1 00:00:00,080 --> 00:00:12,960 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:32,120 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg So 5 00:00:32,159 --> 00:00:34,240 Speaker 1: a big federal reserve decision a great height, but I've 6 00:00:34,280 --> 00:00:36,720 Speaker 1: never seen so much debate over a federal reserve decision 7 00:00:36,720 --> 00:00:40,320 Speaker 1: which involves such few changes to the monetary policy stance 8 00:00:40,600 --> 00:00:42,600 Speaker 1: and even the projection. So let's bring in Jane Foley 9 00:00:42,640 --> 00:00:45,720 Speaker 1: from London Rabba bankhead of fect Strategy. Jane, what was 10 00:00:45,800 --> 00:00:49,360 Speaker 1: your takeaway on a hugely debated federal Reserve decision which 11 00:00:49,400 --> 00:00:53,680 Speaker 1: really generated very little change at all. Well, that's exactly right. 12 00:00:53,680 --> 00:00:56,080 Speaker 1: But I think what the market really is debating about 13 00:00:56,160 --> 00:00:58,320 Speaker 1: right now is is what's going to happen? Saying the 14 00:00:58,320 --> 00:01:01,440 Speaker 1: tailor under twenty nineteen, what's going to happy? I think 15 00:01:01,440 --> 00:01:04,160 Speaker 1: that's what the largest amount of uncertainty is concerned. I mean, 16 00:01:04,200 --> 00:01:06,959 Speaker 1: already surveys are suggesting that the UK or the US 17 00:01:07,160 --> 00:01:10,959 Speaker 1: they could go into ston in twenty Therefore, there's still 18 00:01:10,959 --> 00:01:13,480 Speaker 1: I think a lot of uncertainty about what would happen 19 00:01:13,520 --> 00:01:16,880 Speaker 1: back from the second half of so you sort of 20 00:01:16,880 --> 00:01:20,840 Speaker 1: know what that has projected to do in in the say, 21 00:01:20,880 --> 00:01:24,120 Speaker 1: the next twelve months. But beyond that, I think there's 22 00:01:24,160 --> 00:01:27,319 Speaker 1: a lot of uncertainty uncertainty, and I think that's really 23 00:01:27,319 --> 00:01:29,480 Speaker 1: where the crux of the debate is. And Jane, what 24 00:01:29,640 --> 00:01:32,360 Speaker 1: often comes with the Fellow Reserved decision as the summary 25 00:01:32,440 --> 00:01:34,600 Speaker 1: of economic projections, And as you points out, that's where 26 00:01:34,600 --> 00:01:37,440 Speaker 1: we get the forecasts from each and every individual Fellow 27 00:01:37,480 --> 00:01:39,720 Speaker 1: Reserve official who plot where they think rates should be 28 00:01:39,800 --> 00:01:42,280 Speaker 1: or will be over the coming years. We have a 29 00:01:42,280 --> 00:01:44,280 Speaker 1: pretty good idea of where the President of the United 30 00:01:44,319 --> 00:01:47,400 Speaker 1: States would put his dot plot on this specific dot 31 00:01:47,520 --> 00:01:50,360 Speaker 1: chard m Jane for you, though, it's quite interesting looking out, 32 00:01:51,360 --> 00:01:55,960 Speaker 1: looking out, we see a pretty spread out view of 33 00:01:56,120 --> 00:01:58,280 Speaker 1: rates and a pretty big range as well. What do 34 00:01:58,280 --> 00:02:00,360 Speaker 1: you make of that. I don't see the bunching that 35 00:02:00,440 --> 00:02:04,760 Speaker 1: maybe we've seen in decisions and forecasts gone by. Well, 36 00:02:04,800 --> 00:02:06,880 Speaker 1: I think a year we've had this debate about bond 37 00:02:06,960 --> 00:02:08,639 Speaker 1: deals and what are they telling us of that The 38 00:02:09,080 --> 00:02:11,239 Speaker 1: curve earlier in the year was planning in the market 39 00:02:11,240 --> 00:02:15,040 Speaker 1: got quite upset about the possibility of that that was 40 00:02:15,800 --> 00:02:18,360 Speaker 1: showing a slowdown. We know, of course right now that 41 00:02:18,400 --> 00:02:22,079 Speaker 1: the US is benefiting, of course from the the expansionary 42 00:02:22,080 --> 00:02:26,040 Speaker 1: impact of fiscal listening at the tax cuts, but we 43 00:02:26,120 --> 00:02:29,360 Speaker 1: also know that as we move forward in this cycle, 44 00:02:29,639 --> 00:02:32,840 Speaker 1: particularly when you take account of the progressive interest rate 45 00:02:32,880 --> 00:02:34,880 Speaker 1: hikes that we've had from from the FED, that that 46 00:02:34,919 --> 00:02:36,799 Speaker 1: will run out of steam. Hence you get the talk 47 00:02:36,800 --> 00:02:40,320 Speaker 1: about recession in twenty now. Talking about recession in twenty 48 00:02:40,440 --> 00:02:43,040 Speaker 1: when the US and saying in the second quarters just 49 00:02:43,160 --> 00:02:46,600 Speaker 1: posted growth of four point two percent, seems quite difficult 50 00:02:46,600 --> 00:02:49,920 Speaker 1: to reconcile. And yet that's the path that we may 51 00:02:49,960 --> 00:02:53,960 Speaker 1: be on. And therefore, um, you know, it is very difficult, 52 00:02:54,000 --> 00:02:57,360 Speaker 1: I think, for economists to find a real consensus in 53 00:02:57,360 --> 00:02:59,799 Speaker 1: that time frame. And that is where I think all 54 00:02:59,840 --> 00:03:03,160 Speaker 1: the uncertainty at regarding me, the treasuries and also the 55 00:03:03,240 --> 00:03:05,560 Speaker 1: U s. Dollar. Did the turn to the Ustorians at 56 00:03:05,560 --> 00:03:08,600 Speaker 1: the tail end of next year, That really lie Jen 57 00:03:08,680 --> 00:03:10,160 Speaker 1: stayed with me. I'm very pleased to say that my 58 00:03:10,240 --> 00:03:12,960 Speaker 1: conker is making an appearance in New York City. Good 59 00:03:12,960 --> 00:03:14,960 Speaker 1: morning to Tom King, Good morning John. Got through the 60 00:03:14,960 --> 00:03:18,560 Speaker 1: trafficking time and stopped on how bad is it in Manhattan. 61 00:03:19,120 --> 00:03:21,680 Speaker 1: It's you know, I actually think last year was worse, 62 00:03:21,800 --> 00:03:24,320 Speaker 1: but it is, it is worse than normal. I would say, 63 00:03:24,480 --> 00:03:26,680 Speaker 1: it's like John John Tucker with us as well, John 64 00:03:26,680 --> 00:03:29,800 Speaker 1: coming from New Jersey. I mean, people literally plan what 65 00:03:29,960 --> 00:03:34,320 Speaker 1: an hour ahead account that the you know, they're doing 66 00:03:34,360 --> 00:03:38,080 Speaker 1: construction on the helix. The helix as well, John. The 67 00:03:38,160 --> 00:03:40,880 Speaker 1: helix is a it's like the Eiffel Tower. It's sort 68 00:03:40,920 --> 00:03:46,280 Speaker 1: of an active metal constructing. Something tells me you're not 69 00:03:46,320 --> 00:03:49,200 Speaker 1: being serious as oh no, we were not. Just Jane 70 00:03:49,200 --> 00:03:51,280 Speaker 1: Folly with us with Robbo Bank, Jane, I want to 71 00:03:51,320 --> 00:03:56,360 Speaker 1: know what Robbo Bank economists see in terms of economic growth, 72 00:03:56,400 --> 00:03:59,480 Speaker 1: whether the United States or Europe. There seems to me 73 00:03:59,520 --> 00:04:03,520 Speaker 1: to be an inordinate mystery about what economic growth is 74 00:04:03,560 --> 00:04:07,800 Speaker 1: going to be. Well. I think certainly there has been 75 00:04:08,400 --> 00:04:11,600 Speaker 1: well last year, some good news, better than expected news. 76 00:04:11,640 --> 00:04:14,520 Speaker 1: But I think with respect to looking in the future, 77 00:04:14,640 --> 00:04:18,520 Speaker 1: the uncertainty stems from the trade data and the trade wars. 78 00:04:18,960 --> 00:04:21,880 Speaker 1: And I think if we look at what surveys are saying, 79 00:04:21,880 --> 00:04:23,880 Speaker 1: So for instance, this morning we had confidence survey from 80 00:04:23,880 --> 00:04:26,719 Speaker 1: the Eurozone disappointing. There can be a bit of a 81 00:04:26,760 --> 00:04:28,960 Speaker 1: mismatch between what some of the data is doing, which 82 00:04:29,000 --> 00:04:32,760 Speaker 1: is okay, which in many cases is pretty firm with 83 00:04:32,839 --> 00:04:35,320 Speaker 1: the confidence numbers. And the confidence numbers, there are calls 84 00:04:35,360 --> 00:04:37,919 Speaker 1: looking forward, they are trying to to work through the 85 00:04:37,960 --> 00:04:40,560 Speaker 1: impact of trade wars, and yet there hasn't come to 86 00:04:40,600 --> 