Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg So
Speaker 1: a big federal reserve decision a great height, but I've
Speaker 1: never seen so much debate over a federal reserve decision
Speaker 1: which involves such few changes to the monetary policy stance
Speaker 1: and even the projection. So let's bring in Jane Foley
Speaker 1: from London Rabba bankhead of fect Strategy. Jane, what was
Speaker 1: your takeaway on a hugely debated federal Reserve decision which
Speaker 1: really generated very little change at all. Well, that's exactly right.
Speaker 1: But I think what the market really is debating about
Speaker 1: right now is is what's going to happen? Saying the
Speaker 1: tailor under twenty nineteen, what's going to happy? I think
Speaker 1: that's what the largest amount of uncertainty is concerned. I mean,
Speaker 1: already surveys are suggesting that the UK or the US
Speaker 1: they could go into ston in twenty Therefore, there's still
Speaker 1: I think a lot of uncertainty about what would happen
Speaker 1: back from the second half of so you sort of
Speaker 1: know what that has projected to do in in the say,
Speaker 1: the next twelve months. But beyond that, I think there's
Speaker 1: a lot of uncertainty uncertainty, and I think that's really
Speaker 1: where the crux of the debate is. And Jane, what
Speaker 1: often comes with the Fellow Reserved decision as the summary
Speaker 1: of economic projections, And as you points out, that's where
Speaker 1: we get the forecasts from each and every individual Fellow
Speaker 1: Reserve official who plot where they think rates should be
Speaker 1: or will be over the coming years. We have a
Speaker 1: pretty good idea of where the President of the United
Speaker 1: States would put his dot plot on this specific dot
Speaker 1: chard m Jane for you, though, it's quite interesting looking out,
Speaker 1: looking out, we see a pretty spread out view of
Speaker 1: rates and a pretty big range as well. What do
Speaker 1: you make of that. I don't see the bunching that
Speaker 1: maybe we've seen in decisions and forecasts gone by. Well,
Speaker 1: I think a year we've had this debate about bond
Speaker 1: deals and what are they telling us of that The
Speaker 1: curve earlier in the year was planning in the market
Speaker 1: got quite upset about the possibility of that that was
Speaker 1: showing a slowdown. We know, of course right now that
Speaker 1: the US is benefiting, of course from the the expansionary
Speaker 1: impact of fiscal listening at the tax cuts, but we
Speaker 1: also know that as we move forward in this cycle,
Speaker 1: particularly when you take account of the progressive interest rate
Speaker 1: hikes that we've had from from the FED, that that
Speaker 1: will run out of steam. Hence you get the talk
Speaker 1: about recession in twenty now. Talking about recession in twenty
Speaker 1: when the US and saying in the second quarters just
Speaker 1: posted growth of four point two percent, seems quite difficult
Speaker 1: to reconcile. And yet that's the path that we may
Speaker 1: be on. And therefore, um, you know, it is very difficult,
Speaker 1: I think, for economists to find a real consensus in
Speaker 1: that time frame. And that is where I think all
Speaker 1: the uncertainty at regarding me, the treasuries and also the
Speaker 1: U s. Dollar. Did the turn to the Ustorians at
Speaker 1: the tail end of next year, That really lie Jen
Speaker 1: stayed with me. I'm very pleased to say that my
Speaker 1: conker is making an appearance in New York City. Good
Speaker 1: morning to Tom King, Good morning John. Got through the
Speaker 1: trafficking time and stopped on how bad is it in Manhattan.
Speaker 1: It's you know, I actually think last year was worse,
Speaker 1: but it is, it is worse than normal. I would say,
Speaker 1: it's like John John Tucker with us as well, John
Speaker 1: coming from New Jersey. I mean, people literally plan what
Speaker 1: an hour ahead account that the you know, they're doing
Speaker 1: construction on the helix. The helix as well, John. The
Speaker 1: helix is a it's like the Eiffel Tower. It's sort
Speaker 1: of an active metal constructing. Something tells me you're not
Speaker 1: being serious as oh no, we were not. Just Jane
Speaker 1: Folly with us with Robbo Bank, Jane, I want to
Speaker 1: know what Robbo Bank economists see in terms of economic growth,
Speaker 1: whether the United States or Europe. There seems to me
Speaker 1: to be an inordinate mystery about what economic growth is
Speaker 1: going to be. Well. I think certainly there has been
Speaker 1: well last year, some good news, better than expected news.
Speaker 1: But I think with respect to looking in the future,
Speaker 1: the uncertainty stems from the trade data and the trade wars.
