1 00:00:01,800 --> 00:00:04,400 Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm 2 00:00:04,440 --> 00:00:07,240 Speaker 1: Bloomberg Quick Takes Tim Stanibek. We're here every day bringing 3 00:00:07,280 --> 00:00:09,799 Speaker 1: you the latest news from the world of business and finance, 4 00:00:09,840 --> 00:00:13,600 Speaker 1: plus technology, politics, economics, all furnessing the power of Business 5 00:00:13,640 --> 00:00:17,119 Speaker 1: Week reporters and editors, not to mention our journalists and 6 00:00:17,120 --> 00:00:19,599 Speaker 1: analyst in more than one and twenty countries. You can 7 00:00:19,640 --> 00:00:23,200 Speaker 1: download Bloomberg Business Week and iTunes, SoundCloud, or Bloomberg dot Com. 8 00:00:23,400 --> 00:00:25,120 Speaker 1: You can also listen to our radio show at two 9 00:00:25,160 --> 00:00:27,840 Speaker 1: pm Eastern Time on Bloomberg Radio, or watch us on 10 00:00:27,880 --> 00:00:34,640 Speaker 1: YouTube search Bloomberg Global News. Kathleen Hayes, Global Economics and 11 00:00:34,680 --> 00:00:36,960 Speaker 1: Policy editor at Bloomberg News, with us in our New 12 00:00:37,040 --> 00:00:39,720 Speaker 1: York City bureau. Dave Wilson stocks that at Bloomberg News 13 00:00:39,760 --> 00:00:42,200 Speaker 1: on the remote access from New Jersey. Kathleen, I think, 14 00:00:42,200 --> 00:00:44,080 Speaker 1: heading into the studio, you said there's going to be 15 00:00:44,120 --> 00:00:46,279 Speaker 1: some headlines. Well there are, and there are some very 16 00:00:46,320 --> 00:00:48,080 Speaker 1: important ones, Carol, but you've got to look just a 17 00:00:48,120 --> 00:00:51,560 Speaker 1: little bit deeper to see seven eight of eighteen Fed 18 00:00:51,560 --> 00:00:56,480 Speaker 1: officials see at least one three raid hike. Now a 19 00:00:56,640 --> 00:00:59,680 Speaker 1: change in liftoff. No, it's not a majority yet, But 20 00:01:00,520 --> 00:01:02,920 Speaker 1: at the January excuse me, the December meeting, because you know, 21 00:01:03,000 --> 00:01:06,600 Speaker 1: they changed the dot plots their summary of economic projections 22 00:01:06,640 --> 00:01:09,360 Speaker 1: every three months, there were only five, so you see, 23 00:01:09,400 --> 00:01:12,520 Speaker 1: you're going to get a little more sense that more saying, well, 24 00:01:12,520 --> 00:01:15,280 Speaker 1: the economy is going to be stronger than we thought. 25 00:01:15,560 --> 00:01:17,720 Speaker 1: Listen to this lat you really need more details now 26 00:01:17,840 --> 00:01:21,880 Speaker 1: on on the what they're doing with their forecast real GDP. 27 00:01:22,480 --> 00:01:24,959 Speaker 1: In December they saw four point two percent for the year. 28 00:01:25,080 --> 00:01:28,800 Speaker 1: They boosted that by could amount. It's six point five 29 00:01:28,880 --> 00:01:32,000 Speaker 1: percent on their radio screen. Now in December they thought 30 00:01:32,000 --> 00:01:34,120 Speaker 1: the unemployment rate would fault to five percent. Remember what 31 00:01:34,200 --> 00:01:36,840 Speaker 1: was up around fourteen percent. Now they think unemployment rate 32 00:01:36,880 --> 00:01:38,880 Speaker 1: will end the year at four point five percent and 33 00:01:39,000 --> 00:01:41,800 Speaker 1: next year at three point nine. Some people will say, hey, 34 00:01:41,959 --> 00:01:45,000 Speaker 1: three point now nine sounds very much like full employment. 35 00:01:45,120 --> 00:01:47,760 Speaker 1: The substantial further progress that the feed is hoping to make. 36 00:01:47,920 --> 00:01:52,040 Speaker 1: And you mentioned those COREPC eflation inflation numbers. What's interesting 37 00:01:52,360 --> 00:01:55,680 Speaker 1: so important. In December they thought that the number would 38 00:01:55,720 --> 00:01:58,320 Speaker 1: be one point eight. Now they see it at two 39 00:01:58,360 --> 00:02:00,840 Speaker 1: point two, So they really have changed their outlook on 40 00:02:00,880 --> 00:02:03,360 Speaker 1: the economy. This is all very important. A couple more 41 00:02:03,400 --> 00:02:06,520 Speaker 1: things that you've got to have on the radar screen though, 42 00:02:06,760 --> 00:02:10,040 Speaker 1: because there were some things that they have not done. 43 00:02:10,080 --> 00:02:13,239 Speaker 1: They didn't increase their bond purchases. They want to see 44 00:02:13,240 --> 00:02:16,839 Speaker 1: substantial further progress. As I just said, um, they are 45 00:02:16,960 --> 00:02:20,360 Speaker 1: not increasing the rate the interest on access reserves. That 46 00:02:20,400 --> 00:02:23,480 Speaker 1: ties into some questions about money markets and how they 47 00:02:23,520 --> 00:02:26,120 Speaker 1: could be royaled by some build ups in reserves. But 48 00:02:26,240 --> 00:02:28,480 Speaker 1: really there there's a lot of signals. I think that's 49 00:02:28,520 --> 00:02:30,840 Speaker 1: one of the reasons why we've seen the bond market 50 00:02:30,880 --> 00:02:35,079 Speaker 1: actually gained some ground and now the thirty years back 51 00:02:35,160 --> 00:02:37,760 Speaker 1: even lower than it was the tenure about where it started. 52 00:02:37,800 --> 00:02:40,480 Speaker 1: Because on the one hand, they didn't change anything. But 53 00:02:40,520 --> 00:02:42,280 Speaker 1: at the same time, it looks to me like if 54 00:02:42,320 --> 00:02:45,359 Speaker 1: anything's there a FED that sees higher inflation and stronger 55 00:02:45,600 --> 00:02:48,040 Speaker 1: growth and they thought before maybe they will be on 56 00:02:48,080 --> 00:02:51,200 Speaker 1: the road to a sooner lift off. Not yet, But 57 00:02:51,280 --> 00:02:52,920 Speaker 1: that's the kind of question we're gonna hear put in 58 00:02:52,919 --> 00:02:55,200 Speaker 1: front of j pow. Bottom line, FED turning more hawkish 59 00:02:55,240 --> 00:02:58,720 Speaker 1: are not really I don't think they're hawk as yet. 60 00:02:58,760 --> 00:03:01,000 Speaker 1: I think so far they're just direct ignizing their progress 61 00:03:01,000 --> 00:03:03,360 Speaker 1: in the economy because they say the virus is still 62 00:03:03,400 --> 00:03:06,040 Speaker 1: the biggest issue and it's still out there. He did, Wilson, 63 00:03:06,040 --> 00:03:07,880 Speaker 1: come on in here and give us the equity market reaction. 64 00:03:07,880 --> 00:03:09,840 Speaker 1: What happened when these headlines came out? How our traders 65 00:03:10,040 --> 00:03:13,160 Speaker 1: are responding to this news. Well, you saw the SNP 66 00:03:13,240 --> 00:03:15,440 Speaker 1: five hundred spike up to its highs of the day, 67 00:03:15,639 --> 00:03:18,200 Speaker 1: so clearly it's going over well. And if you want 68 00:03:18,240 --> 00:03:20,359 Speaker 1: to focus on one area of the market to sort 69 00:03:20,400 --> 00:03:23,560 Speaker 1: of tied into the decision, it's the home builders. They 70 00:03:23,560 --> 00:03:27,080 Speaker 1: were up. They immediately moved to their highs of the 71 00:03:27,160 --> 00:03:31,519 Speaker 1: day after the decision came out, you know, and especially 72 00:03:31,520 --> 00:03:35,120 Speaker 1: noteworthy got Lenar with the biggest gain in the SMP 73 00:03:35,280 --> 00:03:37,720 Speaker 1: five hundred right now, it's up more than eleven and 74 00:03:37,760 --> 00:03:40,840 Speaker 1: a half percent. On top of what's happening with FED policy. 75 00:03:41,160 --> 00:03:43,640 Speaker 1: You know, they came out and said they raised capital 76 00:03:43,680 --> 00:03:46,400 Speaker 1: from Center Bridge Partners for a new single family rental 77 00:03:46,440 --> 00:03:49,560 Speaker 1: business and they also plan a spinoff that will include 78 00:03:49,840 --> 00:03:53,160 Speaker 1: uh their technology investment. So there's a company story to 79 00:03:53,280 --> 00:03:57,080 Speaker 1: accompany the bigger story of where rates may be headed here. Yeah, 80 00:03:57,120 --> 00:03:58,720 Speaker 1: good point eight. Two things I want to get you, 81 00:03:58,720 --> 00:04:01,440 Speaker 1: and I know Kathleen mentioned this as well. Fed's forecast 82 00:04:01,440 --> 00:04:03,720 Speaker 1: sharing PC will rise to two point four percent this 83 00:04:03,840 --> 00:04:07,560 Speaker 1: year before backing off to two in two point one 84 00:04:07,600 --> 00:04:11,880 Speaker 1: percent in three Yet the median dots still show no 85 00:04:12,040 --> 00:04:16,000 Speaker 1: rate hike through and this sentence retained from the January 86 00:04:16,040 --> 00:04:19,719 Speaker 1: policy statement quote from the FED, the ongoing public health 87 00:04:19,720 --> 00:04:23,159 Speaker 1: crisis continues to weigh on economic activity, employment, and inflation, 88 00:04:23,240 --> 00:04:26,919 Speaker 1: and poses considerable risks to the economic outlook. Listen, Kathleen, 89 00:04:27,000 --> 00:04:29,360 Speaker 1: this mirrors what Tim and I hear from so many 90 00:04:29,440 --> 00:04:32,839 Speaker 1: folks in the medical communities, the corporate communities, like, until 91 00:04:32,960 --> 00:04:36,040 Speaker 1: we get this vaccine and virus under control, all bets 92 00:04:36,080 --> 00:04:38,440 Speaker 1: are off. But look how much the cases have come down. 93 00:04:39,000 --> 00:04:42,200 Speaker 1: Look how much the viruses we plateau too, And and 94 00:04:42,360 --> 00:04:44,240 Speaker 1: that is troubling to a lot of folks in the 95 00:04:44,240 --> 00:04:46,360 Speaker 1: medical definitely. And I think, and I think it's kind 96 00:04:46,360 --> 00:04:49,080 Speaker 1: of glass half empty, glass half glass have full, because 97 00:04:49,120 --> 00:04:51,680 Speaker 1: if you talk to anybody anecdotally, just oh yeah, I 98 00:04:51,680 --> 00:04:53,960 Speaker 1: didn't couldn't qualify for a vaccine. But I went over 99 00:04:54,000 --> 00:04:56,280 Speaker 1: to Dwayne read to the to the Walgreens, and they 100 00:04:56,320 --> 00:04:58,039 Speaker 1: had a bunch of leftovers at the end of the day. 101 00:04:58,040 --> 00:05:00,200 Speaker 1: And yeah, I'm only twenty eight, but they gave me 102 00:05:00,200 --> 00:05:03,760 Speaker 1: the vaccination. I think what people were very negative about 103 00:05:03,839 --> 00:05:05,880 Speaker 1: this what they called a slow start to a program 104 00:05:05,920 --> 00:05:08,800 Speaker 1: we had never done probably about a hundred years, you know, 105 00:05:09,160 --> 00:05:13,360 Speaker 1: nationwide vaccinations, and now they seem to be gaining some steam. 106 00:05:13,400 --> 00:05:15,400 Speaker 1: So I think that's the thing that's interesting here. Yes, 107 00:05:15,440 --> 00:05:18,440 Speaker 1: it still depends. Yes, there's tons of question marks over 108 00:05:18,680 --> 00:05:20,800 Speaker 1: what happens next, right, because we know things can get 109 00:05:20,800 --> 00:05:23,359 Speaker 1: worse just when you think they're getting better. But it 110 00:05:23,400 --> 00:05:25,400 Speaker 1: seems to me this that's been saying this for the 111 00:05:25,480 --> 00:05:29,400 Speaker 1: last year. What you want to think, what Monterrey policy 112 00:05:29,440 --> 00:05:31,600 Speaker 1: is going to do. Watch the virus. The quicker this 113 00:05:31,680 --> 00:05:34,719 Speaker 1: that gets under control, the more businesses can reopen, the 114 00:05:34,760 --> 00:05:37,040 Speaker 1: more people aren't afraid to go out and shop and 115 00:05:37,080 --> 00:05:39,839 Speaker 1: spend money and fly and go to hotels, the quicker 116 00:05:39,839 --> 00:05:42,359 Speaker 1: the economy will pick up. The longer that lingers, the 117 00:05:42,440 --> 00:05:45,120 Speaker 1: longer it will take. But I see Carroll in and 118 00:05:45,240 --> 00:05:49,000 Speaker 1: Tim in this um, in this particular policy statement, in 119 00:05:49,120 --> 00:05:53,000 Speaker 1: some of the other things they're announcing that uh, this 120 00:05:53,120 --> 00:05:56,520 Speaker 1: is this is asymmetric to me. They're seeing what the 121 00:05:56,560 --> 00:05:59,240 Speaker 1: economy is doing. Some people are saying, maybe we will 122 00:05:59,320 --> 00:06:01,719 Speaker 1: raise rates a little sooner, So watch the economy. If 123 00:06:01,760 --> 00:06:03,599 Speaker 1: it gets a lot stronger, a lot faster, maybe we 124 00:06:03,640 --> 00:06:05,920 Speaker 1: do get lift off sooner. If it doesn't, you know, 125 00:06:06,040 --> 00:06:10,279 Speaker 1: maybe they really can't lift off until So Carol mentioned inflation, 126 00:06:10,360 --> 00:06:13,720 Speaker 1: So I want to ask about that, Kathleen, because the 127 00:06:14,000 --> 00:06:16,560 Speaker 1: medium FED forecast shows that core inflation right around or 128 00:06:16,600 --> 00:06:19,680 Speaker 1: above its target in the next few years. One topic 129 00:06:19,720 --> 00:06:23,560 Speaker 1: that we've heard so much from investors about is inflation. 130 00:06:23,640 --> 00:06:26,080 Speaker 1: So what is the message that the FED is sending 131 00:06:26,320 --> 00:06:30,200 Speaker 1: investors about inflation and how it feels about inflation? Well, 132 00:06:30,320 --> 00:06:33,680 Speaker 1: so far, just looking at the forecast again, because the 133 00:06:33,720 --> 00:06:37,200 Speaker 1: core PCs you note um is two point two percent 134 00:06:37,279 --> 00:06:39,760 Speaker 1: this year. But J Poll and others have made it 135 00:06:39,800 --> 00:06:42,640 Speaker 1: clear we see a temporary kind of spike up in 136 00:06:42,640 --> 00:06:46,200 Speaker 1: inflation as we adjust year after you know, one years, 137 00:06:46,200 --> 00:06:48,839 Speaker 1: hence to the numbers that fell so much last year, 138 00:06:49,000 --> 00:06:50,600 Speaker 1: and so there's been a lot of things and then 139 00:06:50,640 --> 00:06:53,679 Speaker 1: pent up demand after the after not being able to shop. 140 00:06:54,040 --> 00:06:56,200 Speaker 1: But I think the fact that we see in the 141 00:06:56,920 --> 00:07:01,120 Speaker 1: two year two percent two point one percent, the question 142 00:07:01,120 --> 00:07:03,839 Speaker 1: will be J. Powell says, and many of them have 143 00:07:03,880 --> 00:07:06,640 Speaker 1: said they don't mind seeing inflation at two point five percent, 144 00:07:06,680 --> 00:07:09,960 Speaker 1: even higher. They wanted above two percent and staying there 145 00:07:10,280 --> 00:07:14,720 Speaker 1: with two percent in to convince them it's time to 146 00:07:14,760 --> 00:07:17,280 Speaker 1: lift off. Probably not. Yeah, good stuff, guys, Thank you 147 00:07:17,320 --> 00:07:19,680 Speaker 1: so much, Really appreciate it. Kathleen Hayes, Global Economics and 148 00:07:19,680 --> 00:07:22,720 Speaker 1: Policy at at Bloomberg News. Dave Wilson Stocks. This is 149 00:07:22,760 --> 00:07:26,720 Speaker 1: Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes. 150 00:07:26,800 --> 00:07:30,640 Speaker 1: Tim Stinovich from Bloomberg Radio. Of course, our top story 151 00:07:30,840 --> 00:07:33,640 Speaker 1: on this Fed Wednesday is the FED will reserve keeping 152 00:07:33,720 --> 00:07:38,280 Speaker 1: zero rates as expected, uh and in terms of the outlook, 153 00:07:38,360 --> 00:07:40,760 Speaker 1: also going to keep rates pretty low for a while. 154 00:07:40,840 --> 00:07:45,000 Speaker 1: Still season inflation bump as short lived in the future, 155 00:07:45,040 --> 00:07:47,080 Speaker 1: So just giving us some indications of where they see 156 00:07:47,080 --> 00:07:49,600 Speaker 1: things going. Let's get into it with our round table. Yeah, 157 00:07:49,640 --> 00:07:51,840 Speaker 1: let's do it. Ali Wolf is chief economist at Zanda, 158 00:07:52,000 --> 00:07:55,280 Speaker 1: joining us on the phone from Irvine, California. Jeffrey Cleveland 159 00:07:55,320 --> 00:07:57,920 Speaker 1: is chief economist at paid In and Regal on the 160 00:07:57,920 --> 00:08:00,559 Speaker 1: phone from Los Angeles. They're not too far apart right now. 161 00:08:00,760 --> 00:08:02,960 Speaker 1: Thanks to both of you for for joining us. Um Alie, 162 00:08:03,000 --> 00:08:04,800 Speaker 1: I want to start with you your immediate reaction to 163 00:08:04,920 --> 00:08:08,960 Speaker 1: this news. So this is a fun day for the 164 00:08:08,960 --> 00:08:13,080 Speaker 1: FED followers. What we saw. Obviously a huge revision by 165 00:08:13,080 --> 00:08:15,440 Speaker 1: the Fed, but this was to be expected and it 166 00:08:15,440 --> 00:08:18,680 Speaker 1: basically matches what we've been seeing from the private economists 167 00:08:18,680 --> 00:08:20,760 Speaker 1: who have been putting out their forecast that GDP is 168 00:08:20,760 --> 00:08:23,680 Speaker 1: going to be pretty remarkable this year as the economy 169 00:08:24,120 --> 00:08:26,760 Speaker 1: opens up at at a way more rapid pace. And 170 00:08:26,800 --> 00:08:29,760 Speaker 1: I think a lot of us expected. Well, okay, so 171 00:08:29,800 --> 00:08:32,680 Speaker 1: come on in on good to know, um, jeff Jeffrey, 172 00:08:32,720 --> 00:08:35,520 Speaker 1: come on into In terms of your um reaction to 173 00:08:35,880 --> 00:08:38,520 Speaker 1: the FED decision, well, I was gonna say, the distance 174 00:08:38,559 --> 00:08:41,400 Speaker 1: between Irvine and Los Angeles depends a lot of the traffic, 175 00:08:41,520 --> 00:08:45,720 Speaker 1: so eventually just a lot longer than you think. Yeah, 176 00:08:45,760 --> 00:08:48,520 Speaker 1: the big the big thing here is they have a 177 00:08:48,559 --> 00:08:53,559 Speaker 1: better economic outlook, better GDP growth, they have lower unemployment, 178 00:08:53,559 --> 00:08:56,160 Speaker 1: they have a little bit higher inflation. Yet the media thought, 179 00:08:56,240 --> 00:09:01,280 Speaker 1: the media thought does not move for three is the key. Uh. 180 00:09:01,400 --> 00:09:03,679 Speaker 1: It's this kind of tug of war that's going on 181 00:09:04,120 --> 00:09:06,480 Speaker 1: with the financial market, with the bomb market in particular, 182 00:09:06,480 --> 00:09:09,840 Speaker 1: where the bab market is saying, okay, better growth, higher inflation, 183 00:09:09,920 --> 00:09:12,559 Speaker 1: therefore you need to hike, and the Fed is saying no, no, 184 00:09:12,679 --> 00:09:16,000 Speaker 1: no no. That is the script from perhaps last cycle. 185 00:09:16,320 --> 00:09:18,720 Speaker 1: That is not the script we're going to use. We're 186 00:09:18,720 --> 00:09:22,160 Speaker 1: gonna keep rates at zero for longer. And so that's 187 00:09:22,160 --> 00:09:25,680 Speaker 1: a message they delivered here. Whether the market really believes it, 188 00:09:25,800 --> 00:09:30,120 Speaker 1: Carol and Tim, that's a that's another question itself. Dare 189 00:09:30,160 --> 00:09:33,839 Speaker 1: I say, Goldilocks economy, so unemployment rate gets better, although 190 00:09:33,920 --> 00:09:36,640 Speaker 1: let's not forget there. You know these there are so 191 00:09:36,640 --> 00:09:40,600 Speaker 1: many different measures of unemployment. It doesn't really look at um. 192 00:09:40,760 --> 00:09:43,520 Speaker 1: There are millions who are out of the labor force altogether, 193 00:09:43,520 --> 00:09:45,920 Speaker 1: who just said I'm frustrated, I'm out of it. But 194 00:09:46,440 --> 00:09:48,880 Speaker 1: dare I say, Jeffrey, that we are or could be 195 00:09:48,960 --> 00:09:51,960 Speaker 1: headed for kind of a Goldilocks economy, some growth with 196 00:09:52,040 --> 00:09:55,840 Speaker 1: low inflation. Once again, for investors, this is perfect. You 197 00:09:55,880 --> 00:09:58,280 Speaker 1: have better growth, you have a little bit higher inflation, 198 00:09:58,320 --> 00:10:01,520 Speaker 1: which is fine, and you have an easy fed You 199 00:10:01,559 --> 00:10:04,560 Speaker 1: could mix in their very easy physical conditions as well. 200 00:10:04,600 --> 00:10:06,240 Speaker 1: So I think this is a very good back drop 201 00:10:06,240 --> 00:10:09,559 Speaker 1: for risk assets fort for investors overall. I would ignore 202 00:10:09,840 --> 00:10:12,520 Speaker 1: the unemployment rate, Carol, that four percent figure that gets 203 00:10:12,559 --> 00:10:15,240 Speaker 1: bandied about. I would focus instead on the employment of 204 00:10:15,280 --> 00:10:19,079 Speaker 1: population to fifty four year old, how many of them, 205 00:10:19,200 --> 00:10:22,360 Speaker 1: what percentage of those are folks are employed. That's at 206 00:10:22,400 --> 00:10:25,359 Speaker 1: seventy six right now. It needs to be over eighty 207 00:10:25,400 --> 00:10:27,720 Speaker 1: before I even think we should have another phone call 208 00:10:27,800 --> 00:10:30,800 Speaker 1: about full employment. So that's a ways to go. Hey, Aley, 209 00:10:30,800 --> 00:10:33,040 Speaker 1: come on in here and talk about the reaction among 210 00:10:33,080 --> 00:10:35,440 Speaker 1: homebuilders right now, because this is something that that of 211 00:10:35,440 --> 00:10:38,400 Speaker 1: course you watch closely at Zanda. You heard Dave Wilson 212 00:10:38,480 --> 00:10:42,319 Speaker 1: earlier talk about housing stocks on a tear uh this afternoon. 213 00:10:42,920 --> 00:10:46,400 Speaker 1: What's the reaction there. Yeah, So when you look at 214 00:10:46,400 --> 00:10:48,400 Speaker 1: the housing market and you look at what's happened to 215 00:10:48,440 --> 00:10:51,080 Speaker 1: the economy over the past year, you've basically had people 216 00:10:51,240 --> 00:10:53,520 Speaker 1: that have been forced to save. Now, by the way, 217 00:10:53,559 --> 00:10:55,760 Speaker 1: this isn't just applied to the housing market. This applies 218 00:10:55,760 --> 00:10:58,079 Speaker 1: to the wider economy. Here's people that have been forced 219 00:10:58,120 --> 00:11:00,480 Speaker 1: to save. There has been student loaned forbearing, there has 220 00:11:00,520 --> 00:11:03,600 Speaker 1: been three different rounds coming up of stimulus. And then 221 00:11:03,640 --> 00:11:05,560 Speaker 1: you also have, which I think a lot of people forget, 222 00:11:05,800 --> 00:11:10,240 Speaker 1: the underground economy, the hairdressers and the fitness instructors that 223 00:11:10,280 --> 00:11:13,439 Speaker 1: we're still working under the table and also getting unemployment 224 00:11:13,480 --> 00:11:16,120 Speaker 1: insurance and also getting the stimulus. So when you start 225 00:11:16,120 --> 00:11:17,920 Speaker 1: to add up all of those numbers, you really have 226 00:11:18,160 --> 00:11:21,920 Speaker 1: people that were able to continue to work, flush with cash. 227 00:11:22,360 --> 00:11:24,920 Speaker 1: And when you look at the housing market, well, certainly 228 00:11:25,000 --> 00:11:27,880 Speaker 1: that's a game changer because people need to say, for 229 00:11:27,880 --> 00:11:30,040 Speaker 1: a down payment to purchase a home, and all of 230 00:11:30,080 --> 00:11:32,640 Speaker 1: a sudden because of what happened to the economy. Again, 231 00:11:32,679 --> 00:11:34,960 Speaker 1: as long as you were employed, a lot of people 232 00:11:35,000 --> 00:11:37,680 Speaker 1: are in a really healthy position. That's going to drive growth, 233 00:11:37,720 --> 00:11:40,680 Speaker 1: not only for the homebuilders, but also for the wider economy. 234 00:11:40,800 --> 00:11:43,120 Speaker 1: Let's remind everybody. In just about thirteen minutes, a little 235 00:11:43,120 --> 00:11:45,080 Speaker 1: bit under thirteen minutes time, we will take you to 236 00:11:45,360 --> 00:11:47,880 Speaker 1: the Federal Reserve in Washington, d C. And to FED 237 00:11:47,960 --> 00:11:50,960 Speaker 1: Chief J. Powell. His statement and his press commerce will 238 00:11:51,080 --> 00:11:52,959 Speaker 1: begin at that time, and of course we will cover 239 00:11:53,000 --> 00:11:55,280 Speaker 1: it live right here at Bloomberg. Right now we're talking 240 00:11:55,320 --> 00:11:59,000 Speaker 1: with Ali Wolf, chief economist at Zanda, Jeffrey Cleveland, chief 241 00:11:59,000 --> 00:12:02,080 Speaker 1: economist at Payton and Regals. So Ali, let me ask you, though, 242 00:12:02,080 --> 00:12:07,040 Speaker 1: the housing recovery and strength, how important is it though 243 00:12:07,559 --> 00:12:11,160 Speaker 1: in terms of the upcoming economic recovery and and I'm 244 00:12:11,200 --> 00:12:13,960 Speaker 1: I'm asking to with an eye on in some parts 245 00:12:14,000 --> 00:12:15,640 Speaker 1: of the world, it does feel like we're in some 246 00:12:15,640 --> 00:12:18,480 Speaker 1: parts of the country that we're starting to see, you know, 247 00:12:18,640 --> 00:12:23,280 Speaker 1: a shortage of supply. Yeah. So when we look at 248 00:12:23,320 --> 00:12:25,720 Speaker 1: the housing starts numbers, or you look at how many 249 00:12:25,720 --> 00:12:28,160 Speaker 1: homes are being built. For every single home that's built, 250 00:12:28,240 --> 00:12:31,480 Speaker 1: three different jobs are created. And housing has been able 251 00:12:31,520 --> 00:12:34,800 Speaker 1: to partly lead the recovery this time around because builders 252 00:12:34,840 --> 00:12:37,959 Speaker 1: have been so active and on the new and existing homeside. 253 00:12:38,240 --> 00:12:41,960 Speaker 1: For every home someone purchases, they spend money elsewhere. They 254 00:12:41,960 --> 00:12:44,120 Speaker 1: spend money at home depot, they spend money at target, 255 00:12:44,200 --> 00:12:46,320 Speaker 1: and that helps those different companies along the way to 256 00:12:47,080 --> 00:12:49,720 Speaker 1: the risk though, is as we're looking at the tenure treasury, 257 00:12:49,760 --> 00:12:52,520 Speaker 1: we know that that's closely linked to mortgage rates. Yes, 258 00:12:52,559 --> 00:12:55,240 Speaker 1: mortgage rates are still historically low at three percent, but 259 00:12:55,320 --> 00:12:57,960 Speaker 1: we just have to watch how high those go because 260 00:12:58,040 --> 00:13:01,600 Speaker 1: really even pence fifty basis points starts to price people 261 00:13:01,640 --> 00:13:04,760 Speaker 1: out of the market with how much home prices haven't 262 00:13:04,760 --> 00:13:07,120 Speaker 1: gone up over the past year as well, Jeffrey, what 263 00:13:07,160 --> 00:13:08,600 Speaker 1: do you make of of how the Fed is is 264 00:13:08,600 --> 00:13:13,320 Speaker 1: thinking about growth? The feed is even more optimistic one growth, 265 00:13:13,360 --> 00:13:15,120 Speaker 1: as Chris Ansey points out in our in our live 266 00:13:15,160 --> 00:13:18,160 Speaker 1: blog right now, the median forecast among economists survey by 267 00:13:18,160 --> 00:13:22,079 Speaker 1: Bloomberg um the FED policymakers meeting at six point five. 268 00:13:22,120 --> 00:13:25,199 Speaker 1: The Bloomberg Survey medium medium is six, so the Fed 269 00:13:25,280 --> 00:13:28,720 Speaker 1: clearly optimistic here. Yeah, I don't know what the Bloomberg 270 00:13:28,920 --> 00:13:31,000 Speaker 1: survey there's doing. I mean, I think the paid in 271 00:13:31,040 --> 00:13:34,600 Speaker 1: the regal forecast for six and a half percent, so 272 00:13:34,960 --> 00:13:37,440 Speaker 1: it's right in line with the FMC median. I like that, 273 00:13:37,559 --> 00:13:39,400 Speaker 1: So I would the way I would spin it to 274 00:13:39,480 --> 00:13:42,080 Speaker 1: him is that the FED is finally caught up with 275 00:13:42,120 --> 00:13:46,360 Speaker 1: paidon in regal more economics which actually probably should may 276 00:13:46,360 --> 00:13:47,959 Speaker 1: be a little conserved at this point. I don't know 277 00:13:48,200 --> 00:13:52,559 Speaker 1: why talk, yeah, talk, I mean, I mean, obviously it's 278 00:13:52,640 --> 00:13:54,880 Speaker 1: you're joking there, but but like what why why were 279 00:13:54,880 --> 00:13:56,920 Speaker 1: you guys? Why are you guys so optimistic? I mean, 280 00:13:57,240 --> 00:14:00,440 Speaker 1: and why do you go ahead? The optimist sick tone 281 00:14:00,480 --> 00:14:03,960 Speaker 1: sorry to start the year was due to just the reopening. 282 00:14:04,280 --> 00:14:06,560 Speaker 1: The fact that households do have a lot of pent 283 00:14:06,640 --> 00:14:09,840 Speaker 1: up savings, depending on how you measure it, somewhere between 284 00:14:09,840 --> 00:14:12,480 Speaker 1: one and two trillion, you know, or ten percent of 285 00:14:12,520 --> 00:14:15,120 Speaker 1: GDP roughly, So that's a huge amount of money that 286 00:14:15,200 --> 00:14:18,240 Speaker 1: will be I think unleashed as as the economy reopens. 287 00:14:18,640 --> 00:14:21,760 Speaker 1: And then now another round of fiscal relief coming down. 288 00:14:21,920 --> 00:14:24,400 Speaker 1: So you know, all those things together, I think you 289 00:14:24,480 --> 00:14:26,720 Speaker 1: can very easily get to a six six and a 290 00:14:26,760 --> 00:14:29,440 Speaker 1: half percent GDP growth that you're maybe even some risk 291 00:14:29,560 --> 00:14:34,600 Speaker 1: him to hire growth. That means that the thing is 292 00:14:34,640 --> 00:14:36,760 Speaker 1: looking at a little bit further. I think we'll settle 293 00:14:36,800 --> 00:14:39,480 Speaker 1: back down somewhere closer to two per cent or so. 294 00:14:39,480 --> 00:14:42,640 Speaker 1: So it's not something that will persist beyond beyond one, 295 00:14:42,680 --> 00:14:44,440 Speaker 1: but I think it's a very upbeat view for the 296 00:14:44,520 --> 00:14:47,560 Speaker 1: year ahead. So Ali, you know, I asked Jeffrey about, 297 00:14:47,640 --> 00:14:50,480 Speaker 1: you know, a Goldilocks economy. Uh, you know, it took 298 00:14:50,480 --> 00:14:52,320 Speaker 1: a while to kind of get things going coming off 299 00:14:52,320 --> 00:14:55,200 Speaker 1: of the financial crisis, but we did kind of have 300 00:14:55,720 --> 00:14:58,160 Speaker 1: you know, low and steady for a long long time, 301 00:14:58,880 --> 00:15:02,880 Speaker 1: certainly something that financial market investors made them, you know, 302 00:15:03,040 --> 00:15:06,440 Speaker 1: pretty you know, eager to take on risk in a 303 00:15:06,480 --> 00:15:08,680 Speaker 1: low yield environment. How do you see it? Could we 304 00:15:08,800 --> 00:15:11,640 Speaker 1: be setting up for once again kind of a low 305 00:15:11,680 --> 00:15:15,840 Speaker 1: and steady recovery here? Well, I actually think it's gonna 306 00:15:15,920 --> 00:15:19,320 Speaker 1: be really robust when you look at history. So we've 307 00:15:19,320 --> 00:15:22,000 Speaker 1: now put six trillion dollars into the system over the 308 00:15:22,040 --> 00:15:25,520 Speaker 1: past year from just the Congress and from what they've 309 00:15:25,560 --> 00:15:28,400 Speaker 1: done from the different stimulus packages versus one point eight 310 00:15:28,400 --> 00:15:32,040 Speaker 1: trillion over multiple years last time around. And when a 311 00:15:32,040 --> 00:15:33,840 Speaker 1: lot of US economists look at the data, we say, well, 312 00:15:33,840 --> 00:15:36,800 Speaker 1: that's one of the reasons that it was so long 313 00:15:36,840 --> 00:15:40,280 Speaker 1: and protracted to finally get back. But what we've seen 314 00:15:40,360 --> 00:15:42,360 Speaker 1: from the stimulus checks that have gone out so far, 315 00:15:42,480 --> 00:15:44,840 Speaker 1: we can already learn from what consumers do with it. 316 00:15:45,320 --> 00:15:47,920 Speaker 1: And so right now, this is data from the Chicago SPED. 317 00:15:47,960 --> 00:15:51,200 Speaker 1: You can see fifty of the money gets spent basically 318 00:15:51,280 --> 00:15:53,640 Speaker 1: right away, and then fifty percent of it gets saved. 319 00:15:53,920 --> 00:15:55,920 Speaker 1: And some of that money is getting saved for things 320 00:15:55,960 --> 00:15:59,240 Speaker 1: people can't do today but they can do three or 321 00:15:59,280 --> 00:16:02,040 Speaker 1: four months from now. One vacation, go to restaurants, go 322 00:16:02,120 --> 00:16:04,960 Speaker 1: to bars. And so that's why I also feel really positive, 323 00:16:05,000 --> 00:16:07,280 Speaker 1: I think, I mean, we've seen Goldman's forecasts or even 324 00:16:07,360 --> 00:16:09,200 Speaker 1: higher than that six point five percent that we're seeing 325 00:16:09,200 --> 00:16:11,720 Speaker 1: from the FED. But that's what gives me support about 326 00:16:11,760 --> 00:16:14,160 Speaker 1: the economic recovery. But it's a spike alley, right, and 327 00:16:14,200 --> 00:16:15,760 Speaker 1: then we start to settle down to kind of more 328 00:16:15,800 --> 00:16:20,440 Speaker 1: normal levels. It is, but it depends, it depends on 329 00:16:20,920 --> 00:16:23,040 Speaker 1: is it that one time vacation that you're going on. 330 00:16:23,040 --> 00:16:24,480 Speaker 1: I know a lot of people are talking about they 331 00:16:24,480 --> 00:16:26,400 Speaker 1: want to do their take multiple vacation. I want to 332 00:16:26,400 --> 00:16:31,560 Speaker 1: take ten vacations right now. Yes, so I understand that, 333 00:16:31,600 --> 00:16:34,120 Speaker 1: But we also know that there's additional stimulus that's likely 334 00:16:34,160 --> 00:16:36,480 Speaker 1: going to come on the infrastructure side, which fuels more 335 00:16:36,600 --> 00:16:41,520 Speaker 1: longer terms uh growth too. So Jeffrey, the FED is optimistic, 336 00:16:41,520 --> 00:16:44,560 Speaker 1: painting and Regal is optimistic. How quickly, in your opinion, 337 00:16:44,640 --> 00:16:46,720 Speaker 1: does hirings start to pick up just in the next 338 00:16:46,760 --> 00:16:49,960 Speaker 1: few months. I think we could have three or four 339 00:16:50,040 --> 00:16:52,800 Speaker 1: months ahead to know where you have million, a million 340 00:16:52,800 --> 00:16:55,280 Speaker 1: and a half jobs added each and every month, so 341 00:16:55,600 --> 00:16:58,720 Speaker 1: it can come back very very quickly. I think to me, 342 00:16:58,800 --> 00:17:00,920 Speaker 1: that's the lesson the last night months, not just for 343 00:17:00,960 --> 00:17:04,080 Speaker 1: the FED, but also for forecasters. People were very and 344 00:17:04,119 --> 00:17:07,400 Speaker 1: I think it's justifiable last summer to be very pessimistic 345 00:17:07,480 --> 00:17:10,080 Speaker 1: given the state of the world. It's time, but things 346 00:17:10,080 --> 00:17:12,720 Speaker 1: have changed dramatically, especially in the last six or eight weeks. 347 00:17:12,720 --> 00:17:16,440 Speaker 1: Even so, we we've seen that as soon as things reopened, 348 00:17:16,640 --> 00:17:18,720 Speaker 1: hiring will come back very quickly. We got a little 349 00:17:18,760 --> 00:17:20,440 Speaker 1: taste of that last year, but I think that's what's 350 00:17:20,480 --> 00:17:22,760 Speaker 1: ahead for the next I would say three, three or 351 00:17:22,760 --> 00:17:25,399 Speaker 1: four months. Hey, Alian, Jeffrey, I want to ask you, 352 00:17:25,520 --> 00:17:27,879 Speaker 1: is this kind of how we, fingers crossed, had hoped 353 00:17:27,920 --> 00:17:31,439 Speaker 1: it would would play out after the deep decline and 354 00:17:31,480 --> 00:17:34,760 Speaker 1: the economy shut down shutting down last year? You know, Ali, 355 00:17:34,920 --> 00:17:36,639 Speaker 1: isn't this kind of I know it's a lot of 356 00:17:36,640 --> 00:17:38,520 Speaker 1: money being popped into the system, but isn't this kind 357 00:17:38,520 --> 00:17:41,320 Speaker 1: of what we hope for rather than staying down for 358 00:17:41,359 --> 00:17:43,680 Speaker 1: a longer time, which would have made it more difficult 359 00:17:43,720 --> 00:17:47,199 Speaker 1: to bounce back. I think this is what we hoped for. 360 00:17:47,320 --> 00:17:49,439 Speaker 1: But I would say at least my earliest forecast was 361 00:17:49,480 --> 00:17:51,560 Speaker 1: more like a swouch shape. I thought that there would 362 00:17:51,600 --> 00:17:53,919 Speaker 1: be a little bit of economic pain. And I do 363 00:17:53,960 --> 00:17:55,679 Speaker 1: want to temper what I just said with some of 364 00:17:55,680 --> 00:17:58,359 Speaker 1: the labor statistics, because if you do look at the 365 00:17:58,840 --> 00:18:01,520 Speaker 1: leisure and hospitality after so, that's obviously the sector that's 366 00:18:01,560 --> 00:18:04,800 Speaker 1: been hit the hardest. Let's say tomorrow, because the economy 367 00:18:04,840 --> 00:18:07,919 Speaker 1: opens up, every single one of those jobs comes back. Right, 368 00:18:08,040 --> 00:18:10,720 Speaker 1: we go from nine point five million jobs shy of 369 00:18:10,760 --> 00:18:13,200 Speaker 1: where we where we were last year to now five 370 00:18:13,280 --> 00:18:16,000 Speaker 1: million jobs shy where we are last year. So there's 371 00:18:16,000 --> 00:18:17,919 Speaker 1: a lot of enthusiasm that okay, as we open up, 372 00:18:17,960 --> 00:18:19,600 Speaker 1: and I just that it's you guys do There's a 373 00:18:19,600 --> 00:18:22,600 Speaker 1: lot of enthusiasm on that front. But we still have 374 00:18:22,720 --> 00:18:25,439 Speaker 1: some lingering pain with the long term unemployed, with the 375 00:18:25,440 --> 00:18:27,760 Speaker 1: commercial real estate space that I think, honestly and not 376 00:18:27,920 --> 00:18:30,320 Speaker 1: enough people are are acknowledging that there's a risk on 377 00:18:30,359 --> 00:18:32,200 Speaker 1: that front. Tim and I talked about that all the time, 378 00:18:32,240 --> 00:18:35,520 Speaker 1: Like we're just driving around New York. It's just staggering 379 00:18:35,600 --> 00:18:39,360 Speaker 1: the number of boarded up, shut down you know, retail restaurants, 380 00:18:39,400 --> 00:18:41,560 Speaker 1: you name it, that are no longer there. Tim. Yeah, 381 00:18:41,520 --> 00:18:44,919 Speaker 1: And if companies have employees have proven look to you know, 382 00:18:45,040 --> 00:18:47,520 Speaker 1: mixed reviews from executives who we hear from pretty much 383 00:18:47,560 --> 00:18:49,800 Speaker 1: each and every week about how they feel about employees 384 00:18:49,800 --> 00:18:52,119 Speaker 1: not being in the office. But if employees have proven 385 00:18:52,160 --> 00:18:55,320 Speaker 1: that they can work in a hybrid environment or or 386 00:18:55,359 --> 00:18:57,960 Speaker 1: remotely from home or coming into the office just a 387 00:18:58,000 --> 00:19:00,280 Speaker 1: couple of days a week, that has serious repercussion for 388 00:19:00,320 --> 00:19:03,040 Speaker 1: parts of the economy. So, Jeffrey, commercial real estate, is 389 00:19:03,080 --> 00:19:05,320 Speaker 1: that something that might be another shoe to drop maybe 390 00:19:05,359 --> 00:19:08,760 Speaker 1: this year or into next year. Well, I have to say, 391 00:19:08,800 --> 00:19:10,960 Speaker 1: I think if you go back nine months ago, the 392 00:19:10,960 --> 00:19:13,920 Speaker 1: the outlook was much more pessimistic, like we would never 393 00:19:14,040 --> 00:19:16,440 Speaker 1: return to the office. I think that's changed a lot. 394 00:19:16,520 --> 00:19:19,359 Speaker 1: I think you see that change in price for for 395 00:19:19,440 --> 00:19:23,520 Speaker 1: the commercial real estate sector in various ways, so maybe 396 00:19:23,560 --> 00:19:25,960 Speaker 1: we should be a little bit more upbeat. It was 397 00:19:26,000 --> 00:19:28,480 Speaker 1: like Carol, it was the U, the L, the W 398 00:19:28,800 --> 00:19:31,800 Speaker 1: shaped recovery. It's much more like the U then, I think, 399 00:19:32,240 --> 00:19:34,199 Speaker 1: or even like the V. You know, it's not the 400 00:19:34,520 --> 00:19:37,040 Speaker 1: L or it's not the W, but that beings that. 401 00:19:37,200 --> 00:19:39,160 Speaker 1: I mean, I think there is some restructuring that needs 402 00:19:39,200 --> 00:19:41,160 Speaker 1: to go on here, but that's that's something that happens 403 00:19:41,160 --> 00:19:44,200 Speaker 1: every recession where you do have sectors that don't quite 404 00:19:44,240 --> 00:19:46,600 Speaker 1: come back to where they were pre recession, and the 405 00:19:46,920 --> 00:19:49,680 Speaker 1: capital needs to be reallocated. So maybe that that will 406 00:19:49,720 --> 00:19:52,359 Speaker 1: be focused on the on the c R E space. Well, Jeffrey, 407 00:19:52,359 --> 00:19:54,040 Speaker 1: one letter you didn't mention was K, and it's the 408 00:19:54,119 --> 00:19:56,280 Speaker 1: K shaped recovery that that we've been talking about for 409 00:19:56,400 --> 00:19:58,520 Speaker 1: months that the people who have been at the higher 410 00:19:58,600 --> 00:20:01,320 Speaker 1: end of the income bracket have done so much better 411 00:20:01,359 --> 00:20:03,800 Speaker 1: than those at the lower end of what needs to 412 00:20:03,840 --> 00:20:06,520 Speaker 1: happen in order for the recovery to be equal. The 413 00:20:06,560 --> 00:20:08,720 Speaker 1: best thing that can happen for the K shaped type 414 00:20:08,720 --> 00:20:10,959 Speaker 1: recovery to get the lower end back is to have 415 00:20:11,560 --> 00:20:14,640 Speaker 1: full and inclusive employment. So that's why I was so 416 00:20:14,920 --> 00:20:19,360 Speaker 1: emphatic about five four year old corborate the population, which 417 00:20:19,400 --> 00:20:21,560 Speaker 1: at seventy six we need back at eighty. When that 418 00:20:21,800 --> 00:20:24,720 Speaker 1: labor market gets to that level of tightness, that's when 419 00:20:24,760 --> 00:20:27,359 Speaker 1: the lower income stretches tend to benefit the most. We 420 00:20:27,400 --> 00:20:31,000 Speaker 1: saw that in eighteen ten. I think maybe the Fed 421 00:20:31,040 --> 00:20:34,040 Speaker 1: even learned its lesson that perhaps we preemptively hyped too 422 00:20:34,160 --> 00:20:36,960 Speaker 1: much too quickly. Sort of we could have had a 423 00:20:37,080 --> 00:20:39,280 Speaker 1: even hotter labor market. So we need a hot labor 424 00:20:39,280 --> 00:20:42,400 Speaker 1: market to help the bottom part of the K, which 425 00:20:42,400 --> 00:20:44,720 Speaker 1: is just where we were a pre pandemic. Just three 426 00:20:44,720 --> 00:20:47,280 Speaker 1: and a half minutes away from J. Powell of the 427 00:20:47,320 --> 00:20:50,719 Speaker 1: Federal Reserve, he will be making a brief statement, followed by, 428 00:20:50,720 --> 00:20:53,320 Speaker 1: of course, the press conference following that latest FED decision, 429 00:20:53,359 --> 00:20:56,479 Speaker 1: wherewith here with Ali Wolf of Xander and Jeffrey Cleveland 430 00:20:56,480 --> 00:20:59,480 Speaker 1: have paid an in regal guys. Um got a question 431 00:20:59,520 --> 00:21:02,240 Speaker 1: for you about, uh, what keeps you up at night? Ali? 432 00:21:02,320 --> 00:21:06,680 Speaker 1: What worries you about the US economy? Right? Now, so 433 00:21:06,840 --> 00:21:08,880 Speaker 1: I would say, and this is something that I'm sure 434 00:21:08,920 --> 00:21:11,399 Speaker 1: people will ask Dave Powell on when he comes out 435 00:21:11,440 --> 00:21:14,480 Speaker 1: for his press conference, is he has acknowledged that, yes, 436 00:21:14,520 --> 00:21:16,960 Speaker 1: we're going to have this base effect with inflation, and 437 00:21:17,040 --> 00:21:21,600 Speaker 1: yes we're going to have um transitory inflation. But the 438 00:21:21,720 --> 00:21:24,560 Speaker 1: question basically everyone is saying, we haven't seen inflation in 439 00:21:24,600 --> 00:21:27,120 Speaker 1: the past, and going into this, we didn't see really 440 00:21:27,200 --> 00:21:29,760 Speaker 1: high levels of inflation, so we shouldn't expect to see event. 441 00:21:29,800 --> 00:21:31,680 Speaker 1: And I know there's a couple of different camps emerging, 442 00:21:32,040 --> 00:21:34,359 Speaker 1: but we're living through a world of so many different 443 00:21:34,400 --> 00:21:37,200 Speaker 1: unprecedentedge you know, we're talking about a top dollar amount 444 00:21:37,200 --> 00:21:39,159 Speaker 1: that we haven't seen. We're talking about that gap between 445 00:21:39,200 --> 00:21:41,199 Speaker 1: the halves and the halves, not we're talking about the 446 00:21:41,280 --> 00:21:45,400 Speaker 1: savings changes. We're talking about a goods economy that's thriving 447 00:21:45,440 --> 00:21:48,439 Speaker 1: and a service economy that's not. And and eventually they 448 00:21:48,480 --> 00:21:50,800 Speaker 1: both will maybe come up and they'll meet in the middle. 449 00:21:51,280 --> 00:21:53,960 Speaker 1: But how high can inflation go? How long can the 450 00:21:54,040 --> 00:21:57,199 Speaker 1: FED pulled off if the numbers are alarmingly higher than 451 00:21:57,240 --> 00:22:00,520 Speaker 1: what they think, which I think at one phase throughout 452 00:22:00,520 --> 00:22:04,000 Speaker 1: this year we may see pretty alarmingly high inflation numbers. Jeffrey, 453 00:22:04,080 --> 00:22:05,760 Speaker 1: same question. Do you what keeps you up at night? 454 00:22:06,520 --> 00:22:09,560 Speaker 1: I think policymakers are always fighting the last battle and 455 00:22:09,600 --> 00:22:13,159 Speaker 1: the battle last cycle. The lesson that policymakers seem to 456 00:22:13,200 --> 00:22:16,360 Speaker 1: have learned is that they could have let the economy 457 00:22:16,440 --> 00:22:20,520 Speaker 1: run a bit hotter or longer and not preemptively started 458 00:22:20,520 --> 00:22:23,280 Speaker 1: the hiking cycle, and that would have benefited a lot 459 00:22:23,280 --> 00:22:25,280 Speaker 1: of the labor market, and that maybe would have had 460 00:22:25,600 --> 00:22:28,600 Speaker 1: higher inflation. So they seem to think that it was there. 461 00:22:28,640 --> 00:22:31,600 Speaker 1: You know, they're called they control inflation. I wonder about that. 462 00:22:31,640 --> 00:22:34,560 Speaker 1: What if that's the wrong lesson and inflation, you know, 463 00:22:34,600 --> 00:22:37,280 Speaker 1: has the mind of allsven by somebody else, and they'll 464 00:22:37,320 --> 00:22:40,560 Speaker 1: be a bit surprised here by by a more persistent pickup. 465 00:22:40,560 --> 00:22:43,040 Speaker 1: That's probably the biggest concern. All right, kind of leave 466 00:22:43,040 --> 00:22:45,840 Speaker 1: it on that, guys, You were amazing, Thank you so much, 467 00:22:46,000 --> 00:22:48,960 Speaker 1: really smart Inside. Ali Wolfe, chief economist Ad Zonda on 468 00:22:49,000 --> 00:22:51,920 Speaker 1: the phone from Irvine, California. Just around the corner. Jeffreyley, 469 00:22:52,200 --> 00:22:55,119 Speaker 1: Jeffrey Cleveland, the chief economists at paid An in Regal, 470 00:22:55,200 --> 00:22:58,719 Speaker 1: on the phone from Los Angeles. This is Bloomberg Business 471 00:22:58,840 --> 00:23:02,040 Speaker 1: Week with Carol matt Sure and Bloomberg quick takes Tim 472 00:23:02,119 --> 00:23:06,040 Speaker 1: Stinovich from Bloomberg Radio. Let's continue with our coverage of 473 00:23:06,080 --> 00:23:09,520 Speaker 1: today's decision by the Federal Reserve their Open Market Committee 474 00:23:09,520 --> 00:23:12,040 Speaker 1: in J. Powell's press conference shooting us right now. Great 475 00:23:12,040 --> 00:23:14,600 Speaker 1: to have back with us is Stephen Skanky. He's chief 476 00:23:14,640 --> 00:23:17,360 Speaker 1: economic advisor at kill Point, former U S Treasuring White 477 00:23:17,400 --> 00:23:21,080 Speaker 1: House National Security Council staff member based in Washington, d C. 478 00:23:21,400 --> 00:23:25,400 Speaker 1: On the phone though from Missouri on this Wednesday, fed Wednesday. 479 00:23:25,600 --> 00:23:28,679 Speaker 1: Also here Bloomberg Economics chief US economist Carlwick and Donna 480 00:23:29,000 --> 00:23:31,640 Speaker 1: with a recap of the Power press conference as well, 481 00:23:31,920 --> 00:23:35,640 Speaker 1: and he joins us on the phone in New Jersey. So, um, Carl, 482 00:23:35,720 --> 00:23:38,080 Speaker 1: let me start with you. What stood out here? It 483 00:23:38,119 --> 00:23:43,879 Speaker 1: feels like it's almost a perfect report. Well, it certainly 484 00:23:44,000 --> 00:23:46,760 Speaker 1: was a well well executed He spect the landing here. 485 00:23:46,920 --> 00:23:50,320 Speaker 1: I think the market is getting ready to test the 486 00:23:50,320 --> 00:23:53,800 Speaker 1: Feds resolved against both the backup and interest rates, and 487 00:23:53,840 --> 00:23:57,560 Speaker 1: also some signs that maybe inflation pressures are starting to 488 00:23:57,920 --> 00:24:01,240 Speaker 1: warm up, at least on the temporary basis. And so 489 00:24:01,320 --> 00:24:05,640 Speaker 1: we have seen yields backing up to post to pre 490 00:24:05,720 --> 00:24:10,160 Speaker 1: pandemic levels, although when we adjust those Treasury yields for inflation, 491 00:24:10,240 --> 00:24:13,480 Speaker 1: we're right back at zero. So you know, it's not 492 00:24:14,080 --> 00:24:16,640 Speaker 1: while it looks like a large move and yields, when 493 00:24:16,640 --> 00:24:19,200 Speaker 1: we take it in the context of how the economy 494 00:24:19,280 --> 00:24:22,320 Speaker 1: is performing at the moment, Uh, it's not the type 495 00:24:22,440 --> 00:24:25,840 Speaker 1: of backup in rates that could actually derail activity. So 496 00:24:26,240 --> 00:24:28,760 Speaker 1: I was kind of surprised to see the market largely 497 00:24:28,800 --> 00:24:31,879 Speaker 1: take this in stride. But but as expected, this is 498 00:24:31,920 --> 00:24:34,200 Speaker 1: a fed that is not going to be faced by 499 00:24:34,520 --> 00:24:38,640 Speaker 1: short term uh deviations in economic data. So they acknowledge 500 00:24:38,720 --> 00:24:41,680 Speaker 1: that yes, at one point nine trillion and fiscal stimulus 501 00:24:41,800 --> 00:24:46,359 Speaker 1: is going to dramatically change the growth profile for but 502 00:24:46,440 --> 00:24:49,479 Speaker 1: it's not going to have a long term implication for 503 00:24:49,720 --> 00:24:53,240 Speaker 1: either growth or inflation pressures in the economy. So this 504 00:24:53,359 --> 00:24:55,639 Speaker 1: is a fad that still thinks it's too early to 505 00:24:55,720 --> 00:24:59,000 Speaker 1: even talk about talking about the exit. Steve, do you 506 00:24:59,080 --> 00:25:01,399 Speaker 1: agree with that a assessment? How do you see it? 507 00:25:01,840 --> 00:25:04,400 Speaker 1: And is it fed right? And kind of their outlook, 508 00:25:04,560 --> 00:25:06,480 Speaker 1: you know, feeling like we can keep rates low for 509 00:25:06,520 --> 00:25:13,439 Speaker 1: a long time, that's right. Uh, it's actually quite phenomenal 510 00:25:13,560 --> 00:25:18,240 Speaker 1: how how well J. Powell navigated around this issue of 511 00:25:18,280 --> 00:25:21,520 Speaker 1: inflation and what are they going to do and what 512 00:25:21,640 --> 00:25:27,000 Speaker 1: is their outlook. I think what was really impressive was 513 00:25:27,119 --> 00:25:30,320 Speaker 1: that he just well not eat but but the F 514 00:25:30,400 --> 00:25:34,840 Speaker 1: one m C just went into it head first. There 515 00:25:34,960 --> 00:25:38,240 Speaker 1: there's some very of economic rejections. They increased the growth 516 00:25:38,240 --> 00:25:41,600 Speaker 1: outlook to six and a half percent for one versus 517 00:25:41,600 --> 00:25:45,560 Speaker 1: four point two, unemployment lower at three point nine percent, 518 00:25:46,160 --> 00:25:51,800 Speaker 1: and then interestingly right up front headline inflation at two 519 00:25:51,840 --> 00:25:58,000 Speaker 1: point four in one UH and and then two percent 520 00:25:58,160 --> 00:26:03,480 Speaker 1: in two core inflation two. So so when we see 521 00:26:03,520 --> 00:26:07,040 Speaker 1: the numbers start to chick up, they're already out there 522 00:26:07,200 --> 00:26:10,359 Speaker 1: in in front of it that they're saying, we expect this, 523 00:26:10,720 --> 00:26:13,840 Speaker 1: and what we're doing has all of this in mind. 524 00:26:14,600 --> 00:26:17,800 Speaker 1: Uh and that should take a lot of the second 525 00:26:17,880 --> 00:26:20,919 Speaker 1: guesting and and jitters out of the market when it 526 00:26:21,000 --> 00:26:25,080 Speaker 1: comes as it will. Well, and Carl, was there something 527 00:26:25,119 --> 00:26:27,880 Speaker 1: that wasn't asked that you kind of wish had been 528 00:26:28,040 --> 00:26:30,480 Speaker 1: of J. Powell's or something that or after the press 529 00:26:30,480 --> 00:26:32,480 Speaker 1: commerce you're still thinking, God, I'd like to go back 530 00:26:32,960 --> 00:26:36,520 Speaker 1: and kind of push him on some point. Well, Carol, 531 00:26:36,880 --> 00:26:41,119 Speaker 1: the million dollar question, or maybe we should say multi 532 00:26:41,240 --> 00:26:44,800 Speaker 1: trillion dollar question, as it pertains that the quantitative easing 533 00:26:45,400 --> 00:26:48,320 Speaker 1: is this question or that the notion about what the 534 00:26:48,400 --> 00:26:51,320 Speaker 1: exit sequence is going to be like, So we know 535 00:26:51,480 --> 00:26:53,960 Speaker 1: from the get go it's pointless to ask him about 536 00:26:54,320 --> 00:26:56,760 Speaker 1: when they're gonna raise rates or when they're gonna paper 537 00:26:56,760 --> 00:26:59,919 Speaker 1: asset purchases because it's going to give those canned answer 538 00:27:00,080 --> 00:27:02,280 Speaker 1: is that are that are well thought out answers, but 539 00:27:02,320 --> 00:27:05,000 Speaker 1: that that he's been giving for you know, the broader 540 00:27:05,080 --> 00:27:09,080 Speaker 1: course of six months to a year depending on economic conditions, etcetera. 541 00:27:09,280 --> 00:27:10,840 Speaker 1: Heads right, He's not going to come out and say, 542 00:27:10,840 --> 00:27:16,120 Speaker 1: folks going to do this right, right exactly, So, as 543 00:27:16,160 --> 00:27:17,720 Speaker 1: he said in his own words, we're not going to 544 00:27:17,800 --> 00:27:20,760 Speaker 1: put pins in the calendar on those issues. It depends 545 00:27:20,760 --> 00:27:24,119 Speaker 1: on economic data. But what is a very important question 546 00:27:24,200 --> 00:27:27,440 Speaker 1: here is the sequence of the exits. So if we 547 00:27:27,520 --> 00:27:31,560 Speaker 1: look back to the FED response after the two seven 548 00:27:31,600 --> 00:27:36,600 Speaker 1: to two nine two nine recession, they hike rates by 549 00:27:36,600 --> 00:27:39,360 Speaker 1: about a hundred basis points before they started to let 550 00:27:39,400 --> 00:27:43,040 Speaker 1: the balance sheet unwind. The question is will they follow 551 00:27:43,119 --> 00:27:46,360 Speaker 1: the same playbook this time around or is it kind 552 00:27:46,400 --> 00:27:49,560 Speaker 1: of a first in, last out approach where maybe they 553 00:27:49,600 --> 00:27:53,640 Speaker 1: deemed the policy response last time around to be ineffective, 554 00:27:53,920 --> 00:27:57,080 Speaker 1: where they would like to taper asset purchases first and 555 00:27:57,119 --> 00:27:59,399 Speaker 1: then follow through with rate increases, So that would have 556 00:27:59,520 --> 00:28:03,159 Speaker 1: dramatic consequences for the financial markets. And unfortunately we're just 557 00:28:03,240 --> 00:28:06,440 Speaker 1: not getting that question asked to the chairman just yet. 558 00:28:06,480 --> 00:28:08,520 Speaker 1: A great point, Uh, Steve, let me put that question 559 00:28:08,560 --> 00:28:10,280 Speaker 1: to you. Is there something that you kind of wish 560 00:28:10,640 --> 00:28:12,560 Speaker 1: you could go back now and you know, add on 561 00:28:12,600 --> 00:28:14,520 Speaker 1: to the questioning of J. Powell or push them on, 562 00:28:14,720 --> 00:28:19,120 Speaker 1: you know, one particular point. Well, it would be really 563 00:28:19,160 --> 00:28:23,960 Speaker 1: to get a better understanding of of maximum employment and 564 00:28:24,200 --> 00:28:28,040 Speaker 1: the variety of labor market indicators that they're using. It's 565 00:28:28,080 --> 00:28:31,440 Speaker 1: not just the unemployment rate, it's not just labor force participation. 566 00:28:31,840 --> 00:28:36,720 Speaker 1: But they clearly have something in mind about what maximum 567 00:28:36,760 --> 00:28:40,600 Speaker 1: employment looks like and how that has to be spread 568 00:28:40,600 --> 00:28:45,680 Speaker 1: out with with some equality through the disadvantaged sectors of 569 00:28:45,720 --> 00:28:49,200 Speaker 1: the labor market. Uh and uh. And they talk about 570 00:28:49,200 --> 00:28:53,160 Speaker 1: it some, but but never with enough specificity that that 571 00:28:53,240 --> 00:28:56,480 Speaker 1: anyone just trying to read the tea leaves separately could 572 00:28:56,800 --> 00:29:00,520 Speaker 1: could come up with a judgment. Um. I understand that 573 00:29:00,560 --> 00:29:02,520 Speaker 1: they don't want to chip their hand on that, but 574 00:29:02,520 --> 00:29:04,240 Speaker 1: but I sure would love to ask the question and 575 00:29:04,280 --> 00:29:06,600 Speaker 1: here an answer. Yeah, Well, you know, and I've got 576 00:29:06,600 --> 00:29:08,000 Speaker 1: to just put this to you guys. You know, it 577 00:29:08,040 --> 00:29:12,080 Speaker 1: does feel like I talked about kind of a Goldilocks economy, Like, 578 00:29:12,400 --> 00:29:17,120 Speaker 1: could we possibly, Carl, be getting back to that? I 579 00:29:17,160 --> 00:29:19,720 Speaker 1: think very much we're getting back to that, Carol. We're 580 00:29:19,720 --> 00:29:22,000 Speaker 1: looking for economic growth. I know the FED is taking 581 00:29:22,040 --> 00:29:24,240 Speaker 1: growth at about six and a half percent this year. 582 00:29:24,920 --> 00:29:28,520 Speaker 1: My own team is forecasting growth closer to seven point 583 00:29:28,640 --> 00:29:31,680 Speaker 1: seven percent of this year. So we have very robust 584 00:29:31,720 --> 00:29:35,240 Speaker 1: growth numbers, which should drive the unemployment rate lower. Although 585 00:29:35,280 --> 00:29:38,960 Speaker 1: I should add a footnote of caution. Those unemployment rate 586 00:29:38,960 --> 00:29:42,640 Speaker 1: projections that FED put out there do not necessarily assume 587 00:29:43,120 --> 00:29:47,240 Speaker 1: that participation in the economy rebounds where we were the pandemic. 588 00:29:47,280 --> 00:29:50,200 Speaker 1: So keep in mind that even though the last unemployment 589 00:29:50,280 --> 00:29:54,600 Speaker 1: rate was reported at about six point two percent, if 590 00:29:54,600 --> 00:29:57,760 Speaker 1: we adjusted for the collapse and participation that happened during 591 00:29:57,760 --> 00:30:00,720 Speaker 1: the pandemic, we would instead be talking of an unemployment 592 00:30:00,800 --> 00:30:04,600 Speaker 1: rate closer to nine. So, uh, you know, those forecasts 593 00:30:04,680 --> 00:30:09,200 Speaker 1: don't fully take that into account. But back to Steve's point, Uh, 594 00:30:09,320 --> 00:30:12,400 Speaker 1: the answer Steve, look all around you. You're in Missouri. 595 00:30:12,480 --> 00:30:16,440 Speaker 1: It's the show me state. Uh. And so Powell and 596 00:30:16,640 --> 00:30:21,440 Speaker 1: his committee they want to see the evidence of wage 597 00:30:21,480 --> 00:30:25,120 Speaker 1: pressures in the economy, so they wonder where full employment is, uh, 598 00:30:25,160 --> 00:30:27,880 Speaker 1: they'll know that they've gotten there. It used to be 599 00:30:27,960 --> 00:30:30,440 Speaker 1: talking about the whites of the eyes of inflation. Now 600 00:30:30,480 --> 00:30:33,120 Speaker 1: it's the coattails of inflation, where they actually need to 601 00:30:33,160 --> 00:30:37,040 Speaker 1: see inflation marching past them to actually know that we've 602 00:30:37,040 --> 00:30:39,880 Speaker 1: reached full employment in the economy. We've gone through four 603 00:30:39,960 --> 00:30:43,240 Speaker 1: percent in the recent past was an inflationary We were 604 00:30:43,240 --> 00:30:45,800 Speaker 1: at three and a half percent before the pandemic set in, 605 00:30:46,160 --> 00:30:48,960 Speaker 1: and actually we're seeing inflation and wage pressures trending in 606 00:30:49,000 --> 00:30:51,640 Speaker 1: the wrong direction. So while the said doesn't want to 607 00:30:51,640 --> 00:30:55,360 Speaker 1: put a number around this, it's probably low three percent 608 00:30:55,680 --> 00:30:59,040 Speaker 1: or maybe even lower territory, which is wow to things. Steven, 609 00:30:59,040 --> 00:31:00,360 Speaker 1: then I want you to kind of back to this. 610 00:31:00,480 --> 00:31:02,480 Speaker 1: But there's two things that came from j Pal saying 611 00:31:02,480 --> 00:31:04,600 Speaker 1: it's going to take time for ten million to return 612 00:31:04,680 --> 00:31:08,120 Speaker 1: to work. He also said the time of tight unemployment inflation, 613 00:31:08,800 --> 00:31:11,400 Speaker 1: that tie is long gone. So Steve come on in 614 00:31:11,480 --> 00:31:16,760 Speaker 1: and layer on this conversation. Well, there there's probably closer 615 00:31:16,800 --> 00:31:20,720 Speaker 1: to twenty million people who are who are unemployed. Um 616 00:31:21,040 --> 00:31:23,400 Speaker 1: to the point that Karl made earlier, and I think 617 00:31:23,800 --> 00:31:27,880 Speaker 1: I think most recently reported last week is that there 618 00:31:27,880 --> 00:31:31,320 Speaker 1: are twenty million people still receiving in some form of 619 00:31:31,680 --> 00:31:36,720 Speaker 1: unemployment benefits related to the pandemic or otherwise. Uh. And 620 00:31:36,800 --> 00:31:39,600 Speaker 1: that's a huge number. Uh. And when you when you 621 00:31:39,640 --> 00:31:42,480 Speaker 1: when you try to count it up, obviously you get, 622 00:31:42,520 --> 00:31:46,360 Speaker 1: as Carl said, the reduction in labor force participation, the 623 00:31:46,400 --> 00:31:50,640 Speaker 1: people who haven't got their jobs back. Um, within labor 624 00:31:50,680 --> 00:31:54,600 Speaker 1: force participation, the number of five million people who left 625 00:31:54,600 --> 00:31:56,520 Speaker 1: the labor force just to take care of their kids 626 00:31:56,520 --> 00:32:01,680 Speaker 1: when schools closed. Uh. And all of that comes back together. 627 00:32:02,320 --> 00:32:06,720 Speaker 1: And so when when jar poll says, uh, this isn't 628 00:32:06,720 --> 00:32:09,880 Speaker 1: about estimates and guesses that we we want to see 629 00:32:10,200 --> 00:32:16,760 Speaker 1: substantial actual progress, Carl said, marching past us with higher 630 00:32:16,760 --> 00:32:22,120 Speaker 1: employment and in placing. Uh and to see it moving 631 00:32:22,200 --> 00:32:26,160 Speaker 1: beyond beyond our target. Right. And I think that's that's 632 00:32:26,200 --> 00:32:29,280 Speaker 1: that's critical. Uh, what with with the concern and care 633 00:32:29,320 --> 00:32:33,000 Speaker 1: they have about the the employment situation, that that really 634 00:32:33,080 --> 00:32:35,640 Speaker 1: is going to be their focus. Uh. Maybe to the 635 00:32:35,680 --> 00:32:39,360 Speaker 1: detriment of price stability, but I think we all hope 636 00:32:39,360 --> 00:32:41,880 Speaker 1: not for the reason you just said, Carol, you know 637 00:32:41,960 --> 00:32:45,600 Speaker 1: that pie seems to be broken Yeah, and the FETs. 638 00:32:45,640 --> 00:32:47,840 Speaker 1: She's saying that several times that you know, the FETE 639 00:32:47,920 --> 00:32:51,640 Speaker 1: is eyeing actual progress, not forecast progress, in saying that 640 00:32:51,720 --> 00:32:55,240 Speaker 1: the things that they're putting out right now are forecasts. Guys, Um, 641 00:32:55,280 --> 00:32:59,479 Speaker 1: thank you so much. Really smart conversation here. Dr Steven Skanky, 642 00:32:59,600 --> 00:33:02,400 Speaker 1: great check in with him again, chief economic advisor at 643 00:33:02,440 --> 00:33:04,560 Speaker 1: kill Point, former U. S. Treasury and White House National 644 00:33:04,640 --> 00:33:07,960 Speaker 1: Security Council staff member with us from Missouri. As we 645 00:33:08,040 --> 00:33:11,520 Speaker 1: like to say, Carl Rickadonna, the best chief US economist 646 00:33:11,560 --> 00:33:14,320 Speaker 1: at Bloomberg Economics, with us on the phone in New Jersey. 647 00:33:14,560 --> 00:33:18,560 Speaker 1: This is Bloomberg Business Week with Carol Masser and Bloomberg 648 00:33:18,640 --> 00:33:23,080 Speaker 1: Quick Takes. Tim Stinovich from Bloomberg Radio. Let's talk about 649 00:33:23,360 --> 00:33:25,640 Speaker 1: the Drive to the close with David Speaker. He's president 650 00:33:25,680 --> 00:33:28,840 Speaker 1: and chief investment officer at Guidestone Capital Management. Sixteen point 651 00:33:28,880 --> 00:33:31,840 Speaker 1: three billion in assets under management, and there are small 652 00:33:31,880 --> 00:33:34,120 Speaker 1: cap equity fund by the way, up nearly eighteen percent 653 00:33:34,240 --> 00:33:36,240 Speaker 1: year to date, on par with the rise in the 654 00:33:36,680 --> 00:33:40,920 Speaker 1: Russell two thousand. David with us on the phone from Dallas. David, uh, 655 00:33:41,000 --> 00:33:45,160 Speaker 1: interesting market year already and it's only mid March. How 656 00:33:45,160 --> 00:33:47,200 Speaker 1: do you see it, and how does what the Feds 657 00:33:47,200 --> 00:33:49,920 Speaker 1: say you think play into the market play for the 658 00:33:49,960 --> 00:33:52,600 Speaker 1: rest of the year. Well, thanks for having me on, Carroll, 659 00:33:52,680 --> 00:33:55,239 Speaker 1: and I would say, yes, it's been very interesting, and 660 00:33:55,560 --> 00:33:57,840 Speaker 1: clearly the market liked with the hurt from the Fed today, 661 00:33:57,880 --> 00:34:03,520 Speaker 1: a very devilish tone. No hikes until continuing to buy 662 00:34:03,600 --> 00:34:07,719 Speaker 1: bonds and and and and do qui into the foreseeable future. 663 00:34:08,360 --> 00:34:10,400 Speaker 1: That's really been the key ever since the market bottom 664 00:34:10,400 --> 00:34:12,080 Speaker 1: a year ago, has been with the FETE has done 665 00:34:12,080 --> 00:34:14,280 Speaker 1: in terms of stimulus, and now we've got more fiscal 666 00:34:14,280 --> 00:34:18,080 Speaker 1: stimulus courtesy of the federal government. That's also a fueling 667 00:34:18,120 --> 00:34:21,480 Speaker 1: stock prices. Ultimately, what we want to see though, is 668 00:34:21,520 --> 00:34:25,520 Speaker 1: a sustainable economic recovery fueled by consumer spending. Now, we 669 00:34:25,560 --> 00:34:28,440 Speaker 1: had weaker than expected consumer spending in February, but that 670 00:34:28,520 --> 00:34:31,759 Speaker 1: was pre stimulus. Um, we're getting better. Just a lot 671 00:34:31,760 --> 00:34:33,680 Speaker 1: of snow. There was a lot of stuff going on, 672 00:34:33,840 --> 00:34:36,040 Speaker 1: right Yeah, yeah, a lot of snow, a lot of weather. 673 00:34:36,440 --> 00:34:39,080 Speaker 1: We had some bad economic data. But going forward, the 674 00:34:39,120 --> 00:34:41,520 Speaker 1: stimulus should be a key and and we really feel 675 00:34:41,560 --> 00:34:43,680 Speaker 1: like this year we're going to see very strong economic 676 00:34:43,719 --> 00:34:45,840 Speaker 1: growth and the markets should respond to that well. And 677 00:34:45,840 --> 00:34:47,759 Speaker 1: it's interesting. I mean, listen, we have a story on 678 00:34:47,760 --> 00:34:49,600 Speaker 1: the Bloomberg. It's one of our most red Americans have 679 00:34:49,719 --> 00:34:53,640 Speaker 1: one point seven trillion to burn and revenge spending binge, 680 00:34:53,840 --> 00:34:56,640 Speaker 1: and you know, just talking about you know, we've been 681 00:34:56,680 --> 00:34:59,440 Speaker 1: all pent up not spending money on anything, and you 682 00:34:59,440 --> 00:35:04,000 Speaker 1: know that as the economy reopens, the expectation is that 683 00:35:04,000 --> 00:35:06,959 Speaker 1: people are going to be out there spending big time. Yeah, 684 00:35:07,080 --> 00:35:09,200 Speaker 1: that's a great point, Caroline. One of the things that 685 00:35:09,280 --> 00:35:11,880 Speaker 1: we like in in our Small Calf Equity Fund, the 686 00:35:11,880 --> 00:35:14,120 Speaker 1: guides Own Small Calf Equity Fund, is the opportunity to 687 00:35:14,160 --> 00:35:17,200 Speaker 1: see leisure spending take off. And so what you saw 688 00:35:17,360 --> 00:35:20,040 Speaker 1: during the pandemic was a lot more spending on things 689 00:35:20,080 --> 00:35:25,200 Speaker 1: that could support outdoor activities watercraft and bicycles and golf equipment. 690 00:35:25,200 --> 00:35:27,359 Speaker 1: So a company like Malibu Boats that trades at a 691 00:35:27,480 --> 00:35:31,520 Speaker 1: very attractive sixteen times forward earnings multiple, a leader in 692 00:35:31,920 --> 00:35:35,200 Speaker 1: high performance watercraft production, and a company that's mean some 693 00:35:35,280 --> 00:35:37,799 Speaker 1: really nice recent acquisitions, we think they'll benefit from this 694 00:35:37,880 --> 00:35:41,600 Speaker 1: trend as what companies like Dix Sporting Goods and Callaway Golf. 695 00:35:41,640 --> 00:35:44,319 Speaker 1: This is something that's going to continue as companies as 696 00:35:44,440 --> 00:35:47,359 Speaker 1: individuals start spending that money they've been holding onto over 697 00:35:47,360 --> 00:35:49,920 Speaker 1: the past year. This is a pretty remarkable stock tickers 698 00:35:50,040 --> 00:35:51,359 Speaker 1: M b u U and I have to say, I've 699 00:35:51,360 --> 00:35:54,680 Speaker 1: been talking and uh folks, I know, talking with people 700 00:35:54,680 --> 00:35:57,160 Speaker 1: who are in the boating industry and sell boats. They said, 701 00:35:57,200 --> 00:35:59,600 Speaker 1: it has never been busier than what they have been 702 00:35:59,600 --> 00:36:02,080 Speaker 1: seeing for the last year or so, and in particular 703 00:36:02,120 --> 00:36:03,640 Speaker 1: what we're seeing right now. But you look at m 704 00:36:03,640 --> 00:36:05,759 Speaker 1: b u U. Uh, that was a stock that was 705 00:36:05,800 --> 00:36:09,839 Speaker 1: trading at sixteen bucks at the end of TIFT. It's 706 00:36:09,840 --> 00:36:12,960 Speaker 1: now an eight seven dollar stock. It has been consistently 707 00:36:13,040 --> 00:36:17,120 Speaker 1: higher and higher each year. Specifically, another name that you 708 00:36:17,200 --> 00:36:21,360 Speaker 1: like is um an I T staffing company. The takers 709 00:36:21,400 --> 00:36:23,919 Speaker 1: A s g and Virginia based talk to us about 710 00:36:23,920 --> 00:36:26,680 Speaker 1: this company. Uh yeah, A s g N is a 711 00:36:26,719 --> 00:36:30,160 Speaker 1: company that provides staffing solutions in the I T industry. 712 00:36:30,160 --> 00:36:31,799 Speaker 1: And if you think about where the growth is in 713 00:36:31,840 --> 00:36:35,160 Speaker 1: the economy today, I T clearly as a leader. Uh. 714 00:36:35,320 --> 00:36:37,000 Speaker 1: We don't want to forget the fact that I T 715 00:36:37,160 --> 00:36:39,200 Speaker 1: companies and the I T stocks are not performing well. 716 00:36:39,239 --> 00:36:41,960 Speaker 1: But longer term I T growth is going to be 717 00:36:42,000 --> 00:36:44,480 Speaker 1: paramount for the growth of the economy. So a company 718 00:36:44,520 --> 00:36:48,000 Speaker 1: like a s g N that can provide staffing solutions 719 00:36:48,000 --> 00:36:51,160 Speaker 1: for technology companies. Um is going to do very very well. 720 00:36:51,200 --> 00:36:53,640 Speaker 1: And they've also got a very attractive growth oriented m 721 00:36:53,680 --> 00:36:56,360 Speaker 1: and a strategy that's very additive to their growth. And 722 00:36:56,400 --> 00:36:58,520 Speaker 1: so that's another company that we own in the guides 723 00:36:58,600 --> 00:37:01,040 Speaker 1: one small cath equity fund that we're we're very favorable 724 00:37:01,080 --> 00:37:05,960 Speaker 1: towards nineteen up another eighteen percent last year. UM. Let 725 00:37:05,960 --> 00:37:08,080 Speaker 1: me also ask you really quickly about Q two holding. 726 00:37:08,120 --> 00:37:10,360 Speaker 1: It's down about fifteen percent this year. Ticker is Q 727 00:37:10,520 --> 00:37:14,080 Speaker 1: two qt w O just got about thirty five seconds. 728 00:37:14,239 --> 00:37:16,799 Speaker 1: It's got a pretty high short position to what's your 729 00:37:16,800 --> 00:37:19,839 Speaker 1: take here, Well, the valuation is kind of steep because 730 00:37:19,880 --> 00:37:21,799 Speaker 1: they've made a lot of uh, they've got a lot 731 00:37:21,800 --> 00:37:24,560 Speaker 1: of expenses related to their growth, but the popline revenue 732 00:37:24,560 --> 00:37:27,880 Speaker 1: growth is going to be or more for the foreseeable future. 733 00:37:28,160 --> 00:37:31,080 Speaker 1: They provide cloud based services for small and midsides banks 734 00:37:31,320 --> 00:37:35,440 Speaker 1: and seventy of their revenues are recurring, their subscription based 735 00:37:35,760 --> 00:37:37,840 Speaker 1: and if you think about where the activity is going 736 00:37:37,880 --> 00:37:39,879 Speaker 1: to be, the banking sector is going to benefit from 737 00:37:39,880 --> 00:37:42,120 Speaker 1: this rebound in the economy and all the stimulus, and 738 00:37:42,160 --> 00:37:44,440 Speaker 1: a company like Q two will be will positioned to 739 00:37:44,480 --> 00:37:46,600 Speaker 1: benefit from that as well. Yeah, forward looking pe I 740 00:37:46,719 --> 00:37:49,799 Speaker 1: th seventy five. You weren't kidding that. It's deep. Um. 741 00:37:49,800 --> 00:37:51,840 Speaker 1: Hey listen, good to check in with you really appreciate it. 742 00:37:51,920 --> 00:37:55,200 Speaker 1: David Speaker, President and Chief Investment Officer of guide Stone 743 00:37:55,280 --> 00:37:59,000 Speaker 1: Capital Management, sixteen point three billion in assets under management, 744 00:37:59,000 --> 00:38:03,600 Speaker 1: with us on the phone for Dallas. Thanks for listening 745 00:38:03,600 --> 00:38:07,040 Speaker 1: to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, 746 00:38:07,160 --> 00:38:09,320 Speaker 1: or Bloomberg dot com, and you can also listen to 747 00:38:09,320 --> 00:38:11,919 Speaker 1: our radio show at two pm Eastern on Bloomberg Radio 748 00:38:12,040 --> 00:38:14,800 Speaker 1: or watch us on YouTube. Search to Bloomberg Global News