00:04:43,840 Speaker 1: fruition too much in the economic data. However, we also 87 00:04:43,960 --> 00:04:46,960 Speaker 1: know that in the economic data there's probably been some 88 00:04:47,080 --> 00:04:49,720 Speaker 1: front loading. Certainly that's going to be the case in 89 00:04:50,040 --> 00:04:52,720 Speaker 1: trade data. If we look at China, for instance, we've 90 00:04:52,720 --> 00:04:57,600 Speaker 1: had better August IP better August retail sales, possibly for 91 00:04:57,760 --> 00:05:00,880 Speaker 1: front loading. But our concern is as we go forward, 92 00:05:01,200 --> 00:05:03,760 Speaker 1: we will begin to see that these costs of the 93 00:05:03,760 --> 00:05:07,000 Speaker 1: trade wards. Well, let's go through the pairs. What's your 94 00:05:07,080 --> 00:05:10,080 Speaker 1: yen call right now? Out one year, we've seen some 95 00:05:10,160 --> 00:05:14,720 Speaker 1: big figure calls for weaker yen. Do you agree? Yes? Now, 96 00:05:14,760 --> 00:05:17,479 Speaker 1: this is we We do agree, and this is largely 97 00:05:17,520 --> 00:05:19,360 Speaker 1: because we are still of the view that the dollar 98 00:05:19,440 --> 00:05:22,840 Speaker 1: can climb further. The dollar with the interst rate story, 99 00:05:22,880 --> 00:05:24,360 Speaker 1: with a growth story have been good in the US 100 00:05:24,400 --> 00:05:28,600 Speaker 1: still seems to be sucking in capital outflows from emerging markets. Now, 101 00:05:28,600 --> 00:05:31,080 Speaker 1: although emerging markets have been firm in recent weeks, we 102 00:05:31,160 --> 00:05:33,680 Speaker 1: don't think that that story is over, and that is 103 00:05:33,720 --> 00:05:36,680 Speaker 1: because of again the China story. We think the China 104 00:05:36,720 --> 00:05:39,000 Speaker 1: story is only really beginning and we will see at 105 00:05:39,000 --> 00:05:41,080 Speaker 1: worst data. There's already quite a lot of bad data 106 00:05:41,120 --> 00:05:43,680 Speaker 1: from China if you look, if you just scratch below 107 00:05:43,680 --> 00:05:46,480 Speaker 1: the surface. So we do think that the dollar will 108 00:05:46,520 --> 00:05:49,400 Speaker 1: remain firm. So Jane, help we understand something, because there's 109 00:05:49,400 --> 00:05:51,320 Speaker 1: a lot of listeners out there that are looking to pivot, 110 00:05:51,520 --> 00:05:55,799 Speaker 1: and what is involved with that pivot is increasing international exposure, 111 00:05:55,800 --> 00:05:58,080 Speaker 1: moving away from the United States, taking down your risk 112 00:05:58,080 --> 00:06:00,560 Speaker 1: there just a little bit an increasing exposure or elsewhere. 113 00:06:00,800 --> 00:06:03,320 Speaker 1: Do you suggest people do that through EM or through 114 00:06:03,360 --> 00:06:07,440 Speaker 1: Europe right now? No, we're still very cautious on EM 115 00:06:07,560 --> 00:06:10,240 Speaker 1: And again this is because we don't think that we've 116 00:06:10,279 --> 00:06:12,680 Speaker 1: seen or we think perhaps if US has been lolled 117 00:06:12,680 --> 00:06:14,640 Speaker 1: into a false sense of security with respect to some 118 00:06:14,680 --> 00:06:17,960 Speaker 1: other data that I've just mentioned for the Chinese August data, 119 00:06:18,360 --> 00:06:20,159 Speaker 1: we do think that this is going to come through. 120 00:06:20,200 --> 00:06:22,440 Speaker 1: In fact, you know, it's really quite interesting. You know, 121 00:06:22,440 --> 00:06:25,239 Speaker 1: there are stories right now that there have been China 122 00:06:25,320 --> 00:06:30,440 Speaker 1: has been unofficially restricting imports, commodities, imports from places like Australia, 123 00:06:30,480 --> 00:06:33,920 Speaker 1: and this is there's slowing down the custos approvals because 124 00:06:33,960 --> 00:06:37,080 Speaker 1: demand for raw materials and industrial products has taken a 125 00:06:37,160 --> 00:06:39,120 Speaker 1: hit in China, so all of this is likely to 126 00:06:39,160 --> 00:06:42,160 Speaker 1: come through. This will be bad news for e MUM 127 00:06:42,240 --> 00:06:44,599 Speaker 1: and probably good news for the dollar given the intrastruct 128 00:06:44,640 --> 00:06:47,679 Speaker 1: differential it continues to support the dollar. Jane Foley always 129 00:06:47,680 --> 00:06:49,880 Speaker 1: great to get your insight following a federal reserved decision. 130 00:06:49,920 --> 00:07:05,320 Speaker 1: Jane Foley, the rubber backhead of Effects Strategy. John, I 131 00:07:05,360 --> 00:07:08,240 Speaker 1: know you were. You were reading your Horse Walpole seventeen 132 00:07:08,320 --> 00:07:11,000 Speaker 1: sixty one, where he spoke about Lame Duck at the 133 00:07:11,080 --> 00:07:14,680 Speaker 1: London Stock Exchange. And then John migrates over to January 134 00:07:15,360 --> 00:07:18,720 Speaker 1: eighteen sixty three in the heart of the Civil War, 135 00:07:19,080 --> 00:07:22,000 Speaker 1: where in the Congressional Globe they talk about lame Duck's 136 00:07:22,040 --> 00:07:24,880 Speaker 1: Libby cantrol of Pimcoe study this very very cleful. Maybe 137 00:07:24,880 --> 00:07:28,360 Speaker 1: did the same thing. I'm sure Lame Duck. I mean, 138 00:07:28,400 --> 00:07:31,120 Speaker 1: there it is, and it could be upon us in November. 139 00:07:31,600 --> 00:07:34,320 Speaker 1: What is the import of that to our listeners this 140 00:07:34,480 --> 00:07:38,360 Speaker 1: time around? I think the most relevant issue that may 141 00:07:38,400 --> 00:07:41,080 Speaker 1: be addressed in the Lame Duck is um is potentially 142 00:07:41,600 --> 00:07:45,320 Speaker 1: a consideration of NAFTA or HAFTA. Uh, given that it 143 00:07:45,320 --> 00:07:47,320 Speaker 1: doesn't look like the Canada's gonna be able to come 144 00:07:47,360 --> 00:07:50,240 Speaker 1: to the deal. UM. So just from a from a 145 00:07:50,280 --> 00:07:54,120 Speaker 1: procedural perspective, UM, A deal needs to be finalized by 146 00:07:54,200 --> 00:07:56,000 Speaker 1: in the next few days in order for it to 147 00:07:56,000 --> 00:07:59,320 Speaker 1: be considered by before the end of this of this Congress. Um. 148 00:07:59,400 --> 00:08:02,480 Speaker 1: And so there is a Mexican bilateral deal without Canada. 149 00:08:02,520 --> 00:08:03,800 Speaker 1: I think that's gonna be the big issue in front 150 00:08:03,800 --> 00:08:06,000 Speaker 1: of in front of Congress. Let's rip up the script 151 00:08:06,080 --> 00:08:08,680 Speaker 1: and we we We saw this literally in the last 152 00:08:08,760 --> 00:08:12,880 Speaker 1: forty eight hours. I mean, the President wouldn't even speak 153 00:08:12,880 --> 00:08:16,400 Speaker 1: with Mr Trudeau of Canada at the at the festivities 154 00:08:16,440 --> 00:08:20,160 Speaker 1: in New York. We've reached a new level of seriousness 155 00:08:20,200 --> 00:08:24,480 Speaker 1: in this neft to debate. Absolutely. I mean I I've 156 00:08:25,200 --> 00:08:27,200 Speaker 1: I thought that the market has been a little bit 157 00:08:27,200 --> 00:08:30,320 Speaker 1: sanguine about, um, the sort of idea that they could 158 00:08:30,360 --> 00:08:32,280 Speaker 1: come to a resolution so quickly. I mean, these are 159 00:08:32,280 --> 00:08:36,120 Speaker 1: these big media issues between Canada and the US, things 160 00:08:36,120 --> 00:08:39,240 Speaker 1: that have been relevant when we were negotiating TPP with them, 161 00:08:39,600 --> 00:08:43,560 Speaker 1: Dairy subsidies, dispute resolution, auto tariffs. Um. These are not 162 00:08:43,720 --> 00:08:46,120 Speaker 1: things that can be I don't think reconciled in a 163 00:08:46,160 --> 00:08:47,880 Speaker 1: matter of days. And I think that's what you're seeing 164 00:08:47,960 --> 00:08:50,400 Speaker 1: right now. Um. So, I think the big big question 165 00:08:50,480 --> 00:08:53,000 Speaker 1: is here is will members of Congress actually ratified by 166 00:08:53,200 --> 00:08:56,080 Speaker 1: bilateral with Mexico? You know, I'm skeptical, are they? When 167 00:08:56,120 --> 00:08:59,360 Speaker 1: we had the Ford President and chief executive