WEBVTT - Bloomberg Surveillance TV: August 15, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.720 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.240 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:35.880 Terminal and the Bloomberg Business app. 0:00:36.320 --> 0:00:39.159 Here's the latest. Kamala Harrison President Biden are set to 0:00:39.159 --> 0:00:40.400 speak in Maryland today. 0:00:40.400 --> 0:00:42.360 It is their first joint trip. 0:00:42.120 --> 0:00:44.440 Since Biden dropped out of the race. This is coming 0:00:44.600 --> 0:00:47.880 ahead of Harris Israeli and North Carolina tomorrow, where she's 0:00:47.920 --> 0:00:51.440 expected to unveil details about her policy agenda. Joining us 0:00:51.479 --> 0:00:55.840 now is Tom Steyer, co founder of Galvani's Climate Solutions. Tom, 0:00:55.840 --> 0:00:57.400 great to have you back. Thank you so much for 0:00:57.440 --> 0:01:00.560 being with us. What are you hoping to hear from 0:01:00.600 --> 0:01:03.720 Harris's campaign given that we haven't heard so much in 0:01:03.800 --> 0:01:06.520 terms of how she differs from President Biden. 0:01:07.240 --> 0:01:09.760 Well, what I'm expecting to hear Lisa and hoping to 0:01:09.800 --> 0:01:13.400 hear is that her agenda around the economy is going 0:01:13.440 --> 0:01:16.440 to be about opportunity. Then in fact, she understands that 0:01:16.520 --> 0:01:19.160 America is the land of opportunity and it gives everything 0:01:19.160 --> 0:01:21.200 the chance to do the most, and that is exactly 0:01:21.720 --> 0:01:25.640 what drives this economy, what makes our capitalism capitalistic economy 0:01:25.760 --> 0:01:28.240 so strong. At the same time that I expect her 0:01:28.280 --> 0:01:31.479 to continue most of the policies of the Biden Hairris administration. 0:01:31.920 --> 0:01:35.800 So she will continue on this electrifying the grid. What 0:01:35.959 --> 0:01:38.360 more do you expect if she were to win, that 0:01:38.400 --> 0:01:40.399 they can add on to what Biden did. When it 0:01:40.440 --> 0:01:43.200 comes to the Inflation Reduction Act, well, I. 0:01:43.120 --> 0:01:44.680 Think to a large extent, it is going to be 0:01:44.720 --> 0:01:48.280 about implementing the Inflation Reduction Act, which is really two things. 0:01:48.280 --> 0:01:51.080 It's not just about the grid. It's about deploying the 0:01:51.160 --> 0:01:56.639 existing technologies when solar batteries evs, but it's also about 0:01:56.640 --> 0:02:01.480 innovating and creating the next generation of any related companies 0:02:01.880 --> 0:02:06.160 and technologies. So that second part is absolutely critical. We're 0:02:06.200 --> 0:02:11.160 seeing deployment happen spurred by the IRA, but very much 0:02:11.280 --> 0:02:14.000 driven by private money. What we need to see is 0:02:14.080 --> 0:02:17.680 new companies solving some of the problems around energy in 0:02:17.760 --> 0:02:19.560 ways that work for consumers and companies. 0:02:19.600 --> 0:02:21.920 Well, when it comes to the competition, and if you 0:02:21.919 --> 0:02:25.760 think climate is existential, why not let the cheap Chinese 0:02:25.880 --> 0:02:27.360 evs into the United States. 0:02:29.440 --> 0:02:31.440 I'm square. 0:02:31.919 --> 0:02:34.320 Here's my answer for you. Look, I am a huge 0:02:34.320 --> 0:02:38.320 believer in trade. I believe that the benefits, the dispersed 0:02:38.360 --> 0:02:41.920 benefits to American consumers of trade are huge and important, 0:02:41.960 --> 0:02:44.040 and we've all enjoyed them for a long time. And 0:02:44.080 --> 0:02:47.400 it's theoretically true too. What is true is that the 0:02:47.480 --> 0:02:50.840 Chinese economy is doing something strange. They are leading the 0:02:50.840 --> 0:02:58.440 manufacturing of almost every clean energy product wind turbines, solar arrays, batteries, evs. 0:02:58.800 --> 0:03:01.120 But what's also true is they're by far the biggest 0:03:01.160 --> 0:03:04.720 polluter in terms of carbon emissions, and they're using their 0:03:04.760 --> 0:03:08.880 