:12,840 --> 00:02:15,720 Speaker 3: The average incompact refund per household, we believe it's going 43 00:02:15,760 --> 00:02:18,200 Speaker 3: to be able four thousand dollars. Last year is thirty 44 00:02:18,200 --> 00:02:20,840 Speaker 3: two hundred dollars, and that is the exact time when 45 00:02:20,880 --> 00:02:22,840 Speaker 3: retailers are going to feel like they can pass on 46 00:02:22,840 --> 00:02:24,560 Speaker 3: these tariff increases. So I do think we've got a 47 00:02:24,600 --> 00:02:27,560 Speaker 3: little bit of a spurred in tariff inflation still to come. 48 00:02:27,720 --> 00:02:30,519 Speaker 3: But then you know, if nothing else happens, there isn't 49 00:02:30,520 --> 00:02:32,480 Speaker 3: a lot of momentum in this economy, and it'll slow 50 00:02:32,520 --> 00:02:34,520 Speaker 3: down again, and it'll cool down again. So I don't 51 00:02:34,520 --> 00:02:37,000 Speaker 3: think we've got a long term inflation problem. My real 52 00:02:37,120 --> 00:02:41,160 Speaker 3: question is, given how bubbly financial markets are, do you 53 00:02:41,320 --> 00:02:43,880 Speaker 3: really need the Federal Reserve adding more liquidity to the 54 00:02:43,919 --> 00:02:47,320 Speaker 3: party right now? Or should they just hang on in 55 00:02:47,360 --> 00:02:48,919 Speaker 3: there and say this is enough liquidity? 56 00:02:49,120 --> 00:02:49,720 Speaker 1: What are you saying? 57 00:02:49,919 --> 00:02:51,760 Speaker 4: What are you seeing that really is bubbly Given the 58 00:02:51,800 --> 00:02:56,079 Speaker 4: fact that earnings have exceeded expectations, the forecasts have exceeded expectations, 59 00:02:56,520 --> 00:02:58,359 Speaker 4: and we're likely to see more of the same next week. 60 00:02:58,400 --> 00:03:03,160 Speaker 3: With the tech earnings, valuations are extremely high for the 61 00:03:03,200 --> 00:03:05,840 Speaker 3: over now. Obviously, it's a lot of it's concentrated in 62 00:03:05,840 --> 00:03:08,239 Speaker 3: the mega cap stocks, but also profits is a share 63 00:03:08,280 --> 00:03:12,760 Speaker 3: of GDP are extraordinarily high. So overall, the total valuable 64 00:03:12,840 --> 00:03:15,440 Speaker 3: US market cap is about three hundred and sixty five 65 00:03:15,560 --> 00:03:19,280 Speaker 3: percent of GDP right now. It was about two hundred 66 00:03:19,320 --> 00:03:23,000 Speaker 3: and twelve percent before the tech bubble bursts back. 67 00:03:22,840 --> 00:03:23,560 Speaker 5: In two thousand. 68 00:03:23,680 --> 00:03:26,200 Speaker 3: It was eighty seven percent before the eighty seven stock 69 00:03:26,200 --> 00:03:29,560 Speaker 3: market crash. So there's all you know, it's leverage upon leverage, 70 00:03:29,639 --> 00:03:32,200 Speaker 3: high pe ratios on a very high level of earnings 71 00:03:32,200 --> 00:03:35,040 Speaker 3: relative to GDP. Now, I still think this is a 72 00:03:35,120 --> 00:03:39,360 Speaker 3: very good economy for equities, but I wouldn't say that 73 00:03:39,400 --> 00:03:41,800 Speaker 3: you could call the market depressed at this stage. I 74 00:03:41,840 --> 00:03:43,680 Speaker 3: think that, you know, one of the dangers here is 75 00:03:43,720 --> 00:03:46,080 Speaker 3: that everybody gets out over their skis and then you 76 00:03:46,120 --> 00:03:50,080 Speaker 3: have a significant market correction or a bear market. 77 00:03:50,480 --> 00:03:52,840 Speaker 6: So are you talking about potentially if the Fed is 78 00:03:52,880 --> 00:03:56,320 Speaker 6: cutting into strength, they'll be making an error this month. 79 00:03:57,400 --> 00:04:00,880 Speaker 3: Yeah, because it's a different economy. And talking about well 80 00:04:00,920 --> 00:04:03,280 Speaker 3: the Fen's going to tighten to lower inflation, forget about it. 81 00:04:03,360 --> 00:04:06,760 Speaker 3: The federal reserves, short term ingistrates are not impacting growth, 82 00:04:06,760 --> 00:04:09,680 Speaker 3: They're not impacting inflation, but they are impacting financial markets. 83 00:04:09,840 --> 00:04:12,880 Speaker 3: And the big problem that we've had in this century 84 00:04:12,880 --> 00:04:15,680 Speaker 3: of the two thousands hasn't been CPI inflation getting getting 85 00:04:15,680 --> 00:04:17,760 Speaker 3: out of hand. It's asset bubbles, you know, whether it's 86 00:04:17,800 --> 00:04:22,320 Speaker 3: housing bubbles or tech bubbles. And the Federal Reserve should 87 00:04:22,360 --> 00:04:24,479 Speaker 3: not be in the business of blowing up bubbles. So 88 00:04:24,560 --> 00:04:26,680 Speaker 3: I think they should, you know, just take it easy. 89 00:04:26,720 --> 00:04:28,520 Speaker 3: I don't mind if they cut rates a little bitsier, 90 00:04:28,520 --> 00:04:30,680 Speaker 3: but I certainly would have a problem if they cut 91 00:04:30,760 --> 00:04:33,240 Speaker 3: rates below what they think neutral is if the economy 92 00:04:33,800 --> 00:04:35,919 Speaker 3: is you know, is not threatened by a recession, because 93 00:04:36,040 --> 00:04:39,800 Speaker 3: we are seeing money go into financial markets, go into 94 00:04:39,800 --> 00:04:41,720 Speaker 3: financial assets and just not come out. And it's sort 95 00:04:41,760 --> 00:04:44,039 Speaker 3: of it's kind of like a stuck valve, and the 96 00:04:44,080 --> 00:04:46,360 Speaker 3: more money goes in, the more this this market just 97 00:04:46,400 --> 00:04:47,840 Speaker 3: seems to accelerate upon itself. 98 00:04:47,839 --> 00:04:49,599 Speaker 2: And David, if we ask Governor want of this question 99 00:04:49,760 --> 00:04:51,920 Speaker 2: when he was on the program last week, we asked 100 00:04:51,920 --> 00:04:54,520 Speaker 2: whether it's getting lolved into kind of interest rates and 101 00:04:54,560 --> 00:04:57,720 Speaker 2: potentially reducing financial markets. David, do you think there's a 102 00:04:57,760 --> 00:05:00,200 Speaker 2: problem with their interpretation of the dual mandate or just 103 00:05:00,200 --> 00:05:00,919 Speaker 2: the your mandate. 104 00:05:02,720 --> 00:05:04,000 Speaker 5: I think the dual mandate itself. 105 00:05:04,080 --> 00:05:07,160 Speaker 3: I think that I think that if they need, Congress 106 00:05:07,160 --> 00:05:11,120 Speaker 3: needs to recognize, they need to recognize that monetary policy 107 00:05:11,120 --> 00:05:17,800 Speaker 3: has significant impacts on financial conditions, and therefore maintaining stable financial. 