Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Ferrell and Lisa Brownowitz. Daily we bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot Com,
Speaker 1: and of course, on the Bloomberg Terminal. Claudia Sam writes
Speaker 1: brilliantly about the stresses within the American political economy. Founder
Speaker 1: of Sound Consulting, writing for Bloomberg, Opinion in the New
Speaker 1: York Times, and a former Fellow Reserve economist, and always
Speaker 1: interesting even if you don't agree with her. Claudia David
Speaker 1: blanche Flower published a working paper nb ER yesterday with
Speaker 1: some colleagues from Dartmouth, and it's real simple, he says,
Speaker 1: calm down. The labor economy is not hot hot hot.
Speaker 1: Wages are not hot hot hot. You say that may
Speaker 1: be right, or the warriors may be right as well,
Speaker 1: and there may be a middle ground. And what we
Speaker 1: need is time to let things solve out. Claudia Sam
Speaker 1: wants to go out the X axis. How much time
Speaker 1: do we need to get this fixed? Yeah, that's that's
Speaker 1: a big question. So we are absolutely seeing a very
Speaker 1: disrupted economy begin to heal. That is one important interpretation
Speaker 1: of the job's report that we saw last week. We
Speaker 1: have a lot of hiring, We do have strong wage growth.
Speaker 1: How else are you going to solve the labor shortage
Speaker 1: and bring workers back without paying them more? That is
Speaker 1: absolutely a piece of what we're seeing now. We see
Speaker 1: services becoming more prevalent in consumer spending. So a lot
Speaker 1: of the disruptions we saw appear to be unwinding. They
Speaker 1: gotta unwind faster than the Fed keeps going with the rates.
Speaker 1: So that's that's the big question. If we have enough time.
Speaker 1: The politicians, Claudia have a timeline which is based on
Speaker 1: election days. You don't and we don't either. Is this
Speaker 1: an inflation story to be solved in quarters or years
Speaker 1: to be fully solved, it's a solution over years. I
Speaker 1: think we could and and are on track to be
Speaker 1: seeing some relief in the coming quarters. Uh If we
Speaker 1: don't see it, then we're we're going to a very
Speaker 1: weak recessionary place next year. Uh So, and that'll do
Speaker 1: a good number on inflation if we get there. But
Speaker 1: I think a path that's really a healing that is
Speaker 1: um slow but steady pointed in the right direction gets
Speaker 1: us back to something like two percent in two or
Speaker 1: three years. This is not a quick turn in terms of,
Speaker 1: you know, turning back the lights on getting us back
Speaker 1: to a normal that that just takes takes time. But Claudia,
Speaker 1: the new normal is something people have been talking about,
Speaker 1: especially with the participation rate remaining so low. And this
Speaker 1: is the reason why the likes of Danny Blanche Flower
Speaker 1: and others say there's more slack in this labor market
Speaker 1: than it may seem. Do you understand why there are
Speaker 1: so many people still not going back to work? Is
Speaker 1: it long COVID? Is it retirements? Is it all of
Speaker 1: the above. There's some very good research, though it is
Speaker 1: preliminary that we that the long COVID, just that piece
Speaker 1: of it could explain two tents three tents off the
Speaker 1: labor force participation. Right, that's pretty close to a fifth
Speaker 1: of that gap that we've seen open up. So that's
Speaker 1: a piece of it. We know people still have care issues,
Speaker 1: you know, just the ability to be working. We've seen
Speaker 1: a lot of people unable to work as many hours
Speaker 1: as they want to because you know, they get sick,
Speaker 1: they have to come home, there's a lot, and then
Speaker 1: older workers that took this as an opportunity to retire,
Speaker 1: some of them could have retired a lot sooner. So, Claudia,
Speaker 1: the reason why I bring this up is because all
Speaker 1: these issues are sticky issues, right. They're not going to
Speaker 1: bring people back in. You're not gonna necessarily see that
Speaker 1: participation rate go up. So when you talk about time,
Speaker 1: what is your fear that if the FED does back
Speaker 1: off or doesn't raise rates as quickly to allow some time,
Speaker 1: that it gets it wrong yet again, when it's ideological
Speaker 1: framework has been proven wrong or at least delayed again
Speaker 1: and again. I think it's a matter of interpretation. The
Speaker 1: fed's baseline interpretation of what's happening in the labor market
Speaker 1: is running really hot. There are signs that demand is
Speaker 1: cooling all over the place, the business investment, the consumer spending.
