Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane
Speaker 1: Jay Ley. 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. Jonathan
Speaker 1: Gollub was the Credit Squeeze. Of course, as great notoriety
Speaker 1: as I've never heard him say, go to cash. John
Speaker 1: Gollub joins, us are we are? How distant are we
Speaker 1: from go to cash? Well, Tom, don't They will be
Speaker 1: a time when I get on hair and say that,
Speaker 1: And it's not. Let's listen to the likelihood of having
Speaker 1: a recession unless something catastrophic shows up tomorrow is super
Speaker 1: low that the financial risk is is weeks and no,
Speaker 1: I think I think everything's great. Go back with credit
Speaker 1: Swiss research. This is off d l J and the
Speaker 1: merger with credit years ago. Tom Gelvan's great research price
Speaker 1: to sales. I think of Mark Flannery, who was iconic
Speaker 1: in oil, the Excel spreadsheety of your shop. How do
Speaker 1: you fold the business data that you see now in
Speaker 1: America into what we just heard on the trade war?
Speaker 1: You know, I don't think they reconcile. And what I
Speaker 1: mean by that is is it when, when, if, if
Speaker 1: this trade stuff gets sloppy, it's going to hit the
Speaker 1: PE multiple the valuations we put on stocks, not on
Speaker 1: the underlying earnings, or if it's gonna hit earnings, take that.
Speaker 1: How do you you tell me it's all numerator based.
Speaker 1: If the PE modiple comes in, it's all numerator based
Speaker 1: and on the dominator earnings, on on the stuff related
Speaker 1: to trade. Absolutely this right, right this minute. This is
Speaker 1: a sentiment issue that this is going to create. I mean,
Speaker 1: what is a concern that all of a sudden the
Speaker 1: consumer sees this, they stop spending because they get concerned
Speaker 1: about the economy and their jobs. Businesses get concerned because
Speaker 1: they don't know how to spend money, and they don't
Speaker 1: know whether they deal with the future. And and mind
Speaker 1: you those might be there, but right now, in terms
Speaker 1: of actual basis points of earnings, very very little, John,
Speaker 1: You came out with a note you and the same
Speaker 1: I've a credit swats very recently and understanding got a
Speaker 1: bit of pushback, So won't me through it? The case
Speaker 1: for much higher valuations, make the case for much higher valuations, well, funny.
Speaker 1: It's a funny thing is is the second you put
Speaker 1: a piece like like that, you get pushed back from
Speaker 1: all the time this. Yeah, I mean, here's here's the
Speaker 1: bottom line. Businesses in the United States have gone what
Speaker 1: I call capital light. They've gone towards services, they've outsourced
Speaker 1: production overseas, They've are they're running their businesses with much
Speaker 1: less capital and the result is that they are returning
Speaker 1: more of their cash flows back to shareholders in the
Speaker 1: form of dividends and buy backs. When we think about
Speaker 1: a piece multiple on stocks, the reason we use earnings
Speaker 1: is because it's a proxy for the cash flows of
Speaker 1: the company over time. But if the businesses are generating
Speaker 1: more cash flow per dollar earnings, then the stock is
Speaker 1: worth more than it has historically. UM. Just to put
Speaker 1: in perspective, UM, right now PSU are about fift above
Speaker 1: long term averages, but the price to cash flow is
Speaker 1: below its long term averages. That's a huge difference. So
Speaker 1: the immediate question you'll get asked, I'm sure, is that, okay,
Speaker 1: this is the index level. Stories it won't sect the
Speaker 1: scuming get or is it across the board? Lift the
Speaker 1: lid on the index floor us, what's happening beneath the
Speaker 1: su Yeah, and that's that's a that's a great question.
Speaker 1: And I think that there's two stories here. The first
Speaker 1: is that tech companies are so much more cash flow rich,
Speaker 1: their margins are so much higher that as the market
Speaker 1: becomes more tech dominated, the cash flow generation for the
Speaker 1: whole market is lifted up about fifty five of the
Speaker 1: of the benefit is the fact that the SMP today
Speaker 1: does not look d SMP of a decade ago. Is
Speaker 1: individual companies literally doing something different today than they did
Speaker 1: ten years ago, And so it's it's a mix of both.
