WEBVTT - Bloomberg Surveillance TV: January 8, 2025 0:00:02.400 --> 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 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.239 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.680 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.280 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:37.520 Terminal and the Bloomberg Business App. Andrew Honhorst of City 0:00:37.560 --> 0:00:39.400 has got a different idea on things. He's looking for 0:00:39.440 --> 0:00:42.800 one twenty and a very different unemployment rate. And Andrew 0:00:42.880 --> 0:00:45.319 joins us now for more. Andrew go mornig. Let's start 0:00:45.360 --> 0:00:47.960 with unemployment. You think that's the bigger issue. What's your call? 0:00:48.320 --> 0:00:49.640 I think that's a more important issue. 0:00:49.640 --> 0:00:52.600 We're calling for four point four percent on the unemployment rate, 0:00:52.680 --> 0:00:55.160 which is not as big a mover as it sounds like. 0:00:55.360 --> 0:00:57.440 And this is maybe the silliness of what we're doing here, 0:00:57.600 --> 0:00:59.520 but I have to get into the hundreds of a 0:00:59.560 --> 0:01:02.520 percentage point on the unemployment rate. We're at four point 0:01:02.560 --> 0:01:07.399 two four percent unrounded right now, So that means if 0:01:07.400 --> 0:01:09.120 we just move up by a little bit more than 0:01:09.120 --> 0:01:11.360 a tenth, right, a tenth and one hundredth, then you're 0:01:11.440 --> 0:01:12.280 up at four point four. 0:01:12.640 --> 0:01:16.160 Why are you not dissuaded from your more bearish outlook 0:01:16.280 --> 0:01:18.120 on the employment market when you see things like the 0:01:18.200 --> 0:01:20.200 Jolt State of the job opening stata that come in 0:01:20.560 --> 0:01:23.800 hotter than expected, with actually the inflationary read through of 0:01:23.840 --> 0:01:26.679 ism coming in at the hottest level since twenty twenty three. 0:01:26.880 --> 0:01:28.720 Yeah, I think when you look at some of this data, 0:01:28.760 --> 0:01:31.560 and this is the issue we're all dealing with, economists, 0:01:31.560 --> 0:01:35.120 the market, the FED, there's so much noise in the data, 0:01:35.720 --> 0:01:39.119 and there are different details of the data you can 0:01:39.200 --> 0:01:41.560 look at and tell different stories. So the Jolts report 0:01:41.600 --> 0:01:42.959 is a great example of that. If you look at 0:01:43.000 --> 0:01:45.959 the level of job openings, that's stabilized at a higher 0:01:46.040 --> 0:01:48.000 level than where we thought it would have stabilized at, 0:01:48.200 --> 0:01:50.280 So that looks quite healthy. If you look at what 0:01:50.320 --> 0:01:53.200 people are doing, which I think are the more relevant 0:01:53.240 --> 0:01:56.200 statistics in that report, you see layoffs are low, so 0:01:56.240 --> 0:01:58.760 that's very good news for the job market, but you 0:01:58.840 --> 0:02:01.640 also see that the high rate is quite low. And 0:02:01.640 --> 0:02:04.120 that actually surprised us to the downside. Yesterday, that got 0:02:04.120 --> 0:02:06.600 a lot less attention. It was low in October. October, 0:02:06.680 --> 0:02:09.080 we know we had the strikes, we had hurricanes, but 0:02:09.120 --> 0:02:12.600 then in November it actually continued to move lower. 0:02:13.280 --> 0:02:14.320 You look at the quit rate. 0:02:14.360 --> 0:02:16.840 Are people feeling comfortable quitting their jobs? 0:02:16.840 --> 0:02:18.840 And this is kind of goes back to what you were. 0:02:18.720 --> 0:02:21.679 Talking about with companies bringing workers back five days a week. 0:02:21.960 --> 0:02:24.760 People are not feeling as comfortable now that they can 0:02:24.800 --> 0:02:26.600 find a new job if they leave their job. So 0:02:26.680 --> 0:02:29.320 those are the kinds of signs of softness that we're 0:02:29.320 --> 0:02:31.080 seeing in the data that we think are going to 0:02:31.120 --> 0:02:34.600 continue to feed through and lead to a higher unemployment rate. 0:02:34.720 --> 0:02:34.960 Yeah. 0:02:35.120 --> 0:02:36.799 Just talking about the quits rate that was one point 0:02:36.880 --> 0:02:38.760 nine percent. It was tied with the lowest rate going 0:02:38.800 --> 0:02:41.600 back to twenty twenty, talking about that DYNAMICEM I just 0:02:41.680 --> 0:02:44.440 wonder how offsides do you think this market is. How 0:02:44.520 --> 0:02:46.600 much pushback you get, and what you say to people 0:02:46.600 --> 0:02:49.120 who say you've been out of consensus for a while. 0:02:49.400 --> 0:02:52.400 The data has been surprising to the upside. Why aren't 0:02:52.400 --> 0:02:53.160 you capitulating? 0:02:53.400 --> 0:02:55.400 Yeah, so, I mean if you look at how much 0:02:55.440 --> 0:02:58.760 we've moved it's really been incredible over the last six months, 0:02:58.800 --> 0:03:02.040 over the last three months. In September, after we had 0:03:02.120 --> 0:03:04.960 the week jobs report and the FED was cutting fifty 0:03:04.960 --> 0:03:07.240 bases points and the FED was quite worried about unemployment 0:03:07.240 --> 0:03:09.440 picking up. Then we have had a run of better 0:03:09.520 --> 0:03:13.160 data since then. We're trying to look at the underlying 0:03:13.400 --> 0:03:17.360 trends and not kind of change the view every month 0:03:17.440 --> 0:03:20.080 based on where an individual data point is coming in. 0:03:20.760 --> 0:03:23.160 And I think and I don't blame the market. 0:03:22.840 --> 0:03:25.080 Because I think, like I was saying, there's been a 0:03:25.080 --> 0:03:27.280 lot of noise in the data. The FED is reacting 0:03:27.320 --> 0:03:29.679 to that noise in the data. So that means we've 0:03:29.680 --> 0:03:31.760 had ten year treasure heels that have been all over 0:03:31.760 --> 0:03:33.520 the place. We've had two year treasure heelds that have 0:03:33.560 --> 0:03:35.720 been all over the place. I think we're just going 0:03:35.760 --> 0:03:38.760 through a phase now where we've seen some better numbers. 0:03:39.320 --> 0:03:42.640 That unemployment rate at four point two four percent, It 0:03:42.680 --> 0:03:44.920 would be four point six percent if not for the 0:03:44.960 --> 0:03:48.280 participation rate dropping, and I think we'd be in a 0:03:48.400 --> 0:03:51.400 very different discussion right we'd be having a different discussion 0:03:51.480 --> 0:03:53.120 right now if we were at four point six percent. 0:03:53.240 --> 0:03:55.560 So it just shows how quickly the narrative can change. 0:03:55.920 --> 0:03:58.400 What would you maybe change your mind January twentieth, is 0:03:58.480 --> 0:04:02.080 the president elects immigration policies that he's talking about going 0:04:02.120 --> 0:04:03.840 to mean a tighter labor marking. 0:04:04.120 --> 0:04:06.240 So this is part of the issue with trying to 0:04:06.280 --> 0:04:09.120 do a forecast here, is that these policies do matter 0:04:09.280 --> 0:04:11.280 quite a bit. That's why the market is moving so 0:04:11.400 --> 0:04:13.720 much on each of these headlines. And we'll continue to move. 0:04:14.040 --> 0:04:16.360 And it's not necessarily January twenty if when everything is 0:04:16.400 --> 0:04:18.960 going to be answered, because yes, we probably should get 0:04:19.000 --> 0:04:23.120 some answers on immigration. I'm really interested to know what 0:04:23.120 --> 0:04:26.640 does this reconciliation package look like. What's in this fiscal bill. 0:04:27.040 --> 0:04:29.960 If it's just extending existing tax cuts, that's not a 0:04:30.000 --> 0:04:32.799 big new fiscal stimulus to the economy, that's just extending 0:04:32.800 --> 0:04:36.120 what's already there. If we're getting no tax on overtime 0:04:36.200 --> 0:04:39.320 pay and these other kinds of things that could push 0:04:39.440 --> 0:04:42.320 the deficit higher, then that is more stimulus. 0:04:42.360 --> 0:04:44.600 That would change the FEDS view, That would change my view. 0:04:44.960 --> 0:04:47.359 Let's see what happens just quickly in about fifteen seconds, 0:04:47.400 --> 0:04:49.239 if you can. If we get four point four percent 0:04:49.279 --> 0:04:51.960 this Friday one twenty, is that sufficient to cut right 0:04:52.000 --> 0:04:52.839 to the end of this month. 0:04:53.640 --> 0:04:55.719 I think they may still pause. Even in that event, 0:04:55.720 --> 0:04:57.680 I think they have to see something In addition to that. 0:04:57.720 --> 0:05:00.320 It probably sets them up to continue cutting later this year. 0:05:00.440 --> 0:05:03.960 But they've really signaled towards this pause in January. 0:05:03.560 --> 0:05:05.520 My Schumacher of Wells Fargo saying that if we get 0:05:05.560 --> 0:05:07.360 that four point four percent that Andrew and the team 0:05:07.400 --> 0:05:09.880 are looking for, it would be ugly and we'd see 0:05:09.920 --> 0:05:13.760 the tenure yield falling twenty basis points. In that scenario, 0:05:13.839 --> 0:05:15.920 We've had a big move in the other direction over 0:05:15.960 --> 0:05:18.000 the past few months. Andrew, it's going to see us, sir, 0:05:18.000 --> 0:05:30.360 Thank you, Andrew. Homenhoorst there a city. Let's turn back 0:05:30.400 --> 0:05:33.880 to politics. Republicans in Congress gearing up to negotiate an 0:05:33.880 --> 0:05:37.279 extension of Donald Trump's twenty seventeen tax cuts. A group 0:05:37.320 --> 0:05:40.000 of House Republicans we're invited to meet with Trump this 0:05:40.040 --> 0:05:42.599 weekend at marri Laco and are expected to push to 0:05:42.640 --> 0:05:46.320 include an expansion of salt tax deductions in Congress's upcoming 0:05:46.400 --> 0:05:48.560 package and place to say that joining us now is 0:05:48.600 --> 0:05:51.680 one of those House Republicans. Congressman Michael Awler of New 0:05:51.760 --> 0:05:54.360 York Congressman fantastic to catch up with you once again, sir, 0:05:54.760 --> 0:05:56.920 I just want to know, from your perspective, how many 0:05:56.920 --> 0:05:59.160 friends you have outside of New York in the House 0:05:59.200 --> 0:06:01.360 that would be on board with the stafford. 0:06:02.640 --> 0:06:04.520 A lot more than people realize. 0:06:04.920 --> 0:06:08.599 Obviously, New York, New Jersey, and California three of the 0:06:08.800 --> 0:06:14.080 high tax states where this has most acutely impacted. Certainly 0:06:14.760 --> 0:06:18.920 we have a coalition, and given our small majority in 0:06:18.960 --> 0:06:24.039 the House, it's certainly a powerful coalition. But there's other 0:06:24.080 --> 0:06:28.480 states and members across the country in which you know, 0:06:28.560 --> 0:06:32.160 over the last seven years they've seen their own taxes 0:06:32.320 --> 0:06:37.840 rise up against that ten thousand dollars cap. So quietly 0:06:37.920 --> 0:06:40.960 there's a few more members than people would realize, but 0:06:41.000 --> 0:06:45.400 would realize. Look, the cap consalt was a pay for 0:06:45.400 --> 0:06:48.200 for the twenty seventeen tax Cuts in Jobs Act. 0:06:48.360 --> 0:06:49.000 That's it. 0:06:49.000 --> 0:06:51.200 It was used as a pay for to pay for 0:06:51.279 --> 0:06:56.400 other provisions within the tax bill. The ten thousand dollars 0:06:56.400 --> 0:07:01.599 cap is woefully insufficient. It's had a negative impact on 0:07:01.720 --> 0:07:05.479 states like New York. Now we can get into how 0:07:05.560 --> 0:07:09.560 New York excessively spends. They've increased their state budget by 0:07:09.600 --> 0:07:13.720 sixty one billion dollars in the last four years, for instance, that. 0:07:13.640 --> 0:07:14.600 Needs to change. 0:07:15.280 --> 0:07:18.640 But taxpayers should not be penalized by living in a 0:07:18.840 --> 0:07:19.760 eye tax state. 0:07:19.960 --> 0:07:21.320 This is double taxation. 0:07:22.280 --> 0:07:24.600 And for those of my colleagues that say this is 0:07:24.680 --> 0:07:28.920 somehow a subsidy, the fact is New York contributes more 0:07:28.920 --> 0:07:32.840 to the federal government than it receives, and more than 0:07:32.920 --> 0:07:37.840 some of these states in which my colleagues will claim 0:07:37.880 --> 0:07:41.240 that they don't want their taxpayers subsidizing New York. 0:07:41.360 --> 0:07:43.480 But the reality is it's the other way around. 0:07:43.560 --> 0:07:46.160 Congressman, you certainly don't have a friend, though, and someone 0:07:46.360 --> 0:07:49.320 like Lindsey Graham, the center of South Carolina, who said, 0:07:49.320 --> 0:07:52.400 why should I from South Carolina pay for what's going 0:07:52.440 --> 0:07:54.600 on in some of these blue states? And he's pushing 0:07:54.680 --> 0:07:58.840 for this one big sorry for the two bill approach 0:07:59.000 --> 0:08:00.920 because he doesn't want to talk about taxes. He thinks 0:08:00.960 --> 0:08:03.040 it's going to take too long, and he doesn't, frankly 0:08:03.080 --> 0:08:05.600 want to sign up for salt. How are you going 0:08:05.600 --> 0:08:08.040 to convince the president this weekend that you should do 0:08:08.080 --> 0:08:10.120 one bill together and make sure salts included. 0:08:11.280 --> 0:08:14.080 Well, Respectfully, South Carolina is one of those states that 0:08:15.000 --> 0:08:19.320 gets more back, certainly percentage wise, than New York does. 0:08:19.400 --> 0:08:22.600 So you know, if we want to talk about subsidies, 0:08:22.640 --> 0:08:25.560 we can go chapter and burst through everybody's subsidies that 0:08:25.600 --> 0:08:26.120 they get. 0:08:26.760 --> 0:08:29.280 Look with respect to one versus too. 0:08:29.320 --> 0:08:32.600 The President has already made clear he is moving forward 0:08:32.720 --> 0:08:37.880 on one big bill. We need to deal with taxes, 0:08:38.360 --> 0:08:44.560 the border, energy debt, among other issues. And the fact is, 0:08:44.640 --> 0:08:48.280 given our small margin in the House, we're going to 0:08:48.360 --> 0:08:53.080 need everybody's vote and everybody on board. Two track bills 0:08:53.840 --> 0:08:57.040 are going to make that harder. So while it may 0:08:57.080 --> 0:09:01.120 take a little bit more time to get one bill negotiated, 0:09:02.080 --> 0:09:04.800 it is necessary if we're going to get all of 0:09:04.840 --> 0:09:08.079 these issues addressed. And I think the President understands that. 0:09:08.280 --> 0:09:11.800 I think that's why the President made clear last week 0:09:12.600 --> 0:09:15.600 one bill, and that's how we are proceeding forward in 0:09:15.679 --> 0:09:21.000 the House. And look, ultimately, our Senate and House Republican 0:09:21.040 --> 0:09:24.240 majorities are going to have to work together. Nobody's going 0:09:24.280 --> 0:09:27.280 to get everything they want out of this. There's going 0:09:27.320 --> 0:09:29.920 to have to be a good faith negotiation if we 0:09:30.080 --> 0:09:33.840 had any chance of passing a reconciliation bill. 0:09:34.480 --> 0:09:37.240 I was one of those individuals who watched your festivus 0:09:37.320 --> 0:09:40.199 airing of grievances during the Christmas week and you did 0:09:40.200 --> 0:09:43.400 a little bit of a wink at your potential future 0:09:43.559 --> 0:09:46.640 maybe becoming the governor of New York to make sure 0:09:46.720 --> 0:09:49.440 you could potentially go down that path, do you need 0:09:49.480 --> 0:09:51.640 to secure a higher salt tax break. 0:09:53.280 --> 0:09:56.720 Look, regardless of whether or not I run for governor, 0:09:56.880 --> 0:10:00.280 this was a promise of mine, and it's said top 0:10:00.280 --> 0:10:02.880 priority for my district. I represent one of the highest 0:10:02.920 --> 0:10:06.800 tax districts in the country, inclusive of Westchester and Rockland 0:10:06.800 --> 0:10:10.679 Counties number one and number two highest property tax counties 0:10:10.679 --> 0:10:14.760 in America. So this is critically important to lift the 0:10:14.800 --> 0:10:21.080 cap on salt. Ten thousand dollars is woefully insufficient. And 0:10:21.600 --> 0:10:23.480 you know this is something that I said I would 0:10:23.520 --> 0:10:26.200 deliver on, and we're going to as part of this 0:10:26.320 --> 0:10:31.200 reconciliation bill. Long term for New York, this is critical. 0:10:31.280 --> 0:10:34.480 We lead the nation in out migration. Our tax base 0:10:34.640 --> 0:10:38.800 is eroding, in large part because of the disastrous policies 0:10:38.800 --> 0:10:42.679 of Kathy Hochel and Albany Democrats. One party rule in 0:10:42.720 --> 0:10:46.280 Albany has been an abject disaster, whether you're talking about 0:10:46.280 --> 0:10:50.040 the affordability crisis or public safety. People being burned alive 0:10:50.120 --> 0:10:54.120 on subways, pushed in front of oncoming subway trains. Kathy 0:10:54.200 --> 0:10:57.600 Hochl now scamming New Yorkers out of twenty five hundred 0:10:57.679 --> 0:11:02.000 dollars a year for the privilege of driving to work 0:11:02.240 --> 0:11:05.440 while spending billions of dollars of taxpayer money on free 0:11:05.520 --> 0:11:10.559 thousand clothing, food, education, and healthcare for illegal immigrants. New 0:11:10.640 --> 0:11:13.600 York needs change, there's no question about that. But from 0:11:13.640 --> 0:11:16.720 a federal perspective, we should not be penalizing New York 0:11:16.760 --> 0:11:20.960 taxpayers because of the disastrous decisions of Cappy Local and 0:11:21.000 --> 0:11:22.040 Albany Democrats. 0:11:22.080 --> 0:11:23.560 And just to be clear, when it comes to the 0:11:23.600 --> 0:11:25.800 salt cap, how high are you looking for it to 0:11:25.840 --> 0:11:26.320 be raised? 0:11:27.400 --> 0:11:32.520 Look, I've introduced legislation, you know, my marriage Penalty Elimination 0:11:32.679 --> 0:11:36.560 Bill reintroduced to raise it to one hundred thousand dollars 0:11:36.559 --> 0:11:39.760 for individuals two hundred thousand dollars for married couples. 0:11:40.120 --> 0:11:41.520 This is going to be a negotiation. 0:11:42.520 --> 0:11:45.079 My colleagues and I are looking forward to sitting down 0:11:45.240 --> 0:11:49.640 with the President having a discussion about it, hearing obviously 0:11:49.679 --> 0:11:52.680 what his priorities are as part of the tax bill, 0:11:53.360 --> 0:11:56.400 and working to a consensus. At the end of the day, 0:11:57.360 --> 0:12:01.599 my objective is to provide tax really to hardworking Americans. 0:12:01.920 --> 0:12:05.520 It's incumbent upon everybody to negotiate in good faith because 0:12:05.520 --> 0:12:08.480 here's the reality. If we do not pass a tax 0:12:08.520 --> 0:12:12.880 bill number one, salt comes back unlimited, but it is 0:12:12.920 --> 0:12:16.679 accompanied by the largest tax increase in American history. So 0:12:16.720 --> 0:12:20.760 it is important that we actually negotiate a fair tax 0:12:20.840 --> 0:12:24.200 deal for the American people in August. 0:12:24.240 --> 0:12:25.040 I just want to end on this. 0:12:25.160 --> 0:12:27.000 You are one of these individuals that wrote a letter 0:12:27.040 --> 0:12:30.280 to the Speaker talking about that you didn't want the 0:12:30.360 --> 0:12:32.920 repeal of energy tax credits with the IRA. This is 0:12:32.960 --> 0:12:35.000 something that president like Donald Trump wants. Are you going 0:12:35.040 --> 0:12:38.040 to be trying to assuage him of your view over 0:12:38.080 --> 0:12:39.120 this weekend in mar Lago. 0:12:40.920 --> 0:12:45.520 Look, many provisions for the IRA absolutely need to be repealed. 0:12:45.840 --> 0:12:48.120 What we signed on to a letter is that we 0:12:48.120 --> 0:12:51.079 were not going to just sign off on a wholesale repeal. 0:12:51.120 --> 0:12:54.040 There needed to be a discussion and again a negotiation. 0:12:54.880 --> 0:13:00.720 Companies make decisions based on tax provisions and they need certainty. 0:13:00.760 --> 0:13:03.960 And there's already been significant investment, including in New York, 0:13:04.720 --> 0:13:08.720 based on some of these energy tax credits, and so 0:13:08.760 --> 0:13:11.559 we want to make sure that any changes are done 0:13:11.920 --> 0:13:16.520 smartly and not just wholesale repeal. So that'll be part 0:13:16.520 --> 0:13:20.319 of the discussion and conversation as we move forward. And 0:13:21.120 --> 0:13:24.040 you know, again, I think the key here is to 0:13:24.200 --> 0:13:28.720 come up with a reconciliation bill that increases domestic production 0:13:28.840 --> 0:13:34.160 of energy, ensures the American people have a good, smart 0:13:34.240 --> 0:13:39.080 tax bill to reduce their taxes, reduce the cost of 0:13:39.160 --> 0:13:43.199 living here in the US, and ultimately secures our border. 0:13:43.320 --> 0:13:45.760 It's a lot of a lot of important issues that 0:13:45.840 --> 0:13:50.000 have to be included in this reconciliation bill. It's going 0:13:50.040 --> 0:13:54.720 to require negotiation, and it's going to ultimately require every 0:13:54.800 --> 0:13:56.920 Republican supporting the final product. 0:13:57.040 --> 0:14:00.120 A Congressman as we speak, Bonyotza climbing. And we've we've 0:14:00.120 --> 0:14:02.520 seen quite a significant move since September when the Federal 0:14:02.520 --> 0:14:05.480 reserves standing it's right cutting effort. We've moved one hundred 0:14:05.559 --> 0:14:08.079 basis points. And I certainly don't expect you to follow 0:14:08.080 --> 0:14:10.439 the ins and outs of fixed income on any given day, 0:14:10.480 --> 0:14:13.239 but I wonder whether you and your colleagues are sensitive 0:14:13.520 --> 0:14:15.240 to some of the pressure that is starting to build 0:14:15.520 --> 0:14:16.720 in the US dept market. 0:14:18.440 --> 0:14:23.240 No question, Look, our debt at thirty six trillion dollars 0:14:23.280 --> 0:14:28.400 total and counting, is a major problem, and this is 0:14:28.440 --> 0:14:31.800 something that everybody in the Republican Conference is in agreement on. 0:14:32.040 --> 0:14:35.560 We have to tackle our debt. We have to reduce 0:14:35.640 --> 0:14:40.760 our deficit spending. We have to right size the federal government. 0:14:41.400 --> 0:14:46.640 Spending is out of control. Joe Biden's disastrous first two 0:14:46.720 --> 0:14:51.360 years gave us record inflation. It despite the cost of living, 0:14:52.200 --> 0:14:54.440 and we have to unwind a. 0:14:54.400 --> 0:14:54.960 Lot of this. 0:14:55.400 --> 0:14:57.480 You look at a state like New York, it is 0:14:57.640 --> 0:15:01.480 floundering because of some of the economic pressures. 0:15:02.120 --> 0:15:03.040 And just think about this. 0:15:03.560 --> 0:15:08.440 The MTA has more debt than eighty percent of the 0:15:08.480 --> 0:15:12.520 states in the country. So debt is a major problem. 0:15:12.600 --> 0:15:16.320 It's something that we have to deal with across the board. 0:15:16.960 --> 0:15:21.560 We cannot continue to print and borrow money at the 0:15:21.640 --> 0:15:22.440 levels that we have. 0:15:22.680 --> 0:15:25.440 Do you think we can afford to extend CCJA, which 0:15:25.480 --> 0:15:27.680 baseline is something like four to five trillion? Do you 0:15:27.760 --> 0:15:29.800 think we can afford to include an expansion of cell 0:15:29.920 --> 0:15:32.680 tax deductions? In Congressman, I wouldn't push back against anything 0:15:32.760 --> 0:15:35.040 you said about the effort that needs to take place. 0:15:35.080 --> 0:15:37.560 I swear I'm just wondering how much fiscal space you 0:15:37.600 --> 0:15:40.040 and your colleagues believe we actually have at the moment. 0:15:40.800 --> 0:15:45.400 Look, tax policy is critical to economic growth, but it's 0:15:45.440 --> 0:15:49.480 one part. We need to increase domestic production of energy, 0:15:49.760 --> 0:15:54.280 which will help generate more revenues. Energy policy is also critical, 0:15:54.360 --> 0:15:58.720 not just domestically for cost, but for national security. You 0:15:58.760 --> 0:16:02.680 were talking obviously about the threats to Europe from Russia. 0:16:02.880 --> 0:16:07.400 Europe is still buying gas from Russia. It's idiotic. It 0:16:07.560 --> 0:16:10.720 makes no sense that they're helping fund the very war 0:16:10.800 --> 0:16:14.320 they're trying to stop. So there is a lot that 0:16:14.400 --> 0:16:19.080 has to be done here, including reigning in federal spending. Obviously, 0:16:19.440 --> 0:16:22.160 as we work through the tax cuts, we will look 0:16:22.240 --> 0:16:26.800 to help offset some of the cost through spending reduction. 0:16:27.000 --> 0:16:30.120 So this is going to be a comprehensive approach to 0:16:30.280 --> 0:16:32.600 how we right size the American economy. 0:16:32.880 --> 0:16:34.120 I do think it's possible. 0:16:34.240 --> 0:16:36.200 It's going to be one of the most critical things 0:16:36.240 --> 0:16:40.480 any of us ever do in our careers in government, 0:16:41.120 --> 0:16:43.440 and so we all have to be committed to the 0:16:43.480 --> 0:16:44.479 final cause. 0:16:44.240 --> 0:16:46.120 Here, and we're certainly looking forward to continue in the 0:16:46.120 --> 0:16:48.880 conversation with you, sir, in your current capacity and maybe 0:16:48.880 --> 0:16:51.160 in the future. Is the next government of the Great 0:16:51.160 --> 0:16:53.880 State of New York. Mike Laondad Congressman. Thank you, sir, 0:16:53.960 --> 0:17:06.639 appreciate it. We begin this side with stock steady investors 0:17:06.640 --> 0:17:09.320 taking stock of an equity and bond market sell off 0:17:09.320 --> 0:17:11.320 in the last twenty four hours. Mike Wilson and Morgan 0:17:11.359 --> 0:17:14.600 Stanley saying equities are right sensitive once again, which is 0:17:14.600 --> 0:17:17.680 another reason to stick with quality. Rates are the most 0:17:17.720 --> 0:17:21.000 important variable to watch in early twenty five. Mike joins 0:17:21.040 --> 0:17:23.480 us now for more. Mike Wilson, Good morning, Happy New Year, 0:17:23.520 --> 0:17:25.320 Good morning John. It's going to see you, sir. Let's 0:17:25.320 --> 0:17:27.400 start with the bond market and the importance of it. 0:17:27.480 --> 0:17:29.959 What is driving these yeld hire and how important is 0:17:30.000 --> 0:17:31.840 the why to the equity market. 0:17:32.119 --> 0:17:33.080 Yeah, that's the right question. 0:17:33.160 --> 0:17:35.000 It's not just rates are going up, but why are 0:17:35.040 --> 0:17:37.080 they going up? I think Lisa mentioned a few things 0:17:37.080 --> 0:17:39.000 that are driving in an our view, which is some 0:17:39.080 --> 0:17:42.200 of the fiscal sustainability questions. We have a new administration 0:17:42.280 --> 0:17:45.000 and while it is the second version of Trump, it's 0:17:45.000 --> 0:17:47.320 still uncertain, right, It's a new administration. There's a lot 0:17:47.320 --> 0:17:50.040 of new cabinet members we just don't know. And usually 0:17:50.080 --> 0:17:53.359 the first the first quarter after a new president and 0:17:53.440 --> 0:17:56.359 new administration comes in, the markets typically don't do that well, right, 0:17:56.359 --> 0:17:58.520 we rally into the election, have a relief, and then 0:17:58.560 --> 0:18:00.440 we have these variables that we don't know. So the 0:18:01.160 --> 0:18:03.000 main risk that we talked about a month ago was 0:18:03.040 --> 0:18:06.159 probably US dollar strength and rates, and that was always 0:18:06.160 --> 0:18:08.000 our view going into the election that Trump would be 0:18:08.040 --> 0:18:10.680 good for stocks and probably not as good for bonds, 0:18:10.840 --> 0:18:12.679 and that's exactly what's playing out. So we had this 0:18:12.720 --> 0:18:15.360 euphoria around the election. We're getting a pullback on that. 0:18:15.400 --> 0:18:17.439 There's two things that are driving rates now. I think 0:18:17.480 --> 0:18:20.600 it's more about inflation and physical sustainability than it is 0:18:20.680 --> 0:18:22.960 about growth, and that's the key, and that's why the 0:18:23.119 --> 0:18:26.760 rate sensitivity now matters. For equity multiples. We tracked this closely, right, 0:18:26.760 --> 0:18:30.680 The correlation between multiples and rates flipped negative again when 0:18:30.720 --> 0:18:33.199 we crossed over four point five percent, almost exactly what 0:18:33.240 --> 0:18:35.760 we thought because that's what we experienced last year in April, 0:18:36.080 --> 0:18:38.760 so it makes perfect sense. So this is the issue. 0:18:39.160 --> 0:18:40.879 We don't know how it's going to resolve itself. But 0:18:41.000 --> 0:18:43.680 until this does resolve itself in a favorable way, meaning 0:18:43.760 --> 0:18:46.760 rates go back below four point five percent and term 0:18:46.760 --> 0:18:49.159 premium comes down, right, that's the other part of the variable. 0:18:49.240 --> 0:18:51.920 So term premiums up seventy seven to eighty basis points 0:18:51.920 --> 0:18:54.760 somewhere net range. That's a massive move, I mean in 0:18:54.800 --> 0:18:57.200 a very short period of time. So I'm actually surprised 0:18:57.200 --> 0:19:00.240 that multiple seven come down more. Okay, Now, part is 0:19:00.280 --> 0:19:02.879 because the high quality stocks are where people are crowding 0:19:02.880 --> 0:19:05.800 into still, not only in the US but globally, and 0:19:05.840 --> 0:19:08.160 that's probably keeping the S and P multiple a little 0:19:08.200 --> 0:19:11.400 higher than it would be normally. But this persists, multiples 0:19:11.440 --> 0:19:12.240 are going to come in more. 0:19:12.560 --> 0:19:15.400 That mix is toxic for risk ampetsite. The way you've 0:19:15.440 --> 0:19:17.680 laid out things, we have Tolston slock and you'll see 0:19:17.760 --> 0:19:20.240 yesterday from Apollo who raised the risk of a repeat 0:19:20.280 --> 0:19:22.800 of twenty twenty two. Would you share that fear a 0:19:22.880 --> 0:19:25.240 year in which stocks and bonds do poorly? 0:19:25.400 --> 0:19:26.880 Yeah, I think that's I think that's fair. I only 0:19:27.000 --> 0:19:28.840 I mean nearly a severe. I mean the Fed's not 0:19:28.920 --> 0:19:30.720 raising rates. I mean in twenty twenty two, I mean 0:19:30.800 --> 0:19:33.160 they raise rates four hundred basis points and that's not happening. 0:19:33.200 --> 0:19:35.520 So I think that's a little extreme to say that, 0:19:35.600 --> 0:19:37.760 you know, bonds are not going to sell out that much. Okay, 0:19:37.760 --> 0:19:40.199 that's point number one. Point number two though, is that 0:19:40.680 --> 0:19:44.600 multiples are much higher coming into this year than they were, 0:19:44.640 --> 0:19:47.600 say in twenty twenty two, relative to where bond yields are, 0:19:47.640 --> 0:19:49.800 So in other words, I've been surprised. I think a 0:19:49.800 --> 0:19:52.080 lot of people have been surprised that multiples have gotten 0:19:52.119 --> 0:19:54.800 this high in the face of rates at four four 0:19:54.800 --> 0:19:56.200 and a half five percent, I mean, that's where we've 0:19:56.200 --> 0:19:58.240 been from the last year. That's probably been the single 0:19:58.280 --> 0:20:01.800 biggest miss by any most people, then multiples could be 0:20:01.800 --> 0:20:04.080 this high. So you have more give, i think, and 0:20:04.160 --> 0:20:06.439 multiples to come down even if rates just stay in 0:20:06.480 --> 0:20:08.399 this range. They don't have to go up hundred basis 0:20:08.400 --> 0:20:10.960 points for multiples to come in ten percent. And that's 0:20:10.960 --> 0:20:12.560 what we're trying to figure out. So what do you 0:20:12.600 --> 0:20:14.359 do in that environment where you still stay at the 0:20:14.400 --> 0:20:16.960 quality curve? Okay, that's typically what works. And if you 0:20:17.000 --> 0:20:18.480 look at what happened by the way in the fall, 0:20:18.720 --> 0:20:22.680 the low quality stocks absolutely when bonkers, So that has 0:20:22.760 --> 0:20:24.480 to come out of the market. That's where we would 0:20:24.480 --> 0:20:27.720 be most concerned or most kind of area we'd be 0:20:27.760 --> 0:20:30.280 most avoiding for the next sort of three to six months. 0:20:30.320 --> 0:20:33.199 What's interesting to me is how much the narrative has 0:20:33.240 --> 0:20:36.040