Speaker 1: But when they look at that labor market, they're seeing
Speaker 1: hot not everyone right. Governor Waller has expressed some views
Speaker 1: about the vacancy rate coming down without unemployment rising. That
Speaker 1: is clearly a correction of some structural issues. So the
Speaker 1: FED is open minded, as the FED always is. Their
Speaker 1: baseline has been looking at the labor market it's too hot,
Speaker 1: it's unhealthy, and that's what they're trying to cool down.
Speaker 1: It could be too much, well, Claudia to that point.
Speaker 1: Looking at the n f i B Small Business Optimism
Speaker 1: Survey that came out, fort pent of all owners reported
Speaker 1: job openings that they could not fill in the current period.
Speaker 1: So as what we're talking about realistically just an absence
Speaker 1: of hiring, but not necessarily businesses that are going to
Speaker 1: be outright firing people, especially as they've had difficulty bringing
Speaker 1: people back after layoffs during the pandemic. Right, a lot
Speaker 1: of the jobs that are missing are part time jobs.
Speaker 1: I mean, so we've seen an increase in the multiple
Speaker 1: job holders. We've seen people moving back from self employment
Speaker 1: into being employees. That was a very unusual pattern in
Speaker 1: the crisis. The UH. The optimistic scenario is that the
Speaker 1: first place, if if businesses see demands slowing down, which
Speaker 1: it clearly is and it's been at an unsubstainably high pace,
Speaker 1: when they see it slow down, that they're going to
Speaker 1: go first to pulling job openings and not firing because
Speaker 1: they've learned, hopefully at this point, that if you fire
Speaker 1: a bunch of your workers, it can be hard to
Speaker 1: bring them back. I think we gotta go because of
Speaker 1: breaking is Claudius sum thank you so much, particularly on
Speaker 1: inflation tomorrow on some of the labor linkage is that
Speaker 1: we see there as well. Let us give a little
Speaker 1: history here on one of the great great surprises of
Speaker 1: the last twenty years. They were those guys over in
Speaker 1: New Jersey and in our childhood they owned a piece
Speaker 1: of the rock and they would show you Gibraltar and
Speaker 1: they were Prudential, and that's the way it was. Prudential
Speaker 1: became p JIM and with it they became truly one
Speaker 1: of our best best opinionated bond houses. These are bi
Speaker 1: side people managing bond money, full faith and credit, investment
Speaker 1: grade credit, which Lisa's expert in, and also of course
Speaker 1: distress debt. But more than anything, they have done it
Speaker 1: with an opinionated alan that is absolutely second to none, Lisa.
Speaker 1: That includes a gentleman greeting us this morning. Yeah, Greg Peters, co,
Speaker 1: Chief investment Officer at p JIM Fixed Income, who is
Speaker 1: joining us at a time when the one conviction in
Speaker 1: markets had been longer term bonds and continues to be
Speaker 1: longer term bonds. And you've had such a fascinating view
Speaker 1: on this oscillating between conviction and not so much. Where
Speaker 1: do you stand on an area that has been a
Speaker 1: haven amid near term concerns about inflation. Yes, so I
Speaker 1: think the bond market has just reflected the new reality
Speaker 1: after Russian made Ukraine coach lockdown. So we have seen
Speaker 1: and then we're still experiencing this inflation surge um and
Speaker 1: growth surge. And the thing that I'm focused on and
Speaker 1: we're focused on p GEM is as like everyone else
Speaker 1: to rollover in inflation. But I think that kind of
Speaker 1: misses the bigger question on the table is so what snacks?
Speaker 1: And you know we were talking earlier, and I think
Speaker 1: the markets are entirely too comfortable with this notion we're
Speaker 1: just going to be a straight line down, smooth and
Speaker 1: easy right to the FED UH mandated zone. So I
Speaker 1: still think there's lots of room for volatilly, lots of
Speaker 1: room for rates to move both higher and lower UH
Speaker 1: and credit spreads to be much more volatile and wider.
Speaker 1: On balance, that's exactly where I wanted to go. This
Speaker 1: conviction that people have that the FED will get to
Speaker 1: their two percent target that you can see in that
Speaker 1: conviction for longer term bonds. You can see this also
Speaker 1: and break even rates that have actually come down as
Speaker 1: the Fed job bones. Do you expect that to change
Speaker 1: that as we head into the end of the year
Speaker 1: and as people start to see a cooling office some
Speaker 1: of the inflation data, you get less of an inversion.
Speaker 1: The two tents spread, and that ends up being bad
Speaker 1: from markets because that means the long end is increasing,
Speaker 1: yields going higher as people start to question the fasibility
Speaker 1: to get things under control. Yeah, so that's a good question.
Speaker 1: I think that there's a high probability that the high
Speaker 1: end rates have already been put into this market. A
Speaker 1: lot can change, So my conviction level isn't as high
Speaker 1: as it normally has, just given kind of the uncertainty
Speaker 1: and the volatility, the unprecedented nature of it all. But
Speaker 1: I do worry about that. But but actually, Lisa, I
Speaker 1: kind of worry about the flip side of that, where
Speaker 1: once rates do come down, that markets get or not
Speaker 1: rates Inflation rates can come down, the markets get too
Speaker 1: excited over that, and they're declaring victory in the middle
Speaker 1: of the battle. And I think that's where the whip
Speaker 1: saw a moment could really come in uh in her
Speaker 1: investors in a meaningful way. Well, Greg, of course, it's
Speaker 1: not just about getting inflation down. It's what it takes
Speaker 1: to get inflation down. And there is this narrative out
Speaker 1: there that if the data is looking okay, looking resilient,
Speaker 1: that means that the FED can hike aggressively in order
Speaker 1: detain inflation and land softly while doing so. But is
Speaker 1: it actually if the data is stronger, the FED has
Speaker 1: to be even more aggressive in order to actually get
Speaker 1: a handle on demand and bring prices down, and therefore
Speaker 1: a hard landing is inevitable. Yeah, that's kind of been
Speaker 1: my narrative all along. I've always felt that this underlying
Speaker 1: strength of the economy no nominal GDP is really quite robust,
Speaker 1: which is why you're seeing I can be earning supplies
Speaker 1: through the upside, or at least not be as as
Speaker 1: poor as many thought or asserted. So yeah, to me,
Speaker 1: the stronger the economy, and this is a very strong
Speaker 1: economy and lots of different respects requires the FED to
Speaker 1: do more, which in turn means the risk of a
Speaker 1: hard landing uh E is actually higher, not lower. So
Speaker 1: I know it's a perverse way to think about it,
Speaker 1: but that's kind of the viewpoint that I have. So
Speaker 1: if they have to do more, which is get the
Speaker 1: terminal rate to a higher level, what is your expectation
Speaker 1: about how long realistically they're going to be able to
Speaker 1: stay there before cutting, Because this market is still betting
Speaker 1: the cuts are going to come next year. Yeah, so
Speaker 1: the cuts in the marketplace, uh next year seem a
Speaker 1: little heroic to me. Uh so, Um that that's where
Speaker 1: I really disagree with the market. So, you know, once again,
Speaker 1: it's about the path, and I think the markets extrapolating
Speaker 1: the straight line lower and my strong suspicion is that
Speaker 1: you're not going to move in a straight line, and
Speaker 1: so those cuts that are being priced in the market
Speaker 1: next year are unlikely to be fulfilled in my mind. So, Greg,
Speaker 1: given the lack of conviction about a specific trade that
Speaker 1: will be consistently a winning trade, and given your expectation
Speaker 1: that there is going to be more spread widening, where's
Speaker 1: the haven trade, where's the ballast when you start to
Speaker 1: look at investments. Yeah, So I think it's about relative value,
Speaker 1: a risk neutral type of uh themes. And so one
Speaker 1: of the teams exactly Europe over the U S. So
Speaker 1: you know, we look at investment grade corporates, we see
Speaker 1: a lot more value, even with kind of the move
Speaker 1: tighter here in Europe than in the US. We see
Speaker 1: a lot of value and high quality structured products. These
Speaker 1: are assets that should do really well in the environment that,
Speaker 1: you know, the tightened type of recession risk. Uh and
Speaker 1: and basically playing the front end of these predectors. So
Speaker 1: if you believe that these investments that you have will
Speaker 1: be quote unquote money good will not involved, then mining
Speaker 1: that front end is an area to get roll and carry,
Speaker 1: as we like to say in fixing. Come finally, Greg,
Speaker 1: obviously CPI tomorrow eight thirty am Eastern time. The print
Speaker 1: is hot, what happens the prince is cold? What happens? Well,
Speaker 1: So I think it's uh, you know, the market setting
Speaker 1: up for a lower print at least kind of in
Speaker 1: uh in you know the whispers um so um. If
Speaker 1: it is, I think that is a decided risk off
Speaker 1: a type of environment. Uh. And if it's at or below,
Speaker 1: I think we continue to grind here through the course
Speaker 1: of the summer. Just one caveat I'd like to make though,
Speaker 1: is you know, August is a period of time where
Speaker 1: there's not a lot of informational content coming from the marketplace.
Speaker 1: Liquidity is much more thin. A lot of investors are,
Speaker 1: you know, taking their mandatory two weekers, and so let's
Speaker 1: not read too much into what happens here Over the
Speaker 1: next couple of weeks. I think September will get a
Speaker 1: much better read on really the market, true market direction.
Speaker 1: Greg Peters, thank you so much, greatly appreciate it. This morning,
Speaker 1: Greg Peters with Pijam. It is the morning after a
Speaker 1: raid by the Federal Bureau of Investigation under search warrant.
Speaker 1: So not a raid, but a search of a former
Speaker 1: president's private residence. It is unprecedented, Greg Villier, on short
Speaker 1: notice to this this morning. We're honored that the gentleman
Speaker 1: from a g F could join us. Greg. You and
Speaker 1: I remember in our ute water Gate. This isn't Watergate,
Speaker 1: isn't it? No, it's not. There are a lot of differences,
Speaker 1: and one is that, of course Nixon resisted all of this.
Speaker 1: And I would argue Tom that last night was a
Speaker 1: trifecta for Trump at three victories in in one one evening.
Speaker 1: Number one, he's on the front page of every newspaper
Speaker 1: in America. He loves that. Number two he gets to
Speaker 1: play martyr. He's brilliant at playing martyr. And number three,
Speaker 1: the Republicans are looking pretty unified, and if you look
Speaker 1: at the quotes from everyone from Kevin McCarthy to obscure
Speaker 1: House members, they are all outraged that this happens. So
Speaker 1: for I think it's a victory. If Democrats, independence and
Speaker 1: Republicans assumed that the Attorney General will in some point
Speaker 1: voice or act or begin a judicial process, does that
Speaker 1: get in the way of our electoral process this November
Speaker 1: or a November thirty months from now. It made to
Speaker 1: the extent that it might affect voting, but I don't
Speaker 1: think legally it will because Donald Trump specializes in in
Speaker 1: cases the drag on for seven eight years, so he'll
Speaker 1: appeal and appeal and appeal, and I think he still
Speaker 1: could run. The key has always is moderate voters. Will
Speaker 1: moderates decide they've had enough, like many Republican moderates have decided.
Speaker 1: That can make a difference. But right now I think
Speaker 1: that this is a again, it's a plus for Trump.
Speaker 1: How much greg does this change the dynamic heading into
Speaker 1: the midterm elections, Because we didn't see some of the
Speaker 1: polls showing the Democrats had been gaining ground on the
Speaker 1: heels of lower gas prices and some of these legislative wins. Yeah,
Speaker 1: that's really intriguing. I mean, you've got food and gas
Speaker 1: prices coming down, You've got Biden having a pretty darn
Speaker 1: good summer. So it's possible that maybe the Democrats losses
Speaker 1: will only be five or ten seats in the House.
Speaker 1: Maybe the Democrats will keep the Senate. But I can't
Speaker 1: see the House staying democratic. I think the House will flip.
Speaker 1: But Greg, what does it say in terms of President
Speaker 1: Biden's second two years of his first term, this idea
Speaker 1: that he will not be able to get that much
Speaker 1: more legislation through. How do you sort of advise some
Speaker 1: of your clients in terms of what they can expect
Speaker 1: in response to a downturn, what they can expect in
Speaker 1: terms of debt reduction and some of these other issues
Speaker 1: that have been increasing talking points. It's gonna be a
Speaker 1: pretty meek agenda in the last two years. There's there's
Speaker 1: not not much left that they can get done. So
Speaker 1: for my clients in the financial world, that's a good story.
Speaker 1: Gridlock is a good story. They don't have much to
Speaker 1: worry about. I don't see any new taxes coming for
Speaker 1: a long long time. I don't see any big new
Speaker 1: spending coming for a long time. The big crisis, I
Speaker 1: would argue, is geopolitical. There's a lot to worry about there. Yeah, well,
Speaker 1: on that point, Greg, this is a US United States
Speaker 1: of America where we're talking about the home of a
Speaker 1: former president being searched for documentation he may or may
Speaker 1: not have taken from the White House at the same
Speaker 1: time that we're expecting in a couple of weeks hearings
Speaker 1: to resume on insurrection at the US capital. That to
Speaker 1: me looks like a democracy very much in some form
Speaker 1: of crisis. How does that play when we're trying to
Speaker 1: defend democracy in Taiwan. Yeah, it's a very very good point.
Speaker 1: And I think Trump, of course breaks all of the rules.
Speaker 1: That's always been the case with him, and I think
Speaker 1: it will will happen again. If if I would just
Speaker 1: say that Trump is still alive politically, and I would
Speaker 1: have guessed a few months ago that he'd be close
Speaker 1: to finished, He's not finished. You can't underestimate this guy.
Speaker 1: And what about the other Republican potential candidates for they're
Speaker 1: realistically anyone who could beat him if he runs again.
Speaker 1: At this point maybe just Santis. You can't rule him out.
Speaker 1: I think after Liz Cheney lou Is his next Tuesday,
Speaker 1: she'll probably go to New Hampshire and see how things
Speaker 1: look for her as a candidate. There could be a
Speaker 1: dozen candidates, but if Trump runs, he'll clear the field.
Speaker 1: Great value. You better leave it there. Thank you on
Speaker 1: short notice for joining us here on this most historic
Speaker 1: day for a shocked America again a search Warren and
Speaker 1: a search by the Federal Bureau of Investigation of a
Speaker 1: former president's residence. This is in Mara Lago, Florida, right
Speaker 1: now and hugely anticipated. Neil Dotta joins us. He's head
Speaker 1: of the US Economic Research it renaissance macro research. But
Speaker 1: what's important there is, he writes, with a stiletto knife
Speaker 1: in his hands, slicing and dicing the zeitgeist there is
Speaker 1: out there. Neil Dotta joins us on our American economy.
Speaker 1: I love the way you go after consensus. What's consensus
Speaker 1: get most wrong? Right now? Well, I think the consensus
Speaker 1: right now is pivoting very uh feels like very quickly
Speaker 1: to peek inflation slower inflation. Um, you know, maybe the
Speaker 1: FED backing off. I think that's probably a mistake. You
Speaker 1: think that that's a mistake, Neil, because you think that
Speaker 1: the FED is going to keep going and that inflation
Speaker 1: hasn't yet peaked. Well, I don't think core inflation is peaked. Lisa.
Speaker 1: There she is, tom My arch Nemesis. Now my best
Speaker 1: friend were on the same side of that. We're on
Speaker 1: the same side of the fence. Um. Yeah, look, I
Speaker 1: mean you know, at the end of the day, I
Speaker 1: think things changed. At the June fform Sea meeting. The
Speaker 1: FED basically told us that I was willing to, um,
Speaker 1: you know, push the economy into recession to achieve its goals.
Speaker 1: And you know, we went from it's going to be
Speaker 1: challenging to achieve a soft landing, now it's going to
Speaker 1: be very challenging to achieve achieve a soft landing. I mean, um,
Speaker 1: you know, the path is narrowing. I mean they sort
Speaker 1: of use these kinds of you know, words to to
Speaker 1: basically demonstrate how difficult the task is going to be.
Speaker 1: But you know, look, I mean the last employment report
Speaker 1: was a knockout, and you know, essentially we have inflation
Speaker 1: significantly above target. You heard Mike McKee. They're talking about
Speaker 1: unit labor costs. I mean, your labor costs are up
Speaker 1: a lot. You know, interestingly enough, during the pandemic, prices
Speaker 1: have actually been trailing in a labor costs, which in
Speaker 1: my view means that there's more upside to prices going forward. Um.
Speaker 1: And despite the fact that price inflation is so elevated
Speaker 1: financial conditions, what have they been doing over the last
Speaker 1: couple of weeks while they've been easing so to me,
Speaker 1: that suggests that the FED has a lot more room
Speaker 1: to go. UM. I think the diet is cast now
Speaker 1: for a seventy basis point move at the September of
Speaker 1: Film Sea meeting, and they need to leave it on
Speaker 1: the table for the remaining two meetings this year. What
Speaker 1: does that mean for equities? I know that you've been
Speaker 1: a big bull in terms of the corporate resilience and
Speaker 1: their ability to adapt and adjust. To use Tom's phrase,
Speaker 1: why is this time different? This moment different? When it
Speaker 1: comes to that, well, I mean and I mean equity markets. Um.
Speaker 1: When you think about it, fundamentally, it's really different by
Speaker 1: three factors, right, Lisa. It's interest rates, actual and expected earnings,
Speaker 1: and the risk premium right. So the move in July,
Speaker 1: the nine burst in the SNP five last month, that
Speaker 1: was entirely driven by lower interest rates. So if I
Speaker 1: think the Fed's gonna keep hiking, I think interestings will
Speaker 1: go up, and you know, the economy is not out
Speaker 1: of the woods. I mean, we're gonna see residential investment
Speaker 1: contract in the third quarter. We're going to see capital
Speaker 1: spending come down because growth expectations have softened. UM, inventories
Speaker 1: will likely be UM more negative, and particularly for you know,
Speaker 1: sort of durable goods industries, so you'll see an inventory
Speaker 1: liquidation of some kind. I'm assuming that's all negative for
Speaker 1: GDP growth, which is negative for for growth and earnings
Speaker 1: and so um. And so if if interest rates are
Speaker 1: going up and earnings estimates are coming down, uh, it's
Speaker 1: hard to be optimistic about the equity market. And of
Speaker 1: course the equity market is one way the FED has
Speaker 1: to slow the economy down. Yeah. On the subject of
Speaker 1: earnings new obviously, the ability to retain profit margin in
Speaker 1: an inflationary environment like this one is predicated on the
Speaker 1: ability to pass on higher input costs to the consumer
Speaker 1: and consumers to tolerate those higher prices. Are we overestimating
Speaker 1: the resilience of the U S consumer. Consumers have an
Speaker 1: enormous ability to take on higher prices, as evidenced by
Speaker 1: the fact that you know, look at how much excess
Speaker 1: savings they have. They I mean, the entire improvement in
Speaker 1: consumer spending in the first half of the year was
Speaker 1: driven by lower savings rates. But that can't last forever,
Speaker 1: right BINGO. So where does that leave us new? I mean,
Speaker 1: to me, it just leaves me more cautious on the
Speaker 1: economic outlook. I mean, and yeah, I'd be cautious on stocks.
Speaker 1: I mean, I get that the equity markets have kind
Speaker 1: of ripped here. Um. You know, maybe a lot of
Speaker 1: the people that were, you know, thinking the way I
Speaker 1: do about things already sold back in June. But you
Speaker 1: know this isn't over yet. Um and uh you know
Speaker 1: that that that's my view. Um, but I definitely and
Speaker 1: I think one of that is one of those in
Speaker 1: this because the FED is not done yet, and you
Speaker 1: think about the rest of the world, the dollar is
Speaker 1: likely to go. I mean, I don't think the dollar
Speaker 1: strength is over yet. I mean, you have you know,
Speaker 1: US economy holding up better than many of its major
Speaker 1: trading partners. You have the FED still hiking, that's obviously
Speaker 1: very dollable issues holding up better if we get a
Speaker 1: data inflation, if we get whatever the real economy will
Speaker 1: give us, and it doesn't sound like with productivity it's
Speaker 1: going to be all that much. That's still a sustained
Speaker 1: nominal GDP. So let's go to the data optimism. Can
Speaker 1: we say that Datta Data and Brammo agree to agree.
Speaker 1: I think we could say that, folks, this is a
Speaker 1: rare occurring. But away from that, when you say to
Speaker 1: Brammo here in months, you're wrong. It's gonna because Dutta
Speaker 1: is optimistic. Can corporations adapt to this unique set of
Speaker 1: cards right now? Well, they're going to adapt, but Tom,
Speaker 1: that's gonna require some some pain for the economy, right.
Speaker 1: I mean, if you think about the first half of
Speaker 1: the year, you know, to me, for business you can.
Speaker 1: It's the most interesting thing is this reconciliation between the
Speaker 1: fact that hours worked have been rising very robustly and
Speaker 1: output has not. So we've seen this big drop in productivity.
Speaker 1: So the question is how do companies re establish stronger productivity.
Speaker 1: That's going to require some combination of slower hiring, fewer
Speaker 1: hours worked, raising prices for fifty years has been total
Speaker 1: factor productivity to the rescue. Is it going to come
Speaker 1: to the rescue? Again? Technology isn't overlay. I mean it
Speaker 1: takes time. I mean I don't see an investment boom
Speaker 1: out there right now. So so where is the productivity
Speaker 1: going to come from? I just want to get under
Speaker 1: us on a negative note, So Brandmo and daughter agree
Speaker 1: to look, I mean, this is this is the issue,
Speaker 1: is that a lot of people are looking at the
Speaker 1: financial conditions into X and Neil you mentioned this, and
Speaker 1: it's actually the least Uh, it's the least tight. It's
Speaker 1: the weakest that it's been. It's a loosest that it's
Speaker 1: been going back to April, and it makes no sense.
Speaker 1: And this is in their case no and and but
Speaker 1: Neil you alluded to this. And this is where I
Speaker 1: think we agree. Is the Fed's gonna look at this
Speaker 1: and say I don't think so, and they're gonna push back.
Speaker 1: When do we get that pushback? Well, it could come
Speaker 1: as soon as Jackson hole. Uh, it could come. At
Speaker 1: the September of mc um you started to see it,
Speaker 1: particularly among a lot of the regional manufact regional FED presidents, Right,
Speaker 1: I mean, they've been saying we're not done yet. Um.
Speaker 1: You know. Look, I mean the other thing, of course,
Speaker 1: is that they they'll often they'll try to be hawkish,
Speaker 1: but they sound doublish in the process. For example, Um,
Speaker 1: you know, they'll say something like, well, it's the markets too,
Speaker 1: it's too soon to be pricing in cuts. Well, you
Speaker 1: shouldn't be pricing them in it all. So why even
Speaker 1: giving the market that that sort of language. Um, you know,
Speaker 1: I think what the Fed basically needs to say is
Speaker 1: that we have a singular focus on bringing inflation down.
Speaker 1: Um and uh, and we're willing to do what it
Speaker 1: takes in order to do that. And you know there
Speaker 1: are no cuts coming. I'm depressed. Neil, thank you so much.
Speaker 1: You'll out of renaissance Macro. This is a joy. He
Speaker 1: has been so busy that we've just said to Admiral Strevidiz,
Speaker 1: will take you when we can get you, and we
Speaker 1: are thrilled to bring you worldwide now a gentleman of
Speaker 1: the United States Navy. And of course this on Taiwan
Speaker 1: and China, and the backdrop of this is my book
Speaker 1: of the Summer. I think it was a year ago,
Speaker 1: maybe two years ago. Two thousand thirty four, a novel
Speaker 1: of the Next World War. Elliott Ackerman and one James
Speaker 1: Trevidis Admiral thank you so much for joining us UH
Speaker 1: this morning. I want to talk about the beginning in
Speaker 1: the South China Sea of your book, The ren Wry Incident,
Speaker 1: which is fiction and has planted out in two thousand
Speaker 1: thirty four. Are we getting to two thousand thirty four
Speaker 1: faster than you thought we would? Kind of feels that way, Tom,
Speaker 1: And of course the book said in that year starts
Speaker 1: with a miscommunication, a miscalculation between navy destroyers and a
Speaker 1: Chinese fishing vessel. And it makes this point that I
Speaker 1: worry about. These are young people, these are young pilots,
Speaker 1: they are relatively young ship captains. They're not deeply experienced.
Speaker 1: It's not Tony Blinkin flying that hornet around. Um. There
Speaker 1: is going to be that potential for miscalculation. So yes,
Speaker 1: I worry we are closer to that kind of miscalculation.
Speaker 1: In two thousand six, on the Ronald Reagan, a pilot
Speaker 1: landed off of Brisbane and on the aircraft carrier struck
Speaker 1: a ramp whatever a lot of damage. The pilot was okay.
Speaker 1: The aircraft was lost. Things happen at sea, you're the pro.
Speaker 1: What are the things that can happen to the Ronald
Speaker 1: Reagan off of Taiwan that concern you? Well, certainly, the
Speaker 1: Ronald Reagan could be targeted by Chinese long range aircraft.
Speaker 1: They could be targeted, so it could be targeted by
Speaker 1: a like an EXO set missile like in the Falkland
Speaker 1: wars Um EXO Set kind of shorter range, but the
Speaker 1: equivalent of today's version of the EXO Set absolutely And
Speaker 1: the other they're worrying about out there are Chinese submarines.
Speaker 1: They're not as good as our submarines, but they're quite capable.
Speaker 1: So yeah, there's a real threat to the Reagan and
Speaker 1: the ships that are supporting her. Thomas. Soon as we
Speaker 1: are done here, I'm gonna go download The Animal's next book,
Speaker 1: to Risk It All Nine Conflicts and The Crucible of Decision.
Speaker 1: That's gonna be my beach read this weekend, the Rickover
Speaker 1: chapters outstand. Yes, I'm looking forward to that. So, Admiral,
Speaker 1: as we step back here with a little bit of
Speaker 1: perspective here, over the last couple of weeks, starting with
Speaker 1: Speaker Pelosi's trip to uh that region of the world.
Speaker 1: What are your views, what are your takeaways? Should she
Speaker 1: have gone, was it a good move there? And the
Speaker 1: response by the Chinese. She first and foremost has every
Speaker 1: right to go there, and we can't put ourselves, the
Speaker 1: United States, in the position of allowing China to have
Speaker 1: a veto authority over anyone trying to go to Taiwan.
Speaker 1: I've been to Taiwan, visited with Madame, said the President.
Speaker 1: I'm not the Speaker of the House, which brings us
Speaker 1: to Yeah. It raised tensions considerably, and they remain at
Speaker 1: a very elevated level, particularly because of this de facto
Speaker 1: blockade that China has put up around the island. But
Speaker 1: having said all that, I think tensions are going to
Speaker 1: go down over the next couple of weeks. Look, President,
Speaker 1: she has no interest in a big firefight out there,
Speaker 1: an incident, a seaking, a ship. It's not where this
Speaker 1: is headed. So look for tensions to come down into
Speaker 1: weeks ahead. I believe my history is Nimus and Sprague
Speaker 1: were in Hawaii and MacArthur was down in Australia and
Speaker 1: there was a raging battle of how to approach Japan.
Speaker 1: This is a few years back, Sir and The answer
Speaker 1: is MacArthur one and up through the Philippines we went.
Speaker 1: Are we deployed now in the Western Pacific? And do
Speaker 1: we have to revisit This is before Strevid, this is
Speaker 1: a young whipper snap after the sixties. Do we need
Speaker 1: to revisit a base for our US Navy and the
Speaker 1: Western Pacific? I would argue we need to protect the
Speaker 1: bases we have, and that includes Guam. It includes uh
Speaker 1: superb bases in Japan, notably Southern Japan, bases in South Korea.
Speaker 1: We've expanded a bit an added basis in Northern Australia.
Speaker 1: It would be great to get back into the Philippines.
Speaker 1: Secretary B. Lincoln met with Marcos Jr. Two or three
Speaker 1: days ago. Is that our first request? I think it's
Speaker 1: on the agenda and it Autoby. I sailed many times
Speaker 1: back in the not the sixties, Tom, thank you. As
Speaker 1: an elementary school in the sixties, but after I graduate
Speaker 1: Fromnnapolis in the late nineties, seventies and eighties, I went
Speaker 1: many times to uh Subic Bay to Clark Air Force Based.
Speaker 1: These were gorgeous, important strategic basis. It would be terrific
Speaker 1: to get access back there. Well, all I will only
Speaker 1: suggest as you chose to serve the nation at the
Speaker 1: absolute bottom of morale for our military with your schooling
Speaker 1: at the Naval Academy. James Travitez, thank you so much.
Speaker 1: This is the Bloomberg Surveillance Podcast. Thanks for listening. Join
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Speaker 1: the terminal. I'm Tom keatinge In. This is Bloomer