WEBVTT - Bloomberg Surveillance TV: August 15th, 2025 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.400 with Lisa Bromwitz and a Marie Hordern. Join us each 0:00:18.480 --> 0:00:21.360 day for insight from the best in markets, economics, and 0:00:21.400 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.760 --> 0:00:27.400 are live on Bloomberg Television weekday mornings from six to 0:00:27.480 --> 0:00:31.000 nine am Eastern. Subscribe to the podcast on Apple, Spotify 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.479 --> 0:00:37.000 Bloomberg Terminal and the Bloomberg Business app. Thinking Shadow of 0:00:37.000 --> 0:00:39.160 Deutsche Bank right in the following, it is clear from 0:00:39.159 --> 0:00:42.839 company comments that tarifs were a sizeable headwind only for some, 0:00:43.280 --> 0:00:47.080 and the hit was modest and significantly lower than previously feared, 0:00:47.280 --> 0:00:49.000 although it is likely to grow. 0:00:49.080 --> 0:00:49.280 Think. 0:00:49.320 --> 0:00:51.400 He joins us now for more thinking and monic. Good morning, 0:00:51.520 --> 0:00:52.880 It's good to see it. How are things going to 0:00:52.920 --> 0:00:54.200 rebalance in the months to come? 0:00:55.400 --> 0:00:57.120 I think you know where we are. 0:00:57.360 --> 0:01:00.320 I think a very simple way of thinking about out 0:01:00.400 --> 0:01:03.400 where the S and P. Five hundred is is that 0:01:03.480 --> 0:01:07.559 we of course had basically the very very robust twenty 0:01:07.600 --> 0:01:10.880 twenty three and twenty twenty four returns, and if you 0:01:10.880 --> 0:01:12.679 look at it, and if you will pardon me for 0:01:12.920 --> 0:01:17.480 using slightly technical expression S and P. Five hundred, you 0:01:17.520 --> 0:01:20.200 know was for those two years and really starting a 0:01:20.240 --> 0:01:24.280 little earlier, in a very very steep trend channel, we 0:01:24.280 --> 0:01:27.920 were in around numbers twenty four percent years. That's you know, 0:01:27.959 --> 0:01:30.440 twenty four percent a year, that's two percent a month. 0:01:30.440 --> 0:01:34.080 It's a very very robust channel. Of course, Liberation Day 0:01:34.280 --> 0:01:37.679 threw us way way out of that channel, and we 0:01:37.720 --> 0:01:41.120 have now recovered basically to the bottom of that channel 0:01:41.160 --> 0:01:44.000 by the first week of July, and really for the 0:01:44.080 --> 0:01:48.400 last six or seven weeks we're crawling along the bottom. So, 0:01:49.240 --> 0:01:52.400 you know, bigger picture, if you think about it, we 0:01:52.760 --> 0:01:55.720 fell because of the tariffs. We had this big sell off, 0:01:55.880 --> 0:01:59.640 and we've now recovered. So the question is, you know, 0:02:01.040 --> 0:02:05.400 is it justified or is it just optimism? But that 0:02:05.800 --> 0:02:07.760 long drawn out of chart that I just drew for 0:02:07.840 --> 0:02:10.520 you is just sort of focused the mind that actually 0:02:10.800 --> 0:02:13.919 what the market's saying is that, you know, we had 0:02:13.919 --> 0:02:17.040 the tariffs. We're all expected them to have, you know, 0:02:17.200 --> 0:02:21.760 pretty big negative impacts. It's not evident in the growth data, 0:02:21.919 --> 0:02:25.920 it's not evident in the inflation data. Aggregate earnings for 0:02:25.960 --> 0:02:28.000 the S and P five hundred in the second quarter, 0:02:28.840 --> 0:02:32.680 growth actually accelerated, So it's got the wrong sign in 0:02:32.760 --> 0:02:34.320 terms of the negative impact. 0:02:34.520 --> 0:02:36.800 So is there a less technical way of saying this, 0:02:36.880 --> 0:02:40.200 which is that in some ways profit margins are normalizing 0:02:40.240 --> 0:02:43.200 what's cut? Essant was saying to John and Memory this 0:02:43.320 --> 0:02:46.320 week that in a sense this is more normal. You 0:02:46.400 --> 0:02:48.600 might not get the twenty four percent returns every year, 0:02:49.120 --> 0:02:51.680 but you'll be able to adjust and adapt to move 0:02:51.720 --> 0:02:55.480 forward with something that's a solid game, but not necessarily. 