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 Hordernt. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
Speaker 2: from our global headquarters in New York City. We are
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Speaker 2: Terminal and the Bloomberg Business app. Fed officials explaining their
Speaker 2: views after a very divided October interest rate decision. Joining
Speaker 2: us now to discuss is Torston Slock of Apollo Towston,
Speaker 2: Good mornity, Sir, Monday morning, super divided Federal Reserve. Based
Speaker 2: on the communication we've had so far from the committee
Speaker 2: following that decision, this line here from Governor Mayron to
Speaker 2: us just yesterday that we're a fair way away from neutral.
Speaker 2: I think we could get there a bit faster. How
Speaker 2: close are we to neutral?
Speaker 3: Well?
Speaker 4: The key quote here, of course, is were doing manactery
Speaker 4: pols here according to some framework with ours star or
Speaker 4: some forecast or are we're doing monetary posts according to
Speaker 4: data dependency, because it's very clear that a lot of
Speaker 4: the arguments that are being laid out for more cuts,
Speaker 4: of course, is really dependent more on the forecast, or
Speaker 4: its dependent on some framework about what do you think
Speaker 4: our star is? So the discussion about our star, which
Speaker 4: we now had for many years, of course, is very
Speaker 4: clear there's a lot of uncertainty. So with that backdrop, yes,
Speaker 4: some estimates are low, so you could argue that those
Speaker 4: are the ones should be focusing on. But it's very
Speaker 4: clear that the divide really here among AFMC members of
Speaker 4: the last few days has been around should we focus
Speaker 4: the policy decisions today on our star and some forecast
Speaker 4: that we may have, or should we focus it on
Speaker 4: the incoming data.
Speaker 2: Well, let's talk about the incoming data. How can we forecast? Then,
Speaker 2: I think if we don't really know where we are
Speaker 2: at the moment.
Speaker 5: Well, we do have.
Speaker 4: CPI of course before the last DAYFMC meeting, but what
Speaker 4: we also have is a number of indicators for the
Speaker 4: label market also still showing the things are actually still okay.
Speaker 4: If you look, for example, at the macro Edge job announcement,
Speaker 4: cuts data that's still okay. The challenge the grant and
Speaker 4: Christmas job cuts data is actually also still okay. If
Speaker 4: you look at ADP job creation, it's also okay. If
Speaker 4: you look at revidio laps also job creation also okay.
Speaker 4: If you also look at paychecks, there's also link up.
Speaker 4: There's also indep job openings. Taken together, all these indicators
Speaker 4: are not showing a label market when the bottom is
Speaker 4: falling out. So that's why the conclusion from JPA last
Speaker 4: week was very clear. Inflation is still around three, the
Speaker 4: label market is still okay. So with that backdrop, what
Speaker 4: is the argument for cutting rates? At least when you
Speaker 4: look at it from a data dependent perspective.
Speaker 1: The argument is that you are passively tightening, as we
Speaker 1: heard from Stephen Myron yesterday, because of the demographics and
Speaker 1: because of the fact that inflation is coming down and
Speaker 1: with a labor market that's okay but relatively fragile in
Speaker 1: certain corners, why not give them a little bit of
Speaker 1: support if you are above neutral to get back closer
Speaker 1: to neutral.
Speaker 4: What do you make of that argument, Because there's also
Speaker 4: a broader discussion around it is not only about the
Speaker 4: fit funds rate, it's about financial conditions. More broadly, and
Speaker 4: if you look at my Bloomberg measure of financial conditions,
Speaker 4: it still shows me that financ traditions are very easy.
Speaker 4: So in that sense, companies, especially in the AI space,
Speaker 4: they're not barring as a function of the FED funds rate.
Speaker 4: They're barring as a function of equity prices. And given
Speaker 4: where equity prices a off for the Magnificent seven, that's
Speaker 4: very importantly coming at very significant tail went still to
Speaker 4: the economy and still even to hiring, simply because we
Speaker 4: now have that equity financing is getting huge help from
Speaker 4: the fact that equity prices are still as elevated as.
Speaker 3: The time moment.
Speaker 1: You've done a great job of talking about the key
Speaker 1: shaped market, and this is sort of the conundrum for
Speaker 1: the Fed. They've got this blunt tool of cutting rates,
Speaker 1: and there is this question of does that help the
Speaker 1: lower income consumers and companies that are catering to them
Speaker 1: more than it really risks creating a bubble in the
Speaker 1: AI names and those areas where financial conditions are very loose.
Speaker 3: How do you weigh in on that that's exactly right?
