Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordert. Join us each day
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Speaker 2: Terminal and the Bloomberg Business app. Turning back to the
Speaker 2: Federal Reserve sources telling us our colleagues here at Bloomberg
Speaker 2: that a driving force behind the DOJ's decision subpoena the
Speaker 2: Central Bank is the Federal Housing Finance Agency Director Bill Pulty.
Speaker 2: Director Porty has been busy over the last week, some
Speaker 2: purchases of MBS and Focus as well. Director Poruty. Welcome
Speaker 2: to the program sir. You are cited in our story
Speaker 2: this morning. Just wanted to give the opportunity to respond
Speaker 2: to it. But what was your role in the developside
Speaker 2: of a weekend.
Speaker 3: The DOJ's outside of my purview, This is out of
Speaker 3: my purview. I don't know anything about it, and I
Speaker 3: would refer you to the DOJ bill.
Speaker 2: You haven't been shy of sharing your thoughts on the
Speaker 2: Federal Reserve before, particularly over the last twelve months. You
Speaker 2: thought that the chairman would ultimately resign. He's standing firm.
Speaker 2: Do you think this push against the Federal Reserve is
Speaker 2: actually leading to unintended consequences and leading this fed to
Speaker 2: dig in.
Speaker 3: My main focus, John has been on reducing mortgage rates
Speaker 3: to the extent that we can do it and increasing
Speaker 3: housing affordability. President Trump announced a huge thing last week
Speaker 3: when he decided that he was going to ban institutions
Speaker 3: from buying homes. Basically, the concept is that people should
Speaker 3: be living in homes, not corporations. You know, we have
Speaker 3: a supply problem in this country, and obviously we're working
Speaker 3: on the demand side of things, because in some cases,
Speaker 3: affordability has gotten so tough that people don't even want
Speaker 3: to buy a home because of what Joe Biden did,
Speaker 3: and so we're reversing that. That's what we're focused on.
Speaker 3: We had a huge one to two punch last week.
Speaker 3: You saw mortgage rates moved twenty five base points lower
Speaker 3: on the news that Fanny and Freddie have started to
Speaker 3: undergo a two hundred billion dollar mortgage bond buy. And
Speaker 3: I think you're going to see some very exciting things
Speaker 3: come out of Davos. With regard to the President on housing,
Speaker 3: in a couple in a week.
Speaker 4: Director BOLDI, you were with the President this weekend, I believe,
Speaker 4: traveling with him on Air Force one from Washington to
Speaker 4: Palm Beach. Did you talk about the Federal Reserve with
Speaker 4: him this weekend?
Speaker 3: Obviously I would never talk about anything that the President
Speaker 3: and I talk about. I would say this that the
Speaker 3: President is laser focused on housing affordability and reversing what
Speaker 3: has happened these last four years. You look at the
Speaker 3: average mortgage payment under Joe Biden, it's skyrocketed compared to
Speaker 3: what it was under President Trump's first term. We are
Speaker 3: focused on bringing down not only the mortgage rates, but
Speaker 3: also the day to day cost in upkeeping homes, which
Speaker 3: has to do with you know, whether it be your
Speaker 3: ongoing expenses, mortgage insurance, etc. There are so many pieces
Speaker 3: to the cost puzzle that at the FHFA US Federal
Speaker 3: Housing we are working to reduce the costs bird and
Speaker 3: that Americans have.
Speaker 4: I know that you've seen the report from our colleagues.
Speaker 4: I've also got calls last night about the subpoena handed
Speaker 4: to the FED and was told that you were part
Speaker 4: of it, pulling together a report that then went to
Speaker 4: the DOJ. I just wanted to go since from you,
Speaker 4: did the President know this was coming? The Treasury Secretary
Speaker 4: know this was coming? Have you had any of these
Speaker 4: conversations again.
Speaker 3: On that matter, I'd refer you to the Department of Justice.
Speaker 4: Okay, well, we'll wait to hear from the Department of Justice.
Speaker 4: When it goes back to the mortgage backed securities that
Speaker 4: you have been talking about. You already been purchasing about
Speaker 4: north of two hundred and thirty billion dollars of them
Speaker 4: last year. There is a cap. Do you expect to
Speaker 4: reach that cap this year?
Speaker 3: I think all options are on the table. President Trump
Speaker 3: is a president who keeps all options on the table.
Speaker 3: We announced this historic two hundred billion dollar buyback of
Speaker 3: mortgage bonds. This is a huge deal, and you know
Speaker 3: we'll keep all options on the table. Look, we're doing
Speaker 3: our part of Fannie and Freddy. Most presidents didn't even
Speaker 3: know Fanny and Freddie existed. Obviously, your community in Bloomberg
Speaker 3: and all of us in the private sector. We know
Speaker 3: the importance of Fanny and Freddy, but for the average
Speaker 3: day American, they don't understand because the presidents haven't made
Speaker 3: it a priority. Average Americans haven't understood that presidents had
Speaker 3: this authority until President Trump found this authority, which is
Speaker 3: basically to utilize these companies to be companies. Imagine that
Speaker 3: get people to show up back to work. You know,
Speaker 3: we had sixteen thousand people. We have sixteen thousand people
Speaker 3: at the two companies. When I showed up on the
Speaker 3: scene and President Trump came into office, they were all
Speaker 3: working from home. We'd go to these big buildings, air conditioning,
Speaker 3: spewing everywhere, spending fifty million dollars a year on leases.
Speaker 3: Nobody was in these buildings. So we have turned around
Speaker 3: Fanny and Freddy. They tried to get President Trump to
Speaker 3: sell the companies, for the two companies together for one
Speaker 3: hundred billion dollars. I think the valuation of the companies
Speaker 3: is anywhere between five hundred billion and some say up
Speaker 3: to a trillion dollars.
Speaker 5: A lot of people are hoping that there is some
Speaker 5: sort of initial public offering O those companies are you
Speaker 5: preparing them for that at some point later this year
Speaker 5: next year.
Speaker 3: We are fully prepared to do whatever the President would
Speaker 3: like us to do on that matter.
Speaker 1: We have been getting prepared.
Speaker 3: We are prepared, just like we are with the institutional
Speaker 3: home buying ban, just like we are with home builders.
Speaker 3: We have a full set of things to do, and
Speaker 3: once the President decides what to do, we go about
Speaker 3: executing them.
Speaker 5: Director Pulty, A lot of people on Wall Street were
Speaker 5: pretty excited actually about your purchases of mbs of mortgage
Speaker 5: backed securities and saying that this should like it should
Speaker 5: be something that would bring down spreads. They were less
Speaker 5: excited about the idea of preventing institutions from buying single
Speaker 5: family homes, saying that it really do wasn't based in economics,
Speaker 5: considering that in certain regions in the country there's actually
Speaker 5: a glut of houses that this is not because of
Speaker 5: institutions that account for a relatively small portion of overall buyers.
Speaker 3: What do you say back about.
Speaker 5: The economic fundamentals behind this type of proposal and why
Speaker 5: it would bring down fordability and an increase the supply
Speaker 5: of houses, which is the ultimate issue that a lot
Speaker 5: of people.
Speaker 2: Say, Well, it just makes economic sense.
Speaker 3: You talk about supply, I mean, you kind of gave
Speaker 3: narrative there, but if you look at the economic supply
Speaker 3: of things, the fact is you have you know, big
Speaker 3: corporations buying using long term paper, using their balance sheets
Speaker 3: to scoop up homes in a supply shortage as we
Speaker 3: call it, and they're in some cases buying these homes
Speaker 3: for twenty thirty forty percent less than Americans are doing it.
Speaker 3: You know, President Trump was elected with a very very
Speaker 3: popular mandate. You know, sometimes people don't remember because it
Speaker 3: was a year ago, but it was a landslide victory,
Speaker 3: and he was given a mandate to reverse these last
Speaker 3: four years of crazy inflation that happened under Joe Biden.
Speaker 1: And so I think it's very.
Speaker 3: Appropriate that we're doing everything that we can to reduce
Speaker 3: housing costs, and we're going to keep doing it, whether
Speaker 3: it's the institutional ban on buying, looking at all of
Speaker 3: the things that go into a home and owning a home.
Speaker 3: Americans need to own homes in this country, and we're
Speaker 3: committed to restoring that.
Speaker 5: Director Bulty, did you study this in terms of this
Speaker 5: apply demand dynamic and whether it actually would reduce the
Speaker 5: cost of houses for individuals. Should there be a ban
Speaker 5: on single family housing, on instation's buying single family homeless
Speaker 5: because a lot of people in the markets who have
Speaker 5: supported President Trump's policies and thinking of Neildunna in particular,
Speaker 5: came out and said, this is faulty economics.
Speaker 3: Well, of course, I've studied it. I've studied it my
Speaker 3: whole life. I mean, I grew up in the housing business.
Speaker 3: I grew up in the building business. I was on
Speaker 3: the board of Pulti Homes for four years. I understand
Speaker 3: what institutional buying does. It's very powerful. I understand why
Speaker 3: Wall Street might not like it, but we serve the
Speaker 3: American people.
Speaker 1: We don't serve Wall Street.
Speaker 3: And President Trump is laser focused on doing the right
Speaker 3: thing no matter who it affects in terms of their pocketbooks.
Speaker 3: At the Wall Street level, he has focused, laser focused
Speaker 3: on action, not talk like so many of these Democrats,
Speaker 3: like Elizabeth Warren. You know, for years she would talk
Speaker 3: about all institutional buying. She didn't do anything. Joe Biden
Speaker 3: didn't do anything about it. President Trump is doing something
Speaker 3: about it.
Speaker 4: Elizabeth Warren wanted to see an effort like this. Do
Speaker 4: you think the president is taking cues from some of
Speaker 4: the more populist wings of the Democratic Party.
Speaker 3: No, I think Elizabeth Warren's going to have to take
Speaker 3: cues from us or she's going to continue to look
Speaker 3: like a fraud because she says all these things and
Speaker 3: then she does nothing about it. You know, President Trump,
Speaker 3: he gets things done. He said, look, we're going to
Speaker 3: ban institutional buying, and then we're going about both on
Speaker 3: an executive action front as well as codifying and a legislation.
Speaker 3: I mean, the amount of momentum that we've had at
Speaker 3: the legislative level from you know, different Congress people. I
Speaker 3: was at the Financial Services Committee the other night. People
Speaker 3: were ecstatic about this. I also talked with multiple US Senators,
Speaker 3: many who are vying to sponsor the legislation. So this
Speaker 3: is a very big deal, and I think it's going
Speaker 3: to happen.
Speaker 4: Is the President going to declare a housing emergency in
Speaker 4: the United States?
Speaker 3: That's entirely up to the president. I can tell you this.
Speaker 3: He is treating it with great urgency. He understands real
Speaker 3: estate very well. He understands the importance of keeping home
Speaker 3: prices up. He understands this issue very well. And we're
Speaker 3: working very well together, Secretary Turner, Secretary Best and Secretary Lutnik,
Speaker 3: the Vice President Susie Wiles. This is an all hands effort,
Speaker 3: James Blair in the White House. I mean, this is
Speaker 3: an all hands effort to reduce the cost of home
Speaker 3: ownership and get people, not corporations, back in homes.
Speaker 2: Stay with US, mul Bloomberg surveillance coming up after this,
Speaker 2: let's tent and at least a running officials saying they've
Speaker 2: secured full control over the country after mass protests lane
Speaker 2: to two weeks of upheoval and one hundreds reported killed.
Speaker 2: President Trump set for a key briefing on potential US
Speaker 2: involvement as soon as tomorrow. Joining us now is former
Speaker 2: City of US Intelligence official Nomen Rule. Now, I'm welcome
Speaker 2: to the program, sir. We've seen this in this country
Speaker 2: many times over the last ten years. This felt different
Speaker 2: over the last week. How different is it?
Speaker 1: It's quite different, and good morning.
Speaker 6: The current nationwide protest in Ron continue to have reached
Speaker 6: a scaleon intensity that is unprecedented in the history of
Speaker 6: the Islamic Republic. Virtually every major city in town is
Speaker 6: experiencing some form of political protests against the government calling
Speaker 6: for regime change, not just complaints against the specific economic policy.
Speaker 6: And what you have is the tactical government efforts to
Speaker 6: contain these protests through promises of economic reform have not
Speaker 6: satisfied the protesters, and increasingly coercive and violent responses by
Speaker 6: the government have not ended the protests thus far. And
Speaker 6: the result is that we've seen deaths. We've seen hundreds
Speaker 6: of protest or deaths. We've seen as many as forty
Speaker 6: to fifty to one hundred security force personnel be killed,
Speaker 6: and we've seen thousands of arrests. So we're watching a
Speaker 6: very intensive, turbulent situation in Iran.
Speaker 4: Nor absolutely horrific these images coming out of Iran. What
Speaker 4: makes this protest though, different than prior protests we saw.
Speaker 6: We're watching basically a very compressed situation. So in the
Speaker 6: twenty twenty two to twenty twenty three situation, for example,
Speaker 6: the number of the tragic number of deaths, for example,
Speaker 6: that took place where it took place over a much
Speaker 6: longer period of time. The number of arrests took place
Speaker 6: over a much longer period of time.
Speaker 1: So we're watching a compression of this.
Speaker 6: And this is happening because the inflation, the collapse of
Speaker 6: the currency, the dissolution with the government, the failed policy,
Speaker 6: the impression it's built upon itself since twenty seventeen. So
Speaker 6: you've got an extraordinarily unhappy population that fills the government
Speaker 6: correctly so, feeling that the government is just unable to deliver.
Speaker 6: And at the same time you have a government that
Speaker 6: is broken, it's trying to it's trying to satisfy a
Speaker 6: military that's taking a large portion of the budget, missiles,
Speaker 6: regional militias, a nuclear program that's brought it sanctions upon
Speaker 6: the government well at the same time trying to promise
Speaker 6: economic relief to a population and in the end it
Speaker 6: can't deliver.
Speaker 1: And just the currency problem alone is extraordinary.
Speaker 6: So when the time of the nuclear deal of the
Speaker 6: Iranian rio was twenty nine thousand, five hundred to the dollar.
Speaker 1: When the recently fired central Bank.
Speaker 6: Governor took office, it was about nine hundred and twenty thousand.
Speaker 1: To the dollar.
Speaker 6: In December, when the protests began, it was one point
Speaker 6: four to two.
Speaker 1: Million to the dollar.
Speaker 6: There's no reason to believe that this collapse will not
Speaker 6: continue further because the government is broken.
Speaker 4: Norman Overnight, the Ron's foreign Ministry said that there is
Speaker 4: a communication channel between their foreign minister and mister Wickoff
Speaker 4: now open. The President told reporters that the Iranian leaders
Speaker 4: have reached out. He also went on to say a
Speaker 4: meeting is being set up, but we may have to
Speaker 4: act because of what's happening before the meeting. How should
Speaker 4: we read the president's comments seriously?
Speaker 6: So let's take a look first of what is the
Speaker 6: likelihood that the president will conduct a military strike. If
Speaker 6: you look at us behavior and the President's actions, there
Speaker 6: is a high likelihood of a military strike. The President
Speaker 6: has conducted surge limited military action following a series of
Speaker 6: social media statements, a series of promises of action if
Speaker 6: specific behavior is not undertaken, diplomatic outreach, and military moves.
Speaker 6: A lot of this has happened thus far, and the
Speaker 6: social media and the intensity that President's social media statements
Speaker 6: have increased. We've seen a visit of the Omani foreign
Speaker 6: minister to Iran which looked like a message one way
Speaker 6: or the other. Now we have the Iranian outreach, so
Speaker 6: why is that happening? Well, that offers the Iranian several advantages. First,
Speaker 6: gives them a chance to tell their own population. Maybe
Speaker 6: sanctions are being lifted, so that might break the unrest unlikely,
Speaker 6: but it also might allow the United Tests, the United
Speaker 6: States of delay the United States attack. I don't think
Speaker 6: that's going to buy the much patience with the President
Speaker 6: normal What.
Speaker 5: Could the US do with respect to military strikes that
Speaker 5: would be effective? I mean, how risky is this at
Speaker 5: a time we're already there as an incredibly explosive feeling
Speaker 5: in the region, and previous incursions have led to mixed results.
Speaker 1: Frankly, I think it'd be unwise.
Speaker 6: Do you give a lot of detail because the Iranians
Speaker 6: are going to be interested in that question as well.
Speaker 6: But US military power is vast. The Iranians have no
Speaker 6: capability to really defend against it, as we've seen in June.
Speaker 6: The press reports have talked about aerial attacks, other tools
Speaker 6: are available, and the Iranians are very susceptible to this.
Speaker 6: The US has the means to deliver an extraordinary punishing
Speaker 6: blow against those units and personnel that would be involved
Speaker 6: in violence against protesters, and that's what the President has
Speaker 6: talked about, responding to those who have committed of violence
Speaker 6: and against peaceful protesters, deaths against peaceful protesters, and We've
Speaker 6: seen an extraordinary number of deaths in the last weekend.
Speaker 5: Norman, we already have Venezuela with questions around who's going
Speaker 5: to lead it if there is some sort of strike
Speaker 5: that does imperil the Iranian leadership, Do we have a
Speaker 5: sense of who is going to take over and how
Speaker 5: intimately involved the US will be with that.
Speaker 1: I've been working.
Speaker 6: The Middle East other issues too long to make predictions
Speaker 6: on who will lead governments in the future, predicting elections
Speaker 6: of the Iranian people will no doubt choose their own leadership.
Speaker 1: I would say that there is a deep.
Speaker 6: Revolutionary guard network within the country and corporations and all
Speaker 6: aspects of the leadership.
Speaker 1: If you were to draw upon the.
Speaker 6: Existing system of society of who might follow, if the
Speaker 6: existing system remains in place, it's probably going to be
Speaker 6: drawn from that DNA. And that's the sort of DNA
Speaker 6: that would likely be willing to engage with the West
Speaker 6: and with the region in a circuit manner protecting Iranian equities,
Speaker 6: but it would engage with the West with US.
Speaker 2: More Blindberg surveillance coming up after this. Towson Stock for
Speaker 2: Apollo writes the following the market reaction, this morning is
Speaker 2: very muted, which is talent investors that the key issue
Speaker 2: continues to be the incoming data. Tolson joins us now
Speaker 2: for more Torston, good morning, any nice tries is still
Speaker 2: going to ask you to have this tell me your
Speaker 2: thoughts this morning and your response response to what took
Speaker 2: place yesterday.
Speaker 7: Eve nick I do think the market reaction is absolutely critical,
Speaker 7: especially the market reaction in long rates, the dollar, and
Speaker 7: also inflation expectations, and on all three fronts we've had
Speaker 7: a relatively muted reaction. So one conclusion is that the
Speaker 7: market obviously is looking at this and the reaction has
Speaker 7: been as you would have expected. That rates up a bit,
Speaker 7: the dollar is down. We'll see inflation expectations if they
Speaker 7: go up a bit more throughout the day, but it's
Speaker 7: still relatively small compared to how much drama has been
Speaker 7: made of this over the last twenty four hours.
Speaker 5: Is that a huge by signal essentially that this is
Speaker 5: a market that really believes in the institution of the
Speaker 5: Federal Reserve in the United States checks and balances in
Speaker 5: a way that encourages you to invest in the United States.
Speaker 7: Because investors come to the US for two reasons. They
Speaker 7: come for AI, and they come for higher yield. And
Speaker 7: when they come for higher yield, of course it's because
Speaker 7: the rest of the world doesn't have great growth at
Speaker 7: the moment, and the level of uals for the FED
Speaker 7: is of course higher than what it is for the
Speaker 7: easy b and for a number of central banks around
Speaker 7: the world. So for that reason, foreigners come to clip
Speaker 7: a higher coupoon in bonds, and foreigners also come to
Speaker 7: get AI exposure. So for that reason, this is not
Speaker 7: directly linked as such to the AI story, But what
Speaker 7: this could be linked to is of course the yield story.
Speaker 7: If you begin to see the FED lower interest rates
Speaker 7: not for economic reasons, then the big question becomes with
Speaker 7: what would that mean for the steepness of yeal curve
Speaker 7: where is it foreign investors are investing, And if foreign
Speaker 7: investors are further out, then the risk is of course
Speaker 7: that the yeald curve preb be even steeper, and therefore
Speaker 7: foreigners would be getting an even higher level of yield
Speaker 7: further out the curve. So there's a lot of issues
Speaker 7: around this question of why is it allar not weaker,
Speaker 7: namely because foreigners actually still like the AI story and
Speaker 7: they still like the higher coupong that they get in
Speaker 7: the US.
Speaker 5: What would you have to see to suggest that the
Speaker 5: Cell America trade truly is starting to take off. The
Speaker 5: people are starting to take this seriously.
Speaker 7: The dollar going down, because that, of course is ultimately
Speaker 7: the risk that foreigners will begin to say, well, we
Speaker 7: have less appetite for buying US assets. But the key
Speaker 7: issue continues to be that the US growth outlook continues
Speaker 7: to be much better than the growth outlook in Europe,
Speaker 7: much better than the growth outlook in Canada, Australia, Japan,
Speaker 7: because we have the AI Data center boom and energy
Speaker 7: boom of course expanding everything over the next level quarters.
Speaker 7: We have the one big boot of a bill. We
Speaker 7: also have all prices lower. We also have the dollar
Speaker 7: now marginally lower. All those tailwinds continue to support GDP
Speaker 7: growth throughout this year. Let's not forget that the one
Speaker 7: big bit of a bill is going to add zero
Speaker 7: point nine percent to GDP growth according to the Congressional
Speaker 7: Budget Office in twenty twenty six. That's a very meaningful
Speaker 7: boost to GDP over the coming quarter. So that's why
Speaker 7: the CONTENTUS expects. If I look at ECF, you go
Speaker 7: on my Bloomberg that the unemployment rate will peak just
Speaker 7: about now, and the tourment rate is about to go
Speaker 7: down over the coming quarters. That's a very important point
Speaker 7: when you think about the background for this story about
Speaker 7: what's going on with the Federal Reserve mose days.
Speaker 4: When it comes to sell America, what about instead of
Speaker 4: the dollar depreciating, what about the fact that gold continues
Speaker 4: to hit a new record highs almost on a daily basis.
Speaker 7: I do think that this is also a reflection of
Speaker 7: a broader thing, namely that there's also the issue, of
Speaker 7: course that central banks that are imposed with sanctions are
Speaker 7: now shifting away from dollars towards gold. You also have
Speaker 7: that many Chinese investors have been buying gold. They've been
Speaker 7: buying ETFs in China in a very significant way over
Speaker 7: the last several quarters that we haven't seen before. So
Speaker 7: retail demand is very strong, and you also have because
Speaker 7: of sanctions, very strong demand, and of course inflation in
Speaker 7: the US. Let's not forget, which we normally, of course
Speaker 7: talk about, is that it's still not a two percent.
Speaker 7: It's still closer to three than it is to two,
Speaker 7: and that of course is the number one issue driving gold.
Speaker 7: Most frequently named that if inflation is higher for longer
Speaker 7: and we have an economy that's about to get better
Speaker 7: because of the one big beautiful bill the AI and
Speaker 7: Data Center spend well, that raises the risk that there's
Speaker 7: also more upside risk to inflation over the next seven months.
Speaker 2: Tolston GDP right now is tracking at world four to
Speaker 2: five percent.
Speaker 7: Well, their land of at GDP now, as you know,
Speaker 7: is a very very high.
Speaker 2: Pretty fantastic, and the last rate we had was pretty
Speaker 2: decent too, four to five percent. And the president's going
Speaker 2: after the Federal Reserve, the President's looking the camp interest rates,
Speaker 2: the credit card companies. The President's going after things that
Speaker 2: are one on the one hand, in home builders on
Speaker 2: the other hand, might help them. These are things we
Speaker 2: typically associated with GDP tracking closer to one or maybe
Speaker 2: a negative territory. What's gone wrong?
Speaker 7: Well, I think a very important part of this discussion
Speaker 7: is that equity investors care about corporate earnings, and a
Speaker 7: few earning seasons have actually been pretty good, and corporate
Speaker 7: earnings still look pretty good if you look ahead. Contentious
Speaker 7: expectations are that earnings throughout this year will continue to rise.
Speaker 1: So if corporate earnings.
Speaker 7: Are still good, well, then equities likely to say, you
Speaker 7: know what, if earnings are still good and these things
Speaker 7: are not impacting the bottom line, well, then we should still,
Speaker 7: of course expect that equities could continue to do well.
Speaker 2: Is really strang what's gone wrong for mainstream.
Speaker 7: Well, credit and bond in bursters of course have a
Speaker 7: lot of these things, certainly because this begins to matter
Speaker 7: in a number of ten ways, especially of course when
Speaker 7: it comes to rates. So that's why it's more the
Speaker 7: bunt market that's paying more attention to these risks. But
Speaker 7: even the bunt market, the reactions today has had a
Speaker 7: very very muted reaction. So that's why the conclusion here
Speaker 7: is as long as bunt markets and in credit markets
Speaker 7: continue to view this from a relatively complacent and benign perspective,
Speaker 7: then we should still be looking at this from the
Speaker 7: fundamental perspects.
Speaker 2: Can we just partner markets for a moment, just throw
Speaker 2: markets over there. I just want to talk about the
Speaker 2: fact that we're generating four to five percent GDP growth
Speaker 2: and yet everyone seems to be terribly unhappy. What is
Speaker 2: so bad about this kind of growth? What is the
Speaker 2: character of this GDP growth compared to what it used
Speaker 2: to be? Like the jobless growth this time around, What
Speaker 2: has changed? What has gone wrong? Well under the growth
Speaker 2: that we're producing.
Speaker 7: Yeah, So the key issue to that is, of course,
Speaker 7: is a key shaped outlook. Both for consumers we have
Speaker 7: high end versus low, and we also have for corporates
Speaker 7: are you in AI or not in AI? Those differences
Speaker 7: continue to drive that high end consumers spend continues to
Speaker 7: be strong, and AI, of course data center energy build
Speaker 7: out continues to be strong. Those things dominate the negative
Speaker 7: effect that might be coming from the lower leg of
Speaker 7: the key, and the label market is really mainly a
Speaker 7: reflection of immigration. Remember in the last several years, twenty
Speaker 7: twenty two to twenty four, net immigration was about three million.
Speaker 7: The congressional budget of this is now predicting will be
Speaker 7: about five hundred thousand. That's why the Funeral Reserve produces
Speaker 7: a lot of papers saying that the equilibrium rate for
Speaker 7: non found pay rolls is no longer two hundred thousand
Speaker 7: like it was for several years now.
Speaker 2: It's thirty thousand.
Speaker 7: So that's why last Friday is number on non found payrolls.
Speaker 1: It's actually a pretty good number.
Speaker 7: When you take that into account that we actually.
Speaker 1: Have had such a dramatic.
Speaker 2: Declient so in behind you with fifty k.
Speaker 7: Yeah, so fifty k is actually better than this Saint
Speaker 7: Louis estimate of equilibrium for non founday rolls, which is
Speaker 7: thirty thousand.
Speaker 2: Again, so why is everyone so miserable?
Speaker 7: Well, the stock market doesn't seem too miserable.
Speaker 2: Cricket break against those people in the stockma understood.
Speaker 7: So, but this is right if you think about, of course,
Speaker 7: consumer sentiment that's also been driven very differently according to
Speaker 7: where people are in the income distribution. But overall it's
Speaker 7: still very clear that the economy is actually still in
Speaker 7: decent shape. And if you now have the tail who's
Speaker 7: coming from the one big beautiful bill again one percent
Speaker 7: according to the CBO in growth being added this year,
Speaker 7: you have still had data, say under spend out and
Speaker 7: you'll still have also, of course everything going on with
Speaker 7: lower dollar, lower oil prices, all that a really strong
Speaker 7: tail when the growth outlook for the next sevel quarters.
Speaker 2: The American people filled the same way. Because the president's
Speaker 2: claim responding to something when it goes to downa Switzerland
Speaker 2: in a week and talks about this great affordability person
Speaker 2: Obviously he doesn't believe that the consumers in America see
Speaker 2: things the same way.
Speaker 7: Well, of course, affordability is a little bit different discussion
Speaker 7: because it is correct and a number of differferends. Of course,
Speaker 7: home prices have not done particularly well. That's also of course,
Speaker 7: other areas with tuition, healthcare, cetera, where the discussion has
Speaker 7: been very important. But nevertheless, the wealth effect for consumers
Speaker 7: has been strong. Job growth has still been relatively decent.
Speaker 7: At the same time, you know, actually saw wages go
Speaker 7: up on Friday, you still have a number of till
Speaker 7: wins that mean that on average, the US consumer the
Speaker 7: weekly data from red Book, Sametoor retail sales impressively strong,
Speaker 7: still telling you that in aggregate, the net effect of
Speaker 7: the key is still that the higher end of the
Speaker 7: key is dominating the oral picture for where the macro
Speaker 7: data is.
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