Speaker 1: And I think if we look at what surveys are saying,
Speaker 1: So for instance, this morning we had confidence survey from
Speaker 1: the Eurozone disappointing. There can be a bit of a
Speaker 1: mismatch between what some of the data is doing, which
Speaker 1: is okay, which in many cases is pretty firm with
Speaker 1: the confidence numbers. And the confidence numbers, there are calls
Speaker 1: looking forward, they are trying to to work through the
Speaker 1: impact of trade wars, and yet there hasn't come to
Speaker 1: fruition too much in the economic data. However, we also
Speaker 1: know that in the economic data there's probably been some
Speaker 1: front loading. Certainly that's going to be the case in
Speaker 1: trade data. If we look at China, for instance, we've
Speaker 1: had better August IP better August retail sales, possibly for
Speaker 1: front loading. But our concern is as we go forward,
Speaker 1: we will begin to see that these costs of the
Speaker 1: trade wards. Well, let's go through the pairs. What's your
Speaker 1: yen call right now? Out one year, we've seen some
Speaker 1: big figure calls for weaker yen. Do you agree? Yes? Now,
Speaker 1: this is we We do agree, and this is largely
Speaker 1: because we are still of the view that the dollar
Speaker 1: can climb further. The dollar with the interst rate story,
Speaker 1: with a growth story have been good in the US
Speaker 1: still seems to be sucking in capital outflows from emerging markets. Now,
Speaker 1: although emerging markets have been firm in recent weeks, we
Speaker 1: don't think that that story is over, and that is
Speaker 1: because of again the China story. We think the China
Speaker 1: story is only really beginning and we will see at
Speaker 1: worst data. There's already quite a lot of bad data
Speaker 1: from China if you look, if you just scratch below
Speaker 1: the surface. So we do think that the dollar will
Speaker 1: remain firm. So Jane, help we understand something, because there's
Speaker 1: a lot of listeners out there that are looking to pivot,
Speaker 1: and what is involved with that pivot is increasing international exposure,
Speaker 1: moving away from the United States, taking down your risk
Speaker 1: there just a little bit an increasing exposure or elsewhere.
Speaker 1: Do you suggest people do that through EM or through
Speaker 1: Europe right now? No, we're still very cautious on EM
Speaker 1: And again this is because we don't think that we've
Speaker 1: seen or we think perhaps if US has been lolled
Speaker 1: into a false sense of security with respect to some
Speaker 1: other data that I've just mentioned for the Chinese August data,
Speaker 1: we do think that this is going to come through.
Speaker 1: In fact, you know, it's really quite interesting. You know,
Speaker 1: there are stories right now that there have been China
Speaker 1: has been unofficially restricting imports, commodities, imports from places like Australia,
Speaker 1: and this is there's slowing down the custos approvals because
Speaker 1: demand for raw materials and industrial products has taken a
Speaker 1: hit in China, so all of this is likely to
Speaker 1: come through. This will be bad news for e MUM
Speaker 1: and probably good news for the dollar given the intrastruct
Speaker 1: differential it continues to support the dollar. Jane Foley always
Speaker 1: great to get your insight following a federal reserved decision.
Speaker 1: Jane Foley, the rubber backhead of Effects Strategy. John, I
Speaker 1: know you were. You were reading your Horse Walpole seventeen
Speaker 1: sixty one, where he spoke about Lame Duck at the
Speaker 1: London Stock Exchange. And then John migrates over to January
Speaker 1: eighteen sixty three in the heart of the Civil War,
Speaker 1: where in the Congressional Globe they talk about lame Duck's
Speaker 1: Libby cantrol of Pimcoe study this very very cleful. Maybe
Speaker 1: did the same thing. I'm sure Lame Duck. I mean,
Speaker 1: there it is, and it could be upon us in November.
Speaker 1: What is the import of that to our listeners this
Speaker 1: time around? I think the most relevant issue that may
Speaker 1: be addressed in the Lame Duck is um is potentially
Speaker 1: a consideration of NAFTA or HAFTA. Uh, given that it
Speaker 1: doesn't look like the Canada's gonna be able to come
Speaker 1: to the deal. UM. So just from a from a
Speaker 1: procedural perspective, UM, A deal needs to be finalized by
Speaker 1: in the next few days in order for it to
Speaker 1: be considered by before the end of this of this Congress. Um.
Speaker 1: And so there is a Mexican bilateral deal without Canada.
