WEBVTT - CPI, Eco Data, and Ukraine 0:00:02.520 --> 0:00:07.000 Bloomberg Audio Studios, podcasts, radio news. 0:00:12.560 --> 0:00:13.240 This is the. 0:00:13.200 --> 0:00:17.440 Bloomberg Surveillance Podcast. Catch us live weekdays at seven am 0:00:17.480 --> 0:00:21.240 Eastern on Apple CarPlay or Android Auto with the Bloomberg 0:00:21.320 --> 0:00:24.880 Business App. Listen on demand wherever you get your podcasts, 0:00:25.280 --> 0:00:27.360 or watch us live on YouTube the. 0:00:27.360 --> 0:00:30.600 Concerts Center here at Chief Economists yeaws to get us 0:00:30.600 --> 0:00:34.200 to the report, Rebecca Patterson's scheduled after its commercial free 0:00:34.200 --> 0:00:38.040 across the nation in this hour cons there's no whisper number. 0:00:38.960 --> 0:00:41.720 How do you guess the inflation report? If there's so 0:00:41.720 --> 0:00:44.080 many subsets, do you have to go down to each 0:00:44.159 --> 0:00:46.800 subset to try to peace out a guestimate? 0:00:47.320 --> 0:00:47.840 Yeah. 0:00:47.920 --> 0:00:51.479 I mean we've always had a granular view of forecasting inflation, 0:00:51.760 --> 0:00:55.760 but it has gotten more granular given what's happening with tariffs, 0:00:56.280 --> 0:00:59.520 and of course we're looking at the impact of commodities prices. 0:00:59.520 --> 0:01:03.960 We have other idiosyncratic factors like what's happening with beef shortages. 0:01:04.319 --> 0:01:06.560 So there are a lot of cross currents going on 0:01:07.080 --> 0:01:07.920 in this inflation. 0:01:08.440 --> 0:01:11.520 It's the biggest weight or like everybody's sucking use cars. 0:01:11.720 --> 0:01:14.360 Don't tell me use cars as a big weight, is it? 0:01:14.360 --> 0:01:16.560 It's not a big weight real estate. It's really important. 0:01:16.560 --> 0:01:19.039 And in fact, we're seeing new tenant rent in the 0:01:19.080 --> 0:01:22.360 New Tenant Rent Index starting to rise. We're seeing people 0:01:22.760 --> 0:01:25.800 preferring to rent rather than own, so new households that 0:01:25.880 --> 0:01:29.800 are forming are renting, and that's pushing up rental prices 0:01:30.319 --> 0:01:32.199 in the New Tenant Rent Index. We're going to see 0:01:32.200 --> 0:01:34.600 that feed through to all the components of the CPI 0:01:35.080 --> 0:01:36.040 in the coming months. 0:01:36.440 --> 0:01:40.959 If inflation is creeping up, that's kind of a tough 0:01:41.040 --> 0:01:43.039 environment for the FED to cut rates, isn't it. 0:01:43.200 --> 0:01:46.040 I mean, creeping or shooting is Both of them are tough, right, 0:01:46.640 --> 0:01:49.200 But I think what makes it especially tough, right is 0:01:49.200 --> 0:01:53.559 that services inflation is elevated and sticky. It came down 0:01:53.640 --> 0:01:56.840 and then it sort of stalled out. Meanwhile, goods prices 0:01:57.440 --> 0:02:00.880 were close to flat or zero. That's not the case. 0:02:01.120 --> 0:02:03.600 Goods prices are rising at zero point seven percent a 0:02:03.640 --> 0:02:06.720 month over month. They're thirty five percent of the index, 0:02:07.200 --> 0:02:08.760 and they're going to keep rising. 0:02:08.880 --> 0:02:10.000 And so if. 0:02:09.840 --> 0:02:13.519 Services prices continue to come down, even slowly, you're still 0:02:13.520 --> 0:02:15.520 going to see that overall index increased. 0:02:15.520 --> 0:02:18.080 So what's your blooded number at EIU out twelve months? 0:02:18.080 --> 0:02:21.480 Are you guys two ish three ish high three. 0:02:22.520 --> 0:02:23.119 This is a trick. 0:02:23.520 --> 0:02:26.519 This is a trick question time, because if we look 0:02:26.560 --> 0:02:28.040 at the you want to look at what the FED 0:02:28.160 --> 0:02:29.400 is going to look at, They're going to want to 0:02:29.400 --> 0:02:31.320 look at the three month annualized rate. 0:02:31.639 --> 0:02:33.320 So we expect that to start. 0:02:33.080 --> 0:02:36.440 Moditoring in the end of Q two, beginning of Q 0:02:36.520 --> 0:02:38.639 three next year, and we expect that to come down 0:02:38.639 --> 0:02:40.880 to like a two point three two point one percent. 0:02:40.919 --> 0:02:44.200 Did you say next year next year? Three quarters out, 0:02:44.240 --> 0:02:45.119 four quarters out? 0:02:45.200 --> 0:02:47.320 Yeah, Yeah, it's going to take some time. 0:02:47.400 --> 0:02:49.399 Are looking for results September seventeen. 0:02:49.440 --> 0:02:50.160 Oh if we. 0:02:51.840 --> 0:02:56.240 So, I mean again that that's inflation here. How about 0:02:56.560 --> 0:02:58.960 kind of the labor market? I mean, that's another thing 0:02:58.960 --> 0:03:01.679 that I think people feel comfortable with where kind of 0:03:01.680 --> 0:03:02.240 we are here. 0:03:02.160 --> 0:03:03.600 But they say, well, if you look under the hood, 0:03:03.639 --> 0:03:05.600 some of the trends there might be going the other 0:03:05.639 --> 0:03:06.120 way here. 0:03:06.200 --> 0:03:08.680 Well, we've been concerned about the under the hood since 0:03:08.760 --> 0:03:11.040 the start of the year, and it's the under the 0:03:11.080 --> 0:03:14.160 hood that has made us have our call that we 0:03:14.200 --> 0:03:17.640 think the FED is going to cut, and we think 0:03:17.639 --> 0:03:19.480 they're going to cut in September. We think there's a 0:03:19.480 --> 0:03:21.480 good chance they get in two more cuts before the 0:03:21.560 --> 0:03:22.160 end of the year. 0:03:22.560 --> 0:03:22.840 Yep. 0:03:23.200 --> 0:03:25.360 Do you think the labor market is going to This 0:03:25.560 --> 0:03:28.799 is like, I'm I got a textbook. I got Rick 0:03:28.919 --> 0:03:31.799 Michigan's textbook at CLUBB. You pick a constant, you pick 0:03:31.880 --> 0:03:34.760 the textbook. You're telling me they're going to cut interest 0:03:34.840 --> 0:03:37.840 rates with a three point x percent inflation. 0:03:38.400 --> 0:03:40.840 Well, I'm going to chuse Stan Fisher as you you 0:03:40.880 --> 0:03:42.280 talked about him earlier this morning. 0:03:43.240 --> 0:03:44.920 And here's the thing. 0:03:45.280 --> 0:03:48.280 We know that the tariff inflation impact is going to 0:03:48.320 --> 0:03:53.640 be dare I say the word transitory. But the but 0:03:53.720 --> 0:03:56.960 the issue is what is happening with that services inflation? 0:03:57.360 --> 0:03:59.640 And there are compliments of service in this inflation, like 0:03:59.680 --> 0:04:02.360 transfer in ortation where we're seeing falling demand. 0:04:02.920 --> 0:04:03.040 Uh. 0:04:03.480 --> 0:04:05.600 And the real question is how much can the consumer 0:04:05.640 --> 0:04:07.400 take in terms of say auto inflation. 0:04:07.680 --> 0:04:11.560 We go to surveillance transitory correspondent Lisa Matteo. Right now, 0:04:11.760 --> 0:04:14.119 how's that transitory inflation at Costco? 0:04:14.640 --> 0:04:16.320 Lisa, it's not doing so well? 0:04:16.520 --> 0:04:20.479 So well on a day to day constance hunter like 0:04:20.640 --> 0:04:23.880 in consumption, I just don't see transitory. 0:04:23.440 --> 0:04:27.160 Well, it's well, it's present, But the question is is 0:04:27.200 --> 0:04:27.920 it is it? 0:04:27.960 --> 0:04:30.320 Is it going to last for several years? 0:04:30.520 --> 0:04:33.400 It seems unlikely it will last for several years because 0:04:33.480 --> 0:04:37.159 the economy is weakening under the hood. 0:04:37.279 --> 0:04:40.240 I got, I got a hate letter yesterday. Paul doesn't 0:04:40.279 --> 0:04:42.400 know this. Folks, Lisa and Paul get the love notes. 0:04:42.680 --> 0:04:45.440 Michael Byrn, I get all that hate mail constance. It 0:04:45.480 --> 0:04:48.280 was a hate mail against you and all the others. 0:04:48.880 --> 0:04:54.480 The audience detests when smart people like you say inflation 0:04:54.800 --> 0:04:57.359 is a one off and after the lift and inflation 0:04:58.000 --> 0:04:59.239 will all be okay. 0:04:59.600 --> 0:05:02.200 I didn't it will We'll be okay. A lot say well, 0:05:02.279 --> 0:05:04.360 we'll be okay. It is a tax on the consumer. 0:05:04.839 --> 0:05:09.159 It helps to push growth lower. It is painful for households. 0:05:09.200 --> 0:05:13.000 It makes it harder for people to afford basic necessities. 0:05:13.120 --> 0:05:14.320 Let's let alone. 0:05:14.000 --> 0:05:16.240 Some of the nice to have that they want to 0:05:16.240 --> 0:05:19.160 spend money on. It's very, very challenging. 0:05:19.240 --> 0:05:21.360 So you're saying the fetia cut even if we get 0:05:21.360 --> 0:05:22.600 a rising inflation rate. 0:05:22.800 --> 0:05:25.360 The fetcha cut if we get a rising inflation rate 0:05:25.560 --> 0:05:30.000 and continued confirmation the labor market is weaking, weakening. They 0:05:30.279 --> 0:05:32.920 have to see that labor market weakening cut. 0:05:33.000 --> 0:05:34.640 I agree, it's back to the labor market. 0:05:34.720 --> 0:05:37.800 Poll retail sales on Friday, How do you care that 0:05:37.880 --> 0:05:39.920 the consumer is doing. 0:05:39.760 --> 0:05:41.719 Out there, Well, it depends on what you're buying. 0:05:41.760 --> 0:05:44.000 But you're starting to see you're starting to see an 0:05:44.040 --> 0:05:47.920 impact across the board. You're seeing actually a pullback and 0:05:48.000 --> 0:05:51.159 in some of the revenge spending out of the pandemic. 0:05:51.240 --> 0:05:56.160 Right there're still seemingly endless spending on things like leisure 0:05:56.160 --> 0:05:58.360 and hospitality that is coming down. 0:05:58.400 --> 0:05:59.280 So we expect. 0:05:59.080 --> 0:06:04.000 Restaurants to solve, and a little bit. Home furnishings is weak. Obviously, 0:06:04.040 --> 0:06:08.640 we have a really troubled and problematic housing market, so 0:06:08.720 --> 0:06:11.279 we're not getting the lift from growth from a from 0:06:11.279 --> 0:06:15.119 a growing housing market, so we're expecting home furnishings. 