Officer Mr 168 00:08:59,400 --> 00:09:03,000 Speaker 1: Hackett at our Bloomberg Forum yesterday and I'm not sure 169 00:09:03,040 --> 00:09:06,600 Speaker 1: if it came up, but X percent of any given automobile, 170 00:09:07,080 --> 00:09:10,280 Speaker 1: like an F one pickup truck has a Mexican or 171 00:09:10,320 --> 00:09:14,240 Speaker 1: windsor Ontario component to it. Do they understand that? In 172 00:09:14,280 --> 00:09:18,240 Speaker 1: your world living? Um? Yeah, So, I mean, obviously the 173 00:09:18,280 --> 00:09:21,280 Speaker 1: supply chain is incredibly integrated with especially with Mexico, but 174 00:09:21,320 --> 00:09:25,319 Speaker 1: also with Canada. And I think that's why, um, folks 175 00:09:25,480 --> 00:09:29,600 Speaker 1: in Congress have been so concerned about both NAFTA potential 176 00:09:29,679 --> 00:09:32,640 Speaker 1: naft to withdraw and the auto tariffs. UM. Just given 177 00:09:32,960 --> 00:09:35,679 Speaker 1: how sort of integrated we are with with especially our 178 00:09:35,679 --> 00:09:38,559 Speaker 1: our neighbors to the north and the south, I think 179 00:09:38,559 --> 00:09:41,240 Speaker 1: they do understand it. Um. But obviously this is politics 180 00:09:41,360 --> 00:09:44,000 Speaker 1: ruling economics right now. Well, let's go back to the 181 00:09:44,080 --> 00:09:46,480 Speaker 1: lame duck theme then as well. You know, let's assume 182 00:09:46,520 --> 00:09:49,439 Speaker 1: we get a Democrat House. And you know, David Wasserman 183 00:09:49,559 --> 00:09:51,760 Speaker 1: was writing up yesterday in the Cook Political Report and 184 00:09:51,760 --> 00:09:54,560 Speaker 1: there's a huge doubt of us. I get the uncertainty, folks, 185 00:09:54,600 --> 00:09:59,120 Speaker 1: and we heard that from you earlier. But nevertheless, it 186 00:09:59,400 --> 00:10:03,000 Speaker 1: does it just stall through the lame duck or there's 187 00:10:03,040 --> 00:10:06,880 Speaker 1: just a few chosen pieces of legislation that maybe get 188 00:10:07,080 --> 00:10:10,720 Speaker 1: addressed within the uproar. Yeah, And I think it's like 189 00:10:10,720 --> 00:10:13,240 Speaker 1: I think it's all going to be predicated on on 190 00:10:13,320 --> 00:10:15,120 Speaker 1: the outcome of the election. I think if you see 191 00:10:16,040 --> 00:10:18,400 Speaker 1: a big Democratic sweep, I mean, of course, Democrats aren't 192 00:10:18,400 --> 00:10:20,880 Speaker 1: going to be very um willing to go along with 193 00:10:20,920 --> 00:10:22,880 Speaker 1: anything in a lame duck session if they are looking 194 00:10:22,880 --> 00:10:26,680 Speaker 1: at much bigger majorities in the normal congressional session. With 195 00:10:26,800 --> 00:10:29,040 Speaker 1: that said, I think Republicans will have a new urgency 196 00:10:29,080 --> 00:10:32,520 Speaker 1: to get things done, including potentially this bilateral with Mexico 197 00:10:32,760 --> 00:10:36,280 Speaker 1: and potentially a confirmation of of Kabanov depending on on 198 00:10:36,280 --> 00:10:38,920 Speaker 1: how that goes. Libby. If we can learn anything from 199 00:10:38,960 --> 00:10:40,840 Speaker 1: politics over the last couple of years, it's to make 200 00:10:40,880 --> 00:10:44,320 Speaker 1: sure we question the consensus before the vote actually takes place. 201 00:10:44,600 --> 00:10:47,240 Speaker 1: There seems to be an overwhelming consensus that the House 202 00:10:47,360 --> 00:10:51,040 Speaker 1: swings towards the Democrats. Now, I still listen to to 203 00:10:51,200 --> 00:10:53,559 Speaker 1: the to the message coming from the Democrats and struggle 204 00:10:53,600 --> 00:10:56,040 Speaker 1: to really understand what it is. Um, what is the 205 00:10:56,080 --> 00:10:59,000 Speaker 1: message the electorate that comes from the Democrats. Well, I 206 00:10:59,040 --> 00:11:01,680 Speaker 1: think that the prevailing message here is and even though 207 00:11:01,720 --> 00:11:03,640 Speaker 1: they may not want it to be, but I think 208 00:11:03,640 --> 00:11:06,320 Speaker 1: it's an anti Trump message, right, this is uh. I 209 00:11:06,320 --> 00:11:09,960 Speaker 1: think that they are running on interestingly on sort of 210 00:11:10,559 --> 00:11:13,760 Speaker 1: providing a check in balance to to the executive branch. 211 00:11:13,840 --> 00:11:17,120 Speaker 1: And that's been a um, something that they've all emphasized. Um. 212 00:11:17,160 --> 00:11:19,000 Speaker 1: So I think that has been a major theme. Now. 213 00:11:19,400 --> 00:11:22,480 Speaker 1: They would say that they're running on infrastructure, they're running 214 00:11:22,480 --> 00:11:26,640 Speaker 1: on healthcare, um. But but certainly providing a check to 215 00:11:26,640 --> 00:11:29,840 Speaker 1: the executive branch is either implicitly or explicitly part of 216 00:11:29,840 --> 00:11:31,880 Speaker 1: their part of their message. Let me thank you so much. 217 00:11:31,960 --> 00:11:33,920 Speaker 1: Let me control where this here really is the day's 218 00:11:33,960 --> 00:11:38,640 Speaker 1: wearing on towards the election. Really, I thought, really in 219 00:11:38,679 --> 00:11:41,319 Speaker 1: the last hours a whole new tone of the polar 220 00:11:41,320 --> 00:11:55,959 Speaker 1: analysis and the study as well. Very pleased to say 221 00:11:56,080 --> 00:11:58,560 Speaker 1: that dropping bot a studio is paid a chatwaw Miszoo 222 00:11:58,679 --> 00:12:01,720 Speaker 1: International head of rate strategy here in London, paid a 223 00:12:01,720 --> 00:12:03,240 Speaker 1: greater catch up with you. Let's pick up with that 224 00:12:03,320 --> 00:12:06,679 Speaker 1: economic data here in Europe and upside surprise on inflation. 225 00:12:07,200 --> 00:12:09,360 Speaker 1: These sentiment numbers don't look great though, and I'm trying 226 00:12:09,360 --> 00:12:11,439 Speaker 1: to reconcile what's going on in Europe because I'm getting 227 00:12:11,440 --> 00:12:13,559 Speaker 1: a lot of conflicting signals. What do you see? We've 228 00:12:13,559 --> 00:12:17,280 Speaker 1: got the classic issue for the euro areas that we're 229 00:12:17,320 --> 00:12:20,439 Speaker 1: getting to trouble if inflation surprises to the upside, particularly 230 00:12:20,440 --> 00:12:23,920 Speaker 1: if it gets above the e CBS target, which it 231 00:12:23,960 --> 00:12:25,840 Speaker 1: currently is, has been for a couple of months and 232 00:12:25,920 --> 00:12:28,920 Speaker 1: is likely to continue to be the case because then 233 00:12:29,360 --> 00:12:33,040 Speaker 1: it's their single mandate. Um they're likely to be looking 234 00:12:33,320 --> 00:12:37,120 Speaker 1: airing towards title monetary policy then they've previously been signaling. 235 00:12:37,679 --> 00:12:40,520 Speaker 1: And that's whilst the growth backdrops not looking so great. 236 00:12:40,520 --> 00:12:43,760 Speaker 1: You know, it's decelerating somewhat. It's it's certainly not looking 237 00:12:44,040 --> 00:12:47,960 Speaker 1: looking dangerous to the downside, but it's not that strong. 238 00:12:48,280 --> 00:12:52,240 Speaker 1: Can you reconcile data dependence with forward guidance? The reason 239 00:12:52,280 --> 00:12:55,320 Speaker 1: I asked this is because we do have an upside 240 00:12:55,320 --> 00:12:58,480 Speaker 1: surprise on inflation in Germany, regardless of what happens with 241 00:12:58,480 --> 00:13:01,439 Speaker 1: growth and inflation. President Dars tied the hands to the 242 00:13:01,440 --> 00:13:03,600 Speaker 1: whole Government Council until the back end of next year 243 00:13:03,960 --> 00:13:06,800 Speaker 1: on rates. So can they truly be dated dependent when 244 00:13:06,800 --> 00:13:09,560 Speaker 1: the whole Governing Council essentially has their hands tied on 245 00:13:09,760 --> 00:13:14,000 Speaker 1: rates for potentially eighteen months. Yeah, so I would think 246 00:13:14,040 --> 00:13:16,040 Speaker 1: that there is some risk that we start to see 247 00:13:16,080 --> 00:13:19,560 Speaker 1: some evidence that the Governing Council may be frayed somewhat 248 00:13:19,760 --> 00:13:22,719 Speaker 1: about that level of commitment, particularly when they're saying that 249 00:13:22,840 --> 00:13:25,200 Speaker 1: rates can't go up until the end of summer. Perhaps 250 00:13:25,240 --> 00:13:28,200 Speaker 1: the debate about the real timing of that comes back 251 00:13:28,240 --> 00:13:31,360 Speaker 1: onto the table. If that just means a rate hikers 252 00:13:31,400 --> 00:13:34,600 Speaker 1: earlier September nineteen, then possibly they need to be hiking 253 00:13:34,679 --> 00:13:39,440 Speaker 1: rates in larger steps. To to Sutain, I don't mean 254 00:13:39,440 --> 00:13:42,760 Speaker 1: to interrupt what you just said. Peter's absolutely critical. John, 255 00:13:43,080 --> 00:13:47,000 Speaker 1: this is a huge deal. This measured discipline we're on 256 00:13:47,559 --> 00:13:50,360 Speaker 1: versus what we used to do in FED, in FED movement. 257 00:13:51,760 --> 00:13:54,560 Speaker 1: It's a big change. Peter. Yeah, Look, this is uh, 258 00:13:55,000 --> 00:13:58,280 Speaker 1: this is a new regime. But I think what what 259 00:13:58,480 --> 00:14:00,920 Speaker 1: we're currently going through is a re pricing of European 260 00:14:01,000 --> 00:14:03,880 Speaker 1: rate expectations quite rightly, and I think that's going to 261 00:14:03,960 --> 00:14:06,880 Speaker 1: be exacerbated as the market comes to consider who the 262 00:14:06,920 --> 00:14:09,800 Speaker 1: next DCP president. Maybe if they are just a more 263 00:14:09,840 --> 00:14:13,800 Speaker 1: neutral outlook than than Jog and also the chief economist 264 00:14:13,800 --> 00:14:16,800 Speaker 1: Peter Pratt have had, then they could well be looking 265 00:14:16,840 --> 00:14:20,040 Speaker 1: at a significantly tighter path of monetary policy for late 266 00:14:20,120 --> 00:14:22,480 Speaker 1: next year. It depending on how long the European cycle 267 00:14:22,600 --> 00:14:24,600 Speaker 1: runs for I mean, we've got a problem. Let's just 268 00:14:24,640 --> 00:14:26,760 Speaker 1: assume that the U S economists are right and we 269 00:14:26,840 --> 00:14:29,840 Speaker 1: might get a downturn in the United States. Where does 270 00:14:29,880 --> 00:14:32,200 Speaker 1: that leave Europe? How long is the cycle? How much 271 00:14:32,280 --> 00:14:35,040 Speaker 1: runway does the ECB actually have to try and get 272 00:14:35,160 --> 00:14:38,000 Speaker 1: rates back above zero again. ECB we think has gotten 273 00:14:38,040 --> 00:14:40,760 Speaker 1: until two thousand and twenty one to get rates up. 274 00:14:40,960 --> 00:14:43,480 Speaker 1: Is that enough time. It's enough time to probably get 275 00:14:43,480 --> 00:14:46,560 Speaker 1: them up to into positive About half a percent would 276 00:14:46,560 --> 00:14:48,440 Speaker 1: be the highest we're going to. We're going to have 277 00:14:48,680 --> 00:14:52,040 Speaker 1: to fifty basis points in Europe to play with in 278 00:14:52,080 --> 00:14:55,120 Speaker 1: the next economic downturn. That's your base case. Oh no, 279 00:14:55,200 --> 00:14:57,360 Speaker 1: we think I could go negative again. It's been extremely 280 00:14:57,400 --> 00:15:00,200 Speaker 1: successful now that the banks have understood have learned how 281 00:15:00,240 --> 00:15:02,320 Speaker 1: to deal with it. So I'm thinking that there's there's 282 00:15:02,560 --> 00:15:05,920 Speaker 1: ninety basis points of tightening at most ninety basis points 283 00:15:05,920 --> 00:15:08,480 Speaker 1: of easy. Again, but let's think about what happens to 284 00:15:08,680 --> 00:15:11,000 Speaker 1: liquidity in the Euro Area. It has to be more 285 00:15:11,000 --> 00:15:16,120 Speaker 1: money printing. I think that's that's the less palatable outcome here. 286 00:15:16,160 --> 00:15:19,080 Speaker 1: That then that possibly the ECB needs to be putting 287 00:15:19,160 --> 00:15:22,040 Speaker 1: rates up quick more quickly so that they don't have 288 00:15:22,080 --> 00:15:24,360 Speaker 1: to do as much QUEI and balance sheet expansion of 289 00:15:24,520 --> 00:15:27,800 Speaker 1: they have done in this cycle. They've got a big problem, Peter. Well, 290 00:15:27,880 --> 00:15:30,000 Speaker 1: we call it a liquidity trap. We think that's that's 291 00:15:30,200 --> 00:15:34,480 Speaker 1: a fair description of the of the problem that the 292 00:15:34,480 --> 00:15:37,880 Speaker 1: Euro Area has. Um. It's likely to be exacerbated once 293 00:15:37,880 --> 00:15:40,080 Speaker 1: we get some positive views on the risk free assets, 294 00:15:40,320 --> 00:15:43,920 Speaker 1: then the curcy appreciation story really accelerates. Peter. One of 295 00:15:43,960 --> 00:15:48,880 Speaker 1: the themes that we've had is this idea of dullarization. 296 00:15:49,280 --> 00:15:52,520 Speaker 1: It's a new word for something timeless, which is just 297 00:15:52,760 --> 00:15:57,040 Speaker 1: US dollars floating around the world. How does that plate 298 00:15:57,320 --> 00:16:02,480 Speaker 1: ender where we go with rates next year? Well, yes, 299 00:16:02,720 --> 00:16:07,000 Speaker 1: I buy the concept. Um the FEDS tightening is effectively 300 00:16:07,520 --> 00:16:10,560 Speaker 1: meaning that if you look at a monitory ever like 301 00:16:10,600 --> 00:16:14,440 Speaker 1: the euro um they're they're getting easier financial conditions as 302 00:16:14,440 --> 00:16:17,480 Speaker 1: a result of the Fed's tightening UM. So it means 303 00:16:17,480 --> 00:16:20,560 Speaker 1: that where the FED leads, other central banks are likely 304 00:16:20,640 --> 00:16:23,800 Speaker 1: to have to follow UM. So with the FED creating 305 00:16:23,920 --> 00:16:28,080 Speaker 1: if they continue to generate expectations that the dollar can 306 00:16:28,120 --> 00:16:30,280 Speaker 1: go higher, that FED funds can go higher, then it 307 00:16:30,320 --> 00:16:35,120 Speaker 1: will also impact the pricing of European rate expectations. But 308 00:16:35,200 --> 00:16:37,760 Speaker 1: John Ferrell, with your trip to London, with your entourage 309 00:16:37,800 --> 00:16:40,800 Speaker 1: and with your acclaim, with your many media properties, what 310 00:16:40,880 --> 00:16:44,520 Speaker 1: have you learned about dollarization in the foreign exchange capital 311 00:16:44,600 --> 00:16:47,840 Speaker 1: of the world. It's a big, big question, an increasingly 312 00:16:47,960 --> 00:16:52,280 Speaker 1: I think that debate is intensifying. Do not your media properties, 313 00:16:52,320 --> 00:16:54,600 Speaker 1: not my media properties. We can talk about that offline 314 00:16:54,640 --> 00:16:57,120 Speaker 1: if you like. But it's a debate that's intensifying, Peter, 315 00:16:57,360 --> 00:16:59,960 Speaker 1: And it's a debate sort of around what happens, what's 316 00:17:00,040 --> 00:17:03,520 Speaker 1: the reaction function the bias of investors towards specific assets 317 00:17:04,240 --> 00:17:08,800 Speaker 1: during adverse scenarios. Now, typically that would be by the dollar. 318 00:17:09,119 --> 00:17:11,439 Speaker 1: Typically it would be go to where the liquidity is 319 00:17:11,480 --> 00:17:15,240 Speaker 1: by treasuries. Um does that change in the next economic downturn, 320 00:17:15,280 --> 00:17:18,119 Speaker 1: Because there's a real conversation emerging about that well, I 321 00:17:18,160 --> 00:17:20,560 Speaker 1: think firstly, with the level of dollar strength with gost 322 00:17:20,600 --> 00:17:24,000 Speaker 1: already we're on the cusp. We've seen some termoilly in 323 00:17:24,160 --> 00:17:27,040 Speaker 1: e M. So if we get another bout of dollar strength, 324 00:17:27,119 --> 00:17:30,199 Speaker 1: I think that it could it could automatically cap the 325 00:17:30,280 --> 00:17:33,240 Speaker 1: dollar to a degree because it will mean that broader 326 00:17:33,240 --> 00:17:37,200 Speaker 1: financial conditions actually get tighter, and it could slow down 327 00:17:37,240 --> 00:17:39,480 Speaker 1: the FEDS ease and put possibly put them on pause. 