1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,480 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amerie Hordern. Join us each day 4 00:00:18,760 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,960 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,319 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:35,880 Speaker 2: Terminal and the Bloomberg Business App. 10 00:00:36,280 --> 00:00:39,360 Speaker 3: Krishna Guha, Evercore ISI, Vice Chair and head of Central 11 00:00:39,400 --> 00:00:42,199 Speaker 3: Bank Strategy, joins us now for more. Krishna, thanks so 12 00:00:42,280 --> 00:00:44,280 Speaker 3: much for joining us this morning. Do you have an 13 00:00:44,360 --> 00:00:47,800 Speaker 3: understanding of how the court will define for cause in 14 00:00:47,840 --> 00:00:48,479 Speaker 3: this case? 15 00:00:50,120 --> 00:00:53,199 Speaker 4: So I'm not an attorney, I'm an economist, and so 16 00:00:53,440 --> 00:00:57,960 Speaker 4: I certainly don't want to mislead your viewers by offering 17 00:00:58,640 --> 00:01:02,440 Speaker 4: legal expertise here that I don't have. What I will say, 18 00:01:02,440 --> 00:01:05,880 Speaker 4: of course, is that the four course protection and the 19 00:01:05,959 --> 00:01:10,759 Speaker 4: idea that this establishes a high standard before a president 20 00:01:10,920 --> 00:01:14,840 Speaker 4: can consider removing a FED official, is central to our 21 00:01:14,920 --> 00:01:19,440 Speaker 4: understanding of how Central bank independence operates in the US, 22 00:01:19,720 --> 00:01:22,120 Speaker 4: so there's a lot at stake in this litigation. 23 00:01:22,680 --> 00:01:25,960 Speaker 5: Christna, you're head of central bank strategy at Evercore, I say, 24 00:01:25,959 --> 00:01:30,440 Speaker 5: as well as vice chairman. And then I wonder what 25 00:01:30,480 --> 00:01:34,039 Speaker 5: you think about inflation. We're looking for pc to come 26 00:01:34,080 --> 00:01:37,120 Speaker 5: in at two point nine percent. We had Core CPI 27 00:01:37,200 --> 00:01:39,800 Speaker 5: at three point one percent. We had Core PPI at 28 00:01:39,800 --> 00:01:43,360 Speaker 5: three point seven percent. Yet Chris Waller says it's close 29 00:01:43,440 --> 00:01:45,120 Speaker 5: enough to two. Do you agree. 30 00:01:46,840 --> 00:01:50,640 Speaker 4: I think what's important here is that the inflation that 31 00:01:50,680 --> 00:01:55,000 Speaker 4: we really care about is the second round inflation. It's 32 00:01:55,040 --> 00:01:59,080 Speaker 4: the risk of inflation persistence, and no on as a 33 00:01:59,120 --> 00:02:03,440 Speaker 4: matter of theory or practice, thinks that the central bank 34 00:02:03,920 --> 00:02:08,800 Speaker 4: should be directly responding to the first round effect of 35 00:02:08,960 --> 00:02:14,519 Speaker 4: tariffs like attacks mechanically on prices. The issue is what 36 00:02:14,720 --> 00:02:19,360 Speaker 4: pressure does that, if any, in part to underlying inflation dynamics. 37 00:02:19,680 --> 00:02:24,160 Speaker 4: That's the second round question, and so I'm less focused 38 00:02:24,400 --> 00:02:29,280 Speaker 4: on the individual month's inflation passed through from tariffs. That's 39 00:02:29,280 --> 00:02:32,240 Speaker 4: the first round mechanical stuff that I am trying to 40 00:02:32,280 --> 00:02:36,880 Speaker 4: assess what the risks are of inflation persistence and balancing 41 00:02:36,919 --> 00:02:40,520 Speaker 4: those against the risks to the labor market. I actually 42 00:02:40,560 --> 00:02:44,320 Speaker 4: think the conditions likely have been met for an initial 43 00:02:44,840 --> 00:02:50,640 Speaker 4: cautious step down towards a more neutral rate. But I 44 00:02:50,680 --> 00:02:53,880 Speaker 4: also think that the FED should be very careful about 45 00:02:53,960 --> 00:02:56,920 Speaker 4: signaling what follows from here and making it clear that 46 00:02:56,960 --> 00:02:59,840 Speaker 4: it'll take the time it needs to assess the incoming 47 00:03:00,080 --> 00:03:04,240 Speaker 4: data and judge whether, for instance, by December, the case 48 00:03:04,280 --> 00:03:06,240 Speaker 4: for another cut has or hasn't been met. 49 00:03:06,280 --> 00:03:08,760 Speaker 5: Well, what if the FED didn't Krishna take the time 50 00:03:08,760 --> 00:03:13,240 Speaker 5: and needs What if the FED wasn't as thorough? What 51 00:03:13,280 --> 00:03:17,480 Speaker 5: if the FED was stacked with Trump appointees who just 52 00:03:17,520 --> 00:03:21,560 Speaker 5: wanted to do the President's bidding? Would you buy then 53 00:03:21,840 --> 00:03:25,000 Speaker 5: ten year treasuries? I mean, does four to twenty make 54 00:03:25,080 --> 00:03:25,639 Speaker 5: sense to you? 55 00:03:27,760 --> 00:03:32,680 Speaker 4: So I am concerned about the outlook for central bank independence, 56 00:03:33,360 --> 00:03:38,360 Speaker 4: and I'm concerned about the Cook affair in that context. Obviously, 57 00:03:38,640 --> 00:03:42,080 Speaker 4: if the President is able to push Governor Cook out, 58 00:03:42,440 --> 00:03:47,000 Speaker 4: then that accelerates the timeframe over which his nominees may 59 00:03:47,040 --> 00:03:50,240 Speaker 4: acquire a majority on the FED board. And that's as 60 00:03:50,280 --> 00:03:53,320 Speaker 4: you know. That then raises questions as to whether we 61 00:03:53,440 --> 00:03:57,400 Speaker 4: might see an unprecedented effort to deny certain Reserve Bank 62 00:03:57,480 --> 00:04:03,480 Speaker 4: presidents renewal again without cause. But also that the move 63 00:04:03,520 --> 00:04:06,280 Speaker 4: against Cook, based on allegations that have not yet been 64 00:04:06,360 --> 00:04:09,680 Speaker 4: charged or proven in court or established by any kind 65 00:04:09,680 --> 00:04:14,880 Speaker 4: of quasi judicial process, essentially weakens the protections that future 66 00:04:14,920 --> 00:04:17,679 Speaker 4: FED governors, by the way, including the people who present 67 00:04:17,760 --> 00:04:20,720 Speaker 4: trumpets in place, will have in the event that they 68 00:04:20,800 --> 00:04:23,719 Speaker 4: have to make decisions in the future that this or 69 00:04:23,720 --> 00:04:28,720 Speaker 4: a future president doesn't like. So this does absolutely all 70 00:04:28,760 --> 00:04:31,880 Speaker 4: bear then on how you think about the outlook for 71 00:04:31,920 --> 00:04:36,640 Speaker 4: policy and what may happen to bond yields. I personally 72 00:04:36,680 --> 00:04:39,880 Speaker 4: feel that the market is likely underpriced for the risk 73 00:04:39,920 --> 00:04:42,360 Speaker 4: that we could see a more more of a break 74 00:04:42,520 --> 00:04:46,599 Speaker 4: in FED institutional practice and potentially the conduct of monetary 75 00:04:46,640 --> 00:04:50,440 Speaker 4: policy over the next year or so, as the FED 76 00:04:50,480 --> 00:04:55,400 Speaker 4: Board transitions and as the administration attempts to acquire more 77 00:04:55,520 --> 00:05:01,240 Speaker 4: authority over who gets to determine when for course conditions 78 00:05:01,240 --> 00:05:01,719 Speaker 4: have been mere. 79 00:05:02,040 --> 00:05:04,599 Speaker 3: Bill Dudley and Layel Brainer agree with you. We spoke 80 00:05:04,640 --> 00:05:06,599 Speaker 3: to both of them this week. In terms of the 81 00:05:06,640 --> 00:05:10,640 Speaker 3: market reaction, what kind of I guess yield should we see, 82 00:05:10,680 --> 00:05:13,800 Speaker 3: say on the ten year, if the market was really 83 00:05:13,839 --> 00:05:15,680 Speaker 3: taking into account that this could be more of an 84 00:05:15,720 --> 00:05:17,360 Speaker 3: erosion of FED independence. 85 00:05:19,040 --> 00:05:21,240 Speaker 4: So I think what you see at the moment is 86 00:05:21,520 --> 00:05:24,400 Speaker 4: that the bond market is not really quite sure how 87 00:05:24,440 --> 00:05:28,880 Speaker 4: to interpret, first of all, the actions relating to Cook, 88 00:05:30,440 --> 00:05:37,200 Speaker 4: and secondly that the market is wary of shortening bonds 89 00:05:37,200 --> 00:05:41,240 Speaker 4: aggressively in an environment in which, per Governor Walla yesterday, 90 00:05:41,560 --> 00:05:45,000 Speaker 4: we could discover soon that last three payroll months were 91 00:05:45,040 --> 00:05:49,120 Speaker 4: negative right once all the revisions are in. These are 92 00:05:49,160 --> 00:05:53,200 Speaker 4: not necessarily the microeconomic conditions in which you would want 93 00:05:53,200 --> 00:05:56,760 Speaker 4: to ramp yield. But I would say that if and 94 00:05:56,800 --> 00:05:59,760 Speaker 4: we're still dealing in a probabilistic and uncertain environment, that 95 00:06:00,080 --> 00:06:04,040 Speaker 4: if we were to get further confirmation over time that 96 00:06:04,080 --> 00:06:08,520 Speaker 4: the FED is losing independence, and if this resulted, as 97 00:06:08,680 --> 00:06:12,560 Speaker 4: historically generally it has in a central bank becoming more 98 00:06:12,600 --> 00:06:16,800 Speaker 4: structurally dubvish, that I do think at some point you 99 00:06:16,839 --> 00:06:21,800 Speaker 4: would likely see a substantial response in the bond market. 100 00:06:22,120 --> 00:06:24,960 Speaker 4: The issue, of course, is when and under what circumstances 101 00:06:25,000 --> 00:06:28,120 Speaker 4: would that happen. I think it's hard to predict and 102 00:06:28,200 --> 00:06:32,120 Speaker 4: certainly hard to say with any confidence that that adverse 103 00:06:32,200 --> 00:06:35,080 Speaker 4: bond market reaction would come immediately. 104 00:06:37,279 --> 00:06:38,000 Speaker 6: Stay with us. 105 00:06:38,160 --> 00:06:50,200 Speaker 3: More bloomber of surveillance coming up after this, We're going 106 00:06:50,279 --> 00:06:52,600 Speaker 3: to turn to Tech Now. Heath Terry, head of technology 107 00:06:52,640 --> 00:06:57,080 Speaker 3: and Communications at City Research, says, quote first AI analyst 108 00:06:57,120 --> 00:07:00,960 Speaker 3: on Wall Street believes AI revenue will serve eighty billion 109 00:07:01,080 --> 00:07:04,920 Speaker 3: dollars in twenty thirty from forty three billion dollars this year. 110 00:07:05,080 --> 00:07:09,320 Speaker 3: Heath joins us now for more, Heath, that's a massive jump. 111 00:07:09,640 --> 00:07:11,520 Speaker 3: And if you think that's where it's going to go, 112 00:07:11,760 --> 00:07:13,320 Speaker 3: is this market underpriced? 113 00:07:14,560 --> 00:07:16,840 Speaker 4: Look, that's that's the way we look at it. 114 00:07:16,880 --> 00:07:19,000 Speaker 7: I mean, you know, we are in the very early 115 00:07:19,040 --> 00:07:24,040 Speaker 7: stages of this AI cycle, and really we think sort 116 00:07:24,080 --> 00:07:27,240 Speaker 7: of posed for an inflection ahead of us. A lot 117 00:07:27,280 --> 00:07:29,920 Speaker 7: of things that sort of matter to driving growth are 118 00:07:30,160 --> 00:07:33,840 Speaker 7: about to clear in in gross favor. The bottlenecks that 119 00:07:33,840 --> 00:07:39,040 Speaker 7: we've seen in capacity constraint, the model development advances that 120 00:07:39,080 --> 00:07:42,080 Speaker 7: we're seeing particularly around agentic AI, and then of course 121 00:07:42,160 --> 00:07:44,760 Speaker 7: you know the biggest of those being what we think 122 00:07:45,640 --> 00:07:49,480 Speaker 7: could be called AI squared, the idea that AI on 123 00:07:49,520 --> 00:07:51,600 Speaker 7: its own can start programming AI. 124 00:07:52,840 --> 00:07:56,720 Speaker 5: So, you know, I wonder Heath your take on what 125 00:07:56,880 --> 00:08:00,920 Speaker 5: happens in China, because in Nvidia first didn't give us 126 00:08:00,920 --> 00:08:03,360 Speaker 5: a forecast for the third quarter. They had nothing in 127 00:08:03,400 --> 00:08:06,480 Speaker 5: the second quarter, and then the CFO came out and 128 00:08:06,520 --> 00:08:08,840 Speaker 5: said maybe two to five billion, but she's not really 129 00:08:08,920 --> 00:08:12,000 Speaker 5: sure about the president's deal to get a fifteen percent 130 00:08:12,040 --> 00:08:13,440 Speaker 5: take of everything they sell there. 131 00:08:13,520 --> 00:08:15,440 Speaker 7: And to me, it just seems. 132 00:08:15,120 --> 00:08:18,000 Speaker 5: Like the Chinese Communist Party is willing to do a 133 00:08:18,040 --> 00:08:20,400 Speaker 5: whole lot to make sure it's companies don't buy our 134 00:08:20,480 --> 00:08:23,120 Speaker 5: chips anyway. So what's your take on that whole story. 135 00:08:23,920 --> 00:08:26,640 Speaker 7: Look, I think you're seeing that kind of mindset from 136 00:08:26,760 --> 00:08:31,160 Speaker 7: every country China, certainly the countries in the Middle East, 137 00:08:31,760 --> 00:08:34,640 Speaker 7: you know, major countries in Europe and the US. Of course, 138 00:08:34,920 --> 00:08:37,920 Speaker 7: everyone feels like AI is an important enough technology that 139 00:08:37,960 --> 00:08:41,680 Speaker 7: you cannot just suc seceed it to sort of the 140 00:08:41,720 --> 00:08:45,720 Speaker 7: global winners, which in other cycles have always been American 141 00:08:46,160 --> 00:08:49,520 Speaker 7: And I think you know, the mistakes of the Internet 142 00:08:49,600 --> 00:08:52,680 Speaker 7: era for a lot of companies on a country basis, 143 00:08:52,760 --> 00:08:55,680 Speaker 7: or a lot of countries on a company basis, of 144 00:08:55,840 --> 00:08:59,520 Speaker 7: allowing the US companies to come in and sort of 145 00:08:59,760 --> 00:09:03,520 Speaker 7: be their own local champions is something that no one 146 00:09:03,600 --> 00:09:06,720 Speaker 7: really wants to make in AI. Now, that's a really 147 00:09:06,760 --> 00:09:10,440 Speaker 7: hard thing to actually enforce for most countries. China can 148 00:09:10,480 --> 00:09:12,920 Speaker 7: obviously do it. They actually did it very successfully in 149 00:09:12,920 --> 00:09:15,520 Speaker 7: the Internet era. I mean, there are no bigger internet 150 00:09:15,559 --> 00:09:18,679 Speaker 7: companies outside of the US than those that are in China, 151 00:09:18,720 --> 00:09:20,040 Speaker 7: and I think they want to make sure that they 152 00:09:20,080 --> 00:09:22,080 Speaker 7: do the same thing when it comes to when it 153 00:09:22,080 --> 00:09:22,679 Speaker 7: comes to AI. 154 00:09:22,880 --> 00:09:27,200 Speaker 5: I noticed also yesterday that an analyst from E Marketer said, 155 00:09:27,880 --> 00:09:31,079 Speaker 5: we have to see returns on these investments and soon. 156 00:09:31,240 --> 00:09:34,200 Speaker 5: And the threat is that these big hyperscalers who are 157 00:09:34,200 --> 00:09:39,480 Speaker 5: spending forty percent of Invidia's revenue and forgive me that 158 00:09:39,480 --> 00:09:41,120 Speaker 5: I'm heavy on in video, but they just came out 159 00:09:41,160 --> 00:09:44,520 Speaker 5: with earning. So it's occupying my mind that these big 160 00:09:44,600 --> 00:09:47,400 Speaker 5: hyperscalers may pull back on the margin in terms of 161 00:09:47,400 --> 00:09:50,040 Speaker 5: capex if they don't start to see return soon on 162 00:09:50,080 --> 00:09:53,400 Speaker 5: the applications, on the AI applications that they're powering. What 163 00:09:53,440 --> 00:09:54,199 Speaker 5: do you think about that? 164 00:09:55,000 --> 00:09:56,959 Speaker 7: Look, I don't think there's any chance of that, right. 165 00:09:57,000 --> 00:10:00,800 Speaker 7: I mean, we go back a year ago and you 166 00:10:00,880 --> 00:10:06,640 Speaker 7: had the CEOs of Alphabet, Meta, Microsoft all get on 167 00:10:06,679 --> 00:10:10,080 Speaker 7: their earnings calls and say some version of the risk 168 00:10:10,120 --> 00:10:13,120 Speaker 7: of overinvest investing is far less than the risk of 169 00:10:13,280 --> 00:10:16,240 Speaker 7: underinvesting in this space. And then we fast forward a 170 00:10:16,320 --> 00:10:19,080 Speaker 7: year later and they've all said, you know what, even 171 00:10:19,120 --> 00:10:22,880 Speaker 7: though we believe that we actually underinvested and capacity constraints 172 00:10:22,920 --> 00:10:25,760 Speaker 7: are still there. Microsoft in particular called that out on 173 00:10:25,800 --> 00:10:29,040 Speaker 7: their most recent earnings. And so you don't see that 174 00:10:29,120 --> 00:10:33,720 Speaker 7: kind of demand outstripping supply if the returns aren't there. 175 00:10:34,040 --> 00:10:36,400 Speaker 7: And there have been a range of studies and MIT 176 00:10:36,600 --> 00:10:38,839 Speaker 7: had theirs which I think most people sort of misunderstood 177 00:10:38,880 --> 00:10:41,920 Speaker 7: or didn't get past the headline. IDC has had one 178 00:10:41,920 --> 00:10:44,680 Speaker 7: that said that you know, cfo or CIOs are getting 179 00:10:45,080 --> 00:10:47,480 Speaker 7: three point seven x for every dollar they put into 180 00:10:47,679 --> 00:10:49,839 Speaker 7: to AI. So there's a lot of work being done 181 00:10:49,880 --> 00:10:52,199 Speaker 7: around this. We obviously did a lot of work around 182 00:10:52,200 --> 00:10:54,199 Speaker 7: this in the one hundred and paid twenty page report 183 00:10:54,240 --> 00:10:58,040 Speaker 7: that we published earlier this week, and the returns and 184 00:10:58,160 --> 00:11:01,560 Speaker 7: admittedly their early returns at the early return show that 185 00:11:01,600 --> 00:11:03,760 Speaker 7: this stuff is working at the enterprise level. 186 00:11:04,240 --> 00:11:06,480 Speaker 3: He's something that Jonathan has been bringing up a lot 187 00:11:06,480 --> 00:11:08,160 Speaker 3: when it comes to the AI story. I'd love to 188 00:11:08,160 --> 00:11:10,480 Speaker 3: get your take on is do we have the power 189 00:11:10,600 --> 00:11:15,280 Speaker 3: the electricity needed to run this industry and especially given 190 00:11:15,280 --> 00:11:16,920 Speaker 3: the outlook you have in your research. 191 00:11:17,800 --> 00:11:20,439 Speaker 7: Yeah, Look, this is something we cover a lot the 192 00:11:20,840 --> 00:11:23,720 Speaker 7: team at City that covers the industrial space and the 193 00:11:23,800 --> 00:11:25,920 Speaker 7: energy space that spent a lot of time on this, 194 00:11:26,240 --> 00:11:28,600 Speaker 7: and look, they're going to be bottlenecks. But here's the 195 00:11:29,640 --> 00:11:31,040 Speaker 7: for lack of a better time, kind of the sad 196 00:11:31,080 --> 00:11:36,280 Speaker 7: reality of this is that when there are shortages, when 197 00:11:36,280 --> 00:11:40,040 Speaker 7: they are bottlenecks, capacity and supply moves to the highest 198 00:11:40,120 --> 00:11:42,679 Speaker 7: value usage, they move to the highest bidder, for lack 199 00:11:42,720 --> 00:11:44,960 Speaker 7: of a better term, and that's going to be AI. 200 00:11:45,200 --> 00:11:46,920 Speaker 7: And so, yeah, they're going to be shortages, they're going 201 00:11:46,960 --> 00:11:50,920 Speaker 7: to be bottlenecks. But if you're in AI and you're 202 00:11:50,960 --> 00:11:55,240 Speaker 7: building a twenty billion dollars data center, you're far more 203 00:11:55,360 --> 00:11:57,480 Speaker 7: likely to get the equipment you need, the power you 204 00:11:57,559 --> 00:12:00,400 Speaker 7: need than the person who's next further down that down 205 00:12:00,440 --> 00:12:03,719 Speaker 7: that line on that list. And so there will be bottlenecks, 206 00:12:03,760 --> 00:12:05,520 Speaker 7: but I don't think you're going to see them in AI, 207 00:12:05,640 --> 00:12:06,800 Speaker 7: and I don't think that they're going to be the 208 00:12:06,800 --> 00:12:10,360 Speaker 7: things that sort of slow development here. Stay with us. 209 00:12:10,520 --> 00:12:22,520 Speaker 3: More Bloomberg surveillance coming up after this. We're going to 210 00:12:22,520 --> 00:12:25,319 Speaker 3: stick with retail investors digesting a slew of earnings from 211 00:12:25,320 --> 00:12:28,520 Speaker 3: the sector and their signals about the economy. Data Telsea 212 00:12:28,679 --> 00:12:31,600 Speaker 3: of the CEO of Telsey Advisory Group, saying the tariff 213 00:12:31,679 --> 00:12:35,120 Speaker 3: impacts on EPs and margins are being managed and price 214 00:12:35,200 --> 00:12:38,400 Speaker 3: increases have not been fully passed on to customers. The 215 00:12:38,520 --> 00:12:40,679 Speaker 3: bulk are expected to be visible in the third and 216 00:12:40,720 --> 00:12:44,000 Speaker 3: fourth quarter, and Dana joins us, now, good morning, good morning, 217 00:12:44,160 --> 00:12:47,080 Speaker 3: very busy earning season. When will we see the full 218 00:12:47,080 --> 00:12:48,160 Speaker 3: impact of the tariffs. 219 00:12:48,360 --> 00:12:50,000 Speaker 8: I don't think you're going to see the full impact 220 00:12:50,000 --> 00:12:52,800 Speaker 8: of tariffs until heading into the fourth quarter, and it's 221 00:12:52,800 --> 00:12:55,760 Speaker 8: on a select group of merchandise. And frankly, when you 222 00:12:55,800 --> 00:12:58,199 Speaker 8: think of the newness that's coming in, particularly on the 223 00:12:58,240 --> 00:13:01,840 Speaker 8: apparel side, perhaps you'll see more of the price increases 224 00:13:01,880 --> 00:13:04,320 Speaker 8: on the newer products, which you may not even know 225 00:13:04,360 --> 00:13:07,120 Speaker 8: because they never were issued before. So that's some of 226 00:13:07,160 --> 00:13:09,320 Speaker 8: the bulk of it. What we've seen, is we've gone 227 00:13:09,320 --> 00:13:12,160 Speaker 8: through earning season, is you haven't heard that it's been 228 00:13:12,160 --> 00:13:14,400 Speaker 8: the full impact. And keep in mind, we've had a 229 00:13:14,440 --> 00:13:17,800 Speaker 8: price tracker on eighty items since April, and what we've 230 00:13:17,800 --> 00:13:21,640 Speaker 8: seen on iconic items, whether Levi's five oh one, Barbie dolls, 231 00:13:21,960 --> 00:13:25,600 Speaker 8: we haven't seen big increases across the board. It's very 232 00:13:25,640 --> 00:13:27,480 Speaker 8: selective with those price increases, you know. 233 00:13:27,520 --> 00:13:30,960 Speaker 5: I'm the administration has long argued that this is just 234 00:13:31,080 --> 00:13:33,920 Speaker 5: like a sales tax, and it's only just a one 235 00:13:34,000 --> 00:13:37,280 Speaker 5: time price hike. But the thing is, these tariffs trickle 236 00:13:37,400 --> 00:13:41,440 Speaker 5: in over months and months and months, and the manufacturers 237 00:13:41,760 --> 00:13:44,160 Speaker 5: try and hold back price increases when they can, so 238 00:13:44,160 --> 00:13:46,360 Speaker 5: they take some into margins, they pass some to suppliers. 239 00:13:46,559 --> 00:13:48,560 Speaker 5: I feel like we're going to see a step up 240 00:13:48,640 --> 00:13:49,880 Speaker 5: of prices over time. 241 00:13:50,160 --> 00:13:53,280 Speaker 8: That's what's expected. The expectation is it will step up, 242 00:13:53,480 --> 00:13:55,319 Speaker 8: and you're right, it's a third to third. A third, 243 00:13:55,679 --> 00:13:59,000 Speaker 8: a third look to diversify their sourcing, a third look 244 00:13:59,040 --> 00:14:01,720 Speaker 8: to share the cost with manufacturers, and then a third 245 00:14:01,720 --> 00:14:04,200 Speaker 8: of the headwind is passing the prices onto the consumer, 246 00:14:04,440 --> 00:14:06,560 Speaker 8: which we not have fully seen yet. 247 00:14:06,720 --> 00:14:10,120 Speaker 5: What do you think about? Jonathan Levin wrote a column 248 00:14:10,160 --> 00:14:13,199 Speaker 5: for Bloomberg Opinion yesterday pointing out that we have higher 249 00:14:13,440 --> 00:14:16,560 Speaker 5: pes on some of these retailers than we do on Nvidia. 250 00:14:16,600 --> 00:14:18,520 Speaker 5: If you look at the forward pe for cost Co, 251 00:14:19,040 --> 00:14:23,120 Speaker 5: it's fifty two times earnings and in Vidia is only forty. 252 00:14:23,440 --> 00:14:27,520 Speaker 5: Why are investors willing to ascribe such a value to 253 00:14:28,000 --> 00:14:28,920 Speaker 5: these retailers? 254 00:14:29,240 --> 00:14:32,480 Speaker 8: Frankly, for something like a Costco, you have annuity from 255 00:14:32,560 --> 00:14:35,720 Speaker 8: continued membership. You don't have a lot of people not 256 00:14:35,840 --> 00:14:38,440 Speaker 8: renewing their membership. The fact that you still have the 257 00:14:38,520 --> 00:14:42,440 Speaker 8: opportunity to grow your unit base globally, that it encaptures 258 00:14:42,480 --> 00:14:46,160 Speaker 8: such a wide customer. So I've got great value on prices, 259 00:14:46,320 --> 00:14:49,280 Speaker 8: I've got a sticky customer base that's only growing, and 260 00:14:49,320 --> 00:14:52,160 Speaker 8: I still have the ability to open more units. And 261 00:14:52,520 --> 00:14:56,240 Speaker 8: don't forget Kirklands. They've got private label that's of value 262 00:14:56,480 --> 00:14:57,920 Speaker 8: that can expand to many more. 263 00:14:57,840 --> 00:14:59,640 Speaker 4: Category fantastic products when it go. 264 00:15:00,000 --> 00:15:01,600 Speaker 5: Always impressed by Kirkland products. 265 00:15:01,640 --> 00:15:03,040 Speaker 3: Are you a big costco shopper? 266 00:15:03,160 --> 00:15:03,720 Speaker 5: Yeah, I love it. 267 00:15:03,760 --> 00:15:05,120 Speaker 3: Do you have a costco membership? 268 00:15:05,200 --> 00:15:07,160 Speaker 5: Of course, I have the executive membership. 269 00:15:07,200 --> 00:15:08,880 Speaker 3: Wow, you're definitely a different person than I remember you 270 00:15:08,920 --> 00:15:12,160 Speaker 3: a few years ago. So who's doing well in this environment? 271 00:15:12,520 --> 00:15:15,600 Speaker 3: It's the costcos, It's the walmarts because they're big and 272 00:15:15,640 --> 00:15:18,320 Speaker 3: they're able to really mitigate these tariff concerns. 273 00:15:18,400 --> 00:15:20,320 Speaker 8: What about off price? Look what you just saw at 274 00:15:20,360 --> 00:15:23,560 Speaker 8: Burlington a five percent same store sales increase. Look at 275 00:15:23,560 --> 00:15:27,800 Speaker 8: Alta Beauty very strong, that whole beauty category. There's newness 276 00:15:27,800 --> 00:15:30,920 Speaker 8: and beauty and it's driving demand. What about the category 277 00:15:30,960 --> 00:15:34,120 Speaker 8: of Denham and we've seen Denham be look at Levi's 278 00:15:34,600 --> 00:15:37,560 Speaker 8: they talked about Denham on the category side. I mean 279 00:15:37,720 --> 00:15:40,360 Speaker 8: Gap did well with denhim both at Old Navy and 280 00:15:40,440 --> 00:15:43,120 Speaker 8: the Gap brand. And you're seeing in some of the 281 00:15:43,120 --> 00:15:46,640 Speaker 8: intimates areas the rebound of Victoria's Secret in the turnaround 282 00:15:46,840 --> 00:15:50,480 Speaker 8: with the inflection point and intimates give consumers something that's 283 00:15:50,520 --> 00:15:52,560 Speaker 8: new and different, they'll open their wallet. 284 00:15:52,760 --> 00:15:53,760 Speaker 5: No denim intimates. 285 00:15:53,800 --> 00:15:54,920 Speaker 8: I hope there's no denim in. 286 00:15:55,360 --> 00:15:58,560 Speaker 6: Yeah. When it comes to Matt Tmi, you've got to 287 00:15:58,600 --> 00:16:02,160 Speaker 6: have good genes, right, This is the whole American eagle debate, 288 00:16:02,360 --> 00:16:04,200 Speaker 6: is there or do you see a push in retailers 289 00:16:04,200 --> 00:16:07,560 Speaker 6: of trying to go to this cultural Americana? 290 00:16:08,280 --> 00:16:10,440 Speaker 8: You know what? I think it is cultural? What's part 291 00:16:10,440 --> 00:16:13,440 Speaker 8: of the conversation. So you look at the Catside group 292 00:16:13,480 --> 00:16:16,840 Speaker 8: that basically has the better denin campaign for Gap. It's 293 00:16:16,960 --> 00:16:20,360 Speaker 8: driving up tremendous number of views. You take a look, 294 00:16:20,400 --> 00:16:23,840 Speaker 8: look what was just signed by Abercrombie, whether it is 295 00:16:23,880 --> 00:16:27,280 Speaker 8: the NFL Partnerships, whether it's the Dallas Cowboys. How do 296 00:16:27,320 --> 00:16:29,120 Speaker 8: your remain relevant and expand your. 297 00:16:29,040 --> 00:16:30,760 Speaker 3: Audio that Brittany Mahomes is now going to be the 298 00:16:30,760 --> 00:16:33,120 Speaker 3: face of Averercrombie, Travis Kelcey and I think this came 299 00:16:33,160 --> 00:16:35,600 Speaker 3: out in the day they announced their engagement is. 300 00:16:35,600 --> 00:16:36,680 Speaker 8: Doing American Eagle. 301 00:16:37,000 --> 00:16:39,080 Speaker 3: Partnership with American Eagle, you do have to have a 302 00:16:39,120 --> 00:16:41,040 Speaker 3: celebrity endorsement tied to your brand. 303 00:16:41,320 --> 00:16:43,760 Speaker 8: It's working. I mean you look at Beyonce and Levi's 304 00:16:44,080 --> 00:16:47,120 Speaker 8: and the effectiveness of being able to capture the number 305 00:16:47,160 --> 00:16:50,320 Speaker 8: of their audience and their clubs. You're part of their 306 00:16:50,320 --> 00:16:50,800 Speaker 8: club now. 307 00:16:50,960 --> 00:16:53,760 Speaker 5: By the way, I was shocked the other day when 308 00:16:53,760 --> 00:16:57,000 Speaker 5: I looked at the tj Max stock chart over five years, 309 00:16:57,040 --> 00:17:02,440 Speaker 5: they absolutely crushed it. And I'm guessing that like a 310 00:17:02,520 --> 00:17:05,440 Speaker 5: Burlington and a Ross stores and these discounters are all 311 00:17:05,480 --> 00:17:08,240 Speaker 5: doing very well. What do you like the best? Like 312 00:17:08,280 --> 00:17:11,879 Speaker 5: if you could own a couple of retailers, only a 313 00:17:11,880 --> 00:17:13,760 Speaker 5: couple of retailers, which would they do When you. 314 00:17:13,640 --> 00:17:16,040 Speaker 8: Think of best in class in my world you talked 315 00:17:16,040 --> 00:17:19,439 Speaker 8: about Costco. Look at TJX. They are best in class. 316 00:17:19,480 --> 00:17:22,960 Speaker 8: They have category strength. It's very impressive what they've done. 317 00:17:23,240 --> 00:17:25,800 Speaker 8: You take a look, frankly, what Alta Beauty is doing 318 00:17:25,800 --> 00:17:28,520 Speaker 8: and the Beauty Unleashed plan with the new CEO. Well, 319 00:17:28,560 --> 00:17:31,800 Speaker 8: she's promoted CEO. But it's working and they're capturing a 320 00:17:31,800 --> 00:17:35,600 Speaker 8: wider customer base. It's compelling. You look at brand leaders 321 00:17:35,800 --> 00:17:40,080 Speaker 8: and brand leaders like a tapestry, like a Ralph Lauren Levi's. 322 00:17:40,320 --> 00:17:43,720 Speaker 8: They're effective because they capture the consumer and you think 323 00:17:43,760 --> 00:17:47,280 Speaker 8: about what can be what can be enhanced. Take a 324 00:17:47,280 --> 00:17:50,679 Speaker 8: look at Bathroom Bodyworks, watching that very carefully for the 325 00:17:50,800 --> 00:17:52,920 Speaker 8: speed which they're transforming their. 326 00:17:52,840 --> 00:17:56,320 Speaker 5: Business Bottles and bodyworks. Is that just like soap bombs 327 00:17:56,440 --> 00:17:57,119 Speaker 5: or it's. 328 00:17:56,960 --> 00:18:00,919 Speaker 8: Soaps and sanitizers, But what about forty million loyalty members, 329 00:18:01,320 --> 00:18:03,639 Speaker 8: forty million loyalty members who are going there on a 330 00:18:03,680 --> 00:18:07,880 Speaker 8: regular basis that matters and today capturing that customer's key. 331 00:18:08,040 --> 00:18:08,680 Speaker 7: Here's the key. 332 00:18:08,720 --> 00:18:10,359 Speaker 5: That sounds like the consumer has too much money? 333 00:18:10,520 --> 00:18:11,240 Speaker 6: Well not yet. 334 00:18:11,760 --> 00:18:15,320 Speaker 3: Well it depends some people like you know, special bath 335 00:18:15,359 --> 00:18:16,440 Speaker 3: bombs and things like that. 336 00:18:16,560 --> 00:18:17,680 Speaker 8: And also there's a trade doown. 337 00:18:17,840 --> 00:18:20,639 Speaker 3: Here's the true Here's the big question though, in the 338 00:18:20,720 --> 00:18:23,840 Speaker 3: luxury market, especially makeup, would you buy do you think 339 00:18:23,880 --> 00:18:27,199 Speaker 3: consumers will buy one hundred and sixty dollars lipstick. 340 00:18:27,400 --> 00:18:31,040 Speaker 8: Very expensive, more expensive than the Emez eighty dollars lipstick 341 00:18:31,119 --> 00:18:34,359 Speaker 8: or Chanelle fifty dollars lipstick. Yes, there will be people 342 00:18:34,359 --> 00:18:36,800 Speaker 8: who buy it because it's the entryway too. Instead of 343 00:18:36,840 --> 00:18:39,359 Speaker 8: getting the two or three thousand dollars naval full bag, 344 00:18:39,440 --> 00:18:41,320 Speaker 8: you're going to get one hundred and sixty dollars lipstick 345 00:18:41,320 --> 00:18:43,399 Speaker 8: and you'll get a case that says LV Wow. 346 00:18:43,600 --> 00:18:45,080 Speaker 3: You really think that people are gonna buy this? 347 00:18:46,320 --> 00:18:49,440 Speaker 8: You can't surpass what a brand can generate with a 348 00:18:49,560 --> 00:18:50,560 Speaker 8: lifestyle offering. 349 00:18:50,760 --> 00:18:52,600 Speaker 3: And for Matt, if you don't know this is Vaton 350 00:18:54,080 --> 00:18:57,560 Speaker 3: stay with us. More Bloomberg surveillance coming up after this. 351 00:19:06,840 --> 00:19:08,720 Speaker 3: Now we're going to get a reaction from Ryan Wang, 352 00:19:08,720 --> 00:19:11,800 Speaker 3: the US economist at HSBC. So what do you make 353 00:19:11,800 --> 00:19:12,040 Speaker 3: of this? 354 00:19:12,880 --> 00:19:16,080 Speaker 1: Yeah, Well, as Michael said, the numbers are broadly in 355 00:19:16,119 --> 00:19:19,159 Speaker 1: line with expectations. I still do think it's important that 356 00:19:19,200 --> 00:19:21,359 Speaker 1: we're seeing that step up in the core PC inflation 357 00:19:21,440 --> 00:19:23,800 Speaker 1: rate up to two point nine percent. The Fed has 358 00:19:23,840 --> 00:19:26,240 Speaker 1: been projecting that it will reach at least a little 359 00:19:26,240 --> 00:19:28,080 Speaker 1: bit above three percent at the end of this year, 360 00:19:28,320 --> 00:19:29,960 Speaker 1: and that's very key. I mean, if we know that 361 00:19:30,000 --> 00:19:32,040 Speaker 1: inflation is going to go up, and then we're hoping 362 00:19:32,080 --> 00:19:34,800 Speaker 1: that inflation eventually begins to cool off after the full 363 00:19:34,840 --> 00:19:37,359 Speaker 1: effect of tariffs comes through, it's still important to track 364 00:19:37,440 --> 00:19:38,320 Speaker 1: these numbers every month. 365 00:19:38,359 --> 00:19:41,280 Speaker 3: How uncomfortable is it to actually see on your screen 366 00:19:41,359 --> 00:19:44,600 Speaker 3: two point nine percent for core PCEE yet at the 367 00:19:44,640 --> 00:19:46,679 Speaker 3: same time pretty much knowing the FED is going to 368 00:19:46,720 --> 00:19:48,320 Speaker 3: cut interest rates next month. 369 00:19:48,640 --> 00:19:51,119 Speaker 1: Well, that's that's really the tricky part. I mean, inflation 370 00:19:51,200 --> 00:19:53,480 Speaker 1: admittedly is much slower than it was just a few 371 00:19:53,560 --> 00:19:56,399 Speaker 1: years ago. We're not getting those types of price increases. 372 00:19:56,440 --> 00:19:58,560 Speaker 1: But at the end of the day, three percent is 373 00:19:58,560 --> 00:20:01,400 Speaker 1: still not the fedes two percent. And this is why, 374 00:20:01,440 --> 00:20:04,480 Speaker 1: although we do have some kind of consistency amongst the 375 00:20:04,520 --> 00:20:07,600 Speaker 1: FED policy makers, FED shared drone pal saying that yes, okay, 376 00:20:07,600 --> 00:20:10,360 Speaker 1: tariffs are going to be a one time effect, even 377 00:20:10,400 --> 00:20:13,040 Speaker 1: if that one time effect takes a year or multiple 378 00:20:13,119 --> 00:20:16,080 Speaker 1: quarters that fully pass through. But still we need to 379 00:20:16,119 --> 00:20:18,080 Speaker 1: track the data. And I do think you know, if 380 00:20:18,080 --> 00:20:21,480 Speaker 1: the FED does cut rates by twenty five base points 381 00:20:21,480 --> 00:20:24,320 Speaker 1: in September, it's still not going to necessarily mean a 382 00:20:24,320 --> 00:20:26,800 Speaker 1: sequence of rate cuts. And that's largely because of these 383 00:20:26,800 --> 00:20:27,639 Speaker 1: inflation numbers. 384 00:20:27,880 --> 00:20:33,240 Speaker 5: Chris Waller called underlying inflation close to two percent. I 385 00:20:33,280 --> 00:20:36,439 Speaker 5: don't know if he's a statistician, but do you agree. 386 00:20:37,400 --> 00:20:38,280 Speaker 4: Well, I just think. 387 00:20:38,160 --> 00:20:40,720 Speaker 1: It's very tricky to get into this idea of just 388 00:20:40,880 --> 00:20:43,560 Speaker 1: excluding the tariff effect and trying to look at inflation 389 00:20:43,640 --> 00:20:46,159 Speaker 1: on that basis. So no, I mean, if we were 390 00:20:46,200 --> 00:20:48,600 Speaker 1: talking about core inflation that was below two and a 391 00:20:48,640 --> 00:20:51,160 Speaker 1: half percent, Okay, now we're talking about arrange, that's sort 392 00:20:51,200 --> 00:20:54,080 Speaker 1: of within a few tents. But when you see an 393 00:20:54,080 --> 00:20:56,760 Speaker 1: inflation rate that's closer to three percent, and really it's 394 00:20:56,760 --> 00:20:59,600 Speaker 1: the mix of inflation that's coming through. Some of it 395 00:20:59,640 --> 00:21:02,399 Speaker 1: has been, you know, incremental increases in goods prices that 396 00:21:02,880 --> 00:21:05,199 Speaker 1: are clearly related to tariffs, but some of it has 397 00:21:05,200 --> 00:21:08,200 Speaker 1: been on the services side, and that's more structural. Of course, 398 00:21:08,200 --> 00:21:12,240 Speaker 1: services inflation tends to run above goods inflation, and although 399 00:21:12,240 --> 00:21:15,800 Speaker 1: we've seen some deceleration in rental inflation, the overall numbers 400 00:21:15,800 --> 00:21:17,560 Speaker 1: are still adding up to to what we see two 401 00:21:17,600 --> 00:21:18,080 Speaker 1: point nine. 402 00:21:18,160 --> 00:21:20,320 Speaker 5: By the way, we were talking about this with Dana 403 00:21:20,320 --> 00:21:25,040 Speaker 5: Telsea just a moment ago. The administration has argued that 404 00:21:25,240 --> 00:21:27,440 Speaker 5: these tariffs are just going to be a one time 405 00:21:27,520 --> 00:21:31,440 Speaker 5: price increase, But I keep wondering, because the tariff structure 406 00:21:31,560 --> 00:21:36,520 Speaker 5: is so dragged out, doesn't that lead to incremental price 407 00:21:36,600 --> 00:21:37,760 Speaker 5: increases over time? 408 00:21:38,440 --> 00:21:40,160 Speaker 1: Well, I think we're definitely going to see a mix. 409 00:21:40,200 --> 00:21:43,320 Speaker 1: If you really talk to businesses they're adopting different strategies. 410 00:21:43,400 --> 00:21:46,879 Speaker 1: Some businesses passed the tariff straight through right away, but 411 00:21:46,880 --> 00:21:50,320 Speaker 1: that wasn't the majority. The majority adopted other strategies front 412 00:21:50,320 --> 00:21:53,760 Speaker 1: loading of inventory, selling down the pre tariff inventory, and 413 00:21:53,800 --> 00:21:56,560 Speaker 1: some have passed along a portion of those price increases, 414 00:21:56,560 --> 00:21:58,320 Speaker 1: but not all of it. So I do think we're 415 00:21:58,320 --> 00:22:01,520 Speaker 1: going to see an extended period where some products are 416 00:22:01,840 --> 00:22:04,080 Speaker 1: affected by tariffs. Now, is that going to be enough 417 00:22:04,119 --> 00:22:06,880 Speaker 1: to push the overall inflation number, let's say, to three 418 00:22:06,880 --> 00:22:09,680 Speaker 1: and a half percent to four percent? I don't necessarily 419 00:22:09,720 --> 00:22:11,560 Speaker 1: think we're going to get that high. I think more 420 00:22:11,640 --> 00:22:14,200 Speaker 1: likely we're going to see this kind of sticky inflation 421 00:22:14,440 --> 00:22:17,320 Speaker 1: close to three percent. We're looking for actually cor inflation 422 00:22:17,440 --> 00:22:19,240 Speaker 1: to still be above two and a half percent at 423 00:22:19,280 --> 00:22:22,439 Speaker 1: the end of next year. And so again there's this 424 00:22:22,520 --> 00:22:24,960 Speaker 1: idea of a one time effect, but that doesn't mean 425 00:22:24,960 --> 00:22:26,680 Speaker 1: that one time is a short time. 426 00:22:26,840 --> 00:22:31,440 Speaker 5: They also wanted to average two percent, right, and considering 427 00:22:31,480 --> 00:22:33,720 Speaker 5: how high we've been and even how high we are now, 428 00:22:33,760 --> 00:22:36,400 Speaker 5: we need to go far below two percent and hold 429 00:22:36,440 --> 00:22:39,480 Speaker 5: there for years, if not decades, to average two percent, 430 00:22:39,480 --> 00:22:41,240 Speaker 5: wouldn't we. 431 00:22:40,560 --> 00:22:43,719 Speaker 1: Well that's very interesting because the part that was somewhat 432 00:22:43,760 --> 00:22:47,400 Speaker 1: under the radar at Chairpal's latest comments at the Jacksonhalls 433 00:22:47,400 --> 00:22:49,640 Speaker 1: symposium is actually that the FED is backing away from 434 00:22:49,640 --> 00:22:52,440 Speaker 1: that average inflation targeting idea, but they won't say. 435 00:22:52,359 --> 00:22:55,560 Speaker 3: That, not explicit about it. It feels like they're targeting 436 00:22:55,560 --> 00:22:58,600 Speaker 3: a range, but they won't actually say they're targeting range. 437 00:22:58,640 --> 00:23:00,840 Speaker 1: Well, I think this idea that Okay, you know, you 438 00:23:00,880 --> 00:23:02,560 Speaker 1: have a two percent target, and we want to pay 439 00:23:02,560 --> 00:23:04,800 Speaker 1: a lot of attention to that number. But still there 440 00:23:04,880 --> 00:23:08,439 Speaker 1: is some there's some allowance of course for data noise. 441 00:23:08,480 --> 00:23:10,359 Speaker 4: I think that is there. 442 00:23:10,400 --> 00:23:12,560 Speaker 1: But I think we're back in a situation where buy 443 00:23:12,600 --> 00:23:15,840 Speaker 1: guns are by guns. We're not really trying to undershoot 444 00:23:15,880 --> 00:23:18,239 Speaker 1: after the elevated inflation a few years ago, but we 445 00:23:18,320 --> 00:23:20,000 Speaker 1: still do want to get back to two percent. 446 00:23:20,400 --> 00:23:23,480 Speaker 3: Governor Waller yesterday basically said he's all in on seventy 447 00:23:23,480 --> 00:23:27,760 Speaker 3: five basis points, except his view could change depending on 448 00:23:27,800 --> 00:23:30,600 Speaker 3: the employment report. This time next week. We'll be looking 449 00:23:30,640 --> 00:23:32,960 Speaker 3: at that job's report. What are you and the team expecting. 450 00:23:33,480 --> 00:23:35,800 Speaker 1: Yeah, so you know we're looking for a number that's 451 00:23:35,840 --> 00:23:38,760 Speaker 1: around seventy thousand, right, So that would be pretty close 452 00:23:38,840 --> 00:23:41,760 Speaker 1: to the July outcome. But it would be a little 453 00:23:41,760 --> 00:23:45,639 Speaker 1: bit higher than the three month average of thirty five thousand, 454 00:23:45,680 --> 00:23:47,280 Speaker 1: which has attracted a lot of attention. Of course, we 455 00:23:47,320 --> 00:23:50,800 Speaker 1: remember last month those massive downward revisions to really the 456 00:23:50,800 --> 00:23:53,760 Speaker 1: May and the June data, right. So the tricky thing 457 00:23:53,800 --> 00:23:56,720 Speaker 1: here is that we know that a slowdown in net 458 00:23:56,720 --> 00:23:59,399 Speaker 1: immigration has played a huge role in why these numbers 459 00:23:59,400 --> 00:24:01,920 Speaker 1: are lower. We know it's a combination of lower labor 460 00:24:01,960 --> 00:24:04,480 Speaker 1: supply and lower labor demand. Both are playing a role, 461 00:24:04,640 --> 00:24:06,719 Speaker 1: but we're not really sure which is the bigger factor. 462 00:24:06,960 --> 00:24:09,679 Speaker 1: I mean, you could explain this slowdown just from slower 463 00:24:09,680 --> 00:24:13,200 Speaker 1: population growth. Lower population growth probably has taken at least 464 00:24:13,200 --> 00:24:15,640 Speaker 1: a point off of growth in the past year, both 465 00:24:15,640 --> 00:24:18,520 Speaker 1: from a job side and also from a GDP perspective. 466 00:24:19,400 --> 00:24:21,680 Speaker 5: Ran when you look at the curve, when you look 467 00:24:21,680 --> 00:24:24,120 Speaker 5: at the ten year holding at four twenty, and then 468 00:24:24,200 --> 00:24:29,439 Speaker 5: here so many important intelligent people talk about the dangers 469 00:24:29,560 --> 00:24:31,600 Speaker 5: of attacking FED independence. 470 00:24:31,600 --> 00:24:34,479 Speaker 1: How do you reconcile those two things? Well, I do 471 00:24:34,520 --> 00:24:37,080 Speaker 1: think clearly this is a story that has evolved even 472 00:24:37,080 --> 00:24:39,119 Speaker 1: in the last few weeks and months, and it is 473 00:24:39,160 --> 00:24:43,160 Speaker 1: something that is very likely contributing to the steepness of 474 00:24:43,240 --> 00:24:45,040 Speaker 1: the yield curve right. So on the one hand, it's 475 00:24:45,040 --> 00:24:47,560 Speaker 1: the FED that has not really acted at all up 476 00:24:47,640 --> 00:24:49,800 Speaker 1: until this point, and on the other hand, it's these 477 00:24:49,840 --> 00:24:53,760 Speaker 1: concerns incrementally about what FED policy will look like, you know, 478 00:24:53,880 --> 00:24:55,520 Speaker 1: not just for the rest of this year, but into 479 00:24:55,600 --> 00:24:56,040 Speaker 1: next year. 480 00:24:57,119 --> 00:25:00,640 Speaker 2: This is the Bloomberg's Events podcast, bringing you the best 481 00:25:00,720 --> 00:25:03,800 Speaker 2: in markets, economics, a geo politics. You can watch the 482 00:25:03,800 --> 00:25:06,840 Speaker 2: show live on Bloomberg TV weekday mornings from six am 483 00:25:06,960 --> 00:25:10,920 Speaker 2: to nine am Eastern. Subscribe to the podcast on Apple, Spotify, 484 00:25:11,080 --> 00:25:13,280 Speaker 2: or anywhere else you listen, and as always, on the 485 00:25:13,320 --> 00:25:15,760 Speaker 2: Bloomberg Terminal and the Bloomberg Business app.