0:06:14.480 --> 0:06:15.359 To be soft. 0:06:15.760 --> 0:06:18.680 So we are we are looking for that softness under 0:06:18.680 --> 0:06:20.680 the hood to come through. Now we have to point 0:06:20.720 --> 0:06:23.880 out the juxtaposition here is everything that's happening in tech 0:06:23.920 --> 0:06:27.359 and AI. We are seeing continuing to see a boom 0:06:27.400 --> 0:06:30.120 in spending there and that's where you get the lift 0:06:30.560 --> 0:06:32.240 in in capital investment. 0:06:32.880 --> 0:06:35.240 But the other investment out there, I mean, I mean 0:06:35.800 --> 0:06:38.080 I thought of this earlier, folks, we didn't bring it 0:06:38.160 --> 0:06:43.440 up on air. Let's do it business investment away from technology, 0:06:43.720 --> 0:06:47.640 business investment. How do you characterize that grim. 0:06:47.720 --> 0:06:51.800 Yeah, it's zero, it's negative, negative, it's declining, declining, and 0:06:51.839 --> 0:06:53.919 we think and we think that's going to continue. And 0:06:53.920 --> 0:06:56.560 and our forecast at the beginning of the year sort 0:06:56.560 --> 0:06:58.920 of cast us back to March when we were looking 0:06:58.960 --> 0:07:03.000 at the rising level of uncertainty, was that this level 0:07:03.080 --> 0:07:07.360 of uncertainty corresponds to business paralysis. We do not see 0:07:07.440 --> 0:07:11.800 investment growing strongly when we have this level of uncertainty, 0:07:11.840 --> 0:07:14.480 because businesses are like, I'll just just wait a quarter, 0:07:14.720 --> 0:07:16.080 I'll wait till I get more clarity. 0:07:16.360 --> 0:07:17.560 Right, I'm not going to Why would I. 0:07:17.600 --> 0:07:19.600 Drive down the road at ninety miles an hour when 0:07:19.600 --> 0:07:22.320 it's really foggy outside, I'll go forty five instead. 0:07:22.440 --> 0:07:23.880 Has that eased up a little bit in the last 0:07:23.920 --> 0:07:24.760 couple of months as well? 0:07:24.920 --> 0:07:28.440 I recognize that, Well, it's eased up, but we're still 0:07:28.720 --> 0:07:35.160 significantly above previous spikes and of course above previous stasis levels. 0:07:35.440 --> 0:07:37.680 So what's your number or in a headline, CPI, are 0:07:37.720 --> 0:07:42.480 you on survey? Are you disinflating or increased inflation? 0:07:43.240 --> 0:07:45.360 Well, we're looking at zero point three percent month over 0:07:45.440 --> 0:07:48.240 month and about two point eight on a year every year. 0:07:48.640 --> 0:07:52.080 Two point eight year every year that's sort of where 0:07:52.120 --> 0:07:55.200 we are. Well. CPI month over month is zero point 0:07:55.280 --> 0:07:57.760 two is a survey, So you're a tick above. 0:07:57.840 --> 0:07:58.480 I'm a tick above. 0:07:58.520 --> 0:08:00.640 Every little tick matters right well, and. 0:08:00.600 --> 0:08:02.760 It matters especially for that annualized rate. 0:08:02.800 --> 0:08:05.760 And it also matters where if people are feeling prices 0:08:05.760 --> 0:08:09.120 go up in things that they purchase frequently, it takes 0:08:09.200 --> 0:08:11.440 it psychologically. That takes a bigger bite out. 0:08:11.760 --> 0:08:13.400 So what we have here at Bloomberg, just to give 0:08:13.400 --> 0:08:16.239 you a snapshot of is the constance one Hunter twelve 0:08:16.320 --> 0:08:20.920 seconds to adjust to this. But what we have here 0:08:21.160 --> 0:08:23.520 is the data that we all talk about in the media. 0:08:24.120 --> 0:08:26.760 And then Michael McDonough and our team develop off the 0:08:26.800 --> 0:08:33.120 Bureau of Labor Statistics a wonderfully colored chart which tells 0:08:33.320 --> 0:08:37.439 a story. And I have core goods instantly here from 0:08:37.520 --> 0:08:40.640 the report. It is zero point one point five to one. 0:08:40.640 --> 0:08:43.200 I have no idea what that number means other than 0:08:43.320 --> 0:08:47.880 constance hunter. I think I'm seeing a continuing trend of 0:08:48.000 --> 0:08:50.400 core goods inflation. 0:08:50.360 --> 0:08:53.160 Ron yep, and we're seeing it in autos. So if 0:08:53.200 --> 0:08:55.640 we look down in the detail, use cars and trucks 0:08:55.760 --> 0:08:58.280 are now row zero point five percent month of a 0:08:58.280 --> 0:09:01.520 month four point eight percent year over year. And like 0:09:01.559 --> 0:09:04.640 I said, services is sticky, right, we have services less 0:09:04.760 --> 0:09:07.840 energy services at zero point four percent month over month, 0:09:08.320 --> 0:09:11.160 three point six percent year over year. And with those 0:09:11.200 --> 0:09:14.520 sticky services, I will have to say it's going to 0:09:14.559 --> 0:09:16.600 be challenging for the FED cut. We're going to have 0:09:16.640 --> 0:09:19.720 to see really weak other data in the form of 0:09:19.760 --> 0:09:20.880 jobs and retail sales. 0:09:20.960 --> 0:09:23.240 Should we say what the market's doing? Paul Sure? I 0:09:23.280 --> 0:09:25.880 think we should five basis points in a lower yield 0:09:26.240 --> 0:09:28.080 on a two year yield, the ten year yield and 0:09:28.120 --> 0:09:31.200 three basis points the equity markets lived from flat up 0:09:31.240 --> 0:09:34.160 to futures up twenty eight and the vicks in almost 0:09:34.160 --> 0:09:36.319 to stick fifteen point four eight punk. 0:09:36.600 --> 0:09:36.840 Yeah. 0:09:36.880 --> 0:09:39.600 The three point one percent annual increase in the core 0:09:39.679 --> 0:09:43.480 CPI takes that measure back to the height since February. 0:09:44.040 --> 0:09:46.520 I'm looking at the Bloomberg Live top. 0:09:46.320 --> 0:09:48.520 Live can to list them there stand right on. 0:09:48.480 --> 0:09:50.560 Top of that, I mean the top like these blogs. 0:09:50.640 --> 0:09:51.760 These guys are all over it. 0:09:51.840 --> 0:09:53.880 It's awesome now Chris and the entered team. 0:09:54.040 --> 0:09:54.839 Yeah, veryxy so. 0:09:54.760 --> 0:09:57.760 Wh sp fiatures up twenty four, Dow up one ninety, 0:09:57.800 --> 0:10:00.760 and NASHTAC up one hundred and five points, it's four 0:10:00.800 --> 0:10:01.880 tens to one percent. 0:10:01.600 --> 0:10:04.240 So certainly a move there constance. 0:10:04.320 --> 0:10:07.840 I mean, you know, it's calling into question that two 0:10:07.840 --> 0:10:11.960 percent ish kind of target that the FED has for inflation, 0:10:12.040 --> 0:10:15.360 whether it's core PCE or however you want to define it. 0:10:15.400 --> 0:10:18.079 Is that a realistic goal these days in this economy. 0:10:18.160 --> 0:10:19.360 I just don't. A. 0:10:19.520 --> 0:10:21.520 I'm not sure whether they're fixated on the number. B. 0:10:21.760 --> 0:10:23.000 I'm not sure how we get there. 0:10:23.400 --> 0:10:25.560 Well, should I answer the easier questions? 0:10:25.640 --> 0:10:26.319 First? 0:10:27.240 --> 0:10:30.200 The reason they're the reason that it's two percent is 0:10:30.240 --> 0:10:33.000 because you need to have some inflation to grease the 0:10:33.080 --> 0:10:35.959 wheels of growth, right, you don't you don't want to 0:10:36.000 --> 0:10:38.840 tip into disinflation or deflation. On the other hand, you 0:10:38.880 --> 0:10:41.800 don't want inflation to be a factor in businesses making 0:10:41.840 --> 0:10:44.640 their decisions. And the problem with the level we have 0:10:44.760 --> 0:10:47.760 now is it is a factor in businesses making their decisions, 0:10:47.960 --> 0:10:51.000 and it's a factor in consumers making their decisions. And 0:10:51.080 --> 0:10:53.839 so that's where it becomes really challenging for the FED. 0:10:54.200 --> 0:10:57.079 On the other hand, we see this as attacks on 0:10:57.160 --> 0:11:01.200 the economy. It in itself is going to slow growth 0:11:01.600 --> 0:11:05.079 in addition to the slowness that we see under the hood, 0:11:05.400 --> 0:11:08.439 and so It really just depends on the timing of 0:11:08.520 --> 0:11:11.880 how quickly the labor market deteriorates and whether or not 0:11:11.920 --> 0:11:13.760 the FED has space to act. 0:11:14.760 --> 0:11:20.480 Yeah, just an extraordinary here so again kind of the CPI, Right, Yeah, 0:11:20.480 --> 0:11:22.360 I gave you your point two percent, Tom, I kind 0:11:22.360 --> 0:11:24.880 of spot on line. I mean that core that ex 0:11:25.000 --> 0:11:27.120 food and energy you're on your one percent is kind 0:11:27.120 --> 0:11:28.280 of getting some play, folks. 0:11:28.679 --> 0:11:34.080 Here's here's the core CPI three monthly annualized is published 0:11:34.080 --> 0:11:38.400 by bl S. This is from April two point one. 0:11:38.800 --> 0:11:41.520 It went down to one point seven, it went up 0:11:41.520 --> 0:11:44.719 to two point four, and now the three month annualized 0:11:44.800 --> 0:11:48.480 is up to two point eight. Every textbook I have, 0:11:48.679 --> 0:11:52.520 Constance Hunder tells me it's really hard to cut rates 0:11:53.160 --> 0:11:57.400 given a three month trend of the three month annualized statistic. 0:11:58.320 --> 0:12:00.600 Right, And if you look at the Fed's work on this, 0:12:00.840 --> 0:12:03.400 going back to the previous time that we raised traffs 0:12:03.480 --> 0:12:07.760 admittedly by substantially less, right, it was that they should 0:12:07.760 --> 0:12:11.360 look through this. Now the question is does a larger 0:12:11.480 --> 0:12:14.200 teriff rate warrant the same look through. I think the 0:12:14.200 --> 0:12:16.439 FED has telegraphed to us that they think it doesn't, 0:12:18.360 --> 0:12:19.000 But does it. 0:12:19.040 --> 0:12:21.839 Warrant zero look through that also. 0:12:21.600 --> 0:12:23.440 They have they have seem to have telegraphed that they 0:12:23.440 --> 0:12:25.520 think it doesn't warrant zero look through. If you look 0:12:25.559 --> 0:12:27.160 at the dot plot, if you look at some of 0:12:27.200 --> 0:12:29.839 the things that different FED governors have been saying, whether 0:12:30.240 --> 0:12:35.400 it's Mary Daily, whether it's Neil Kashkari, right, Fed governors 0:12:35.400 --> 0:12:38.160 that FED presidents have been saying, look, we see weakening 0:12:38.240 --> 0:12:42.400 under the hood. And remember the FED funds, tart run 0:12:42.480 --> 0:12:44.720 funds right right now is restrictive? Does it need to 0:12:44.800 --> 0:12:48.400 be this restrictive? If they were to cut twice, it's 0:12:48.440 --> 0:12:49.320 still restrictive. 0:12:49.880 --> 0:12:52.560 And this this headline here from Mark Niquet, Thank you 0:12:52.640 --> 0:12:56.600 Mark for this. Just it's amazing. Our Bloomberg team gets 0:12:56.720 --> 0:13:01.040 us out us core CPI picks up fastest pay since 0:13:01.120 --> 0:13:04.200 January on services. Constance Hunter, thank you so much. Just 0:13:04.200 --> 0:13:08.520 brilliant with the EIU. This morning, Rebecca Patterson said time 0:13:08.600 --> 0:13:10.800 you really need to wear makeup? And I said no, 0:13:10.960 --> 0:13:13.960 All our handlers are saying YouTube is We're makeup free 0:13:13.960 --> 0:13:16.600 on YouTube at least I am, So we'll go with that. 0:13:16.760 --> 0:13:20.679 Joining us now is Rebecca Patterson with a Council on 0:13:20.760 --> 0:13:24.000 Foreign Relations and all over our service to best of 0:13:24.080 --> 0:13:29.240 our trust JP Morgan and of course Bridgewater over the years. Rebecca, 0:13:29.360 --> 0:13:31.680 this is the oddest place to be. I'm looking for 0:13:31.720 --> 0:13:36.800 the revisions. I guess if I don't trust BLS, I 0:13:36.840 --> 0:13:39.120 guess I trust the data. I don't have revisions yet 0:13:39.200 --> 0:13:42.199 up on the screen. Let's just start with that. Okay, 0:13:42.240 --> 0:13:44.480 the unemployment, right, there's an uproar. We got a new 0:13:44.520 --> 0:13:48.600 guy in a hugely controversial Does Rebecca Patterson trust the 0:13:48.600 --> 0:13:54.600 inflation statistics? Yes, that's where you gotta talk more, Lisa, 0:13:55.400 --> 0:13:56.800 tellers talk more over. 0:13:56.960 --> 0:14:01.240 No, I mean, the United States has the best government 0:14:01.360 --> 0:14:05.439 data in the world by a lot, and there are 0:14:05.640 --> 0:14:10.080 dedicated civil servants who literally go around the country checking 0:14:10.120 --> 0:14:14.240 prices in every community, of every variable and making sure 0:14:14.280 --> 0:14:17.400 the data is as clean and reflective of what's really 0:14:17.400 --> 0:14:18.360 happening as they can. 0:14:18.600 --> 0:14:21.000 My textbooks say, you got to be nuts. You can 0:14:21.120 --> 0:14:23.960 cut rates given a two ish three ish three month 0:14:24.040 --> 0:14:27.880 annualize inflation. Do you see any sense of transitory in 0:14:27.920 --> 0:14:28.840 these statistics. 0:14:29.520 --> 0:14:31.920 I think we're in a new regime for inflation. I 0:14:31.920 --> 0:14:35.320 think we're in a new regime for bond yields. So 0:14:35.640 --> 0:14:39.280 if the economy slows a lot which Constant Constance was 0:14:39.280 --> 0:14:42.960 talking about right before me. If the economy slows enough, 0:14:43.080 --> 0:14:45.400 that's going to help pull inflation down. But that's not 0:14:45.520 --> 0:14:49.080 a situation anyone wants, right. Usually you get deflation when 0:14:49.120 --> 0:14:49.360 you have. 0:14:49.320 --> 0:14:50.960 A deep recession. We don't want that. 0:14:51.480 --> 0:14:53.720 But I think for the Federal Reserve, I was trying 0:14:53.760 --> 0:14:55.960 to look at when is the last time we got 0:14:56.040 --> 0:14:59.120 this rate cuts with inflation above target and the job 0:14:59.200 --> 0:15:04.520 market softening? But okay, okay, nineteen ninety five. So at 0:15:04.520 --> 0:15:08.640 the time they did three twenty five basis point insurance cuts, 0:15:09.000 --> 0:15:12.480 inflation was running about two point three, so lower than where. 0:15:12.280 --> 0:15:12.880 We are now. 0:15:13.520 --> 0:15:16.479 The job market was okay, but the economy broadly was softening, 0:15:16.600 --> 0:15:18.920 and so they said we're going to try to massage 0:15:19.040 --> 0:15:22.120 this a little bit, and the stock market obviously loved it. 0:15:22.120 --> 0:15:24.800 It was up about fifteen percent over the three cut 0:15:24.880 --> 0:15:27.960 period the SMP, and I think that's probably what we're 0:15:28.000 --> 0:15:29.720 going to get this time. I don't know if it's 0:15:29.800 --> 0:15:33.920 one cut, two three. I lean towards less frankly because 0:15:33.920 --> 0:15:36.960 of the inflation risk, and I think they'll they'll do 0:15:37.040 --> 0:15:39.320 a cut in September. It's so priced in it would 0:15:39.360 --> 0:15:41.800 be very difficult for the FED to argue against that, 0:15:42.160 --> 0:15:45.240 but Jackson hole later this month. I believe it's August 0:15:45.280 --> 0:15:48.160 twenty first, twenty third. That'll give us some more color, 0:15:48.200 --> 0:15:50.600 I think on the sidelines of where they're leaning. 0:15:51.200 --> 0:15:54.120 Bloomberg Intelligence US rate strategist Are Jersey out with the 0:15:54.120 --> 0:15:57.160 first take, saying, basically, the CPI print with the CPI 0:15:57.320 --> 0:16:00.560 running at zero point two percent on the headline, suggests 0:16:00.560 --> 0:16:05.320 that the pc print will allow the FED to ease 0:16:05.440 --> 0:16:08.320 in September. So that's the first take from Ira Jersey here. 0:16:08.720 --> 0:16:09.320 What do you make? 0:16:09.840 --> 0:16:12.960 What did you make, Rebecca last week of the labor 0:16:13.040 --> 0:16:16.880 data and then the president firing the BLS head and 0:16:16.920 --> 0:16:19.240 all that kind of stuff, What did you make of 0:16:19.280 --> 0:16:19.560 all that? 0:16:21.240 --> 0:16:24.800 I mean, is there an opportunity for the government to 0:16:24.880 --> 0:16:29.280 modernize its data collection? Absolutely? But this is not easy, 0:16:29.680 --> 0:16:33.040 right if you think about people do analysis of data 0:16:33.400 --> 0:16:37.720 looking back ten twenty fifty in some organizations one hundred years. 0:16:37.920 --> 0:16:40.240 If I suddenly change how I collect the data, I 0:16:40.320 --> 0:16:43.120 have to make sure that new methodology doesn't screw up 0:16:43.440 --> 0:16:45.440 how I look at the old data. Right, we don't 0:16:45.440 --> 0:16:48.359 want apples and oranges. So it's actually a very difficult 0:16:48.400 --> 0:16:51.440 process to make these changes, and you. 0:16:51.400 --> 0:16:52.760 Need resources to do that. 0:16:52.840 --> 0:16:56.000 The government has cut the budget for the BLS the 0:16:56.000 --> 0:16:58.880 Bureau of Labor Statistics, so they have fewer resources, not 0:16:59.080 --> 0:17:03.000 more to this modernization. But I do think they would 0:17:03.000 --> 0:17:05.880 agree that this is the direction they should go. Try 0:17:05.920 --> 0:17:07.880 to see what tools are out there they can use 0:17:08.200 --> 0:17:10.440 to include in this process to make sure the data 0:17:10.640 --> 0:17:14.040 is as relevant and reflective of the economy as possible. 0:17:14.400 --> 0:17:17.440 Firing the head of the BLS I think was performative 0:17:17.840 --> 0:17:20.600 and really a shame. I think at the margin, it's 0:17:20.720 --> 0:17:23.520 one more small nail in the coffin of credibility of 0:17:23.600 --> 0:17:24.600 US institutions. 0:17:24.760 --> 0:17:26.320 Mckey's going to be with a cerin a bit, but 0:17:26.400 --> 0:17:29.160 let's start with you, Rebecca. My biggest problem with us. 0:17:29.200 --> 0:17:32.440 You and I've talked about this before as we set up, 0:17:32.560 --> 0:17:34.400 and I'm not going to blame ail in green Span. 0:17:34.480 --> 0:17:36.040 I'm going to think it's going to come on behind 0:17:36.040 --> 0:17:39.600 green Span. This idea that if we cut rates, once 0:17:39.680 --> 0:17:43.480 we've established a new vector, a new trend of cutting rates, 0:17:44.040 --> 0:17:47.200 why can't they come out, given the mess we're in, 0:17:47.760 --> 0:17:51.639 whatever anybody's politics, and say we're going to do a 0:17:51.760 --> 0:17:56.080 one off, twenty five beep cut. Why can't we do that. 0:17:56.800 --> 0:17:59.159 I think that's what they'll try to condition the market 0:17:59.240 --> 0:18:02.959 towards that we felt there was room to make this 0:18:03.000 --> 0:18:05.320 one insurance cut, and then we're going to continue to 0:18:05.359 --> 0:18:08.520 be data dependent and see what's needed. The job data 0:18:08.560 --> 0:18:11.440 is really tough. I was just looking before I came 0:18:11.440 --> 0:18:13.720 in this morning. On one hand, you have the small 0:18:13.760 --> 0:18:16.880 business sentiment survey this morning. Small business is a huge 0:18:16.880 --> 0:18:20.880 part of the labor market. Confidence improved in July after 0:18:20.920 --> 0:18:25.000 the big, beautiful fiscal stimulus bill was passed, but uncertainties high. 0:18:25.240 --> 0:18:28.920 You get Challenger in Gray showing layoffs year on year 0:18:29.000 --> 0:18:32.280 the oh sorry, year to date, the highest since twenty twenty. 