Speaker 1: You're you're very Mathew. Today is this because there was
Speaker 1: no English football this weekend the walls there was the
Speaker 1: f A Cup final. While we're pivoting to small because
Speaker 1: Jonathan this, Mathew, the SMP is not what it was
Speaker 1: ten years ago. I mean, we get that with Amazon
Speaker 1: and Apple and the others expand on that. Well, just
Speaker 1: just say, Tom, you and I on on the TV
Speaker 1: show before this, we're talking about the consumer discretionary space.
Speaker 1: Just think about what a retailer is today and how
Speaker 1: we purchase things. Think about the margins that we go
Speaker 1: to Amazon, right, and the and the margin potential there,
Speaker 1: The growth potential there is just much great. The efficiencies
Speaker 1: of the business models are are greater there, and that's
Speaker 1: really what's changing. And frankly, even companies you're talking about before,
Speaker 1: even businesses in old sect or is the you know
Speaker 1: in airlines and autos are using technology better. They're outsourcing
Speaker 1: to oversee suppliers um in ways that that allow them
Speaker 1: to generate more cash well for a dollar or sale.
Speaker 1: Jonathan Golla, Great to have you with us, is monic.
Speaker 1: Appreciate your time. Shan Ali bask with us now on finance.
Speaker 1: But there's only one finance story that matters, and that's
Speaker 1: Deutsche Bank. Has been an ongoing story of Bloomberg reporting
Speaker 1: and many other shops. The New York Times this weekend
Speaker 1: crushes Deutsche Bank, where they sort of knew what was
Speaker 1: going on and they didn't do it with an updation.
Speaker 1: How will the regulators in the United States, How will
Speaker 1: the regulators in Germany react to what The New York
Speaker 1: Times reported this weekend? What's a big deal about the
Speaker 1: New York Times story? As they said, yes, they saw
Speaker 1: suspicious activity, but they did not file suspicious activity reports
Speaker 1: to the Treasury depart what's the history of regulators in
Speaker 1: America on that kind of printed journalism, if you will.
Speaker 1: They're they're tough on it, right, I mean, and they
Speaker 1: also I mean it's not even just people familiar. They
Speaker 1: had somebody on the record exactly the division over the
Speaker 1: weekend that was pretty staggerant. So what happens today? I mean,
Speaker 1: if somebody die, they go, okay, wait till Monday, they
Speaker 1: pick up the phone and they say that's it. Or
Speaker 1: do they lecture the German regulators? I mean, what's the
Speaker 1: history of our US regulators deal with what's in the
Speaker 1: New York Times when some Senator or some congressman sees it. Frankly,
Speaker 1: progress is very, very very slow, and you know, the
Speaker 1: U s could probably be better at working with their
Speaker 1: international counterparts. But you know, you've got to be sure
Speaker 1: that when it comes to a bank of the scale
Speaker 1: that they are talking to each other. The dons can
Speaker 1: matter that one of the biggest money laundering scanals of
Speaker 1: all separate from this report. From this report, that's another
Speaker 1: issue that our own reporting also showed that they also
Speaker 1: didn't file suspicious activity report. It's when it in regard
Speaker 1: to when they found it. Jackson did you see this
Speaker 1: this weekend, John, you were standing outside Glossier trying to
Speaker 1: get in. But um, but you know still you see that,
Speaker 1: I know you see this article. You see this article
Speaker 1: and you go, Okay, when is enough enough? What did
Speaker 1: you think is the story was advanced by the Times.
Speaker 1: The biggest piece of the story for me was, I mean,
Speaker 1: this comes in the middle of subpoenas by the House
Speaker 1: Financial Service Committee looking for more information about Donald Trump
Speaker 1: and its relationship to Deeutge Bank. And then on top
Speaker 1: of that, some of this was found as early as seventeen,
Speaker 1: which is definitely. Um. You know, there are a lot
Speaker 1: of the same people working at Deutsche Bank now that
Speaker 1: there were then, So you can't keep on blaming the
Speaker 1: past when when some of the stuff was happening so soon.
Speaker 1: The ubs kind in the stock this morning. Pretty aggressive
Speaker 1: price target. I guess that would have been aggressive many
Speaker 1: years ago at five seventy now seemingly set to bright
Speaker 1: six where it's six sixty five right now, So ups
Speaker 1: with the second lowest price target on the street, five seventy.
