Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: There's a gentleman and it's Bill Murray, and it's Tailor
Speaker 2: of Chicago, the Nobel Laureate. And then there's Jim Bianco
Speaker 2: who hang out at Wrigley Field. And as we look
Speaker 2: to the Knicks and what we're observing in New York,
Speaker 2: Jim Bianco has lived it. John Lester came to the
Speaker 2: rescue with Joe Madden. But it was brutal nineteen forty five,
Speaker 2: one hundred and eight years of losing, losing, And that
Speaker 2: pressure cooker of twenty sixteen is exactly like MSG tonight,
Speaker 2: isn't it.
Speaker 3: Absolutely When in twenty sixteen with the Cubs, it wasn't
Speaker 3: a sporting event, it was in a milestone in human history.
Speaker 3: And the pressure on the team, the pressure on the
Speaker 3: players were so great. They lost all the home games.
Speaker 3: They won the World Series by winning the away games.
Speaker 3: I kind of felt that way watching the Game three
Speaker 3: in Madison Square Garden. That is, it's not just a
Speaker 3: basketball game, it's a Mileston own in this city's history.
Speaker 3: And the pressure on those players is so great. I
Speaker 3: wonder if they're gonna have to do the same as
Speaker 3: the Cubs and win this on the road.
Speaker 4: You were you at Game three?
Speaker 1: I know I watched the Game three. I was at
Speaker 1: the Tops Games ten years ago.
Speaker 2: Okay, I mean, what do you think of Alexis?
Speaker 5: I mean, I.
Speaker 4: Have to tell you, I hear what you're saying, and
Speaker 4: I kind of feel it a little bit myself. I
Speaker 4: was watching and it just looked insane. Everybody with their
Speaker 4: lights on looked like a huge, you know, music concert.
Speaker 4: The sound was just booming, and you just wonder if that. Yeah,
Speaker 4: maybe they want to throw off the Spurs, but are
Speaker 4: you throwing off your own guys in the process.
Speaker 3: Right, You're not disappointing the Spurs. You're only disappointing your
Speaker 3: home team. When you have a situation like that.
Speaker 2: Montreal Canadians were exactly the same young kids up there.
Speaker 2: These kids are twenty twenty two and the frenzy of
Speaker 2: the Vatica.
Speaker 4: Even for veterans, it could be a lot. But let's
Speaker 4: hope you're wrong.
Speaker 1: That's okay, wrong?
Speaker 2: Should we continue on this theme or actually talk about it?
Speaker 2: Let's you are the arch call ages Ago in lonely
Speaker 2: with Muhammad al Arian. I get him credit saying inflation
Speaker 2: will be resilient what's the quality of our resilient inflation now?
Speaker 2: Above four percent?
Speaker 3: Yeah, you know, we should get it about four percent today,
Speaker 3: it'll be sixty three months that it's been above two
Speaker 3: percent the FEDS target, and even core inflation is going
Speaker 3: to start creeping towards three percent. So it's just not
Speaker 3: oh gasoline, it's more than gasoline. I think that the
Speaker 3: inflation rate is continuing to be problematic. I also think
Speaker 3: if you were to break it down and look at
Speaker 3: the so called CA shaped economy, it's actually worse at
Speaker 3: the lower end because they tend to spend more of
Speaker 3: their income on stuff like food, think beef prices or
Speaker 3: gasoline prices as a percentage of their income than the
Speaker 3: higher end. So they're getting a higher inflation rate than
Speaker 3: even that four percent inflation rate that we're seeing as
Speaker 3: the average right now.
Speaker 1: So it's still with us that it's still a problem.
Speaker 5: You mentioned sixty three months of this inflation. What's let's
Speaker 5: just x out the energy stuff from Iran and so
Speaker 5: that what's driving inflation higher than the two percent? And
Speaker 5: is two percent even a realistic number of these days
Speaker 5: in this economy?
Speaker 3: No, I don't think it's a realistic number. But I
Speaker 3: think what's driving it is the cycle turned in twenty twenty.
Speaker 3: I think, you know, every time we have a recession,
Speaker 3: we come out of a recession, the economy changes. And
Speaker 3: I like to say change. I didn't say dystopian, it's
Speaker 3: just it's different. This is a post pandemic economy. Post
Speaker 3: pandemic economy is a work from home economy. That structure
Speaker 3: restructured the entire workforce, the office market, and the way
Speaker 3: we live because we're at home a lot more. It's
Speaker 3: a deglobalization economy. And unfortunately, it's an economy with more
Speaker 3: war because according to the Institute of War, we've got
Speaker 3: the most war now in forty years around the world
Speaker 3: that we're seeing. So all of those things are leading
Speaker 3: to frictions and higher prices. And that's the state of
Speaker 3: the world we live in right now.
Speaker 2: I think one of the reality is there. Eric emails
Speaker 2: in from a childcare center in New York. Thank you
Speaker 2: for that, Eric, and he notes that pigs and Bianco
Speaker 2: of Chicago got the inflation call right. I look at
Speaker 2: the farm, I look you wake up in Chicago. You
Speaker 2: look south, you look west. It's a whole different view
Speaker 2: than looking out at the Hudson River I got since
Speaker 2: COVID farm production expense is surging thirty four percent as well.
Speaker 2: Basically our farm economies flat on their back because of inflation.
Speaker 1: Right, Yeah, it is struggling.
Speaker 3: But one of the things that the farmers have going
Speaker 3: for them is they've got other income. I've got a
Speaker 3: bunch of friends that are in that business. So they
Speaker 3: could put up solar panels, they could work with data centers,
Speaker 3: and they could make income off of a lot of
Speaker 3: that stuff to kind of keep the farms going. But
Speaker 3: you're right, if you're looking at purely being a farmer
Speaker 3: trying to grow corner wheat or soybeans and make a
Speaker 3: living off of it, it's very difficult right now.
Speaker 5: So this deglobalization which we all grew up with globalization,
Speaker 5: and they're resulting lower prices now to the extent that
Speaker 5: there's a de globalization trend out there. The America first
Speaker 5: type of thing is higher inflation the new norm? And
Speaker 5: does the FED have to adjust to that?
Speaker 1: Yes, I do think higher inflation is the new norm,
Speaker 1: And I.
Speaker 3: Like to be clear that I think it's like a
Speaker 3: three percent maybe three high threes inflation world, not an
Speaker 3: eight times Zimbabwe inflation world. So when you know, when
Speaker 3: you say inflation, you don't want to give that. But yeah,
Speaker 3: the Fed does have to start thinking about it in
Speaker 3: those terms, because not are they no, because they think
Speaker 3: that the neutral rate is still three percent. They come up.
Speaker 3: They arrive at that by saying that the long run
Speaker 3: inflation rates two plus one for our star. But if
Speaker 3: that two percent numbers closer to three three and a half,
Speaker 3: then neutral might be right where we're at right now,
Speaker 3: and that they don't need to be cutting rates anymore.
Speaker 5: Do they need to be raising rates? I mean, I'm
Speaker 5: looking at the warp function kind of suggesting maybe a
Speaker 5: little bit.
Speaker 1: Oh it's not even just a little bit.
Speaker 3: It's one hundred percent chance that they're going to raise
Speaker 3: rates by the end of the year. I think, no,
Speaker 3: they shouldn't be raising rates. Maybe at next week's meeting.
Speaker 3: They don't have to be that urgent. But I think
Speaker 3: that as the market starts to move forward, if we're
Speaker 3: going to be in a high inflation world.
Speaker 1: I'll quote Bob Michael. He has a great line that I.
Speaker 3: Attribute to him that as a bond investor, I can
Speaker 3: stop panicking when the FED starts panicking.
Speaker 1: So if the Fed doesn't feel.
Speaker 3: The need to panic at four percent inflation, then maybe
Speaker 3: bond investors should start panicking and leave. So maybe they
Speaker 3: should consider raising rates or at least talking a little
Speaker 3: bit more hawkish to calm bond investors.
Speaker 2: So then discuss the ambiguity of a level or Bianco
Speaker 2: like higher rate regime on the equity market.
Speaker 3: You know, I don't think it's a I don't think
Speaker 3: it's a problem. I think what the President has done
Speaker 3: is a very good job of telling everybody think of
Speaker 3: interest rates like a real estate guy. Right, lower is
Speaker 3: always better for whatever reason, and higher is always bad
Speaker 3: for whatever reason. But that's not the way rates should work.
Speaker 3: They should approximate a they're a little more nuanced of
Speaker 3: fair value. If the economy is stronger, if the inflation's
Speaker 3: moving up, they should creep higher. And that's what they've
Speaker 3: been doing. And as long as they do that, I
Speaker 3: don't think it should be a problem for the equity market.
Speaker 3: But no, the equity market thinks of it like a
Speaker 3: real estate person. Oh they went up, it's bad, So
Speaker 3: that's kind of the way they think we're.
Speaker 1: Gonna run here.
Speaker 2: But in thirty seconds, are you is Bianca looking for
Speaker 2: a modest move higher in rates, or you with the
Speaker 2: wordzagg and posing that we could see a real jump condition.
Speaker 3: I'm looking for a modest move higher in rates. The
Speaker 3: jump condition would occur if I think a the FED
Speaker 3: seems to be dismissive about inflation or b the story
Speaker 3: today that's got the market down. If we do get
Speaker 3: something that produces a massive jump in crude oil prices,
Speaker 3: that could a jump.
Speaker 2: Lets of emails in from the other side of the studio,
Speaker 2: Nicks or Spurs.
Speaker 3: I'm gonna go with the Knicks and seven just because
Speaker 3: you're killing me seven.
Speaker 1: Seven, geez all right, Spurs are good team. Heard that.
Speaker 4: I don't want to hear that, but I do hear
Speaker 4: you though.
Speaker 2: Go away shouldn't be on. Thank you so much in
Speaker 2: our studios from Chicago. Greatly appreciated today. He's been just
Speaker 2: fabulous on his higher inflation regime.