0:18:33.240 --> 0:18:35.760 But we know a lot of layoffs are very specific 0:18:35.840 --> 0:18:41.119 federal government technology. So you can easily paint bullish and 0:18:41.240 --> 0:18:44.880 not bullish, but okay pictures of the labor market and bearish, 0:18:45.080 --> 0:18:47.679 and I feel like right now, depending on where you 0:18:47.680 --> 0:18:50.600 sit in the FED, you can select data to have 0:18:50.680 --> 0:18:52.560 a reasonable argument for your view. 0:18:53.160 --> 0:18:57.200 Are the separations in America? I mean, I think ludite 0:18:57.320 --> 0:19:01.399 nineteenth century, I mean book where we are is a 0:19:01.520 --> 0:19:07.159 nation and we're almost needing to prescribe rather two or 0:19:07.200 --> 0:19:13.040 three FED policies. How can they do an aggregate FED policy, Paul, 0:19:13.119 --> 0:19:17.120 to help the users of chat GBT exactly and perplexity 0:19:17.640 --> 0:19:20.119 and people flat on their back and des moines, I 0:19:20.280 --> 0:19:20.919 still get it. 0:19:21.000 --> 0:19:24.200 Think about Europe, right, you have a central bank governor 0:19:24.240 --> 0:19:26.400 from Italy who's going to have a very different view 0:19:26.680 --> 0:19:28.520 than the central bank governor from Are we. 0:19:28.880 --> 0:19:30.919 Different, brilliant, Are we any different on that? 0:19:31.119 --> 0:19:31.679 No, we're not. 0:19:31.840 --> 0:19:33.600 And that's part of the reason the FED was set 0:19:33.680 --> 0:19:35.920 up the way it was to have a representative from 0:19:36.560 --> 0:19:39.960 Kansas City and one from Texas and one from San Francisco, 0:19:40.119 --> 0:19:43.320 so we represent the different economies within the US and 0:19:43.400 --> 0:19:46.000 ideally they can debate and come up to an aggregate 0:19:46.119 --> 0:19:49.199 view that's not perfect for any given region, but is 0:19:49.280 --> 0:19:52.520 optimal for the economy. That's that's the goal, and that's 0:19:52.520 --> 0:19:54.400 why they're set up that way, and honestly, I don't 0:19:54.400 --> 0:19:55.560 know a better way to do it. 0:19:56.160 --> 0:19:58.320 A surprised at the stock market keeps seeing all time 0:19:58.359 --> 0:19:59.120 hunts every day. 0:19:59.480 --> 0:20:03.960 No, it's oh concentrated in tech, and my perception is 0:20:04.000 --> 0:20:07.080 that there is a lot of belief that in the 0:20:07.119 --> 0:20:09.680 next whatever one to three years, we're going to break 0:20:09.680 --> 0:20:12.359 into superintelligence and you're going to have a hockey stick 0:20:12.400 --> 0:20:14.920 moment for those stocks, similar to what we saw after 0:20:15.000 --> 0:20:17.320 GPT was launched two years ago, two and a half 0:20:17.400 --> 0:20:20.080 years ago, and no one wants to miss that return. 0:20:20.200 --> 0:20:23.040 So everyone's, as they say, holding on for dear life. 0:20:23.119 --> 0:20:25.879 Just so you know. This surveillance on August twelfth, the 0:20:25.960 --> 0:20:30.560 break and super intelligence. It's surveillance is have your offspring 0:20:30.680 --> 0:20:34.280 done their summer reading list? That's what we call super intelligence. 0:20:34.359 --> 0:20:36.640 Right now, Lisa, how are we doing over there? I mean, 0:20:36.960 --> 0:20:39.560 there's their second book, second book out of what eight? 0:20:39.680 --> 0:20:40.280 That's awesome. 0:20:42.480 --> 0:20:44.920 You're there, You're there, success, check the box. 0:20:45.000 --> 0:20:47.600 Kuse me, Rebecca. I got to switch here and apply 0:20:47.800 --> 0:20:50.960 this economics and this inflation. The market's loving in futures. 0:20:50.960 --> 0:20:55.560 I'm thirty three right now. Over to the oddity of 0:20:55.600 --> 0:21:00.440 this market. You have handled really serious family high net 0:21:00.480 --> 0:21:05.960 worth work at Bessemer just as one example, how do 0:21:06.000 --> 0:21:10.200 you invest in this chaos? If you want to be measured, 0:21:10.560 --> 0:21:14.040 want to be prudent, but must participate in the growth, 0:21:14.160 --> 0:21:16.040 do you buy more? Nvidia is at the solution. 0:21:17.400 --> 0:21:19.959 No, I wouldn't hear at these levels, but if I 0:21:20.040 --> 0:21:23.399 owned it, I also wouldn't be rushing to disinvest I 0:21:23.480 --> 0:21:26.960 mean my approach has been for most of this year 0:21:27.080 --> 0:21:31.560 to have be invested in equities, have a Barbelle approach, 0:21:31.680 --> 0:21:34.959 so the tech sector, which is a structural theme despite 0:21:34.960 --> 0:21:38.040 the valuations, but then to protect your downside with some 0:21:38.080 --> 0:21:41.639 defensive sectors like utilities or consumer staples. And you know, 0:21:41.680 --> 0:21:44.000 we've been talking about this for well over a year 0:21:44.440 --> 0:21:47.800 as part of my diversifiers, to protect my downside. I 0:21:47.960 --> 0:21:50.960 like gold, even with the tariff removed by President Trump 0:21:51.000 --> 0:21:54.560 earlier this week, Gold's up twenty seven percent year to date, 0:21:55.560 --> 0:21:58.399 more last year. And I think as long as the 0:21:58.400 --> 0:22:01.520 world is uncertain and inflation and risks are to the upside, 0:22:01.760 --> 0:22:03.919 that's going to be an asset that can benefit you. 0:22:05.240 --> 0:22:08.120 So evaluation here. You mentioned the concentration risk. 0:22:08.320 --> 0:22:12.159 Yeah, we haven't seen that really since the late nineties. 0:22:12.200 --> 0:22:14.480 Now this is a different environment from the late nineties. 0:22:14.480 --> 0:22:18.159 These companies have real earnings, real cash flow, but still 0:22:18.240 --> 0:22:19.760 that concentration risk. 0:22:19.960 --> 0:22:21.600 It certainly makes me concerned. 0:22:21.680 --> 0:22:23.720 Yeah, I agree with that, and again that's part of 0:22:23.760 --> 0:22:26.440 the reason I want to have this Barbell strategy. When 0:22:26.480 --> 0:22:29.520 you talk to the CEOs of these large language models, 0:22:29.560 --> 0:22:33.320 these megacap companies, megacap tech companies. 0:22:33.600 --> 0:22:34.240 They don't know. 0:22:34.560 --> 0:22:35.320 They don't know. 0:22:35.280 --> 0:22:37.480 How this story ends, and they'll admit that, and I 0:22:37.480 --> 0:22:40.359 think they do publicly. So you're taking a risk with this. 0:22:40.480 --> 0:22:44.399 You're counting on this inflection point moment for technology and 0:22:44.440 --> 0:22:47.040 that over time it spreads through the economy. I think 0:22:47.080 --> 0:22:51.399 looking for AI beneficiaries, not just the KEAI companies, is 0:22:51.440 --> 0:22:54.400 a smart play. I think there's other thematics and they're 0:22:54.400 --> 0:22:57.040 getting priced in, but I think they still have runway 0:22:57.400 --> 0:23:02.359 things like infrastructure, things like global defense. Those are ways 0:23:02.359 --> 0:23:04.960 that get an indirect play on AI, but at slightly 0:23:05.040 --> 0:23:08.080 less crazy value. Not crazy crazy is the only word 0:23:08.119 --> 0:23:09.280 to use high valuations. 0:23:09.480 --> 0:23:11.520 I got to call at Kansas City Fed today and 0:23:11.600 --> 0:23:14.399 beg for a chair at the Pioneer Grill for breakfast. 0:23:14.640 --> 0:23:17.720 Sounds good. I think it's on Friday when I'm there. 0:23:17.800 --> 0:23:19.320 Are you going to be a checkson a hole? 0:23:19.560 --> 0:23:20.320 Sadly, I'm not. 0:23:20.440 --> 0:23:22.320 I'm going to Are you not going to be there? 0:23:22.480 --> 0:23:24.879 Because I'm also a mom and I'm going to make 0:23:24.920 --> 0:23:27.040 sure my daughter is set up for a great school year? 0:23:27.400 --> 0:23:30.760 There you go, fun, It is time the. 0:23:30.720 --> 0:23:34.040 Door you do a dorm room like with the TV 0:23:34.200 --> 0:23:36.600 in the Nine Yards. No, no, no, No, this was 0:23:36.640 --> 0:23:38.800 a major debate a couple of nights ago. We're not 0:23:38.840 --> 0:23:40.280 doing this. I don't judge. 0:23:40.320 --> 0:23:42.879 If someone wants to deck out their kids dorm Lisa, 0:23:43.040 --> 0:23:46.160 help have fun, but no, I'm more of a I'm 0:23:46.160 --> 0:23:47.879 going to get you there, make sure you have the 0:23:47.920 --> 0:23:50.439 basics you need. Thank you, you're a grown up. You 0:23:50.480 --> 0:23:51.640 can do this, go for it. 0:23:51.760 --> 0:23:54.960 Yeah, but my kids are perfectly Some of these kids 0:23:55.000 --> 0:23:57.119 go to school today and it's like moving a house. 0:23:57.400 --> 0:23:59.560 There's a thing as a bed party. 0:23:59.640 --> 0:24:01.080 You have a bed party so. 0:24:01.000 --> 0:24:03.080 That the kids come to the house and they decorate 0:24:03.080 --> 0:24:07.280 your child's bed in all the whole you know, merchandise 0:24:07.320 --> 0:24:07.879 of the school. 0:24:08.280 --> 0:24:09.040 It's a thing now. 0:24:09.080 --> 0:24:10.960 I mean, God bless America. 0:24:11.080 --> 0:24:11.920 I guess we are. 0:24:12.080 --> 0:24:14.560 I mean there's a reason sixty eight percent of GDP 0:24:14.760 --> 0:24:18.040 is consumption because people can be convinced they quote unquote 0:24:18.040 --> 0:24:20.159 need to spend on this. And again, no judgment. If 0:24:20.200 --> 0:24:22.240 they want, if that's how they want to spend their money, fine, 0:24:22.280 --> 0:24:24.080 as long as they can afford it, As long as 0:24:24.080 --> 0:24:25.600 these people are financially literate. 0:24:25.840 --> 0:24:28.000 I talked to McKeith, tough it out, tell your daughter, 0:24:28.119 --> 0:24:31.440 kick her out the door. We'll see in JACKSONA Rebecca Patterson, 0:24:31.520 --> 0:24:34.920 thank you so much with the counsul on Ford relations, 0:24:34.960 --> 0:24:42.959 some important essays recently in the media. Just brilliant. There. 0:24:45.040 --> 0:24:48.640 You're listening to the Bloomberg Surveillance podcast. Catch US Live 0:24:48.720 --> 0:24:51.879 weekday afternoons from seven to ten am Eastern Listen on 0:24:51.960 --> 0:24:55.600 Applecarplay and Android Otto with the Bloomberg Business app, or 0:24:55.760 --> 0:24:57.280 watch US Live on YouTube. 0:24:57.560 --> 0:25:01.320 Joining us now for Bloomberg Intelligence and fixing Irid Jersey 0:25:01.359 --> 0:25:03.960 as well. Ira. As you set up to write to 0:25:04.000 --> 0:25:06.840 the end of the week, are you looking at bills, notes, 0:25:07.040 --> 0:25:09.800 bonds or are you looking even more short term than that? 0:25:11.359 --> 0:25:13.840 Well, actually medium term, but we're looking at we're looking 0:25:13.880 --> 0:25:16.159 at real yields and what tips are doing and what 0:25:16.200 --> 0:25:20.400 they're suggesting for inflation going forward, because obviously the market 0:25:20.600 --> 0:25:23.119 and how it prices for inflation going forward is going 0:25:23.200 --> 0:25:25.480 to be one of the determinants that the Federal Reserve 0:25:25.600 --> 0:25:28.800 is going to use for determining whether or not, right 0:25:28.840 --> 0:25:33.119 it's close enough to its target of two percent to 0:25:33.720 --> 0:25:36.160 cut rates maybe as early as September. 0:25:36.440 --> 0:25:38.560 Okay, but I'm seeing in a real yield, Am I right? 0:25:38.640 --> 0:25:41.720 The real yield as a general statements within range has 0:25:41.760 --> 0:25:43.120 it broken out up or down? 0:25:44.119 --> 0:25:46.480 Yeah, it's been in this range for the better part 0:25:46.520 --> 0:25:50.080 of this year. You know, call it on the tenure 0:25:50.080 --> 0:25:52.880 about one and a half percent to two percent, and 0:25:53.160 --> 0:25:55.080 you know we're towards the top of that right now. 0:25:55.280 --> 0:25:58.439 And I suspect that over time as the Federal Reserve 0:25:58.560 --> 0:26:01.480 cuts interest rates. Whether or not that's warranted is one thing, 0:26:02.119 --> 0:26:05.440 but you will see probably really yields move a little 0:26:05.480 --> 0:26:09.080 bit lower, but it will be move lower in a 0:26:09.400 --> 0:26:11.400 what we call a bull steepening. So you'll see short 0:26:11.480 --> 0:26:14.240 term like five year and two year tips yields probably 0:26:14.320 --> 0:26:18.080 fall much more quickly than ten yure yields because the 0:26:18.320 --> 0:26:23.240 longer term real yields are affected not only by monetary policy, 0:26:23.240 --> 0:26:27.239 but also by expectations of supply. Right, what is the 0:26:27.240 --> 0:26:29.560 deficit going to be at? And you know, so far 0:26:29.680 --> 0:26:32.600 we haven't seriously addressed deficits, and we're still going to 0:26:32.640 --> 0:26:35.240 have two trillion dollars more of treasuries a year from 0:26:35.280 --> 0:26:37.960 now than we have today, and that's going to continue 0:26:38.040 --> 0:26:40.480 to prop up long term real yields. 0:26:40.920 --> 0:26:43.240 Neil dudd It just out with a note from Renaissance Macro. 0:26:43.359 --> 0:26:46.240 He says, you know, for the Fed July CPI data 0:26:46.280 --> 0:26:50.240 lately cements a September rate cut. You think that's how 0:26:50.240 --> 0:26:51.600 the market's interpreting IRA. 0:26:52.840 --> 0:26:55.720 Yeah, so the market's almost fully priced for a September 0:26:55.800 --> 0:26:58.240 rate cut. What's interesting is that we're priced now for 0:26:58.320 --> 0:27:00.720 a September rate cut and a December rate cut. My 0:27:00.840 --> 0:27:02.960 feeling is is that once the Fed starts to move, 0:27:03.000 --> 0:27:05.879 they're going to move and keep going. They're not going 0:27:05.920 --> 0:27:08.520 to skip a meeting just at random. So I think 0:27:08.520 --> 0:27:11.399 that if they do cut in September, they'll also go 0:27:11.440 --> 0:27:14.320 in October and then December. Now will they go more 0:27:14.359 --> 0:27:17.840 than say, another you know, four cuts and cut one 0:27:17.880 --> 0:27:19.760 hundred basis points or will they cut more than that? 0:27:20.160 --> 0:27:22.960 Still an open question. I suspect that ultimately they will 0:27:22.960 --> 0:27:25.879 cut to below three percent. So you're talking about one 0:27:25.920 --> 0:27:27.959 hundred and fifty basis points one hundred and seventy five 0:27:28.000 --> 0:27:32.119 basis points of rate cuts this cycle. Well, keep in mind, Tom, 0:27:32.160 --> 0:27:34.120 like you know, the way that they're thinking about this. Look, 0:27:34.240 --> 0:27:37.120 inflation right now is two and a half percent. FED 0:27:37.160 --> 0:27:39.439 funds is over four percent, So that means you have 0:27:39.880 --> 0:27:42.440 a one and a half percent or more than one 0:27:42.440 --> 0:27:45.840 and a half percent a real funds rate so to 0:27:45.880 --> 0:27:49.919 get the neutral under be kind of there a simplistic 0:27:50.000 --> 0:27:52.359 view of the world, they should could be able to 0:27:52.400 --> 0:27:54.760 cut one hundred and seventy five base points and just 0:27:54.840 --> 0:27:58.359 be at neutral as opposed to being at. 0:27:57.840 --> 0:28:03.280 Then why why well cut? Yeah? 0:28:03.320 --> 0:28:06.080 I think they haven't cut because they are worried about inflation, right, 0:28:06.119 --> 0:28:10.080 They're worried about another another spike of inflation, and seeing 0:28:11.280 --> 0:28:13.880 with with all the tariffs and the like, they are 0:28:13.880 --> 0:28:16.960 concerned about about that. And also until recently, remember the 0:28:17.040 --> 0:28:20.000 job market seemed to be holding up reasonably well and 0:28:20.080 --> 0:28:22.760 even the wages continue to grow close to four percent. 0:28:23.119 --> 0:28:26.919 When you have when you have job growth that is 0:28:26.960 --> 0:28:31.120 barely at the replacement rate, there is a concern that 0:28:31.160 --> 0:28:34.119 the job market might be the catalyst during this cycle 0:28:34.560 --> 0:28:37.879 to actually slow the economy a lot more. And the 0:28:37.960 --> 0:28:39.720 you know, the Federal Reserve does have a dual mandate. 0:28:39.760 --> 0:28:43.160 And if we get another really weak data print for 0:28:43.400 --> 0:28:46.360 the job market in September, you know, that opens up 0:28:46.360 --> 0:28:49.840 the side open for the market to price in a 0:28:49.880 --> 0:28:50.520 lot more cuts. 0:28:50.560 --> 0:28:52.720 And that's where I'm looking at the labor economy more 0:28:52.760 --> 0:28:56.960 than the inflation focus is the focus to your Avery Jersey, 0:28:57.000 --> 0:28:59.720 thank you so much. With Bloomberg Intelligence. 0:29:00.160 --> 0:29:04.040 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:29:04.080 --> 0:29:07.400 starting at seven am Eastern on Applecarplay and Android Auto 0:29:07.520 --> 0:29:10.480 with the Bloomberg Business app. You can also listen live 0:29:10.560 --> 0:29:14.160 on Amazon Alexa from our flagship New York station. Just 0:29:14.200 --> 0:29:16.720 say Alexa play Bloomberg eleven thirty. 0:29:17.000 --> 0:29:19.840 This conversation is so timely, so important. We're going to 0:29:19.840 --> 0:29:22.920 place it before CPI right now. As you know, the 0:29:22.960 --> 0:29:26.760 President and mister Putin will meet in Alaska. Site unknown 0:29:26.800 --> 0:29:30.560 and Marie Horden are reporting on that each and every day, 0:29:30.840 --> 0:29:35.280 and Ukraine is on the periphery. Kira Rudik is of 0:29:35.320 --> 0:29:40.320 the Ukraine Parliament, serving as a People's Deputy of Ukraine 0:29:40.360 --> 0:29:42.480 and from the Holos party, and we're thrilled she could 0:29:42.480 --> 0:29:46.880 brief us this morning. Kira, all of Ukraine must be 0:29:47.080 --> 0:29:52.400 riveted on this debate. What is Ukraine's best outcome for 0:29:52.560 --> 0:29:53.600 this Friday meeting? 0:29:55.120 --> 0:29:57.440 Hello, and thank you so much for having me. Well, 0:29:57.480 --> 0:30:00.800 the best outcome would be that President Trump wouldn't take 0:30:01.200 --> 0:30:07.480 yet another public humidiation from Russian President put In, and 0:30:07.800 --> 0:30:11.080 that he will get finally annoyed and will impose sanctions 0:30:11.080 --> 0:30:14.440 that he has promised and tariffs on everybody who is 0:30:14.480 --> 0:30:17.840 buying something from Russia and will go ahead on continuing 0:30:17.880 --> 0:30:22.160 pressuring Russia. The best outcome would be for President Trump 0:30:22.160 --> 0:30:25.360 to realize yet again that it's not Ukraine that is 0:30:25.400 --> 0:30:31.880 on the way of the peace coming. And well, you 0:30:32.520 --> 0:30:35.360 to judge if it's realistic, but this will be the 0:30:35.400 --> 0:30:36.959 best outcome that we can hope for. 0:30:37.200 --> 0:30:40.800 Should Ukraine give up territory, acreage land? 0:30:42.840 --> 0:30:46.240 The main question here, because you know everybody's asking should 0:30:46.320 --> 0:30:50.360 Ukraine give up territories? The main question is for what? 0:30:51.040 --> 0:30:54.760 And the second question is who or what will make 0:30:54.800 --> 0:30:57.960 sure that in this case Russia would not attack us again, 0:30:58.320 --> 0:31:02.720 Because asking Ukraine about territories is a simple question, Asking 0:31:02.880 --> 0:31:05.240 who will make sure that Trashia will keep the part 0:31:05.240 --> 0:31:08.720 of the bargain, whatever that bargain is, is a complicated question. 0:31:08.840 --> 0:31:12.840 And we didn't hear any single world leader trying to 0:31:12.840 --> 0:31:16.000 figure out that or at least hint him of how 0:31:16.040 --> 0:31:18.760 it will work. Because we have been in so called 0:31:19.160 --> 0:31:23.600 ceasefires with Russia since twenty thirteen dozens of times and 0:31:23.680 --> 0:31:26.280 it never worked and there was nobody to complain to, 0:31:26.720 --> 0:31:29.840 So how this time will be different? President Trump was 0:31:29.880 --> 0:31:32.840 talking about swapping of the territories. How do you make 0:31:32.880 --> 0:31:37.240 sure if even if we talk about swapping territories the 0:31:37.320 --> 0:31:40.000 Trausia wouldn't take them back in like one or two. 0:31:40.000 --> 0:31:45.760 Years, Kira, For those in your country that advocate for peace, 0:31:46.680 --> 0:31:49.800 what is that kind of based upon? What would be 0:31:49.840 --> 0:31:55.720 an acceptable reasonable peace negotiation form? Do you think. 0:31:56.840 --> 0:31:59.680 Again, like when we are talking about peace, of course 0:32:00.280 --> 0:32:02.960 people here on the ground they want peace, and we 0:32:03.000 --> 0:32:04.320 are all exhausted. 0:32:03.880 --> 0:32:04.320 Of the war. 0:32:04.680 --> 0:32:08.760 But we also know again that whatever you agree with Russia, 0:32:08.880 --> 0:32:12.280 it's very hard, almost impossible to make them stick to it. 0:32:12.760 --> 0:32:19.000 So whatever talks are about heritories, about any agreements, the 0:32:19.080 --> 0:32:22.720 first thing is how do you President Trump or European 0:32:22.800 --> 0:32:25.960 leaders or whoever, how do you pressure Russia to keep 0:32:26.000 --> 0:32:29.760 the part of the bargain. And before that, anything else 0:32:29.880 --> 0:32:33.760 is useless to discuss because if the security guarantees are 0:32:33.800 --> 0:32:36.840 not there, Russia will just use this time to group 0:32:37.120 --> 0:32:39.560 and they will attack us again in a couple of years. 0:32:39.600 --> 0:32:44.080 This is what happened again and again to us. 0:32:42.800 --> 0:32:47.000 This unique situation. And if we assume mister Zelenski is 0:32:47.040 --> 0:32:51.400 on the outside, what do you need from Europe? Are 0:32:51.440 --> 0:32:55.920 you looking the individual nations, Heiro rudic Or you're looking 0:32:56.040 --> 0:32:59.280 to Brussels of a modern European Union. 0:33:01.560 --> 0:33:04.200 What worked for us in the past is working with 0:33:04.560 --> 0:33:10.840 the individual nations. So we didn't get like certain amount 0:33:10.840 --> 0:33:14.240 of weapons from NATO as it is, but from countries 0:33:14.280 --> 0:33:19.240 like Britain, like Denmark, like Norway, like Germany, France. So 0:33:19.400 --> 0:33:21.440 it works the best when we are working with the 0:33:21.480 --> 0:33:26.480 individual nations. And the overall truth is we want everyone 0:33:26.920 --> 0:33:29.520 just to execute on the promises that they have already made. 0:33:30.000 --> 0:33:32.320 If that was done, we will already be in the 0:33:32.360 --> 0:33:37.040 better positions. Unfortunately, times go differently in Ukraine when you 0:33:37.080 --> 0:33:40.520 are under the bombardment and in peaceful cities of Europe 0:33:41.200 --> 0:33:44.160 that are able to stay peaceful while we are stopping 0:33:44.200 --> 0:33:47.240 Russia from whatever wherever they want to go next. And 0:33:47.360 --> 0:33:51.440 so sometimes between the political promise and the moment when 0:33:51.560 --> 0:33:54.600 Ukrainian soldiers getting weapons in his or her hands, it 0:33:54.600 --> 0:33:56.840 could be years and this is not something that we 0:33:56.880 --> 0:33:57.400 can afford. 0:33:57.480 --> 0:34:00.440 Right now, when you're in New York again, we would 0:34:00.480 --> 0:34:02.680 be honored to have you in. Kier Rudik is a 0:34:02.720 --> 0:34:06.560 member of Parliament for the Ukraine for Ukrainian Government. I 0:34:06.560 --> 0:34:10.239 should say she's the People's Deputy of Ukraine, leader of 0:34:10.320 --> 0:34:14.759 the holiest Party. 0:34:17.239 --> 0:34:21.160 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:34:21.160 --> 0:34:24.200 starting at seven am Eastern on Apple, Corplay and Android 0:34:24.200 --> 0:34:27.200 Otto with the Bloomberg Business app. You can also watch 0:34:27.280 --> 0:34:30.239 us live every weekday on YouTube and always on the 0:34:30.280 --> 0:34:31.280 Bloomberg Terminal. 0:34:31.360 --> 0:34:34.200 Juvensteinis and the rest of the elite of the United 0:34:34.280 --> 0:34:36.920 Kingdom have lived it. I'm going to say two years 0:34:36.960 --> 0:34:41.400 ago they had a modest pension issue where they basically 0:34:41.440 --> 0:34:46.120 had a marketing concept around pensions, which blew up. I mean, 0:34:46.280 --> 0:34:49.160 just let's cut. Let's just leave it at that because 0:34:49.160 --> 0:34:53.120 of time. He Peu von steinas with Oliver Wyman, just 0:34:53.160 --> 0:34:56.240 wrote an essay. You know, Tracy Eloway and Joe Wis 0:34:57.680 --> 0:35:00.120 them roars. He wrote it. You know he's the kill 0:35:00.880 --> 0:35:04.200 and you wrote an essay for ad lites. The next 0:35:04.200 --> 0:35:07.759 big thing in private credit? Come on, Hewett. Reminds me 0:35:07.800 --> 0:35:11.280 of what you people lived in the Liz Trust. Blow 0:35:11.360 --> 0:35:16.560 up your pension system? Do we really want bitcoin or directly, 0:35:16.600 --> 0:35:19.600 do we want private credit in our four or one k? 0:35:20.320 --> 0:35:20.480 Well? 0:35:20.480 --> 0:35:22.160 Thanks for having me back on, Tom Well. The first 0:35:22.239 --> 0:35:25.560 lesson I learned is never to I don't own the title, 0:35:25.719 --> 0:35:28.919 the headline and the rock stars to use the title. Look, 0:35:29.000 --> 0:35:32.000 I think that if you look at a retirement savings 0:35:32.000 --> 0:35:34.400 around the world. You know, in the States a defined 0:35:34.400 --> 0:35:37.280 benefit scheme has about twenty three percent in real estate 0:35:37.360 --> 0:35:41.160 fixing come private equity Australia twenty to thirty points. But 0:35:41.200 --> 0:35:44.120 for US retirees it's close to zero. It's actually about 0:35:44.120 --> 0:35:48.280 two percent. And so I think giving investors more opportunities 0:35:48.280 --> 0:35:52.439 to save and also manage their retirement is responsible. How 0:35:52.440 --> 0:35:54.640 it's done. You know, there's a lot of innovation which 0:35:54.680 --> 0:35:56.600 needs to be done. But literally give you one statistic. 0:35:56.760 --> 0:35:59.240 About three and a half trillion are in target date funds. 0:36:00.120 --> 0:36:02.400 Sixty eight percent of all inflows go into target light funds. 0:36:02.480 --> 0:36:04.840 Do you know how many people switch every year? Just 0:36:04.960 --> 0:36:08.279 one percent? It means it's the stickiest investment product on 0:36:08.280 --> 0:36:10.840 the planet. And therefore, to say you have to invest 0:36:11.040 --> 0:36:14.400 all of that in daily liquidity funds feels too tight. Okay, 0:36:14.480 --> 0:36:15.320 what's the right amount? 0:36:15.360 --> 0:36:15.920 That's a debate. 0:36:16.000 --> 0:36:18.280 Let me get the line up here. Are you telling 0:36:18.360 --> 0:36:21.480 me that Lisa Mateo in or two or John Tucker 0:36:21.520 --> 0:36:24.719 in his two oh one K John Tucker goes into 0:36:24.760 --> 0:36:28.239 private credit, he's going to get the quality the three 0:36:28.360 --> 0:36:30.919 phone calls from Blackstone's going to get. I just don't 0:36:30.920 --> 0:36:33.080 buy it. I mean, how do we know that we're 0:36:33.080 --> 0:36:36.760 going to have quality private credit in a reserve vehicle. 0:36:37.239 --> 0:36:38.960 Look, I think it's a great question. So I think 0:36:38.960 --> 0:36:40.320 you've got a couple of layers to this. So the 0:36:40.400 --> 0:36:43.200 first is there's a whole bunch of fiduciaries who run 0:36:43.239 --> 0:36:47.160 these systems. So there's investment consultants, there's planned sponsors. And 0:36:47.200 --> 0:36:50.520 I think also these assets are not going to just 0:36:50.560 --> 0:36:53.800 be thrown into a portfolio. They're going to be probably 0:36:53.800 --> 0:36:57.320 in an evergreen fund, so in a thoughtfully managed, professionally 0:36:57.320 --> 0:37:00.759 managed building block. So I think point one is there's 0:37:00.760 --> 0:37:02.840 at least three layers of fiduciaries which are going to 0:37:02.880 --> 0:37:05.759 be overseeing this. I think two is then thinking about 0:37:05.840 --> 0:37:08.680 what is the right risk return. And obviously some large 0:37:08.680 --> 0:37:11.759 institutional investors can take much more risk because they've got 0:37:11.760 --> 0:37:14.719 pots of money and long duration. I think obviously here 0:37:14.760 --> 0:37:17.160 it's going to be building blocks. But I think in 0:37:17.200 --> 0:37:19.719 an environment where more and more loans are being done 0:37:19.800 --> 0:37:22.839 outside of the banking system, I think it's fair enough 0:37:22.880 --> 0:37:25.200 that that investors can invest in more credit, And I 0:37:25.200 --> 0:37:27.680 think the key point, which we've discussed before, is the 0:37:27.760 --> 0:37:30.560 difference between a five year public bond and a five 0:37:30.600 --> 0:37:33.200 year private credit. It's a grey scale now, both are 0:37:33.280 --> 0:37:35.879 quite a liquid, both have got characteristics. So I think 0:37:35.920 --> 0:37:38.560 it's no longer black and white in this market. 0:37:38.719 --> 0:37:43.720 We haven't seen private credit experience a significant prolonged economic downturn, 0:37:43.800 --> 0:37:45.520 have we. We don't know how it's going to perform 0:37:45.600 --> 0:37:49.959 in a capitalic constrained environment. What's the what's the thinking there? 0:37:50.480 --> 0:37:51.920 Look, it's a great question. 0:37:52.080 --> 0:37:54.160 So I mean, one way I think about it is 0:37:54.160 --> 0:37:56.720 that as the as the universe of what's in private 0:37:56.719 --> 0:37:59.279 credit spans, it's going to drift towards what we've learned 0:37:59.280 --> 0:38:00.920 from the banks of the lot twenty or thirty years, 0:38:00.920 --> 0:38:03.759 because effectively these are bank loans which are being put 0:38:03.760 --> 0:38:06.759 into private structures. There was a FED study about two 0:38:06.840 --> 0:38:09.160 years ago, so it's a bit dated now, which showed 0:38:09.160 --> 0:38:13.400 that the loss the probability of default was about a 0:38:13.440 --> 0:38:15.880 third lower for the private credit loans at that stage. 0:38:16.080 --> 0:38:18.399 Probably bit of cherry picking, but then the loss given 0:38:18.400 --> 0:38:20.480 default so when it goes wrong, what you reclaim was 0:38:20.520 --> 0:38:23.600 a bit worse, but net net, so far it's been 0:38:24.120 --> 0:38:24.879 it has been better. 0:38:24.880 --> 0:38:25.399 But you're right. 0:38:25.760 --> 0:38:27.960 As the industry scales, there'll be good decisions and bad 0:38:28.000 --> 0:38:30.360 decisions and so naturally returns will. 0:38:30.080 --> 0:38:31.799 Probably cold down the market. 0:38:32.840 --> 0:38:35.719 Look, this is this is one of the ask this 0:38:35.760 --> 0:38:38.040 is one of the really critical questions. So the moment 0:38:38.080 --> 0:38:42.000 they're marked probably every quarter, every quarter, every quarter, Oh, 0:38:42.000 --> 0:38:44.080 come on, and that's note. So what we argue in 0:38:44.080 --> 0:38:47.320 that piece for the rock stars was that the pricing 0:38:47.400 --> 0:38:50.520 conventions will need to evolve so they're done at least 0:38:50.560 --> 0:38:52.000 on a monthly basis. 0:38:52.120 --> 0:38:54.200 Say, is this a new thing or Colm Tracy and 0:38:54.280 --> 0:38:56.759 Joe rock stars? Yeah, is that like a new thing? 0:38:57.320 --> 0:39:02.160 That's a mandate? Okay, continue the rock starts so every 0:39:02.320 --> 0:39:03.640 ninety days in no way. 0:39:04.480 --> 0:39:05.240 So that's why. 0:39:05.360 --> 0:39:09.040 But this so as you move from money being managed 0:39:09.080 --> 0:39:13.120 for institutional investors and coming into wealth, there's a number 0:39:13.120 --> 0:39:15.600 of things which will have to change, and obviously around 0:39:15.600 --> 0:39:18.799 that ecosystem for a better word, you know, pricing will 0:39:18.880 --> 0:39:21.920 change the structures. You know, there's a lot of work 0:39:21.920 --> 0:39:23.320 which is being done and people. 0:39:23.080 --> 0:39:24.839 Are going to have a limitation and how much they 0:39:24.840 --> 0:39:27.440 can have in private creditor for that matter been done. 0:39:28.480 --> 0:39:30.520 So if we think about in the retirement system. Look, 0:39:30.560 --> 0:39:32.840 we've only just had the executive order last week, so 0:39:32.840 --> 0:39:34.719 there's a lot of work still to be done. But 0:39:34.719 --> 0:39:38.640 it's like rewirement, right, So going back to it, there's 0:39:38.640 --> 0:39:41.600 at least three layers of fiduciaries. I think the fiduciaries 0:39:41.640 --> 0:39:44.719 will have you know, will want to pilot, they want 0:39:44.760 --> 0:39:46.600 to experiment, they want to go slowly. Give you an 0:39:46.600 --> 0:39:50.000 example in the Australian system. Let's take the Australian super Fund. 0:39:50.000 --> 0:39:52.080 It's the biggest funds in Australia. They have twenty three 0:39:52.120 --> 0:39:56.480 points in private assets. They really two percent in private 0:39:56.520 --> 0:39:59.719 credit because they're trying to listen, learn and ex experiment. 0:39:59.800 --> 0:40:02.240 So this is not a this is not a torrent. 0:40:02.360 --> 0:40:03.719 This is going to be something which will take a 0:40:03.719 --> 0:40:04.080 good sh. 0:40:04.239 --> 0:40:08.480 Australia has twenty three plus two twenty five basis points 0:40:08.640 --> 0:40:10.520 in alternative. 0:40:09.840 --> 0:40:12.799 Twenty three twenty three points not basis points points, So 0:40:12.920 --> 0:40:16.440 twenty three percent of the Australian super Fund which. 0:40:16.280 --> 0:40:17.920 Is alternative investments. 0:40:18.000 --> 0:40:20.360 Yeah, now that's across really stay of equity. 0:40:20.360 --> 0:40:23.719 In the Veronicas, Tom, you know the Veronicas, we do 0:40:23.760 --> 0:40:26.560 a lot of work with registered investment advisors here at 0:40:26.560 --> 0:40:28.600 Bloomberg and Alex Steel and I did a bunch of 0:40:29.040 --> 0:40:33.360 remotes with them, and I was shocked at the amount 0:40:33.560 --> 0:40:38.000 that an average registered investment advisor, a retail advisor in 0:40:38.080 --> 0:40:42.120 any town USA has an allocation to private alternatives. 0:40:42.160 --> 0:40:42.879 I thought it would have been. 0:40:42.840 --> 0:40:46.440 Five percent, six percent. No, it's twenty twenty five percent. 0:40:47.160 --> 0:40:49.319 That's just amazing. But I'm guessing not a lot of 0:40:49.320 --> 0:40:50.640 that is in private credit. 0:40:51.040 --> 0:40:53.000 At the moment. It'd be not that much. 0:40:53.200 --> 0:40:55.560 Although actually, you know interesting if you look at these 0:40:55.600 --> 0:40:58.919 sort of private credit funds for wealthy that's called called 0:40:58.920 --> 0:41:02.400 evergreen funds, they're not only for a wealthy of they 0:41:02.440 --> 0:41:05.320 can be for institutions YEA. To date, they're growing about 0:41:05.360 --> 0:41:08.680 sixty percent compound probably makes it the fastest growing part 0:41:08.719 --> 0:41:11.160 of the investment ecosystem. So it's growing, it's growing. 0:41:12.000 --> 0:41:15.000 Keevan Steina's with this area are commercial free until nine am. 0:41:15.080 --> 0:41:17.759 We welcome all of you across at the nation. Good 0:41:17.760 --> 0:41:21.400 morning across the United Kingdom as well. Mister van Stinez 0:41:21.480 --> 0:41:26.040 is with Oliver Wyman, run YouTube. Subscribe to Bloomberg Podcasts 0:41:26.080 --> 0:41:30.279 a live Chad effervescent this morning to say at least read, 0:41:30.280 --> 0:41:34.320 agree to the screen extremely quiet tape here nineteen minutes 0:41:34.360 --> 0:41:36.440 away from the CPI. 0:41:36.640 --> 0:41:39.399 Paul with you please, I mean, I'm shocked, Hugh. 0:41:39.440 --> 0:41:42.120 I want to what your view is. Why are the 0:41:42.200 --> 0:41:46.280 banks allowing this business to go away? From the private 0:41:46.280 --> 0:41:48.720 credit business. I started my career at the Chase Manhattan 0:41:48.719 --> 0:41:53.440 bank leverage lending to the media sector. You know, we 0:41:53.680 --> 0:41:56.000 make money upfront, and we did the deal we did 0:41:56.080 --> 0:41:58.920 lve Woark plus three, we sold off. We syndicated all 0:41:58.960 --> 0:42:01.399 of our risk off the balance the solid to banks 0:42:01.440 --> 0:42:03.680 all around the country so we had no balance sheet risk, 0:42:03.920 --> 0:42:05.200 and then the next day we turn around to do 0:42:05.239 --> 0:42:08.319 it all again. That was a great business. We made 0:42:08.320 --> 0:42:10.880 a fortunes. Why am I letting that business go to 0:42:10.960 --> 0:42:12.160 some of these private credit guys? 0:42:12.360 --> 0:42:13.640 Look, Paul, I think it's a great question. 0:42:13.680 --> 0:42:15.600 I think actually the wins are slightly changing on this, 0:42:15.760 --> 0:42:18.799 partly with the deregulation but stronger banks. But let's face it, 0:42:19.120 --> 0:42:22.520 post the Financial crisis, there was a whole reregulation of banks, 0:42:22.960 --> 0:42:26.120 particularly in twenty twelve the FED told the US banks 0:42:26.120 --> 0:42:28.319 not to own as many leverage loans, and then from 0:42:28.320 --> 0:42:31.760 that there was a decade into the pandemic where private 0:42:31.800 --> 0:42:34.680 credit grew a trillion dollar parallel system in the US, 0:42:35.320 --> 0:42:37.240 and now as we come to today, then we obviously 0:42:37.239 --> 0:42:39.399 twenty three you know, with the interest rate shot banks 0:42:39.400 --> 0:42:43.040 from the back foot, they also were cautious. Today the 0:42:43.120 --> 0:42:45.359 leading banks are now much back on the front foot. 0:42:45.440 --> 0:42:48.560 And if you look at the leverage lending space, many 0:42:48.560 --> 0:42:51.480 of the banks have tried to refinance the private credit 0:42:51.480 --> 0:42:53.640 loans and lift them to try and argue them back. 0:42:54.000 --> 0:42:56.399 But you know, there's also some structural areas where many 0:42:56.400 --> 0:42:59.040 of the private credit firms, being entrepreneurial, are now looking 0:42:59.040 --> 0:43:03.240 for fresher pastures. So they're looking into equipment leasing, aircraft leasing. 0:43:03.560 --> 0:43:05.960 Well thanks just got out of aircraft leasing, you know 0:43:06.040 --> 0:43:10.360 years ago, data center financing again, that's moving increasingly towards 0:43:10.360 --> 0:43:13.800 the private credit. So look, I think everything has a cycle, 0:43:14.080 --> 0:43:16.360 and I think the private smarter private credit funds are 0:43:16.400 --> 0:43:17.760 looking for fresh, fresh loans. 0:43:17.960 --> 0:43:20.719 Okay, I mean everybody wants in on this. I get it. 0:43:20.800 --> 0:43:24.719 And it's an umpteen trillion dollar fronk plan. What are 0:43:24.719 --> 0:43:27.200 you worried about, Hugh Vanstein, is what's the you know, 0:43:27.320 --> 0:43:30.759 paragraph three, page twelve of the red hearing ages ago, 0:43:30.800 --> 0:43:32.160 what's the risk factors here? 0:43:32.719 --> 0:43:34.759 Look, I think there's there's a there's a number of things. 0:43:34.840 --> 0:43:38.440 So as you move towards the wealthy in retail, I think, 0:43:38.480 --> 0:43:41.480 as you said, Tom, we need to get the pricing conventions, 0:43:41.560 --> 0:43:44.680 the right structures, the right cash flows. There's a whole 0:43:44.680 --> 0:43:48.480 bunch of stuff around the engineering of the of the plumbing. 0:43:48.600 --> 0:43:51.520 And look at what we've learned in finance is often 0:43:51.560 --> 0:43:54.080 it's the plumbing which actually creates the problem rather than 0:43:54.080 --> 0:43:55.200 actually just the assets something. 0:43:55.320 --> 0:43:59.640 So tranches, folks, are not a trench, a trunch. Tranches 0:43:59.680 --> 0:44:03.120 are high quality pieces of whatever it is down to 0:44:03.160 --> 0:44:07.800 a lesser quality. We learned in seven that the quality 0:44:07.880 --> 0:44:12.440 tranch is moving was a really ugly mover for institutional money. 0:44:12.840 --> 0:44:16.239 Is private credit going to be trenched out? So you 0:44:16.360 --> 0:44:19.120 know in your four oh and K the level of 0:44:19.320 --> 0:44:22.399 risk of private credit you're going to have in your portfolio. 0:44:22.719 --> 0:44:26.480 So this is a that this is something that I expect. 0:44:26.719 --> 0:44:30.040 I think the ratings agencies are all over this space. 0:44:30.480 --> 0:44:32.920 They see a new business in trying to rate a 0:44:33.000 --> 0:44:36.160 much larger amount of the private credit space too. And look, Tom, 0:44:36.200 --> 0:44:38.000 I think we need to be careful here between the 0:44:38.080 --> 0:44:41.440 risky stuff, the non investment grade and the ig that 0:44:41.560 --> 0:44:43.600 you know what tripped us up in the financial crisis 0:44:43.840 --> 0:44:46.520 was buying an awful lot of the stuff that people 0:44:46.520 --> 0:44:49.480 thought was low risk. Actually the non investment grade by definition, 0:44:49.520 --> 0:44:51.160 you know it's risky, so you don't pile it on. 0:44:51.560 --> 0:44:53.319 We got to do a joint interview with Hugh von 0:44:53.400 --> 0:44:57.280 Steinas and Mark Kearney. Well, Curry is a little occupied something, 0:44:57.400 --> 0:44:59.880 so I think thank Yousina's working with the Bank of 0:45:00.160 --> 0:45:01.319 Them a bit ago. 0:45:01.560 --> 0:45:05.440 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:45:05.480 --> 0:45:08.520 starting at seven am Eastern on Apple, Corclay and Android 0:45:08.520 --> 0:45:11.560 Auto with the Bloomberg Business app. You can also listen 0:45:11.640 --> 0:45:14.920 live on Amazon Alexa from our flagship New York station, 0:45:15.440 --> 0:45:17.400 Just say Alexa, play Bloomberg. 0:45:17.400 --> 0:45:18.640 Eleven thirty were. 0:45:18.440 --> 0:45:19.880 The Newspaper's Lisa Matteo. 0:45:20.000 --> 0:45:21.520 Okay, Tom, I thought you would get a kick out 0:45:21.520 --> 0:45:23.200 of the story because I know you love the dreaded 0:45:23.280 --> 0:45:26.600 Yankees as you call them. They have the star studded roster, right, 0:45:26.600 --> 0:45:28.960 the three hundred million dollar payroll. But the question and 0:45:29.040 --> 0:45:31.880 every fan's mind is what the heck is going on? 0:45:32.040 --> 0:45:32.200 Right? 0:45:32.239 --> 0:45:34.080 Why is the team not showing up? 0:45:34.600 --> 0:45:36.759 They came out of the weekend barely clinging to the 0:45:36.760 --> 0:45:39.120 half game lead over the Cleveland Guardians to get that 0:45:39.280 --> 0:45:42.680 final Al wild card spot. So the Wall Street Journal 0:45:42.760 --> 0:45:46.360 kind of puts the spotlight on the ownership and points 0:45:46.400 --> 0:45:49.200 to hal Steinbrenner, who took over the family business like 0:45:49.280 --> 0:45:54.120 seventeen years ago, a different managerial philosophy than his father did. 0:45:54.400 --> 0:45:56.560 They said that house a little bit loyal. You know, 0:45:56.640 --> 0:45:58.520 he doesn't scream and do all that kind of stuff. 0:45:59.080 --> 0:46:01.879 But the question there is when does he step in? 0:46:02.000 --> 0:46:04.400 Like the Yankees are struggling right We know that pitching 0:46:04.440 --> 0:46:06.560 has been an issue. They haven't won a title since 0:46:06.600 --> 0:46:08.560 two thousand and nine. I still have the T shirt, 0:46:09.640 --> 0:46:13.120 but little has changed. So that is the question when 0:46:13.280 --> 0:46:15.920 are things going to start to They're. 0:46:15.800 --> 0:46:17.200 In the playoffs pretty much every year. 0:46:17.239 --> 0:46:20.399 They were the World Series last year, but Yankee expectations 0:46:20.440 --> 0:46:26.120 are uniquely higher than everybody else in the sports. It's 0:46:26.160 --> 0:46:29.719 when the World Series orts a it's a bad year. 0:46:30.640 --> 0:46:33.279 Can we note even though we lost last night, the 0:46:33.320 --> 0:46:36.480 ace for the Red Sox is pitching. The ace for 0:46:36.520 --> 0:46:38.479 the Yankees has been out all year. 0:46:39.239 --> 0:46:41.200 Yeah, that's that's a big deal. 0:46:41.239 --> 0:46:41.680 That's key. 0:46:41.840 --> 0:46:42.600 That's a big deal. 0:46:42.719 --> 0:46:46.279 And so we started the airplane just fantastic, But the 0:46:46.320 --> 0:46:49.520 last fifty games have been terrible, so we'll see if 0:46:49.520 --> 0:46:50.400 they can turn it around. 0:46:50.920 --> 0:46:52.520 But they've got time to turn it around. 0:46:52.560 --> 0:46:55.360 You have time with a wild card, I mean exactly. 0:46:55.400 --> 0:46:57.960 You know, I think the Chicago White Sox are reaching 0:46:57.960 --> 0:46:59.920 for the worst right now. You're still in it. 0:47:00.360 --> 0:47:03.680 Next, okay, we'll take you over to the labor market. 0:47:04.400 --> 0:47:05.000 This is interesting. 0:47:05.000 --> 0:47:06.520 The Wall Street Journal is saying the era of those 0:47:06.560 --> 0:47:10.160 big pay raises for low paid workers could be over, 0:47:10.320 --> 0:47:10.640 or at. 0:47:10.600 --> 0:47:12.000 Least maybe taking a pause. 0:47:12.400 --> 0:47:14.799 It's it's a different site before, you know, the year 0:47:14.920 --> 0:47:17.160 right before the pandemic and then right after the pandemic 0:47:17.160 --> 0:47:19.200 where we saw the opposite of it. You know, it 0:47:19.239 --> 0:47:21.760 pointed to the July jobs report which kind of compared 0:47:21.800 --> 0:47:24.879 you know, leisure and hospitality workers, you know, a three 0:47:24.920 --> 0:47:27.000 point five percent increase from a year earlier, and then 0:47:27.000 --> 0:47:29.399 you had the information sector that was up about five 0:47:29.440 --> 0:47:32.560 point four percent. But what it really does, it's a 0:47:32.560 --> 0:47:35.000 good look into the history of the wage gap and 0:47:35.040 --> 0:47:37.360 how that has fluctuated over the past few years. So 0:47:37.400 --> 0:47:39.680 I just thought this was a good one to point 0:47:39.680 --> 0:47:41.680 out because you know, it's a good look back into. 0:47:41.480 --> 0:47:42.200 The history of it. 0:47:42.239 --> 0:47:44.800 And how college Sun's got a summer job. I'm shocked 0:47:44.800 --> 0:47:46.120 that it was getting paid per hour. 0:47:46.280 --> 0:47:48.640 I mean it's like a real paycheck. I'm like, dude, 0:47:48.640 --> 0:47:49.760 what do you can do with all this cash? 0:47:49.920 --> 0:47:52.920 Like, what's there? Lisa, let's stop to show your folks. 0:47:53.280 --> 0:47:57.360 Lisa and Tom Keane asking Paul, how do your children 0:47:57.440 --> 0:47:59.120 are all gods? They're all employed? 0:47:59.360 --> 0:48:03.319 Not hu, she cut him off. But it depends on 0:48:03.360 --> 0:48:03.760 the sector. 0:48:03.840 --> 0:48:06.640 Like my nephew just got a job. He's still in college, 0:48:06.640 --> 0:48:10.160 but they guaranteed him a job making six figures before 0:48:10.200 --> 0:48:11.160 he's even graduated. 0:48:11.239 --> 0:48:14.680 Yeah, I think just for the like the you know, 0:48:14.719 --> 0:48:15.600 the hourly worker. 0:48:16.239 --> 0:48:17.640 Amazon is the market. 0:48:17.800 --> 0:48:18.480 I mean, it's not the. 0:48:18.920 --> 0:48:21.680 Federal governor, the market government market center. 0:48:21.800 --> 0:48:22.480 Absolutely. 0:48:22.560 --> 0:48:24.319 I mean, because they employed so many people and they're 0:48:24.360 --> 0:48:27.080 paying up and that's you have to match it. 0:48:27.160 --> 0:48:28.319 So anyway, thank you. 0:48:28.560 --> 0:48:31.400 Okay, swifties waking up to a real treat. 0:48:31.520 --> 0:48:32.399 Did you know it was. 0:48:32.320 --> 0:48:35.200 A surprise album drop from Taylor Swift It is the 0:48:35.320 --> 0:48:37.719 Life of a show Girl, and she revealed it on 0:48:37.760 --> 0:48:41.560 her boyfriend Travis Kelsey's new Heights poss Still Together. They're 0:48:41.640 --> 0:48:45.000 still together. This was the announcement on Access. She pulled 0:48:45.000 --> 0:48:46.640 out a vinyl record from a briefcase. 0:48:46.680 --> 0:48:48.080 Take a lesson mc green. 0:48:49.560 --> 0:48:52.799 Yep, this is my brand new album, The Life of 0:48:52.800 --> 0:48:53.400 a Showgirl. 0:48:56.640 --> 0:48:57.640 If that is it? 0:48:57.800 --> 0:48:58.080 Okay? 0:48:58.080 --> 0:49:00.640 So the videos posted at twelve twelve New York Time 0:49:00.800 --> 0:49:03.320 on the twelfth, her twelfth studio. 0:49:02.960 --> 0:49:04.200 Album, You Get I Get It. 0:49:04.200 --> 0:49:05.040 Okay, see the theme. 0:49:05.120 --> 0:49:08.680 Okay. It comes after her eleventh album. The official release 0:49:08.760 --> 0:49:10.800 date it hasn't been announced yet, but pre. 0:49:10.719 --> 0:49:12.320 Orders now available. 0:49:12.400 --> 0:49:14.640 So that was the whole thing together. I mean they're 0:49:14.640 --> 0:49:16.960 in an age. 0:49:17.920 --> 0:49:19.800 Yeah, she's still going strong. 0:49:21.120 --> 0:49:24.360 They are, they are, but if these are are rejoicing 0:49:24.440 --> 0:49:24.920 this morning. 0:49:25.000 --> 0:49:27.200 But she just got off like a monster tour. That 0:49:27.239 --> 0:49:29.240 was a couple of years, right, yes, yes. 0:49:29.120 --> 0:49:31.280 Yes, so now so now comes the next album. 0:49:31.320 --> 0:49:33.720 All right, this is just you know, out of COVID. 0:49:34.160 --> 0:49:37.960 I mean, I mean, she invented the self help record 0:49:38.040 --> 0:49:41.200 in COVID, No kidding, those quiet records. 0:49:41.280 --> 0:49:43.359 Jack in a big fight against him. 0:49:43.400 --> 0:49:45.879 Yeah, you know it is Shrewd the right wok. 0:49:46.000 --> 0:49:46.760 Yeah, totally. 0:49:46.960 --> 0:49:49.960 Yeah, she's like a big time Shrewd and she's killing it. 0:49:50.080 --> 0:49:52.239 Lisa Matteo, thank you so much. 0:49:52.680 --> 0:49:57.520 This is the Bloomberg Surveillance podcast, available on Apple Spotify, 0:49:57.640 --> 0:50:01.920 and anywhere else you get your podcasts. Listen live each weekday, 0:50:02.040 --> 0:50:05.520 seven to ten am Eastern on Bloomberg dot Com, the 0:50:05.600 --> 0:50:09.640 iHeartRadio app, tune In, and the Bloomberg Business app. You 0:50:09.680 --> 0:50:13.040 can also watch us live every weekday on YouTube and 0:50:13.239 --> 0:50:14.960 always on the Bloomberg terminal