Speaker 1: Want me through the problems outside of the politics, Shinnale,
Speaker 1: It is not looking good right now. Right we were
Speaker 1: just talking about some of the regulatory issues. But let's
Speaker 1: talk about how they have an annual meeting coming up
Speaker 1: just on Thursday, and how some people are very much
Speaker 1: against the current management, very much against the board, and
Speaker 1: so it might get pretty contentious. We have a story
Speaker 1: out this morning saying black Rock has outsourced um its
Speaker 1: decision making to another firm. That it means that no
Speaker 1: matter what happens, black Rock wants to say put their
Speaker 1: hands back and say we did the best possible thing
Speaker 1: for our shareholders and got independent advice as well. Uh.
Speaker 1: The Deutsche Bank stories a complicated one, right, because there
Speaker 1: is not a really clear future ahead. Um, do you
Speaker 1: have the same people at the top of the helm
Speaker 1: who have been there forever, who know where all the
Speaker 1: bodies are buried, or do you have somebody else come
Speaker 1: in and carve a new, more aggressive future for this bank.
Speaker 1: So we're talking potentially a leadership change again at Deutsche Bank.
Speaker 1: Rage right, that that's a question if there was a
Speaker 1: leadership change again, that how do you create a new strategy?
Speaker 1: Takes the years to implementage new strategy. Also, You're favorite question, Tom,
Speaker 1: is anyone going to ever buy Deutsche Bank? If you
Speaker 1: buy Deutsche bank, you have to buy all their legal
Speaker 1: problems also, and so who's going to inherit firm? Where
Speaker 1: the trajectory is on the decline with mounting legal I
Speaker 1: took a long term trend study today from two thousand
Speaker 1: seven and two standard deviations, which is a hugely rare
Speaker 1: event for any bank, including Deutsche Bank. Is six point
Speaker 1: one zero euros per share? Where right now at six
Speaker 1: point six four. Folks, all you need to know is
Speaker 1: that's a lot closer than it was a week or
Speaker 1: two weeks ago. Is there a tip point in share
Speaker 1: price where all this dialogue changes. It's funny. I feel like, um,
Speaker 1: you know, we've talked about this every other week and
Speaker 1: it doesn't seem nine exactly. I'll keep going lower. You don't.
Speaker 1: You don't have any single point like the three digits.
Speaker 1: I have no crystal ball for you on that one.
Speaker 1: Where are we up? We're giving an update on the
Speaker 1: rest of the American banking I mean we're shaping up
Speaker 1: this may we get into on where everybody takes eight
Speaker 1: weeks of vacation, like John Farrell, we come back, we
Speaker 1: do the business plan for how are the American banks
Speaker 1: doing right now? You know, big question Mark right. I mean,
Speaker 1: there's some things that are kind of propping things up
Speaker 1: at the I p O market being one of them.
Speaker 1: But after Uber being so shaky last week, we're going
Speaker 1: to see how these next big ones come to market,
Speaker 1: and that's kind of propping up a lot of activity
Speaker 1: right now. Um, But the question is it village just
Speaker 1: depends on how the markets hold up and whether people
Speaker 1: want to trade or stand the sideline or with business
Speaker 1: in business loans like confidence was the theme last week?
Speaker 1: Do they the loans flat? We got to thank sal
Speaker 1: bloom Bag Investment Banking Report. And now, folks, someone we
Speaker 1: don't speak to nearly enough, one of our truly most
Speaker 1: pression viewers of American politics, William Schneider. You know Bill
Speaker 1: Schneider from CNN over the years now at George Mason
Speaker 1: and his exceptionally direct book standoff, How America Became Ungovernable
Speaker 1: was out a year ago, it was true, it was
Speaker 1: out now, it's true, and in a year from now
Speaker 1: it will still be true. Bill Schneider, How big is
Speaker 1: the standoff right now? May two thousand and nineteen. It's
Speaker 1: getting bigger and bigger. They're about to take legal action
Speaker 1: between the President and Congress. The president Trump essentially won't
Speaker 1: respond to Congress. Uh, he's attacked yet high, he's attacked
Speaker 1: the CIA. Nothing gets done. It's gridlock. What you were
Speaker 1: great at, the charm of you and Gurgen going at
Speaker 1: it and the others as well, and seen and years
Speaker 1: ago is parsing in always fractious Democratic Party. We had
Speaker 1: the royal years of the Clintons, maybe onto the Obamas,
Speaker 1: and we are back to the fractional tone of a Democrat.
Speaker 1: Synthesize that for us right now. Well, let me say this.