0:02:54.919 --> 0:02:55.520 Out of the water. 0:02:55.800 --> 0:02:56.000 Yeah. 0:02:56.040 --> 0:02:58.239 So again I would say, you know, in terms of 0:02:58.280 --> 0:03:00.880 the margin issue, I mean, the cost counting way of 0:03:00.960 --> 0:03:05.359 thinking about margins is you know, is fine, but it. 0:03:05.280 --> 0:03:07.399 Doesn't really actually hold up. 0:03:07.440 --> 0:03:09.120 I mean, for the S and P five hundred as 0:03:09.160 --> 0:03:12.360 a whole, margins actually went up and margins are at 0:03:12.400 --> 0:03:16.120 new high. So I mean, I understand the nice intuitive narrative, 0:03:16.639 --> 0:03:22.080 It's just it's not in the facts. 0:03:21.320 --> 0:03:23.359 What the economists are saying at the moment. To sort 0:03:23.360 --> 0:03:25.359 of put that together with what you see. 0:03:25.400 --> 0:03:29.000 In anex I think, you know, the economists position is 0:03:29.080 --> 0:03:33.680 pretty reasonable if you think about basically, you know, their 0:03:33.919 --> 0:03:37.360 calls for inflation take our house view. I mean, we 0:03:37.480 --> 0:03:41.560 see basically, you know, the direct impact of the tariffs 0:03:41.760 --> 0:03:46.080 as about two percentage points on core goods prices, and 0:03:46.120 --> 0:03:49.600 then there's the indirect impact, you know, as everything feeds 0:03:49.640 --> 0:03:52.000 on each other, and that's I would argue the larger 0:03:52.120 --> 0:03:54.920 standard error to try to estimate as an when and 0:03:55.040 --> 0:03:55.600 how much. 0:03:56.000 --> 0:03:56.480 But if you. 0:03:56.440 --> 0:03:59.760 Focus for a second or the direct impacts, I would argue, 0:03:59.800 --> 0:04:02.880 if you look at core goods prices, we already had 0:04:03.120 --> 0:04:06.120 half the pass through that we were looking for. So 0:04:06.600 --> 0:04:09.040 you know, if you're negative and bearish, you can wait 0:04:09.080 --> 0:04:11.000 for the second half is going to tip us over 0:04:11.080 --> 0:04:13.080 into something or the other. But on the face of it, 0:04:13.200 --> 0:04:15.640 why should it be any different than the first half, 0:04:15.920 --> 0:04:18.720 And in fact, it might be even a little bit slower. 0:04:20.400 --> 0:04:22.240 And we think it might be a little bit slower 0:04:22.279 --> 0:04:25.560 because if you listen to companies, I mean, raising pricing 0:04:25.920 --> 0:04:29.080 is basically the last resort, so to speak. 0:04:29.320 --> 0:04:30.360 Number one, Number two. 0:04:31.080 --> 0:04:34.760 You know, the directly impacted companies are about seventeen percent 0:04:34.880 --> 0:04:37.919 less than twenty percent of S and P five hundred earnings. 0:04:38.440 --> 0:04:41.560 Five percentage points of that is Apple, And they did 0:04:41.680 --> 0:04:45.080 talk about tariffs, but there's lots of other things going on, 0:04:46.080 --> 0:04:48.880 they just dominated basically the impact. 0:04:49.000 --> 0:04:50.880 So sim this is another way saying the economy is 0:04:50.920 --> 0:04:53.560 not the S and P. Five hundred fair enough. 0:04:53.600 --> 0:04:55.359 I think a lot of people have said that again again, 0:04:55.400 --> 0:04:57.440 but I think that that's the conclusion that we have 0:04:57.520 --> 0:04:57.880 to choge. 0:04:57.880 --> 0:05:00.760 Another reminder this morning from Binkie Chadwotoutsche Binkie's going to 0:05:00.760 --> 0:05:02.720 see you. I know you take it two weeks off 0:05:02.800 --> 0:05:05.400 your birthday too, so happy birthday, your. 0:05:05.200 --> 0:05:06.680 Vacation, congratulations. 0:05:06.839 --> 0:05:09.760 Nothing ever happens in August, and then things happen in August. 0:05:09.839 --> 0:05:20.919 I know repeatedly, Eddie. 0:05:20.720 --> 0:05:23.880 Fisherman at Columbia University, writing the following quote, even small 0:05:23.960 --> 0:05:27.720 symbolic concessions from Trump could undermine the broader campaign and 0:05:27.760 --> 0:05:31.320 fracture Allies unity, a scenario that Europe fears. 0:05:31.600 --> 0:05:33.400 Eddie joins to surround the table. EDDI, good morning, get 0:05:33.440 --> 0:05:33.800 to see you. 0:05:33.800 --> 0:05:34.440 Great to see you too. 0:05:34.480 --> 0:05:36.120 I want to try the question at you that Lisha 0:05:36.120 --> 0:05:37.599 and I were discussed in just months ago. How do 0:05:37.640 --> 0:05:40.239 we sufficiently incentivize President Putin this weekend? 0:05:40.880 --> 0:05:44.200 I think Putin needs to understand that Trump is actually 0:05:44.240 --> 0:05:46.640 serious when he says he wants peace, because I think 0:05:46.720 --> 0:05:48.960 right now. Putin believes that time is on his side, 0:05:49.000 --> 0:05:51.320 so he actually sees these negotiations now does an end 0:05:51.360 --> 0:05:54.239 to peace, but actually as a means to allow himself 0:05:54.400 --> 0:05:57.800 to continue the war without facing significant pressure. There was 0:05:57.920 --> 0:06:01.719 momentum building in Washington last week four more sanctions on Russia. 0:06:01.880 --> 0:06:03.480 Trump himself said that there were going to be very 0:06:03.520 --> 0:06:06.200 severe sanctions if Putin didn't agree to a ceasefire about 0:06:06.200 --> 0:06:08.520 by last Friday. That date came and went. So Putin 0:06:08.560 --> 0:06:10.840 already has kind of gotten a victory by delaying that. 0:06:11.040 --> 0:06:13.520 There's also a mentum to provide some more military assistants 0:06:13.520 --> 0:06:15.799 in Ukraine. So I think Putin just by getting Trump 0:06:15.800 --> 0:06:18.160 in the room, by sort of convincing him that he's serious, 0:06:18.440 --> 0:06:20.920 he knows that Trump wants that Nobel Peace prize and 0:06:20.960 --> 0:06:23.880 will stay in that negotiation, and by prevent real pressure 0:06:23.880 --> 0:06:24.479 from coming down up. 0:06:24.640 --> 0:06:26.280 I'd love to know what you think about this framing, 0:06:26.279 --> 0:06:28.640 because I hear this a lot. President Putin is driven 0:06:28.680 --> 0:06:32.760 by territorial ambition, not economic prosperity. He does not respond 0:06:32.760 --> 0:06:35.120 to economic sanctions. How do you change that? 0:06:35.400 --> 0:06:35.599 See? 0:06:35.640 --> 0:06:40.360 I disagree with that fundamentally, he clearly wants to achieve 0:06:40.360 --> 0:06:43.240 his maximalist objectives, which is to truly annex these four 0:06:43.320 --> 0:06:46.320 territories of Ukraine that he's formally annexed but doesn't yet control. 0:06:46.839 --> 0:06:48.920 But what happens if the Russian economy is in a 0:06:49.000 --> 0:06:51.720 massive crisis right even this year, just as we are 0:06:51.800 --> 0:06:54.000 right now, the Russian economies in stagflation. They're going to 0:06:54.040 --> 0:06:56.279 grow at probably at most by one percent this year, 0:06:56.360 --> 0:06:59.040 and they've got inflation well above ten percent. So the 0:06:59.160 --> 0:07:00.800 question is what if you could get them into a 0:07:00.800 --> 0:07:03.480 significant recession, and if you had inflation at twenty percent, 0:07:03.640 --> 0:07:05.520 which you know we saw in the lead up to 0:07:05.839 --> 0:07:08.280 the nuclear deal with Iran, US anctions can do this 0:07:08.360 --> 0:07:10.400 if we actually are willing to go for the jugular, 0:07:10.480 --> 0:07:12.320 which in the case of Russia is its oil sales. 