carbon emissions to try and drive their economic program of 0:03:08.960 --> 0:03:13.399 leading this energy transition to pull their very weak economy 0:03:13.400 --> 0:03:16.120 out of the ditch. So, in fact, the idea that 0:03:16.160 --> 0:03:19.000 they should be charged for their emissions that are about 0:03:19.040 --> 0:03:23.040 a third of global emissions makes very good sense to me. 0:03:23.360 --> 0:03:25.840 And we're doing it in not direct way, but it's 0:03:25.880 --> 0:03:27.799 actually a way that turns out to be pretty fair. 0:03:28.040 --> 0:03:30.480 The other big issue, not just national security when it 0:03:30.480 --> 0:03:33.000 comes to China, but the other big political issue in 0:03:33.040 --> 0:03:35.200 the election is who's going to win the union vote. 0:03:35.760 --> 0:03:38.400 How does Kamala Harris strike that tone the fact that 0:03:38.440 --> 0:03:40.760 they want to see more evs in the road. But 0:03:40.920 --> 0:03:43.800 actually this unnerves a lot of rank and file of 0:03:43.840 --> 0:03:47.160 those labor unions in places like Michigan, which is critical 0:03:47.600 --> 0:03:49.840 to Democrats maintaining the White House. 0:03:50.320 --> 0:03:53.240 Absolutely, But let's take a step back, if we could, Henry, 0:03:53.280 --> 0:03:56.120 which is this We've all listened to Elon Musk and 0:03:56.160 --> 0:03:59.880 Donald Trump talk about their attitude towards organized labor and 0:04:00.320 --> 0:04:03.440 labor unions. In fact, they've been sued over what they 0:04:03.520 --> 0:04:06.280 said on Twitter. So the truth is, it's not a 0:04:06.360 --> 0:04:09.840 choice between Kamala, who is a very strong union person, 0:04:10.640 --> 0:04:14.360 and a blank person. It's someone who clearly is anti union, 0:04:14.400 --> 0:04:19.039 an anti working person. And that's been a long history 0:04:19.160 --> 0:04:21.640 over decades of where mister Trump has gone and where 0:04:21.640 --> 0:04:25.640 he's likely to go. So yes, it's absolutely clear that Michigan. Obviously, 0:04:25.680 --> 0:04:29.840 the UAW has a huge sway in Michigan and they're 0:04:29.880 --> 0:04:32.680 a really important part of the Democratic coalition. But the 0:04:32.760 --> 0:04:35.760 truth is that the person who supports working people and 0:04:35.800 --> 0:04:39.520 who supports organized labor is definitely Kamala Harris. And to 0:04:39.560 --> 0:04:44.000 go any other way is to ignore the facts of 0:04:44.040 --> 0:04:46.120 this week, let alone the last two decades. 0:04:46.160 --> 0:04:49.200 And Tom, you're painting quite a dichotomy between the two candidates. 0:04:49.200 --> 0:04:51.680 And I just wonder in your conversations with not just 0:04:51.720 --> 0:04:55.720 investors but portfolio companies that want to do clean technology, 0:04:55.839 --> 0:04:58.920 if there's a sense that they're holding back on investing 0:04:58.960 --> 0:05:01.840 because of the uncertainty of the race, and it might 0:05:01.880 --> 0:05:04.040 continue to do so if it is a Trump presidency. 0:05:05.279 --> 0:05:07.600 Well, I think when we talk about the possibility of 0:05:07.640 --> 0:05:10.400 a Trump presidency, let's break it down into two things. 0:05:10.720 --> 0:05:12.520 One is what's going to happen in the United States 0:05:12.560 --> 0:05:15.640 of America. And I think that to a very large extent, 0:05:16.000 --> 0:05:18.839 when it comes to the deployment of the existing technologies, 0:05:18.880 --> 0:05:21.080 they're just cheaper. You know, if you look around the 0:05:21.120 --> 0:05:25.719 world last year, so twenty twenty three of new electricity generation, 0:05:26.120 --> 0:05:28.719 eighty six percent of it was renewable. They're not doing 0:05:28.720 --> 0:05:30.640 that to be nice. They're doing it because it's a cheaper, 0:05:30.680 --> 0:05:33.560 better deal. And those lines have crossed and there's nothing 0:05:33.920 --> 0:05:37.200 that mister Trump can do to change the economic forces. 