Speaker 1: I'm old enough to know when the Democrats was actually
Speaker 1: worse over civil rights, over the Vietnam War, started writing
Speaker 1: in the streets of a Democratic convention. It's not good
Speaker 1: now because look what have we got twenty four Democrats
Speaker 1: running from president. But they're not in open warfare against
Speaker 1: each other. There's a division between the front runner, Joe Biden,
Speaker 1: and a lot of the progressive Democrats. But that's something
Speaker 1: we've seen in the Democratic Party for a long time.
Speaker 1: And then hot civil rights are Vietnam. But how does
Speaker 1: that play out? The certitude of Biden out front? How
Speaker 1: does that play right now? Well, Biden is out front,
Speaker 1: He's a familiar figure, and I think there is a
Speaker 1: reason for it. Biden offers voters something they're longing for
Speaker 1: that they're not getting from President Trump. In one word, normalcy.
Speaker 1: Normalcy sounds kind of boring. It's not a very exciting thing.
Speaker 1: Democrats like to fall in love with John Kennedy and
Speaker 1: Bill Clinton and Barack Obama, someone who sweeped them off
Speaker 1: their feet. But I think after Donald Trump, what they
Speaker 1: may what they may want is not a great lover,
Speaker 1: but a good provider. And that's the way Joe Biden
Speaker 1: is running. Well, Bill, didn't the electorate tell us seen
Speaker 1: that that's not what the American people want, That they
Speaker 1: want something radically different, And doesn't that not play into
Speaker 1: Mr Biden's hands? Uh, Well, that was in sixteen, that
Speaker 1: was two years ago. Things change. I think what's happened
Speaker 1: is there's a lot of Trump fatigue setting in. Uh.
Speaker 1: He's chaotic, he's disruptive. Every day we hear new shocks, firings,
Speaker 1: sudden policy reversals, insulting tweets, blaydon lies, angry threats. People
Speaker 1: are really getting tired of that. And that's why Biden
Speaker 1: looks attractive. He looks you know, he is old. He
Speaker 1: would be the oldest president ever elected for the first time. Uh.
Speaker 1: But he looks like a return to normalcy, and to
Speaker 1: an awful lot of voters that's exactly what they want.
Speaker 1: We can talk to William Snyder about old. How do
Speaker 1: you think old will play in the campaign? Bill Schnyder, Well,
Speaker 1: it's going to be interesting because the top two Democrats
Speaker 1: in the field of what do we now have twenty
Speaker 1: four with the mayor di Blasio getting in Oh my god. Um,
Speaker 1: But age doesn't seem to be a big issue at
Speaker 1: this point. My guess is that in the primary process,
Speaker 1: when we see a lot of candidates drop out, the
Speaker 1: race could very well end up between two sep two Gendarians.
Speaker 1: There would be Joe Biden, who next year will be
Speaker 1: seventy seven and Bernie Sanders, who will be seventy eight
Speaker 1: and represents a constituency that wants revenge because they figured
Speaker 1: he was treated badly by the Democratic establishment. So we
Speaker 1: could see and I call it a steel cage deathmatch
Speaker 1: two dies in their late seventies. Interesting. He's joining US
Speaker 1: Coast Coast williams Center. Bill Snyder with us, you know
Speaker 1: for years with his excellence in driving the American discourse forward.
Speaker 1: It's see that his book is Standoff Paul, So Bill,
Speaker 1: how about some of the more progressive members of the
Speaker 1: Democratic Party that are in the race, whether it's Senator
Speaker 1: Warren or or someone else, how do you think they
Speaker 1: are going to fare during the primary season? And do
Speaker 1: you think any one of those types of candidates I
Speaker 1: eat not a centrist, could in fact go up against
Speaker 1: Mr Trump. Well, I think the likeliest candidate to do
Speaker 1: that would be Bernie Sanders. He's got a following. They're
Speaker 1: angry because they feel as if they were cheated out
Speaker 1: of the nomination and the Democratic establishment wasn't very nice
Speaker 1: to them. Uh, there were revelations of the emails from
Speaker 1: the Democratic National Committee. They want revenge and that's a
Speaker 1: powerful motive in politics. That's why I say it's going
Speaker 1: to be as a standoff at the end between Biden
Speaker 1: and Sanders. And my guess is that Biden will win,
Speaker 1: although it wouldn't surprise me if Sanders wont He Sanders
Speaker 1: look right now, he's running ahead of Trump. Uh, you
Speaker 1: can't say he's unelectable, but he would be a very
Speaker 1: unusual candidate for the Democrats to nominate. So Bill. Let's
Speaker 1: assume that former Vice President Biden does win the Democratic nomination.
