WEBVTT - Surveillance: Cabana on the Fed 0:00:05.120 --> 0:00:07.119 This is the Bloomberg Surveillance Podcast. 0:00:07.160 --> 0:00:11.000 I'm Tom Keane, along with Jonathan Farrow and Lisa Abramowitz. 0:00:11.280 --> 0:00:15.760 Join us each day for insight from the best and economics, geopolitics, 0:00:15.760 --> 0:00:20.720 finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 0:00:20.960 --> 0:00:25.439 Spotify and anywhere you get your podcasts, and always on 0:00:25.520 --> 0:00:29.840 Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business App. 0:00:30.000 --> 0:00:31.680 We're just going to move on to bonds, and we 0:00:31.720 --> 0:00:32.839 do that with Mark Cambana. 0:00:32.920 --> 0:00:35.280 He is one of our favorites here at Bloomberg Surveillance, 0:00:35.320 --> 0:00:38.120 head of US rates Strategy at Bank of America in 0:00:38.159 --> 0:00:41.040 the hallmark here as he writes with clarity and avoids 0:00:41.200 --> 0:00:43.760 bs and so you lead your note with one of 0:00:43.760 --> 0:00:48.240 the all time jargon words of the moment, resilience. Everybody 0:00:48.280 --> 0:00:51.480 out there, the Boston Red Sox are showing resilience. 0:00:51.560 --> 0:00:52.559 What a bunch of boloney. 0:00:52.920 --> 0:00:56.080 Translate your use of resilience to the real world of 0:00:56.120 --> 0:00:56.720 fixed income. 0:00:56.800 --> 0:00:59.200 Well, I think it's a generous characterization of the Red Sox. 0:01:00.360 --> 0:01:03.280 But what we mean by this is that the economy 0:01:03.320 --> 0:01:06.480 has really shown that it has been relatively insensitive to 0:01:06.720 --> 0:01:09.679 higher interest rates so far. We all thought that we 0:01:09.720 --> 0:01:12.520 would see the unemployment rate tick higher. We thought we 0:01:12.560 --> 0:01:15.560 would see fixed investment drop by more. We thought we 0:01:15.560 --> 0:01:19.119 would see financial conditions tightened more substantially as a result 0:01:19.120 --> 0:01:20.840 of all of the rate hikes that have been delivered 0:01:20.840 --> 0:01:23.440 so far and that are expected either in the future 0:01:23.560 --> 0:01:26.560 or that are expected to remain elevated for a while. 0:01:27.000 --> 0:01:29.119 And what we've seen is that the economy is really 0:01:29.160 --> 0:01:32.319 held in and that has challenged at least some perceptions 0:01:32.319 --> 0:01:35.080 at BAVA about how much we would expect to see 0:01:35.080 --> 0:01:39.240 the economy turn. Our economists just last week changed their 0:01:39.280 --> 0:01:42.319 base case from a recession to a soft landing. Now 0:01:42.360 --> 0:01:45.920 that's a maybe mindor distinction, but nonetheless it implies less 0:01:45.920 --> 0:01:48.880 of upward pressure in the unemployment rate. It implies an 0:01:48.880 --> 0:01:52.000 economy that can continue to grow for longer, and it 0:01:52.040 --> 0:01:53.840 implies that the FED is going to probably have to 0:01:53.880 --> 0:01:56.400 adjust accordingly. And the way that we think that that 0:01:56.440 --> 0:02:00.280 adjustment takes place is not necessarily through a higher overall 0:02:00.360 --> 0:02:02.920 terminal rate, But for a FED that does indeed remain 0:02:03.000 --> 0:02:07.000 higher for longer, and by cutting slower than the market anticipates, 0:02:07.240 --> 0:02:09.320 certainly higher for longer can mean that you hold the 0:02:09.400 --> 0:02:11.680 terminal rate for an extended period of time, or it 0:02:11.680 --> 0:02:14.000 can mean that you maybe cut once a quarter, which 0:02:14.000 --> 0:02:16.080 is now our economist base case, as opposed to the 0:02:16.080 --> 0:02:19.640 almost every meeting rate cut that the market is anticipating 0:02:19.800 --> 0:02:20.800 once it gets started. 