328 00:17:39,920 --> 00:17:44,160 Speaker 1: But I think also because President Trump is doing some 329 00:17:44,680 --> 00:17:49,080 Speaker 1: interesting measures, some controversial measures, we could have more efforts 330 00:17:49,119 --> 00:17:55,480 Speaker 1: from European policymakers to gain some monetary independence. Um. You know, 331 00:17:55,520 --> 00:17:58,240 Speaker 1: think about it. You travel around various countries in Europe, 332 00:17:58,240 --> 00:18:03,080 Speaker 1: you're actually typically paying for your expenses through American financial systems. 333 00:18:03,200 --> 00:18:06,320 Speaker 1: Very true, swift all of these systems in fact swift 334 00:18:06,359 --> 00:18:08,880 Speaker 1: going through Europe as well. These are big, big issues, Peter, 335 00:18:09,040 --> 00:18:12,480 Speaker 1: and they're big big issues connected to economic sanctions as well. 336 00:18:12,640 --> 00:18:15,480 Speaker 1: Be a chat well, Missue, International head of European Rights Strotagists. 337 00:18:15,560 --> 00:18:27,080 Speaker 1: Great to catch up with you. Thank you. If you're 338 00:18:27,160 --> 00:18:32,119 Speaker 1: interested in rent or buy, or housing or real estate. 339 00:18:32,880 --> 00:18:36,640 Speaker 1: This is the interview of the day. Every economist worth 340 00:18:36,720 --> 00:18:41,600 Speaker 1: their salt on wall Street claims fame with a certain focused, 341 00:18:41,720 --> 00:18:45,000 Speaker 1: narrow niche when they start out. Nobody did it on 342 00:18:45,040 --> 00:18:48,040 Speaker 1: a housing like Michelle Meyer of Bank of America. Mary 343 00:18:48,119 --> 00:18:51,560 Speaker 1: Lynch now running all of their US economics so long ago, 344 00:18:51,680 --> 00:18:54,359 Speaker 1: far away. You just one day said I'm going to 345 00:18:54,440 --> 00:18:57,119 Speaker 1: own a housing, and you nailed it. You nailed the 346 00:18:57,320 --> 00:19:00,520 Speaker 1: ups and downs of our housing in your new research 347 00:19:00,600 --> 00:19:03,960 Speaker 1: note is really abrupt. This is as good as it gets. 348 00:19:04,600 --> 00:19:07,879 Speaker 1: Why is this the peak? I think it's the peak 349 00:19:07,920 --> 00:19:10,959 Speaker 1: for existing home sales, which was important. Distinction is not 350 00:19:11,000 --> 00:19:14,320 Speaker 1: necessarily the pink for housing starts, single family housing starts. 351 00:19:14,680 --> 00:19:17,040 Speaker 1: The reason I think existing home sales have peaked is 352 00:19:17,040 --> 00:19:19,680 Speaker 1: that affordability has been coming down, and there is a 353 00:19:19,720 --> 00:19:22,240 Speaker 1: pretty tight correlation in the growth rate of affordability with 354 00:19:22,240 --> 00:19:24,879 Speaker 1: that and the existing factors their house price and also 355 00:19:24,920 --> 00:19:27,600 Speaker 1: the mortgage rate, which is more important. Precisely, and even 356 00:19:27,600 --> 00:19:31,200 Speaker 1: though affordability is still high relative to historical standards, it's 357 00:19:31,320 --> 00:19:33,760 Speaker 1: that it's been shifting down and it should continue to 358 00:19:33,760 --> 00:19:36,080 Speaker 1: shift down if we think rates are heading up, which 359 00:19:36,119 --> 00:19:40,120 Speaker 1: seems the most likely scenario. The distinction is existing homes 360 00:19:40,240 --> 00:19:43,040 Speaker 1: exist in new homes are only for the rich because 361 00:19:43,480 --> 00:19:48,600 Speaker 1: contractors construction building land dynamics mean only big fancy houses 362 00:19:48,600 --> 00:19:52,080 Speaker 1: with granite marble and you know, you know, a grill 363 00:19:52,160 --> 00:19:54,720 Speaker 1: out back the price of a normal kitchen. They're the 364 00:19:54,760 --> 00:19:58,240 Speaker 1: only ones getting built. Is that stereotype true? Well, that 365 00:19:58,520 --> 00:20:01,040 Speaker 1: was true in the early stage. Is the recovery, that's 366 00:20:01,040 --> 00:20:05,360 Speaker 1: where developers focus to the expensive properties, the ones where 367 00:20:05,359 --> 00:20:08,240 Speaker 1: people can get financing, et cetera. But now what you're 368 00:20:08,280 --> 00:20:11,560 Speaker 1: seeing is a move down towards entry level properties to 369 00:20:11,640 --> 00:20:14,719 Speaker 1: more affordable type units. And frankly, that's where they should 370 00:20:14,720 --> 00:20:17,520 Speaker 1: be building. That's where we need more supply, and that's 371 00:20:17,520 --> 00:20:19,920 Speaker 1: where there's opportunities. So I think what builders are doing, 372 00:20:19,960 --> 00:20:22,240 Speaker 1: and the reason I think new home sales have further 373 00:20:22,320 --> 00:20:25,800 Speaker 1: upside is builders are being selective. They're adding homes to 374 00:20:25,960 --> 00:20:29,080 Speaker 1: areas where there's tight inventory and there is incremental demand. 375 00:20:29,160 --> 00:20:30,800 Speaker 1: Can you give us some names of cities that are 376 00:20:30,840 --> 00:20:33,520 Speaker 1: like that, where there's tight inventory, where there's a healthy 377 00:20:33,520 --> 00:20:36,240 Speaker 1: housing economy. I assume New York sit out in that last. Yeah, 378 00:20:36,280 --> 00:20:39,160 Speaker 1: so cities is going to be a problem. Urban areas 379 00:20:39,200 --> 00:20:42,639 Speaker 1: are more saturated. That's where a lot of development came 380 00:20:42,680 --> 00:20:45,400 Speaker 1: in multi family. The rent story was very strong there. 381 00:20:45,680 --> 00:20:48,360 Speaker 1: It's more in the surrounding areas of some of these 382 00:20:48,359 --> 00:20:51,200 Speaker 1: big cities. I think still the West Coast is where 383 00:20:51,200 --> 00:20:53,679 Speaker 1: you have a pretty healthy economy. The tech industry is 384 00:20:53,680 --> 00:20:56,399 Speaker 1: helping to support so you are seeing a lot of 385 00:20:56,440 --> 00:20:59,160 Speaker 1: focus in in in in some of those markets. Part 386 00:20:59,280 --> 00:21:02,280 Speaker 1: of the matter we've you think of Doug Duncan at 387 00:21:02,320 --> 00:21:06,160 Speaker 1: Fannie May and others that are specialists in housing economics 388 00:21:06,320 --> 00:21:10,240 Speaker 1: is about income growth. That German Paul yesterday noted this 389 00:21:10,320 --> 00:21:13,640 Speaker 1: mystery over wage growth and a lot of articles recently 390 00:21:13,680 --> 00:21:18,040 Speaker 1: on the benefit contribution to wages other than the elite, 391 00:21:18,080 --> 00:21:21,160 Speaker 1: the upper x percent that are looking at six thousand 392 00:21:21,160 --> 00:21:25,159 Speaker 1: square feet, three wood burning fireplaces and all that, where's 393 00:21:25,200 --> 00:21:29,080 Speaker 1: the wage growth to drive this forward? So wage growth 394 00:21:29,119 --> 00:21:31,840 Speaker 1: has been slow, which is a challenge of course, and 395 00:21:32,240 --> 00:21:35,360 Speaker 1: UM that can further create some challenges are affordability, because 396 00:21:35,359 --> 00:21:38,520 Speaker 1: if home prices are rising at six seven percent nationally 397 00:21:38,560 --> 00:21:40,880 Speaker 1: like we saw last year, mortgage rates are up, but 398 00:21:41,240 --> 00:21:43,679 Speaker 1: wages are only increasing two and a half to three percent, 399 00:21:43,920 --> 00:21:46,000 Speaker 1: you start to create some challenges in terms of the 400 00:21:46,040 --> 00:21:52,359 Speaker 1: ability to access housing. UM. But nonetheless you have to consider, uh, 401 00:21:52,400 --> 00:21:55,399 Speaker 1: the alternative rents have increased as well, so the end 402 00:21:55,400 --> 00:21:57,480 Speaker 1: of day. You need a place to live. So it's 403 00:21:57,480 --> 00:21:59,400 Speaker 1: comes to being a choice. Are we going to buy? 404 00:21:59,480 --> 00:22:01,560 Speaker 1: We in a and how do we balance our budget together? 405 00:22:02,080 --> 00:22:04,280 Speaker 1: Michel Meyer with this Bank of America, Mary Lynch, And 406 00:22:04,320 --> 00:22:06,399 Speaker 1: we're gonna focus here. We'll do a little bit of 407 00:22:06,400 --> 00:22:08,760 Speaker 1: fed chat here in a bit, but right now on 408 00:22:08,880 --> 00:22:12,320 Speaker 1: our real expertise of housing as well, render by go 409 00:22:12,440 --> 00:22:15,280 Speaker 1: to it. Which is it? Tell me New York City, 410 00:22:15,280 --> 00:22:17,639 Speaker 1: which is the weirdest market. New York City is a 411 00:22:17,880 --> 00:22:22,320 Speaker 1: is an allier means basically Europe right well, New York 412 00:22:22,320 --> 00:22:26,200 Speaker 1: City has support from foreign investors UM people by properties 413 00:22:26,200 --> 00:22:31,600 Speaker 1: simply for investment purposes. UM in New York City is softening. 414 00:22:32,119 --> 00:22:34,000 Speaker 1: That is very clear in the statistics that are have 415 00:22:34,119 --> 00:22:35,840 Speaker 1: been coming off of the past year, both in terms 416 00:22:35,880 --> 00:22:38,320 Speaker 1: of rent and in terms of home prices. Given the 417 00:22:38,359 --> 00:22:42,320 Speaker 1: amount or Memphis. Yeah, so if you look more broadly 418 00:22:42,320 --> 00:22:47,800 Speaker 1: and you think rent versus own, UM, the equation has 419 00:22:48,359 --> 00:22:52,440 Speaker 1: started to shift in the towards towards renting again, given 420 00:22:52,480 --> 00:22:55,680 Speaker 1: that home prices have increased pretty notably and mortgage rates 421 00:22:55,680 --> 00:23:00,240 Speaker 1: are now rising as well. UM rents picked up post crisis. 422 00:23:00,280 --> 00:23:03,000 Speaker 1: But UM, outside of the big cities, it's been fairly 423 00:23:03,040 --> 00:23:05,760 Speaker 1: modest games if you look at, for example, the owner's 424 00:23:05,760 --> 00:23:08,040 Speaker 1: equivalent rent series within the c p I, if you 425 00:23:08,080 --> 00:23:10,680 Speaker 1: take out some of those big metro areas, it's still 426 00:23:10,800 --> 00:23:14,200 Speaker 1: fairly modest. So um, I think if you're just looking 427 00:23:14,240 --> 00:23:19,080 Speaker 1: at a relative price story in outside the big cities, yeah, 428 00:23:19,240 --> 00:23:21,760 Speaker 1: rent is still pretty attractive. Le's kind of the FED yesterday, 429 00:23:21,960 --> 00:23:23,840 Speaker 1: and what I noticed that I've mentioned it's like eight 430 00:23:23,840 --> 00:23:26,360 Speaker 1: times this morning, and we're efforting Michael McKee will see 431 00:23:26,400 --> 00:23:28,320 Speaker 1: if we can get him in here, just off the 432 00:23:28,320 --> 00:23:33,600 Speaker 1: airplane from Washington. But Craig Tourists had a terrific question 433 00:23:33,640 --> 00:23:37,000 Speaker 1: of the chairman on dynamics, and the McKee was rude 434 00:23:37,000 --> 00:23:40,479 Speaker 1: and asked about the dots, and then mineam and Apple Obama. 435 00:23:40,560 --> 00:23:43,240 Speaker 1: The New York Times nailed it off of those two 436 00:23:43,320 --> 00:23:47,879 Speaker 1: questions on dynamics as well, and the dynamics were to me, 437 00:23:47,960 --> 00:23:50,960 Speaker 1: it was almost a chairman walking away from the PhDs 438 00:23:51,400 --> 00:23:54,600 Speaker 1: at the FED and saying we're slaves to data dependency. 439 00:23:54,840 --> 00:23:58,720 Speaker 1: Is that that your interpretation? Yeah? I think increasingly he's 440 00:23:58,720 --> 00:24:00,800 Speaker 1: saying he does not have stars in his eyes. He 441 00:24:00,960 --> 00:24:03,840 Speaker 1: is not focused as much on this idea. The Gospel 442 00:24:03,880 --> 00:24:08,159 Speaker 1: of Eastern Harris as we know it um so to me, 443 00:24:08,400 --> 00:24:12,200 Speaker 1: the messages look, we like models to provide a framework 444 00:24:12,640 --> 00:24:15,800 Speaker 1: trying to understand where our star is a useful exercise, 445 00:24:16,040 --> 00:24:20,320 Speaker 1: but is not the only way of determining monetary policy. 446 00:24:20,520 --> 00:24:23,320 Speaker 1: And if we tie ourselves too much to our forecast, 447 00:24:23,359 --> 00:24:26,959 Speaker 1: to our dots, to these longer equilibrium models, we can 448 00:24:27,040 --> 00:24:29,720 Speaker 1: end up getting it wrong. So let's look at incoming data. 449 00:24:29,800 --> 00:24:32,440 Speaker 1: Let's look at how financial conditions are going. The message 450 00:24:32,480 --> 00:24:34,879 Speaker 1: to me from POWs We're going to keep plugging along, 451 00:24:35,119 --> 00:24:37,960 Speaker 1: provide the data lets us because we don't know what 452 00:24:38,040 --> 00:24:41,440 Speaker 1: the end goal is. But now with a short term 453 00:24:41,560 --> 00:24:45,960 Speaker 1: FED funds target rate adjusted for inflation that zero or 454 00:24:46,080 --> 00:24:50,399 Speaker 1: even slightly positive was yesterday, the day we got back 455 00:24:50,440 --> 00:24:55,240 Speaker 1: to normal where these rate increases have actual impact on 456 00:24:55,280 --> 00:24:58,760 Speaker 1: the economy. As President Trump would suggest, what's possible if 457 00:24:58,760 --> 00:25:01,600 Speaker 1: you believe the Lubbuck will Illiam short term our star model. 458 00:25:01,600 --> 00:25:08,640 Speaker 1: And there, well that's you know, that's in theory where 459 00:25:08,640 --> 00:25:11,560 Speaker 1: we are. But Kevin's online to Kevin Warsh is online 460 00:25:11,600 --> 00:25:14,639 Speaker 1: to say, and Michelle, what are you talking about? Kevin Warsh, 461 00:25:14,760 --> 00:25:18,480 Speaker 1: the former governor, critical of our stories, are sure you 462 00:25:18,480 --> 00:25:21,120 Speaker 1: know look it's are are we at the point where 463 00:25:21,440 --> 00:25:23,840 Speaker 1: monetary policy is going to start to matter for financial 464 00:25:23,880 --> 00:25:26,760 Speaker 1: conditions and bleed into the broader economy. Maybe so far 465 00:25:26,840 --> 00:25:29,240 Speaker 1: it hasn't. And and I think that there's still a 466 00:25:29,320 --> 00:25:33,040 Speaker 1: question as to the mechanism for which the fet is 467 00:25:33,040 --> 00:25:36,120 Speaker 1: is impacting the economy. So we'll see. And I think 468 00:25:36,160 --> 00:25:38,720 Speaker 1: that I think Powell isn't sure either, which is why 469 00:25:38,800 --> 00:25:42,680 Speaker 1: he's emphasizing look at the data flow, look at financial conditions. 470 00:25:42,680 --> 00:25:46,360 Speaker 1: We're going to calibrate as we go within this is 471 00:25:46,440 --> 00:25:47,960 Speaker 1: to look back. And I had this in the TV 472 00:25:48,040 --> 00:25:51,280 Speaker 1: script this morning that Economic Club of New York speech 473 00:25:51,320 --> 00:25:56,120 Speaker 1: by Vice Chairman Stanley Fisher accommodative, where we're clearly removed 474 00:25:56,160 --> 00:26:00,159 Speaker 1: ourselves looking at two year yield from that you no 475 00:26:00,280 --> 00:26:04,600 Speaker 1: clue or neutrality is Chairman Powell as no clue or 476 00:26:04,640 --> 00:26:07,760 Speaker 1: neutrality is then why do we worry? Why do we 477 00:26:07,880 --> 00:26:13,560 Speaker 1: attempt a mathematical exercise involving what for plug ins? So 478 00:26:13,600 --> 00:26:15,600 Speaker 1: I think the idea is that we're supposed to understand 479 00:26:15,640 --> 00:26:19,000 Speaker 1: the relationship between growth, inflation and rates. That goes back 480 00:26:19,000 --> 00:26:20,800 Speaker 1: to the tailor role, goes back to all of these 481 00:26:20,880 --> 00:26:24,400 Speaker 1: variety of different models. Um do we it's not obvious, 482 00:26:24,560 --> 00:26:27,119 Speaker 1: but we can look at historical relationships and we have 483 00:26:27,240 --> 00:26:30,959 Speaker 1: some basis for understanding. So the idea is that history matters, 484 00:26:31,000 --> 00:26:34,119 Speaker 1: those relationships are somewhat relevant. Let's look at them and 485 00:26:34,160 --> 00:26:36,960 Speaker 1: determine what it means for today. Understanding that we have 486 00:26:37,080 --> 00:26:39,480 Speaker 1: to be able to take some error around that. Pim 487 00:26:39,480 --> 00:26:43,560 Speaker 1: from Midtown emails in and says Michelle great comments on 488 00:26:43,680 --> 00:26:47,760 Speaker 1: render by how much further will home prices go down 489 00:26:47,840 --> 00:26:53,240 Speaker 1: in New York City? Um? You know that is we're 490 00:26:53,280 --> 00:26:56,800 Speaker 1: not forecasting specifically by by cities, so excuse me by 491 00:26:56,880 --> 00:27:00,960 Speaker 1: zip code? How about voting district? Um? You know? To me, 492 00:27:01,320 --> 00:27:03,760 Speaker 1: you just look at look at the imbalance. There's so 493 00:27:03,840 --> 00:27:07,239 Speaker 1: much supply coming in in New York City. Um, to me, 494 00:27:07,320 --> 00:27:08,720 Speaker 1: it's gonna be a function of what happens to the 495 00:27:08,720 --> 00:27:11,600 Speaker 1: broader business cycle if every session comes in the next 496 00:27:11,640 --> 00:27:14,879 Speaker 1: few years. Given the excesses in the city in terms 497 00:27:14,880 --> 00:27:17,720 Speaker 1: of supply, I think we're vulnerable for decline. Now, welcome 498 00:27:17,760 --> 00:27:20,600 Speaker 1: online to pim Fox, who's just joined us here. She 499 00:27:20,760 --> 00:27:23,560 Speaker 1: was brilliant on New York is I was south, yes, 500 00:27:23,680 --> 00:27:27,760 Speaker 1: indeed south or south or south there? Interesting. I just 501 00:27:27,760 --> 00:27:31,000 Speaker 1: gotta say that even though we talk about the actual 502 00:27:31,119 --> 00:27:35,400 Speaker 1: transaction value of a lot of properties, I don't see 503 00:27:35,400 --> 00:27:38,760 Speaker 1: it getting less expensive. I see it getting more expensive 504 00:27:38,800 --> 00:27:41,800 Speaker 1: every time I hear there's some every homeowner, So I 505 00:27:42,560 --> 00:27:44,399 Speaker 1: mean I appreciate it. And it's also you know, one 506 00:27:44,520 --> 00:27:46,720 Speaker 1: to transaction. You know they are limited, right because a 507 00:27:46,800 --> 00:27:49,920 Speaker 1: limited supply of bias. Something to talk about the next door. 508 00:27:50,000 --> 00:27:53,520 Speaker 1: Pim Fox with his studio Michelle Meyer, Bank of America, 509 00:27:53,600 --> 00:27:57,400 Speaker 1: Merrill Lynch, thank you so much. A clinic on housing 510 00:28:08,600 --> 00:28:12,399 Speaker 1: and now at Bloomberg Surveillance worldwide and coast to coast 511 00:28:12,520 --> 00:28:16,840 Speaker 1: with fourteen out of twelve cable news networks tuned into 512 00:28:17,040 --> 00:28:20,680 Speaker 1: what will occur here at ten am is most important 513 00:28:21,280 --> 00:28:25,040 Speaker 1: issues on Judge Kavanaugh, and we will attempt at Bloomberg 514 00:28:25,119 --> 00:28:28,400 Speaker 1: Surveillance to commit perspective. We do that with Bob Moon 515 00:28:28,960 --> 00:28:31,720 Speaker 1: and Bob it goes really back within your research to 516 00:28:31,760 --> 00:28:36,680 Speaker 1: October fourteenth when Anita Hill had to pass a lie 517 00:28:36,680 --> 00:28:39,480 Speaker 1: detector test, and I think that picks up your wonderful 518 00:28:39,520 --> 00:28:42,480 Speaker 1: perspective you've put together. Yeah, you know, Tom Shakespeare said 519 00:28:42,680 --> 00:28:45,200 Speaker 1: what has passed his prologue? So with the Senate Judiciary 520 00:28:45,240 --> 00:28:49,120 Speaker 1: Committee set to gabble to order. It's high drama hearing 521 00:28:49,320 --> 00:28:54,520 Speaker 1: into the sexual misconduct allegations against Supreme Court nominee Brett Kavanaugh. 522 00:28:54,840 --> 00:28:58,560 Speaker 1: It is informative to look back twenty seven years to October. 523 00:28:59,400 --> 00:29:02,400 Speaker 1: That's when President George H. W. Bush's Supreme Court nominee 524 00:29:02,440 --> 00:29:05,880 Speaker 1: Clarence Thomas was called back in his confirmation process to 525 00:29:05,920 --> 00:29:10,280 Speaker 1: face the sexual misconduct allegations of Anita Hill, his former assistant. 526 00:29:10,560 --> 00:29:13,880 Speaker 1: The panel's chairman at the time was Democrat Joe Biden 527 00:29:14,160 --> 00:29:17,920 Speaker 1: of Delaware. This is not a referendum on whether or 528 00:29:17,960 --> 00:29:22,920 Speaker 1: not whether or not sexual harassment is a grave offense. 529 00:29:22,960 --> 00:29:25,360 Speaker 1: I said from the beginning. This is about whether or 530 00:29:25,400 --> 00:29:30,560 Speaker 1: not sexual harassment occurred. Now we're gonna hear more. Witnesses 531 00:29:30,560 --> 00:29:33,400 Speaker 1: are gonna come in and cooborate your position and hers. 532 00:29:34,040 --> 00:29:36,520 Speaker 1: We'll find out whether there's telling the truth or not 533 00:29:36,600 --> 00:29:39,280 Speaker 1: as best as we are capable of doing, just like you, 534 00:29:39,320 --> 00:29:41,040 Speaker 1: as a judge are when you look them in the 535 00:29:41,080 --> 00:29:43,320 Speaker 1: eye and make a judgment. So that I think this 536 00:29:43,400 --> 00:29:47,400 Speaker 1: whole affair is sink. I think it's sick to Utah 537 00:29:47,480 --> 00:29:50,240 Speaker 1: Republican or In Hatch was one of Thomas's defenders in 538 00:29:50,280 --> 00:29:52,960 Speaker 1: those hearings, just as he's defending Brett Kavanaugh as a 539 00:29:52,960 --> 00:29:55,760 Speaker 1: member of the same Senate panel today. Just as the 540 00:29:55,840 --> 00:29:58,920 Speaker 1: Clarence Thomas hearing was then, today's hearing is being called 541 00:29:58,920 --> 00:30:02,000 Speaker 1: a watershed moment. A record two hundred fifty seven women 542 00:30:02,040 --> 00:30:03,840 Speaker 1: are running for the House and Senate in the twenty 543 00:30:03,920 --> 00:30:07,320 Speaker 1: eighteen midterm elections. In nineteen ninety two, twenty eight women 544 00:30:07,320 --> 00:30:09,800 Speaker 1: were elected to the House of Representatives and four to 545 00:30:09,840 --> 00:30:12,760 Speaker 1: the Senate, among them Democrat Patty Murray, the state of 546 00:30:12,760 --> 00:30:15,960 Speaker 1: Washington's first female U S Senator. I am a United 547 00:30:16,000 --> 00:30:20,560 Speaker 1: States Senator today because of the way Anita Hill was 548 00:30:20,640 --> 00:30:25,800 Speaker 1: treated in nineteen They called Anita Hill a liar. They 549 00:30:25,840 --> 00:30:29,240 Speaker 1: said she was coached by special interest groups. They looked 550 00:30:29,240 --> 00:30:33,000 Speaker 1: for ways to blame her, impugne her, and attack her. 551 00:30:33,160 --> 00:30:35,880 Speaker 1: They pressed the young professor for explicit details of the 552 00:30:35,920 --> 00:30:38,360 Speaker 1: harassment she said she had faced on the job. My 553 00:30:38,480 --> 00:30:44,440 Speaker 1: working relationship became even more strained when Judge Thomas began 554 00:30:44,720 --> 00:30:50,200 Speaker 1: to use work situations to discuss sex. On these occasions, 555 00:30:50,680 --> 00:30:53,920 Speaker 1: he would call me into his office for reports on 556 00:30:54,080 --> 00:30:58,000 Speaker 1: education issues and projects, or he might suggest that, because 557 00:30:58,000 --> 00:31:00,520 Speaker 1: of the time pressures of his schedule, we go to 558 00:31:00,640 --> 00:31:05,160 Speaker 1: lunch to a government cafeteria. After a brief discussion of work, 559 00:31:05,240 --> 00:31:09,280 Speaker 1: he would turn the conversation to a discussion of sexual matters. 560 00:31:10,760 --> 00:31:16,720 Speaker 1: His conversations were very vivid. Because I was extremely uncomfortable 561 00:31:16,760 --> 00:31:20,360 Speaker 1: talking about sex with him at all, and particularly in 562 00:31:20,400 --> 00:31:24,440 Speaker 1: such a graphic way. I told him that I did 563 00:31:24,520 --> 00:31:27,200 Speaker 1: not want to talk about these subjects. What happened after 564 00:31:27,240 --> 00:31:30,200 Speaker 1: Hill's opening statement explains why this time Republicans on the 565 00:31:30,280 --> 00:31:33,280 Speaker 1: Judiciary Committee have named an outside council who they can 566 00:31:33,360 --> 00:31:37,880 Speaker 1: choose to have question Dr Christine Bozzy Ford. Hill was 567 00:31:37,920 --> 00:31:41,000 Speaker 1: a lone woman facing a panel of fourteen skeptical men, 568 00:31:41,400 --> 00:31:46,240 Speaker 1: among them Pennsylvania Republican Arlen Specter. A mere allegation, Senator, 569 00:31:46,280 --> 00:31:48,240 Speaker 1: I would suggest to you that for me, these are 570 00:31:48,240 --> 00:31:51,200 Speaker 1: more than mere allegations. These are the truth to me. 571 00:31:51,400 --> 00:31:54,000 Speaker 1: These comments are the truth to me. I'm not I'm 572 00:31:54,040 --> 00:31:58,480 Speaker 1: not questioning your statement when I used the word allegation. 