WEBVTT - Surveillance: US Consumer Spending Stays Hot 0:00:05.080 --> 0:00:08.280 This is the Bloomberg Surveillance Podcast. I'm Lisa A. 0:00:08.320 --> 0:00:11.640 Bromoids, along with Tom Keen and Jonathan Ferrell. Join us 0:00:11.680 --> 0:00:15.280 each day for insight from the best in economics, geopolitics, 0:00:15.320 --> 0:00:16.440 finance and investment. 0:00:16.760 --> 0:00:18.760 Subscribe to Bloomberg Surveillance. 0:00:18.320 --> 0:00:21.840 On demand on Apple, Spotify and anywhere you get your podcasts, 0:00:22.120 --> 0:00:25.200 and always on Bloomberg dot Com, the Bloomberg Terminal and 0:00:25.200 --> 0:00:26.440 the Bloomberg Business App. 0:00:27.240 --> 0:00:30.040 We're waiting for the PC data. We're joined by Mike 0:00:30.120 --> 0:00:34.400 Nicky Aron the Deak. So we're waiting for the personal spending, 0:00:34.760 --> 0:00:38.120 the deflator. Mike, will it be disinflationary? Roll of the dice, 0:00:38.159 --> 0:00:39.720 that's the question. We're waiting for the numbers to come 0:00:39.720 --> 0:00:42.200 down on the Bloomberg Terminal. 0:00:42.280 --> 0:00:45.519 Well, I got about four seconds until that happens. But 0:00:46.000 --> 0:00:49.200 the ideas we may get a little more disinflation. Let's 0:00:49.200 --> 0:00:52.280 find out from the Bureau of Economic Analysis, and here 0:00:52.280 --> 0:00:55.720 come the numbers. And we'll start with the inflation numbers. 0:00:55.760 --> 0:00:58.960 They come in hotter than anticipated, up four tenths of 0:00:58.960 --> 0:01:01.040 a percent. I don't know month over a month basis. 0:01:01.080 --> 0:01:04.319 For the headline, the core comes in up a three 0:01:04.400 --> 0:01:07.720 tenths which is about what was expected, although there was 0:01:07.760 --> 0:01:11.720 some leaning towards maybe a little lower number year over year. 0:01:11.800 --> 0:01:14.560 Now we see the PCE headline number at three point 0:01:14.640 --> 0:01:17.919 four percent, that's down from three to five, and the 0:01:17.959 --> 0:01:20.679 core comes in at three seven, down from three to nine. 0:01:20.840 --> 0:01:24.399 Both of those expected. All the people who like to 0:01:24.440 --> 0:01:28.039 dive into all those numbers and figure out what actually 0:01:28.160 --> 0:01:32.320 changed will be with us in a few seconds. Personal 0:01:32.360 --> 0:01:35.240 income up three tenths. That's lower than the prior month 0:01:35.240 --> 0:01:38.600 of four tenths gain, but also lower than what was 0:01:38.640 --> 0:01:43.319 anticipated a four tenths gain. Spending up seven tenths, I 0:01:43.319 --> 0:01:44.039 mean not strong. 0:01:44.120 --> 0:01:45.640 On the back of that, on the back of that 0:01:45.680 --> 0:01:47.119 GDP and the connginut. 0:01:46.800 --> 0:01:48.800 Well, this number is in the GDP because this is 0:01:48.800 --> 0:01:52.279 a September number. It was the third month of the quarter, 0:01:52.400 --> 0:01:55.000 so he kind of sort of backed out the numbers 0:01:55.040 --> 0:01:57.520 and anticipated that this would be fairly strong. We were 0:01:57.600 --> 0:02:00.840 up four tenths the prior month. The question is now 0:02:00.880 --> 0:02:06.320 do we continue to see that spending happen, Because if 0:02:06.360 --> 0:02:09.480 incomes are falling behind and they have been the spending 0:02:09.520 --> 0:02:11.880 levels over the last couple of months, that would suggest 0:02:11.919 --> 0:02:14.640 that maybe there's a pullback ahead. Now I'm not the 0:02:14.639 --> 0:02:15.200 expert here. 0:02:15.200 --> 0:02:19.240 There's one more there is, indeed, La Rain chief economists 0:02:19.240 --> 0:02:20.440 out with us this morning. 0:02:21.280 --> 0:02:25.799 First take, I think that we continue to see inflation 0:02:26.400 --> 0:02:30.799 coming down, but it's still uncomfortably It's still unacceptably high 0:02:31.120 --> 0:02:33.280 from the point of view of the Fed, and I 0:02:33.280 --> 0:02:38.000 think the conversation as we go into next year continues 0:02:38.040 --> 0:02:41.040 to the options for the Fed continue to narrow because 0:02:41.080 --> 0:02:44.240 if inflation stays about where it is and it's going 0:02:44.240 --> 0:02:46.560 to take a long time for it to get closer 0:02:46.600 --> 0:02:50.000 to too, their room to maneuver should the economy. 0:02:49.639 --> 0:02:51.040 Slow at all, is going to be very narrow. 0:02:51.360 --> 0:02:54.240 And look by these numbers, it looks like the economy 0:02:54.280 --> 0:02:57.040 is just still incredibly strong. We know that from the 0:02:57.080 --> 0:03:00.760 GDP numbers that we already got, but I mean the 0:03:00.840 --> 0:03:04.480 spending has just by the households that has defied every 0:03:04.760 --> 0:03:07.840 expectation of it to slow, and it's accelerated so much 0:03:07.880 --> 0:03:08.600 in the third quarter. 0:03:08.800 --> 0:03:09.880 That's what's extraordinary. 0:03:10.040 --> 0:03:13.280 I think savings rate comes in a three point four percent. 0:03:13.320 --> 0:03:15.600 People have been watching that for some indication of whether 0:03:15.680 --> 0:03:17.359 or not they're going to run out of money in 0:03:17.400 --> 0:03:20.160 the American consumer. It's down from four percent and it's 0:03:20.160 --> 0:03:24.880 been a steady decline. But historically, before the pandemic, we 0:03:25.200 --> 0:03:28.160 used to say people spend what they make. They don't 0:03:28.520 --> 0:03:31.040 dip into savings the way people tend to think they do. 0:03:31.880 --> 0:03:35.000 And so if that's the case, then there's more of 0:03:35.000 --> 0:03:39.040 a case now for maybe a slow down. People don't 0:03:39.160 --> 0:03:41.480 have as much to dip into if they wanted to, 0:03:41.560 --> 0:03:43.840 but they're also not making as much as they were. 0:03:44.040 --> 0:03:46.120 Well, I had johnat Henry with me this morning from 0:03:46.240 --> 0:03:48.960 HSBC and she said, actually Americans are more likely to 0:03:49.000 --> 0:03:51.080 dip into their savings and spend, spend, spend right to 0:03:51.200 --> 0:03:51.800 the very end. 0:03:52.040 --> 0:03:54.200 But I want to bring you an idea. 0:03:54.040 --> 0:03:58.000 From UBS, which is Paul Donovan, where he said, you know, 0:03:58.000 --> 0:04:01.000 when we go to write the history of twenty twenties, 0:04:01.840 --> 0:04:05.800 do not bet against the headonism of the US consumer. 0:04:05.800 --> 0:04:06.760 It's very rich. I love it. 0:04:06.800 --> 0:04:08.480 I mean, there's a there's a brilliant wine place in 0:04:08.480 --> 0:04:09.640 London called Hedonism Wines. 0:04:09.680 --> 0:04:12.560 Whole other story the hedonism. You can tell us that later. 0:04:12.880 --> 0:04:13.520 I could tell you. 0:04:13.600 --> 0:04:16.599 That later, but I want to understand from you laya 0:04:16.680 --> 0:04:21.039 the hedonism of the US consumer. Is that real or 0:04:21.200 --> 0:04:23.080 do you think that runs out of mileage as well. 0:04:23.160 --> 0:04:25.720 Next sure, listen, he's got a point. That's a really 0:04:25.720 --> 0:04:27.920 colorful way to put it. But that's what the third 0:04:28.000 --> 0:04:33.160 quarter felt like. Between the headlines about the concerts, Yeah, 0:04:33.200 --> 0:04:35.440 all of that, and then and all everyone who followed. 0:04:35.760 --> 0:04:38.479 I think, you know, people seem to be looking for 0:04:38.520 --> 0:04:41.960 that next experience and looking to pay whatever is required 0:04:42.000 --> 0:04:45.719 to get it. You know, this issue of savings has 0:04:45.760 --> 0:04:50.000 gotten so complicated because we of course have the excess 0:04:50.040 --> 0:04:55.240 savings that accumulated during the shutdown. Is that more you know, 0:04:55.320 --> 0:04:58.360 bucketed with these you know sort of now the highest 0:04:58.480 --> 0:05:02.120 quintile of quartile of household that sort of maybe aren't 0:05:02.160 --> 0:05:03.680 going to spend them as much. We know that that 0:05:03.720 --> 0:05:06.560 access savings is run out for a lot of the 0:05:06.680 --> 0:05:08.600 lower you know sort of strata. 0:05:08.839 --> 0:05:10.080 The other seventy. 0:05:09.720 --> 0:05:11.719 Five percent of us, we're not in that upper quintal. 0:05:11.760 --> 0:05:15.400 I think as we think about it, people, the normal people, 0:05:15.640 --> 0:05:19.640 I think, and yet you know, we just see the 0:05:19.839 --> 0:05:24.840 strong job growth I think reinforces the foundation of the household, 0:05:25.240 --> 0:05:29.040 and we just see this reacceleration is really unexpected in. 0:05:29.040 --> 0:05:34.640 Terms of your hedonism. Example, here services spending went up 0:05:34.680 --> 0:05:37.480 eight tenths whereas goods spending went up seven tents. There 0:05:37.480 --> 0:05:39.720 was always a story about people switching away from goods, 0:05:39.720 --> 0:05:42.640 but they still seem to be spending a lot on goods. 0:05:43.040 --> 0:05:45.159 Services don't go into the retail sales numbers that we 0:05:45.200 --> 0:05:48.760 got earlier this month, except for bars and drinking places 0:05:49.279 --> 0:05:52.960 fitting your theme, but eight tenths of a percent to 0:05:53.160 --> 0:05:56.400 gain for services pretty strong. So it looks like people 0:05:56.480 --> 0:05:59.520 were spending money during the third quarter on all sorts 0:05:59.560 --> 0:05:59.919 of things. 0:06:00.000 --> 0:06:02.120 I do think there's an interesting dynamic here, which is 0:06:02.160 --> 0:06:05.320 that if you look at consumer confidence, it's still well 0:06:05.360 --> 0:06:09.240 below where it was before the pandemic, and that's, you know, 0:06:09.279 --> 0:06:10.600 despite strong growth. 0:06:10.800 --> 0:06:12.359 So can you tie those two together. 0:06:12.480 --> 0:06:14.599 You know that the consumer confidence is being a little 0:06:14.640 --> 0:06:18.160 bit battered, but the spending it remains unabated. 0:06:18.680 --> 0:06:21.560 To me, it really, I think inflation is something that 0:06:21.640 --> 0:06:25.440 is still really casting a long shadow over the household, 0:06:25.480 --> 0:06:28.120 because you know, when I'm not here, I'm the mom 0:06:28.160 --> 0:06:30.240 at the grocery store and I've got one bag of 0:06:30.240 --> 0:06:32.640 groceries and it still cost me ninety five dollars and 0:06:32.640 --> 0:06:34.520 I can't figure out what's in it, you know, So 0:06:34.600 --> 0:06:37.400 I think you know this idea that your over year 0:06:37.440 --> 0:06:40.640 inflation is coming down, but the sticker shock is still 0:06:40.640 --> 0:06:43.760 a very real and present pain point to household budgets. 0:06:43.800 --> 0:06:47.080 And Coca Cola are raising prices, and Netflix are raising prices, 0:06:47.480 --> 0:06:51.000 and there are a Whole and Apple TV they're raising 0:06:51.040 --> 0:06:54.040 prices as well, and we are moderately immune to those. 0:06:54.279 --> 0:06:56.240 Do you know that you'll still order a Coca Cola? 0:06:56.480 --> 0:06:58.840 You'll still order You'll still order your Netflix movie. 0:06:58.880 --> 0:07:01.839 Mike Well, I was looking here to see if we 0:07:01.839 --> 0:07:04.360 get super Core. I haven't got that number pulled out yet, 0:07:04.400 --> 0:07:07.760 but that's the one that the Chairman of the Fed 0:07:07.800 --> 0:07:10.560 says he likes the most. See if we have that 0:07:10.680 --> 0:07:15.560 number calculated yet, because you got to take out. 0:07:15.000 --> 0:07:18.840 And then the CPI number that had risen the most 0:07:19.000 --> 0:07:22.280 since you know, about a year, so it had. I 0:07:22.360 --> 0:07:24.280 think that's going to be a key piece of today's 0:07:24.280 --> 0:07:24.960 report too. 0:07:25.120 --> 0:07:27.600 Well, just looking at the bond market, it's virtually flat. 0:07:27.640 --> 0:07:29.560 I mean four eighty five is where we are on 0:07:29.640 --> 0:07:33.160 tenure government bonds. So there's a sort of a flat, 0:07:33.400 --> 0:07:37.160 sort of unknown entity within the bond market. Let's just 0:07:37.240 --> 0:07:40.040 check in on equities up for tenenths of one percent again, 0:07:40.080 --> 0:07:42.600 you've got an Amazon recovery and nice kicker there. It 0:07:42.640 --> 0:07:44.440 was up six percent at one juncture, giving a little 0:07:44.440 --> 0:07:47.600 bit back. You're looking at ten year years, just still 0:07:47.640 --> 0:07:52.160 incrementally rising. This morning at four eighty five, we just 0:07:52.240 --> 0:07:54.800 had Bmo in Lingen here with us saying look, the 0:07:54.840 --> 0:07:58.480 next three weeks will define where the endpoint is for 0:07:58.560 --> 0:08:01.560 the bond spike. Use oil is up one point ninety 0:08:01.560 --> 0:08:04.360 three percent this morning. Again there's more geopolitical anks with 0:08:05.280 --> 0:08:09.000 military action in Syria from the US side, and that 0:08:09.080 --> 0:08:12.840 has brought again a geopolitical bid back to the oil markets. 0:08:12.840 --> 0:08:16.720 But personal income rises zero point three percent. The estimate 0:08:16.840 --> 0:08:21.080 was for plus point four percent, So Mike this the 0:08:21.160 --> 0:08:24.400 takeaway from this is the core price index rises to 0:08:24.440 --> 0:08:28.160 three point seven percent, pretty much in line with the estimates. 0:08:28.360 --> 0:08:32.319 We're seeing disinflation, I mean O creative inflation is slowing down. 0:08:32.679 --> 0:08:36.200 It's not slowing down as perhaps fast as people would like. 0:08:36.280 --> 0:08:40.200 And to Lar's point, especially about the being the moment 0:08:40.200 --> 0:08:44.640 at the grocery store, prices go up at a slower rate, 0:08:44.760 --> 0:08:48.280 but they don't come down. So you're paying more for 0:08:49.120 --> 0:08:51.480 a lot of staples and they're going to just stay 0:08:51.480 --> 0:08:53.360 at that price. And so people look at that and 0:08:53.679 --> 0:08:57.440 they're still experiencing inflation, even if inflation is not as 0:08:57.480 --> 0:08:58.520 bad as it was before. 0:08:59.440 --> 0:09:02.880 What what happens then to this view in the market 0:09:02.920 --> 0:09:06.439 that we're going to get right cuts into twenty twenty 0:09:06.480 --> 0:09:08.599 four does not debate change. 0:09:09.200 --> 0:09:12.480 It's got to continue. The FED, I think now has 0:09:12.600 --> 0:09:16.560 to just continue to ring rate cut expectations out of 0:09:16.600 --> 0:09:19.320 that future's curve. I feel like this is the deal 0:09:19.320 --> 0:09:21.560 with the devil right now, because if you had told 0:09:21.600 --> 0:09:23.880 me that we were going to have GDP growth of 0:09:23.920 --> 0:09:25.760 almost five percent and the FED was not going to 0:09:25.840 --> 0:09:28.840 cut rates again, I would have just not believed that 0:09:29.000 --> 0:09:32.480 was a possible outcome. But FED future's markets are not 0:09:32.600 --> 0:09:35.280 pricing in another rate cut. Markets seem very convinced the 0:09:35.320 --> 0:09:37.320 Fed is done. And I think the only way that 0:09:37.400 --> 0:09:39.840 works is if we continue to get this drift higher 0:09:40.200 --> 0:09:42.600 in long term yields. And there's a room for that 0:09:42.960 --> 0:09:46.240 because today markets have seventy five basis points of rate 0:09:46.320 --> 0:09:48.840 cuts priced in for next year, So if the FED 0:09:48.880 --> 0:09:51.280 is going to kind of stay on hold, there's room 0:09:51.320 --> 0:09:53.240 for that to continue to come out, for long term 0:09:53.320 --> 0:09:54.800 rates to continue to move higher. 0:09:54.960 --> 0:09:57.680 How do you think they look at this in the Fed? 0:09:57.760 --> 0:10:00.560 In the Fed might give you look at this the 0:10:00.559 --> 0:10:03.920 top line is pce is it a four month high 0:10:03.960 --> 0:10:08.720 consumer spending picks up. It doesn't leave them that huge 0:10:08.760 --> 0:10:12.240 optionality to be very very dubbish, does it. 0:10:12.280 --> 0:10:14.800 They can just sit on this at the moment because 0:10:14.840 --> 0:10:18.040 they forecast in September, the last time they did forecast 0:10:18.040 --> 0:10:21.120 that we would see PCEE core at three point seven 0:10:21.160 --> 0:10:22.880 percent at the end of the year. Well, I'm with 0:10:23.000 --> 0:10:26.800 there bang on where we are. So most economists think 0:10:26.800 --> 0:10:28.480 with a couple of months to go, we're going to 0:10:28.480 --> 0:10:30.640 come in below that. So the Fed could argue its 0:10:30.960 --> 0:10:33.839 targets are being hit. And you mentioned Ian Ling, and 0:10:33.880 --> 0:10:37.360 he had a great note this morning about how we're 0:10:37.559 --> 0:10:43.120 starting to see more impacts from higher FED rates and 0:10:43.520 --> 0:10:47.080 that is slowly getting into the economy and we should 0:10:47.080 --> 0:10:48.880 see more. So the Fed is probably going to sit 0:10:48.880 --> 0:10:51.400 there and say what we're doing is working. We're at 0:10:51.440 --> 0:10:54.240 a level where inflation is still coming down. We don't 0:10:54.240 --> 0:10:56.400 have to go up more right now with all this 0:10:56.559 --> 0:10:58.640 uncertainty out there about what's going to happen. 0:10:58.880 --> 0:11:01.319 Well, and unless inflation is a nine percent there really 0:11:01.400 --> 0:11:04.760 is no emergency reason to raise rates. That's usually you know, 0:11:04.880 --> 0:11:06.960 not a thing. So they you know, to your point, 0:11:06.960 --> 0:11:10.959 they have the time and yet. To me, this increase 0:11:11.000 --> 0:11:14.720 in long term interest rates is the reason that they 0:11:14.760 --> 0:11:18.240 can be patient, and that is going to continue to 0:11:18.520 --> 0:11:20.920 sort of pump the brakes on activity. You know, when 0:11:20.920 --> 0:11:24.040 I look ahead at next year, my forecast is for 0:11:24.120 --> 0:11:27.040 slower growth. I think these higher interest rates have actually 0:11:27.080 --> 0:11:29.040 increased the chance of a recession, not decreased. 0:11:29.280 --> 0:11:33.520 Is that slower growth? No landing, soft landing, not hard landing. 0:11:33.840 --> 0:11:36.720 I think it has to be as soft landing. I 0:11:36.760 --> 0:11:39.120 still feel like there is very real risk of recession 0:11:39.160 --> 0:11:41.560 next year, and we cannot discount that. But all the 0:11:41.600 --> 0:11:43.880 reasons why we've been saying it might be a mild 0:11:43.920 --> 0:11:47.480 recession could also mean that you just end up with 0:11:47.520 --> 0:11:48.440 some sluggish growth. 0:11:48.960 --> 0:11:50.960 So, Mike, as we go to the close of the year, 0:11:51.000 --> 0:11:52.400 what's the next piece that you're going to hang your 0:11:52.400 --> 0:11:54.160 hat on in terms of dead We've got Michigan at 0:11:54.200 --> 0:11:55.040 University of Michigan. 0:11:55.800 --> 0:11:58.040 Yeah, I don't think that's going to move the needle 0:11:58.080 --> 0:12:01.080 a whole lot. But I think what we are going 0:12:01.160 --> 0:12:04.040 to focus on is all the data next week, particularly 0:12:04.800 --> 0:12:07.480 the ISM numbers and then jobs at the end of 0:12:07.520 --> 0:12:11.559 the week. The Fed meets on Wednesday, so they won't 0:12:11.559 --> 0:12:14.800 have the jobs figures, but at this point to get 0:12:14.800 --> 0:12:16.920 an idea of where they're going to go, and nobody 0:12:17.320 --> 0:12:19.559 is less than a two percent chance they do anything 0:12:19.600 --> 0:12:24.280 on Wednesday, but nobody expects that. But the question is 0:12:24.280 --> 0:12:28.640 then what happens January December, January, and the jobs report 0:12:28.640 --> 0:12:30.360 will contribute to that. That's what will. 0:12:30.200 --> 0:12:45.400 Be joining us is Isaac Boltanski, director of policy research 0:12:45.400 --> 0:12:47.680 at BTIG. Can you give us a sense, to Isaac, 0:12:48.000 --> 0:12:50.640 of just what kind of leader Mike Johnson is going 0:12:50.679 --> 0:12:53.840 to be? Can he find some sort of consensus within 0:12:53.880 --> 0:12:55.160 a very fractured party. 0:12:56.480 --> 0:12:59.200 I think the simple answer to that is now. I 0:12:59.240 --> 0:13:01.840 think I think that there are lots of folks who 0:13:01.840 --> 0:13:04.640 are breathing this deep sigh of relief because now there's 0:13:04.640 --> 0:13:07.520 someone with a gavel and we can begin handling the 0:13:07.520 --> 0:13:10.280 people's business again. But when you take a step back, 0:13:10.440 --> 0:13:13.800 you've got to see that the House Republican caucus is 0:13:13.800 --> 0:13:17.120 still deeply fractured. It's not clear how well they're going 0:13:17.160 --> 0:13:20.040 to be able to govern going forward. There's no semblance 0:13:20.040 --> 0:13:23.480 of bipartisanship anywhere on Capitol Hill, and frankly, Lisa I 0:13:23.520 --> 0:13:27.160 think that people are downplaying the risk associated with a 0:13:27.520 --> 0:13:31.440 prolonged government shutdown. I still think that is distinctly possible 0:13:31.480 --> 0:13:34.959 because we are nowhere, and I mean this nowhere when 0:13:34.960 --> 0:13:37.400 it comes to figuring out a way to fund the 0:13:37.400 --> 0:13:40.559 government and deal with all the supplemental funding requests that 0:13:40.600 --> 0:13:41.880 have been sent from the White House. 0:13:41.920 --> 0:13:43.439 There's a lot to impact there, and a lot of 0:13:43.480 --> 0:13:45.600 people have pushed backed against that and said that actually, 0:13:45.640 --> 0:13:47.880 the fact that we have a speaker makes it less 0:13:47.960 --> 0:13:49.920 likely that we will have a government shutdown. Are you 0:13:50.000 --> 0:13:52.640 disagreeing with that? Are you saying that basically this is 0:13:52.800 --> 0:13:57.040 just a window dressing over a pretty big fracture fissure 0:13:57.080 --> 0:13:57.920 in the Congress. 0:13:57.960 --> 0:14:02.080 In Congress, though, the unknown right now is how much 0:14:02.120 --> 0:14:05.240 of a honeymoon speaker the new speaker is going to get. 0:14:05.800 --> 0:14:07.800 But my sense when you start to look at some 0:14:07.960 --> 0:14:11.480 of the specific issues here and really hone in on 0:14:11.559 --> 0:14:15.640 things like Ukraine funded, or you take a step back 0:14:15.840 --> 0:14:18.120 and you look at the fact that we haven't even 0:14:18.160 --> 0:14:22.000 agreed on overall spending levels, I think it's incredibly difficult 0:14:22.000 --> 0:14:24.520 to believe that that this group is going to be 0:14:24.520 --> 0:14:28.120 able to easily avert a shutdown. My base case is 0:14:28.120 --> 0:14:30.280 that we are going to see a shutdown later this year. 0:14:30.440 --> 0:14:33.000 I don't think that's going to be a massive market 0:14:33.080 --> 0:14:37.640 moving event, but I do think that the getting the 0:14:37.720 --> 0:14:41.560 gabble to Speaker Johnson has lessened fears in the market, 0:14:41.560 --> 0:14:43.160 and that that's unfounded at this point. 0:14:43.880 --> 0:14:46.120 So the President wants a total of what one hundred 0:14:46.120 --> 0:14:50.720 and sixty two billion dollars from Congress across Ukraine, Israel, 0:14:50.960 --> 0:14:56.080 supplemental spending, et cetera. How contentious is this going to be? 0:14:56.520 --> 0:14:58.400 How much of a flashpoint is this going to be? 0:14:59.000 --> 0:15:01.280 Will it all be cojoin? Will it just be a 0:15:01.280 --> 0:15:04.360 great dissipation of this request. 0:15:05.200 --> 0:15:08.880 So first and foremost, they haven't even agreed on basic 0:15:08.960 --> 0:15:11.920 funding levels yet, right, so we're not even at a 0:15:11.960 --> 0:15:14.800 point of agreement over the normal funding levels, and that's 0:15:14.840 --> 0:15:16.360 going to be the fight for the next few weeks 0:15:16.600 --> 0:15:20.000 when we then dig into the supplementals, where you do 0:15:20.200 --> 0:15:23.120 have over one hundred billion in different ass I think 0:15:23.160 --> 0:15:26.520 that there is clearly political support for things like funding 0:15:26.640 --> 0:15:29.640 Israel and supporting Israel and it's battle with Hamas. I 0:15:29.640 --> 0:15:33.200 think that fourteen billion dollars is very likely to get done. 0:15:33.240 --> 0:15:36.560 There's clearly support for more money at the US southern border. 0:15:36.920 --> 0:15:40.160 I think that that's bipartisan and by Camel on Ukraine, 0:15:40.240 --> 0:15:42.479 it's going to be a little bit tougher. And note 0:15:42.560 --> 0:15:45.280 that this is something that the News Speaker has actually 0:15:45.680 --> 0:15:49.120 fought against in the past. Last night he did suggest 0:15:49.200 --> 0:15:51.720 that there is a way to move forward on Ukraine funding, 0:15:52.000 --> 0:15:54.360 but that they're going to have to be conditions attached 0:15:54.400 --> 0:15:56.960 to that. No one knows what those conditions are yet. 0:15:57.400 --> 0:15:58.960 Put it all together, and I think that there is 0:15:59.000 --> 0:16:02.640 a way forward on this spending package. I just think 0:16:02.640 --> 0:16:04.440 that we're going to have to go through the same 0:16:04.600 --> 0:16:07.960 type of pain that we were seeing before when Speaker 0:16:08.040 --> 0:16:09.240 McCarthy lost the gap. 0:16:09.680 --> 0:16:11.480 How long do you think this speaker lasts or do 0:16:11.520 --> 0:16:13.120 you think he is there for the duration? 0:16:14.320 --> 0:16:15.960 So what of the first things he's going to have 0:16:16.000 --> 0:16:18.120 to do is try to get rid of that motion 0:16:18.240 --> 0:16:21.880 to vacate which pulled Kevin McCarthy out of the chair. 0:16:22.680 --> 0:16:25.520 I think that this speaker has a decent runway to 0:16:25.520 --> 0:16:28.359 get into first quarter of next year at a minimum. 0:16:28.880 --> 0:16:31.560 My conversation suggests that there's a real focus on at 0:16:31.640 --> 0:16:34.960 least getting to April of next year. As a reminder, 0:16:35.120 --> 0:16:38.480 that's when the one percent across the board. Budget cuts 0:16:38.480 --> 0:16:41.480 will go into effect if Congress does not pass the 0:16:41.520 --> 0:16:44.400 twelve appropriation spills. So I think that that's the date 0:16:44.400 --> 0:16:46.800 that a lot of people have circled on their calendar 0:16:46.880 --> 0:16:48.880 just trying to make it to that point. 0:16:50.040 --> 0:16:52.440 So, Isaac, how do you deal with the fact that 0:16:52.480 --> 0:16:54.960 you are in a situation where the interest that the 0:16:54.960 --> 0:16:57.200 government has to pay continues to go up? Where does 0:16:57.200 --> 0:17:00.160 that fall in these budgetary arguments? No one seems to 0:17:00.200 --> 0:17:02.360 talk about it, but it's on the rise. So if 0:17:02.400 --> 0:17:04.439 we can't cut the budget at all to do what 0:17:04.480 --> 0:17:06.600 we want to do, how are we dealing with spending 0:17:06.600 --> 0:17:08.200 that we now are compelled to do. 0:17:09.359 --> 0:17:11.399 That's one of the most frustrating parts of the past 0:17:11.440 --> 0:17:14.280 three weeks is that we weren't talking about the real issues. 0:17:14.320 --> 0:17:16.560 We weren't talking about the thirty three trillion in debt, 0:17:16.600 --> 0:17:19.359 we weren't talking about the two trillion deficit we're running 0:17:19.359 --> 0:17:22.480 this year. We weren't talking about the seven hundred billion 0:17:22.560 --> 0:17:26.359 dollars it costs US just this year to fund our deficits. 0:17:26.520 --> 0:17:30.560 And so I think that I remain deeply disheartened because 0:17:30.560 --> 0:17:34.240 we're not having those conversations, and more broadly, no one, 0:17:34.440 --> 0:17:37.880 no one, No one cares about the deficit when they're 0:17:37.880 --> 0:17:41.199 in the majority. They only care about the deficit when 0:17:41.240 --> 0:17:44.280 they're in the minority. And so until we see something 0:17:44.359 --> 0:17:48.920 that shocks DC tou to the point where it's forced 0:17:49.280 --> 0:17:52.320 to think about the debts and deficit differently, it's going 0:17:52.400 --> 0:17:54.960 to be status quo business as usual. 0:17:55.280 --> 0:17:57.280 How do you force someone to take a look at 0:17:57.280 --> 0:18:00.280 their own balance sheet and say, your payment next year 0:18:00.359 --> 0:18:02.520 is going to be double what your payment was this year, 0:18:02.680 --> 0:18:04.400 and you couldn't afford your payment this year. 0:18:04.400 --> 0:18:05.040 Why do we not? 0:18:05.160 --> 0:18:07.359 Why is that not part of the conversation. I know 0:18:07.440 --> 0:18:09.240 nobody wants to have it when they're in the majority. 0:18:09.400 --> 0:18:12.000 Nobody wants to not spend because everybody wants they get there, 0:18:12.040 --> 0:18:13.879 has a million things they want to spend on. But 0:18:13.920 --> 0:18:15.720 it's sort of like no one is dealing with the 0:18:15.720 --> 0:18:18.159 elephant in the room, no pun intended, which is the 0:18:18.160 --> 0:18:20.000 fact that we've got all this spending that still has 0:18:20.000 --> 0:18:22.400 to come through on this And I find that particularly 0:18:22.440 --> 0:18:25.640 frustrating in general. So I just how do we get 0:18:25.680 --> 0:18:26.480 to that conversation? 0:18:27.560 --> 0:18:29.879 You should run for office, come on down here and 0:18:29.480 --> 0:18:31.280 try to try to figure it out. But look, We're 0:18:31.280 --> 0:18:34.080 going to have a real, real fight over this with 0:18:34.200 --> 0:18:38.240 the Trump tax cuts expiring. You've got trillions of dollars 0:18:38.280 --> 0:18:40.800 in tax cuts that are coming due in twenty twenty 0:18:40.800 --> 0:18:44.960 five from the expiration of the Trump tax cuts, and 0:18:44.960 --> 0:18:47.119 I think that that could be a forcing mechanism for 0:18:47.119 --> 0:18:49.960 a broader conversation, but it's going to depend who's in power, 0:18:50.440 --> 0:18:53.080 right and sot. The next hurdle is to understand who's 0:18:53.119 --> 0:18:54.080 ahead in the elections. 0:18:54.359 --> 0:18:58.000 How much is Jennet Yellen's idea the mainstream that yields 0:18:58.000 --> 0:18:59.920 are going to go back down once we get past 0:19:00.119 --> 0:19:02.679 this blip, and that higher yields in the US is 0:19:02.720 --> 0:19:05.520 not a reflection of deficits but really just a reflection 0:19:05.560 --> 0:19:08.320 of how strong the US economy is. Is that the 0:19:08.359 --> 0:19:11.200 main idea and belief in Washington, DC. 0:19:13.280 --> 0:19:16.320 It's the hope of many on Capitol Hill. I don't 0:19:16.320 --> 0:19:19.560 think that there is anyone who has a firm feel 0:19:19.720 --> 0:19:22.920 for where yields are going, surely not on Capitol Hill. 0:19:22.960 --> 0:19:25.320 But it is definitely the hope at this point that 0:19:25.400 --> 0:19:28.160 everything will fix itself. Because our politics are so broken, 0:19:28.200 --> 0:19:31.119 they're unable to fix the problems, and so there is 0:19:31.200 --> 0:19:33.439 a hope that that's the direction that's going, Lisa. But 0:19:33.520 --> 0:19:35.479 I don't think anyone has a firm feeling one way 0:19:35.520 --> 0:19:35.840 or the other. 0:19:37.000 --> 0:19:39.359 Hope is not a strategy. I just keep thinking about that. 0:19:39.359 --> 0:19:42.760 Isaac Boltanski of BTIG, thank you so much for being 0:19:42.760 --> 0:19:50.160 with us. Joining us now is Lisa Shallatt CIO at 0:19:50.160 --> 0:19:52.399 Morgan Stanley Wealth Management, And Lisa, I just want to 0:19:52.440 --> 0:19:54.879 start with have we sold off enough? Because I know 0:19:54.920 --> 0:19:57.919