Speaker 4: And that's why what becomes exactly critical, Lisa, is to
Speaker 4: think about what is the weight in aggregate consumption from
Speaker 4: the bottom twenty percent of the population, which is roughly
Speaker 4: around eight percent of toward consumption, whereas the top twenty
Speaker 4: percent accounts for forty percent of total consumption according to
Speaker 4: the Consumer Expandsire Survey. So because of that, it still
Speaker 4: is the case that when stock priceer up, home prizer up,
Speaker 4: and when interst rates are high, the cash flow for
Speaker 4: those who own debt, who own private credit is still strong.
Speaker 4: So for those households at the other anything come distribution,
Speaker 4: things are still looking good. And that's a very important
Speaker 4: reason why the consumer still continues to do well. And critically,
Speaker 4: it's not only a case shaped economy for the consumer,
Speaker 4: it's actually also a case shaped economy for the corporate sector.
Speaker 4: If you look at EPs expectations since the beginning of
Speaker 4: the year Magnificent seven, the expectation is that earnings will
Speaker 4: grow further, but the S and P four ninety three
Speaker 4: earning expectations have actually come down. Likewise, the same thing
Speaker 4: for profit margins for the Magnificent seven is going up.
Speaker 4: For the SNP four ninety three profit markets expectations have
Speaker 4: been coming down. So we're seeing more signs of the
Speaker 4: case shaped economy, not only the division in terms of
Speaker 4: the consumer side, but also on the corporate side, where
Speaker 4: it's more and more the AI story that continues to
Speaker 4: drive everything.
Speaker 3: Do you see limits to that trend?
Speaker 4: Well, the key issue, of course is to what extent
Speaker 4: on the AI story. Of course, the AI companies that
Speaker 4: the Magnificent seven can continue to deliver the earnings that
Speaker 4: are priced in at the moment. If therefore, whatever reason,
Speaker 4: is any slowdown in earnings growth in AI, it will
Speaker 4: certainly begin to create some wabbles, not only in the
Speaker 4: data center build out and also of course the challenges
Speaker 4: of the associated the energy side, but it will also
Speaker 4: begin to have some wealth effix, especially if we do
Speaker 4: get the correction that we've had some conversations about in
Speaker 4: the last several here twenty four hours.
Speaker 2: Yeah, just to think throw this and the ultimate extreme.
Speaker 2: You need someone to have a job to buy the
Speaker 2: product you sounding, ultimately, don't you? And the fact that
Speaker 2: we've seen some decoupling between employment and corporate profits. I
Speaker 2: just wonder how much longer that can possess.
Speaker 4: Well, A very important part of that is, indeed that
Speaker 4: immigration has been slowing down, So the Dallas fat is
Speaker 4: now saying that the equlibrium non found pay rolls is
Speaker 4: thirty thousand. So think about the ADP that came out
Speaker 4: last week. The monthly number was around fifty sixty thousand,
Speaker 4: So that means that suddenly we have that fifty sixty
Speaker 4: is actually not too bad when you think about that.
Speaker 4: Suddenly the Fed is telling us that the new going
Speaker 4: rate where we should be is thirty. So from that perspective,
Speaker 4: we can have a slowdown for immigration restriction reasons. Also
Speaker 4: the one hundred thousand and the h one b that
Speaker 4: will slow down job growth and therefore still create a
Speaker 4: label market that's just having slower growth in jobs, but
Speaker 4: not so much because the economy is slowing in GDP,
Speaker 4: but simply because immigration inflows a lot weaken Touristan.
Speaker 1: If the federed a cup by twenty five basis points,
Speaker 1: does that cause the ke shape to get wider or narrower?
Speaker 4: So that depends on, of course, for the consumer side.
Speaker 4: If we continue to have a rally in the stock market,
Speaker 4: if we continue to have a divergence in asset prices
Speaker 4: going up further, then we will continue to see the
Speaker 4: key get even longer on each side of the leg.
Speaker 4: So in that sense, cutting rates is certainly something that
Speaker 4: normally boosts asset prices and therefore makes the wider k
Speaker 4: AT distinct possibility.
Speaker 2: Stay with US multile impact surveillance coming up after this
Speaker 2: gues selection dang here in New York City, President Donald
Speaker 2: Trump endorsing Andrew Cuomo for the city's next man, as
Speaker 2: the former governor faces an pill battle against the front runner,
Speaker 2: Democratic Socialist Mamdanie Hendritta triese fighter putas joins usnap for
Speaker 2: more Henriette. Is something that Lasa and I've been wrestling
Speaker 2: with throughout this morning. Is this election here in this
Speaker 2: city taking the temperature of the country, the mood of
Speaker 2: the country, or just taking the temperare of the Democratic Party,
Speaker 2: and which chargument's going to win out as we head
Speaker 2: towards the midterms.
Speaker 5: You know, it's fascinating.
Speaker 6: I think you said Donald Trump's name fifteen more times
Speaker 6: than either of the Democratic candidates in the race today
Speaker 6: in the lead into here, and I think that just
Speaker 6: really exemplifies where the Democratic Party is right now. They're
Speaker 6: so bifurcated and so lacking in a cohesive message that
Speaker 6: they can really only be anti Donald Trump now for Democrats.
Speaker 6: That's a good thing because Donald Trump is a massive
Speaker 6: vote turnout machine.
Speaker 5: So for Cuomo, for Mom Donnie.
Speaker 6: They're both going to be taking exactly what they want,
Speaker 6: spreading it out to voters, and making it all about Trump,
Speaker 6: which really speaks to the lack of comprehensive message that
Speaker 6: Democrats have struggled with since twenty sixteen.
Speaker 5: Quite frankly, I.
Speaker 1: Think Henryette, a lot of people think of this as
Speaker 1: sort of like a mini pre midterms moment, especially given
Speaker 1: the fact that there are races in New Jersey and
Speaker 1: in Virginia. In California, there's an initiative that people are
Speaker 1: going to be voting on about redistricting. How much are
Speaker 1: you going to take a big read through in terms
Speaker 1: of what type of mandate President Trump has, what kind
Speaker 1: of vision gets the most voters for Democrats? How much
Speaker 1: is this taking the temperature versus idiosyncratic races With a
Speaker 1: number of very specific inputs.
Speaker 6: The off year elections, this mid midterm is one of
Speaker 6: the best predictors of what will happen in the House
Speaker 6: of Representatives next November. It is an exceptional early indicator
Speaker 6: from New Jersey Virginia, not just two wins but what
Speaker 6: the margins are and the reason that President Trump is
Speaker 6: so animated about the midterms, if you follow his social
Speaker 6: media feeds, it's been forty straight hours of endorsements, is
Speaker 6: because he is very likely. Republicans are very likely to
Speaker 6: lose the House just statistically type margin, and that means
Speaker 6: massive subpoena power for the House of Representatives next year
Speaker 6: if it is democratically owned. So it is incumbent upon
Speaker 6: President Trump to do what I just said he does best,
Speaker 6: which is turn out the votes. But in favor of
Speaker 6: the Republican candidates, he really needs to hold onto the
Speaker 6: House more than anything else, and it's going to be
Speaker 6: a very serious uphill battle that you know, statistics and
Speaker 6: history show he is very likely to lose, so California,
Speaker 6: Pennsylvania Supreme Court, Virginia, New Jersey. The margins are where
Speaker 6: walks like myself will be watching just to see exactly
Speaker 6: what we should be looking for next year.
Speaker 5: Is it going to be a.
Speaker 6: Seven seat margin in the House of Representatives or are
Speaker 6: we talking like thirty seats.
Speaker 5: That's what this today's election.
Speaker 1: Can tell us how much our national concerns feeding into
Speaker 1: the local races.
Speaker 3: Given the fact that the.
Speaker 5: Government's shut down.
Speaker 3: There's a lot of.
Speaker 1: Dissatisfaction on a national level. At a local level, there
Speaker 1: is more engagement, an increasing amount of engagement from residents.
Speaker 3: Is there a divergence.
Speaker 1: Here or is there a pretty clear correlation.
Speaker 5: That's a fascinating question. I think it's different for each party.
Speaker 6: So in this cycle, the Republican Party has continued to
Speaker 6: be led.
Speaker 5: By Donald Trump, and he's not on the ballot.
Speaker 6: And so what Republican staff and campaign operatives I speak
Speaker 6: with will tell you is that Republican voters are tuned out.
Speaker 6: When we saw the returns on the national election last year,
Speaker 6: people would go to the polls, vote for Donald Trump,
Speaker 6: and then leave. So the fact that Trump is not
Speaker 6: on the ballot this cycle, he's not on the ballot
Speaker 6: in the midterms, and he won't be next year either,
Speaker 6: the Republican Party is trying to figure out, how can
Speaker 6: I backfill that darth and that absence left by Donald
Speaker 6: Trump himself the plane leader of the Republican Party, and
Speaker 6: get our voters excited for JD. Vans, Formarco Rubio, for
Speaker 6: any of these local politicians. So you see this depressed
Speaker 6: participation on the Republican side because Trump is not on
Speaker 6: the top of the ticket, and that leaves a vacuum
Speaker 6: for Democrats to turn out.
Speaker 5: So really it depends on which party you're.
Speaker 3: Talking about, Henrietta.
Speaker 2: I understand the temptation whenever we cover these stories the
Speaker 2: group in people in some very neat groups Republicans Democrats.
Speaker 2: But is there another group, another set of individuals that
Speaker 2: can't be put into one buckheit that are pretty fluid
Speaker 2: and they're willing to vote for someone who's got a
Speaker 2: solution to their problem. And right now, the problem for
Speaker 2: a lot of people in this country, and it's persisted
Speaker 2: for a long time, is affordability, and those problems were
Speaker 2: exacerbated through the Buider administration.
Speaker 3: They're looking for solutions.
Speaker 2: It might come from the far left, it might come
Speaker 2: from the conservative right, Henriette. So, I just wonder how
Speaker 2: much of a feature that's going to be in the
Speaker 2: elections through the next twelve eighteen months.
Speaker 5: Yeah, I think it's the biggest feature.
Speaker 6: You have sixty eight percent of the US population that
Speaker 6: does not support the state of the US economy and
Speaker 6: is very concerned about inflation and does not support the
Speaker 6: president's terrace. So the president and his trake, his committee
Speaker 6: officials and cabinet officials are saying, you know, give us
Speaker 6: another year, let us bring prices down. But when voters
Speaker 6: are looking at their grocery bill, their electricity bill, the
Speaker 6: cost of a new car, whatever they're looking at trying
Speaker 6: to buy, it's all more expensive.
Speaker 5: It's all because of the tires, and.
Speaker 6: They know that, and they are seeing manufacturing, they are
Speaker 6: seeing grocery prices increase, but not their wages.
Speaker 5: So the President.
Speaker 6: Ran on, you know, theoretically an inflation related campaign. Inflation
Speaker 6: was high after COVID, but it remains on the upper
Speaker 6: rise today as well, and you can see that again
Speaker 6: at the grocery stores most plainly. So when we go
Speaker 6: to the polls in November of next year, that's going
Speaker 6: to be paramount. Our grocery price is high. Is it
Speaker 6: our number one issue? Or do we care about immigration
Speaker 6: or crime or healthcare or other tertiary issues.
Speaker 5: But it's really always the economy.
Speaker 6: And the president is underwater with the lowest approval ratings
Speaker 6: that he has ever had in this term or last
Speaker 6: because of the state of the economy.
Speaker 2: Stay with us, mult Bloomberg Savannah's coming up after this.
Speaker 3: Stocks pulling back from their old time highs.
Speaker 2: It's Wall Street bosses issue a fresh warning on rich
Speaker 2: valuations and if possible, draw down, joining us not to
Speaker 2: discuss Henry. Anna mac christ strategist that Deutsche Henry, I
Speaker 2: feel like this is a move looking a fan a narrative.
Speaker 2: How would you describe this to clients this morning? What
Speaker 2: is this pullback so far today?
Speaker 7: I think this is actually just a kind of normal,
Speaker 7: regular pullback that you're going to get in any normal
Speaker 7: ball run. I mean, at the end of the day,
Speaker 7: you're not going to hit all time highs day after
Speaker 7: day after day. We've had over thirty this year, so
Speaker 7: getting these kind of pullbacks, which in the grand scheme
Speaker 7: of this relentless ball run, are pretty modest. We're still
Speaker 7: only around two percent off the all time highs to
Speaker 7: the SMP is to be expected. But you know, if
Speaker 7: we look at the macro fundamentals right now, they do
Speaker 7: remain pretty strong. Clearly, with the US China trade truce,
Speaker 7: the risk of near term tariffs has been taken off
Speaker 7: the table. We still have the tailwind from the recent
Speaker 7: FED rate cut and another fifty bits already this year
Speaker 7: even if they don't cut in December, and actually a
Speaker 7: lot of the activity data at a global level has
Speaker 7: been pretty good. I was struck, for instance, in Europe
Speaker 7: that the flash PMI, actually the composite PMI was at
Speaker 7: a two year high. So actually the ism manufacturing yesday, Yes,
Speaker 7: a little bit weaker than expected. But you know, I
Speaker 7: appreciate the day has been limited out of the US,
Speaker 7: but that has actually been the exception rather than the rule.
Speaker 7: And I think that fundamental bullish backdrop does remain in
Speaker 7: place Henry.
Speaker 3: At the same time, a thing we have to take.
Speaker 2: No, when a stock falls on good news, not bad
Speaker 2: news Palenteer and the earnings from Palenteer wasn't bad at all.
Speaker 2: If he goes through the numbers relative to expectations. Then
Speaker 2: you see the move this morning and the stock is
Speaker 2: down by six or seven percent. Does that speak to
Speaker 2: full valuations? What do you think that speaks too?
Speaker 3: I think you.
Speaker 7: Always get these moments where single headlines can create a
Speaker 7: lot of fear. I mean, I remember back in earlier
Speaker 7: in the year before the Liberation Day TERMOL, we had
Speaker 7: the deep seek AI model released and there was a
Speaker 7: very big temporary pullback in tech stocks that proved me
Speaker 7: very short lived. People thought this might be a new
Speaker 7: big narrative shift and it wasn't. But you know, I
Speaker 7: was thinking about those CEO warnings you played just before this.
Speaker 7: If you think about what has generated you got fifteen
Speaker 7: percent draw downs to the SMP. In recent decades, it's
Speaker 7: usually taken one of three things. One is a recession,
Speaker 7: which there's no sign of yet. The Alandzo fed's GDP
Speaker 7: track are actually at.
Speaker 3: Three point nine percent in Q three. Another is fears
Speaker 3: of a recession.
Speaker 7: Like we saw after Liberation Day, but no one's seriously
Speaker 7: talking about a recession right now. And the other third
Speaker 7: component that has gone with that is FED rate hikes.
Speaker 7: So a lot of the cellers we've seen in recent year,
Speaker 7: so twenty fifteen, sixteen, late twenty eighteen, and indeed twenty
Speaker 7: twenty two most notably, have gone hand in hand with
Speaker 7: FED rate hikes, but they're not talking about hiking anytime soon,
Speaker 7: and if anything, obviously, with a new fetcher coming in
Speaker 7: next year, the direction of travel remains pretty dubbish.
Speaker 1: We'll talk about the FED in just a second, but
Speaker 1: it's not just the big Wall Street CEOs that are
Speaker 1: talking about this. I actually took more notice of a
Speaker 1: story that came out this morning that Michael Burry of
Speaker 1: the Big short fame is shorting Palenteer and nvideo shares,
Speaker 1: and he's coming out and talking about valuations, but he's
Speaker 1: also kind of leaning into a narrative that increasing number
Speaker 1: people have talked about, which is this case shaped market
Speaker 1: can continue, you have to see some monetization of the
Speaker 1: software of the hardware in order to keep this AI
Speaker 1: trend going. Do you think there's validity in that that
Speaker 1: maybe some of the winners need to take a pause
Speaker 1: and there needs to be a transfer in terms of
Speaker 1: stock market leadership.
Speaker 7: I think to some extent there is, But I think
Speaker 7: a lot of the comparisons to the dot com bubble
Speaker 7: are really quite overregged at the moment. So for instance,
Speaker 7: you know, the nastak is up by twenty three percent
Speaker 7: year to date so far.
Speaker 3: Now that's very healthy, but in.
Speaker 7: Nineteen ninety nine, we had the nastak up eighty five
Speaker 7: percent that year, and in the final seven or eight
Speaker 7: months of the dot com bubble, the nassack literally doubled.
Speaker 7: So I don't think the games we're seeing, you know,
Speaker 7: it can really be compared to what we saw at
Speaker 7: the time of the dot com bubble. And another key
Speaker 7: difference between now and then is back then, you know,
Speaker 7: a lot of the assumptions that valuations rested on was
Speaker 7: a belief that four percent growth as we saw in
Speaker 7: the mid to late nineties would continue forever. You know,
Speaker 7: forecasts from reputable people like the FED were saying that
Speaker 7: would continue well into the two thousands. But then, as
Speaker 7: we know in retrospect, we had that downturn in two
Speaker 7: thousand and two thousand and one and there was a recession. Whereas,
Speaker 7: again today, valuations are not resting on continued four percent
Speaker 7: growth forever. We're kind of in a two and a
Speaker 7: half to three percent range, perhaps with some upside. If
Speaker 7: AI productivity does lead to a bo and again there's
Speaker 7: no recession on the horizon, so clearly about macro picture changes,
Speaker 7: and we do get a growth downturn, then I think
Speaker 7: that would take some of the underpinning away. But for
Speaker 7: now we're not seeing those relentless, remorseless gains that we
Speaker 7: saw at the time of the late nineties.
Speaker 1: We talked about the other catalyst to the potential catalyst
Speaker 1: for an end to the rally, which comes from the
Speaker 1: FED in a potential tightening, and FED policy seems like
Speaker 1: that is nowhere on the table. As you were mentioning,
Speaker 1: you did say that maybe inflation is underappreciated, and that's
Speaker 1: something that Deutsche Bank has been talking about quite a bit.
Speaker 1: What makes you think that based on the ism manufacturing,
Speaker 1: which was the opposite base in the fact that there
Speaker 1: is this case shaped economy that has put pressure on
Speaker 1: any additional price gains that we've seen in the consumer sector.
Speaker 7: Well, I think there are still a lot of inflationary catalysts.
Speaker 7: I think the market has been a bit too reassured
Speaker 7: by the US China trade truths we saw last week
Speaker 7: in some of the other recent data, But at the
Speaker 7: end of the day, for instance, tariffs very still much
Speaker 7: in the picture. I know we associate a lot of
Speaker 7: the tarifts that have come in with April time, but
Speaker 7: actually a lot of the tariffs, for instance, the fifteen
Speaker 7: percent of the EU and Japan, the ten percent increase
Speaker 7: on Canada, the sectoral tariffs like copper, A lot of
Speaker 7: those tariffs only came into effect in August, and the
Speaker 7: data we've got only goes up to September, so that's
Speaker 7: still going to be a theme as we move towards
Speaker 7: year end. The Q four data and into twenty twenty six.
Speaker 7: On top of that, we still have the lagged impact
Speaker 7: of all the rate cuts. Indeed, it's worth bearing in
Speaker 7: mind the FED of now cut rates by one hundred
Speaker 7: and fifty basis points since September last year. That is
Speaker 7: the fastest pace of rate cuts outside of a recession
Speaker 7: since the nineteen eighties. This is not a framework that
Speaker 7: we've been used to in recent times. You've got momentum
Speaker 7: there too. The activity data you're still proving pretty resilient,
Speaker 7: so that suggests demand pressures. And at a global level
Speaker 7: as well, you've got factors like the European fiscal stimulus
Speaker 7: coming in. So as I look around the world right now,
Speaker 7: including in the US, I think there's actually still a
Speaker 7: lot of inflationary catalysts on the table, and I think
Speaker 7: market's risk ignoring that in their peril, because if we
Speaker 7: do see inflation started to pick up again more than
Speaker 7: markets expect, I think the risk is we get a
Speaker 7: similar hawkish surprise to what we saw last week, where
Speaker 7: markets were surprised to in FT chair Palell took that
Speaker 7: December rate cut a bit off the table, put it
Speaker 7: in some doubt.
Speaker 1: Henry. I know that Deutsche Bank just re entered a
Speaker 1: short position on ten year treasuries and have a target
Speaker 1: at four point four or five percent. I'm just wondering
Speaker 1: is that enough to continue the sell off that we're
Speaker 1: seeing this morning in risk assets given the underappreciation as
Speaker 1: you've been saying, of inflationary risks.
Speaker 3: I mean, that's an interesting question.
Speaker 7: I think that the key question, particularly if we move
Speaker 7: forward into next year, is do we get that reacceleration
Speaker 7: the economy, Because one thing I've been struck by in
Speaker 7: this post COVID cycle is that consistently, particularly in the US,
Speaker 7: the macro picture surprise on the upside. So even in
Speaker 7: twenty twenty two that we had the fastest FED rate
Speaker 7: hikes in a generation, which previously had always led to recession,
Speaker 7: they pulled off the soft landing just about then.
Speaker 3: In twenty three and twenty four we.
Speaker 7: Had stellar equity gains, the S and P five hundred
Speaker 7: rising back to MAC twenty percent for the first time
Speaker 7: since the late nineties. So again that macro picture has
Speaker 7: been very strong, and again this year, even though we
Speaker 7: had genuine fears of a recession around Liberation Day, the
Speaker 7: biggest trade shock since the nineteenth century. Again the economy
Speaker 7: has been remarkably resilient, So actually, I do think there
Speaker 7: is upside potential for yields as we look forward to
Speaker 7: the rest of this year into next year. And actually
Speaker 7: I've shot that last year when the Fed cut rates,
Speaker 7: actually it was the point they were cutting rates that
Speaker 7: actually proved to be below for yields. From then onwards
Speaker 7: they picked up again. So I definitely think there's about
Speaker 7: a case lab.
Speaker 3: Stay with us.
Speaker 2: More Bloomberg surveillance coming up after this, a record number
Speaker 2: of New Yorkers already casting early ballots for the city's
Speaker 2: next mayor. President Trump announcing a support for Andrew Cuomo,
Speaker 2: who is running as an independent, and threatening to withhold
Speaker 2: federal funding if front runner Democratic socialist Sir Round Mam.
Speaker 3: Danny turns out to win.
Speaker 2: Whitney Tilson is a former hedge fund manager and was
Speaker 2: a twenty twenty five New York City candidate in the
Speaker 2: Democratic mayoral primary. He joined US now for more winning.
Speaker 2: Good morning, it's good to see you, good morning, thanks
Speaker 2: for thank you for being here. What's his thank today, Well,
Speaker 2: it's a big day for New York. I think there's
Speaker 2: going to be a big surgeon turnout and I'm glad
Speaker 2: to see New Yorkers are getting politically involved. Early voting
Speaker 2: was four times what it was four years ago. I
Speaker 2: wish that didn't favor Mom donnie, but it probably does,
Speaker 2: as it did in the primary.
Speaker 8: But the poll show the racist tightening. It was fifteen points,
Speaker 8: and now the latest poll just yesterday, it's under five points,
Speaker 8: So it's not completely impossible that there could be a
Speaker 8: big election day. Surprised though, Mom Donnie's clearly up. Five
Speaker 8: is still a good place to be going into election day.
Speaker 2: You're familiar with the headline on Wall Street that the
Speaker 2: capital of American capitalism is lurching towards socialism? Is this
Speaker 2: telling you more about the mood of the country or
Speaker 2: the mood of the Democratic Party?
Speaker 8: Well, and also tells you something about the candidates. Mom
Speaker 8: donnie is a gifted politician. He identified the key issue
Speaker 8: for New Yorkers is affordability, and he came up with
Speaker 8: some very clear, you know, freeze the rent, free buses,
Speaker 8: free childcare, very easy slogans. And one thing I learned
Speaker 8: as a politician, if you want to win, promise the
Speaker 8: maximum number of people the maximount of free stuff, and
Speaker 8: tell them they don't have to pay for it, and
Speaker 8: he nailed that, and he's been on message. And Cuomo
Speaker 8: thought he was going to coast to victory, coast to
Speaker 8: victory in the primary and really didn't even campaign out there,
Speaker 8: and by the time I was raising the alarm in
Speaker 8: the late stages of the primary, it was too little,
Speaker 8: too late.
Speaker 1: It's simplistic, though, to say that it's just promising people freebies,
Speaker 1: and that's what got some of the attention. It's also
Speaker 1: that Zorn Mumdanie was talking about wasn't just the anti
Speaker 1: Trump platform, it was the idea of trying to identify
Speaker 1: some of these needs. Have you been disappointed that the
Speaker 1: Democratic Party hasn't done a better job of crystallizing those
Speaker 1: issues and running on that and not an anti Trump message.
Speaker 8: Yes, very much. And I don't think it's just here
Speaker 8: in New York. We're seeing it, We're seeing it nationally.
Speaker 8: I'm a lifelong Democrat. I ran the Democratic Party to
Speaker 8: try and drag my party back to the center to
Speaker 8: bread and butter issues for people rather than social issues
Speaker 8: and just attacking Trump and Mom Donnie, to his credit,
Speaker 8: hasn't spent a lot of time attacking Trump. That was
Speaker 8: not his it was affordability and a few key ideas.
Speaker 8: And in the same way from the opposite side, he's
Speaker 8: a little like Trump. You know. Trump was We're going
Speaker 8: to build a wall in Mexico's going to pay for it.
Speaker 8: And I don't think his supporters it actually believed that,
Speaker 8: but it was a clear message on the issue that
Speaker 8: they cared about. And Mom Donnie took a page out
Speaker 8: of that book and is executed superbly.
Speaker 3: I got to tip my hat to him.
Speaker 1: One thing that you do really well is that you're
Speaker 1: at the crossroads of Wall Street and the political scene,
Speaker 1: and I'm just wondering how realistic you think some of
Speaker 1: the threats are by your colleagues of leaving New York City.
Speaker 1: If Zoron Mom Donnie should win.
Speaker 8: That will depend on whether he governs as he has
Speaker 8: in the past few months, as he's promised to sort
Speaker 8: of tacking to the center and said I will protect
Speaker 8: the Jewish population of New York despite his dangerous rhetoric
Speaker 8: in previous years, I will not defund the police, and
Speaker 8: to his credit, said he will keep Jessica Tish. I'm
Speaker 8: going to embrace entrepreneurs and businesses as opposed to you know,
Speaker 8: government seizing all means of production, which is what's on
Speaker 8: his political party, the Democrats. Socialism in America says that,
Speaker 8: So I'm cautiously optimistic hopeful. I would say that if
Speaker 8: he is elected, he will try and govern from the center,
Speaker 8: keep us safe and keep New York the incredible center
Speaker 8: of entrepreneurship and finance and trade and all. But there
Speaker 8: is a risk that, you know, a thirty four year
Speaker 8: old guy who's grown up with the rhetoric of the
Speaker 8: far left, if he governs as a radical, I think
Speaker 8: people will flee this any.
Speaker 2: And businesses at least, so sorey have nick You've been
Speaker 2: saying it now for years, I think is the JP
Speaker 2: Milkan Chanson now has more employees in Texas than it
Speaker 2: does in New York State, which ten, fifteen, twenty years
Speaker 2: ago I might have been shocking to some people, but
Speaker 2: that's the reality of America in twenty twenty five.
Speaker 1: A lot of it has to do with taxes, A
Speaker 1: lot of it has to do with certain busneys practices
Speaker 1: that haven't been as friendly. How much does this accelerate
Speaker 1: that move as we've seen, and how much is Zoronmmdanni
Speaker 1: if he does win, going to be sensitive to that,
Speaker 1: to want those people to remain, to remain an income
Speaker 1: based for the city.
Speaker 2: It's not just making the city more competitive with global capitals,
Speaker 2: it's making this state more competitive with the other states
Speaker 2: across this country. Which goes to Least's question, what's going
Speaker 2: to stop people from moving Whitney. When you were coming
Speaker 2: out there and campaigning, what are you campaigning for? What
Speaker 2: would you like to see change in this city in
Speaker 2: this state to make sure we attract the best at
Speaker 2: the best, not just around the world, but in this
Speaker 2: country too.
Speaker 8: Yeah, well, it starts with public safety and not defunding
Speaker 8: the police, defunded and dismantled, the wicked police or all
Speaker 8: things Mom Donnie had on his website, and I said,
Speaker 8: we knew he need to do the opposite. Word a
Speaker 8: thirty four year low in the number of police officers
Speaker 8: and we need five thousand more police officers. I was
Speaker 8: going in the other direction on public safety. And then secondly, look,
Speaker 8: economic growth is the key to everything, is the key
Speaker 8: to paying for all the things Mom Donnie wants. I
Speaker 8: would love to deliver free childcare at every New Yorker
Speaker 8: as well. It's that cost is crushing people. But you've
Speaker 8: got to be able to pay for it. So under
Speaker 8: Mike Bloomberg, the taxes doubled, but that's because the economy doubled.
Speaker 8: During his twelve years. Under Deblasio, economic growth slowed from
Speaker 8: six percent a year to two percent a year, and
Speaker 8: all of a sudden, we're running budget deficits.
Speaker 3: So creating a business.
Speaker 8: Friendly environment is critical, and unfortunately Mom Donnie's hetoric is
Speaker 8: sort of the opposite, and rhetoric matters when it comes
Speaker 8: to making long term investment decisions about where to locate
Speaker 8: your business, whether to invest in building and hiring people
Speaker 8: and so forth. That was a key part of my platform,
Speaker 8: but it turns out just affordability and promising lower costs
Speaker 8: in a few areas was the winning message this year,
Speaker 8: and Mom Donnie executed on it superbly.
Speaker 3: He was on message.
Speaker 2: I mentioned JP Morgan Jamie Diamond talked about Bill de
Speaker 2: Blacio and he said something like, we survived, build de
Speaker 2: Blacio will survive.
Speaker 3: This is that too simplistic?
Speaker 8: So it's actually it's my model that my working scenario
Speaker 8: going forward is is Mom Donnie will be Deblasio two
Speaker 8: point zero little left too far left for me, But
Speaker 8: Deblasio did not mess up this city. New York is
Speaker 8: still doing incredibly well, and I'm actually much more optimistic
Speaker 8: on New York having run for mayor and spent seven
Speaker 8: months in every corner of the city. We're an incredibly rich, dynamic,
Speaker 8: entrepreneurial city, and I'm confident Mom Donie is not going
Speaker 8: to drive everybody out and mess it up.
Speaker 1: You know, this is sort of a sensitive question, but
Speaker 1: are you surprised to the degree that the politics around
Speaker 1: the Middle East are driving voters in New York City
Speaker 1: to a large degree?
Speaker 8: Not really, because New York has the second largest Jewish
Speaker 8: population outside of Tel Aviv in the world. It's about
Speaker 8: ten percent of the population here, and my wife and
Speaker 8: children are Jewish. We've been members of Central Synagogue for
Speaker 8: twenty five years, and Central Synagogue anytime you go to
Speaker 8: services now there are not just a few police officer
Speaker 8: like there's paramilitary people out there protecting us. We have
Speaker 8: to go through metal detectives to fortress. Because of these
Speaker 8: mobs and the rhetoric, the anti Israel rhetoric that Mamdanni
Speaker 8: is trafficked in. There's only are not You don't have
Speaker 8: to go very far before it becomes anti Semitic and
Speaker 8: some of these people are committing violent acts against New
Speaker 8: York's Jewish community.
Speaker 3: So it's a big issue.
Speaker 8: It's one I hit Mam Donnie hard On during the
Speaker 8: primary and again to his credit, he has said that,
Speaker 8: you know, job one for me is going to be
Speaker 8: protecting all communities that are under threat, especially the Jewish community.
Speaker 8: I'm hoping he delivers on that.
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