Speaker 1: I think that's gonna be the big issue in front
Speaker 1: of in front of Congress. Let's rip up the script
Speaker 1: and we we We saw this literally in the last
Speaker 1: forty eight hours. I mean, the President wouldn't even speak
Speaker 1: with Mr Trudeau of Canada at the at the festivities
Speaker 1: in New York. We've reached a new level of seriousness
Speaker 1: in this neft to debate. Absolutely. I mean I I've
Speaker 1: I thought that the market has been a little bit
Speaker 1: sanguine about, um, the sort of idea that they could
Speaker 1: come to a resolution so quickly. I mean, these are
Speaker 1: these big media issues between Canada and the US, things
Speaker 1: that have been relevant when we were negotiating TPP with them,
Speaker 1: Dairy subsidies, dispute resolution, auto tariffs. Um. These are not
Speaker 1: things that can be I don't think reconciled in a
Speaker 1: matter of days. And I think that's what you're seeing
Speaker 1: right now. Um. So, I think the big big question
Speaker 1: is here is will members of Congress actually ratified by
Speaker 1: bilateral with Mexico? You know, I'm skeptical, are they? When
Speaker 1: we had the Ford President and chief executive Officer Mr
Speaker 1: Hackett at our Bloomberg Forum yesterday and I'm not sure
Speaker 1: if it came up, but X percent of any given automobile,
Speaker 1: like an F one pickup truck has a Mexican or
Speaker 1: windsor Ontario component to it. Do they understand that? In
Speaker 1: your world living? Um? Yeah, So, I mean, obviously the
Speaker 1: supply chain is incredibly integrated with especially with Mexico, but
Speaker 1: also with Canada. And I think that's why, um, folks
Speaker 1: in Congress have been so concerned about both NAFTA potential
Speaker 1: naft to withdraw and the auto tariffs. UM. Just given
Speaker 1: how sort of integrated we are with with especially our
Speaker 1: our neighbors to the north and the south, I think
Speaker 1: they do understand it. Um. But obviously this is politics
Speaker 1: ruling economics right now. Well, let's go back to the
Speaker 1: lame duck theme then as well. You know, let's assume
Speaker 1: we get a Democrat House. And you know, David Wasserman
Speaker 1: was writing up yesterday in the Cook Political Report and
Speaker 1: there's a huge doubt of us. I get the uncertainty, folks,
Speaker 1: and we heard that from you earlier. But nevertheless, it
Speaker 1: does it just stall through the lame duck or there's
Speaker 1: just a few chosen pieces of legislation that maybe get
Speaker 1: addressed within the uproar. Yeah, And I think it's like
Speaker 1: I think it's all going to be predicated on on
Speaker 1: the outcome of the election. I think if you see
Speaker 1: a big Democratic sweep, I mean, of course, Democrats aren't
Speaker 1: going to be very um willing to go along with
Speaker 1: anything in a lame duck session if they are looking
Speaker 1: at much bigger majorities in the normal congressional session. With
Speaker 1: that said, I think Republicans will have a new urgency
Speaker 1: to get things done, including potentially this bilateral with Mexico
Speaker 1: and potentially a confirmation of of Kabanov depending on on
Speaker 1: how that goes. Libby. If we can learn anything from
Speaker 1: politics over the last couple of years, it's to make
Speaker 1: sure we question the consensus before the vote actually takes place.
Speaker 1: There seems to be an overwhelming consensus that the House
Speaker 1: swings towards the Democrats. Now, I still listen to to
Speaker 1: the to the message coming from the Democrats and struggle
Speaker 1: to really understand what it is. Um, what is the
Speaker 1: message the electorate that comes from the Democrats. Well, I
Speaker 1: think that the prevailing message here is and even though
Speaker 1: they may not want it to be, but I think
Speaker 1: it's an anti Trump message, right, this is uh. I
Speaker 1: think that they are running on interestingly on sort of
Speaker 1: providing a check in balance to to the executive branch.
Speaker 1: And that's been a um, something that they've all emphasized. Um.
Speaker 1: So I think that has been a major theme. Now.
Speaker 1: They would say that they're running on infrastructure, they're running
Speaker 1: on healthcare, um. But but certainly providing a check to
Speaker 1: the executive branch is either implicitly or explicitly part of
Speaker 1: their part of their message. Let me thank you so much.
Speaker 1: Let me control where this here really is the day's
Speaker 1: wearing on towards the election. Really, I thought, really in
Speaker 1: the last hours a whole new tone of the polar
Speaker 1: analysis and the study as well. Very pleased to say
Speaker 1: that dropping bot a studio is paid a chatwaw Miszoo
Speaker 1: International head of rate strategy here in London, paid a
Speaker 1: greater catch up with you. Let's pick up with that
Speaker 1: economic data here in Europe and upside surprise on inflation.
Speaker 1: These sentiment numbers don't look great though, and I'm trying
Speaker 1: to reconcile what's going on in Europe because I'm getting
Speaker 1: a lot of conflicting signals. What do you see? We've
Speaker 1: got the classic issue for the euro areas that we're
Speaker 1: getting to trouble if inflation surprises to the upside, particularly
Speaker 1: if it gets above the e CBS target, which it
Speaker 1: currently is, has been for a couple of months and
Speaker 1: is likely to continue to be the case because then
Speaker 1: it's their single mandate. Um they're likely to be looking
Speaker 1: airing towards title monetary policy then they've previously been signaling.
Speaker 1: And that's whilst the growth backdrops not looking so great.
Speaker 1: You know, it's decelerating somewhat. It's it's certainly not looking
Speaker 1: looking dangerous to the downside, but it's not that strong.
Speaker 1: Can you reconcile data dependence with forward guidance? The reason
Speaker 1: I asked this is because we do have an upside
Speaker 1: surprise on inflation in Germany, regardless of what happens with
Speaker 1: growth and inflation. President Dars tied the hands to the
Speaker 1: whole Government Council until the back end of next year
Speaker 1: on rates. So can they truly be dated dependent when
Speaker 1: the whole Governing Council essentially has their hands tied on
Speaker 1: rates for potentially eighteen months. Yeah, so I would think
Speaker 1: that there is some risk that we start to see
Speaker 1: some evidence that the Governing Council may be frayed somewhat
Speaker 1: about that level of commitment, particularly when they're saying that
Speaker 1: rates can't go up until the end of summer. Perhaps
Speaker 1: the debate about the real timing of that comes back
Speaker 1: onto the table. If that just means a rate hikers
Speaker 1: earlier September nineteen, then possibly they need to be hiking
Speaker 1: rates in larger steps. To to Sutain, I don't mean
Speaker 1: to interrupt what you just said. Peter's absolutely critical. John,
Speaker 1: this is a huge deal. This measured discipline we're on
Speaker 1: versus what we used to do in FED, in FED movement.