573 00:31:58,640 --> 00:32:02,320 Speaker 1: I know about soctual harassment and discrimination against women, and 574 00:32:02,400 --> 00:32:05,840 Speaker 1: I think I have some sensitivity on it. How reliable 575 00:32:07,000 --> 00:32:12,719 Speaker 1: is your testimony in October of on events that occurred 576 00:32:12,720 --> 00:32:16,560 Speaker 1: eight ten years ago? How sure can you expect this 577 00:32:16,600 --> 00:32:20,000 Speaker 1: committee to be on the accuracy of your statements, and 578 00:32:20,040 --> 00:32:22,760 Speaker 1: it wasn't just Republicans who raised the eyebrows and even 579 00:32:22,800 --> 00:32:25,720 Speaker 1: the ire of many women watching the hearings. She could 580 00:32:25,760 --> 00:32:30,440 Speaker 1: be living in a fantasy world. I don't know. We're 581 00:32:30,480 --> 00:32:33,080 Speaker 1: just trying to get to the bottom of all of 582 00:32:33,120 --> 00:32:36,360 Speaker 1: these facts. Howell Heflin was a Democrat from Alabama, and 583 00:32:36,400 --> 00:32:42,760 Speaker 1: trying to determine whether you are telling falsehoods or not. 584 00:32:43,800 --> 00:32:49,160 Speaker 1: I've got to determine what your motivation might be. Are 585 00:32:49,200 --> 00:32:55,560 Speaker 1: you a scorned woman? Do you have a militant attitude 586 00:32:55,720 --> 00:32:59,960 Speaker 1: relative to the area of civil rights? No, I don't 587 00:33:00,040 --> 00:33:06,040 Speaker 1: have a militant attitude. Do you have a modern complex? No? 588 00:33:06,360 --> 00:33:16,360 Speaker 1: I don't. Well do you see that coming out of 589 00:33:16,360 --> 00:33:21,200 Speaker 1: this that you can be a hero in the civil 590 00:33:21,320 --> 00:33:25,240 Speaker 1: rights movement? I do not have that kind of complex. 591 00:33:25,400 --> 00:33:27,959 Speaker 1: I don't like all of the attention that I'm getting. 592 00:33:28,640 --> 00:33:33,680 Speaker 1: I don't. I would not even if I liked the attention. 593 00:33:34,200 --> 00:33:38,760 Speaker 1: I would not lie to get attention. Thomas adamantly insisted 594 00:33:38,840 --> 00:33:42,320 Speaker 1: the accusations were not true. I've never been accused of 595 00:33:42,360 --> 00:33:46,040 Speaker 1: sex harassment, and anybody who knows me knows I am 596 00:33:46,080 --> 00:33:52,040 Speaker 1: adamantly opposed to that, adamant and yet I sit here accused, 597 00:33:52,080 --> 00:33:53,880 Speaker 1: and I'll never be able to get my name back. 598 00:33:53,960 --> 00:33:58,600 Speaker 1: I know it. The day I received the phone call 599 00:33:58,680 --> 00:34:05,800 Speaker 1: on Saturday night, last Saturday night about and told that 600 00:34:05,840 --> 00:34:10,000 Speaker 1: this was going to be in the press. I had. 601 00:34:10,239 --> 00:34:14,640 Speaker 1: I died the person you knew, whether you voted for 602 00:34:14,760 --> 00:34:18,200 Speaker 1: me or against me. He choked back tears as he 603 00:34:18,239 --> 00:34:21,240 Speaker 1: complained that he, his family, his friends, and the country 604 00:34:21,320 --> 00:34:24,480 Speaker 1: had been irreparably harmed. In my views, that that is 605 00:34:24,520 --> 00:34:31,960 Speaker 1: an injustice. And if by going through this, another nominee 606 00:34:31,960 --> 00:34:35,719 Speaker 1: in the future or another American won't have to go 607 00:34:35,800 --> 00:34:38,359 Speaker 1: through it, then so be it. In the end, Republicans 608 00:34:38,360 --> 00:34:41,120 Speaker 1: on the panel delivered impassioned defenses of the Supreme Court 609 00:34:41,200 --> 00:34:47,680 Speaker 1: nominee Wyoming's Allan Simpson confronting Hill directly. Maybe maybe it 610 00:34:47,760 --> 00:34:51,839 Speaker 1: seems to me it didn't really intend to kill him, 611 00:34:51,880 --> 00:34:59,000 Speaker 1: but you might have. And that's pretty heavy. I don't 612 00:34:59,000 --> 00:35:02,960 Speaker 1: care if you're a man or a woman. Kind of 613 00:35:03,000 --> 00:35:11,920 Speaker 1: a singular singular torpedo blow below the waterline and he sinks. 614 00:35:12,520 --> 00:35:15,839 Speaker 1: Within five days, Thomas was confirmed by a narrow cinemajority 615 00:35:15,920 --> 00:35:19,280 Speaker 1: of fifty two to forty eight. Today, Washington Democrat Patty 616 00:35:19,360 --> 00:35:23,280 Speaker 1: Murray is warning Republicans against a rush to confirm Brett Kavanaugh. 617 00:35:23,480 --> 00:35:27,399 Speaker 1: Women are watching. We are not going to allow that 618 00:35:27,480 --> 00:35:31,600 Speaker 1: to happen again. If Republicans attack Dr Ford and this 619 00:35:31,640 --> 00:35:35,920 Speaker 1: turns into anything like what we saw back in women 620 00:35:35,960 --> 00:35:38,920 Speaker 1: across the country are going to rise up, make their 621 00:35:39,000 --> 00:35:42,720 Speaker 1: voices heard, and Republicans will pay a very huge price 622 00:35:43,080 --> 00:35:45,839 Speaker 1: tom him. A lot of people will be watching in 623 00:35:45,960 --> 00:35:48,600 Speaker 1: just a few minutes. Just extraordinary. And you go back 624 00:35:48,640 --> 00:35:52,400 Speaker 1: to Senator Heflin there, who was before Jeff Sessions for Alabama, 625 00:35:52,480 --> 00:35:57,640 Speaker 1: silver star guy, huge marine track record in World War Two. 626 00:35:57,719 --> 00:36:00,800 Speaker 1: And what I went to Bob, within your wonderful history 627 00:36:00,840 --> 00:36:04,759 Speaker 1: there is Hefflin was born in and here we are 628 00:36:04,960 --> 00:36:08,800 Speaker 1: almost a hundred years ahead of that. The generational shifts 629 00:36:08,840 --> 00:36:14,840 Speaker 1: here have been cultural and generational have been extraordinary. Yeah, 630 00:36:14,880 --> 00:36:18,560 Speaker 1: and you have to consider that this was just twenty 631 00:36:18,600 --> 00:36:21,840 Speaker 1: seven years ago. That's not all that long ago, really, 632 00:36:22,920 --> 00:36:26,000 Speaker 1: And also is it worth noting that the process has 633 00:36:26,040 --> 00:36:30,040 Speaker 1: now become a political process, not a legal or judicial process. 634 00:36:30,160 --> 00:36:32,879 Speaker 1: I think it all began with with that hearing where 635 00:36:33,000 --> 00:36:37,200 Speaker 1: where it it turned political and has become increasingly political 636 00:36:37,280 --> 00:36:41,680 Speaker 1: with each confirmation. What was your insight from digging up 637 00:36:41,760 --> 00:36:44,840 Speaker 1: all of this audio. I mean you go back and folks, 638 00:36:44,920 --> 00:36:47,480 Speaker 1: for for those of us in the Bloomberg newsroom, Uh, 639 00:36:47,600 --> 00:36:51,320 Speaker 1: Bob Moon sits in a coveted cubicle with acres of 640 00:36:51,480 --> 00:36:54,640 Speaker 1: video and in audio reels. What was it like to 641 00:36:54,680 --> 00:36:56,920 Speaker 1: go through it all? What? What was your take on 642 00:36:57,040 --> 00:37:01,160 Speaker 1: going through? Overwhelming? Take? Is it? How much times changed 643 00:37:01,239 --> 00:37:04,200 Speaker 1: just in that twenty seven years. I mean a lot 644 00:37:04,239 --> 00:37:07,960 Speaker 1: of this I don't think would fly today that that 645 00:37:08,120 --> 00:37:11,319 Speaker 1: was going on back then, particularly with the me too movement. Now, 646 00:37:11,440 --> 00:37:13,759 Speaker 1: Bob Moon, thank you so much, just extraordinary. Will be 647 00:37:13,760 --> 00:37:22,160 Speaker 1: sure to get that out on Bloomberg Digital. Thanks for 648 00:37:22,239 --> 00:37:26,640 Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to 649 00:37:26,800 --> 00:37:32,520 Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. 650 00:37:33,080 --> 00:37:36,440 Speaker 1: I'm on Twitter at Tom Keane before the podcast. You 651 00:37:36,440 --> 00:37:39,840 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio