WEBVTT - Digesting Fed and Eco Data and The Latest on Biden-Trump 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.960 --> 0:00:15.560 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:15.600 --> 0:00:18.960 with Paul Sweeney. Join us each day for insight from 0:00:18.960 --> 0:00:23.160 the best in economics, finance, investment, and international relations. You 0:00:23.160 --> 0:00:26.520 can also watch the show live on YouTube. Visit the 0:00:26.520 --> 0:00:31.280 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:31.280 --> 0:00:34.320 mornings from seven to ten am Eastern from our global 0:00:34.360 --> 0:00:39.000 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:39.360 --> 0:00:42.920 or anywhere else you listen, and always I'm Bloomberg Radio, 0:00:43.080 --> 0:00:47.040 the Bloomberg Terminal, and the Bloomberg Business app. The Day 0:00:47.080 --> 0:00:50.720 Never ends in Bruce Kasmin and Michael FERRELLI ruined it 0:00:50.760 --> 0:00:55.160 at JP Morgan because they publish their must read weekly Prospects. 0:00:55.600 --> 0:00:58.160 It's seven o five pm Friday night. 0:00:58.240 --> 0:00:58.840 Yeah, thank you. 0:00:58.960 --> 0:01:01.680 I've read about eighty five percent of Faroli that I've read. 0:01:01.680 --> 0:01:03.680 I've read in a bar, right, you know. It's the 0:01:03.720 --> 0:01:07.319 way it is. And they're making multiple further progress towards 0:01:07.319 --> 0:01:10.400 his Friday where they'll publish the weekly Progress. Joining us 0:01:10.440 --> 0:01:13.760 now from JP Morgan, Michael Faroli, Michael, what in God's 0:01:13.800 --> 0:01:16.720 name is multiple further progress? And what do you write 0:01:16.720 --> 0:01:19.680 about Friday in your weekly Prospects? 0:01:21.080 --> 0:01:23.759 Well, it's hard to say. I think you're referring to 0:01:24.760 --> 0:01:28.000 the FMC statement yesterday, and I think that was probably 0:01:29.240 --> 0:01:32.480 influenced in part by what we saw yesterday morning with 0:01:32.520 --> 0:01:34.560 the CPI report, and that's probably going to be a 0:01:34.600 --> 0:01:36.200 big part of what we write about tomorrow. 0:01:37.319 --> 0:01:39.720 So I tell me, does Michael FAROLEI did you get 0:01:39.800 --> 0:01:42.160 an office at the new JP Morgan building on. 0:01:45.080 --> 0:01:49.720 They're above the Gold Vault, though, you know the Diamond Vault. 0:01:49.240 --> 0:01:53.720 The vault exactly, Michael, What did you take from FED 0:01:53.800 --> 0:01:56.560 Chairman Jay Pal's comments yesterday? It kind of feels like 0:01:57.600 --> 0:01:59.160 he feels like he's in a pretty good position. He 0:01:59.200 --> 0:02:01.360 doesn't need the Russian anything. What'd you take away from it? 0:02:02.200 --> 0:02:05.120 Yeah, you know, I do think he's pretty satisfied with 0:02:05.240 --> 0:02:08.320 where things are going. And I think he's probably satisfied 0:02:08.360 --> 0:02:12.440 that he's taken a pretty calm approach both to the 0:02:12.520 --> 0:02:15.200 you know, favorable inflation surprises we got in the second 0:02:15.240 --> 0:02:18.840 half of last year the less favorable surprises we got 0:02:18.880 --> 0:02:20.520 in the first quarter of this year. And I think 0:02:20.520 --> 0:02:24.240 he's kept a pretty you know, good eye on the 0:02:24.240 --> 0:02:26.960 horizon rather than getting to you know, swung around here. 0:02:27.040 --> 0:02:29.840 But you know, I think he's happy with the progress 0:02:29.840 --> 0:02:32.720 on inflation, labor market. I think, you know, Look, I 0:02:32.720 --> 0:02:36.520 think over the last several press conferences he has in 0:02:36.560 --> 0:02:39.480 the market, I think agrees came out quite dubbish. 0:02:39.600 --> 0:02:40.079 Yesterday. 