Speaker 1: It's a big change. Peter. Yeah, Look, this is uh,
Speaker 1: this is a new regime. But I think what what
Speaker 1: we're currently going through is a re pricing of European
Speaker 1: rate expectations quite rightly, and I think that's going to
Speaker 1: be exacerbated as the market comes to consider who the
Speaker 1: next DCP president. Maybe if they are just a more
Speaker 1: neutral outlook than than Jog and also the chief economist
Speaker 1: Peter Pratt have had, then they could well be looking
Speaker 1: at a significantly tighter path of monetary policy for late
Speaker 1: next year. It depending on how long the European cycle
Speaker 1: runs for I mean, we've got a problem. Let's just
Speaker 1: assume that the U S economists are right and we
Speaker 1: might get a downturn in the United States. Where does
Speaker 1: that leave Europe? How long is the cycle? How much
Speaker 1: runway does the ECB actually have to try and get
Speaker 1: rates back above zero again. ECB we think has gotten
Speaker 1: until two thousand and twenty one to get rates up.
Speaker 1: Is that enough time. It's enough time to probably get
Speaker 1: them up to into positive About half a percent would
Speaker 1: be the highest we're going to. We're going to have
Speaker 1: to fifty basis points in Europe to play with in
Speaker 1: the next economic downturn. That's your base case. Oh no,
Speaker 1: we think I could go negative again. It's been extremely
Speaker 1: successful now that the banks have understood have learned how
Speaker 1: to deal with it. So I'm thinking that there's there's
Speaker 1: ninety basis points of tightening at most ninety basis points
Speaker 1: of easy. Again, but let's think about what happens to
Speaker 1: liquidity in the Euro Area. It has to be more
Speaker 1: money printing. I think that's that's the less palatable outcome here.
Speaker 1: That then that possibly the ECB needs to be putting
Speaker 1: rates up quick more quickly so that they don't have
Speaker 1: to do as much QUEI and balance sheet expansion of
Speaker 1: they have done in this cycle. They've got a big problem, Peter. Well,
Speaker 1: we call it a liquidity trap. We think that's that's
Speaker 1: a fair description of the of the problem that the
Speaker 1: Euro Area has. Um. It's likely to be exacerbated once
Speaker 1: we get some positive views on the risk free assets,
Speaker 1: then the curcy appreciation story really accelerates. Peter. One of
Speaker 1: the themes that we've had is this idea of dullarization.
Speaker 1: It's a new word for something timeless, which is just
Speaker 1: US dollars floating around the world. How does that plate
Speaker 1: ender where we go with rates next year? Well, yes,
Speaker 1: I buy the concept. Um the FEDS tightening is effectively
Speaker 1: meaning that if you look at a monitory ever like
Speaker 1: the euro um they're they're getting easier financial conditions as
Speaker 1: a result of the Fed's tightening UM. So it means
Speaker 1: that where the FED leads, other central banks are likely
Speaker 1: to have to follow UM. So with the FED creating
Speaker 1: if they continue to generate expectations that the dollar can
Speaker 1: go higher, that FED funds can go higher, then it
Speaker 1: will also impact the pricing of European rate expectations. But
Speaker 1: John Ferrell, with your trip to London, with your entourage
Speaker 1: and with your acclaim, with your many media properties, what
Speaker 1: have you learned about dollarization in the foreign exchange capital
Speaker 1: of the world. It's a big, big question, an increasingly
Speaker 1: I think that debate is intensifying. Do not your media properties,
Speaker 1: not my media properties. We can talk about that offline
Speaker 1: if you like. But it's a debate that's intensifying, Peter,
Speaker 1: And it's a debate sort of around what happens, what's
Speaker 1: the reaction function the bias of investors towards specific assets
Speaker 1: during adverse scenarios. Now, typically that would be by the dollar.
Speaker 1: Typically it would be go to where the liquidity is
Speaker 1: by treasuries. Um does that change in the next economic downturn,
Speaker 1: Because there's a real conversation emerging about that well, I
Speaker 1: think firstly, with the level of dollar strength with gost
Speaker 1: already we're on the cusp. We've seen some termoilly in
Speaker 1: e M. So if we get another bout of dollar strength,
Speaker 1: I think that it could it could automatically cap the
Speaker 1: dollar to a degree because it will mean that broader
Speaker 1: financial conditions actually get tighter, and it could slow down
Speaker 1: the FEDS ease and put possibly put them on pause.
Speaker 1: But I think also because President Trump is doing some
Speaker 1: interesting measures, some controversial measures, we could have more efforts
Speaker 1: from European policymakers to gain some monetary independence. Um. You know,
Speaker 1: think about it. You travel around various countries in Europe,
Speaker 1: you're actually typically paying for your expenses through American financial systems.
Speaker 1: Very true, swift all of these systems in fact swift
Speaker 1: going through Europe as well. These are big, big issues, Peter,
Speaker 1: and they're big big issues connected to economic sanctions as well.
Speaker 1: Be a chat well, Missue, International head of European Rights Strotagists.
Speaker 1: Great to catch up with you. Thank you. If you're
Speaker 1: interested in rent or buy, or housing or real estate.
Speaker 1: This is the interview of the day. Every economist worth
Speaker 1: their salt on wall Street claims fame with a certain focused,
Speaker 1: narrow niche when they start out. Nobody did it on
Speaker 1: a housing like Michelle Meyer of Bank of America. Mary
Speaker 1: Lynch now running all of their US economics so long ago,
Speaker 1: far away. You just one day said I'm going to
Speaker 1: own a housing, and you nailed it. You nailed the
Speaker 1: ups and downs of our housing in your new research
Speaker 1: note is really abrupt. This is as good as it gets.
Speaker 1: Why is this the peak? I think it's the peak
Speaker 1: for existing home sales, which was important. Distinction is not
Speaker 1: necessarily the pink for housing starts, single family housing starts.
Speaker 1: The reason I think existing home sales have peaked is
Speaker 1: that affordability has been coming down, and there is a
Speaker 1: pretty tight correlation in the growth rate of affordability with
Speaker 1: that and the existing factors their house price and also
Speaker 1: the mortgage rate, which is more important. Precisely, and even
Speaker 1: though affordability is still high relative to historical standards, it's
Speaker 1: that it's been shifting down and it should continue to
Speaker 1: shift down if we think rates are heading up, which
Speaker 1: seems the most likely scenario. The distinction is existing homes
Speaker 1: exist in new homes are only for the rich because
Speaker 1: contractors construction building land dynamics mean only big fancy houses
Speaker 1: with granite marble and you know, you know, a grill
Speaker 1: out back the price of a normal kitchen. They're the
Speaker 1: only ones getting built. Is that stereotype true? Well, that
Speaker 1: was true in the early stage. Is the recovery, that's
Speaker 1: where developers focus to the expensive properties, the ones where
Speaker 1: people can get financing, et cetera. But now what you're
Speaker 1: seeing is a move down towards entry level properties to
Speaker 1: more affordable type units. And frankly, that's where they should
Speaker 1: be building. That's where we need more supply, and that's
Speaker 1: where there's opportunities. So I think what builders are doing,
Speaker 1: and the reason I think new home sales have further
Speaker 1: upside is builders are being selective. They're adding homes to
Speaker 1: areas where there's tight inventory and there is incremental demand.
Speaker 1: Can you give us some names of cities that are
Speaker 1: like that, where there's tight inventory, where there's a healthy
Speaker 1: housing economy. I assume New York sit out in that last. Yeah,
Speaker 1: so cities is going to be a problem. Urban areas
Speaker 1: are more saturated. That's where a lot of development came
Speaker 1: in multi family. The rent story was very strong there.
Speaker 1: It's more in the surrounding areas of some of these
Speaker 1: big cities. I think still the West Coast is where
Speaker 1: you have a pretty healthy economy. The tech industry is
Speaker 1: helping to support so you are seeing a lot of
Speaker 1: focus in in in in some of those markets. Part
Speaker 1: of the matter we've you think of Doug Duncan at
Speaker 1: Fannie May and others that are specialists in housing economics
Speaker 1: is about income growth. That German Paul yesterday noted this
Speaker 1: mystery over wage growth and a lot of articles recently
Speaker 1: on the benefit contribution to wages other than the elite,
Speaker 1: the upper x percent that are looking at six thousand
Speaker 1: square feet, three wood burning fireplaces and all that, where's
Speaker 1: the wage growth to drive this forward? So wage growth
Speaker 1: has been slow, which is a challenge of course, and
Speaker 1: UM that can further create some challenges are affordability, because
Speaker 1: if home prices are rising at six seven percent nationally
Speaker 1: like we saw last year, mortgage rates are up, but
Speaker 1: wages are only increasing two and a half to three percent,
Speaker 1: you start to create some challenges in terms of the
Speaker 1: ability to access housing. UM. But nonetheless you have to consider, uh,
Speaker 1: the alternative rents have increased as well, so the end
Speaker 1: of day. You need a place to live. So it's
Speaker 1: comes to being a choice. Are we going to buy?
Speaker 1: We in a and how do we balance our budget together?
Speaker 1: Michel Meyer with this Bank of America, Mary Lynch, And
Speaker 1: we're gonna focus here. We'll do a little bit of
Speaker 1: fed chat here in a bit, but right now on
Speaker 1: our real expertise of housing as well, render by go
Speaker 1: to it. Which is it? Tell me New York City,
Speaker 1: which is the weirdest market. New York City is a
Speaker 1: is an allier means basically Europe right well, New York
Speaker 1: City has support from foreign investors UM people by properties
Speaker 1: simply for investment purposes. UM in New York City is softening.
Speaker 1: That is very clear in the statistics that are have
Speaker 1: been coming off of the past year, both in terms
Speaker 1: of rent and in terms of home prices. Given the
Speaker 1: amount or Memphis. Yeah, so if you look more broadly
Speaker 1: and you think rent versus own, UM, the equation has
Speaker 1: started to shift in the towards towards renting again, given
Speaker 1: that home prices have increased pretty notably and mortgage rates
Speaker 1: are now rising as well. UM rents picked up post crisis.
Speaker 1: But UM, outside of the big cities, it's been fairly
Speaker 1: modest games if you look at, for example, the owner's
Speaker 1: equivalent rent series within the c p I, if you
Speaker 1: take out some of those big metro areas, it's still
Speaker 1: fairly modest. So um, I think if you're just looking
Speaker 1: at a relative price story in outside the big cities, yeah,
Speaker 1: rent is still pretty attractive. Le's kind of the FED yesterday,
Speaker 1: and what I noticed that I've mentioned it's like eight
Speaker 1: times this morning, and we're efforting Michael McKee will see
Speaker 1: if we can get him in here, just off the
Speaker 1: airplane from Washington. But Craig Tourists had a terrific question
Speaker 1: of the chairman on dynamics, and the McKee was rude
Speaker 1: and asked about the dots, and then mineam and Apple Obama.
Speaker 1: The New York Times nailed it off of those two
Speaker 1: questions on dynamics as well, and the dynamics were to me,
Speaker 1: it was almost a chairman walking away from the PhDs
Speaker 1: at the FED and saying we're slaves to data dependency.
Speaker 1: Is that that your interpretation? Yeah? I think increasingly he's
Speaker 1: saying he does not have stars in his eyes. He
Speaker 1: is not focused as much on this idea. The Gospel
Speaker 1: of Eastern Harris as we know it um so to me,
Speaker 1: the messages look, we like models to provide a framework
Speaker 1: trying to understand where our star is a useful exercise,
Speaker 1: but is not the only way of determining monetary policy.
Speaker 1: And if we tie ourselves too much to our forecast,
Speaker 1: to our dots, to these longer equilibrium models, we can
Speaker 1: end up getting it wrong. So let's look at incoming data.
Speaker 1: Let's look at how financial conditions are going. The message
Speaker 1: to me from POWs We're going to keep plugging along,
Speaker 1: provide the data lets us because we don't know what
Speaker 1: the end goal is. But now with a short term
Speaker 1: FED funds target rate adjusted for inflation that zero or
Speaker 1: even slightly positive was yesterday, the day we got back
Speaker 1: to normal where these rate increases have actual impact on
Speaker 1: the economy. As President Trump would suggest, what's possible if
Speaker 1: you believe the Lubbuck will Illiam short term our star model.
Speaker 1: And there, well that's you know, that's in theory where
Speaker 1: we are. But Kevin's online to Kevin Warsh is online
Speaker 1: to say, and Michelle, what are you talking about? Kevin Warsh,
Speaker 1: the former governor, critical of our stories, are sure you
Speaker 1: know look it's are are we at the point where
Speaker 1: monetary policy is going to start to matter for financial
Speaker 1: conditions and bleed into the broader economy. Maybe so far
Speaker 1: it hasn't. And and I think that there's still a
Speaker 1: question as to the mechanism for which the fet is
Speaker 1: is impacting the economy. So we'll see. And I think
Speaker 1: that I think Powell isn't sure either, which is why
Speaker 1: he's emphasizing look at the data flow, look at financial conditions.
Speaker 1: We're going to calibrate as we go within this is
Speaker 1: to look back. And I had this in the TV
Speaker 1: script this morning that Economic Club of New York speech
Speaker 1: by Vice Chairman Stanley Fisher accommodative, where we're clearly removed
Speaker 1: ourselves looking at two year yield from that you no
Speaker 1: clue or neutrality is Chairman Powell as no clue or
Speaker 1: neutrality is then why do we worry? Why do we
Speaker 1: attempt a mathematical exercise involving what for plug ins? So
Speaker 1: I think the idea is that we're supposed to understand
Speaker 1: the relationship between growth, inflation and rates. That goes back
Speaker 1: to the tailor role, goes back to all of these
Speaker 1: variety of different models. Um do we it's not obvious,
Speaker 1: but we can look at historical relationships and we have
Speaker 1: some basis for understanding. So the idea is that history matters,
Speaker 1: those relationships are somewhat relevant. Let's look at them and
Speaker 1: determine what it means for today. Understanding that we have
Speaker 1: to be able to take some error around that. Pim
Speaker 1: from Midtown emails in and says Michelle great comments on
Speaker 1: render by how much further will home prices go down
Speaker 1: in New York City? Um? You know that is we're
Speaker 1: not forecasting specifically by by cities, so excuse me by
Speaker 1: zip code? How about voting district? Um? You know? To me,
Speaker 1: you just look at look at the imbalance. There's so
Speaker 1: much supply coming in in New York City. Um, to me,
Speaker 1: it's gonna be a function of what happens to the
Speaker 1: broader business cycle if every session comes in the next
Speaker 1: few years. Given the excesses in the city in terms
Speaker 1: of supply, I think we're vulnerable for decline. Now, welcome
Speaker 1: online to pim Fox, who's just joined us here. She
Speaker 1: was brilliant on New York is I was south, yes,
Speaker 1: indeed south or south or south there? Interesting. I just
Speaker 1: gotta say that even though we talk about the actual
Speaker 1: transaction value of a lot of properties, I don't see
Speaker 1: it getting less expensive. I see it getting more expensive
Speaker 1: every time I hear there's some every homeowner, So I
Speaker 1: mean I appreciate it. And it's also you know, one
Speaker 1: to transaction. You know they are limited, right because a
Speaker 1: limited supply of bias. Something to talk about the next door.
Speaker 1: Pim Fox with his studio Michelle Meyer, Bank of America,
Speaker 1: Merrill Lynch, thank you so much. A clinic on housing
Speaker 1: and now at Bloomberg Surveillance worldwide and coast to coast
Speaker 1: with fourteen out of twelve cable news networks tuned into
Speaker 1: what will occur here at ten am is most important
Speaker 1: issues on Judge Kavanaugh, and we will attempt at Bloomberg
Speaker 1: Surveillance to commit perspective. We do that with Bob Moon
Speaker 1: and Bob it goes really back within your research to
Speaker 1: October fourteenth when Anita Hill had to pass a lie
Speaker 1: detector test, and I think that picks up your wonderful
Speaker 1: perspective you've put together. Yeah, you know, Tom Shakespeare said
Speaker 1: what has passed his prologue? So with the Senate Judiciary
Speaker 1: Committee set to gabble to order. It's high drama hearing
Speaker 1: into the sexual misconduct allegations against Supreme Court nominee Brett Kavanaugh.
Speaker 1: It is informative to look back twenty seven years to October.
Speaker 1: That's when President George H. W. Bush's Supreme Court nominee
Speaker 1: Clarence Thomas was called back in his confirmation process to
Speaker 1: face the sexual misconduct allegations of Anita Hill, his former assistant.
Speaker 1: The panel's chairman at the time was Democrat Joe Biden
Speaker 1: of Delaware. This is not a referendum on whether or
Speaker 1: not whether or not sexual harassment is a grave offense.
Speaker 1: I said from the beginning. This is about whether or
Speaker 1: not sexual harassment occurred. Now we're gonna hear more. Witnesses
Speaker 1: are gonna come in and cooborate your position and hers.
Speaker 1: We'll find out whether there's telling the truth or not
Speaker 1: as best as we are capable of doing, just like you,
Speaker 1: as a judge are when you look them in the
Speaker 1: eye and make a judgment. So that I think this
Speaker 1: whole affair is sink. I think it's sick to Utah
Speaker 1: Republican or In Hatch was one of Thomas's defenders in
Speaker 1: those hearings, just as he's defending Brett Kavanaugh as a
Speaker 1: member of the same Senate panel today. Just as the
Speaker 1: Clarence Thomas hearing was then, today's hearing is being called
Speaker 1: a watershed moment. A record two hundred fifty seven women
Speaker 1: are running for the House and Senate in the twenty
Speaker 1: eighteen midterm elections. In nineteen ninety two, twenty eight women
Speaker 1: were elected to the House of Representatives and four to
Speaker 1: the Senate, among them Democrat Patty Murray, the state of
Speaker 1: Washington's first female U S Senator. I am a United
Speaker 1: States Senator today because of the way Anita Hill was
Speaker 1: treated in nineteen They called Anita Hill a liar. They
Speaker 1: said she was coached by special interest groups. They looked
Speaker 1: for ways to blame her, impugne her, and attack her.
Speaker 1: They pressed the young professor for explicit details of the
Speaker 1: harassment she said she had faced on the job. My
Speaker 1: working relationship became even more strained when Judge Thomas began
Speaker 1: to use work situations to discuss sex. On these occasions,
Speaker 1: he would call me into his office for reports on
Speaker 1: education issues and projects, or he might suggest that, because
Speaker 1: of the time pressures of his schedule, we go to
Speaker 1: lunch to a government cafeteria. After a brief discussion of work,
Speaker 1: he would turn the conversation to a discussion of sexual matters.
Speaker 1: His conversations were very vivid. Because I was extremely uncomfortable
Speaker 1: talking about sex with him at all, and particularly in
Speaker 1: such a graphic way. I told him that I did
Speaker 1: not want to talk about these subjects. What happened after
Speaker 1: Hill's opening statement explains why this time Republicans on the
Speaker 1: Judiciary Committee have named an outside council who they can
Speaker 1: choose to have question Dr Christine Bozzy Ford. Hill was
Speaker 1: a lone woman facing a panel of fourteen skeptical men,
Speaker 1: among them Pennsylvania Republican Arlen Specter. A mere allegation, Senator,
Speaker 1: I would suggest to you that for me, these are
Speaker 1: more than mere allegations. These are the truth to me.