0:02:20.880 --> 0:02:22.959 So would you push back against the people one after 0:02:23.000 --> 0:02:24.919 another who've come on this show and said we're buying 0:02:24.919 --> 0:02:27.119 long term bonds because we think it's great to lock 0:02:27.160 --> 0:02:29.360 in four percent yields. It's going down to three and 0:02:29.400 --> 0:02:31.680 a quarter three and a half percent on the tenure. 0:02:32.080 --> 0:02:37.480 So we're still reasonably constructive on duration. We do recommend 0:02:37.520 --> 0:02:39.880 that clients trade the back end of the rates curve 0:02:39.960 --> 0:02:43.440 with a tactical long bias. You've got to respect the range, 0:02:43.440 --> 0:02:45.720 which looks intends to be around three seventy five to 0:02:45.720 --> 0:02:49.200 four to twenty five now. And we think that because 0:02:49.240 --> 0:02:51.720 we just believe that long end rates look somewhat asymmetrically 0:02:51.760 --> 0:02:54.040 skewed to the downside. It's a lot more difficult for 0:02:54.120 --> 0:02:56.760 us to envision tends at five than it is tens 0:02:56.760 --> 0:03:00.040 at three. And with a FED that's cutting slow, No, 0:03:00.440 --> 0:03:03.040 you're not going to maybe see as significant of a 0:03:03.080 --> 0:03:05.480 bond market rally. You're not going to see as rapid 0:03:05.520 --> 0:03:08.079 of a yield decline. But we still think that yields 0:03:08.080 --> 0:03:10.320 will be moving lower in time as the FED does 0:03:10.320 --> 0:03:12.880 indeed move to cuts, but just cutting slower perhaps than 0:03:12.880 --> 0:03:13.839 the market anticipates. 0:03:13.919 --> 0:03:16.560 I want to just ask about the consequences of holding 0:03:16.639 --> 0:03:19.680 rates at this level for a longer period of time. 0:03:19.919 --> 0:03:25.000 Are people adequately understanding how restrictive that becomes as growth 0:03:25.040 --> 0:03:27.840 slows and as companies have to start refinancing. 0:03:27.919 --> 0:03:28.680 Yeah, it's a great question. 0:03:28.720 --> 0:03:30.680 I heard you come on earlier about credit and Torsten 0:03:30.720 --> 0:03:34.640 Slock and what he is saying about underlying fundamentals there. Look, 0:03:34.680 --> 0:03:36.680 we do think that the credit markets are going to 0:03:36.720 --> 0:03:40.320 be okay if the FED ultimately delivers on what's priced 0:03:40.360 --> 0:03:44.000 for cuts in the forwards, because as you have a 0:03:44.040 --> 0:03:45.920 lot of maturities that come do the FED will be 0:03:45.920 --> 0:03:48.200 lowering rates and that's going to soften the blow to 0:03:48.240 --> 0:03:50.440 some extent. The challenge will be if the FED does 0:03:50.520 --> 0:03:53.400 indeed remain higher for longer and if you start to 0:03:53.400 --> 0:03:55.960 see some of those refinancings occur at higher rates and 0:03:56.000 --> 0:03:58.760 see companies begin to adjust how they're going to manage 0:03:58.800 --> 0:04:02.880 that cost factor into their own calculus. But it's a 0:04:02.920 --> 0:04:04.400 part of what I think the FED is looking for. 0:04:04.440 --> 0:04:06.920 They need to slow the economy somewhat, and they need 0:04:06.960 --> 0:04:10.640 to ensure that inflation does indeed remain around two in 0:04:10.800 --> 0:04:13.400 our economist's new profile for growth. They do think that 0:04:13.400 --> 0:04:16.680 inflation just falls slower understandably. Right You're going to be 0:04:16.720 --> 0:04:20.839 averaging two point eight percent next year, almost two to 0:04:20.880 --> 0:04:23.839 two and a half percent in twenty twenty five, and 0:04:23.839 --> 0:04:26.960 the Fed's going to have to move rates slower, allow 0:04:27.040 --> 0:04:29.599 for more restrictive monetary policy over time in order to 0:04:29.640 --> 0:04:30.400 ensure that that's sticks. 0:04:30.480 --> 0:04:32.920 We're tight in time, But the questions too important. Can 0:04:32.960 --> 0:04:35.160 price give way? Is yield moose higher? If I look 0:04:35.200 --> 0:04:38.039 at the Bloomberg Total Return Index, I got a Pennant formation. 