WEBVTT - Surveillance: Soft Recession with Ruskin 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.200 --> 0:00:13.200 with Jonathan Ferrell and Lisa Abramowitz. Daily we bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.800 --> 0:00:23.840 To find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg dot com, 0:00:23.920 --> 0:00:30.080 and of course on the Bloomberg terminal. Alan Ruskin right 0:00:30.080 --> 0:00:34.080 now chief international strategist at Deutsche Bank and hugely esteemed 0:00:34.200 --> 0:00:37.080 in this uh Ellen Ruskin and paper by the former 0:00:37.200 --> 0:00:40.559 vice chair and chairman Allan Blinder years ago. How do 0:00:40.840 --> 0:00:48.879 central banks talk? How do they talk with this dot plot? Well, 0:00:48.880 --> 0:00:52.160 I think they try stee other markets to where they 0:00:52.280 --> 0:00:56.480 think rates should be. And obviously they've got a little 0:00:56.480 --> 0:00:59.520 bit of a problem right now because the markets very 0:00:59.600 --> 0:01:02.800 pacis stant in his thought process that the FED is 0:01:02.800 --> 0:01:05.640 going to be cutting rates in three I think the 0:01:05.880 --> 0:01:08.720 intriguing aspect of what you have right now is that, 0:01:09.440 --> 0:01:12.399 you know, we thought the FED would probably lose control 0:01:12.600 --> 0:01:15.240 or could lose control of the back end of the 0:01:15.319 --> 0:01:19.280 curve because back end heels were too high, and you know, 0:01:19.360 --> 0:01:22.640 QUT would maybe push heels higher, and we've got exactly 0:01:22.680 --> 0:01:27.040 the reverse problem um with heels. You know, more consistent 0:01:27.120 --> 0:01:29.240 with the three percent funds rate than a five percent 0:01:29.280 --> 0:01:32.640 funds rate. So the mark is not really listening to 0:01:32.680 --> 0:01:35.600 the Fed. It's not the worst problem the Fed could have, 0:01:35.880 --> 0:01:38.240 but I think the fair is s thoughts trying to 0:01:38.360 --> 0:01:41.720 steer the curve higher in terms of heals, Allen, do 0:01:41.760 --> 0:01:46.920 you see them being successful in doing so? Not at 0:01:46.959 --> 0:01:51.560 this meeting necessarily. I think, you know, the odds are 0:01:51.600 --> 0:01:57.200 that the twenty three three dart is between four and 0:01:57.240 --> 0:02:00.280 three quarters and five percent um. You know, it looked 0:02:00.280 --> 0:02:02.960 like it maybe a bit higher than that before cp I, 0:02:03.000 --> 0:02:06.160 But I think that probably is a reasonable guestimate of 0:02:06.160 --> 0:02:09.600 where that medium dot will be. Uh, you know, that's 0:02:10.200 --> 0:02:12.320 not far from where the Fed, of you know, where 0:02:12.360 --> 0:02:15.799 the market effectively believes the peak will be. Anyway, it's 0:02:15.800 --> 0:02:18.519 really the discrepancy, I think, is in the rate cuts 0:02:18.520 --> 0:02:21.200 that follow very soon after the market thinks this is 0:02:21.200 --> 0:02:24.040 going to be more of a traditional cycle. You get 0:02:24.080 --> 0:02:26.160 to the peak, you don't spend very much time there, 0:02:26.280 --> 0:02:28.440 and you start to see rate cuts and the FED 0:02:28.520 --> 0:02:30.800 saying no, wait a minute, yeah, there is a different cycle. 0:02:31.040 --> 0:02:33.640 And obviously the more the back end hills are low, 0:02:34.240 --> 0:02:37.840 the more you could actually see fed funds plateau for 0:02:37.919 --> 0:02:39.840 quite some time. Alan, I remember a note that you 0:02:39.960 --> 0:02:42.520 put out months ago when you look at the previous 0:02:42.560 --> 0:02:45.800 few rate hiking cycles and calculated the average duration of 0:02:45.840 --> 0:02:48.280 staying at peak. We put out a similar story over 0:02:48.320 --> 0:02:50.560 the weekend last five cycles. I think the average was 0:02:50.560 --> 0:02:53.680 about eleven months. And what is about the characteristics of 0:02:53.720 --> 0:02:56.480 this tightening cycle, the economic back draft the influences your 0:02:56.520 --> 0:03:01.000 thoughts about how long they will stay at peak? Yeah, 0:03:01.040 --> 0:03:03.600 you know, I think it's all about how much the 0:03:03.720 --> 0:03:08.280 economy slows, and how much that slowing, particularly in the 0:03:08.360 --> 0:03:11.799 labor market, leads to a reduction in wage inflation that's 0:03:11.880 --> 0:03:14.840 consistent with a two percent inflation rate. You know, I 0:03:14.840 --> 0:03:17.720 think the supply side is all coming together very nicely. 