108 00:05:17,480 --> 00:05:18,680 Speaker 5: Conditions should be part of the goal. 109 00:05:19,120 --> 00:05:21,240 Speaker 3: It's kind of like with the ECB, who for years 110 00:05:21,440 --> 00:05:24,360 Speaker 3: decided they didn't they weren't supposed to interview if one 111 00:05:24,480 --> 00:05:28,480 Speaker 3: particular country got into significant economic distress and destabilize the eurosystem. 112 00:05:28,600 --> 00:05:30,880 Speaker 3: And then finally Mario drag He said, look, if Greece 113 00:05:30,960 --> 00:05:33,120 Speaker 3: is a problem, we're going to do something about Greece. Well, 114 00:05:33,160 --> 00:05:35,640 Speaker 3: this is a similar situation where the mandate needs to 115 00:05:35,640 --> 00:05:38,400 Speaker 3: be expanded a little to recognize the impact of FED 116 00:05:38,440 --> 00:05:42,200 Speaker 3: policy on financial and other asset price bubbles, to try 117 00:05:42,240 --> 00:05:44,960 Speaker 3: to prevent bubbles or busts, because of course that's what 118 00:05:45,120 --> 00:05:46,680 Speaker 3: you bubble creates a bus and you want to have 119 00:05:46,760 --> 00:05:50,920 Speaker 3: financial market stability, not just economic stability, and I think 120 00:05:50,920 --> 00:05:52,520 Speaker 3: the Federal Reserve can have an impact on that. 121 00:05:54,000 --> 00:05:57,480 Speaker 2: Stay with US multile impact surveillance coming up after this, 122 00:06:06,480 --> 00:06:10,200 Speaker 2: a downside surprise on headline and core CPI unlocking some 123 00:06:10,279 --> 00:06:12,960 Speaker 2: lower bondiolds this morning. Going into that Federal Reserve decision 124 00:06:13,279 --> 00:06:15,880 Speaker 2: next Wednesday. Joining us now to discuss is Tiffany wanting 125 00:06:15,920 --> 00:06:18,279 Speaker 2: of pimcod Tiffany welcome to the program. Is this a 126 00:06:18,400 --> 00:06:20,960 Speaker 2: source of comfort for this Federal Reserve next week? 127 00:06:23,080 --> 00:06:24,600 Speaker 7: Well, I mean, I don't know. 128 00:06:24,680 --> 00:06:26,520 Speaker 8: I mean, I think certainly it's good news on the 129 00:06:26,520 --> 00:06:29,960 Speaker 8: inflationary pressures. But the argument that we've been making, which 130 00:06:30,160 --> 00:06:32,960 Speaker 8: I think is symptomatic of this report, is that the 131 00:06:33,040 --> 00:06:37,159 Speaker 8: economic adjustment that we're seeing to tariffs is coming through 132 00:06:37,600 --> 00:06:42,080 Speaker 8: less on a price adjustment, and instead companies are finding 133 00:06:42,200 --> 00:06:46,560 Speaker 8: ways to defend margins by offsetting other costs. You know. 134 00:06:46,760 --> 00:06:48,640 Speaker 8: I think the fact that you saw another headline this 135 00:06:48,760 --> 00:06:52,040 Speaker 8: morning around a large retailer, you know that is doing 136 00:06:52,320 --> 00:06:54,320 Speaker 8: you know, some layoffs at the you know, kind of 137 00:06:54,400 --> 00:06:55,640 Speaker 8: higher executive levels. 138 00:06:56,320 --> 00:06:58,760 Speaker 7: That's just in our minds symptomatic. 139 00:06:58,240 --> 00:07:01,160 Speaker 8: Of that that that they are I'm finding these other 140 00:07:01,160 --> 00:07:03,160 Speaker 8: ways to cut costs. So you know what that means 141 00:07:03,160 --> 00:07:06,159 Speaker 8: for the Federal Reserve is that there is some downside 142 00:07:06,240 --> 00:07:08,440 Speaker 8: risk to the labor market here. So I don't I 143 00:07:08,480 --> 00:07:11,480 Speaker 8: don't know that they should be you know completely, you know, 144 00:07:11,520 --> 00:07:13,480 Speaker 8: taking a sigh of relief here. We need to see 145 00:07:13,520 --> 00:07:16,920 Speaker 8: the labor market data obviously when the government reopens. But 146 00:07:17,000 --> 00:07:19,160 Speaker 8: as as you and Mike mentioned, we do think they 147 00:07:19,200 --> 00:07:22,680 Speaker 8: cut in October, you know, and of course the median 148 00:07:22,800 --> 00:07:25,680 Speaker 8: expectation from the FED is that they'll cut again in December. 149 00:07:25,840 --> 00:07:28,040 Speaker 2: How much the forward look can they give us at 150 00:07:28,040 --> 00:07:30,520 Speaker 2: the October mating, Tiffany, when chem and Pal goes into 151 00:07:30,520 --> 00:07:33,920 Speaker 2: the news conference, Hey doesn't have much visibility on anything 152 00:07:34,040 --> 00:07:36,080 Speaker 2: right now. How much guidance can he offer us for 153 00:07:36,120 --> 00:07:37,000 Speaker 2: December and beyond. 154 00:07:38,840 --> 00:07:42,120 Speaker 8: Yeah, I mean, I think it's incredibly tricky, and I'm 155 00:07:42,160 --> 00:07:44,960 Speaker 8: not sure that they will offer a lot of guidance. 156 00:07:45,000 --> 00:07:45,120 Speaker 7: You know. 157 00:07:45,200 --> 00:07:47,920 Speaker 8: I think they're going to they're gonna they're going to 158 00:07:47,920 --> 00:07:49,520 Speaker 8: say that we don't have a lot of data to 159 00:07:49,560 --> 00:07:53,160 Speaker 8: go on here. There's private sources of data, but even there, 160 00:07:53,200 --> 00:07:55,480 Speaker 8: it appears that some of the Feds, you know, the 161 00:07:55,560 --> 00:07:57,360 Speaker 8: previous sources of private data that they got in the 162 00:07:57,400 --> 00:07:59,680 Speaker 8: labor market, maybe they're not getting anymore. So it is 163 00:07:59,680 --> 00:08:03,000 Speaker 8: a much more tricky situation for the FED. You know, 164 00:08:03,040 --> 00:08:05,680 Speaker 8: they're going to be looking at you know, markets and 165 00:08:06,240 --> 00:08:08,640 Speaker 8: you know, and I think the news flow in order 166 00:08:08,680 --> 00:08:11,200 Speaker 8: to kind of figure out what's going on here. And 167 00:08:11,200 --> 00:08:12,760 Speaker 8: I think it's going to be really tough for him 168 00:08:13,080 --> 00:08:16,760 Speaker 8: in terms of guiding any further tiffany. 169 00:08:16,760 --> 00:08:18,480 Speaker 1: A lot of people have been looking at the housing. 170 00:08:18,240 --> 00:08:21,440 Speaker 4: Market in particular as a sign of disinflation going forward, 171 00:08:21,440 --> 00:08:24,000 Speaker 4: and one thing that Mike pointed to is owner's equivalent rent. 172 00:08:24,320 --> 00:08:26,559 Speaker 4: Looking at this, it just looks like inflation and owner's 173 00:08:26,600 --> 00:08:29,040 Speaker 4: equivalent rent has fallen to the lowest pace going back 174 00:08:29,040 --> 00:08:32,080 Speaker 4: to twenty twenty one, with a pretty big decline, which 175 00:08:32,120 --> 00:08:34,040 Speaker 4: is one thing that's giving fuel to some of the 176 00:08:34,440 --> 00:08:36,320 Speaker 4: enthusiasm and pun markets this morning. 