Speaker 1: These comments are the truth to me. I'm not I'm
Speaker 1: not questioning your statement when I used the word allegation.
Speaker 1: I know about soctual harassment and discrimination against women, and
Speaker 1: I think I have some sensitivity on it. How reliable
Speaker 1: is your testimony in October of on events that occurred
Speaker 1: eight ten years ago? How sure can you expect this
Speaker 1: committee to be on the accuracy of your statements, and
Speaker 1: it wasn't just Republicans who raised the eyebrows and even
Speaker 1: the ire of many women watching the hearings. She could
Speaker 1: be living in a fantasy world. I don't know. We're
Speaker 1: just trying to get to the bottom of all of
Speaker 1: these facts. Howell Heflin was a Democrat from Alabama, and
Speaker 1: trying to determine whether you are telling falsehoods or not.
Speaker 1: I've got to determine what your motivation might be. Are
Speaker 1: you a scorned woman? Do you have a militant attitude
Speaker 1: relative to the area of civil rights? No, I don't
Speaker 1: have a militant attitude. Do you have a modern complex? No?
Speaker 1: I don't. Well do you see that coming out of
Speaker 1: this that you can be a hero in the civil
Speaker 1: rights movement? I do not have that kind of complex.
Speaker 1: I don't like all of the attention that I'm getting.
Speaker 1: I don't. I would not even if I liked the attention.
Speaker 1: I would not lie to get attention. Thomas adamantly insisted
Speaker 1: the accusations were not true. I've never been accused of
Speaker 1: sex harassment, and anybody who knows me knows I am
Speaker 1: adamantly opposed to that, adamant and yet I sit here accused,
Speaker 1: and I'll never be able to get my name back.
Speaker 1: I know it. The day I received the phone call
Speaker 1: on Saturday night, last Saturday night about and told that
Speaker 1: this was going to be in the press. I had.
Speaker 1: I died the person you knew, whether you voted for
Speaker 1: me or against me. He choked back tears as he
Speaker 1: complained that he, his family, his friends, and the country
Speaker 1: had been irreparably harmed. In my views, that that is
Speaker 1: an injustice. And if by going through this, another nominee
Speaker 1: in the future or another American won't have to go
Speaker 1: through it, then so be it. In the end, Republicans
Speaker 1: on the panel delivered impassioned defenses of the Supreme Court
Speaker 1: nominee Wyoming's Allan Simpson confronting Hill directly. Maybe maybe it
Speaker 1: seems to me it didn't really intend to kill him,
Speaker 1: but you might have. And that's pretty heavy. I don't
Speaker 1: care if you're a man or a woman. Kind of
Speaker 1: a singular singular torpedo blow below the waterline and he sinks.
Speaker 1: Within five days, Thomas was confirmed by a narrow cinemajority
Speaker 1: of fifty two to forty eight. Today, Washington Democrat Patty
Speaker 1: Murray is warning Republicans against a rush to confirm Brett Kavanaugh.
Speaker 1: Women are watching. We are not going to allow that
Speaker 1: to happen again. If Republicans attack Dr Ford and this
Speaker 1: turns into anything like what we saw back in women
Speaker 1: across the country are going to rise up, make their
Speaker 1: voices heard, and Republicans will pay a very huge price
Speaker 1: tom him. A lot of people will be watching in
Speaker 1: just a few minutes. Just extraordinary. And you go back
Speaker 1: to Senator Heflin there, who was before Jeff Sessions for Alabama,
Speaker 1: silver star guy, huge marine track record in World War Two.
Speaker 1: And what I went to Bob, within your wonderful history
Speaker 1: there is Hefflin was born in and here we are
Speaker 1: almost a hundred years ahead of that. The generational shifts
Speaker 1: here have been cultural and generational have been extraordinary. Yeah,
Speaker 1: and you have to consider that this was just twenty
Speaker 1: seven years ago. That's not all that long ago, really,
Speaker 1: And also is it worth noting that the process has
Speaker 1: now become a political process, not a legal or judicial process.
Speaker 1: I think it all began with with that hearing where
Speaker 1: where it it turned political and has become increasingly political
Speaker 1: with each confirmation. What was your insight from digging up
Speaker 1: all of this audio. I mean you go back and folks,
Speaker 1: for for those of us in the Bloomberg newsroom, Uh,
Speaker 1: Bob Moon sits in a coveted cubicle with acres of
Speaker 1: video and in audio reels. What was it like to
Speaker 1: go through it all? What? What was your take on
Speaker 1: going through? Overwhelming? Take? Is it? How much times changed
Speaker 1: just in that twenty seven years. I mean a lot
Speaker 1: of this I don't think would fly today that that
Speaker 1: was going on back then, particularly with the me too movement. Now,
Speaker 1: Bob Moon, thank you so much, just extraordinary. Will be
Speaker 1: sure to get that out on Bloomberg Digital. Thanks for
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to
Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.
Speaker 1: I'm on Twitter at Tom Keane before the podcast. You
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio