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 Hordernt. 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 --> 00:00:37,879 Speaker 2: Terminal and the Bloomberg Business app. Fed officials explaining their 10 00:00:37,960 --> 00:00:41,440 Speaker 2: views after a very divided October interest rate decision. Joining 11 00:00:41,520 --> 00:00:44,160 Speaker 2: us now to discuss is Torston Slock of Apollo Towston, 12 00:00:44,159 --> 00:00:47,040 Speaker 2: Good mornity, Sir, Monday morning, super divided Federal Reserve. Based 13 00:00:47,040 --> 00:00:49,320 Speaker 2: on the communication we've had so far from the committee 14 00:00:49,320 --> 00:00:51,559 Speaker 2: following that decision, this line here from Governor Mayron to 15 00:00:51,640 --> 00:00:54,680 Speaker 2: us just yesterday that we're a fair way away from neutral. 16 00:00:54,760 --> 00:00:56,920 Speaker 2: I think we could get there a bit faster. How 17 00:00:56,920 --> 00:00:58,280 Speaker 2: close are we to neutral? 18 00:00:58,760 --> 00:00:59,160 Speaker 3: Well? 19 00:00:59,320 --> 00:01:01,920 Speaker 4: The key quote here, of course, is were doing manactery 20 00:01:01,920 --> 00:01:04,679 Speaker 4: pols here according to some framework with ours star or 21 00:01:04,680 --> 00:01:07,400 Speaker 4: some forecast or are we're doing monetary posts according to 22 00:01:07,560 --> 00:01:09,840 Speaker 4: data dependency, because it's very clear that a lot of 23 00:01:09,880 --> 00:01:11,960 Speaker 4: the arguments that are being laid out for more cuts, 24 00:01:11,959 --> 00:01:15,160 Speaker 4: of course, is really dependent more on the forecast, or 25 00:01:15,200 --> 00:01:17,280 Speaker 4: its dependent on some framework about what do you think 26 00:01:17,319 --> 00:01:19,720 Speaker 4: our star is? So the discussion about our star, which 27 00:01:19,720 --> 00:01:21,959 Speaker 4: we now had for many years, of course, is very 28 00:01:21,959 --> 00:01:24,720 Speaker 4: clear there's a lot of uncertainty. So with that backdrop, yes, 29 00:01:24,840 --> 00:01:27,160 Speaker 4: some estimates are low, so you could argue that those 30 00:01:27,160 --> 00:01:29,240 Speaker 4: are the ones should be focusing on. But it's very 31 00:01:29,240 --> 00:01:31,600 Speaker 4: clear that the divide really here among AFMC members of 32 00:01:31,640 --> 00:01:34,080 Speaker 4: the last few days has been around should we focus 33 00:01:34,319 --> 00:01:38,000 Speaker 4: the policy decisions today on our star and some forecast 34 00:01:38,080 --> 00:01:40,280 Speaker 4: that we may have, or should we focus it on 35 00:01:40,319 --> 00:01:41,040 Speaker 4: the incoming data. 36 00:01:41,120 --> 00:01:44,160 Speaker 2: Well, let's talk about the incoming data. How can we forecast? Then, 37 00:01:44,200 --> 00:01:45,760 Speaker 2: I think if we don't really know where we are 38 00:01:45,800 --> 00:01:46,360 Speaker 2: at the moment. 39 00:01:46,480 --> 00:01:47,240 Speaker 5: Well, we do have. 40 00:01:47,240 --> 00:01:49,720 Speaker 4: CPI of course before the last DAYFMC meeting, but what 41 00:01:49,760 --> 00:01:51,480 Speaker 4: we also have is a number of indicators for the 42 00:01:51,520 --> 00:01:54,800 Speaker 4: label market also still showing the things are actually still okay. 43 00:01:55,080 --> 00:01:58,040 Speaker 4: If you look, for example, at the macro Edge job announcement, 44 00:01:58,080 --> 00:02:00,400 Speaker 4: cuts data that's still okay. The challenge the grant and 45 00:02:00,480 --> 00:02:03,400 Speaker 4: Christmas job cuts data is actually also still okay. If 46 00:02:03,400 --> 00:02:06,240 Speaker 4: you look at ADP job creation, it's also okay. If 47 00:02:06,280 --> 00:02:09,280 Speaker 4: you look at revidio laps also job creation also okay. 48 00:02:09,440 --> 00:02:11,680 Speaker 4: If you also look at paychecks, there's also link up. 49 00:02:11,800 --> 00:02:15,240 Speaker 4: There's also indep job openings. Taken together, all these indicators 50 00:02:15,240 --> 00:02:17,359 Speaker 4: are not showing a label market when the bottom is 51 00:02:17,400 --> 00:02:20,079 Speaker 4: falling out. So that's why the conclusion from JPA last 52 00:02:20,120 --> 00:02:23,160 Speaker 4: week was very clear. Inflation is still around three, the 53 00:02:23,240 --> 00:02:26,840 Speaker 4: label market is still okay. So with that backdrop, what 54 00:02:27,000 --> 00:02:28,840 Speaker 4: is the argument for cutting rates? At least when you 55 00:02:28,840 --> 00:02:30,399 Speaker 4: look at it from a data dependent perspective. 56 00:02:30,600 --> 00:02:33,079 Speaker 1: The argument is that you are passively tightening, as we 57 00:02:33,160 --> 00:02:36,160 Speaker 1: heard from Stephen Myron yesterday, because of the demographics and 58 00:02:36,200 --> 00:02:38,520 Speaker 1: because of the fact that inflation is coming down and 59 00:02:38,560 --> 00:02:41,920 Speaker 1: with a labor market that's okay but relatively fragile in 60 00:02:41,960 --> 00:02:44,040 Speaker 1: certain corners, why not give them a little bit of 61 00:02:44,080 --> 00:02:47,040 Speaker 1: support if you are above neutral to get back closer 62 00:02:47,080 --> 00:02:47,720 Speaker 1: to neutral. 63 00:02:47,800 --> 00:02:49,560 Speaker 4: What do you make of that argument, Because there's also 64 00:02:49,600 --> 00:02:51,760 Speaker 4: a broader discussion around it is not only about the 65 00:02:51,800 --> 00:02:54,680 Speaker 4: fit funds rate, it's about financial conditions. More broadly, and 66 00:02:54,760 --> 00:02:57,399 Speaker 4: if you look at my Bloomberg measure of financial conditions, 67 00:02:57,400 --> 00:03:00,440 Speaker 4: it still shows me that financ traditions are very easy. 68 00:03:00,680 --> 00:03:03,760 Speaker 4: So in that sense, companies, especially in the AI space, 69 00:03:04,000 --> 00:03:06,320 Speaker 4: they're not barring as a function of the FED funds rate. 70 00:03:06,480 --> 00:03:09,200 Speaker 4: They're barring as a function of equity prices. And given 71 00:03:09,200 --> 00:03:11,760 Speaker 4: where equity prices a off for the Magnificent seven, that's 72 00:03:11,960 --> 00:03:15,200 Speaker 4: very importantly coming at very significant tail went still to 73 00:03:15,280 --> 00:03:18,160 Speaker 4: the economy and still even to hiring, simply because we 74 00:03:18,280 --> 00:03:21,639 Speaker 4: now have that equity financing is getting huge help from 75 00:03:21,680 --> 00:03:24,040 Speaker 4: the fact that equity prices are still as elevated as. 76 00:03:24,000 --> 00:03:24,640 Speaker 3: The time moment. 77 00:03:24,680 --> 00:03:26,200 Speaker 1: You've done a great job of talking about the key 78 00:03:26,240 --> 00:03:28,239 Speaker 1: shaped market, and this is sort of the conundrum for 79 00:03:28,280 --> 00:03:30,600 Speaker 1: the Fed. They've got this blunt tool of cutting rates, 80 00:03:30,960 --> 00:03:34,080 Speaker 1: and there is this question of does that help the 81 00:03:34,160 --> 00:03:38,240 Speaker 1: lower income consumers and companies that are catering to them 82 00:03:38,680 --> 00:03:41,400 Speaker 1: more than it really risks creating a bubble in the 83 00:03:41,440 --> 00:03:45,120 Speaker 1: AI names and those areas where financial conditions are very loose. 84 00:03:45,680 --> 00:03:47,640 Speaker 3: How do you weigh in on that that's exactly right? 85 00:03:47,680 --> 00:03:50,160 Speaker 4: And that's why what becomes exactly critical, Lisa, is to 86 00:03:50,240 --> 00:03:53,200 Speaker 4: think about what is the weight in aggregate consumption from 87 00:03:53,200 --> 00:03:55,880 Speaker 4: the bottom twenty percent of the population, which is roughly 88 00:03:55,880 --> 00:03:58,560 Speaker 4: around eight percent of toward consumption, whereas the top twenty 89 00:03:58,560 --> 00:04:01,240 Speaker 4: percent accounts for forty percent of total consumption according to 90 00:04:01,280 --> 00:04:04,080 Speaker 4: the Consumer Expandsire Survey. So because of that, it still 91 00:04:04,120 --> 00:04:06,720 Speaker 4: is the case that when stock priceer up, home prizer up, 92 00:04:06,760 --> 00:04:09,000 Speaker 4: and when interst rates are high, the cash flow for 93 00:04:09,040 --> 00:04:11,840 Speaker 4: those who own debt, who own private credit is still strong. 94 00:04:12,120 --> 00:04:14,560 Speaker 4: So for those households at the other anything come distribution, 95 00:04:14,920 --> 00:04:17,400 Speaker 4: things are still looking good. And that's a very important 96 00:04:17,400 --> 00:04:20,120 Speaker 4: reason why the consumer still continues to do well. And critically, 97 00:04:20,160 --> 00:04:22,600 Speaker 4: it's not only a case shaped economy for the consumer, 98 00:04:22,839 --> 00:04:25,679 Speaker 4: it's actually also a case shaped economy for the corporate sector. 99 00:04:25,920 --> 00:04:28,120 Speaker 4: If you look at EPs expectations since the beginning of 100 00:04:28,160 --> 00:04:31,040 Speaker 4: the year Magnificent seven, the expectation is that earnings will 101 00:04:31,080 --> 00:04:33,800 Speaker 4: grow further, but the S and P four ninety three 102 00:04:34,080 --> 00:04:37,160 Speaker 4: earning expectations have actually come down. Likewise, the same thing 103 00:04:37,160 --> 00:04:39,680 Speaker 4: for profit margins for the Magnificent seven is going up. 104 00:04:39,839 --> 00:04:42,560 Speaker 4: For the SNP four ninety three profit markets expectations have 105 00:04:42,600 --> 00:04:44,640 Speaker 4: been coming down. So we're seeing more signs of the 106 00:04:44,680 --> 00:04:47,279 Speaker 4: case shaped economy, not only the division in terms of 107 00:04:47,320 --> 00:04:49,600 Speaker 4: the consumer side, but also on the corporate side, where 108 00:04:49,600 --> 00:04:51,800 Speaker 4: it's more and more the AI story that continues to 109 00:04:51,880 --> 00:04:52,520 Speaker 4: drive everything. 110 00:04:52,640 --> 00:04:54,640 Speaker 3: Do you see limits to that trend? 111 00:04:54,800 --> 00:04:57,000 Speaker 4: Well, the key issue, of course is to what extent 112 00:04:57,240 --> 00:05:00,080 Speaker 4: on the AI story. Of course, the AI companies that 113 00:05:00,120 --> 00:05:02,560 Speaker 4: the Magnificent seven can continue to deliver the earnings that 114 00:05:02,600 --> 00:05:05,000 Speaker 4: are priced in at the moment. If therefore, whatever reason, 115 00:05:05,320 --> 00:05:08,960 Speaker 4: is any slowdown in earnings growth in AI, it will 116 00:05:09,000 --> 00:05:11,400 Speaker 4: certainly begin to create some wabbles, not only in the 117 00:05:11,480 --> 00:05:13,799 Speaker 4: data center build out and also of course the challenges 118 00:05:13,839 --> 00:05:15,920 Speaker 4: of the associated the energy side, but it will also 119 00:05:15,920 --> 00:05:18,120 Speaker 4: begin to have some wealth effix, especially if we do 120 00:05:18,200 --> 00:05:20,960 Speaker 4: get the correction that we've had some conversations about in 121 00:05:21,040 --> 00:05:22,839 Speaker 4: the last several here twenty four hours. 122 00:05:22,920 --> 00:05:25,239 Speaker 2: Yeah, just to think throw this and the ultimate extreme. 123 00:05:25,360 --> 00:05:26,680 Speaker 2: You need someone to have a job to buy the 124 00:05:26,680 --> 00:05:29,680 Speaker 2: product you sounding, ultimately, don't you? And the fact that 125 00:05:29,680 --> 00:05:33,440 Speaker 2: we've seen some decoupling between employment and corporate profits. I 126 00:05:33,480 --> 00:05:35,480 Speaker 2: just wonder how much longer that can possess. 127 00:05:35,640 --> 00:05:37,760 Speaker 4: Well, A very important part of that is, indeed that 128 00:05:37,800 --> 00:05:39,920 Speaker 4: immigration has been slowing down, So the Dallas fat is 129 00:05:39,920 --> 00:05:42,120 Speaker 4: now saying that the equlibrium non found pay rolls is 130 00:05:42,160 --> 00:05:44,720 Speaker 4: thirty thousand. So think about the ADP that came out 131 00:05:44,800 --> 00:05:47,440 Speaker 4: last week. The monthly number was around fifty sixty thousand, 132 00:05:47,720 --> 00:05:49,920 Speaker 4: So that means that suddenly we have that fifty sixty 133 00:05:50,040 --> 00:05:52,000 Speaker 4: is actually not too bad when you think about that. 134 00:05:52,080 --> 00:05:54,239 Speaker 4: Suddenly the Fed is telling us that the new going 135 00:05:54,320 --> 00:05:56,920 Speaker 4: rate where we should be is thirty. So from that perspective, 136 00:05:56,920 --> 00:06:00,240 Speaker 4: we can have a slowdown for immigration restriction reasons. Also 137 00:06:00,240 --> 00:06:01,960 Speaker 4: the one hundred thousand and the h one b that 138 00:06:02,080 --> 00:06:04,440 Speaker 4: will slow down job growth and therefore still create a 139 00:06:04,480 --> 00:06:07,400 Speaker 4: label market that's just having slower growth in jobs, but 140 00:06:07,560 --> 00:06:09,520 Speaker 4: not so much because the economy is slowing in GDP, 141 00:06:09,880 --> 00:06:13,479 Speaker 4: but simply because immigration inflows a lot weaken Touristan. 142 00:06:13,560 --> 00:06:15,720 Speaker 1: If the federed a cup by twenty five basis points, 143 00:06:15,880 --> 00:06:19,440 Speaker 1: does that cause the ke shape to get wider or narrower? 144 00:06:20,120 --> 00:06:22,440 Speaker 4: So that depends on, of course, for the consumer side. 145 00:06:22,520 --> 00:06:24,640 Speaker 4: If we continue to have a rally in the stock market, 146 00:06:24,720 --> 00:06:27,160 Speaker 4: if we continue to have a divergence in asset prices 147 00:06:27,200 --> 00:06:29,600 Speaker 4: going up further, then we will continue to see the 148 00:06:29,680 --> 00:06:32,040 Speaker 4: key get even longer on each side of the leg. 149 00:06:32,200 --> 00:06:34,479 Speaker 4: So in that sense, cutting rates is certainly something that 150 00:06:34,560 --> 00:06:37,840 Speaker 4: normally boosts asset prices and therefore makes the wider k 151 00:06:38,360 --> 00:06:39,479 Speaker 4: AT distinct possibility. 152 00:06:40,080 --> 00:06:43,520 Speaker 2: Stay with US multile impact surveillance coming up after this 153 00:06:52,839 --> 00:06:55,400 Speaker 2: gues selection dang here in New York City, President Donald 154 00:06:55,400 --> 00:06:58,520 Speaker 2: Trump endorsing Andrew Cuomo for the city's next man, as 155 00:06:58,560 --> 00:07:01,839 Speaker 2: the former governor faces an pill battle against the front runner, 156 00:07:01,880 --> 00:07:05,839 Speaker 2: Democratic Socialist Mamdanie Hendritta triese fighter putas joins usnap for 157 00:07:05,920 --> 00:07:08,560 Speaker 2: more Henriette. Is something that Lasa and I've been wrestling 158 00:07:08,560 --> 00:07:11,280 Speaker 2: with throughout this morning. Is this election here in this 159 00:07:11,360 --> 00:07:14,160 Speaker 2: city taking the temperature of the country, the mood of 160 00:07:14,200 --> 00:07:17,000 Speaker 2: the country, or just taking the temperare of the Democratic Party, 161 00:07:17,280 --> 00:07:19,280 Speaker 2: and which chargument's going to win out as we head 162 00:07:19,280 --> 00:07:20,240 Speaker 2: towards the midterms. 163 00:07:20,920 --> 00:07:22,000 Speaker 5: You know, it's fascinating. 164 00:07:22,080 --> 00:07:25,440 Speaker 6: I think you said Donald Trump's name fifteen more times 165 00:07:25,440 --> 00:07:28,440 Speaker 6: than either of the Democratic candidates in the race today 166 00:07:28,520 --> 00:07:30,160 Speaker 6: in the lead into here, and I think that just 167 00:07:30,200 --> 00:07:32,800 Speaker 6: really exemplifies where the Democratic Party is right now. They're 168 00:07:32,840 --> 00:07:36,040 Speaker 6: so bifurcated and so lacking in a cohesive message that 169 00:07:36,080 --> 00:07:39,840 Speaker 6: they can really only be anti Donald Trump now for Democrats. 170 00:07:39,840 --> 00:07:42,920 Speaker 6: That's a good thing because Donald Trump is a massive 171 00:07:42,960 --> 00:07:44,160 Speaker 6: vote turnout machine. 172 00:07:44,320 --> 00:07:47,560 Speaker 5: So for Cuomo, for Mom Donnie. 173 00:07:47,040 --> 00:07:50,080 Speaker 6: They're both going to be taking exactly what they want, 174 00:07:50,120 --> 00:07:52,440 Speaker 6: spreading it out to voters, and making it all about Trump, 175 00:07:53,480 --> 00:07:56,240 Speaker 6: which really speaks to the lack of comprehensive message that 176 00:07:56,320 --> 00:07:58,720 Speaker 6: Democrats have struggled with since twenty sixteen. 177 00:07:58,800 --> 00:08:00,280 Speaker 5: Quite frankly, I. 178 00:08:00,240 --> 00:08:01,840 Speaker 1: Think Henryette, a lot of people think of this as 179 00:08:01,880 --> 00:08:05,680 Speaker 1: sort of like a mini pre midterms moment, especially given 180 00:08:05,680 --> 00:08:07,320 Speaker 1: the fact that there are races in New Jersey and 181 00:08:07,320 --> 00:08:10,800 Speaker 1: in Virginia. In California, there's an initiative that people are 182 00:08:10,800 --> 00:08:13,680 Speaker 1: going to be voting on about redistricting. How much are 183 00:08:13,720 --> 00:08:16,040 Speaker 1: you going to take a big read through in terms 184 00:08:16,120 --> 00:08:19,800 Speaker 1: of what type of mandate President Trump has, what kind 185 00:08:19,880 --> 00:08:23,160 Speaker 1: of vision gets the most voters for Democrats? How much 186 00:08:23,280 --> 00:08:27,080 Speaker 1: is this taking the temperature versus idiosyncratic races With a 187 00:08:27,160 --> 00:08:29,440 Speaker 1: number of very specific inputs. 188 00:08:29,880 --> 00:08:33,679 Speaker 6: The off year elections, this mid midterm is one of 189 00:08:33,720 --> 00:08:36,240 Speaker 6: the best predictors of what will happen in the House 190 00:08:36,240 --> 00:08:41,280 Speaker 6: of Representatives next November. It is an exceptional early indicator 191 00:08:41,320 --> 00:08:44,080 Speaker 6: from New Jersey Virginia, not just two wins but what 192 00:08:44,120 --> 00:08:46,960 Speaker 6: the margins are and the reason that President Trump is 193 00:08:47,000 --> 00:08:50,560 Speaker 6: so animated about the midterms, if you follow his social 194 00:08:50,559 --> 00:08:54,280 Speaker 6: media feeds, it's been forty straight hours of endorsements, is 195 00:08:54,360 --> 00:08:57,800 Speaker 6: because he is very likely. Republicans are very likely to 196 00:08:57,840 --> 00:09:02,040 Speaker 6: lose the House just statistically type margin, and that means 197 00:09:02,800 --> 00:09:05,880 Speaker 6: massive subpoena power for the House of Representatives next year 198 00:09:06,040 --> 00:09:08,640 Speaker 6: if it is democratically owned. So it is incumbent upon 199 00:09:08,679 --> 00:09:11,120 Speaker 6: President Trump to do what I just said he does best, 200 00:09:11,160 --> 00:09:12,760 Speaker 6: which is turn out the votes. But in favor of 201 00:09:12,760 --> 00:09:15,640 Speaker 6: the Republican candidates, he really needs to hold onto the 202 00:09:15,679 --> 00:09:17,520 Speaker 6: House more than anything else, and it's going to be 203 00:09:17,760 --> 00:09:21,160 Speaker 6: a very serious uphill battle that you know, statistics and 204 00:09:21,280 --> 00:09:24,440 Speaker 6: history show he is very likely to lose, so California, 205 00:09:24,679 --> 00:09:28,000 Speaker 6: Pennsylvania Supreme Court, Virginia, New Jersey. The margins are where 206 00:09:28,200 --> 00:09:30,880 Speaker 6: walks like myself will be watching just to see exactly 207 00:09:30,880 --> 00:09:32,280 Speaker 6: what we should be looking for next year. 208 00:09:32,320 --> 00:09:33,240 Speaker 5: Is it going to be a. 209 00:09:33,320 --> 00:09:35,720 Speaker 6: Seven seat margin in the House of Representatives or are 210 00:09:35,720 --> 00:09:37,080 Speaker 6: we talking like thirty seats. 211 00:09:37,120 --> 00:09:39,679 Speaker 5: That's what this today's election. 212 00:09:39,480 --> 00:09:42,520 Speaker 1: Can tell us how much our national concerns feeding into 213 00:09:42,559 --> 00:09:44,079 Speaker 1: the local races. 214 00:09:44,400 --> 00:09:45,600 Speaker 3: Given the fact that the. 215 00:09:45,559 --> 00:09:46,520 Speaker 5: Government's shut down. 216 00:09:46,760 --> 00:09:47,360 Speaker 3: There's a lot of. 217 00:09:47,280 --> 00:09:51,200 Speaker 1: Dissatisfaction on a national level. At a local level, there 218 00:09:51,280 --> 00:09:55,520 Speaker 1: is more engagement, an increasing amount of engagement from residents. 219 00:09:55,840 --> 00:09:57,840 Speaker 3: Is there a divergence. 220 00:09:57,160 --> 00:09:59,439 Speaker 1: Here or is there a pretty clear correlation. 221 00:10:00,320 --> 00:10:03,000 Speaker 5: That's a fascinating question. I think it's different for each party. 222 00:10:03,080 --> 00:10:06,320 Speaker 6: So in this cycle, the Republican Party has continued to 223 00:10:06,320 --> 00:10:06,960 Speaker 6: be led. 224 00:10:06,720 --> 00:10:09,360 Speaker 5: By Donald Trump, and he's not on the ballot. 225 00:10:09,400 --> 00:10:12,240 Speaker 6: And so what Republican staff and campaign operatives I speak 226 00:10:12,280 --> 00:10:15,439 Speaker 6: with will tell you is that Republican voters are tuned out. 227 00:10:15,720 --> 00:10:19,040 Speaker 6: When we saw the returns on the national election last year, 228 00:10:19,240 --> 00:10:21,360 Speaker 6: people would go to the polls, vote for Donald Trump, 229 00:10:21,440 --> 00:10:23,760 Speaker 6: and then leave. So the fact that Trump is not 230 00:10:23,920 --> 00:10:26,199 Speaker 6: on the ballot this cycle, he's not on the ballot 231 00:10:26,200 --> 00:10:28,480 Speaker 6: in the midterms, and he won't be next year either, 232 00:10:28,559 --> 00:10:30,920 Speaker 6: the Republican Party is trying to figure out, how can 233 00:10:31,000 --> 00:10:34,000 Speaker 6: I backfill that darth and that absence left by Donald 234 00:10:34,000 --> 00:10:37,160 Speaker 6: Trump himself the plane leader of the Republican Party, and 235 00:10:37,280 --> 00:10:40,839 Speaker 6: get our voters excited for JD. Vans, Formarco Rubio, for 236 00:10:40,920 --> 00:10:43,600 Speaker 6: any of these local politicians. So you see this depressed 237 00:10:44,360 --> 00:10:47,240 Speaker 6: participation on the Republican side because Trump is not on 238 00:10:47,280 --> 00:10:49,319 Speaker 6: the top of the ticket, and that leaves a vacuum 239 00:10:49,320 --> 00:10:50,680 Speaker 6: for Democrats to turn out. 240 00:10:51,040 --> 00:10:52,800 Speaker 5: So really it depends on which party you're. 241 00:10:52,640 --> 00:10:53,640 Speaker 3: Talking about, Henrietta. 242 00:10:53,679 --> 00:10:56,040 Speaker 2: I understand the temptation whenever we cover these stories the 243 00:10:56,080 --> 00:11:00,280 Speaker 2: group in people in some very neat groups Republicans Democrats. 244 00:11:00,440 --> 00:11:03,240 Speaker 2: But is there another group, another set of individuals that 245 00:11:03,280 --> 00:11:06,000 Speaker 2: can't be put into one buckheit that are pretty fluid 246 00:11:06,200 --> 00:11:07,920 Speaker 2: and they're willing to vote for someone who's got a 247 00:11:07,920 --> 00:11:09,840 Speaker 2: solution to their problem. And right now, the problem for 248 00:11:09,880 --> 00:11:11,880 Speaker 2: a lot of people in this country, and it's persisted 249 00:11:11,920 --> 00:11:15,199 Speaker 2: for a long time, is affordability, and those problems were 250 00:11:15,200 --> 00:11:17,160 Speaker 2: exacerbated through the Buider administration. 251 00:11:17,400 --> 00:11:18,559 Speaker 3: They're looking for solutions. 252 00:11:18,600 --> 00:11:20,880 Speaker 2: It might come from the far left, it might come 253 00:11:20,920 --> 00:11:23,400 Speaker 2: from the conservative right, Henriette. So, I just wonder how 254 00:11:23,480 --> 00:11:25,240 Speaker 2: much of a feature that's going to be in the 255 00:11:25,240 --> 00:11:27,280 Speaker 2: elections through the next twelve eighteen months. 256 00:11:28,120 --> 00:11:30,160 Speaker 5: Yeah, I think it's the biggest feature. 257 00:11:30,280 --> 00:11:32,880 Speaker 6: You have sixty eight percent of the US population that 258 00:11:32,880 --> 00:11:35,080 Speaker 6: does not support the state of the US economy and 259 00:11:35,160 --> 00:11:37,840 Speaker 6: is very concerned about inflation and does not support the 260 00:11:37,880 --> 00:11:42,800 Speaker 6: president's terrace. So the president and his trake, his committee 261 00:11:42,840 --> 00:11:45,600 Speaker 6: officials and cabinet officials are saying, you know, give us 262 00:11:45,640 --> 00:11:48,400 Speaker 6: another year, let us bring prices down. But when voters 263 00:11:48,400 --> 00:11:51,520 Speaker 6: are looking at their grocery bill, their electricity bill, the 264 00:11:51,559 --> 00:11:53,680 Speaker 6: cost of a new car, whatever they're looking at trying 265 00:11:53,720 --> 00:11:55,000 Speaker 6: to buy, it's all more expensive. 266 00:11:55,000 --> 00:11:56,200 Speaker 5: It's all because of the tires, and. 267 00:11:56,200 --> 00:11:59,240 Speaker 6: They know that, and they are seeing manufacturing, they are 268 00:11:59,280 --> 00:12:02,559 Speaker 6: seeing grocery prices increase, but not their wages. 269 00:12:02,880 --> 00:12:04,679 Speaker 5: So the President. 270 00:12:04,520 --> 00:12:08,480 Speaker 6: Ran on, you know, theoretically an inflation related campaign. Inflation 271 00:12:08,640 --> 00:12:12,080 Speaker 6: was high after COVID, but it remains on the upper 272 00:12:12,160 --> 00:12:14,520 Speaker 6: rise today as well, and you can see that again 273 00:12:14,559 --> 00:12:17,560 Speaker 6: at the grocery stores most plainly. So when we go 274 00:12:17,600 --> 00:12:20,280 Speaker 6: to the polls in November of next year, that's going 275 00:12:20,360 --> 00:12:22,320 Speaker 6: to be paramount. Our grocery price is high. Is it 276 00:12:22,320 --> 00:12:25,240 Speaker 6: our number one issue? Or do we care about immigration 277 00:12:25,520 --> 00:12:28,080 Speaker 6: or crime or healthcare or other tertiary issues. 278 00:12:28,080 --> 00:12:29,559 Speaker 5: But it's really always the economy. 279 00:12:29,760 --> 00:12:32,559 Speaker 6: And the president is underwater with the lowest approval ratings 280 00:12:32,600 --> 00:12:34,680 Speaker 6: that he has ever had in this term or last 281 00:12:35,080 --> 00:12:36,559 Speaker 6: because of the state of the economy. 282 00:12:37,280 --> 00:12:40,760 Speaker 2: Stay with us, mult Bloomberg Savannah's coming up after this. 283 00:12:49,640 --> 00:12:51,600 Speaker 3: Stocks pulling back from their old time highs. 284 00:12:51,600 --> 00:12:54,440 Speaker 2: It's Wall Street bosses issue a fresh warning on rich 285 00:12:54,520 --> 00:12:57,440 Speaker 2: valuations and if possible, draw down, joining us not to 286 00:12:57,480 --> 00:13:00,840 Speaker 2: discuss Henry. Anna mac christ strategist that Deutsche Henry, I 287 00:13:00,840 --> 00:13:03,439 Speaker 2: feel like this is a move looking a fan a narrative. 288 00:13:03,559 --> 00:13:05,800 Speaker 2: How would you describe this to clients this morning? What 289 00:13:05,880 --> 00:13:07,600 Speaker 2: is this pullback so far today? 290 00:13:08,440 --> 00:13:10,080 Speaker 7: I think this is actually just a kind of normal, 291 00:13:10,120 --> 00:13:12,280 Speaker 7: regular pullback that you're going to get in any normal 292 00:13:12,360 --> 00:13:13,800 Speaker 7: ball run. I mean, at the end of the day, 293 00:13:14,040 --> 00:13:16,000 Speaker 7: you're not going to hit all time highs day after 294 00:13:16,080 --> 00:13:18,440 Speaker 7: day after day. We've had over thirty this year, so 295 00:13:18,960 --> 00:13:21,360 Speaker 7: getting these kind of pullbacks, which in the grand scheme 296 00:13:21,400 --> 00:13:23,960 Speaker 7: of this relentless ball run, are pretty modest. We're still 297 00:13:23,960 --> 00:13:25,880 Speaker 7: only around two percent off the all time highs to 298 00:13:25,920 --> 00:13:28,719 Speaker 7: the SMP is to be expected. But you know, if 299 00:13:28,720 --> 00:13:31,080 Speaker 7: we look at the macro fundamentals right now, they do 300 00:13:31,160 --> 00:13:34,200 Speaker 7: remain pretty strong. Clearly, with the US China trade truce, 301 00:13:34,280 --> 00:13:36,839 Speaker 7: the risk of near term tariffs has been taken off 302 00:13:36,840 --> 00:13:40,080 Speaker 7: the table. We still have the tailwind from the recent 303 00:13:40,080 --> 00:13:42,040 Speaker 7: FED rate cut and another fifty bits already this year 304 00:13:42,080 --> 00:13:45,079 Speaker 7: even if they don't cut in December, and actually a 305 00:13:45,120 --> 00:13:47,559 Speaker 7: lot of the activity data at a global level has 306 00:13:47,559 --> 00:13:49,880 Speaker 7: been pretty good. I was struck, for instance, in Europe 307 00:13:50,400 --> 00:13:53,960 Speaker 7: that the flash PMI, actually the composite PMI was at 308 00:13:53,960 --> 00:13:57,120 Speaker 7: a two year high. So actually the ism manufacturing yesday, Yes, 309 00:13:57,120 --> 00:13:59,320 Speaker 7: a little bit weaker than expected. But you know, I 310 00:13:59,360 --> 00:14:01,160 Speaker 7: appreciate the day has been limited out of the US, 311 00:14:01,200 --> 00:14:03,520 Speaker 7: but that has actually been the exception rather than the rule. 312 00:14:03,559 --> 00:14:05,920 Speaker 7: And I think that fundamental bullish backdrop does remain in 313 00:14:05,960 --> 00:14:06,720 Speaker 7: place Henry. 314 00:14:06,760 --> 00:14:08,160 Speaker 3: At the same time, a thing we have to take. 315 00:14:08,200 --> 00:14:11,200 Speaker 2: No, when a stock falls on good news, not bad 316 00:14:11,200 --> 00:14:14,559 Speaker 2: news Palenteer and the earnings from Palenteer wasn't bad at all. 317 00:14:14,679 --> 00:14:16,840 Speaker 2: If he goes through the numbers relative to expectations. Then 318 00:14:16,880 --> 00:14:19,280 Speaker 2: you see the move this morning and the stock is 319 00:14:19,320 --> 00:14:22,120 Speaker 2: down by six or seven percent. Does that speak to 320 00:14:22,160 --> 00:14:24,200 Speaker 2: full valuations? What do you think that speaks too? 321 00:14:25,000 --> 00:14:25,480 Speaker 3: I think you. 322 00:14:25,440 --> 00:14:28,440 Speaker 7: Always get these moments where single headlines can create a 323 00:14:28,440 --> 00:14:31,120 Speaker 7: lot of fear. I mean, I remember back in earlier 324 00:14:31,120 --> 00:14:33,080 Speaker 7: in the year before the Liberation Day TERMOL, we had 325 00:14:33,120 --> 00:14:36,000 Speaker 7: the deep seek AI model released and there was a 326 00:14:36,120 --> 00:14:39,240 Speaker 7: very big temporary pullback in tech stocks that proved me 327 00:14:39,400 --> 00:14:41,360 Speaker 7: very short lived. People thought this might be a new 328 00:14:41,400 --> 00:14:43,960 Speaker 7: big narrative shift and it wasn't. But you know, I 329 00:14:44,040 --> 00:14:46,960 Speaker 7: was thinking about those CEO warnings you played just before this. 330 00:14:47,520 --> 00:14:49,920 Speaker 7: If you think about what has generated you got fifteen 331 00:14:49,960 --> 00:14:52,920 Speaker 7: percent draw downs to the SMP. In recent decades, it's 332 00:14:53,000 --> 00:14:55,600 Speaker 7: usually taken one of three things. One is a recession, 333 00:14:55,680 --> 00:14:57,760 Speaker 7: which there's no sign of yet. The Alandzo fed's GDP 334 00:14:57,880 --> 00:14:58,680 Speaker 7: track are actually at. 335 00:14:58,560 --> 00:15:01,440 Speaker 3: Three point nine percent in Q three. Another is fears 336 00:15:01,440 --> 00:15:02,600 Speaker 3: of a recession. 337 00:15:02,200 --> 00:15:05,600 Speaker 7: Like we saw after Liberation Day, but no one's seriously 338 00:15:05,600 --> 00:15:08,080 Speaker 7: talking about a recession right now. And the other third 339 00:15:08,080 --> 00:15:10,560 Speaker 7: component that has gone with that is FED rate hikes. 340 00:15:10,560 --> 00:15:12,440 Speaker 7: So a lot of the cellers we've seen in recent year, 341 00:15:12,480 --> 00:15:15,440 Speaker 7: so twenty fifteen, sixteen, late twenty eighteen, and indeed twenty 342 00:15:15,520 --> 00:15:18,040 Speaker 7: twenty two most notably, have gone hand in hand with 343 00:15:18,080 --> 00:15:21,600 Speaker 7: FED rate hikes, but they're not talking about hiking anytime soon, 344 00:15:21,640 --> 00:15:23,920 Speaker 7: and if anything, obviously, with a new fetcher coming in 345 00:15:24,000 --> 00:15:26,280 Speaker 7: next year, the direction of travel remains pretty dubbish. 346 00:15:26,440 --> 00:15:28,480 Speaker 1: We'll talk about the FED in just a second, but 347 00:15:28,560 --> 00:15:30,920 Speaker 1: it's not just the big Wall Street CEOs that are 348 00:15:30,960 --> 00:15:33,440 Speaker 1: talking about this. I actually took more notice of a 349 00:15:33,520 --> 00:15:36,320 Speaker 1: story that came out this morning that Michael Burry of 350 00:15:36,400 --> 00:15:39,880 Speaker 1: the Big short fame is shorting Palenteer and nvideo shares, 351 00:15:40,160 --> 00:15:42,720 Speaker 1: and he's coming out and talking about valuations, but he's 352 00:15:42,800 --> 00:15:45,600 Speaker 1: also kind of leaning into a narrative that increasing number 353 00:15:45,680 --> 00:15:48,120 Speaker 1: people have talked about, which is this case shaped market 354 00:15:48,160 --> 00:15:51,760 Speaker 1: can continue, you have to see some monetization of the 355 00:15:51,840 --> 00:15:55,080 Speaker 1: software of the hardware in order to keep this AI 356 00:15:55,240 --> 00:15:57,280 Speaker 1: trend going. Do you think there's validity in that that 357 00:15:57,360 --> 00:16:00,000 Speaker 1: maybe some of the winners need to take a pause 358 00:16:00,080 --> 00:16:02,280 Speaker 1: and there needs to be a transfer in terms of 359 00:16:02,440 --> 00:16:03,680 Speaker 1: stock market leadership. 360 00:16:04,520 --> 00:16:06,280 Speaker 7: I think to some extent there is, But I think 361 00:16:06,280 --> 00:16:08,280 Speaker 7: a lot of the comparisons to the dot com bubble 362 00:16:08,440 --> 00:16:10,880 Speaker 7: are really quite overregged at the moment. So for instance, 363 00:16:10,880 --> 00:16:13,520 Speaker 7: you know, the nastak is up by twenty three percent 364 00:16:13,560 --> 00:16:14,360 Speaker 7: year to date so far. 365 00:16:14,520 --> 00:16:16,000 Speaker 3: Now that's very healthy, but in. 366 00:16:16,000 --> 00:16:18,440 Speaker 7: Nineteen ninety nine, we had the nastak up eighty five 367 00:16:18,520 --> 00:16:20,560 Speaker 7: percent that year, and in the final seven or eight 368 00:16:20,560 --> 00:16:22,640 Speaker 7: months of the dot com bubble, the nassack literally doubled. 369 00:16:22,920 --> 00:16:25,480 Speaker 7: So I don't think the games we're seeing, you know, 370 00:16:25,480 --> 00:16:28,200 Speaker 7: it can really be compared to what we saw at 371 00:16:28,200 --> 00:16:30,160 Speaker 7: the time of the dot com bubble. And another key 372 00:16:30,160 --> 00:16:33,160 Speaker 7: difference between now and then is back then, you know, 373 00:16:33,200 --> 00:16:35,440 Speaker 7: a lot of the assumptions that valuations rested on was 374 00:16:35,480 --> 00:16:37,760 Speaker 7: a belief that four percent growth as we saw in 375 00:16:37,760 --> 00:16:40,200 Speaker 7: the mid to late nineties would continue forever. You know, 376 00:16:40,280 --> 00:16:42,320 Speaker 7: forecasts from reputable people like the FED were saying that 377 00:16:42,360 --> 00:16:44,680 Speaker 7: would continue well into the two thousands. But then, as 378 00:16:44,720 --> 00:16:47,840 Speaker 7: we know in retrospect, we had that downturn in two 379 00:16:47,840 --> 00:16:51,000 Speaker 7: thousand and two thousand and one and there was a recession. Whereas, 380 00:16:51,040 --> 00:16:54,720 Speaker 7: again today, valuations are not resting on continued four percent 381 00:16:54,760 --> 00:16:56,040 Speaker 7: growth forever. We're kind of in a two and a 382 00:16:56,040 --> 00:16:58,280 Speaker 7: half to three percent range, perhaps with some upside. If 383 00:16:58,440 --> 00:17:01,320 Speaker 7: AI productivity does lead to a bo and again there's 384 00:17:01,360 --> 00:17:04,520 Speaker 7: no recession on the horizon, so clearly about macro picture changes, 385 00:17:04,520 --> 00:17:06,560 Speaker 7: and we do get a growth downturn, then I think 386 00:17:06,600 --> 00:17:08,439 Speaker 7: that would take some of the underpinning away. But for 387 00:17:08,520 --> 00:17:11,600 Speaker 7: now we're not seeing those relentless, remorseless gains that we 388 00:17:11,640 --> 00:17:13,399 Speaker 7: saw at the time of the late nineties. 389 00:17:13,480 --> 00:17:16,040 Speaker 1: We talked about the other catalyst to the potential catalyst 390 00:17:16,080 --> 00:17:17,639 Speaker 1: for an end to the rally, which comes from the 391 00:17:17,640 --> 00:17:20,520 Speaker 1: FED in a potential tightening, and FED policy seems like 392 00:17:20,520 --> 00:17:22,480 Speaker 1: that is nowhere on the table. As you were mentioning, 393 00:17:22,560 --> 00:17:25,480 Speaker 1: you did say that maybe inflation is underappreciated, and that's 394 00:17:25,480 --> 00:17:28,440 Speaker 1: something that Deutsche Bank has been talking about quite a bit. 395 00:17:28,840 --> 00:17:31,720 Speaker 1: What makes you think that based on the ism manufacturing, 396 00:17:31,720 --> 00:17:33,920 Speaker 1: which was the opposite base in the fact that there 397 00:17:34,000 --> 00:17:37,040 Speaker 1: is this case shaped economy that has put pressure on 398 00:17:37,080 --> 00:17:40,159 Speaker 1: any additional price gains that we've seen in the consumer sector. 399 00:17:41,200 --> 00:17:43,240 Speaker 7: Well, I think there are still a lot of inflationary catalysts. 400 00:17:43,240 --> 00:17:45,320 Speaker 7: I think the market has been a bit too reassured 401 00:17:45,400 --> 00:17:48,800 Speaker 7: by the US China trade truths we saw last week 402 00:17:48,840 --> 00:17:50,440 Speaker 7: in some of the other recent data, But at the 403 00:17:50,520 --> 00:17:52,920 Speaker 7: end of the day, for instance, tariffs very still much 404 00:17:53,200 --> 00:17:55,240 Speaker 7: in the picture. I know we associate a lot of 405 00:17:55,280 --> 00:17:57,280 Speaker 7: the tarifts that have come in with April time, but 406 00:17:57,320 --> 00:17:59,520 Speaker 7: actually a lot of the tariffs, for instance, the fifteen 407 00:17:59,520 --> 00:18:01,880 Speaker 7: percent of the EU and Japan, the ten percent increase 408 00:18:02,160 --> 00:18:04,600 Speaker 7: on Canada, the sectoral tariffs like copper, A lot of 409 00:18:04,600 --> 00:18:07,040 Speaker 7: those tariffs only came into effect in August, and the 410 00:18:07,119 --> 00:18:09,200 Speaker 7: data we've got only goes up to September, so that's 411 00:18:09,240 --> 00:18:11,440 Speaker 7: still going to be a theme as we move towards 412 00:18:11,640 --> 00:18:14,200 Speaker 7: year end. The Q four data and into twenty twenty six. 413 00:18:14,600 --> 00:18:16,760 Speaker 7: On top of that, we still have the lagged impact 414 00:18:16,960 --> 00:18:18,800 Speaker 7: of all the rate cuts. Indeed, it's worth bearing in 415 00:18:18,880 --> 00:18:21,040 Speaker 7: mind the FED of now cut rates by one hundred 416 00:18:21,080 --> 00:18:24,159 Speaker 7: and fifty basis points since September last year. That is 417 00:18:24,200 --> 00:18:26,879 Speaker 7: the fastest pace of rate cuts outside of a recession 418 00:18:27,240 --> 00:18:29,520 Speaker 7: since the nineteen eighties. This is not a framework that 419 00:18:29,520 --> 00:18:31,960 Speaker 7: we've been used to in recent times. You've got momentum 420 00:18:32,000 --> 00:18:35,280 Speaker 7: there too. The activity data you're still proving pretty resilient, 421 00:18:35,320 --> 00:18:38,440 Speaker 7: so that suggests demand pressures. And at a global level 422 00:18:38,480 --> 00:18:40,720 Speaker 7: as well, you've got factors like the European fiscal stimulus 423 00:18:41,000 --> 00:18:43,640 Speaker 7: coming in. So as I look around the world right now, 424 00:18:43,640 --> 00:18:45,800 Speaker 7: including in the US, I think there's actually still a 425 00:18:45,840 --> 00:18:48,920 Speaker 7: lot of inflationary catalysts on the table, and I think 426 00:18:48,920 --> 00:18:50,919 Speaker 7: market's risk ignoring that in their peril, because if we 427 00:18:50,960 --> 00:18:53,600 Speaker 7: do see inflation started to pick up again more than 428 00:18:53,640 --> 00:18:56,040 Speaker 7: markets expect, I think the risk is we get a 429 00:18:56,080 --> 00:18:58,960 Speaker 7: similar hawkish surprise to what we saw last week, where 430 00:18:59,200 --> 00:19:01,479 Speaker 7: markets were surprised to in FT chair Palell took that 431 00:19:01,520 --> 00:19:03,639 Speaker 7: December rate cut a bit off the table, put it 432 00:19:03,640 --> 00:19:04,160 Speaker 7: in some doubt. 433 00:19:04,480 --> 00:19:07,480 Speaker 1: Henry. I know that Deutsche Bank just re entered a 434 00:19:07,520 --> 00:19:10,439 Speaker 1: short position on ten year treasuries and have a target 435 00:19:10,440 --> 00:19:12,959 Speaker 1: at four point four or five percent. I'm just wondering 436 00:19:13,000 --> 00:19:15,320 Speaker 1: is that enough to continue the sell off that we're 437 00:19:15,320 --> 00:19:19,719 Speaker 1: seeing this morning in risk assets given the underappreciation as 438 00:19:19,760 --> 00:19:22,119 Speaker 1: you've been saying, of inflationary risks. 439 00:19:22,600 --> 00:19:23,800 Speaker 3: I mean, that's an interesting question. 440 00:19:23,880 --> 00:19:26,800 Speaker 7: I think that the key question, particularly if we move 441 00:19:26,840 --> 00:19:30,160 Speaker 7: forward into next year, is do we get that reacceleration 442 00:19:30,200 --> 00:19:32,639 Speaker 7: the economy, Because one thing I've been struck by in 443 00:19:32,680 --> 00:19:37,000 Speaker 7: this post COVID cycle is that consistently, particularly in the US, 444 00:19:37,040 --> 00:19:39,560 Speaker 7: the macro picture surprise on the upside. So even in 445 00:19:39,600 --> 00:19:41,719 Speaker 7: twenty twenty two that we had the fastest FED rate 446 00:19:41,800 --> 00:19:44,480 Speaker 7: hikes in a generation, which previously had always led to recession, 447 00:19:44,800 --> 00:19:46,840 Speaker 7: they pulled off the soft landing just about then. 448 00:19:46,880 --> 00:19:48,360 Speaker 3: In twenty three and twenty four we. 449 00:19:48,320 --> 00:19:50,840 Speaker 7: Had stellar equity gains, the S and P five hundred 450 00:19:50,920 --> 00:19:53,200 Speaker 7: rising back to MAC twenty percent for the first time 451 00:19:53,280 --> 00:19:56,520 Speaker 7: since the late nineties. So again that macro picture has 452 00:19:56,520 --> 00:19:59,040 Speaker 7: been very strong, and again this year, even though we 453 00:19:59,160 --> 00:20:01,639 Speaker 7: had genuine fears of a recession around Liberation Day, the 454 00:20:01,680 --> 00:20:05,240 Speaker 7: biggest trade shock since the nineteenth century. Again the economy 455 00:20:05,240 --> 00:20:08,640 Speaker 7: has been remarkably resilient, So actually, I do think there 456 00:20:08,640 --> 00:20:11,600 Speaker 7: is upside potential for yields as we look forward to 457 00:20:11,600 --> 00:20:13,879 Speaker 7: the rest of this year into next year. And actually 458 00:20:13,880 --> 00:20:15,800 Speaker 7: I've shot that last year when the Fed cut rates, 459 00:20:15,840 --> 00:20:17,399 Speaker 7: actually it was the point they were cutting rates that 460 00:20:17,440 --> 00:20:20,520 Speaker 7: actually proved to be below for yields. From then onwards 461 00:20:20,560 --> 00:20:22,480 Speaker 7: they picked up again. So I definitely think there's about 462 00:20:22,480 --> 00:20:23,240 Speaker 7: a case lab. 463 00:20:23,720 --> 00:20:24,360 Speaker 3: Stay with us. 464 00:20:24,680 --> 00:20:37,400 Speaker 2: More Bloomberg surveillance coming up after this, a record number 465 00:20:37,480 --> 00:20:40,000 Speaker 2: of New Yorkers already casting early ballots for the city's 466 00:20:40,040 --> 00:20:43,000 Speaker 2: next mayor. President Trump announcing a support for Andrew Cuomo, 467 00:20:43,240 --> 00:20:45,840 Speaker 2: who is running as an independent, and threatening to withhold 468 00:20:45,840 --> 00:20:48,800 Speaker 2: federal funding if front runner Democratic socialist Sir Round Mam. 469 00:20:48,800 --> 00:20:50,200 Speaker 3: Danny turns out to win. 470 00:20:50,560 --> 00:20:53,359 Speaker 2: Whitney Tilson is a former hedge fund manager and was 471 00:20:53,359 --> 00:20:55,520 Speaker 2: a twenty twenty five New York City candidate in the 472 00:20:55,520 --> 00:20:58,200 Speaker 2: Democratic mayoral primary. He joined US now for more winning. 473 00:20:58,240 --> 00:20:59,840 Speaker 2: Good morning, it's good to see you, good morning, thanks 474 00:20:59,880 --> 00:21:03,760 Speaker 2: for thank you for being here. What's his thank today, Well, 475 00:21:03,800 --> 00:21:06,240 Speaker 2: it's a big day for New York. I think there's 476 00:21:06,280 --> 00:21:08,120 Speaker 2: going to be a big surgeon turnout and I'm glad 477 00:21:08,160 --> 00:21:11,080 Speaker 2: to see New Yorkers are getting politically involved. Early voting 478 00:21:11,200 --> 00:21:14,639 Speaker 2: was four times what it was four years ago. I 479 00:21:14,760 --> 00:21:18,160 Speaker 2: wish that didn't favor Mom donnie, but it probably does, 480 00:21:18,200 --> 00:21:19,280 Speaker 2: as it did in the primary. 481 00:21:19,320 --> 00:21:22,400 Speaker 8: But the poll show the racist tightening. It was fifteen points, 482 00:21:22,440 --> 00:21:26,160 Speaker 8: and now the latest poll just yesterday, it's under five points, 483 00:21:26,200 --> 00:21:29,919 Speaker 8: So it's not completely impossible that there could be a 484 00:21:29,920 --> 00:21:32,920 Speaker 8: big election day. Surprised though, Mom Donnie's clearly up. Five 485 00:21:33,040 --> 00:21:35,360 Speaker 8: is still a good place to be going into election day. 486 00:21:35,400 --> 00:21:37,240 Speaker 2: You're familiar with the headline on Wall Street that the 487 00:21:37,359 --> 00:21:41,439 Speaker 2: capital of American capitalism is lurching towards socialism? Is this 488 00:21:41,520 --> 00:21:43,280 Speaker 2: telling you more about the mood of the country or 489 00:21:43,280 --> 00:21:44,600 Speaker 2: the mood of the Democratic Party? 490 00:21:44,960 --> 00:21:48,480 Speaker 8: Well, and also tells you something about the candidates. Mom 491 00:21:48,560 --> 00:21:52,960 Speaker 8: donnie is a gifted politician. He identified the key issue 492 00:21:53,000 --> 00:21:55,959 Speaker 8: for New Yorkers is affordability, and he came up with 493 00:21:56,040 --> 00:21:59,320 Speaker 8: some very clear, you know, freeze the rent, free buses, 494 00:21:59,720 --> 00:22:03,320 Speaker 8: free childcare, very easy slogans. And one thing I learned 495 00:22:03,320 --> 00:22:05,480 Speaker 8: as a politician, if you want to win, promise the 496 00:22:05,560 --> 00:22:08,280 Speaker 8: maximum number of people the maximount of free stuff, and 497 00:22:08,400 --> 00:22:10,320 Speaker 8: tell them they don't have to pay for it, and 498 00:22:10,400 --> 00:22:13,719 Speaker 8: he nailed that, and he's been on message. And Cuomo 499 00:22:13,800 --> 00:22:16,359 Speaker 8: thought he was going to coast to victory, coast to 500 00:22:16,480 --> 00:22:19,520 Speaker 8: victory in the primary and really didn't even campaign out there, 501 00:22:19,680 --> 00:22:21,760 Speaker 8: and by the time I was raising the alarm in 502 00:22:21,800 --> 00:22:24,000 Speaker 8: the late stages of the primary, it was too little, 503 00:22:24,000 --> 00:22:24,400 Speaker 8: too late. 504 00:22:24,560 --> 00:22:27,360 Speaker 1: It's simplistic, though, to say that it's just promising people freebies, 505 00:22:27,359 --> 00:22:29,760 Speaker 1: and that's what got some of the attention. It's also 506 00:22:30,119 --> 00:22:33,520 Speaker 1: that Zorn Mumdanie was talking about wasn't just the anti 507 00:22:33,560 --> 00:22:36,360 Speaker 1: Trump platform, it was the idea of trying to identify 508 00:22:36,400 --> 00:22:38,560 Speaker 1: some of these needs. Have you been disappointed that the 509 00:22:38,600 --> 00:22:41,880 Speaker 1: Democratic Party hasn't done a better job of crystallizing those 510 00:22:41,920 --> 00:22:45,639 Speaker 1: issues and running on that and not an anti Trump message. 511 00:22:45,320 --> 00:22:47,680 Speaker 8: Yes, very much. And I don't think it's just here 512 00:22:47,680 --> 00:22:49,800 Speaker 8: in New York. We're seeing it, We're seeing it nationally. 513 00:22:50,080 --> 00:22:53,000 Speaker 8: I'm a lifelong Democrat. I ran the Democratic Party to 514 00:22:53,080 --> 00:22:56,560 Speaker 8: try and drag my party back to the center to 515 00:22:56,680 --> 00:23:00,960 Speaker 8: bread and butter issues for people rather than social issues 516 00:23:01,040 --> 00:23:04,840 Speaker 8: and just attacking Trump and Mom Donnie, to his credit, 517 00:23:04,920 --> 00:23:07,080 Speaker 8: hasn't spent a lot of time attacking Trump. That was 518 00:23:07,119 --> 00:23:11,000 Speaker 8: not his it was affordability and a few key ideas. 519 00:23:11,040 --> 00:23:13,840 Speaker 8: And in the same way from the opposite side, he's 520 00:23:13,880 --> 00:23:16,639 Speaker 8: a little like Trump. You know. Trump was We're going 521 00:23:16,680 --> 00:23:18,479 Speaker 8: to build a wall in Mexico's going to pay for it. 522 00:23:18,560 --> 00:23:22,359 Speaker 8: And I don't think his supporters it actually believed that, 523 00:23:22,640 --> 00:23:25,240 Speaker 8: but it was a clear message on the issue that 524 00:23:25,280 --> 00:23:27,560 Speaker 8: they cared about. And Mom Donnie took a page out 525 00:23:27,600 --> 00:23:29,400 Speaker 8: of that book and is executed superbly. 526 00:23:29,400 --> 00:23:30,480 Speaker 3: I got to tip my hat to him. 527 00:23:30,520 --> 00:23:32,719 Speaker 1: One thing that you do really well is that you're 528 00:23:32,760 --> 00:23:35,639 Speaker 1: at the crossroads of Wall Street and the political scene, 529 00:23:35,640 --> 00:23:38,000 Speaker 1: and I'm just wondering how realistic you think some of 530 00:23:38,040 --> 00:23:41,200 Speaker 1: the threats are by your colleagues of leaving New York City. 531 00:23:41,400 --> 00:23:43,400 Speaker 1: If Zoron Mom Donnie should win. 532 00:23:44,560 --> 00:23:48,640 Speaker 8: That will depend on whether he governs as he has 533 00:23:48,680 --> 00:23:50,920 Speaker 8: in the past few months, as he's promised to sort 534 00:23:50,920 --> 00:23:54,400 Speaker 8: of tacking to the center and said I will protect 535 00:23:54,440 --> 00:23:58,400 Speaker 8: the Jewish population of New York despite his dangerous rhetoric 536 00:23:58,480 --> 00:24:01,000 Speaker 8: in previous years, I will not defund the police, and 537 00:24:01,040 --> 00:24:03,880 Speaker 8: to his credit, said he will keep Jessica Tish. I'm 538 00:24:03,880 --> 00:24:10,199 Speaker 8: going to embrace entrepreneurs and businesses as opposed to you know, 539 00:24:10,280 --> 00:24:13,080 Speaker 8: government seizing all means of production, which is what's on 540 00:24:13,280 --> 00:24:16,920 Speaker 8: his political party, the Democrats. Socialism in America says that, 541 00:24:17,760 --> 00:24:22,200 Speaker 8: So I'm cautiously optimistic hopeful. I would say that if 542 00:24:22,200 --> 00:24:25,439 Speaker 8: he is elected, he will try and govern from the center, 543 00:24:25,720 --> 00:24:29,800 Speaker 8: keep us safe and keep New York the incredible center 544 00:24:29,840 --> 00:24:34,000 Speaker 8: of entrepreneurship and finance and trade and all. But there 545 00:24:34,040 --> 00:24:36,360 Speaker 8: is a risk that, you know, a thirty four year 546 00:24:36,359 --> 00:24:38,879 Speaker 8: old guy who's grown up with the rhetoric of the 547 00:24:38,880 --> 00:24:41,040 Speaker 8: far left, if he governs as a radical, I think 548 00:24:41,040 --> 00:24:42,360 Speaker 8: people will flee this any. 549 00:24:42,240 --> 00:24:44,399 Speaker 2: And businesses at least, so sorey have nick You've been 550 00:24:44,440 --> 00:24:47,120 Speaker 2: saying it now for years, I think is the JP 551 00:24:47,240 --> 00:24:49,280 Speaker 2: Milkan Chanson now has more employees in Texas than it 552 00:24:49,280 --> 00:24:52,040 Speaker 2: does in New York State, which ten, fifteen, twenty years 553 00:24:52,040 --> 00:24:53,640 Speaker 2: ago I might have been shocking to some people, but 554 00:24:53,760 --> 00:24:55,680 Speaker 2: that's the reality of America in twenty twenty five. 555 00:24:55,720 --> 00:24:57,159 Speaker 1: A lot of it has to do with taxes, A 556 00:24:57,160 --> 00:24:59,400 Speaker 1: lot of it has to do with certain busneys practices 557 00:24:59,440 --> 00:25:02,200 Speaker 1: that haven't been as friendly. How much does this accelerate 558 00:25:02,280 --> 00:25:05,879 Speaker 1: that move as we've seen, and how much is Zoronmmdanni 559 00:25:05,920 --> 00:25:07,800 Speaker 1: if he does win, going to be sensitive to that, 560 00:25:08,000 --> 00:25:10,520 Speaker 1: to want those people to remain, to remain an income 561 00:25:10,560 --> 00:25:12,080 Speaker 1: based for the city. 562 00:25:12,160 --> 00:25:14,760 Speaker 2: It's not just making the city more competitive with global capitals, 563 00:25:14,760 --> 00:25:17,040 Speaker 2: it's making this state more competitive with the other states 564 00:25:17,080 --> 00:25:19,520 Speaker 2: across this country. Which goes to Least's question, what's going 565 00:25:19,560 --> 00:25:22,040 Speaker 2: to stop people from moving Whitney. When you were coming 566 00:25:22,080 --> 00:25:24,760 Speaker 2: out there and campaigning, what are you campaigning for? What 567 00:25:24,760 --> 00:25:26,520 Speaker 2: would you like to see change in this city in 568 00:25:26,560 --> 00:25:28,439 Speaker 2: this state to make sure we attract the best at 569 00:25:28,440 --> 00:25:30,159 Speaker 2: the best, not just around the world, but in this 570 00:25:30,240 --> 00:25:30,800 Speaker 2: country too. 571 00:25:31,359 --> 00:25:37,000 Speaker 8: Yeah, well, it starts with public safety and not defunding 572 00:25:37,040 --> 00:25:40,040 Speaker 8: the police, defunded and dismantled, the wicked police or all 573 00:25:40,080 --> 00:25:42,240 Speaker 8: things Mom Donnie had on his website, and I said, 574 00:25:42,280 --> 00:25:43,960 Speaker 8: we knew he need to do the opposite. Word a 575 00:25:44,000 --> 00:25:46,359 Speaker 8: thirty four year low in the number of police officers 576 00:25:46,840 --> 00:25:49,680 Speaker 8: and we need five thousand more police officers. I was 577 00:25:49,720 --> 00:25:54,080 Speaker 8: going in the other direction on public safety. And then secondly, look, 578 00:25:54,240 --> 00:25:56,520 Speaker 8: economic growth is the key to everything, is the key 579 00:25:56,560 --> 00:25:59,879 Speaker 8: to paying for all the things Mom Donnie wants. I 580 00:26:00,040 --> 00:26:02,520 Speaker 8: would love to deliver free childcare at every New Yorker 581 00:26:02,520 --> 00:26:05,040 Speaker 8: as well. It's that cost is crushing people. But you've 582 00:26:05,040 --> 00:26:06,920 Speaker 8: got to be able to pay for it. So under 583 00:26:06,960 --> 00:26:13,000 Speaker 8: Mike Bloomberg, the taxes doubled, but that's because the economy doubled. 584 00:26:13,200 --> 00:26:18,000 Speaker 8: During his twelve years. Under Deblasio, economic growth slowed from 585 00:26:18,040 --> 00:26:19,919 Speaker 8: six percent a year to two percent a year, and 586 00:26:19,960 --> 00:26:21,919 Speaker 8: all of a sudden, we're running budget deficits. 587 00:26:21,960 --> 00:26:24,080 Speaker 3: So creating a business. 588 00:26:23,720 --> 00:26:27,760 Speaker 8: Friendly environment is critical, and unfortunately Mom Donnie's hetoric is 589 00:26:27,760 --> 00:26:30,440 Speaker 8: sort of the opposite, and rhetoric matters when it comes 590 00:26:30,480 --> 00:26:33,720 Speaker 8: to making long term investment decisions about where to locate 591 00:26:33,720 --> 00:26:37,240 Speaker 8: your business, whether to invest in building and hiring people 592 00:26:37,280 --> 00:26:40,119 Speaker 8: and so forth. That was a key part of my platform, 593 00:26:40,119 --> 00:26:45,600 Speaker 8: but it turns out just affordability and promising lower costs 594 00:26:45,640 --> 00:26:48,440 Speaker 8: in a few areas was the winning message this year, 595 00:26:48,640 --> 00:26:50,640 Speaker 8: and Mom Donnie executed on it superbly. 596 00:26:50,680 --> 00:26:51,640 Speaker 3: He was on message. 597 00:26:51,680 --> 00:26:54,240 Speaker 2: I mentioned JP Morgan Jamie Diamond talked about Bill de 598 00:26:54,280 --> 00:26:56,520 Speaker 2: Blacio and he said something like, we survived, build de 599 00:26:56,560 --> 00:26:57,840 Speaker 2: Blacio will survive. 600 00:26:57,920 --> 00:26:59,639 Speaker 3: This is that too simplistic? 601 00:27:00,000 --> 00:27:03,960 Speaker 8: So it's actually it's my model that my working scenario 602 00:27:04,040 --> 00:27:06,680 Speaker 8: going forward is is Mom Donnie will be Deblasio two 603 00:27:06,720 --> 00:27:11,719 Speaker 8: point zero little left too far left for me, But 604 00:27:11,840 --> 00:27:16,159 Speaker 8: Deblasio did not mess up this city. New York is 605 00:27:16,200 --> 00:27:19,679 Speaker 8: still doing incredibly well, and I'm actually much more optimistic 606 00:27:19,680 --> 00:27:21,760 Speaker 8: on New York having run for mayor and spent seven 607 00:27:21,800 --> 00:27:25,480 Speaker 8: months in every corner of the city. We're an incredibly rich, dynamic, 608 00:27:25,800 --> 00:27:29,359 Speaker 8: entrepreneurial city, and I'm confident Mom Donie is not going 609 00:27:29,400 --> 00:27:31,320 Speaker 8: to drive everybody out and mess it up. 610 00:27:31,520 --> 00:27:33,359 Speaker 1: You know, this is sort of a sensitive question, but 611 00:27:33,400 --> 00:27:36,440 Speaker 1: are you surprised to the degree that the politics around 612 00:27:36,480 --> 00:27:39,520 Speaker 1: the Middle East are driving voters in New York City 613 00:27:39,640 --> 00:27:40,840 Speaker 1: to a large degree? 614 00:27:41,480 --> 00:27:45,280 Speaker 8: Not really, because New York has the second largest Jewish 615 00:27:45,320 --> 00:27:47,840 Speaker 8: population outside of Tel Aviv in the world. It's about 616 00:27:47,880 --> 00:27:51,199 Speaker 8: ten percent of the population here, and my wife and 617 00:27:51,280 --> 00:27:53,679 Speaker 8: children are Jewish. We've been members of Central Synagogue for 618 00:27:53,680 --> 00:27:56,760 Speaker 8: twenty five years, and Central Synagogue anytime you go to 619 00:27:56,800 --> 00:28:00,000 Speaker 8: services now there are not just a few police officer 620 00:28:00,560 --> 00:28:03,879 Speaker 8: like there's paramilitary people out there protecting us. We have 621 00:28:03,880 --> 00:28:07,560 Speaker 8: to go through metal detectives to fortress. Because of these 622 00:28:07,720 --> 00:28:11,720 Speaker 8: mobs and the rhetoric, the anti Israel rhetoric that Mamdanni 623 00:28:11,800 --> 00:28:15,520 Speaker 8: is trafficked in. There's only are not You don't have 624 00:28:15,600 --> 00:28:18,280 Speaker 8: to go very far before it becomes anti Semitic and 625 00:28:18,840 --> 00:28:21,639 Speaker 8: some of these people are committing violent acts against New 626 00:28:21,720 --> 00:28:22,720 Speaker 8: York's Jewish community. 627 00:28:22,840 --> 00:28:24,400 Speaker 3: So it's a big issue. 628 00:28:24,520 --> 00:28:27,119 Speaker 8: It's one I hit Mam Donnie hard On during the 629 00:28:27,119 --> 00:28:30,720 Speaker 8: primary and again to his credit, he has said that, 630 00:28:31,119 --> 00:28:32,960 Speaker 8: you know, job one for me is going to be 631 00:28:32,960 --> 00:28:36,600 Speaker 8: protecting all communities that are under threat, especially the Jewish community. 632 00:28:36,600 --> 00:28:37,920 Speaker 8: I'm hoping he delivers on that. 633 00:28:39,080 --> 00:28:42,640 Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best 634 00:28:42,640 --> 00:28:45,960 Speaker 2: in markets, economics, antient politics. You can watch the show 635 00:28:46,040 --> 00:28:49,000 Speaker 2: live on Bloomberg TV weekday mornings from six am to 636 00:28:49,120 --> 00:28:52,880 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify, 637 00:28:53,000 --> 00:28:55,240 Speaker 2: or anywhere else you listen, and as always on the 638 00:28:55,280 --> 00:28:57,680 Speaker 2: Bloomberg Terminal and the Bloomberg Business Amp.