0:02:40.120 --> 0:02:42.680 I thought he had struck the same tone that you 0:02:42.800 --> 0:02:45.360 kind of picked up in the statement and in the 0:02:46.720 --> 0:02:48.440 and in the Dotson's Hill coorts. I thought he was 0:02:48.520 --> 0:02:50.560 much more balanced yesterday. But the one area where he 0:02:50.560 --> 0:02:53.440 sounded dubbish was I think on the labor market. 0:02:54.000 --> 0:02:57.280 Right now, folks for Global Wall Street, the single question 0:02:57.360 --> 0:03:01.880 to Michael Frowley of the Booth School Chicago and JP Morgan, Michael, 0:03:01.960 --> 0:03:06.080 you stop time a long time ago with a potential 0:03:06.120 --> 0:03:10.000 GDP of America that was sub two percent. If we 0:03:10.080 --> 0:03:14.160 impute a higher our start, if we settle for something 0:03:14.160 --> 0:03:17.240 of a two point x percent, as Richard claredon, others 0:03:17.360 --> 0:03:22.240 talk about if we model in a new inflation, what 0:03:22.280 --> 0:03:24.920 does that do to your potential GDP estimate? 0:03:25.160 --> 0:03:25.959 Does it lift? 0:03:28.240 --> 0:03:33.640 So I'm not really yet on the higher trend growth 0:03:34.120 --> 0:03:36.520 story I do see obviously. So first of all, I 0:03:36.720 --> 0:03:39.160 guess we can divide trend growth and a trend labor 0:03:39.160 --> 0:03:43.120 force growth and trend productivity growth. I think clearly labor 0:03:43.120 --> 0:03:46.560 force growth has been stronger in recent years given the 0:03:46.560 --> 0:03:50.880 immigration story. How much of that is sustained after now, 0:03:51.120 --> 0:03:53.000 after the election and on into next year, I think 0:03:53.040 --> 0:03:57.600 is more of a question. I think on productivity, it's 0:03:57.640 --> 0:04:00.320 still hard for me to be a big believer that 0:04:00.400 --> 0:04:03.640 in part because when you look at the capital deepening numbers, 0:04:04.400 --> 0:04:08.760 which is essentially investment after depreciation, they really haven't changed 0:04:08.840 --> 0:04:13.880 much since slow growth decade we had last decade. So 0:04:14.760 --> 0:04:17.080 once that you know, that changes, I'll be more of 0:04:17.080 --> 0:04:19.840 a believer. But I think, you know, what we saw 0:04:19.880 --> 0:04:23.640 in the first quarter, uh was kind of to me 0:04:23.760 --> 0:04:25.960 a return to earth after what was a pretty good 0:04:26.000 --> 0:04:29.040 second half last year of our activity. But without those 0:04:30.000 --> 0:04:32.280 investment numbers, I'm still kind of thinking we're in the 0:04:32.320 --> 0:04:33.479 slow growth trend here. 0:04:34.240 --> 0:04:36.760 Michael, what's your view on inflation here? 0:04:36.800 --> 0:04:39.000 We've you know, we had the beginning in the first quarter, 0:04:39.080 --> 0:04:40.760 the first three months kind of a you know pick 0:04:40.839 --> 0:04:44.320 up and inflation activity kind of caused some people to 0:04:44.360 --> 0:04:47.560 really step back here and think about the moderation call 0:04:47.600 --> 0:04:50.040 and inflation. How do you think about it here? As 0:04:50.040 --> 0:04:52.160 we as this FED tries to get to its two 0:04:52.200 --> 0:04:52.839 percent target. 0:04:54.839 --> 0:05:00.440 I still think the moderation is in place. And you know, 0:05:00.520 --> 0:05:02.320 when I look at I think, in particular, when you 0:05:02.320 --> 0:05:06.000 look at nominal wage growth, wage inflation, and I know 0:05:06.120 --> 0:05:09.120 the links between wage and price inflation are very contentious, 0:05:09.400 --> 0:05:12.080 but I think in the long run, no one disputes 0:05:12.120 --> 0:05:14.640 that there's got to be some linkage there, right, And 0:05:14.720 --> 0:05:17.839 what you've seen, for you know, for production workers, is 0:05:17.839 --> 0:05:21.240 that wage inflation, after peaking around seven percent, has come 0:05:21.279 --> 0:05:22.599 down to around four percent. 0:05:22.680 --> 0:05:22.840 Now. 0:05:22.960 --> 0:05:26.560 I know May was a little stronger for average ality inflation, 0:05:26.680 --> 0:05:28.680 but I think when you look at you know, you 0:05:28.760 --> 0:05:32.520 kind of look impressionistically at average hourly earnings, Atlanta FED, 0:05:32.560 --> 0:05:37.240 wage tractor, e C, I E C, e C. All 0:05:37.279 --> 0:05:41.599 these things kind of suggest moderation in wage inflation, which 0:05:41.640 --> 0:05:43.599 is ongoing. And I think as long as that is 0:05:43.640 --> 0:05:49.159 in place, I think the price inflation story to me 0:05:49.320 --> 0:05:51.880 looks like it's in place. But again, these are stories 0:05:51.880 --> 0:05:54.200 I think you have to kind of zoom back at 0:05:54.240 --> 0:05:57.400 and look at a quarterly frequency. But I think the 0:05:57.480 --> 0:05:59.800 story to me looks, you know, pretty intact. 0:06:00.839 --> 0:06:03.960 Driver Michael, thank you so much, particularly those discussions of 0:06:04.040 --> 0:06:08.239 potential GDP, a key part of JP Morgan research. Doctor 0:06:08.240 --> 0:06:30.600 Feroli working at Versus Chasman. 0:06:20.120 --> 0:06:23.920 Stuart Kaiser, us equity trading strategy A City Global Markets 0:06:24.240 --> 0:06:28.040 three ninety Greenwich Street in Lower Manhattan, the worst elevators 0:06:28.080 --> 0:06:31.720 on Global Wall Street, Stuart, What did you think yesterday 0:06:32.880 --> 0:06:36.320 from the CPI print from Federal Reserve in the afternoon, 0:06:36.400 --> 0:06:38.239 What did you guys on a trading desk at City 0:06:38.640 --> 0:06:39.359 think about all that? 0:06:39.800 --> 0:06:41.480 Yeah, good morning guys. You know, I would say, look, 0:06:41.520 --> 0:06:44.400 the the CPI print was on equickally positive news, right, 0:06:44.440 --> 0:06:46.880 I mean, the print was low, the mix, the mix 0:06:46.960 --> 0:06:50.480 within the CPI data was positive. Markets responded. I think 0:06:50.520 --> 0:06:52.719 as you might have expected, lower quality stocks did well. 0:06:52.800 --> 0:06:54.880 Stuff that had been sort of under pressure from a 0:06:54.960 --> 0:06:58.000 higher for longer narrative, you know, rallied pretty well. And 0:06:58.040 --> 0:06:59.479 then you got the FED. You know, I think the 0:06:59.520 --> 0:07:03.120 FED is sort of the mirror image of what they 0:07:03.120 --> 0:07:05.080 did back in March, which was back in March, you 0:07:05.120 --> 0:07:07.600 would have expected them to have a slightly more hawkish 0:07:07.680 --> 0:07:10.400 narrative just based on the incoming data, and they sort 0:07:10.440 --> 0:07:12.800 of tacked a little bit duvish, particularly pow in the 0:07:12.800 --> 0:07:14.880 press conference. And I think the effort back then was 0:07:14.920 --> 0:07:17.280 to keep the market centered and not let it drift 0:07:17.360 --> 0:07:19.600 kind of too far in either direction from the base case. 0:07:19.840 --> 0:07:21.680 And I think that's really what we got yesterday. In 0:07:21.680 --> 0:07:24.400 the opposite direction, you would have thought, with the strong 0:07:24.440 --> 0:07:27.080 payrolls and then the friendly CPI, the FED would have, 0:07:27.120 --> 0:07:29.560 you know, maybe been a little bit more positive in 0:07:29.640 --> 0:07:31.960 message and a little more dubbish and pale. I think 0:07:32.040 --> 0:07:33.680 sounded a little hawkish, and I think that was an 0:07:33.760 --> 0:07:36.400 intentional effort to keep the market kind of centered on 0:07:36.440 --> 0:07:37.400 the base case outlook. 0:07:38.240 --> 0:07:41.240 Does just feel like a market that just wants to 0:07:41.240 --> 0:07:44.040 move higher given everything else that's out there, just wants 0:07:44.080 --> 0:07:46.560 to move I'm quoting Alex Steel Tom she came up with, 0:07:46.560 --> 0:07:48.480 I think the best call I've ever heard, which is 0:07:48.480 --> 0:07:50.440 a market feels like it just wants to go higher. 0:07:50.640 --> 0:07:52.200 Yeah, I think it does. I think, look, you have, 0:07:52.680 --> 0:07:56.760 you know, an economy that for now is holding in solidly. 0:07:57.000 --> 0:08:00.440 You've got double digit EPs growth, and I think those 0:08:00.440 --> 0:08:03.240 two things, generally speaking, you'd want high or you would 0:08:03.280 --> 0:08:06.240 expect higher equity markets in that environment. And I think 0:08:06.240 --> 0:08:09.960 that's just sort of the situation we're in, and that's 0:08:10.040 --> 0:08:12.000 our view, I mean, our base case view. Is higher 0:08:12.080 --> 0:08:15.320 until and unless the labor market really comes under significant pressure. 0:08:15.400 --> 0:08:18.200 So you know, we're gonna remain constructive. 0:08:17.760 --> 0:08:20.440 And honor you. It's so intimidating when Stuart Kaiser walks in. 0:08:20.520 --> 0:08:22.600 I mean, Lisa, we gotta go mathe here, we gotta 0:08:22.640 --> 0:08:27.600 go log Euclidean math Okay, run semi log mavstack the 0:08:27.640 --> 0:08:30.520 Stuart Kaiser chart. I ran it back to November of 0:08:30.520 --> 0:08:31.480 twenty eighteen. 0:08:31.520 --> 0:08:35.160 Ben Ladler shingles out at HSBC at the time, and 0:08:35.200 --> 0:08:38.040 he says, there's something going on, shut up and buy. 0:08:38.559 --> 0:08:43.920 And what's important here, folks log regression. We're barely out 0:08:44.000 --> 0:08:48.920 over one standard deviation on the trend. We're not extended 0:08:49.320 --> 0:08:51.400 in this bull market. I don't think a lot of 0:08:51.400 --> 0:08:52.200 people know that. 0:08:52.800 --> 0:08:54.680 Yeah, I think I think to your point toppy, especially 0:08:54.679 --> 0:08:56.640 if you look at the Erniees growth re generating. You know, 0:08:56.640 --> 0:08:58.280 I know a lot of people are concerned with the 0:08:58.400 --> 0:09:00.520 large cap tech and growth rally, but you know why 0:09:00.520 --> 0:09:03.240 are those stocks out performing Because they're the unique companies 0:09:03.240 --> 0:09:06.080 that are generating this massive, you know, kind of EPs growth, 0:09:06.120 --> 0:09:10.200 both realized and in the forecast. So you know, when 0:09:10.280 --> 0:09:12.760 folks push back about us being more positive, you know, 0:09:12.840 --> 0:09:15.040 we're just sort of anchoring back to fundamentally. 0:09:14.720 --> 0:09:17.719 People think they're extended. I mean, I get it, Nton Navidia, 0:09:17.800 --> 0:09:20.560 and you know Lisa owns it. We don't. Fine, but 0:09:20.800 --> 0:09:25.640 the answer is the Nasdaq one hundred. The math doesn't 0:09:25.679 --> 0:09:31.320 show Robert Schiller exuberance, like you know what he wrote 0:09:31.320 --> 0:09:33.400 about Eel years ago. It's not there. Do you see 0:09:33.679 --> 0:09:35.720 Do you see exuberance in the Nastack? 0:09:37.040 --> 0:09:39.480 I'm sure there's a stock here there. Yes, But you know, 0:09:39.480 --> 0:09:41.800 if you look to your point big picture, this is 0:09:41.800 --> 0:09:44.400 not tech bubble type valuations, right, This is not you know, 0:09:44.520 --> 0:09:47.440 tech bubble type over your skis. This is a small 0:09:47.520 --> 0:09:50.280 number of companies generating a massive amount of earnings growth 0:09:50.360 --> 0:09:52.920 that are getting rewarded for it. So, you know, are 0:09:52.920 --> 0:09:55.240 we above average valuation? Yes? I think if you looked 0:09:55.280 --> 0:09:56.839 at the S and P five hundred, you'd say you're 0:09:56.880 --> 0:10:00.600 probably maybe even upper cortile, upper decyle. But but you know, 0:10:00.640 --> 0:10:03.240 there's still room to expand. I think if the economy 0:10:03.240 --> 0:10:05.040 holds in and we continue to put the type erning 0:10:05.120 --> 0:10:05.680 growth we are. 0:10:06.200 --> 0:10:08.880 Stuart, I just got in my inbox, you know, from 0:10:08.880 --> 0:10:11.960 Torsten Slock, our good friend over at Apollo Global management. 0:10:12.040 --> 0:10:13.880 He's just basically calling out kind of what we know, 0:10:13.960 --> 0:10:16.320 but he's putting some numbers on it, which is Boy, 0:10:16.400 --> 0:10:21.480 the big cap stocks are just really richly valued. Small 0:10:21.520 --> 0:10:25.920 cap stocks relatively cheap here. But I'm not sure I ever, 0:10:26.160 --> 0:10:28.080 I'm not sure I rotate out of the big caps 0:10:28.160 --> 0:10:29.920 and try to look for value here. How do you 0:10:29.960 --> 0:10:32.719 guys think of when you talk to your clients. I mean, 0:10:33.360 --> 0:10:35.080 I think I just kind of owned the big caps 0:10:35.120 --> 0:10:37.640 and go to the Jersey shore and wait for September. 0:10:37.880 --> 0:10:40.079 Look, you know, we we like the broadening theme to 0:10:40.080 --> 0:10:42.200 start off the year because we actually thought Ernie growth 0:10:42.320 --> 0:10:44.480 is going to broaden out. I think that's worked probably 0:10:44.480 --> 0:10:46.640 for a total of four weeks this year. You know 0:10:46.720 --> 0:10:49.240 where the broadening trade has kind of worked. You know 0:10:49.240 --> 0:10:51.160 why a small cap not working? I think it's because 0:10:51.200 --> 0:10:53.320 that's the part of the market that's most susceptible if 0:10:53.320 --> 0:10:55.800 you get a recession, and is most susceptible to kind 0:10:55.800 --> 0:10:58.240 of hire for long. But so people have been very cautious, 0:10:58.520 --> 0:11:00.480 you know, to get into that space and look, large 0:11:00.480 --> 0:11:03.439 cap is big earnings, introducing dividends, et cetera. 0:11:03.679 --> 0:11:06.880 This strange word profit Megnum decided LC it is his 0:11:07.280 --> 0:11:08.400 most important word. 0:11:08.960 --> 0:11:09.360 Profit. 0:11:09.480 --> 0:11:11.640 Let's bring it over to something bow tie like free 0:11:11.760 --> 0:11:16.520 cash flow? Do you see margin compression or the gloom 0:11:16.559 --> 0:11:19.720 of a lesser free cash flow out there for say 0:11:19.800 --> 0:11:22.720 thirty percent of the universe well run companies. 0:11:23.679 --> 0:11:25.959 No, not yet. And I think if you were to 0:11:26.000 --> 0:11:28.760 identify the one fundamental risk equities this year, it was 0:11:28.800 --> 0:11:30.680 going to be what does the margin out look look like? 0:11:30.800 --> 0:11:30.959 Right? 0:11:31.000 --> 0:11:33.160 You know, if you look at the past four to 0:11:33.240 --> 0:11:36.720 six quarters, you've had very high nominal GDP growth and 0:11:36.840 --> 0:11:38.320 companies were able to So what are your. 0:11:38.240 --> 0:11:41.360 Security analysts not you? What are your security analysts and 0:11:41.440 --> 0:11:42.400 city groups say to that? 0:11:43.400 --> 0:11:46.040 I think for now they're they're comfortable with the margin outlook. 0:11:46.040 --> 0:11:48.360 You know Scott Kroner, who's are us equity strategist about 0:11:48.360 --> 0:11:49.440 two hundred and forty five bucks. 0:11:50.320 --> 0:11:52.800 I know when he had a real job, Yeah, big 0:11:52.920 --> 0:11:54.200 sales manager for the West Coast. 0:11:54.240 --> 0:11:57.360 Now he's got three real jobs. Yeah, that's even more popular. 0:11:57.600 --> 0:11:59.880 But he was he was high end of the street 0:11:59.880 --> 0:12:02.240 for a while on EPs, you know, basically on this 0:12:02.360 --> 0:12:04.719 logic Tom and he remains there. So they're of the 0:12:04.800 --> 0:12:08.320 view that it is still a relatively robust fundamental environment 0:12:08.400 --> 0:12:09.240 for US corporates. 0:12:09.360 --> 0:12:12.880 What is owning twenty five delta calls on either the 0:12:12.960 --> 0:12:14.800 SPX or IWM. 0:12:15.320 --> 0:12:17.600 What does that mean? It just me jo and some 0:12:17.679 --> 0:12:20.520 out of the money upside in US equities. And you know, 0:12:20.559 --> 0:12:22.839 basically we don't have very many rules of thumb. But 0:12:22.840 --> 0:12:24.520 but for a while you could pay less than the 0:12:24.600 --> 0:12:28.120 ten implied volatility on that. That s and p FUF option, 0:12:28.200 --> 0:12:30.560 which is just a really attractive entry to kind of 0:12:30.559 --> 0:12:31.360 rent rented. 0:12:31.520 --> 0:12:33.920 Okay, so is that like betting on the Edmonton Oilers. 0:12:35.120 --> 0:12:37.400 Yeah, I guess, I guess it is like equivalent. 0:12:37.000 --> 0:12:38.480 To saying the Oilers can win one? 0:12:38.640 --> 0:12:41.040 Yeah, yeah, yeah, well I mean I mean win one, yes, 0:12:41.080 --> 0:12:43.320 win one, maybe not the whole series. Folks, get a game, 0:12:43.480 --> 0:12:43.800 go to. 0:12:43.760 --> 0:12:48.240 Bloomberg, type in your stock MVDA or NANCEDAC index whatever 0:12:49.040 --> 0:12:53.960 OVDV and that will give you the delta in the gamma. 0:12:53.679 --> 0:12:56.959 And it's got all the volatilty there x y Z, 0:12:57.080 --> 0:12:59.400 good morning, Bruno to peer in the late Peter Carr. 0:12:59.200 --> 0:13:01.640 Who put that together for us, it's yeah, you can 0:13:01.679 --> 0:13:04.400 sell terminals with OVD You're done, right, you can? Yeah, 0:13:04.440 --> 0:13:06.680 I mean you you just you know, I have no 0:13:06.720 --> 0:13:09.480 idea what I'm looking at I'm looking at a swissy 0:13:09.679 --> 0:13:14.479 Hungarian for it, and you throw up an OVD volatility surface. 0:13:14.120 --> 0:13:17.280 And it's like, whoa very cool Stuart kais are on 0:13:17.440 --> 0:13:20.640 and come come back with the market goes down. He's 0:13:20.679 --> 0:13:21.600 your city group. 0:13:21.920 --> 0:13:27.760 I should say, ahead of US equity trading strategy. 0:13:29.360 --> 0:13:30.040 That was Eddie. 0:13:30.040 --> 0:13:32.199 I don't have a revision yet on weekly claims. We'll 0:13:32.200 --> 0:13:34.320 get it here in a moment. I'll interrupt when we 0:13:34.360 --> 0:13:37.840 get there. But come on, the disinflation vector is in place. 0:13:38.160 --> 0:13:40.560 We saw it yesterday at eight thirty, We see it 0:13:40.600 --> 0:13:41.800 this morning at eight thirty. 0:13:42.240 --> 0:13:44.400 Yeah, I would high both data points. 0:13:44.480 --> 0:13:46.880 You know, initial jobless claims jumping up to two hundred 0:13:46.880 --> 0:13:49.080 and forty thousand is an important data point. Now there's 0:13:49.160 --> 0:13:50.839 volatility in the week to week data. But if that 0:13:50.880 --> 0:13:52.439 were to stick, what's. 0:13:52.280 --> 0:13:54.880 Your four week moving average on claims? Where it's a 0:13:54.880 --> 0:13:56.120 whole new world after all. 0:13:56.200 --> 0:13:58.040 I think if you're if you are two forty to 0:13:58.080 --> 0:14:01.559 two fifty, really that tight. That is usually the numbers. 0:14:01.320 --> 0:14:02.600 That you might begin to think about. 0:14:02.640 --> 0:14:04.800 I mean an initial job as claims, when they move 0:14:04.880 --> 0:14:07.960 up in a sustainable way, typically stick there. Now there's 0:14:08.000 --> 0:14:09.360 volatility in the week to week data. We had to 0:14:09.440 --> 0:14:11.520 jump a few weeks back up to two hundred and 0:14:11.520 --> 0:14:13.280 thirty thousand. You have to look at what's going on 0:14:13.320 --> 0:14:14.760 in the state level data. So I don't want to 0:14:15.240 --> 0:14:17.080 seeing all the details. It's hard to know. But if 0:14:17.080 --> 0:14:19.480 that sticks, that's an important data point because the labor 0:14:19.520 --> 0:14:22.880 market has been strong because layoffs have been low. If 0:14:22.880 --> 0:14:24.800 that changes, it changes the picture of the labor market. 0:14:24.800 --> 0:14:26.600 I'm not saying this this morning data point did that, 0:14:27.200 --> 0:14:29.680 but it certainly could be important if it's sticks. 0:14:29.880 --> 0:14:32.840 Well, the Sweeney offspring are employed, so you know, we're 0:14:33.120 --> 0:14:35.040 doing our part here. What'd you take out of the 0:14:36.120 --> 0:14:39.240 Federal Reserves comments at Chairman's comments yesterday and just kind 0:14:39.240 --> 0:14:40.000 of the data we saw. 0:14:40.360 --> 0:14:43.080 Yeah, so yesterday's morning CPI was a great data point 0:14:43.120 --> 0:14:46.280 from their perspective. It showed a softening, you know, sixteen 0:14:46.280 --> 0:14:48.760 basis points a month a month. It was good and 0:14:48.880 --> 0:14:50.560 a lot of the areas that they would want it 0:14:50.600 --> 0:14:53.400 to be good. Services inflation was softer, you know, renton 0:14:53.440 --> 0:14:55.760 O we are was a little bit disappointing. I was 0:14:55.840 --> 0:14:58.440 surprised that they only showed one rate cut for this year. 0:14:58.640 --> 0:15:00.400 Now now it is our baseline that they only cut 0:15:00.440 --> 0:15:03.840 rates once, so you think that only once in December? 0:15:03.960 --> 0:15:06.280 Okay in December, but I was still surprised that they 0:15:06.480 --> 0:15:09.080 signaled that yesterday. I thought that they would want to 0:15:09.120 --> 0:15:11.600 maintain more actively optionality to cut rates before meeting. 0:15:12.480 --> 0:15:12.600 Now. 0:15:12.680 --> 0:15:15.360 Chair Pale downplayed the signal from that dotlets as he 0:15:15.400 --> 0:15:17.680 typically does, but at the same time, I don't think 0:15:17.720 --> 0:15:19.560 he was as dubbish as he could have been. He 0:15:19.640 --> 0:15:22.400 talked very strongly about the economy, about the labor market, 0:15:22.400 --> 0:15:23.920 about wage growth being high. 0:15:23.960 --> 0:15:27.640 Come on, you're you're at uc LA with a wonderful 0:15:27.680 --> 0:15:31.040 faculty there and all the prig of Allen Meltzer being there, 0:15:32.000 --> 0:15:36.640 and come on, no textbook, Obsfeld, Rogue Off all the 0:15:36.680 --> 0:15:40.840 rest of them has multiple further progress in it. What 0:15:41.000 --> 0:15:43.720 a bunch of malarkey. I mean, I'm sorry, there's like 0:15:43.800 --> 0:15:48.520 three adverbs back to back. Who invented multiple further progress? 0:15:48.760 --> 0:15:52.800 Look, the reality is we had four stronger prints to 0:15:52.800 --> 0:15:56.120 start this year. We did get one much better print. 0:15:56.800 --> 0:15:59.120 But the FED, looking at the economy, the labor market 0:15:59.120 --> 0:16:02.560 report that we got on for Atlanta, FED GDP tracking 0:16:02.560 --> 0:16:04.960 above three percent in Q two is looking at an 0:16:05.000 --> 0:16:07.240 economy that does not urgently need so then. 0:16:07.160 --> 0:16:09.080 Why doesn't he come out like in the old days 0:16:09.080 --> 0:16:11.160 and say, we don't know, we're data dependent. 0:16:11.560 --> 0:16:14.440 The market's gotta pop, the economy's gotta pop, the stock 0:16:14.480 --> 0:16:15.480 market's gotta pop. 0:16:15.720 --> 0:16:18.000 We're gonna wait instead of all this mumbo jumps. 0:16:18.040 --> 0:16:19.800 So I think he did the problem is that they 0:16:19.800 --> 0:16:23.000 have the dot plot now, and so if you if 0:16:23.040 --> 0:16:26.520 you just think the press conference in isolation, he essentially 0:16:26.520 --> 0:16:29.160 said that we are data dependent. We're making decisions on 0:16:29.200 --> 0:16:31.160 a meeting by meeting basis. We have to see how 0:16:31.200 --> 0:16:33.160 the inflation and labor market data come in. We think 0:16:33.160 --> 0:16:35.640 the economy is strong right now, so we don't urgently 0:16:35.680 --> 0:16:38.040 need to cut rates now. The issues they have the 0:16:38.040 --> 0:16:40.000 dop plot. Greenspan did not have the dot plot, and 0:16:40.040 --> 0:16:42.760 so it's harder to get away from any calendar based guidance. 0:16:43.280 --> 0:16:47.320 Can you can you imagine Luzzetti and Folkartz, Landau and 0:16:47.440 --> 0:16:50.440 Hooper in a room together talking about the dot plot. 0:16:51.040 --> 0:16:52.480 They probably have to switch to German. 0:16:52.560 --> 0:16:54.040 They get so upset rividly. 0:16:54.240 --> 0:16:56.680 All right, initial jobs claims today, again, as Tom mentioned, 0:16:56.720 --> 0:16:59.360 they came into two hundred and forty two thousand. Consensus 0:16:59.440 --> 0:17:01.280 was for two and twenty five thousand, so a little 0:17:01.320 --> 0:17:04.280 bit higher than what we've typically seen. Here was two 0:17:04.320 --> 0:17:06.240 hundred and twenty nine thousand last period. 0:17:06.240 --> 0:17:07.400 But I don't know. 0:17:08.440 --> 0:17:11.080 It seems like the consumer is in good shape. The 0:17:11.080 --> 0:17:17.040 consumer has a job, they're getting wage increases, they're spending money. 0:17:17.680 --> 0:17:19.560 How do you feel about the consumer these days? 0:17:19.760 --> 0:17:21.840 So there's been a lot of questions about the consumer. 0:17:21.880 --> 0:17:26.240 You have kind of idiosyncratic reports from companies. You did 0:17:26.280 --> 0:17:28.479 have a week consumer spending report. If you look two 0:17:28.520 --> 0:17:30.840 weeks back now, it comes off of consumer strength. 0:17:31.400 --> 0:17:32.440 But I would agree with you. 0:17:32.200 --> 0:17:35.840 You know, there's this circularity between thinking about the labor 0:17:35.840 --> 0:17:37.440 market and the consumer. You know, as long as the 0:17:37.480 --> 0:17:40.840 labor market remains resilient and strong, and job gains are 0:17:41.320 --> 0:17:43.520 solid and wage growth is there, there's very little reason 0:17:43.560 --> 0:17:46.560 to think that the aggregate consumer weakens. Now there is 0:17:46.960 --> 0:17:49.480 greater heterogeneity. You do have at the lower end of 0:17:49.480 --> 0:17:51.919 the income distribution. There does seem to be some evidence 0:17:51.960 --> 0:17:55.199 of stress strains that are there. From my perspective, that's 0:17:55.240 --> 0:17:58.080 a little bit more returning to what the pre COVID 0:17:58.080 --> 0:18:01.840 economy looked like than something that signaling a worrying slowdown 0:18:02.640 --> 0:18:04.720 on behalf of the consumer is inflation. 0:18:05.320 --> 0:18:07.360 You know, we think about inflation, because the FED thinks 0:18:07.400 --> 0:18:09.239 about an inflation here when we think about a two 0:18:09.280 --> 0:18:13.399 percent inflation rate is kind of a target. Is that 0:18:13.480 --> 0:18:15.919 something this economy can get down to, or it just 0:18:16.040 --> 0:18:19.560 feels like we're kind of stuck here at this I 0:18:19.600 --> 0:18:21.560 don't know, a high twos or a three percent kind 0:18:21.600 --> 0:18:22.560 of inflation rate. 0:18:22.800 --> 0:18:24.800 Are we stuck there for a while? Do you think? 0:18:25.040 --> 0:18:25.520 I don't think so. 0:18:25.600 --> 0:18:27.320 I mean this year, from a year of year rate, 0:18:27.359 --> 0:18:29.040 we will be stuck there. I mean you have base 0:18:29.040 --> 0:18:31.760 effects that are difficult. Are inflation for core PC at 0:18:31.760 --> 0:18:33.160 the end of the year's two point seven a little 0:18:33.160 --> 0:18:35.280 bit below what the FED was, But as you look 0:18:35.280 --> 0:18:37.600 ahead to next year, I would expect shelter inflation is 0:18:37.600 --> 0:18:39.919 coming off. It does lag a bit, but that we 0:18:39.960 --> 0:18:42.920 can get closer to two percent. It's probably difficult to 0:18:42.920 --> 0:18:45.320 get into the low twos without shelter inflation coming off 0:18:45.720 --> 0:18:48.440 more materially. But I think importantly for the Fed, they've 0:18:48.480 --> 0:18:50.280 been clear they don't need to get down to two 0:18:50.280 --> 0:18:52.439 percent to begin to cut rates. They just need to 0:18:52.440 --> 0:18:54.280 have confidence that they are on the path to get there. 0:18:54.280 --> 0:18:58.840 For our listeners are viewers on YouTube what impacts their 0:18:58.960 --> 0:19:02.320 life with the first or even the second rate cut. 0:19:02.720 --> 0:19:03.480