0:03:17.720 --> 0:03:21.720 We're actually getting a positive supply side shock developing, and 0:03:22.080 --> 0:03:26.320 it's really the demand side that needs restraint. And it's 0:03:26.320 --> 0:03:29.000 not obvious what's going to happen here, because you can 0:03:29.040 --> 0:03:33.640 imagine a situation where if employment remains pretty resilient and 0:03:33.960 --> 0:03:38.040 inflation starting to come down. That mix of employments resilience 0:03:38.240 --> 0:03:43.920 driving nominal wages and inflation being lower means the real 0:03:43.960 --> 0:03:47.400 incomes will actually be growing again and demand could be 0:03:47.440 --> 0:03:51.280 quite resilient. So you know, there's a lot to play 0:03:51.320 --> 0:03:55.160 for here. The recession, which seemed like a complete gimme h, 0:03:55.360 --> 0:03:57.800 you know a couple of months ago, is you know, 0:03:57.920 --> 0:04:00.720 certainly looking at at worst like a know, a very 0:04:00.800 --> 0:04:03.000 much sort of soft procession as it work. Well, that's 0:04:03.000 --> 0:04:06.080 where I wanted to go. Allen. Does yesterday's CPI print 0:04:06.440 --> 0:04:09.600 give you a greater sense that there could potentially be 0:04:09.640 --> 0:04:12.200 a soft landing? Does it make that a more plausible 0:04:12.240 --> 0:04:16.480 scenario to you? I think it does At the margins, 0:04:16.560 --> 0:04:20.400 I think absolutely. I think you're seeing that the goods 0:04:20.400 --> 0:04:26.520 disinflation that we all have been anticipating is definitely feeding through. 0:04:26.680 --> 0:04:29.679 I mean, we we do some nice calculations on the CPI. 0:04:29.760 --> 0:04:33.000 Of course, we go x energy, X food, X shelter, 0:04:33.480 --> 0:04:36.880 you know, lose half of CPI and low and behold, 0:04:37.120 --> 0:04:41.160 we don't have much inflation. We have disinflation. Um. So 0:04:41.200 --> 0:04:43.400 maybe that's a bit of an exaggeration, but I think 0:04:43.400 --> 0:04:47.760 you're getting some constructive signals there that the supply side 0:04:48.040 --> 0:04:50.560 is without question helpful. I think you're going to see 0:04:50.560 --> 0:04:52.800 it right now. In fact, the import priced data that's 0:04:52.800 --> 0:04:55.240 coming out at thirty look at that and you know, 0:04:55.279 --> 0:04:58.520 look at the x petroleum numbers. They've been down for 0:04:58.560 --> 0:05:02.120 the last six consecutive months, and that serves as a 0:05:02.160 --> 0:05:05.200 strong correlation with pp I finished goods. So I think 0:05:05.279 --> 0:05:08.200 that side is actually very constructive as far as the 0:05:08.200 --> 0:05:10.400 soft landing is concerned. As I said, I think you've 0:05:10.440 --> 0:05:12.760 got to be cautious on the wage inflation side. I 0:05:12.760 --> 0:05:16.080 think Pal laid this out lot in his last speech 0:05:16.520 --> 0:05:19.359 when he suggested that, you know, with it effectively excess 0:05:19.360 --> 0:05:22.159 demand to tune about four million workers. I think that 0:05:22.279 --> 0:05:26.000 is deeply problematic to get inflation down quickly. I think 0:05:26.200 --> 0:05:29.400 what you have right now is not that inflation is 0:05:29.480 --> 0:05:33.000 coming down, but ultimately can we make that transition from 0:05:33.000 --> 0:05:37.040 say a three and a half percent core inflation rate 0:05:37.080 --> 0:05:39.320 to a two percent inflation rate? Just real quick here out. 0:05:39.320 --> 0:05:41.039 And we were speaking with Sarah House of VOLS Fargo 0:05:41.120 --> 0:05:43.599 earlier and she said, all things being equal, a reopening 0:05:43.600 --> 0:05:47.000 of China would be inflationary. We are looking at a 0:05:47.080 --> 0:05:50.320 more rapid reopening that many people had expected. Do you 0:05:50.400 --> 0:05:52.520 see this boosting inflation in a way that it's not 0:05:52.680 --> 0:05:59.120 currently being accounted for by by current projections? Yeah, I 0:05:59.160 --> 0:06:02.560 think you know, if the opening is successful and it's 0:06:02.560 --> 0:06:04.800 a you know, big If you could think in terms 0:06:04.880 --> 0:06:09.719 of revising up Chinese GDP numbers, you know, our forecasts 0:06:09.760 --> 0:06:11.880 about four and a half percent, you could think, you know, 0:06:12.000 --> 0:06:15.120 successful opening could raise that number up to six percent. 0:06:15.480 --> 0:06:20.320 Obviously you've seen base metal cyclicals are very depressed, if anything, 0:06:21.160 --> 0:06:25.279 in over the last six to twelve months. And um, 0:06:25.720 --> 0:06:29.000 you could see that commodities inflation start to pick up 0:06:29.000 --> 0:06:31.599 to a degree, but I'm not particularly worried that that's 0:06:31.640 --> 0:06:34.000 the big driver at this point in time. And again, 0:06:34.000 --> 0:06:35.880 if you look at the import prices, you can you 0:06:35.880 --> 0:06:39.880 know see today, Um, you know, the inflation pressures from 0:06:40.000 --> 0:06:43.920 China are quite muted. The import prices from China of 0:06:44.560 --> 0:06:47.560 quite muted, running roughly about two percent. And just to 0:06:47.600 --> 0:06:50.040 squeeze this in just briefly, at the top of your 0:06:50.080 --> 0:06:53.120 note that you put out yesterday, you indicated that for 0:06:53.160 --> 0:06:55.880 the last year, the two year has sold off for 0:06:55.960 --> 0:06:59.039 every single FED meeting. I wasn't aware of that, Alan, 0:06:59.080 --> 0:07:04.120 Do you believe today is going to be any different? Um? 0:07:04.120 --> 0:07:07.000 I think pal is going to triangle in that direction. 0:07:07.320 --> 0:07:09.720 So you know, at least you've got the fat chair 0:07:09.840 --> 0:07:12.400 pushing in that direction. Uh, you know is it going 0:07:12.440 --> 0:07:15.480 to be successful for more than twenty four hours. Probably 0:07:15.480 --> 0:07:19.600 not that uh I would say on balance the biases 0:07:19.600 --> 0:07:22.080 in that direction, slightly higher to your heels. And I'm 0:07:22.120 --> 0:07:24.920 rescing at Deutsche Bank and a great note again, fantastic. 0:07:35.560 --> 0:07:38.600 We are honored to bring a Torsten Slack for years 0:07:38.600 --> 0:07:41.520 of Deutsche Bank and now chief economist and Apollo Management 0:07:41.880 --> 0:07:45.800 to brief this morning. As we said defined cumulative, let's 0:07:45.840 --> 0:07:49.200 define faster. That's a lead note. David mel passed now 0:07:49.240 --> 0:07:50.960 at the World Bank, when he was at bear Stearns 0:07:51.240 --> 0:07:54.680 love to use that word as a calculus substitution. What 0:07:54.760 --> 0:07:57.760 does faster mean as we look at the inflation continuum 0:07:57.840 --> 0:08:01.200 right now? So of course what's important is, as you 0:08:01.320 --> 0:08:04.440 just talked about, the interest rates have already gone up 0:08:04.600 --> 0:08:07.640 and the cumulative effects are beginning to show, most importantly 0:08:07.680 --> 0:08:10.560 in interest rate sensitive components of GDP. We're seeing a 0:08:10.640 --> 0:08:13.480 slow down in housing. We're seeing a slow down in autos, 0:08:13.600 --> 0:08:16.559 and because those are the sectors that require financing. So 0:08:16.800 --> 0:08:19.640 at the moment, the good spot of the economy housing, 0:08:19.680 --> 0:08:22.760 all those durable goods washers, dryers, is slowing down. It's 0:08:22.760 --> 0:08:25.560 the service sector that the Fed would like to slow 0:08:25.600 --> 0:08:27.520 down at this point you said that it's too it's 0:08:27.560 --> 0:08:29.640 too soon to call the all clear, that we're actually 0:08:29.680 --> 0:08:31.680 on some sort of disinflationary tread. But you also have 0:08:31.720 --> 0:08:35.079 been talking about how there is this strong year over 0:08:35.200 --> 0:08:38.199 year comparison effect that is taking effect and that is 0:08:38.240 --> 0:08:42.000 going to drive inflation lower. So how should investors look 0:08:42.040 --> 0:08:44.360 at this? Are we heading into the same era that 0:08:44.400 --> 0:08:47.720 we left or is this a new more inflationary environment 0:08:47.720 --> 0:08:50.240 that we're seeing led by services. Well, that's a very 0:08:50.320 --> 0:08:52.679 very important question, Lisa, because there is a very important 0:08:52.679 --> 0:08:55.400 debate in FIT working papers and in the academic circles 0:08:55.440 --> 0:08:59.240 also about how much demand destruction is needed to get 0:08:59.280 --> 0:09:01.800 inflation back to two percent. A lot of people highlight 0:09:01.840 --> 0:09:04.000 and say are they're worried about inflation might be sticking 0:09:04.000 --> 0:09:07.000 at say three fall five percent, But that is not 0:09:07.080 --> 0:09:09.080 anchored in any model or any framework other than the 0:09:09.160 --> 0:09:12.000 fear that more demand instruction is needed. And there's a 0:09:12.080 --> 0:09:15.360 very wide range of views that. For example, Danny blast 0:09:15.400 --> 0:09:17.720 Flower is saying, well, we'll be back at two percent 0:09:17.720 --> 0:09:21.480 inflation in six months, whereas the SEP the summer if 0:09:21.480 --> 0:09:23.040 your own projection from the FIT is saying no, this 0:09:23.080 --> 0:09:25.480 will be more like three years. So the question for 0:09:25.520 --> 0:09:27.960 markets is not whether inflation is folding. Everyone agrees that 0:09:28.000 --> 0:09:30.480 inflation is falling. But the question is if you both 0:09:30.559 --> 0:09:33.439 have know that the supply chains are getting straightened out, 0:09:33.760 --> 0:09:35.920 and also the economy is slowing down, it was the 0:09:35.960 --> 0:09:38.079 good sector and the interest rate sensitive components, you could 0:09:38.160 --> 0:09:41.439 have the combination of inflation coming down potentially faster than 0:09:41.480 --> 0:09:43.800 what the consensus is saying here at the moment. Un 0:09:43.920 --> 0:09:47.839 financial conditions tie into this trajectory. In other words, would 0:09:47.920 --> 0:09:52.120 tighter financial conditions lead to a faster rate of change 0:09:52.200 --> 0:09:54.760 or faster rate of inflation coming down and to a 0:09:54.840 --> 0:09:57.680 lower multiple. Yeah, that's very critical. I mean, it's not 0:09:57.679 --> 0:10:00.400 clear to me that the fit once financial distance with 0:10:00.480 --> 0:10:03.320 titan everywhere. That's a very important nuance in this debate 0:10:03.400 --> 0:10:06.560 about interest rate sensitive components of GDP slowing. So we're 0:10:06.559 --> 0:10:09.840 definitely seeing housing all those rouble goods slowing down, and 0:10:09.880 --> 0:10:12.560 that's of course helpful in both dragging inflation down and 0:10:12.600 --> 0:10:14.880 in slowing growth down. But the service TX that's not 0:10:14.960 --> 0:10:18.160 quite slowing down yet. So tightening financial conditions is already happening, 0:10:18.320 --> 0:10:20.440 in particular on the good side, but on the service side. 0:10:20.480 --> 0:10:23.480 If think about primary high yield markets essentially shut down 0:10:23.520 --> 0:10:26.000 at the moment? Is that a desired goal for the Fed? 0:10:26.040 --> 0:10:28.199 Do they want that to spread to i G? I mean, 0:10:28.240 --> 0:10:30.640 that's a very important debate about, well, do they really 0:10:30.679 --> 0:10:33.320 want to slow down financial markets to the degree that 0:10:33.720 --> 0:10:36.680 is potentially required? And maybe they want to broaden this 0:10:36.720 --> 0:10:38.719 out and spread this out over a longer period. When 0:10:38.720 --> 0:10:40.880 you're George B I could just see Dr Hooper turning 0:10:40.920 --> 0:10:42.840 to you and saying, Tarsten, would you make up a 0:10:42.920 --> 0:10:46.559 chart here about when the real yield the real wage flips. 0:10:46.559 --> 0:10:49.599 So part of the service sector idea here is we 0:10:49.720 --> 0:10:54.800 have massive negative real wages. What's the dynamic as we 0:10:54.840 --> 0:10:57.480 go through this process? Chairman Powell wants us to go. 0:10:57.559 --> 0:10:59.760 So you mentioned i G as a risk spreading over 0:10:59.800 --> 0:11:05.520 from housing. Well, can they successfully manage allousy inflation adjusted 0:11:05.640 --> 0:11:09.000 wage back to some kind of positive wage. Well that's 0:11:09.000 --> 0:11:11.040 a real challenge because as you know, about full million 0:11:11.040 --> 0:11:13.520 workers are missing from the workforce. The labor force participation 0:11:13.640 --> 0:11:16.240 rates about full million below trend, and that means that 0:11:16.280 --> 0:11:18.640 the pressure on wages continues to be out there, and 0:11:18.679 --> 0:11:21.319 with wage inflation at five pc, it is absolutely the 0:11:21.400 --> 0:11:24.080 case that the labor market does need to deteriorate, meaning 0:11:24.120 --> 0:11:26.120 to soften a bit more, and that's also what Japal 0:11:26.240 --> 0:11:28.840 himself has been asking for. But to your point, there 0:11:28.920 --> 0:11:31.360 is a very important question also about can we have 0:11:31.800 --> 0:11:34.600 inflation coming back to two percent without the labor markets 0:11:34.640 --> 0:11:37.440 often incontentially, So you're talking about the people who are 0:11:37.440 --> 0:11:39.800 pitted on either sides of that exact debate of where 0:11:39.800 --> 0:11:42.200 exactly we're heading and where the natural rate of inflation 0:11:42.240 --> 0:11:45.079 will end up. Where do you stand? So I do 0:11:45.160 --> 0:11:47.400 think that from all the FED working papers that have 0:11:47.480 --> 0:11:50.080 looked at what drove inflation higher, two thirds of the 0:11:50.120 --> 0:11:52.600 increase in inflation was probably because of supply shocks and 0:11:52.600 --> 0:11:54.880 supply chains that are now getting straightened out. We'll resolve 0:11:54.880 --> 0:11:56.719 that on its own time will take care of that, 0:11:57.000 --> 0:11:59.120 but the one third that's demand is going to be 0:11:59.200 --> 0:12:01.640 much more challenging. But the question is, with the cumulative 0:12:01.840 --> 0:12:04.440 rates increases that we've already seen, maybe this could be 0:12:04.559 --> 0:12:07.560 enough to actually lower the economy down. So therefore, if 0:12:07.600 --> 0:12:09.640 you look easy FCCO on your Bloomberg screen and the 0:12:09.640 --> 0:12:12.719 contentious expects growth and basically zero for the first two 0:12:12.760 --> 0:12:14.600 quarters of next year, and that does mean that maybe 0:12:14.600 --> 0:12:16.920 we already have in the pipeline that's lowdown that's required 0:12:17.120 --> 0:12:19.040 to gradually lift there on the flo rate and therefore, 0:12:19.080 --> 0:12:21.440 get to your question, leads and the soft landing that 0:12:21.480 --> 0:12:24.199 I think is the most likely scenario, And other people 0:12:24.200 --> 0:12:26.040 are starting to agree with you more than they were 0:12:26.120 --> 0:12:29.000 perhaps three weeks ago. The Max Kuttter view of the world, 0:12:29.000 --> 0:12:31.760 the Neil Dotter view of the world is for perhaps 0:12:31.840 --> 0:12:34.080 not a recession in the first half of next year, 0:12:34.160 --> 0:12:37.280 perhaps pushing it back to later in the year. This 0:12:37.360 --> 0:12:40.240 is not a positive outcome though for markets, because it 0:12:40.280 --> 0:12:42.640 indicates the Fed will have to keep rates at a 0:12:42.720 --> 0:12:45.160 high level. Do you agree, Well, no, I don't agree 0:12:45.160 --> 0:12:47.520 because I think remember, if we do not have a 0:12:47.559 --> 0:12:50.520 deep recession, then earnings should actually still be okay. So 0:12:50.559 --> 0:12:52.440 if there's a soft landing, I still think markets could 0:12:52.440 --> 0:12:54.640 actually do okay. But we are going into the period. 0:12:54.640 --> 0:12:56.920 The inflection point is very clear. We're going from a 0:12:56.920 --> 0:12:58.880 period where the FED was saying rates are going up 0:12:58.960 --> 0:13:00.880 up up to now I fet is saying, well, we 0:13:00.920 --> 0:13:02.920 can see the peak is in sight, and now we 0:13:03.000 --> 0:13:05.040 might begin to see rates going sideways. That means that 0:13:05.120 --> 0:13:08.360 vall was very, very significant, very high when we were 0:13:08.360 --> 0:13:10.360 going up and now vall is being compressed, and that 0:13:10.400 --> 0:13:12.520 should also get more clarity to equity investors and to 0:13:12.600 --> 0:13:14.920 credit investors both for i g. Higher than the loans. 0:13:15.120 --> 0:13:17.960 You should begin to see more clarity about well where 0:13:18.040 --> 0:13:19.960 is the peak and rates. We're getting closer to the 0:13:19.960 --> 0:13:22.720 point when we will have a better idea about where 0:13:22.720 --> 0:13:24.760 we're going in terms of the economic data. So the 0:13:24.800 --> 0:13:26.560 bottom line where that is that from having a long 0:13:26.600 --> 0:13:28.800 period of a risk of a hotter landing, I think 0:13:28.800 --> 0:13:30.800 that the mall we can get the sequencing of inflation 0:13:30.840 --> 0:13:33.960 coming down without the plan rate going up the mall, 0:13:34.000 --> 0:13:36.559 we will be moving towards the south landing scenario. Most 0:13:36.679 --> 0:13:42.560 people talk, including me, you do you play soccer all 0:13:42.559 --> 0:13:45.120 the time over in Brooklyn. This was a dump of 0:13:45.160 --> 0:13:49.080 a shipyard which was a grassroots Brooklyn effort. And then 0:13:49.720 --> 0:13:52.120 Governor Pataki and a mayor I can't remember his name, 0:13:52.160 --> 0:13:55.960 but then a mayor jump started this going into a 0:13:56.000 --> 0:14:00.280 gorgeous soccer field as well. You are qualified here team 0:14:00.360 --> 0:14:05.960 Denmark and uh Brooklyn. Can Morocco actually get this done today? 0:14:06.000 --> 0:14:08.080 Are they gonna, you know, be like Croatian? Then we've 0:14:08.080 --> 0:14:10.800 got France, Argentina, They've clearly been the underdog. They've been 0:14:10.880 --> 0:14:13.440 very impressive, as Thesa was just mentioning that defense is 0:14:13.559 --> 0:14:16.440 very very good. She more than me, so I think, well, friends, 0:14:16.480 --> 0:14:18.640 of course they like they lose to France, so you 0:14:18.640 --> 0:14:23.720 think that's funny over there, I do that one. We'll see, 0:14:23.760 --> 0:14:25.800 we'll see how far they get. But I mean France, 0:14:25.840 --> 0:14:32.320 of course, Bobby is just outstanding. France Argentina quick it's Argentina. Yeah, well, 0:14:33.080 --> 0:14:35.640 well I'm going to go with friends. But but Argentina 0:14:35.800 --> 0:14:37.400 has some really good players. But I still think that 0:14:37.520 --> 0:14:39.760 France has the opperlex. I mean, they have some really 0:14:39.800 --> 0:14:43.200 good players. They've been praying incredible tournament so so, but 0:14:43.280 --> 0:14:46.040 let's see both both of course are very good. Argentina 0:14:46.080 --> 0:14:48.600 of course also has with messy and incredible team and 0:14:48.640 --> 0:14:52.680 they did incredibly well yesterday. Would you like to incredibly 0:14:52.680 --> 0:14:57.400 creative offense. I've really enjoy his his energy and and 0:14:58.280 --> 0:15:03.160 has illusions. Mr to uh Pharaoh says to diego Madonna. 0:15:03.320 --> 0:15:05.600 You know, I think it really works out that that 0:15:05.720 --> 0:15:08.720 sounded really smart, Tom, that was good. It was really fun. 0:15:09.520 --> 0:15:14.800 Any other references there is really good. He really played well. 0:15:14.880 --> 0:15:22.920 Torson slock, thank you Paul, Liz Young joins his head 0:15:22.920 --> 0:15:25.920 of investor strategies. So far in our fed hour, it 0:15:26.080 --> 0:15:29.160 is about the time continuum, which is moving averages, and 0:15:29.240 --> 0:15:33.080 Liz Young has written about something I can't stand, which 0:15:33.120 --> 0:15:36.320 is the gloomy death cross. Liz Young, what does the 0:15:36.400 --> 0:15:39.480 death cross and what does it matter for Chairman Paul Well? 0:15:39.520 --> 0:15:41.520 I don't know that it matters so much for Chairman Paul, 0:15:41.560 --> 0:15:44.200 but it matters for investors, and it's been something that's 0:15:44.200 --> 0:15:47.400 signaled earlier this year. What happens is when the fifty 0:15:47.480 --> 0:15:51.000 day moving average goes below the two D day moving average, 0:15:51.040 --> 0:15:53.880 that's the death cross. And at that point, it's widely 0:15:53.920 --> 0:15:57.680 believed that the two D day moving average becomes our 0:15:57.720 --> 0:16:00.720 top point, our resistance level. And if you watch what 0:16:00.760 --> 0:16:03.360 the SMP five hundred has done this year, we have 0:16:03.600 --> 0:16:06.960 not been able to break above those resistance levels. You 0:16:07.000 --> 0:16:09.000 can draw those in a couple of different ways, but 0:16:09.080 --> 0:16:12.320 the point is that they have held strong, and they 0:16:12.360 --> 0:16:15.480 held strong again yesterday we got right up to about 0:16:15.520 --> 0:16:18.120 forty one and gave a lot of it back. So 0:16:18.200 --> 0:16:20.800 the market just has not gotten out of that range. 0:16:20.920 --> 0:16:22.520 So what does that mean? How does that push back 0:16:22.560 --> 0:16:25.240 against the bulliance that we have felt about disinflation in 0:16:25.280 --> 0:16:29.960 the FED moving away from some of the more hawkish proclamations. Well, 0:16:30.000 --> 0:16:33.000 I think that there is a desire by a lot 0:16:33.040 --> 0:16:35.280 of investors to number one, just be done with all 0:16:35.320 --> 0:16:38.840 this negativity and find some durable upside in the market. 0:16:39.120 --> 0:16:41.640 But when we sit here with three different yield curve 0:16:41.680 --> 0:16:44.120 in versions that are very meaningful, and many of those 0:16:44.200 --> 0:16:47.480 are meaningful to the FED. We've got the twos tends inverted, 0:16:47.680 --> 0:16:50.160 the three month tenure, and now it's called the near 0:16:50.240 --> 0:16:54.080 term forward spread inverted. That keeps a lid on equity market. 0:16:54.320 --> 0:16:57.880 And when you look at just the upside opportunity, it's 0:16:57.920 --> 0:17:02.320 difficult to get past certain les evaluation and really feel 0:17:02.320 --> 0:17:05.320 like we deserve to be at that pe. So when 0:17:05.320 --> 0:17:07.280 you get up where we are now seventeen and a 0:17:07.280 --> 0:17:11.200 half to seventeen point eight times forward earnings, it's difficult 0:17:11.240 --> 0:17:14.800 to really say, Okay, we're doing that based on strong 0:17:14.800 --> 0:17:18.280 earnings momentum or strong fundamentals in the economy. It's just 0:17:18.400 --> 0:17:21.320 not the case right now. There's still a lot of headwinds. So, Liz, 0:17:21.320 --> 0:17:23.959 how do you talk then with investors in terms of 0:17:24.080 --> 0:17:26.760 how they should look at next year, how they should 0:17:26.760 --> 0:17:29.120 look at the FED, how they should look at what 0:17:29.200 --> 0:17:31.080 may or may not be a recession if you take 0:17:31.119 --> 0:17:34.840 a look at some of the increasing pullback from recessionary 0:17:34.880 --> 0:17:37.440 types of scenarios. Even Alan Ruskin over at Deutsche Bank 0:17:37.520 --> 0:17:41.200 saying that yesterday's data pointed more toward a soft landing 0:17:41.240 --> 0:17:44.760 than he previously thought. Look, yesterday's data was good. That 0:17:44.840 --> 0:17:47.199 was that was a positive report in the sense that 0:17:47.240 --> 0:17:51.080 we surprised to the downside. It's signaled to the market 0:17:51.160 --> 0:17:55.479 that it's possible we we avert catastrophe. But we're still 0:17:55.520 --> 0:17:57.520 not done with this. And here's what I want to 0:17:57.520 --> 0:18:00.640 hear from Jerome Powell today. I expect that they will 0:18:00.680 --> 0:18:03.560 do a fifty basis point hike. I'd like to hear 0:18:03.720 --> 0:18:06.639 how they decided to downshift, because it will give us 0:18:06.640 --> 0:18:10.840 a signal of exactly what indicators they're watching to choose 0:18:10.840 --> 0:18:13.040 whether or not they need to slow down or pause, 0:18:13.080 --> 0:18:14.960 and that will give us a little bit more certainty 0:18:14.960 --> 0:18:19.000 going into I'd also like to hear, sorry, just real quick, 0:18:19.000 --> 0:18:21.800 I'd also like to hear what his definition of restrictive is. 0:18:22.160 --> 0:18:24.200 Does four and a half on the upper round get 0:18:24.280 --> 0:18:27.680 us to restrict it? Interesting. Is the stock market one 0:18:27.760 --> 0:18:31.119 of his indicators, as it was for Chairman Greenspan. I 0:18:31.119 --> 0:18:34.959 think it's one of the indicators for financial conditions. But 0:18:34.960 --> 0:18:37.000 what we've heard from them, and I don't expect this 0:18:37.080 --> 0:18:40.080 to change today or anytime soon, is that they are 0:18:40.280 --> 0:18:43.119 laser focused on inflation and the labor market. So I 0:18:43.160 --> 0:18:45.879 think the more likely narrative shift will be that we 0:18:45.960 --> 0:18:49.200 stop hearing so much about inflation and we start hearing 0:18:49.240 --> 0:18:52.440 about the tight labor market, much more interesting, lace brilliant 0:18:52.440 --> 0:18:55.159 as a wise So I final LEAs, thank you, thank you, 0:18:59.480 --> 0:19:02.000 and I'm going narrow here when I could go broad, 0:19:02.040 --> 0:19:04.760 broad broad with Edward s. I'man he is the ever 0:19:04.840 --> 0:19:07.920 cores I s I founder, far more than that, someone 0:19:08.040 --> 0:19:11.040 so esteemed in market economics. He has been discussed as 0:19:11.080 --> 0:19:13.679 a member of the governor Board of Governors of the 0:19:13.720 --> 0:19:16.520 FED or vice chairman. And have you've ever been vetted 0:19:16.560 --> 0:19:19.639 to be chairman of the Fed? Has anyone been that? 0:19:20.240 --> 0:19:23.720 You know? I can't imagine you demanding the FED members 0:19:23.920 --> 0:19:27.120 to read your note? Have you ever been vetted? We'll 0:19:27.240 --> 0:19:30.639 do reading some, but you know, as you know on 0:19:30.760 --> 0:19:33.919 my fourth I love your show, everything you do, but 0:19:34.480 --> 0:19:39.120 my criminal record just gets in a way round. We're 0:19:39.119 --> 0:19:41.879 not going to crypto right now, and I want to 0:19:41.880 --> 0:19:45.160 go to one paragraph and this goes back to C. J. Lawrence. 0:19:45.160 --> 0:19:48.680 Folks in my ute when when Ed was at C. J. 0:19:48.840 --> 0:19:51.960 Lawrence in venting market economics as we know it today, 0:19:52.200 --> 0:19:55.679 the world stopped. I believe it was Thursday afternoon for 0:19:56.000 --> 0:19:58.160 M O, which is Larry Cudler's big number M one, 0:19:58.400 --> 0:20:00.879 M two, M three, M eight and the rest of it. 0:20:01.400 --> 0:20:05.000 You have ad him in a chart which speaks volumes 0:20:05.000 --> 0:20:09.200 of United States inflation adjusted M two and the only 0:20:09.240 --> 0:20:12.679 word that works in the modern lexicon is cratered. What 0:20:12.720 --> 0:20:15.640 do we make of the plunge in M two off 0:20:15.680 --> 0:20:19.879 the pandemic spike? That's dangerous? Uh, time you hit the 0:20:19.880 --> 0:20:23.920 thing I'm most focused on right now. I just had 0:20:24.000 --> 0:20:28.400 Greg you go in uh for our morning meeting, and 0:20:28.840 --> 0:20:33.399 he's somewhat dismissive of this, and the fete is totally dismissive. 0:20:34.000 --> 0:20:39.320 But I've I grew up in this period in his seventies, UH, 0:20:40.040 --> 0:20:43.560 when Russell Freeland was rock star, and so I think 0:20:43.560 --> 0:20:47.080 it's very serious. But we have an analyst here, Glenn 0:20:47.080 --> 0:20:50.359 Shore does the banks number one analysts in space. And 0:20:50.400 --> 0:20:53.080 he's been telling me this for six months that bank 0:20:53.119 --> 0:20:56.000 deposits are going to decline three this year and as 0:20:56.000 --> 0:20:59.280 a Friday down one per cent. Uh. And bank deposits 0:20:59.280 --> 0:21:02.560 are five percent and two So you can get your 0:21:02.640 --> 0:21:08.000 MP too reading uh now from that source on Friday afternoon. 0:21:08.520 --> 0:21:12.199 And now bank deposits are down a little over one 0:21:12.240 --> 0:21:15.840 percent already. Uh. And that means my supplies probably contracting 0:21:15.920 --> 0:21:23.560 hasn't contracted since. So let's say to you, you follow everything, 0:21:24.040 --> 0:21:27.320 You're amazing, but let's say the odds that it makes 0:21:27.320 --> 0:21:35.080 a difference or eighty or sixty. It's a very serious issue. Uh, 0:21:35.800 --> 0:21:38.679 we'll see how it works. Is slowing And how do 0:21:38.720 --> 0:21:41.439