0:07:12.440 --> 0:07:15.120 There's also this question of Russia's leverage, and that has 0:07:15.160 --> 0:07:17.280 to do with also a nuclear deal that I know 0:07:17.360 --> 0:07:19.400 has been in the works with the United States, and 0:07:19.440 --> 0:07:21.760 a question of what happens with their weapons and what 0:07:21.880 --> 0:07:25.280 happens on an ongoing basis. Do you think that somehow 0:07:25.320 --> 0:07:28.840 Vladimer Putin has gotten more leverage than people had expected 0:07:28.880 --> 0:07:29.800 heading into this meeting. 0:07:29.920 --> 0:07:32.000 Yeah, I think something that can play very close attention 0:07:32.080 --> 0:07:35.200 to is that Putin and the Russian media have come 0:07:35.200 --> 0:07:37.520 into this meeting saying that it's not just about Ukraine. 0:07:37.560 --> 0:07:38.320 They're also going to. 0:07:38.240 --> 0:07:39.720 Talk about cooperation in the Arctic. 0:07:39.880 --> 0:07:40.520 They may talk. 0:07:40.400 --> 0:07:43.680 About restarting the New Start Treaty which you know Russia 0:07:43.720 --> 0:07:45.920 stopped participating in in twenty twenty three, which is this 0:07:46.040 --> 0:07:48.720 arms control treaty, And of course they've been talking about 0:07:48.720 --> 0:07:51.400 these potential economic deals. To me, something that raised my 0:07:51.440 --> 0:07:53.600 eyebrows is that Scott Besen apparently is going to be 0:07:53.600 --> 0:07:55.920 part of the delegation as well as the Russian finance minister. 0:07:56.120 --> 0:07:58.360 That's kind of unusual if you're thinking about this as 0:07:58.400 --> 0:08:02.600 a ceasefire negotiation. And so what Putin seeks to gain 0:08:02.680 --> 0:08:05.360 there is to really kind of shift the discussion away 0:08:05.360 --> 0:08:08.120 from Ukraine and persuade Trump is that there's a bigger 0:08:08.120 --> 0:08:11.040 picture here and then he should actually normalize US Russian 0:08:11.040 --> 0:08:13.440 relations irrespective of what happens in Ukraine. 0:08:13.480 --> 0:08:16.560 If Trump entertains this idea, how much of a wedge 0:08:16.560 --> 0:08:18.720 does that put between the United States and Europe? 0:08:18.880 --> 0:08:19.640 A huge wedge. 0:08:19.640 --> 0:08:21.600 And look, I just got back last night from Helsinkia. 0:08:21.600 --> 0:08:23.320 I was there for the past week meeting with various 0:08:23.680 --> 0:08:27.640 European officials, European diplomats, and they're petrified of this because 0:08:27.680 --> 0:08:30.520 they know that as soon as there's even a small 0:08:30.560 --> 0:08:33.000 sign that the US is backing off. Let's say Trump 0:08:33.000 --> 0:08:36.520 agrees to some symbolic sanctions using Putin himself is sanctioned, 0:08:36.520 --> 0:08:39.040 and actually, just a couple of days ago, Treasury had 0:08:39.080 --> 0:08:42.960 to issue a license to allow Putin to travel to Alaska. 0:08:43.559 --> 0:08:45.240 Let's say Trump says, Okay, We're going to give you 0:08:45.280 --> 0:08:47.640 a little bit of sanctions using in exchange for some 0:08:47.720 --> 0:08:50.680 perfunctory Russian concessions. The Europeans are going to be panicked, 0:08:50.679 --> 0:08:52.720 and they're going to wonder what can we do to 0:08:52.880 --> 0:08:54.960 prevent sort of the lid from falling off of this 0:08:55.000 --> 0:08:57.920 pressure campaign that we have painstakingly built together over the 0:08:58.000 --> 0:08:58.600 last three years. 0:08:58.720 --> 0:09:00.679 That has been some criticism of the Europeans in their 0:09:00.720 --> 0:09:02.239 approach by this administration. 0:09:02.480 --> 0:09:04.800 Have the Europeans done enough? What have they been doing recently? 0:09:05.080 --> 0:09:07.640 Yeah, So I'm glad you asked this because I heard 0:09:07.679 --> 0:09:10.000 Secretary Besen on the show a couple of days ago 0:09:10.000 --> 0:09:12.520 saying that the Europeans need to step up. Well, just 0:09:12.559 --> 0:09:15.520 a few weeks ago, Europeans did the most dramatic sanctions 0:09:15.559 --> 0:09:17.400 package that I have seen since the beginning of the war. 0:09:17.760 --> 0:09:20.679 They uilaterally lowered the price cap on Russian oil from 0:09:20.720 --> 0:09:23.600 sixty dollars a barrow to forty seven dollars and sixty cents. 0:09:23.679 --> 0:09:26.200 Kind of a strange number. It's fifteen percent below the 0:09:26.280 --> 0:09:29.280 market price. They did that by themselves. This was supposed 0:09:29.280 --> 0:09:30.800 to be a G seven decision, but they went ahead 0:09:30.800 --> 0:09:34.439 and did it themselves. They also imposed secondary sanctions. These 0:09:34.440 --> 0:09:37.400 are not sanctions on Russia, but actually on Russia's trading partners. 0:09:37.559 --> 0:09:39.439 They did two Chinese banks. 0:09:39.160 --> 0:09:41.920 Were sanctioned by the EU, and I think most importantly, 0:09:41.920 --> 0:09:44.840 they actually sanctioned the second biggest oil refinery in India, 0:09:45.240 --> 0:09:49.719 Niara Energy. So they are already directly targeting Chinese and 0:09:49.800 --> 0:09:52.560 Russian businesses that are in bed with Russia. And that's 0:09:52.600 --> 0:09:54.679 not something that the US has been willing to do 0:09:54.760 --> 0:09:55.040 so far. 0:09:55.120 --> 0:09:56.920 What's left what would you like to see happen? 0:09:57.120 --> 0:09:57.200 So? 0:09:57.280 --> 0:09:59.760 I would like to see the US join these sanctions 0:09:59.800 --> 0:10:03.199 with the EU, because ultimately, because of the dollar is 0:10:03.240 --> 0:10:06.040 still the global reserve currency. When the US is on board, 0:10:06.040 --> 0:10:08.200 the sanctions are much more powerful than if it's just 0:10:08.240 --> 0:10:10.320 the EU. But there's more that needs to be done, 0:10:10.320 --> 0:10:13.800 I think sanctioning other Indian refineries, sanctioning Chinese refineries and 0:10:13.880 --> 0:10:17.200 more banks, and ultimately providing a clear roadmap for how 0:10:17.280 --> 0:10:20.760 these purchasers of Russian oil, like China and India can 0:10:20.840 --> 0:10:22.800 gradually bring down their purchases over time. 0:10:22.880 --> 0:10:25.320 You've done an amazing job in your latest book and 0:10:25.400 --> 0:10:29.320 just generally through your research in understanding how much the 0:10:29.360 --> 0:10:32.920 global relationships are changing depending on what happens in this meeting. 0:10:33.160 --> 0:10:36.080 How much does I indicate who is against who, whether 0:10:36.120 --> 0:10:37.880 this is a multipolar world while. 0:10:37.679 --> 0:10:39.960 This is or whether this is everyone go it alone. 0:10:40.080 --> 0:10:43.440 Look, I think that there's also maybe a third option 0:10:43.559 --> 0:10:47.400 here where Trump may be reorienting US relationships toward our 0:10:47.520 --> 0:10:51.000 historical adversaries. We saw just last week Trump agree to 0:10:51.160 --> 0:10:55.480 allow Nvidia and AMD to sell semiconductors to China as 0:10:55.520 --> 0:10:57.920 long as they pay fifteen percent to the US government. 0:10:58.080 --> 0:11:01.439 That's a giant concession to China, and it's a huge 0:11:01.480 --> 0:11:04.720 sort of example of how we are warming our relationship 0:11:04.720 --> 0:11:08.000 with China on this key area of technology competition. If 0:11:08.000 --> 0:11:10.320 we also start seeing some easing of sanctions on Russia, 0:11:10.320 --> 0:11:11.880 which I want to be clear it's not my base 0:11:11.960 --> 0:11:14.360 case scenario, but it's still possible that it happens today. 0:11:14.920 --> 0:11:17.520 Then you could start saying that Trump actually is kind 0:11:17.520 --> 0:11:20.200 of pivoting toward Russia and China and the Europeans are 0:11:20.200 --> 0:11:21.040 out left in the court. 0:11:21.280 --> 0:11:23.600 Eddie, I appreciate your take and your opinion. 0:11:23.600 --> 0:11:26.040 Thank you, sir, Eddie Fishman, there of Columbia University and 0:11:26.200 --> 0:11:38.880 author of choke Points narrowing his choice is to replace 0:11:38.880 --> 0:11:40.880 fed schare J. Powe to three or four names, saying 0:11:40.920 --> 0:11:44.199 he'll announce his nominee a little earlier than initially expected. 0:11:44.440 --> 0:11:46.840 Joining us now is the former economic advisor to President 0:11:46.880 --> 0:11:47.320 George W. 0:11:47.400 --> 0:11:48.319 Bush, Mark Summlin. 0:11:48.360 --> 0:11:48.520 Mark. 0:11:48.559 --> 0:11:50.240 Of course, your name has been in the mix as 0:11:50.280 --> 0:11:52.480 well over the past week or so. Welcome to the program. 0:11:52.600 --> 0:11:54.400 Let's just start with the base case, the case for 0:11:55.040 --> 0:11:57.200 ray reductions. Mark, what do you think the strongest case 0:11:57.280 --> 0:11:57.880 is right now? 0:11:58.720 --> 0:11:59.000 Great? 0:11:59.200 --> 0:12:01.120 I think the strongest First off, thank you very much 0:12:01.160 --> 0:12:03.560 for having me. I think the strongest case is we 0:12:03.640 --> 0:12:06.120 just have to mark to market to the new data 0:12:06.160 --> 0:12:10.400 that we have. The data was revised very strongly to 0:12:10.440 --> 0:12:13.360 the downside on the jobs, and that's the most important 0:12:13.440 --> 0:12:16.040 data that we have. And so it's you know, jobs 0:12:16.040 --> 0:12:18.760 for May and June only came in at thirty three 0:12:18.760 --> 0:12:21.680 thousand combined for those two months, and so had we 0:12:21.720 --> 0:12:24.000 gotten those in real time, it's likely that the SAID 0:12:24.040 --> 0:12:28.400 would have cut probably in June and July. And we 0:12:28.440 --> 0:12:31.080 know that the economy barely grew over one percent in 0:12:31.120 --> 0:12:33.160 the first half of the year, and so a four 0:12:33.160 --> 0:12:36.000 point three three percent SAID funds rate is just too 0:12:36.080 --> 0:12:39.160 high for the economy, the economy that we have right now. 0:12:39.720 --> 0:12:41.760 Mak, can we stay on that payroll data, because there's 0:12:41.760 --> 0:12:43.280 been this great debate on Wall Stream, and I have 0:12:43.280 --> 0:12:45.360 to say it's very divided at the moment. Do you 0:12:45.400 --> 0:12:48.319 think that's stepped down in payroll's growth, and clearly you do. 0:12:48.360 --> 0:12:48.800 You think it. 0:12:48.760 --> 0:12:51.480 Speaks to a cyclical turn and not a structural shift. 0:12:51.480 --> 0:12:54.199 But can you tell us why you believe that's the case? 0:12:54.600 --> 0:12:57.040 What do you distance between one versus the other? 0:12:58.320 --> 0:12:59.920 Absolutely? I do. I do think it's sickle. 0:13:00.200 --> 0:13:02.520 I mean, I think if you step back, like very 0:13:02.559 --> 0:13:05.560 big picture of macro, we have fiscal tightening this year 0:13:05.559 --> 0:13:07.760 from the tariffs. Next year we're going to have some 0:13:07.760 --> 0:13:12.360 fiscal loosening from the tax bill, and behind all of that, 0:13:12.400 --> 0:13:16.280 we have the AI productivity gains starting to take hold 0:13:16.320 --> 0:13:19.760 for the first time, and so the pretty mixed the 0:13:19.880 --> 0:13:23.439 confusing macro picture, but you got to kind of write 0:13:23.440 --> 0:13:26.160 it out in real time. And so we just know, 0:13:26.320 --> 0:13:29.679 like before the data revision there was a disconnect between 0:13:29.760 --> 0:13:33.200 jobs and GDP, and then after the revision there was 0:13:33.200 --> 0:13:36.719 no disconnect. Jobs got revised down to reflect what was 0:13:36.760 --> 0:13:40.839 going on elsewhere in the economy. And it's really important 0:13:41.080 --> 0:13:44.320 to mark to market to where we are and not 0:13:44.520 --> 0:13:47.079 just to say, oh, well, whatever we had. 0:13:46.920 --> 0:13:49.280 Before is still fine for the FED funds. 0:13:49.320 --> 0:13:52.560 Right, So let's do some scenario analysis. Let's say you 0:13:52.640 --> 0:13:55.400 become the next FED share congratulations, And let's say in 0:13:55.440 --> 0:13:58.840 September you cut by fifty basis points on the heels 0:13:58.920 --> 0:14:01.120 of some of this jobs data, and then you see 0:14:01.400 --> 0:14:04.360 tenure yields shoot higher kin to what we saw last 0:14:04.440 --> 0:14:06.360 year when the FED cut significantly. 0:14:06.400 --> 0:14:06.880 What do you do? 0:14:07.679 --> 0:14:11.760 Yeah, then I mean, then you stop. And so one 0:14:11.760 --> 0:14:13.880 of the reasons that I support the fifty basis point 0:14:13.880 --> 0:14:16.640 cut right now is that you have the inversion in 0:14:16.679 --> 0:14:19.640 the front end of the curve that's something like sixty 0:14:19.680 --> 0:14:22.760 basis points last time I looked, And so you know 0:14:22.840 --> 0:14:25.560 that you can cut by that amount without really upsetting things. 0:14:26.240 --> 0:14:29.400 But the weakest part of the market or the economy 0:14:29.440 --> 0:14:32.400 right now is housing, and so you can't have the 0:14:32.400 --> 0:14:34.520 long end go up, and that's your constream right now, 0:14:34.560 --> 0:14:37.600 and so the long end starts to go up on you, 0:14:37.600 --> 0:14:38.760 you have to stop cutting. 0:14:39.520 --> 0:14:40.880 You know, it's that simple. 0:14:41.320 --> 0:14:44.040 You can make the argument that if the market, if 0:14:44.160 --> 0:14:48.120 sort of this collective decision making body truly believe that 0:14:48.160 --> 0:14:52.640 the economy was significantly weakening, the tenure would be significantly lower. 0:14:53.080 --> 0:14:55.480 Doesn't that sort of indicate that there is enough strength 0:14:55.640 --> 0:14:58.560 to continue at this sort of pace with these rates? 0:14:58.560 --> 0:15:00.840 I mean, isn't that some sort of signal in and 0:15:00.880 --> 0:15:01.400 of itself? 0:15:03.160 --> 0:15:05.240 I mean, I think we go back to January, a 0:15:05.240 --> 0:15:07.280 lot of people, a lot of the best bond traders 0:15:07.280 --> 0:15:09.440 on the planet, thought the tenure was going to be 0:15:09.440 --> 0:15:12.360 at five or over, and so the fact that we're 0:15:12.360 --> 0:15:14.160 at four twenty nine and set of five is a 0:15:14.240 --> 0:15:17.000 reflection of the weaker economy in my mind. 0:15:18.520 --> 0:15:20.960 So, you know, these things are always judgment calls. 0:15:21.800 --> 0:15:24.560 But I think right now you have the scope to 0:15:24.560 --> 0:15:28.160 cut by fifty basis points, and then after there that 0:15:28.200 --> 0:15:29.560 you'd have to look at the data and you'd have 0:15:29.560 --> 0:15:31.200 to look at the markets, and you have to look 0:15:31.200 --> 0:15:32.880 at what's going on in the real economy and put 0:15:32.920 --> 0:15:33.480 it all together. 0:15:33.720 --> 0:15:35.000 Mark, I'd love to know if you can share with 0:15:35.080 --> 0:15:37.000 us what your approach would be if you had the 0:15:37.040 --> 0:15:39.760 honor of taking over the top job at the Federal Reserve. 0:15:40.080 --> 0:15:42.200 We heard from the Treasury Secretary was sitting around the 0:15:42.200 --> 0:15:44.520 table with It's just a few days ago on this program, 0:15:44.600 --> 0:15:46.800 and he talked about the need for foundational change of 0:15:46.840 --> 0:15:47.480 the institution. 0:15:47.680 --> 0:15:49.400 Yeah, what do you think needs to change? 0:15:50.400 --> 0:15:52.400 Yeah, I mean, first of all, I think that the 0:15:52.520 --> 0:15:56.960 staff is all set up wrong. We you know, to 0:15:57.000 --> 0:15:59.840 do the job correctly, you have to understand three things. 