Speaker 1: Can he close? How do you think he will run
Speaker 1: against President Trump? Well, he's already running against President Trump.
Speaker 1: And a lot of Democrats were scratching their heads. They're saying,
Speaker 1: what he already thinks he's the nominee. Well, that's his strategy.
Speaker 1: He wants to make the point he can beat Donald Trump.
Speaker 1: And there are lots of polls of the elector that
Speaker 1: suggests that might be possible. Because in the polls that
Speaker 1: I saw, something interesting is happening. People are saying what
Speaker 1: they want is political experience, what they want is a
Speaker 1: political insider. There was a Monmouth University poll that asked
Speaker 1: which candidate would you prefer as the party nominee? A
Speaker 1: Democrat you agree with on most issues but would have
Speaker 1: a hard time beating Trump, or a Democrat you do
Speaker 1: not agree with our most issues, but would be a
Speaker 1: stronger candidate against Donald Trump. Electability beat ideology hands down.
Speaker 1: One final question, because we have to go to some
Speaker 1: breaking news, but very simply, what does Vice President Biden
Speaker 1: have to do in a given state, Let's say Wisconsin,
Speaker 1: its Secretary Clinton didn't do. He has to get voters excited. Uh,
Speaker 1: he has to resist the urge. And this is I
Speaker 1: think not part of Biden's personality to be condescending. I
Speaker 1: think Clinton lost in large part because she seemed condescending
Speaker 1: to most voters. She was a charter member of the
Speaker 1: political establishment. I remember she called the Trump people a
Speaker 1: basket of deplorables, the world's most condescending statement. Biden isn't
Speaker 1: like that, Biden. When Biden campaigns, uh, he's one of you.
Speaker 1: He has has a connection with working class voters. Clinton,
Speaker 1: I think was a little remote from ordinary voters. Biden
Speaker 1: is making it clear that he's on the same wavelength.
Speaker 1: It is a premier The book is standoff, of course,
Speaker 1: from William Schneider at George Mason, of course for years
Speaker 1: at sen and Bill Snyder. Thank you so much. Really
Speaker 1: look forward to catching up you in the political months ahead.
Speaker 1: Is well. Our Michael McKee is in Florida, the Federal
Speaker 1: Reserve Bank Atlanta meeting here is Michael McKee. Well, thank
Speaker 1: you very much, and we'd like to thank our guests,
Speaker 1: the President of the Atlanta Federal Reserve Bank, Raphael Bostick,
Speaker 1: thanks for joining us on Bloomberg Television. And radio worldwide.
Speaker 1: I know you've been traveling around your district a lot lately,
Speaker 1: and I want to find out from you what the
Speaker 1: district is thinking about the economy these days. What are
Speaker 1: companies thinking about the economy and what they're going to
Speaker 1: do going forward. Well, first of all, it's good to
Speaker 1: have you here, thanks for coming down. And I would
Speaker 1: say that as I go around the sixth district, I
Speaker 1: talked to UNESS leaders. Um, they all pretty uniformly are
Speaker 1: pretty confident and please with how the economy is going
Speaker 1: right now. Um, they know that the economy's growth is
Speaker 1: not going to be at the pace that it was
Speaker 1: last year and there was so much extra stimulus, but
Speaker 1: they're not expecting and they're not seeing a significant drop
Speaker 1: off to suggest that the economy is going to be
Speaker 1: weaker for them. Their consumer demands is remain strong and
Speaker 1: they're pretty optimistic now. The one thing I would say, though,
Speaker 1: is that as you go across the district, there is variation.
Speaker 1: So if you go to the big cities, we definitely
Speaker 1: see a lot of robust growth, but there are many
Speaker 1: parts of the district where we're not seeing that same
Speaker 1: sort of robust and some of the smaller towns, places
Speaker 1: that are more rural. There's a lot of variation across
Speaker 1: the district, and I've been really trying to get my
Speaker 1: finger on that pulsive variation, UH, to really appreciate some
Speaker 1: of the challenges that some particular communities are having. Well,
Speaker 1: the company is reporting higher input costs, either from tariffs
Speaker 1: or because your capacity constrained in this ecatom, So they
Speaker 1: are reporting that to date. What they're telling me is that,
Speaker 1: um the increases haven't been so great that they can't
Speaker 1: manage it, so they have passing through most of those
Speaker 1: costs to the final product consumer. But they have expressed
Speaker 1: some concern that you know, there are limits to how
Speaker 1: far how long they can forbear, and we may be
Speaker 1: approaching those depending on how tariffs evolve and the negotiations.
Speaker 1: But what do they say about investment going forward? Are
Speaker 1: they going to be adding to capacity or is it
Speaker 1: tariffs holding them back, or is it uncertainty or is
Speaker 1: it just lack of enough demand to increasing enough. Well,
Speaker 1: there's some variation in this. Some say, you know, we
Speaker 1: have we're meeting we're meeting demand. We're doing fine, and
Speaker 1: so they really aren't investment opportunities. Most are telling us
Speaker 1: that you know, there are going to be opportunities, but
Speaker 1: the uncertainty definitely has affected them. Uh. And until they're
Speaker 1: confident about what the rules of tomorrow are going to be,
Speaker 1: they're gonna wait and see. And and that's an important
Speaker 1: thing for us to be mindful of, is is my
Speaker 1: team goes around and tries to understand what's going to
Speaker 1: happen moving forward. Uh. And then there are a whole
Speaker 1: host of others who are trying to figure out what
Speaker 1: opportunities might be. They're trying to incorporate new technologies to
Speaker 1: increase the productivity of their workers, and that's happening over
Speaker 1: a much longer arc, and so a lot of the
Speaker 1: the the resolution of that will just take time to
Speaker 1: play out. What about consumers. Earnings have been growing above
Speaker 1: three percent now, which has sort of been a rough
Speaker 1: target for the FIT. Uh do they notice that? And
Speaker 1: do you think we're going to see a ramp up
Speaker 1: in consumer spending or people kind of sated with everything
Speaker 1: they bought. So that's a very good question. Consumer spending
Speaker 1: has been strong, and it's been robust for for quite
Speaker 1: some time, and I've not really heard or seeing any
Speaker 1: signs to suggest that that's going to fall off considerably
Speaker 1: now certainly, Um, I'm also not seeing signs that is
Speaker 1: gonna go ramp up. So so I'm not expecting to
Speaker 1: see a big acceleration in consumer spending. But I'm not
Speaker 1: seeing anything that would suggest that we're gonna see any weakness.
Speaker 1: Are weak getting in the months to come. Well, when
Speaker 1: you put it together the businesses in the consumers in
Speaker 1: your district, do you get an impression that we're late cycle?
Speaker 1: Mid cycle? Where are we? So? I don't actually even
Speaker 1: like to talk about it like that. The economy is
Speaker 1: operating the way that is operated, and it's really operating
Speaker 1: in a sustained way. That growth is robust and it
Speaker 1: is there's something that looks like I can go on
Speaker 1: for quite some time for me. I think about the
Speaker 1: cycle if you want to talk about it, uh, in
Speaker 1: the context of risk taking and are we starting to
Speaker 1: see signs that businesses and consumers are taking more risks
Speaker 1: than than they might have otherwise and starting to take
Speaker 1: a risk that some might consider to be imprudent. When
Speaker 1: you start to see those kind of risks, that to
Speaker 1: me is the equivalent of this late cycle that you
Speaker 1: would talk about and I'm really not seeing that. You know,
Speaker 1: businesses are being pretty prudent. The debt that consumers are
Speaker 1: taking on is happening mainly at the higher credit quality
Speaker 1: levels among housholds with higher credit quality. So I'm not
Speaker 1: seeing risks to suggest that that we're at a tipping
Speaker 1: point where the economy should um or might turn. But
Speaker 1: do you think at this point the markets are then
Speaker 1: ahead of themselves and thinking that you've got to do
Speaker 1: a rate move either one way or another. They're betting
Speaker 1: at the moment on on rate cuts. Yeah. Well, I
Speaker 1: am not in the position right now where I think
Speaker 1: that a move in one direction or the other is
Speaker 1: more likely. There are a lot of risks out there which,
Speaker 1: if they come to fruition, might have the economy weekend,
Speaker 1: and if that happens, then a rate cut might be appropriate.
Speaker 1: But there are also a lot of sources of uncertainty
Speaker 1: that if there resolves in particular ways, the economy might
Speaker 1: actually get a whole lot stronger, which could suggest that
Speaker 1: we might want to do a rate hike right now.
Speaker 1: There are still uncertainty right so so it's hard to
Speaker 1: say what the next move will likely be. But I
Speaker 1: am certainly not in a case where if you ask
Speaker 1: me how the scales are, I don't feel like for me,
Speaker 1: they are tilted more to the cut than to the hike.
Speaker 1: I think we're pretty much in balance. Well, monetary policy
Speaker 1: works with long and variable lags, as they say, So,
Speaker 1: do you think that the December rate hike was still justified?
Speaker 1: Could it be a mistake? Could the Fed be slowing
Speaker 1: the economy as the year goes up? So I actually
Speaker 1: don't think it was a mistake. You know, it fit
Speaker 1: in my model. I was very supportive of the cut
Speaker 1: in December. I thought that that was going to be one,
Speaker 1: probably the last one, and we'd have to see what
Speaker 1: happened with the economy. And you know, when I talk
Speaker 1: about the arc of my policy, um, it really goes
Speaker 1: to the feedback I was getting from businesses. Early businesses
Speaker 1: were excited, they were energized. We had just had the
Speaker 1: tax reform. They saw a lot of possibilities. When I
Speaker 1: got to the middle of the year, to the about September,
Speaker 1: business leaders were telling me something very different. They's like,
Speaker 1: you know, we're comfortable, we're gonna move on, but they're
Speaker 1: uncertainty in and you guys might want to just hold
Speaker 1: off for a bit, and that became sort of a
Speaker 1: common theme in what I was hearing. So I I
Speaker 1: listened to them frankly, and you know, they said, you
Speaker 1: guys are good. We think that you should look and
Speaker 1: take your time and don't be rushing to a number.
Speaker 1: And that's pretty much how we're operating. So so I
Speaker 1: actually think that the policy course that we've done has
Speaker 1: been exactly on point. I think the economic performance would
Speaker 1: bear that out. We've seen growth continue above the long
Speaker 1: term trend, and we haven't seen very much inflation as
Speaker 1: well to suggest that the economy is overheating. And so
Speaker 1: I think we're in a pretty good place. Before we
Speaker 1: let you go, you get to travel around and talk
Speaker 1: to all these people. And I'm curious the media live
Speaker 1: in these bubbles in Wall Street bubble in New York,
Speaker 1: political bubble in Washington. What do people tell you about
Speaker 1: their economic decision making? How much is it affected by
Speaker 1: what happens on Wall Street, in the stock market, or
Speaker 1: what happens with Donald Trump? So there are two those
Speaker 1: are two very different issues. First, with the stock market,
Speaker 1: it's important to remember that almost half of Americans don't
Speaker 1: have a position in the stock market. And so their
Speaker 1: decisions are really based on other things, what's happening in
Speaker 1: the dollar store and Walmart versus their prospects for having
Speaker 1: a job. And what we've seen the last there would
Speaker 1: be a ten year expansion is growing confidence that the
Speaker 1: job they have today is going to be around tomorrow,
Speaker 1: and also growing confidence that the economy is going to
Speaker 1: continue to perform in a way that they can start
Speaker 1: to make longer plans. So I think that from an
Speaker 1: economic perspective, UM is much more the general performance that
Speaker 1: is more important than Walton than stock market per se
Speaker 1: In terms of Washington, you know, I hear a lot
Speaker 1: of your different viewpoints on the politics of Washington. UM,
Speaker 1: there's frustration, UH. There are a lot of folks who
Speaker 1: feel that, UM, we should be able to get to
Speaker 1: more bipartisan positions that could really get policies that would
Speaker 1: help the economy move forward. But in general, I think
Speaker 1: that even the political UH landscape has not been one
Speaker 1: UM that has really caused people to lose faith in
Speaker 1: the economy. And I'll tell you, the president's approach is
Speaker 1: very different than his predecessor, and it's taken people a
Speaker 1: while to get comfortable with that. But in our last
Speaker 1: board meeting, um one of my board members said she
Speaker 1: feels that on some level we've adjusted and adapted and
Speaker 1: so are less being less affected by the day to
Speaker 1: day swings and the new things that come on a
Speaker 1: dated on a regular basis. Well, thank you very much,
Speaker 1: Raphaelbustic Keith, the president of the Atlanta Federal Reserve, Thank
Speaker 1: you very much for joining us. Thanks for listening to
Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on
Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm
Speaker 1: on Twitter at Tom Keane before the podcast. You can
Speaker 1: always catch us worldwide. I'm Bloomberg Radio.