0:05:37.680 --> 0:05:41.320 What is really important from the standpoint of addressing the 0:05:41.320 --> 0:05:44.640 climate crisis more broadly, is this, This is obviously a 0:05:44.680 --> 0:05:49.680 global issue. It requires global cooperation and American leadership. That 0:05:49.839 --> 0:05:52.920 is something that a Trump administration will never do. I mean, 0:05:52.920 --> 0:05:56.480 they famously withdrew from the Paris Accords. He's talking about 0:05:56.480 --> 0:06:00.760 getting out of NATO, let alone cooperating with the UN 0:06:00.839 --> 0:06:04.520 efforts around climate. So from the standpoint of the American economy, 0:06:04.520 --> 0:06:07.080 we're going to continue to deploy. I think that's baked 0:06:07.120 --> 0:06:09.240 in the cake, just because it's a better deal. Texas 0:06:09.760 --> 0:06:13.880 has tripled its solar since twenty eighteen, and that's the 0:06:13.920 --> 0:06:16.120 state where they love to say how bad renewables are, 0:06:16.279 --> 0:06:19.080 but they're a bigger win producer and producer than California. 0:06:19.200 --> 0:06:21.000 Tell me, Joseph about thirty seconds. Do you think that 0:06:21.080 --> 0:06:24.160 Musk's friendship with Donald Trump will ensure that there will 0:06:24.200 --> 0:06:26.320 be a friendly environment for electric vehicles even if Trump 0:06:26.320 --> 0:06:27.400 gets since the office. No. 0:06:28.080 --> 0:06:30.359 I think that mister Trump doesn't really have policies and 0:06:30.360 --> 0:06:33.720 he doesn't have friendships. So whatever he said on said 0:06:33.760 --> 0:06:36.840 this week, that's something that'll change over time because they 0:06:36.839 --> 0:06:39.279 don't even have a platform. They literally don't have a 0:06:39.279 --> 0:06:42.120 platform because they don't have policies. They just have instincts 0:06:42.240 --> 0:06:43.200 urges and vengeance. 0:06:43.600 --> 0:06:46.600 Time Stier of Galvanized Climate Solutions, who really appreciate you 0:06:46.680 --> 0:06:57.960 coming in as always, thank you for being here. Here's 0:06:57.960 --> 0:07:01.080 the latest cruise lines of bucking the trend and travel industry. 0:07:01.279 --> 0:07:03.600 The signs of a consumer slowdown continue to mound, at 0:07:03.640 --> 0:07:07.240 least in certain corners. Norwegian Cruise Line Holdings, Carnival and 0:07:07.360 --> 0:07:10.960 Royal Caribbean all boosting their year end outlooks amid record 0:07:11.000 --> 0:07:14.640 setting demand. Harry Summer, Norwegian Cruise Line Holdings President and 0:07:14.720 --> 0:07:17.480 Chief executive Officer, joins us. Now, Harry, thank you so 0:07:17.560 --> 0:07:19.239 much for being with us. I want to just start 0:07:19.280 --> 0:07:21.840 with what you're seeing in terms of whether demand is 0:07:21.880 --> 0:07:25.360 sort of plateauing, accelerating or falling off. Just a touch 0:07:25.440 --> 0:07:25.760 on the. 0:07:25.720 --> 0:07:30.080 Margins, Well, good morning. Thank you for having me. On 0:07:30.800 --> 0:07:33.800 Demand in the cruise industry right now is great. We're 0:07:34.000 --> 0:07:36.520 very very happy with what we're seeing with the consumer. 0:07:37.200 --> 0:07:39.800 You know, keeping in mind that the demographic that we're 0:07:39.800 --> 0:07:44.000 pursuing is mostly upper middle class, upper class demographic across 0:07:44.040 --> 0:07:47.760 our three brands, and those consumers certainly continue to have 0:07:47.840 --> 0:07:51.119 money to spend and are continuing to spend it on crucifigations. 0:07:51.520 --> 0:07:53.720 At this point, Harry, I guess there's this key question 0:07:53.920 --> 0:07:57.640 of how divorced the upper echelons are from the rest 0:07:57.640 --> 0:08:01.480 of the economy. Essentially, do you find that your business 0:08:01.560 --> 0:08:04.920 is somewhat insulated from a cycle where you have consumers 0:08:05.080 --> 0:08:07.680 that aren't necessarily feeling the same kind of pinches elsewhere. 0:08:08.640 --> 0:08:11.720 So I think there's a number of criteria, a number 0:08:11.760 --> 0:08:14.120 of things that really do help insulate us, as you 0:08:14.200 --> 0:08:16.520 mentioned now. Number one, we are fishing in the upper 0:08:16.560 --> 0:08:19.160 demographic pool, as I mentioned, but we also have a 0:08:19.360 --> 0:08:22.720 very long lead time for booking. So unlike hotels and 0:08:22.800 --> 0:08:25.600 air which are dependent on a lot of close in bookings, 0:08:25.760 --> 0:08:28.640 our average booking curve is six eight months into the future. 0:08:28.920 --> 0:08:32.240 So we have tremendous visibility into trends. If there is 0:08:32.280 --> 0:08:34.520 ever any weakness that we're not seeing any but every 0:08:34.559 --> 0:08:36.440 once in a while there's a few sailings that perhaps 0:08:36.440 --> 0:08:39.240 are doing less well, we can make adjustments six eight 0:08:39.280 --> 0:08:42.839 months in advance, small adjustments that put things back on track. 0:08:43.120 --> 0:08:46.040 It's really a unique feature of the cruise industry that 0:08:46.160 --> 0:08:50.520 allows us to continue to have more stable and higher returns. 0:08:50.720 --> 0:08:55.240 You know, fundamentally, cruises is a tremendous value. Our average yield, 0:08:55.400 --> 0:08:58.319 you know, versus a hotel ADR is anywhere from thirty 0:08:58.360 --> 0:09:01.800 to forty percent below what they expend on a hotel. 0:09:02.160 --> 0:09:05.160 And I think consumers, whether times are good, but especially 0:09:05.160 --> 0:09:08.840 if times are less good, certainly recognize that value and 0:09:08.880 --> 0:09:11.559 that accrues to us. I mean, the last couple of quarters, 0:09:11.800 --> 0:09:15.280 we've reported eight and six percent year over year yield 0:09:15.360 --> 0:09:19.160 increases compared to last year, where we're guiding to another 0:09:19.200 --> 0:09:21.920 six percent for Q three. We see that as a 0:09:22.040 --> 0:09:23.120 very strong consumer. 0:09:23.720 --> 0:09:27.320 Harry, I just wonder about prices. I mean, are you 0:09:27.320 --> 0:09:29.520 in a position where you might even be able to 0:09:29.640 --> 0:09:32.400 rise raise prices given that level of demand? 0:09:33.640 --> 0:09:37.000 You know, I think, yes, great question. I think what 0:09:37.080 --> 0:09:39.320 we've showed in our financewers for the last few quarters 0:09:39.360 --> 0:09:42.000 is pricing has been going up. We're guiding in Q 0:09:42.080 --> 0:09:44.440 three and Q four for prices to go up. I 0:09:44.480 --> 0:09:46.520 mean you may imagine, you know, with the long lead 0:09:46.600 --> 0:09:49.680 time I described, Q three and Q four are substantially 0:09:49.720 --> 0:09:52.680 sold out, so we have great visibility and we stand 0:09:52.679 --> 0:09:54.840 behind the guidance we just issued a few weeks ago 0:09:54.880 --> 0:09:58.000 in our quarterly earnings goal. Pricing will absolutely go up 0:09:58.040 --> 0:10:00.280 in both quarters, and it looks that way for twenty 0:10:00.320 --> 0:10:02.240 twenty five certainly as well, Harry. 0:10:02.600 --> 0:10:04.679 I want to get your thoughts as a CEO of 0:10:04.720 --> 0:10:08.320 a major company. Lisa mentioned this fascinating statistics of CEO 0:10:08.400 --> 0:10:11.440 is being let go from companies at an unprecedented pace, 0:10:11.520 --> 0:10:15.560 going back to twenty seventeen. I wonder how you think 0:10:15.559 --> 0:10:17.800 about this moment in time. You're obviously the CEO of 0:10:17.840 --> 0:10:20.480 a company that's successful, but when you look among your 0:10:20.480 --> 0:10:23.240 peers again, not just the cruise industry, but CEOs of 0:10:23.320 --> 0:10:26.840 large companies, has something changed that there is more pressure 0:10:26.840 --> 0:10:28.240 in a way there hasn't been before. 0:10:29.440 --> 0:10:33.000 So I'm guessing there's always been pressure in the CEO role. 0:10:33.360 --> 0:10:36.119 But I think we're in a world of a rapidly 0:10:36.120 --> 0:10:40.000 involving consumer. You know, tastes change over time and consumers 0:10:40.080 --> 0:10:43.000 change over time, and we have to be constantly thinking 0:10:43.000 --> 0:10:45.240 and innovating in the future. I mean, right now, as 0:10:45.280 --> 0:10:49.520 an example, we're planning for ship deliveries through twenty thirty six. 0:10:49.840 --> 0:10:52.439 I mean, we have to have a pretty good crystal 0:10:52.480 --> 0:10:54.960 ball and a pretty good feel for what the consumers 0:10:54.960 --> 0:10:57.240 are going to want for you know, years, even a 0:10:57.280 --> 0:11:00.360 decade into the future, and it's really important to keep 0:11:00.360 --> 0:11:02.439 that future focus if we're going to be successful. 0:11:03.040 --> 0:11:05.520 Harry, we had the Sea of Marriott on yesterday and 0:11:05.559 --> 0:11:09.080 I'm talking about Marriotte yachts. Now, are you concerned on 0:11:09.120 --> 0:11:13.240 the higher end consumer the competition that's coming into the industry. 0:11:14.480 --> 0:11:17.720 You know, I've always said that our competition is not 0:11:17.920 --> 0:11:20.959 other cruises. I mean, cruises in general make up about 0:11:21.000 --> 0:11:24.360 two to three percent of the overall vacation market. You know, 0:11:24.400 --> 0:11:27.720 we're keenly focused on what hotels do in general, and 0:11:27.800 --> 0:11:31.280 we believe cruising is a wonderful vacation alternative to hotels. 0:11:31.400 --> 0:11:34.280 I mentioned before the huge gap in value or price 0:11:34.360 --> 0:11:37.400 thirty to forty percent below hotel. But also, you know, 0:11:37.840 --> 0:11:41.440 hotels have their asset light model as being a competitive 0:11:41.440 --> 0:11:45.280 advantage in their industry. It's also a competitive disadvantage because 0:11:45.320 --> 0:11:48.080 they lose control of the product. We own all thirty 0:11:48.080 --> 0:11:50.280 two ships in our fleet, fully own them one hundred 0:11:50.280 --> 0:11:52.840 percent ourselves. We have thirteen more ships on order, by 0:11:52.920 --> 0:11:55.360 the way, and we can ensure that we deliver an 0:11:55.400 --> 0:11:58.720 outstanding consistent product across the fleet, and I think guests 0:11:58.760 --> 0:12:01.360 are beginning to realize that that consistency is something you 0:12:01.400 --> 0:12:03.040 don't always get in the hotel space. 0:12:03.320 --> 0:12:05.200 I've been on cruises before, and when you get on 0:12:05.240 --> 0:12:07.840 board all the extras you have to spend more on, 0:12:08.080 --> 0:12:10.959 especially things like some of these excursions. Are you seeing 0:12:11.040 --> 0:12:14.199 consumers start to ratchet back some of that spending. 0:12:14.960 --> 0:12:17.880 You know, not at all. Our onboard spend continues at 0:12:17.920 --> 0:12:20.560 record levels, you know, you know, we get weekly reports, 0:12:20.800 --> 0:12:23.199 you know, as our ship's travel of our fifty five 0:12:23.240 --> 0:12:26.080 to sixty thousand guests that we're carrying at any given time, 0:12:26.360 --> 0:12:29.480 on board spend shows no cracks. We're very very happy. 0:12:29.679 --> 0:12:32.839 You know. It's another advantage I mentioned the long lee 0:12:32.840 --> 0:12:35.720 time that consumers have in making bookings, so they're paying 0:12:35.720 --> 0:12:38.480 for their cruises four or five months in advance. By 0:12:38.520 --> 0:12:40.720 the time they come on the cruise, that money spend, 0:12:40.960 --> 0:12:43.400 it's already paid for off their credit card. They come 0:12:43.440 --> 0:12:45.800 on the ship with the full whilet ready to spend more. 0:12:46.000 --> 0:12:49.040 And unlike hotels where people don't really stay at a hotel, 0:12:49.080 --> 0:12:51.840 although the tent to sleep, people stay on the ship 0:12:51.880 --> 0:12:56.079 to do everything, shop, spa casino, they arrange their short 0:12:56.120 --> 0:12:58.400 tours for us, so we really have we really getting 0:12:58.480 --> 0:13:02.120 much larger share the consumer's wallet on the ship as well. 0:13:02.240 --> 0:13:04.960 It is literally a captured audience. Harry Summer, Thank you 0:13:04.960 --> 0:13:07.360 so much for being with us. Harry Summer, Norwegian Cruise 0:13:07.400 --> 0:13:19.560 Line Holdings, President and chief executive Officer, bond market selling 0:13:19.559 --> 0:13:21.760 off of but yields Hire you are seeing good news 0:13:21.760 --> 0:13:23.920 is good news across the equity sphere. Joining us now 0:13:23.960 --> 0:13:26.559 Tom Porcelli a PGM fixed income which is a good 0:13:26.600 --> 0:13:28.480 and beautiful thing. Tom, always wonderful to see. 0:13:28.640 --> 0:13:30.280 Thank you for being here. Good to be with you all. 0:13:30.440 --> 0:13:33.199 So what's your initial take? This actually wouldn't suggest that 0:13:33.240 --> 0:13:34.800 the Fed is behind the curve and needs to cut 0:13:34.880 --> 0:13:35.599 rates aggressively. 0:13:35.880 --> 0:13:38.600 So I think it depends how you define behind curve, right, 0:13:38.640 --> 0:13:40.720 because I don't know that you're supposed to be looking 0:13:40.760 --> 0:13:45.640 for notable consumer weakness today. But let's just use the 0:13:45.760 --> 0:13:48.320 sort of the FED zone forecast against them for a second. 0:13:48.600 --> 0:13:50.880 If you look at what they're forecasting for the unemployment 0:13:50.960 --> 0:13:54.720 rate next year, what they're forecasting for inflation next year, 0:13:55.040 --> 0:13:59.200 and what they're forecasting for the FED funds rate next year, 0:13:59.679 --> 0:14:03.400 the unemployment rate and the inflation rate are we have 0:14:03.559 --> 0:14:05.880 that right now, and they have one hundred basis points 0:14:05.880 --> 0:14:09.920 of cuts next year. So I would argue that you 0:14:10.080 --> 0:14:12.520 pulled forward all of this. You've pulled forward the slowing 0:14:12.559 --> 0:14:15.400 and labor, you've pulled forward the slowing in the unemployment rate. 0:14:15.679 --> 0:14:18.320 So I think there is justification for pulling forward this 0:14:18.440 --> 0:14:20.840 hundred basis points worth of cuts that they actually are 0:14:20.840 --> 0:14:24.000 forecasting for next year to this year. So to me, 0:14:24.040 --> 0:14:25.640 that's the sort of the right calculus of it. 0:14:25.920 --> 0:14:27.080 I would actually also. 0:14:26.880 --> 0:14:29.000 Argue that, you know, when you think about cuts, even 0:14:29.040 --> 0:14:31.200 if and again it's not our forecast, we're not saying 0:14:31.200 --> 0:14:32.960 they're going to do one hundred basis points worth of cuts, 0:14:32.960 --> 0:14:35.040 But I have a lot of sympathy for the idea, 0:14:35.040 --> 0:14:36.520 which is what the market is pricing in. 0:14:37.760 --> 0:14:37.920 You know. 0:14:37.960 --> 0:14:39.240 I think what we have to keep in mind is 0:14:39.960 --> 0:14:42.520 you're even at one hundred basis points. If you cut 0:14:42.560 --> 0:14:45.880 one hundred basis points, defend is still restrictive. I mean, 0:14:45.880 --> 0:14:48.960 that's sort of the interesting thing. Policy was calibrated or 0:14:49.080 --> 0:14:53.160 is calibrated for a meaningfully higher inflation rate and is 0:14:53.200 --> 0:14:55.920 calibrated for meaningfully lower unemployment rate. But those things have 0:14:56.000 --> 0:14:56.680 now moved. 0:14:56.760 --> 0:15:00.240 Okay, that said, you have to wonder, if this is 0:15:00.240 --> 0:15:03.880 incredibly restrictive, why the economy isn't feeling it, why you're 0:15:03.880 --> 0:15:05.720 seeing an acceleration in retail sales. 0:15:05.800 --> 0:15:08.440 Yeah, So what I would say is that there have 0:15:08.480 --> 0:15:10.560 been so many buffers in place, right, Like, if you 0:15:10.640 --> 0:15:13.480 think back to how this whole thing started, all that 0:15:13.560 --> 0:15:17.760 fiscal stimulus, all of that excess saving, the idea that 0:15:17.800 --> 0:15:20.040 there was a wealth effect because home prices were rising 0:15:20.080 --> 0:15:23.240 a lot, equity prices were up a lot. This made 0:15:23.320 --> 0:15:24.960 people sort of, you know, sort of exist in this 0:15:25.000 --> 0:15:28.080 feel good environment, and I think that really sort of 0:15:28.240 --> 0:15:31.240 propelled consumption in so many ways. So I would argue 0:15:31.240 --> 0:15:34.800 that the hikes that we saw, that aggressive tightening cycle 0:15:34.960 --> 0:15:37.120 really didn't have a chance to sort of clamp down 0:15:37.640 --> 0:15:39.880 because of all of those sort of extra factors that 0:15:40.120 --> 0:15:43.480 were in play. But I would highlight that you are 0:15:43.560 --> 0:15:46.520 starting to see delinquency rates on the rise, modestly, but 0:15:46.560 --> 0:15:49.240 they're rising. You are starting to see the unemployment rate 0:15:49.520 --> 0:15:52.320 rise again. It's still relatively low, but it's up to 0:15:52.520 --> 0:15:54.840 seven ten to percent at this point. So I think 0:15:54.880 --> 0:15:57.560 you're starting to see some of the tight policy now 0:15:57.600 --> 0:15:58.360 start to show through. 0:15:58.480 --> 0:16:00.640 Well, it's this idea that you're not cutting to react 0:16:00.720 --> 0:16:02.440 or cutting just to get us in the right place. 0:16:03.160 --> 0:16:06.120 When you think about ray cuts, what even is that line, 0:16:06.120 --> 0:16:07.960 because I know you're saying, just what the Fed's projections 0:16:07.960 --> 0:16:10.240 one hundred makes sense? Or is the idea of cutting 0:16:10.240 --> 0:16:12.240 a hundred basis points something that looks like a recession? 0:16:12.240 --> 0:16:13.680 Where's kind of that cutoff for them? 0:16:14.200 --> 0:16:16.000 I think it's such an important idea, and that's why 0:16:16.040 --> 0:16:18.240 I think, you know, and I've said this before, I 0:16:18.240 --> 0:16:20.960 think when the FED starts cutting, I don't think classically, 0:16:20.960 --> 0:16:22.920 when the FED starts cutting, it's like, oh, you know, 0:16:23.040 --> 0:16:25.680 it's over right, the recession is here. I don't think 0:16:25.680 --> 0:16:27.600 that's what this is. I think the narrative coming from 0:16:27.640 --> 0:16:29.400 the FED has to be, hey, look, we're just looking 0:16:29.400 --> 0:16:32.440 to extend the cycle, right, We're looking to extend the expansion. 0:16:32.480 --> 0:16:34.720 I think so the FED has a real opportunity here 0:16:34.920 --> 0:16:37.040 to sort of shift the narrative. And I would argue 0:16:37.040 --> 0:16:39.680 that they're starting that process now. You know, when Powell 0:16:39.720 --> 0:16:42.760 finally shifted to focusing on labor over inflation, which I 0:16:42.760 --> 0:16:47.000 would argue is long overdue, I think that's that's step one. 0:16:47.040 --> 0:16:48.760 And I think the next step is, hey, look, we 0:16:48.840 --> 0:16:50.680 don't think that things are really sort of slowing in 0:16:50.760 --> 0:16:53.960 a notable way, but we are recognized that policies calibrated 0:16:54.000 --> 0:16:56.280 for a completely different inflation regime than what we have 0:16:56.400 --> 0:16:57.640 right now, and so we can take back some of 0:16:57.640 --> 0:16:58.480 that aggressive tightening. 0:16:58.520 --> 0:17:01.040 Well, Rauffa al Bostic certainly one of those individuals that 0:17:01.320 --> 0:17:04.159 is starting to recalibrate. But if that's the case, and 0:17:04.200 --> 0:17:06.960 they're going to message that this isn't in deterioration, but 0:17:07.000 --> 0:17:09.560 we're trying to land the plane, how do they do 0:17:09.600 --> 0:17:10.760 that before the US election? 0:17:11.240 --> 0:17:11.439 You know? 0:17:11.800 --> 0:17:15.280 So I love this question, and I have We've done 0:17:15.320 --> 0:17:17.000 this analysis. I'm sure so many others have. 0:17:17.720 --> 0:17:17.879 You know. 0:17:17.880 --> 0:17:19.800 We went back and we just went back to nineteen 0:17:19.840 --> 0:17:22.760 eighty four. It seemed like a fine round number. We 0:17:22.800 --> 0:17:26.040 looked at every single election from nineteen eighty four through 0:17:26.080 --> 0:17:29.320 to today, and what you see is that history, that 0:17:29.960 --> 0:17:33.400 modest history, is littered with examples of the FED adjusting 0:17:33.440 --> 0:17:36.879 policy during election years. In fact, not just during election years, 0:17:37.080 --> 0:17:41.080 but in and around the election month. All they needed 0:17:41.240 --> 0:17:44.080 was the sort of the justification from a data perspective, 0:17:44.080 --> 0:17:46.080 and I would argue that the unemployment rate being up 0:17:46.119 --> 0:17:48.720 as much as it is. Inflation being down as much 0:17:48.720 --> 0:17:50.040 as it is is your justification. 0:17:50.560 --> 0:17:52.760 How do we know though, that it isn't actually headed 0:17:52.760 --> 0:17:55.040 in the other direction that we already saw the slowdown, 0:17:55.160 --> 0:17:58.760 especially because Joba's claims are actually going down and you're seeing, 0:17:58.800 --> 0:18:03.080 for example, Walmart increasing its expectation for profits. You're seeing 0:18:03.119 --> 0:18:06.240 companies actually doing better out of the four hundred and 0:18:06.320 --> 0:18:09.879 ninety three other than the magnificent seven and accelerating earnings. 0:18:10.200 --> 0:18:11.800 How do we know are not the prespose of an 0:18:11.800 --> 0:18:15.720 acceleration that will only be turbocharged by rate cuts. 0:18:15.840 --> 0:18:18.600 So it's again a super important question. And what I 0:18:18.640 --> 0:18:21.840 would say is Walmart. Walmart is maybe the exception to 0:18:21.840 --> 0:18:23.560 what's going on broadly, right, because we know from a 0:18:23.560 --> 0:18:25.560 lot of other retailers that things are starting to they're 0:18:25.560 --> 0:18:28.080 starting to feel some of the pressure of the consumer 0:18:28.080 --> 0:18:31.280 that's really sort of really looking around for value. And 0:18:31.280 --> 0:18:33.320 if Walmart's really the value player, then it actually makes 0:18:33.359 --> 0:18:34.760 a lot of sense that they performed well. And I 0:18:34.800 --> 0:18:36.720 didn't look at the numbers directly today, but I heard 0:18:36.760 --> 0:18:39.440 that they did pretty well, So I think that that 0:18:39.600 --> 0:18:41.879 is an important idea. But again, I think this is 0:18:42.080 --> 0:18:45.920 this is exactly my point, I think, let this continue 0:18:45.920 --> 0:18:48.280 to roll out, right, Let the economy continue to sort 0:18:48.280 --> 0:18:50.720 of expand by just removing some of the aggressive tightening 0:18:50.720 --> 0:18:53.280 that they have in place. I don't know that unless 0:18:53.320 --> 0:18:56.320 you think that inflation is going to reaccelerate to you know, 0:18:56.400 --> 0:18:59.320 four handles, which is what this policy is calibrated for. 0:18:59.520 --> 0:19:01.600 I think the it can feel very comfortable that alls 0:19:01.600 --> 0:19:04.080 you're doing is taking back some of the aggressive commodation 0:19:04.119 --> 0:19:07.000 that we don't need anymore because inflation has slowed so much. 0:19:07.280 --> 0:19:09.199 And sorry this so I'll make this one last point. 0:19:09.520 --> 0:19:11.679 You know, just keep in mind when we think about inflation, 0:19:11.760 --> 0:19:13.639 just think about how labor it is doing. The unemployment 0:19:13.720 --> 0:19:15.080 rate again, I hate to say it again, but the 0:19:15.160 --> 0:19:18.240 unemployment is up. But in combination with that, hours are down. 0:19:18.320 --> 0:19:21.080 I think Mike mentioned that earlier, but that broadly speaking, 0:19:21.119 --> 0:19:23.800 hours are down a lot, wages are down a lot, 0:19:24.119 --> 0:19:27.159 quit rates are down a lot. The consumer's not feeling 0:19:27.200 --> 0:19:28.960 that great about labor right now. And if you think 0:19:29.000 --> 0:19:31.320 about the thing that really does the driving from a 0:19:31.320 --> 0:19:35.320 consumption perspective, it is the unemployment rate. The unemployment rate 0:19:35.400 --> 0:19:38.159 rises and consumption tends to slow just quickly. 0:19:38.200 --> 0:19:40.400 Here, what would you have to see in the non 0:19:40.400 --> 0:19:42.640 farm Payrolls report in September to change your view. 0:19:42.880 --> 0:19:45.479 So I think that you need a dud of a report, 0:19:45.560 --> 0:19:47.280 right Like you know, I don't know how you quantified 0:19:47.320 --> 0:19:49.920 dut I've fully acknowledged that, but I think you need 0:19:49.920 --> 0:19:53.480