0:16:00.280 --> 0:16:03.920 There's the data, and there's the economic modeling side, and 0:16:04.400 --> 0:16:06.960 all of the staff basically that's what they do. And 0:16:07.000 --> 0:16:09.800 then you have financial markets. You need to understand what's 0:16:09.800 --> 0:16:12.680 going on in high yield spreads, what's going on in 0:16:12.720 --> 0:16:16.840 oil markets, what's going on in bond markets. And then 0:16:16.880 --> 0:16:19.720 you have what's happening in companies, and especially right now 0:16:20.520 --> 0:16:22.640 at a time of so much change, you really need 0:16:22.680 --> 0:16:26.640 to understand what's going on with AI and productivity gains 0:16:26.680 --> 0:16:29.280 in companies. And so I would like to have the 0:16:29.320 --> 0:16:33.560 staff completely change where you know, a third of it 0:16:33.640 --> 0:16:37.960 is doing economic modeling type of stuff and then a 0:16:38.040 --> 0:16:40.760 third of it is real sectral experts. I mean, the 0:16:40.760 --> 0:16:43.520 FED chairman should have someone who is an expert in autos, 0:16:43.640 --> 0:16:46.640 an expert in retail sales, an expert in every single 0:16:46.680 --> 0:16:49.360 thing in the house, so that you really have the 0:16:50.120 --> 0:16:53.480 pace and the field of the economy going on, as 0:16:53.520 --> 0:16:58.120 well as more market people there that understand, okay, high yields, 0:16:58.360 --> 0:17:00.440 spreads are blowing out, and this is why we need 0:17:00.480 --> 0:17:02.600 to worry, why we don't need to worry. And so 0:17:02.680 --> 0:17:06.160 for me, it's less of a you know. 0:17:06.119 --> 0:17:07.600 I don't have a problem with the size of the 0:17:07.600 --> 0:17:09.560 staff because I think, you know, the FED is so 0:17:09.640 --> 0:17:11.159 mission critical to the whole world. 0:17:11.680 --> 0:17:14.000 I just think they are doing there's just so much 0:17:14.040 --> 0:17:17.800 redundancy and right now it basically functions as like a 0:17:17.920 --> 0:17:20.920 university research department, and I don't know why that's the case. 0:17:21.320 --> 0:17:21.520 Mark. 0:17:21.600 --> 0:17:25.280 This actually raises a point that John's been talking about significantly, 0:17:25.560 --> 0:17:29.040 which is how much does that mean a more active 0:17:29.119 --> 0:17:31.960 FED when it comes to balance sheet management? And it's 0:17:32.000 --> 0:17:35.359 not just quantitative easing, but also just the denominations of 0:17:35.359 --> 0:17:37.480 where you buy I mean, if you treat this more 0:17:37.640 --> 0:17:41.440 like a market's operations and a university, how much more 0:17:41.520 --> 0:17:43.520 active does that balance sheet become? 0:17:44.840 --> 0:17:48.720 Yeah, you know, that's a good question. And I look, 0:17:48.760 --> 0:17:51.040 I think that the balance sheet is an important tool 0:17:51.160 --> 0:17:54.600 when you need it, you know, so definitely in crisis. 0:17:55.480 --> 0:17:58.320 You you know, it's something that's in the toolbox, and 0:17:58.359 --> 0:18:01.399 it works. I don't think it works that well or 0:18:01.480 --> 0:18:04.800 needs to be continued after after the crisis is over. 0:18:05.480 --> 0:18:06.800 And so you know, if we were. 0:18:06.680 --> 0:18:08.480 Coming out of the pandemic or something, I would have 0:18:08.520 --> 0:18:12.760 definitely ended the QI sooner rather than later. But they're 0:18:12.800 --> 0:18:14.919 you know, they're important questions right now when we have 0:18:15.119 --> 0:18:17.840 very high mortgage spreads about why are we still selling 0:18:17.880 --> 0:18:20.720 off nbs when we have you know, one hundred and 0:18:20.760 --> 0:18:23.240 fifty basis points spreads that are you know, that are. 0:18:23.400 --> 0:18:25.280 Hitting the housing market right now. 0:18:26.560 --> 0:18:28.480 So I think you have to, I mean, you just 0:18:28.520 --> 0:18:31.000 have to look at it very objectively about what is 0:18:31.000 --> 0:18:32.919 it what's the impact of the balance sheet in the 0:18:32.920 --> 0:18:38.440 real time. And you know, there's some people who would 0:18:38.520 --> 0:18:40.120 love to go back to the old days when there 0:18:40.200 --> 0:18:43.160