0:04:38.200 --> 0:04:41.719 I'm really on support right now? Can price break through 0:04:41.760 --> 0:04:43.440 that price down yield up? 0:04:43.760 --> 0:04:45.080 What we think you need to see is that you 0:04:45.120 --> 0:04:49.160 need to see some type of economic driver for that. 0:04:49.520 --> 0:04:51.800 We know that supply demand in the treasure market is 0:04:51.960 --> 0:04:54.880 really quite daunting right now. You had a surprise from 0:04:54.920 --> 0:04:57.840 the US Treasury on supply last week. The number one 0:04:57.880 --> 0:04:59.480 question that we get right now is who's going to 0:04:59.520 --> 0:05:01.600 buy the b and so what you really need to 0:05:01.600 --> 0:05:03.599 see is that you need to see the economy provide 0:05:03.680 --> 0:05:07.400 cover for investors to justify that long duration bias that 0:05:07.440 --> 0:05:10.599 we've been recommending that they appear to be holding, especially 0:05:10.600 --> 0:05:14.599 on the real money side, and thus far you haven't 0:05:14.600 --> 0:05:18.240 really had it yet. CPI tomorrow should hopefully move us 0:05:18.320 --> 0:05:20.960 in that direction, but you really need to see signs 0:05:21.000 --> 0:05:24.000 of a broader economic moderation, and right now the growth 0:05:24.040 --> 0:05:26.440 data is not providing that because the economy continues to 0:05:26.440 --> 0:05:27.000 re accelerate. 0:05:27.120 --> 0:05:30.000 CPI tomorrow, morning, Mark, this was good as alwise, Mark 0:05:30.000 --> 0:05:42.120 about it. Thank you, sir, of Thanks for America right now. 0:05:42.160 --> 0:05:46.560 If Kathleen bus Johnson joins US chief economist at Nationwide Mutual, 0:05:46.640 --> 0:05:49.280 katy Am, I right that the public here doesn't really 0:05:49.360 --> 0:05:52.599 care about all this microdata analysis. They're looking at the 0:05:52.640 --> 0:05:55.599 one year, the two year, the three year pandemic inflation 0:05:56.240 --> 0:05:57.839 and it's killing them. 0:05:58.360 --> 0:06:00.320 Well, good, good morning. Time'm happy to be with you 0:06:00.480 --> 0:06:04.640 Lisa and Mike this morning. I think that weighs on 0:06:04.680 --> 0:06:07.240 the Fed Reserve, not just ways on consumers, but it 0:06:07.320 --> 0:06:10.440 is something in the back of all the Fed officials, 0:06:11.120 --> 0:06:13.360 you know mind when they think about inflation. Yes, they're 0:06:13.400 --> 0:06:15.560 looking at the most recent print and they're doing the 0:06:15.600 --> 0:06:19.600 three month annualized, six month annualize, but they know that 0:06:19.640 --> 0:06:24.200 this inflation is really attacks on consumers, especially lower income 0:06:24.480 --> 0:06:27.960 and middle income households. So you know, Chairman Pale wants 0:06:28.000 --> 0:06:30.160 to make sure that you know, when he looks back 0:06:30.240 --> 0:06:34.280 and his legacy is assessed, he's not seen as leaving 0:06:34.360 --> 0:06:37.080 with high inflation. He missed right, The Fed thought it 0:06:37.080 --> 0:06:40.520 would be transitory. You don't really want to leave and 0:06:40.600 --> 0:06:43.880 move on and still have high inflation, you know, as 0:06:43.920 --> 0:06:45.279 you ended your tenure. 0:06:45.000 --> 0:06:47.440 There, Kathy, are you in the camp who believes that 0:06:47.480 --> 0:06:49.960 the CPI report will be really important in order to 0:06:50.000 --> 0:06:53.280 determine whether the Fed hikes or stays put, or are 0:06:53.279 --> 0:06:55.560 you in the camp that probably it will not give 0:06:55.640 --> 0:06:57.479 us a whole lot of information. It might even be 0:06:57.520 --> 0:07:00.840 a head fake for reinflation that we see later this year. 0:07:02.320 --> 0:07:05.840 Yeah, so timing is always difficult. I think for now 0:07:05.880 --> 0:07:09.680 we are in a disinflationary trend, and I do think 0:07:10.480 --> 0:07:14.640 tomorrow's report and the subsequent report after that will be 0:07:14.680 --> 0:07:18.480 important as the Fed convenience in September to decide whether 0:07:18.640 --> 0:07:21.640 you know, to keep you know, raise rates again or 0:07:21.680 --> 0:07:25.760 to be on hold. But you're right when you look out. 0:07:26.280 --> 0:07:28.240 The problem is there's quite a long lag. So we 0:07:28.320 --> 0:07:33.720 look at home prices. They lead the rental inflation by 0:07:33.760 --> 0:07:37.160 about a year and a half in our modeling. So yes, 0:07:37.200 --> 0:07:39.360 eventually could start to turn back up, but it's a 0:07:39.400 --> 0:07:43.280 long time before that. But yeah, we are concerned about that. 0:07:44.000 --> 0:07:45.840 You know, what I'm also concerned about is the fact 0:07:45.840 --> 0:07:49.120 you were talking about this earlier with GDP growth. We 0:07:49.200 --> 0:07:52.680 seem to be accelerating, right we two percent Q one 0:07:53.080 --> 0:07:55.480 to four Q two and now you know at least 0:07:55.520 --> 0:07:57.480 three percent. We're not quite at the four percent they 0:07:57.480 --> 0:08:00.080 Atlanta Fed, as Mike rightly said, that's kind of a 0:08:00.080 --> 0:08:05.400 snapshot of current data. But the economy accelerating or not 0:08:05.480 --> 0:08:08.160 certainly not soling below potential what the Fed wants. I 0:08:08.160 --> 0:08:11.320 think it's tough for to bring down inflation from an 0:08:11.360 --> 0:08:12.360 economic perspective. 0:08:12.800 --> 0:08:15.880 We were talking about wage inflation with respective particularly to 0:08:15.920 --> 0:08:19.600 the union organization and what we saw with ups and 0:08:19.640 --> 0:08:21.520 some of the wages. John wants to get one hundred 0:08:21.520 --> 0:08:24.200 and seventy thousand dollars job driving a truck, as he 0:08:24.240 --> 0:08:29.080 informed us this morning, does that factor into your estimates 0:08:29.240 --> 0:08:32.120 of wage inflation of the dynamic of how much you 0:08:32.120 --> 0:08:35.960 could get an acceleration in the economy as wages continue 0:08:36.000 --> 0:08:39.320 to increase. Is that something that you're looking more closely 0:08:39.400 --> 0:08:42.959 at as you do hear more of these organized labor discussions. 0:08:44.440 --> 0:08:48.640 Yeah, I'm concerned, you know, I'm concerned that not that 0:08:49.200 --> 0:08:54.280 wage growth is the strong wage growth is causing inflation, 0:08:54.400 --> 0:08:58.080 but that it's a barrier to lower inflation. Certainly, it's 0:08:58.120 --> 0:09:01.719 great for workers to get their share of the income PI, 0:09:02.640 --> 0:09:04.959 but it comes at a time where we had these 0:09:05.000 --> 0:09:09.960 inflation pressures, and again it's just a barrier to lowering it. 0:09:10.000 --> 0:09:12.240 So I think it makes it more difficult, keeps the 0:09:12.320 --> 0:09:16.240 Fed more in a hawkish tone or mood, and may 0:09:16.280 --> 0:09:17.880 even lead them to raise rates further. 0:09:18.400 --> 0:09:20.400 Kathy went from rent and housing. 0:09:20.440 --> 0:09:22.120 That's what we talked to, particularly in New York, were 0:09:22.120 --> 0:09:24.760 really focused on at twenty four to seven. What's food 0:09:24.800 --> 0:09:27.839 inflation doing, what's auto inflation doing? 0:09:29.360 --> 0:09:33.360 Yeah, So food and inflation has come down quite nicely 0:09:34.040 --> 0:09:37.720 since the peak, especially right after the Ukraine the outbreak 0:09:37.720 --> 0:09:41.960 of the Ukraine Russia War, and that's encouraging. Now there's 0:09:42.000 --> 0:09:46.520 still concerns, right if there's some kind of blockade and 0:09:46.679 --> 0:09:52.080 what happens with wet prices and just in general there's 0:09:52.120 --> 0:09:55.679 still I think a fragility and uncertainty about you know, 0:09:55.760 --> 0:09:59.000 if there could be disruptions. But in general food inflation 0:09:59.040 --> 0:10:03.320 we should be key, as Mike said earlier, inflation slowing, 0:10:03.360 --> 0:10:06.280 but we're not seeing outright declines. Now the auto sector 0:10:06.360 --> 0:10:10.640 is different. We are seeing used car prices outright decline, 0:10:10.640 --> 0:10:16.480 and that's welcome news for consumers and also for inflation measures. 0:10:16.559 --> 0:10:20.000 But you know, how far that goes is key. You know, 0:10:20.040 --> 0:10:23.120 we may see some outright declines, but we're still seeing 0:10:23.120 --> 0:10:26.199 a supply demand imbalance in the auto sector. Meeting auto 0:10:26.200 --> 0:10:29.959 companies when they do produce and supply comes online, we're 0:10:30.000 --> 0:10:34.480 seeing demand exactly match that. So I think there's still 0:10:34.600 --> 0:10:38.480 upward pressure. Again, resistance in the auto sector, especially for 0:10:38.559 --> 0:10:39.559 new autos. 0:10:39.640 --> 0:10:42.520 Remind us as we end this Kathleen mus Johnsick. The 0:10:42.640 --> 0:10:46.440 inflation series that matters to Chairman Powell, which is it? 0:10:48.280 --> 0:10:50.760 So it is core inflation, and I would say it's 0:10:50.800 --> 0:10:55.440 super core inflation. So that's core inflation less the rent 0:10:56.559 --> 0:10:59.640 and the reason being that rental inflation even when we 0:10:59.679 --> 0:11:01.960 model that should come down very short. We think it 0:11:02.000 --> 0:11:04.400 goes from eight percent at the peak to about five 0:11:04.440 --> 0:11:06.840 percent by year end, but that is bigd then they 0:11:06.880 --> 0:11:10.679 want to see what's happening the service prices elsewhere, you know, 0:11:10.800 --> 0:11:13.400 outside of rental Kales, great. 0:11:13.160 --> 0:11:15.080 Brief, Kathy Beson Thick, thank you so much. 0:11:19.280 --> 0:11:22.160 Victoria Fernandez, is whether it's around the table, Chief Market Strategistic, 0:11:22.160 --> 0:11:25.040 Crossmark Global Investments, Victoria, good morning, Good morning. Not going 0:11:25.040 --> 0:11:26.920 to ask you rupert in this morning. Let's talk about 0:11:26.920 --> 0:11:28.800 your price target on the S and P five hundred. 0:11:29.080 --> 0:11:30.640 It's amazing for me that we've seen this day to 0:11:30.679 --> 0:11:33.120 come out of China and typically years ago what we 0:11:33.120 --> 0:11:35.080 would have seen on the morning like this morning through 0:11:35.120 --> 0:11:37.640 this week, it's just an aggressive running in the bond market, 0:11:37.760 --> 0:11:41.040 yields much lower. We'd be talking about China exporting deflation 0:11:41.480 --> 0:11:44.000 to the rest of the world. What's changed, Well. 0:11:43.880 --> 0:11:45.240 I think we have to look under the hood a 0:11:45.280 --> 0:11:47.800 little bit on this China data. Yes, the headline numbers 0:11:47.840 --> 0:11:51.320 are down and we're seeing deflation, there are disinflation, but 0:11:51.400 --> 0:11:54.480 the core number is actually the highest it's been since January. 0:11:54.679 --> 0:11:56.840 It's the food prices in China that brought down that 0:11:56.920 --> 0:12:00.000 headline number. You had port prices up twenty six percent 0:12:00.320 --> 0:12:03.760 in June of last year. They're flat this month, so 0:12:04.240 --> 0:12:06.520 we have to look a little bit more and see 0:12:06.559 --> 0:12:09.840 what is driving it. Typically you would see a response, 0:12:09.880 --> 0:12:12.720 but I think because that underlying core inflation, which is 0:12:12.720 --> 0:12:15.640 the concern here in the US, what is that core 0:12:15.640 --> 0:12:18.080 inflation going to look like? Is that going to remain sticky, 0:12:18.360 --> 0:12:21.160 especially with wages? That's going to be the concern. 0:12:21.280 --> 0:12:24.240 I'm so happy you're here. Cross Mark has such a 0:12:24.480 --> 0:12:28.120 pulse on what people emotionally are doing with their money 0:12:28.160 --> 0:12:32.920 right now, institutional, high high networth and the whole thing. 0:12:33.440 --> 0:12:36.880 What's the fear level out there meeting to meeting at 0:12:36.880 --> 0:12:37.520 cross Mark. 0:12:37.600 --> 0:12:40.280 Yeah, it's gone up definitely over the last quarter. Each 0:12:40.320 --> 0:12:42.840 meeting that we have. People are concerned because we've been 0:12:42.920 --> 0:12:45.760 telling our clients we think there's going to be some 0:12:45.840 --> 0:12:48.200 choppiness here. We think we're going to see a pullback 0:12:48.240 --> 0:12:50.040 in the fourth quarter of this year, so we need 0:12:50.080 --> 0:12:52.600 to be prepared for that. So they're getting a little concerned. 0:12:52.800 --> 0:12:54.800 What we've seen as of late, though, is more people 0:12:54.840 --> 0:12:57.680 wanting to go into the bond market. They see these yields, 0:12:57.960 --> 0:13:01.040 they think that we're probably at peak close to peak 0:13:01.360 --> 0:13:03.160 in bond yields. You know, we were what floor in 0:13:03.200 --> 0:13:05.320 a quarter in October of last year. We think that's 0:13:05.320 --> 0:13:07.920 the peak for the cycle. So if those yields start 0:13:07.920 --> 0:13:09.880 to come down, they want to add some duration in 0:13:09.920 --> 0:13:12.360 their fixed income markets. So we're seeing that there. But 0:13:12.400 --> 0:13:14.920 they like the fact that we're being cautious a little bit. 0:13:15.280 --> 0:13:18.560 In the equity market. We're invested, we're in there, we're 0:13:18.559 --> 0:13:21.200 getting them a good return, but we're being a little 0:13:21.200 --> 0:13:22.560 bit cautious as to where we invest. 0:13:22.679 --> 0:13:25.240 So I just want to go through the chronology of 0:13:25.240 --> 0:13:27.720 this year. It was, I believe a soft landing than 0:13:27.760 --> 0:13:30.920 a no landing. Then it was a hard landing in March. John, 0:13:30.960 --> 0:13:34.199 you've been very good about documenting the different charctershifts. 0:13:34.320 --> 0:13:36.720 You're tracking it. Now we're in soft landing. 0:13:37.320 --> 0:13:38.000 Do you buy it? 0:13:38.200 --> 0:13:40.800 Are you basically leaning in that there is this idea 0:13:41.160 --> 0:13:43.439 just to you divine a soft landing that we could 0:13:43.480 --> 0:13:47.000 get back down to near two percent inflation without unemployment 0:13:47.080 --> 0:13:48.439 rates really rising all that much. 0:13:49.040 --> 0:13:51.120 I don't think so. I don't think we're going to 0:13:51.160 --> 0:13:53.880 be able to have whatever the magic is, the sparkle 0:13:53.960 --> 0:13:56.080 dusk that's going to make that happen for us. I mean, 0:13:56.960 --> 0:13:59.400 we assume that the Fed people were close to peak 0:13:59.400 --> 0:13:59.920 FED funds. 0:14:00.320 --> 0:14:01.000 Are we there? 0:14:01.200 --> 0:14:01.640 I don't know. 0:14:01.679 --> 0:14:04.040 I wouldn't be surprised to see the fedgo another twenty 0:14:04.080 --> 0:14:06.840 five or fifty basis points. When you look at some 0:14:06.960 --> 0:14:09.520 of the inflation numbers, you look at average hourly earnings 0:14:09.520 --> 0:14:12.640 over the last three months, it's up about five percent 0:14:12.679 --> 0:14:14.520 on an annual basis. If you look at just the 0:14:14.559 --> 0:14:18.520 goods producing sector over the same timeframe, up seven percent. 0:14:18.720 --> 0:14:22.600 We've got the UAW their contract ending in September. If 0:14:22.640 --> 0:14:24.560 we could have wages go even higher than so, I 0:14:24.560 --> 0:14:28.320 think there's some underlying pressure on inflation that's going to 0:14:28.360 --> 0:14:30.440 continue to be there. And you have an economy that 0:14:30.600 --> 0:14:33.280 is doing pretty well because the consumer is there, because 0:14:33.280 --> 0:14:36.560 the labor market is strong. So at some point we're 0:14:36.560 --> 0:14:38.440 going to have to pay the piper for everything that 0:14:38.480 --> 0:14:41.480 we've seen up until now. I think we could start 0:14:41.480 --> 0:14:44.360 to have a consolidation around a forty two hundred to 0:14:44.440 --> 0:14:47.440 forty three hundred on the SMP take us back another 0:14:47.520 --> 0:14:50.800 five percent to us, that's your opportunity to get into 0:14:50.840 --> 0:14:51.240 the market. 0:14:51.320 --> 0:14:53.800 Are you staying away from companies where there as strong 0:14:53.960 --> 0:14:58.560 labor negotiations or a potential risk there for either shutdowns 0:14:58.760 --> 0:15:02.400 or a significant incre in some of their compensation costs. 0:15:02.520 --> 0:15:04.960 Yeah, I wouldn't say we're staying away. We're not pulling 0:15:05.000 --> 0:15:07.000 out of those names completely, but we could be a 0:15:07.000 --> 0:15:09.520 little underweight in those names. And if we start to 0:15:09.560 --> 0:15:13.600 see more pressure ramp up, especially with the auto makers, 0:15:13.600 --> 0:15:15.720 then yes, we could come out of those names to 0:15:15.800 --> 0:15:18.320 avoid some you know, some choppiness. 0:15:18.440 --> 0:15:20.720 Jeah, And I think this is insane. We are down 0:15:20.840 --> 0:15:24.080 six percent standard and pores five hundred from the peak 0:15:24.240 --> 0:15:27.640 of late twenty twenty one. We are down one point 0:15:27.720 --> 0:15:31.400 five percent from the recent peak of days weeks months ago. 0:15:32.040 --> 0:15:36.520 I think it's literally August financial media hysteria going on. 0:15:36.800 --> 0:15:38.640 And I don't mean just TV and radio, I mean 0:15:38.680 --> 0:15:40.640 print in the whole. We got nothing better to do, 0:15:40.720 --> 0:15:42.640 so let's talk about SPX down five. 0:15:42.560 --> 0:15:43.200 Days in a row or what. 0:15:43.320 --> 0:15:46.040 Yeah, that's anyone suggesting this, Cinama, get somewhere, Dan, like. 0:15:46.080 --> 0:15:47.480 I think the tone is out there a lot. 0:15:47.520 --> 0:15:50.240 Oh you think you think this is ready next to the correction. 0:15:50.320 --> 0:15:52.200 You think the comfort to the last week is that negative. 0:15:52.240 --> 0:15:52.960 I haven't found that. 0:15:53.120 --> 0:15:55.280 I don't think at Bloomberg. I think we're just reporting 0:15:55.280 --> 0:15:57.400 the statistics. I mean, pretty group is always. 0:15:57.200 --> 0:15:59.840 Very negative, but you're blaming the media organization. 0:16:00.240 --> 0:16:03.480 No, I'm just saying there's a hysteriaut there among our 0:16:03.560 --> 0:16:06.560 listeners and viewers over OMG, we're not going up two 0:16:06.640 --> 0:16:07.440 percent a week. 0:16:07.760 --> 0:16:10.600 You are seeing some capitulation along that line. 0:16:10.720 --> 0:16:13.800 This you capitulated a negative one per four four. 0:16:13.640 --> 0:16:16.240 Percent because people have been so positive and I don't 0:16:16.240 --> 0:16:17.560 think anything has been. 0:16:17.480 --> 0:16:19.480 Priced in the market off of October. 0:16:19.520 --> 0:16:20.400 That's exactly right. 0:16:20.600 --> 0:16:23.560 Let's compare multiplese now compared to the start of the year. 0:16:23.760 --> 0:16:25.240 Just how much multiple growth has to been. 0:16:25.920 --> 0:16:29.440 Well, the gains that we've seen in earnings are all 0:16:29.560 --> 0:16:32.360 pe expansions, right, It's not the earnings itself that are 0:16:32.400 --> 0:16:34.720 really driving it. And we're actually in what the third 0:16:34.800 --> 0:16:38.440 month of an earnings recession going on here, So I 0:16:38.440 --> 0:16:40.440 think we have to be very cautious. It's one of 0:16:40.440 --> 0:16:43.800 the things you look at. Valuations are too high, especially 0:16:43.800 --> 0:16:46.160 for the level of inflation that we're at, so we're 0:16:46.160 --> 0:16:48.880 going to have to see something give, and I think 0:16:48.920 --> 0:16:49.760 it's probably going. 0:16:49.760 --> 0:16:50.280 To be pees. 0:16:50.360 --> 0:16:50.480 Well. 0:16:50.480 --> 0:16:51.800 The question we could to ask is where does the 0:16:51.880 --> 0:16:54.680 endings acceleration come from. It's next year West, not coming 0:16:54.680 --> 0:16:55.600 from He's driving that. 0:16:55.760 --> 0:16:58.960 Yeah, I don't know we're not seeing it really and truly. 0:16:59.040 --> 0:17:01.200 Is it going to be more hope? Is that what's 0:17:01.240 --> 0:17:03.880 going to get us there? To me, that's pretty shaky 0:17:03.920 --> 0:17:05.399 ground if that's what you're betting on. 0:17:05.640 --> 0:17:08.159 So what's your top kind of shift heading into the 0:17:08.200 --> 0:17:09.360 last couple of months of the year. 0:17:09.760 --> 0:17:12.320 Well, we've always been cautious this year, and we've talked 0:17:12.320 --> 0:17:15.480 about that story. But adding some cyclicality to your portfolio 0:17:15.560 --> 0:17:18.800 along with some of your more value focused names, I 0:17:18.840 --> 0:17:21.399 think is really smart to have that balanced approach, and 0:17:21.480 --> 0:17:23.600 so I think you need to do that. Have some 0:17:23.640 --> 0:17:26.720 cyclical names. Look at the finance names. Banks have taken 0:17:26.760 --> 0:17:28.520 a hit obviously just because of the headlines over the 0:17:28.600 --> 0:17:32.000 last few days, the downgrades coming out of Moody's and 0:17:32.040 --> 0:17:35.720 then Italy as well, but financial services should do quite well. 0:17:35.760 --> 0:17:38.520 A Visa, a MasterCard, maybe an amor prize names we 0:17:38.560 --> 0:17:41.640 own just for full disclosure, but I think you can 0:17:41.760 --> 0:17:47.160 find pockets. The correlation between stocks is very low right now. 0:17:47.240 --> 0:17:49.159 That tells us it's a stock pickers market. 0:17:49.200 --> 0:17:51.119 I don't care what I want to know. The reason 0:17:51.200 --> 0:17:52.959 we had you up here, Thank you so much for 0:17:53.000 --> 0:17:57.160 coming in. Can you explain Astro's rangers rivalry. I think 0:17:57.160 --> 0:18:00.280 for north people like us. Yeah, it's like a it's 0:18:00.320 --> 0:18:02.680 like literally a foreign country. Is it a big deal 0:18:02.760 --> 0:18:04.720 Astro's Rangers baseball, it's. 0:18:04.520 --> 0:18:06.520 A big deal, but I'd say it's not as big 0:18:06.560 --> 0:18:08.640 a deal now as it used to be. But look 0:18:08.720 --> 0:18:12.880 Houston Dallas, there's a rivalry on everything there. So even 0:18:12.920 --> 0:18:14.960 though we're in the same state, we are world on 0:18:15.000 --> 0:18:16.320 the road trips. 0:18:16.040 --> 0:18:19.600 Labor Day weekends September fifth. Yeah, Astro's Rangers, and I 0:18:19.600 --> 0:18:20.600 think it's in near Dallas. 0:18:20.600 --> 0:18:22.160 Which is the team that chased Arlington. 0:18:22.800 --> 0:18:23.720 Oh, listen to yours. 0:18:31.920 --> 0:18:34.200 It runs the won the World Series twice. 0:18:34.280 --> 0:18:36.960 Yeah, all right, that's the same that chiefs. Okay, Victoria, 0:18:37.040 --> 0:18:39.679 thank you, it's good to see you. I need that Victoria. 0:18:39.720 --> 0:18:41.760 If not is a cross smock club and investments. 0:18:51.880 --> 0:18:52.840 This is too important. 0:18:52.840 --> 0:18:56.880 It's a two hour conversation with Michael Nathan's senior Research Channel's. 0:18:56.560 --> 0:18:59.119 Moffatt Nathanson, expert on Disney. 0:18:59.119 --> 0:19:02.159 Michael, I'm going to go back a few years to 0:19:02.240 --> 0:19:04.199 the summer of two thousand and three where you were 0:19:04.200 --> 0:19:07.000 a young Buck analyst and you were forced to watch 0:19:07.040 --> 0:19:10.600 Finding Nemo Pirates of the Caribbean bringing down the House 0:19:10.640 --> 0:19:14.520 in Freaky Friday all back to back. Disney was riding 0:19:14.560 --> 0:19:15.040 a high. 0:19:15.200 --> 0:19:15.800 It was a. 0:19:15.760 --> 0:19:20.640 Double digit layup, and it's been the mother of all disappointments. 0:19:20.960 --> 0:19:24.040 What does Aiger do today and in the next ninety 0:19:24.119 --> 0:19:25.640 days to write the ship. 0:19:27.000 --> 0:19:29.639 Tom He has a long checklist of things he has 0:19:29.680 --> 0:19:30.840 to fix, right. 0:19:30.920 --> 0:19:31.680 He has to. 0:19:33.560 --> 0:19:38.360