177 00:08:36,360 --> 00:08:38,600 Speaker 1: I'm just wondering how big of a tell that is 178 00:08:38,640 --> 00:08:41,200 Speaker 1: for you. Yeah. 179 00:08:41,280 --> 00:08:45,400 Speaker 8: No, I mean I think that that the normalization in 180 00:08:45,440 --> 00:08:48,640 Speaker 8: housing and rents is something that you know, the economics 181 00:08:48,640 --> 00:08:52,000 Speaker 8: community has expected for some time, and I would argue 182 00:08:52,000 --> 00:08:54,559 Speaker 8: that it's delayed, and it was delayed because we saw 183 00:08:54,600 --> 00:08:57,800 Speaker 8: a really big immigration boom over the last couple of years. 184 00:08:58,160 --> 00:09:00,960 Speaker 8: Now obviously that the immigration police has taken a big 185 00:09:01,040 --> 00:09:04,840 Speaker 8: u turn, you're not seeing those tailwinds of you know, 186 00:09:04,880 --> 00:09:08,920 Speaker 8: additional population coming into the United States needing housing, and 187 00:09:09,000 --> 00:09:11,160 Speaker 8: as a result of that, you're seeing rens cool off 188 00:09:11,240 --> 00:09:13,440 Speaker 8: quite a bit. So I don't think it's that surprising, 189 00:09:13,800 --> 00:09:15,839 Speaker 8: you know, but I do think it's you know, one 190 00:09:15,840 --> 00:09:18,200 Speaker 8: of one of the things that should give the Federal 191 00:09:18,240 --> 00:09:21,920 Speaker 8: Reserve comfort, you know that they you know, the inflationary 192 00:09:21,960 --> 00:09:25,040 Speaker 8: pressures outside of you know, some terraff related pass through 193 00:09:25,480 --> 00:09:27,559 Speaker 8: are pretty benign at this point, given. 194 00:09:27,280 --> 00:09:30,480 Speaker 4: The fact that we're seeing no inflationary pressures to note 195 00:09:30,679 --> 00:09:33,360 Speaker 4: that really are even beyond what people expected, and you 196 00:09:33,400 --> 00:09:36,280 Speaker 4: are getting these announcements you were talking about the target 197 00:09:36,320 --> 00:09:40,199 Speaker 4: announcements without naming them, laying off about a thousand people 198 00:09:40,280 --> 00:09:43,959 Speaker 4: and removing eight hundred jobs from their listings. We also 199 00:09:44,000 --> 00:09:48,000 Speaker 4: saw GM announcing around of job cuts this morning. I'm 200 00:09:48,040 --> 00:09:51,480 Speaker 4: just wondering how much these are just anecdotes and typical 201 00:09:51,840 --> 00:09:56,400 Speaker 4: versus something that really is softening, that is behind the disinflation, 202 00:09:56,640 --> 00:09:58,800 Speaker 4: as well as the concerns that the Fed has about 203 00:09:58,840 --> 00:09:59,640 Speaker 4: the labor market. 204 00:10:01,320 --> 00:10:03,559 Speaker 8: Yeah, I mean, I mean again, we think it's it's 205 00:10:03,720 --> 00:10:08,480 Speaker 8: very symptomatic of how we see the economy that's ultimately 206 00:10:08,520 --> 00:10:11,160 Speaker 8: adjusting to tariffs. You know, I think the really big 207 00:10:11,200 --> 00:10:13,360 Speaker 8: surprise this year coming in, you know, coming into the 208 00:10:13,400 --> 00:10:15,320 Speaker 8: year and thinking about tariffs is that you'd get some 209 00:10:15,440 --> 00:10:19,800 Speaker 8: price level adjustment. And there's multiple ways that companies can 210 00:10:19,880 --> 00:10:21,720 Speaker 8: adjust to this. You know, and I think what we're 211 00:10:21,800 --> 00:10:25,120 Speaker 8: learning is that, you know, they're not fully adjusting prices 212 00:10:25,520 --> 00:10:28,000 Speaker 8: and that they're trying to offset costs in other ways, 213 00:10:28,280 --> 00:10:28,440 Speaker 8: you know. 214 00:10:28,440 --> 00:10:30,040 Speaker 7: And I think the fact that you're seeing this. 215 00:10:30,160 --> 00:10:33,680 Speaker 8: AI investment boom and some broadening out just in the 216 00:10:33,720 --> 00:10:38,120 Speaker 8: diffusion of AI technology, companies are hoping to get some 217 00:10:38,280 --> 00:10:43,199 Speaker 8: labor saving cost benefits here and investing in capital because 218 00:10:43,200 --> 00:10:46,280 Speaker 8: of the tax the new tax law, the One Big 219 00:10:46,280 --> 00:10:49,480 Speaker 8: Beautiful Bill Act, you know, gives you pretty big you know, 220 00:10:49,559 --> 00:10:52,720 Speaker 8: tax tax incentives with upfront capital expensing. So I think 221 00:10:52,720 --> 00:10:55,680 Speaker 8: companies are really just making this adjustment, you know, more 222 00:10:55,720 --> 00:10:58,400 Speaker 8: so through the labor market and in terms of the 223 00:10:58,400 --> 00:11:02,120 Speaker 8: federal reserve, and they're mandate. You know, that just suggests 224 00:11:02,120 --> 00:11:05,080 Speaker 8: that they have more room to start to uh, you know, 225 00:11:05,120 --> 00:11:08,440 Speaker 8: to adjust policy back towards neutral. If they do cut 226 00:11:08,480 --> 00:11:10,600 Speaker 8: two more times this year, they would be uh, you know, 227 00:11:10,800 --> 00:11:12,280 Speaker 8: three three and a half, which is kind of the 228 00:11:12,360 --> 00:11:15,679 Speaker 8: upper end of the range of neutral estimates that they have. 229 00:11:16,000 --> 00:11:18,160 Speaker 8: And so getting back there and making that adjustment, you know, 230 00:11:18,160 --> 00:11:20,880 Speaker 8: seems very reasonable to us, just given the information that's 231 00:11:20,880 --> 00:11:21,960 Speaker 8: coming in tifically. 232 00:11:22,000 --> 00:11:25,079 Speaker 6: When you say labor saving cost benefits, should we all 233 00:11:25,080 --> 00:11:27,800 Speaker 6: be expecting more layoffs then to be announced in twenty 234 00:11:27,840 --> 00:11:28,400 Speaker 6: twenty six. 235 00:11:30,440 --> 00:11:32,880 Speaker 8: Well, I mean, I think the the economy will will 236 00:11:32,920 --> 00:11:35,560 Speaker 8: need to go through an adjustment as a result of 237 00:11:35,679 --> 00:11:38,240 Speaker 8: you know, these these transitions that we're seeing, whether it 238 00:11:38,280 --> 00:11:41,600 Speaker 8: be you know, the policy related transitions this year or 239 00:11:42,000 --> 00:11:44,200 Speaker 8: you know this tech uh you know sort of tech 240 00:11:44,240 --> 00:11:46,480 Speaker 8: transition that we're seeing. You know, it does seem like 241 00:11:46,559 --> 00:11:49,440 Speaker 8: AI is moving pretty quickly, you know. I think it's 242 00:11:49,840 --> 00:11:52,559 Speaker 8: you know, it's it's still uncertain how how much productivity 243 00:11:52,600 --> 00:11:55,520 Speaker 8: gains will will actually will actually get and how that 244 00:11:55,600 --> 00:11:58,679 Speaker 8: will you know, save costs for companies, you know, but 245 00:11:58,840 --> 00:12:01,640 Speaker 8: I think it we are starting to see the effects 246 00:12:01,679 --> 00:12:01,920 Speaker 8: of that. 247 00:12:02,240 --> 00:12:03,559 Speaker 7: I think you could start to see. 248 00:12:03,360 --> 00:12:06,520 Speaker 8: It at announcements layoff announcements as well at some of 249 00:12:06,559 --> 00:12:10,160 Speaker 8: the tech companies. You know, it is displacing some workers. Now, 250 00:12:10,160 --> 00:12:13,160 Speaker 8: I think what's harder to understand is, you know, eventually 251 00:12:13,240 --> 00:12:15,040 Speaker 8: it will also create new jobs. 252 00:12:15,200 --> 00:12:18,480 Speaker 7: And how quickly will that happen and what. 253 00:12:18,520 --> 00:12:21,280 Speaker 8: Those new jobs will be is more difficult to forecast. 254 00:12:21,360 --> 00:12:22,760 Speaker 8: But I think at least in the near term you 255 00:12:22,840 --> 00:12:26,400 Speaker 8: will see some you know, some labor saving you know, 256 00:12:26,440 --> 00:12:30,600 Speaker 8: displacement here and the companies need that and are forced 257 00:12:30,600 --> 00:12:33,040 Speaker 8: to try to get it because they have more terar 258 00:12:33,080 --> 00:12:33,880 Speaker 8: for related costs. 259 00:12:34,520 --> 00:12:37,960 Speaker 2: Stay with US mult Bloomberg Surveillance Coming up after this, 260 00:12:47,000 --> 00:12:49,840 Speaker 2: President Donald Trump and Chinese President Chaing Ping is set 261 00:12:49,840 --> 00:12:52,560 Speaker 2: to meet on Thursday in South Korea as the world's 262 00:12:52,600 --> 00:12:55,800 Speaker 2: two lunchest economies looked at East trade sentience. To extend 263 00:12:55,800 --> 00:12:59,120 Speaker 2: the conversation, George Pollack of Signum joined US. Now for more, George, 264 00:12:59,120 --> 00:13:02,360 Speaker 2: that's Guy's for the issue rare raths, soybeans, and then 265 00:13:02,360 --> 00:13:04,920 Speaker 2: we've got the issues around fence and O. Of those three, 266 00:13:05,160 --> 00:13:08,079 Speaker 2: what's the higher, Rocky, what's the more difficult one to achieve? 267 00:13:09,320 --> 00:13:11,160 Speaker 9: I think for the President, the most difficult one to 268 00:13:11,200 --> 00:13:14,199 Speaker 9: achieve is rare earth because China understands that with rare 269 00:13:14,200 --> 00:13:18,000 Speaker 9: earths they have the US and a disadvantageous position. And 270 00:13:18,040 --> 00:13:21,320 Speaker 9: they remember when these tiers were first implemented earlier this year, 271 00:13:21,679 --> 00:13:24,280 Speaker 9: the car manufacturers came to the president and said, if 272 00:13:24,320 --> 00:13:26,319 Speaker 9: you don't get the rare earths started, we're going to 273 00:13:26,400 --> 00:13:29,199 Speaker 9: have to shut down production. And China knows that, and 274 00:13:30,000 --> 00:13:31,680 Speaker 9: that's where the President's probably going to have to be 275 00:13:31,760 --> 00:13:34,760 Speaker 9: most aggressive. But at the same time, understand China has 276 00:13:34,800 --> 00:13:35,559 Speaker 9: the advantage. 277 00:13:35,960 --> 00:13:39,320 Speaker 6: Is China sending any signals that they're prepared to walk 278 00:13:39,400 --> 00:13:41,840 Speaker 6: back what they plant, what they have been doing when 279 00:13:41,840 --> 00:13:42,680 Speaker 6: it comes to rare earth. 280 00:13:44,480 --> 00:13:48,160 Speaker 9: I think China's understanding of this rare issue is we 281 00:13:48,240 --> 00:13:51,480 Speaker 9: haven't really done anything, and what we have done was 282 00:13:51,520 --> 00:13:54,120 Speaker 9: more a response to your restrictions, and all we're doing 283 00:13:54,160 --> 00:13:57,080 Speaker 9: is setting up a new licensing regiment. Rare earth are 284 00:13:57,120 --> 00:13:59,160 Speaker 9: going to continue to come out, and you don't have 285 00:13:59,240 --> 00:14:02,839 Speaker 9: to worry. It's be happy with the status quote. But 286 00:14:02,920 --> 00:14:05,520 Speaker 9: you decided to change things up and you've decided to 287 00:14:05,559 --> 00:14:07,800 Speaker 9: overreact and become more pugnacious. 288 00:14:08,000 --> 00:14:11,440 Speaker 6: Well, it's not just a new regime when it comes 289 00:14:11,480 --> 00:14:14,880 Speaker 6: to rare Earth's any material that China exports it has 290 00:14:14,960 --> 00:14:17,920 Speaker 6: an ounce of a trace of a rare earth needs 291 00:14:17,920 --> 00:14:20,240 Speaker 6: to get a specific export license, which is why the 292 00:14:20,240 --> 00:14:25,560 Speaker 6: Europeans are even considering using their anti coercion tool, George. 293 00:14:25,680 --> 00:14:27,760 Speaker 6: The fact that the Europeans are willing to go to 294 00:14:27,800 --> 00:14:30,960 Speaker 6: the third rail, a tool they've never used in any negotiation, 295 00:14:31,600 --> 00:14:33,960 Speaker 6: is that at the moment helping the United States into 296 00:14:34,040 --> 00:14:35,119 Speaker 6: Thursday's meeting. 297 00:14:35,800 --> 00:14:38,600 Speaker 9: I think for the President from Scott Bessen's O viewpoint, 298 00:14:38,680 --> 00:14:41,440 Speaker 9: it is helping, It is helping the president give him 299 00:14:41,880 --> 00:14:44,520 Speaker 9: a more global power and a more global idea that 300 00:14:44,600 --> 00:14:48,160 Speaker 9: this can't go on. But at the same time, China's 301 00:14:48,200 --> 00:14:51,200 Speaker 9: responded to this as that's great that you're united, but 302 00:14:51,280 --> 00:14:53,920 Speaker 9: we still have the advantage and we don't understand why 303 00:14:53,920 --> 00:14:57,200 Speaker 9: you're being so aggressive with us back and why you're 304 00:14:57,200 --> 00:14:58,840 Speaker 9: deciding to play it so fast and loose. 305 00:14:59,400 --> 00:15:02,000 Speaker 6: So what's your case then, for Thursdays, it's just a 306 00:15:02,040 --> 00:15:04,680 Speaker 6: continuing rolling truth. 307 00:15:06,000 --> 00:15:08,480 Speaker 9: Our base case is a continuing rolling truth where the 308 00:15:08,600 --> 00:15:11,680 Speaker 9: US and China understand the current situation where the presence 309 00:15:11,680 --> 00:15:14,640 Speaker 9: of threating increased tariffs and the continuing threat that is 310 00:15:14,640 --> 00:15:17,880 Speaker 9: a new licensing regime kind of rolls back to an 311 00:15:17,920 --> 00:15:21,080 Speaker 9: extent where we get back to the Geneva London understanding. 312 00:15:21,480 --> 00:15:24,040 Speaker 9: But that doesn't mean it's a positive situation because we're 313 00:15:24,080 --> 00:15:26,760 Speaker 9: still going to be having these situations pop up every 314 00:15:26,760 --> 00:15:29,320 Speaker 9: couple of weeks where either the President is frustrated or 315 00:15:29,440 --> 00:15:30,440 Speaker 9: China is frustrated. 316 00:15:30,640 --> 00:15:32,280 Speaker 4: In the fact, in the past few weeks, it seems 317 00:15:32,280 --> 00:15:34,640 Speaker 4: like the US has been trying to mend relations with 318 00:15:34,640 --> 00:15:38,920 Speaker 4: a number of traditional allies and create closer ties, which 319 00:15:38,960 --> 00:15:42,040 Speaker 4: is the reason why, in the wake of the announced 320 00:15:42,080 --> 00:15:45,400 Speaker 4: meeting between Jijinpang and President Trump, the new tensions with 321 00:15:45,480 --> 00:15:46,600 Speaker 4: Canada are interesting. 322 00:15:46,840 --> 00:15:48,800 Speaker 1: How do you sort of understand. 323 00:15:48,360 --> 00:15:51,160 Speaker 4: That in the bigger sphere of negotiations with. 324 00:15:51,240 --> 00:15:55,200 Speaker 9: China in terms of the attentions with Canada. The way 325 00:15:55,240 --> 00:15:57,600 Speaker 9: we view this is Canada's right now between a rock 326 00:15:57,640 --> 00:15:59,680 Speaker 9: and a hard place within the Canola tariffs and ev 327 00:15:59,800 --> 00:16:02,080 Speaker 9: tears they've placed on China, and they need to get 328 00:16:02,080 --> 00:16:04,120 Speaker 9: that restarted. But at the same time they need to 329 00:16:04,160 --> 00:16:07,960 Speaker 9: deal with USMCA renegotiation. And we've always thought that USMCA 330 00:16:08,080 --> 00:16:10,520 Speaker 9: is going to be an aggressive renegotiation from the President 331 00:16:10,760 --> 00:16:13,320 Speaker 9: and things like transhipment and rules of origin are going 332 00:16:13,360 --> 00:16:15,960 Speaker 9: to come into play. And I think for the President, 333 00:16:16,040 --> 00:16:18,480 Speaker 9: he's making clear to Canada, you're either with US the 334 00:16:18,600 --> 00:16:21,960 Speaker 9: United States, or are you with China. You can't get both. 335 00:16:22,600 --> 00:16:25,920 Speaker 4: This feels like a long game of leverage, and that's 336 00:16:25,960 --> 00:16:28,240 Speaker 4: sort of been the big question between the US and China. 337 00:16:28,280 --> 00:16:30,720 Speaker 1: Who has the leverage, And people argue on both sides. 338 00:16:30,920 --> 00:16:33,200 Speaker 4: China having the leverage and rare earth minerals, maybe the 339 00:16:33,280 --> 00:16:34,960 Speaker 4: US having a bit of an edge when it comes 340 00:16:34,960 --> 00:16:36,440 Speaker 4: to technology, and just the. 341 00:16:36,480 --> 00:16:40,080 Speaker 1: Dynamism in the US economy. I just wonder how much. 342 00:16:40,000 --> 00:16:43,360 Speaker 4: You expect there to be some discussion of Russia and 343 00:16:43,480 --> 00:16:46,920 Speaker 4: oil purchases, how much that's on the table versus just 344 00:16:47,160 --> 00:16:50,000 Speaker 4: getting there and figuring out how to job own and 345 00:16:50,080 --> 00:16:52,200 Speaker 4: kind of poke your elbows out, sort of have the 346 00:16:52,240 --> 00:16:53,520 Speaker 4: same thing that we have right now. 347 00:16:54,360 --> 00:16:55,880 Speaker 9: I have no doubt that there's people in the White 348 00:16:55,880 --> 00:16:57,760 Speaker 9: House who would like to discuss Russia, whould like to 349 00:16:57,760 --> 00:17:00,480 Speaker 9: discuss oil. But I think the President's made clear hisorities are, 350 00:17:00,480 --> 00:17:03,360 Speaker 9: among other things, fentanel and soybeans, and I think that's 351 00:17:03,360 --> 00:17:05,919 Speaker 9: where his focus is going to be. He is thinking 352 00:17:05,960 --> 00:17:08,520 Speaker 9: short term right now, and his most likely his biggest 353 00:17:08,520 --> 00:17:11,800 Speaker 9: short term weakness is the farmers, and is their inability 354 00:17:11,840 --> 00:17:14,240 Speaker 9: to get assistance during the shutdown, and inability to get 355 00:17:14,240 --> 00:17:16,720 Speaker 9: assistance because China, what for the first time in seven 356 00:17:16,800 --> 00:17:19,440 Speaker 9: years in September did not purchase a single soybean. 357 00:17:19,760 --> 00:17:22,120 Speaker 2: Can you tell me, George, your day on the calendar 358 00:17:22,240 --> 00:17:24,080 Speaker 2: was circled when you think the shutdown finishes. 359 00:17:25,000 --> 00:17:27,120 Speaker 9: I think we're still taking the place that this ends 360 00:17:27,119 --> 00:17:31,080 Speaker 9: in November first for US Democrats. Send Democrats understand that 361 00:17:31,119 --> 00:17:35,080 Speaker 9: at November first, the open care healthcare woman opens up. 362 00:17:35,520 --> 00:17:38,040 Speaker 9: Republican voters are going to see the other premiums increase, 363 00:17:38,160 --> 00:17:40,439 Speaker 9: and for Democrats that will be well will be negative 364 00:17:40,440 --> 00:17:42,600 Speaker 9: for voters. Democrats will be able to say we wanted 365 00:17:42,680 --> 00:17:44,439 Speaker 9: to fix this, Republicans were the one. 366 00:17:44,280 --> 00:17:44,840 Speaker 5: Who said no. 367 00:17:45,440 --> 00:17:48,880 Speaker 6: So you're basically saying it ends November first because Democrats 368 00:17:48,920 --> 00:17:51,560 Speaker 6: will line up for the continuing resolution, not because they 369 00:17:51,560 --> 00:17:53,640 Speaker 6: struck a deal with Republicans on healthcare. 370 00:17:54,520 --> 00:17:56,439 Speaker 9: I think we will have to happen as Senator Schumer 371 00:17:56,480 --> 00:17:58,719 Speaker 9: will have to walk with a hard line to not 372 00:17:58,920 --> 00:18:01,840 Speaker 9: go down, but to navigate his caucus and to allow 373 00:18:02,119 --> 00:18:04,600 Speaker 9: either the retiring members or the more moderate members to 374 00:18:04,680 --> 00:18:07,560 Speaker 9: vote for it, and then message saying Democrats wanted to 375 00:18:07,560 --> 00:18:10,240 Speaker 9: fix your healthcare. Democrats wanted you to avoid these premiums, 376 00:18:10,280 --> 00:18:12,760 Speaker 9: but Republicans were the one who are saying no. And 377 00:18:12,800 --> 00:18:15,680 Speaker 9: that will be the I guess the Democratic win will 378 00:18:15,720 --> 00:18:17,960 Speaker 9: be one making healthcare an issue in the elect In 379 00:18:18,000 --> 00:18:20,800 Speaker 9: the election, two Democrats being able to take the eighty 380 00:18:20,880 --> 00:18:22,800 Speaker 9: twenty side of an issue the eighty side of an 381 00:18:22,840 --> 00:18:26,120 Speaker 9: eighty twenty issue, and Democrats being able to say Republicans 382 00:18:26,160 --> 00:18:28,119 Speaker 9: are the ones to blame for what is happening with 383 00:18:28,160 --> 00:18:30,399 Speaker 9: your premiums, and if you want to punish them, the 384 00:18:30,400 --> 00:18:31,960 Speaker 9: best way to do that is to vote for us. 385 00:18:33,160 --> 00:18:33,800 Speaker 10: Stay with us. 386 00:18:34,119 --> 00:18:46,800 Speaker 2: More Bloomberg Surveillance coming up after this, stocks rising, its 387 00:18:46,800 --> 00:18:49,760 Speaker 2: markets are way. The latest read on inflation, John Stoffers 388 00:18:49,760 --> 00:18:52,760 Speaker 2: of Oppenheimer writing, our intermediate and longer term outlook for 389 00:18:52,800 --> 00:18:56,120 Speaker 2: the US economy and the stock market remains decidedly drum 390 00:18:56,200 --> 00:18:59,960 Speaker 2: roll bullish, John, the most bullish man on the street. 391 00:19:00,240 --> 00:19:01,880 Speaker 2: Let to see a second month, to see you too. 392 00:19:02,080 --> 00:19:04,800 Speaker 2: Let's get to somebody these questions regarding inflation. How relevant 393 00:19:04,800 --> 00:19:07,880 Speaker 2: is this morning CPISA to today's market. 394 00:19:08,160 --> 00:19:10,960 Speaker 11: I think as long as it comes in in line 395 00:19:11,040 --> 00:19:14,440 Speaker 11: or close to inline, I think we'll be fine. If 396 00:19:14,480 --> 00:19:19,040 Speaker 11: it's a drastic surprise, then of course to higher inflation, 397 00:19:19,680 --> 00:19:22,520 Speaker 11: not so. And if it's also much lower inflation than 398 00:19:22,560 --> 00:19:24,600 Speaker 11: people say, we're in trouble. Is the Fed going to 399 00:19:24,600 --> 00:19:27,240 Speaker 11: do fifty in set of twenty five? So it's any 400 00:19:27,320 --> 00:19:29,920 Speaker 11: kind of action that can create BIPs for the traders 401 00:19:30,320 --> 00:19:32,199 Speaker 11: you have to watch for. But we think it'll be 402 00:19:33,240 --> 00:19:36,280 Speaker 11: it'll come in line with expectations, and we think that 403 00:19:36,560 --> 00:19:37,560 Speaker 11: we're going to cut tomorrow. 404 00:19:37,680 --> 00:19:41,000 Speaker 2: It's important today next week, it shapes perceptions of feder 405 00:19:41,000 --> 00:19:43,760 Speaker 2: reserve policy for next week and beyond. Does it shape 406 00:19:43,760 --> 00:19:46,119 Speaker 2: perceptions of money policy for next week and beyond? 407 00:19:46,240 --> 00:19:48,480 Speaker 11: You know, I think it's We've said for a long time, 408 00:19:48,520 --> 00:19:51,680 Speaker 11: we think the Fed is making down payments to Main 409 00:19:51,720 --> 00:19:54,920 Speaker 11: Street and to Wall Street to give them an idea. Indeed, 410 00:19:54,960 --> 00:20:00,760 Speaker 11: this this monetary tightening policy period is ending, not ending 411 00:20:00,760 --> 00:20:03,119 Speaker 11: as quick or as deep in terms of the cuts 412 00:20:03,440 --> 00:20:06,719 Speaker 11: as both Main Street and Wall Street would like. But sometimes, 413 00:20:06,760 --> 00:20:08,719 Speaker 11: you know, you can't always get what you want, but 414 00:20:08,800 --> 00:20:10,200 Speaker 11: you may find you get what you need. 415 00:20:10,320 --> 00:20:12,320 Speaker 4: You know, Well, at this point, we're looking at earnings 416 00:20:12,320 --> 00:20:14,320 Speaker 4: that are coming in better than expected. We're looking at 417 00:20:14,320 --> 00:20:16,760 Speaker 4: a FED that's going to look past any kind of CPI. 418 00:20:16,480 --> 00:20:17,480 Speaker 1: Print and cut rates. 419 00:20:17,800 --> 00:20:20,360 Speaker 4: And yet yes, you're bullish at the same time you're 420 00:20:20,400 --> 00:20:22,160 Speaker 4: talking about going up in quality. 421 00:20:22,560 --> 00:20:23,960 Speaker 1: How do you pair those two ideas? 422 00:20:24,200 --> 00:20:24,440 Speaker 5: Well? 423 00:20:24,480 --> 00:20:27,280 Speaker 11: You know, I think you have to be realistic in 424 00:20:27,359 --> 00:20:29,920 Speaker 11: that the market has genuinely shown that it's still a 425 00:20:29,960 --> 00:20:32,200 Speaker 11: little bit nervous about small and midcaps. 426 00:20:32,640 --> 00:20:34,000 Speaker 10: You have these days when we go. 427 00:20:34,080 --> 00:20:36,639 Speaker 11: Risk off, where they don't go completely risk off in 428 00:20:36,680 --> 00:20:39,520 Speaker 11: a traditional sense. They're not running out of the market, 429 00:20:39,760 --> 00:20:41,720 Speaker 11: but all of a sudden, you'll see the smalls in 430 00:20:41,760 --> 00:20:43,920 Speaker 11: the mids will get a good day, you know, versus 431 00:20:44,000 --> 00:20:46,600 Speaker 11: the large caps. But when it comes down to it, 432 00:20:46,640 --> 00:20:51,680 Speaker 11: people are concerned that perhaps the economy is weaker than perceived. 433 00:20:52,240 --> 00:20:55,560 Speaker 11: We're in this blackout period without without any data flow. 434 00:20:56,040 --> 00:21:00,440 Speaker 11: So the thought really is, it's you hug the large caps. Also, 435 00:21:00,880 --> 00:21:03,879 Speaker 11: the large cap stocks appear to be the most resilient 436 00:21:03,880 --> 00:21:05,639 Speaker 11: when it comes to earnings. If you look at the 437 00:21:05,680 --> 00:21:10,680 Speaker 11: earnings reports for the last earning season fourth quarter, first quarter, 438 00:21:10,840 --> 00:21:13,760 Speaker 11: second quarter, and thus far third quarter, this looks good. 439 00:21:14,400 --> 00:21:16,240 Speaker 4: I love a good cliche on a Friday morning. What 440 00:21:16,920 --> 00:21:19,680 Speaker 4: inning are we in here? Just because that is sort 441 00:21:19,680 --> 00:21:22,240 Speaker 4: of a question, given that some people were talking about 442 00:21:22,280 --> 00:21:24,880 Speaker 4: almost recession like conditions earlier this year that have really 443 00:21:24,880 --> 00:21:28,240 Speaker 4: revived in a sort of reacceleration now into the beginning 444 00:21:28,240 --> 00:21:28,840 Speaker 4: of next year. 445 00:21:29,040 --> 00:21:31,320 Speaker 11: Yeah, I'd say, you know, we've thought for a long 446 00:21:31,400 --> 00:21:34,440 Speaker 11: time because of the change in the federal reserves policy 447 00:21:34,480 --> 00:21:37,040 Speaker 11: and the way it acts, how quick it acts, and 448 00:21:37,080 --> 00:21:40,879 Speaker 11: how communicative it is, that essentially we've for a long 449 00:21:40,960 --> 00:21:44,639 Speaker 11: period been it's an extended mid cycle. I like to 450 00:21:44,680 --> 00:21:49,639 Speaker 11: say the economic cycle is as wide as the Amazon 451 00:21:49,920 --> 00:21:50,840 Speaker 11: and we mean the river. 452 00:21:51,400 --> 00:21:53,680 Speaker 10: Okay, because it's been going on for a long time. 453 00:21:53,720 --> 00:21:55,920 Speaker 11: How often have you heard from the bears were light 454 00:21:56,000 --> 00:21:58,200 Speaker 11: cycle that all of a sudden some of the most 455 00:21:58,200 --> 00:22:00,760 Speaker 11: bearished in the past are saying we're actually coming to 456 00:22:00,880 --> 00:22:02,000 Speaker 11: early cycle. 457 00:22:01,720 --> 00:22:04,080 Speaker 10: And we're going back. But no, I think it's it's 458 00:22:04,119 --> 00:22:05,680 Speaker 10: a big fat mid cycle. 459 00:22:05,760 --> 00:22:09,520 Speaker 11: And it's because between the federal reserve policy that's Ben 460 00:22:09,560 --> 00:22:14,280 Speaker 11: Bernanki legacy, as well as increased use of technology creating 461 00:22:14,320 --> 00:22:20,800 Speaker 11: greater efficiencies for both the consumer and business, and experience 462 00:22:20,840 --> 00:22:23,200 Speaker 11: that's been garnered from all these things, whether it was 463 00:22:23,240 --> 00:22:27,160 Speaker 11: the financial crisis, COVID coming out of COVID, supply chain, 464 00:22:28,320 --> 00:22:32,440 Speaker 11: trade wars, all this stuff, it's you know, it's it's 465 00:22:32,520 --> 00:22:34,080 Speaker 11: better than expected. 466 00:22:33,560 --> 00:22:36,240 Speaker 10: And it's resilience. It's not you know, what was the old. 467 00:22:36,119 --> 00:22:39,359 Speaker 11: Word they used to host robust. Heck with robust, I 468 00:22:39,440 --> 00:22:41,399 Speaker 11: will take resilience. 469 00:22:40,840 --> 00:22:41,560 Speaker 10: Is what I like. 470 00:22:41,920 --> 00:22:43,680 Speaker 1: Well, you in a very long term view. 471 00:22:44,359 --> 00:22:48,080 Speaker 6: Short term though there's a lot of policy uncertainty, what 472 00:22:48,200 --> 00:22:49,280 Speaker 6: gives you the most angst? 473 00:22:50,160 --> 00:22:53,320 Speaker 11: And Marie, it's the the well, what gives me the 474 00:22:53,359 --> 00:22:56,520 Speaker 11: most angst has very little to do a lot of 475 00:22:56,520 --> 00:22:59,000 Speaker 11: times with the market. It's just that the popularism of 476 00:22:59,119 --> 00:23:04,560 Speaker 11: socialism and communism, which are failed ideologies, is rising in 477 00:23:04,640 --> 00:23:07,919 Speaker 11: different places around the world. But I think related to 478 00:23:08,080 --> 00:23:11,680 Speaker 11: what keeps me up at night is just I look 479 00:23:11,720 --> 00:23:15,160 Speaker 11: at valuations, and as long as it's recognized that valuations 480 00:23:15,160 --> 00:23:18,479 Speaker 11: are probably higher than historical standards would have us at 481 00:23:18,480 --> 00:23:22,040 Speaker 11: this point, what we're believing is that people are investing 482 00:23:22,119 --> 00:23:24,960 Speaker 11: more seriously than ever before, at least in the US, 483 00:23:25,160 --> 00:23:28,280 Speaker 11: because they recognize social security will simply not be the 484 00:23:28,320 --> 00:23:32,200 Speaker 11: same percentage of income and retirement, and people are worried 485 00:23:32,240 --> 00:23:34,080 Speaker 11: that they might live too long. They don't want to 486 00:23:34,119 --> 00:23:39,240 Speaker 11: lose their living standards, and so people go to equities, 487 00:23:39,240 --> 00:23:43,440 Speaker 11: which historically have proven to be past performance no guarantee 488 00:23:43,440 --> 00:23:47,360 Speaker 11: of future results. But it's that equities have shown resilience 489 00:23:47,400 --> 00:23:50,760 Speaker 11: in dealing with inflation, changes in the economy, changes in 490 00:23:50,840 --> 00:23:53,960 Speaker 11: tread in trend. It's good to own a good business. 491 00:23:54,080 --> 00:23:55,840 Speaker 2: This must be a generational thing. Who do you know 492 00:23:55,880 --> 00:23:57,120 Speaker 2: the worries about living too long? 493 00:23:57,960 --> 00:24:00,800 Speaker 10: Well, you know, but everybody the same thing. Do you 494 00:24:00,800 --> 00:24:02,360 Speaker 10: know if you want not at all? 495 00:24:02,640 --> 00:24:04,439 Speaker 11: If you look at it though, if you look at 496 00:24:04,480 --> 00:24:09,240 Speaker 11: the another year with the report in terms of investor behavior, 497 00:24:09,280 --> 00:24:12,960 Speaker 11: it's cross generational, so you still have among the youth, 498 00:24:13,040 --> 00:24:16,280 Speaker 11: you still have the desire to gamble a in a 499 00:24:16,320 --> 00:24:16,840 Speaker 11: bull market. 500 00:24:16,920 --> 00:24:20,600 Speaker 10: It's the crypto, it's gold or silver. 501 00:24:20,359 --> 00:24:22,560 Speaker 2: Way Ama that bus to take resks, don't you? 502 00:24:22,600 --> 00:24:25,199 Speaker 10: Oh, and you need that. It's good for liquidity. 503 00:24:25,359 --> 00:24:28,760 Speaker 11: But they also are investing seriously on the other side 504 00:24:28,800 --> 00:24:32,760 Speaker 11: of it because they recognize that this social security. It's 505 00:24:32,800 --> 00:24:35,040 Speaker 11: not that the politicians are going to eliminate it. That 506 00:24:35,080 --> 00:24:38,840 Speaker 11: would be like an insurance company default and those people 507 00:24:38,880 --> 00:24:42,480 Speaker 11: would never get elected ever again to anything. But they 508 00:24:42,520 --> 00:24:45,280 Speaker 11: recognize it just will not be the same support that 509 00:24:45,359 --> 00:24:46,600 Speaker 11: it was, the same safety. 510 00:24:46,880 --> 00:24:49,200 Speaker 2: I think America gets it. I think it's the Europeans 511 00:24:49,200 --> 00:24:51,240 Speaker 2: that don't. The state is just not going to be 512 00:24:51,280 --> 00:24:55,160 Speaker 2: there for them, particular our generation in the coming decades. 513 00:24:55,240 --> 00:24:57,280 Speaker 2: The state is not going to be there for them 514 00:24:57,480 --> 00:24:59,200 Speaker 2: in the same way. Do you see the Europeans doing 515 00:24:59,200 --> 00:25:02,720 Speaker 2: the same thing to invest to participate in capitalism in 516 00:25:02,760 --> 00:25:03,520 Speaker 2: a secuity market. 517 00:25:03,640 --> 00:25:06,480 Speaker 11: I think from a cultural perspective, it's more difficult to 518 00:25:06,560 --> 00:25:09,480 Speaker 11: move towards that You've begun to see it, just in 519 00:25:09,560 --> 00:25:12,040 Speaker 11: terms of if you look at elections in Europe, if 520 00:25:12,080 --> 00:25:14,679 Speaker 11: you look at the way the market is beginning to 521 00:25:14,800 --> 00:25:18,480 Speaker 11: respond to needs for development of technology to some extent. 522 00:25:19,160 --> 00:25:22,160 Speaker 11: All of that shows that things are changing, but slower 523 00:25:22,200 --> 00:25:25,040 Speaker 11: because it has been you know, Europe and the UK 524 00:25:25,160 --> 00:25:28,680 Speaker 11: have been steeped in socialistic practices that are big government 525 00:25:29,080 --> 00:25:32,480 Speaker 11: and that's expensive bureaucracy for the services provided. 526 00:25:33,040 --> 00:25:35,720 Speaker 10: And there's a move that's beginning to happen. 527 00:25:35,760 --> 00:25:38,840 Speaker 11: It's a pendulum that's slow, and politically it's gosh. You 528 00:25:38,920 --> 00:25:41,960 Speaker 11: have to you have to avoid missing the signal for 529 00:25:42,040 --> 00:25:43,960 Speaker 11: all the noise on a day to day basis. But 530 00:25:44,040 --> 00:25:47,800 Speaker 11: the market is telling us this is actually manageable and 531 00:25:47,359 --> 00:25:52,920 Speaker 11: if anything, the alternative to cooler heads prevailing is much 532 00:25:53,000 --> 00:25:56,080 Speaker 11: too awful to move towards well. 533 00:25:56,119 --> 00:25:57,480 Speaker 1: And this is really the key question. 534 00:25:57,880 --> 00:26:01,560 Speaker 4: Are things better than expectations this morning out of Europe 535 00:26:01,800 --> 00:26:05,040 Speaker 4: or pmis that actually came in better than expected led 536 00:26:05,040 --> 00:26:08,440 Speaker 4: by Germany Francis its own story. I'm just wondering how 537 00:26:08,560 --> 00:26:11,119 Speaker 4: much you can get excited there or how much you 538 00:26:11,200 --> 00:26:13,760 Speaker 4: really are staying focused on the United States based on 539 00:26:13,800 --> 00:26:15,879 Speaker 4: the underperformance of the dollars so far this year, and 540 00:26:15,920 --> 00:26:17,280 Speaker 4: based in the fact that you do have the base 541 00:26:17,320 --> 00:26:19,919 Speaker 4: of people who very much are going to invest in 542 00:26:19,960 --> 00:26:22,200 Speaker 4: preparation for reduced benefits. 543 00:26:21,840 --> 00:26:24,160 Speaker 11: Down the line, I would have to say we're still 544 00:26:24,200 --> 00:26:27,760 Speaker 11: overweight US, but we say meaningful exposure to both developed 545 00:26:27,800 --> 00:26:31,800 Speaker 11: international markets as well as emerging markets because there you've 546 00:26:31,800 --> 00:26:35,840 Speaker 11: got combination of valuation demographics where they are on the 547 00:26:35,880 --> 00:26:41,440 Speaker 11: timeline of their financial history at an attractive area. 548 00:26:41,520 --> 00:26:42,399 Speaker 10: But we would have to. 549 00:26:42,400 --> 00:26:46,560 Speaker 11: Say in the US, it's accountability, transparency and governance for 550 00:26:46,640 --> 00:26:48,959 Speaker 11: all the arguments that we have. We do have all 551 00:26:49,280 --> 00:26:50,959 Speaker 11: you just see it in all the court action that 552 00:26:51,000 --> 00:26:56,000 Speaker 11: happens in Washington. You've got people can still work things. 553 00:26:56,040 --> 00:26:58,440 Speaker 11: There's a potential to work things out. The other thing 554 00:26:58,520 --> 00:27:00,280 Speaker 11: is the dollar. When I look at it, this is 555 00:27:00,320 --> 00:27:03,520 Speaker 11: the Bloomberg A Dollar Index, which is my favorite because 556 00:27:03,520 --> 00:27:07,640 Speaker 11: it includes the emerging markets as well as the ephas. 557 00:27:08,520 --> 00:27:10,680 Speaker 10: What you've got is it was up last year. 558 00:27:10,720 --> 00:27:13,200 Speaker 11: It was up about seven point nine eight percent, to 559 00:27:13,240 --> 00:27:16,359 Speaker 11: get too specific, and this year it's down something like 560 00:27:16,400 --> 00:27:19,120 Speaker 11: somewhere between eight and ten depending what day you look 561 00:27:19,160 --> 00:27:19,479 Speaker 11: at it. 562 00:27:19,480 --> 00:27:20,040 Speaker 10: It's down. 563 00:27:20,560 --> 00:27:23,200 Speaker 11: Essentially, it's just giving back after a period of the 564 00:27:23,280 --> 00:27:27,360 Speaker 11: dollar being so incredibly strong. Because in an uncertain world, 565 00:27:27,440 --> 00:27:30,919 Speaker 11: when things get really bad, all the world moves towards Poppa, 566 00:27:31,000 --> 00:27:33,360 Speaker 11: which looks like Uncle Sam. 567 00:27:33,560 --> 00:27:37,119 Speaker 2: This is the Bloomberg Savanics podcast, bringing you the best 568 00:27:37,119 --> 00:27:40,440 Speaker 2: in markets, economics, anchio politics. You can watch the show 569 00:27:40,480 --> 00:27:43,439 Speaker 2: Life on bloombag TV weekday mornings from six am to 570 00:27:43,560 --> 00:27:47,359 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 571 00:27:47,480 --> 00:27:49,720 Speaker 2: or anywhere else you listen, and as always, on the 572 00:27:49,720 --> 00:27:52,160 Speaker 2: Bloomberg Terminal and the Bloomberg Business app.