WEBVTT - US Payrolls Rise After October Drop 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.320 --> 0:00:27.880 You're really going to. 0:00:27.960 --> 0:00:30.240 Drill down here into the jobs report right now. Jeffrey 0:00:30.280 --> 0:00:33.000 Cleveland with us with Peyton Riego love having on with 0:00:33.120 --> 0:00:36.640 just an inherent optimism about waking up and taking a swim. 0:00:36.640 --> 0:00:39.280 We'll talk about that in a bit here. A ton 0:00:39.360 --> 0:00:44.159 of moving parts here to partse. Retail sales came in 0:00:44.400 --> 0:00:48.000 SAGY except the control group. The control group takes out this, 0:00:48.159 --> 0:00:50.880 that and the other thing, and it's a boom number 0:00:50.920 --> 0:00:54.360 of zero point eight percent. But Paul, the revisions on 0:00:54.520 --> 0:00:58.000 retail sales and the published retail sales is sort of 0:00:58.080 --> 0:01:00.920 just a mess. Yeah, that's how I do I'd put it. 0:01:01.040 --> 0:01:03.640 Your comment, Paul on the four point six percent. 0:01:03.640 --> 0:01:05.680 Yeah, looking at the four point six percent, I mean, 0:01:05.760 --> 0:01:08.720 you know, we started the year kind of like around 0:01:08.720 --> 0:01:11.480 four percent here three point nine percent, so it's definitely 0:01:11.680 --> 0:01:13.840 jumped a little bit there, market. 0:01:13.560 --> 0:01:16.679 Lifting up a little bit. Yields come in a little 0:01:16.720 --> 0:01:19.640 bit as well. Again, maybe the most important statistic today 0:01:20.040 --> 0:01:23.479 oil under fifty six dollars barrel. We're given Jeffrey Regal 0:01:23.520 --> 0:01:26.800 about four more seconds here to parse the data. I'm 0:01:26.840 --> 0:01:29.679 going to say, folks, there's a single line here thanks 0:01:29.720 --> 0:01:33.440 to our great economic team, non farm payrolls three month 0:01:33.600 --> 0:01:39.640 average change is twenty two thousand. I don't understand politically, Paul, 0:01:40.120 --> 0:01:44.640 how twenty two thousand is okay for Washington. 0:01:44.959 --> 0:01:46.680 Yeah, exactly right, Tom. I mean I think that's a 0:01:46.680 --> 0:01:48.920 little bit of a challenge there. It seems like at 0:01:48.920 --> 0:01:52.760 that no higher, no fire kind of economy still kind 0:01:52.760 --> 0:01:53.760 of with us to some agree. 0:01:53.880 --> 0:01:55.960 Well, we'll have to see. We're commercial free for you 0:01:56.640 --> 0:02:01.080 through this far. We're going to continue here with Jeffrey 0:02:01.120 --> 0:02:05.000 Cleveland and get some good bond analysis as well. Bloomberg 0:02:05.080 --> 0:02:08.560 Surveillance this morning brought you by Interactive Brokers. Trade over 0:02:08.639 --> 0:02:13.320 ten thousand US stocks and ETFs, US equity index options, 0:02:13.400 --> 0:02:17.480 US treasuries and more on your timetable. Learn more at 0:02:17.520 --> 0:02:21.119 IBr dot com, slash around the clock, and we think 0:02:21.280 --> 0:02:25.280 Interactive Brokers for all their support. Michael mckeey scheduled to 0:02:25.280 --> 0:02:28.480 be with us. Christina Kemeny will be with SOT Invesco. 0:02:28.560 --> 0:02:31.359 But we continue now with Jeffrey Cleveland, who's had all 0:02:31.360 --> 0:02:35.040 of two minutes forty seven seconds to massage the data. 0:02:35.080 --> 0:02:38.000 What's the first thing you looked at, mister Cleveland. 0:02:38.360 --> 0:02:40.680 I think, Tom, for me, the unemployment rate taking up 0:02:40.720 --> 0:02:43.239 to four point six, as we said in the preamble. 0:02:43.600 --> 0:02:47.760 I think that's going to get attention of investors and policymakers. 0:02:47.800 --> 0:02:49.720 I think you see that moving the bond market already. 0:02:50.600 --> 0:02:53.480 After that, I quickly looked at your non farm payroll. 0:02:53.720 --> 0:02:55.480 I mean, I guess on a positive note, if you 0:02:55.520 --> 0:02:58.160 want the West Coast optimistic spin, you did have a 0:02:58.240 --> 0:03:04.359 negative October, but total private if you exclude the government payrolls, 0:03:04.639 --> 0:03:07.239 didn't look too bad. Tom, you're talking about fifty two 0:03:07.280 --> 0:03:12.400 thousand in October. You're talking about sixty nine thousand in November. 0:03:12.960 --> 0:03:14.400 You mentioned the three month average. 0:03:14.400 --> 0:03:16.440 We do like to look at that as well, and 0:03:16.800 --> 0:03:19.560 the Bloomberg Economic team absolutely right that twenty two thousand. 0:03:20.360 --> 0:03:22.960 You know, that's total non farm. If you look at 0:03:23.000 --> 0:03:26.800 just private, it looks a bit better. It's seventy five thousand. 0:03:27.200 --> 0:03:31.000 So I would still characterize that as soggy. To steal 0:03:31.000 --> 0:03:34.840 your phrase, your reference for retail sales, and I still 0:03:34.840 --> 0:03:37.840 think the risk here is a higher unemployment rate, and 0:03:37.880 --> 0:03:40.760 so I think this brings the FED already back into play. 0:03:40.800 --> 0:03:43.640 We've got a lot more data before the next FOMC meeting, 0:03:43.680 --> 0:03:46.120 but I think the bomb market will react. If I'm 0:03:46.120 --> 0:03:47.080 not mistaken, I'm going. 0:03:47.080 --> 0:03:49.320 To go to three months average. But Jeffrey, with your 0:03:49.360 --> 0:03:54.560 study at Claremont of Politics, a seventy five thousand private 0:03:54.600 --> 0:03:58.640 statistic or a twenty two thousand non farm payroll three 0:03:58.720 --> 0:04:02.160 much average. I don't care what flavor you are, Jeffrey Cleveland, 0:04:02.160 --> 0:04:03.920 that's politically unacceptable. 0:04:04.720 --> 0:04:06.240 I agree. I don't want people. 0:04:06.560 --> 0:04:09.720 I do get messages from people, a friends, family, and 0:04:09.760 --> 0:04:12.680 they say, you know, it's okay if we have a 0:04:12.800 --> 0:04:15.280 soft job growth. You know, as long as the unemployment 0:04:15.360 --> 0:04:18.560 rate stays low, well bad news everyone. If we have 0:04:18.680 --> 0:04:21.360 slow job growth, the unemployment rate tends to take up. 0:04:21.240 --> 0:04:23.120 Which is what we're seeing in the last few months. 0:04:23.279 --> 0:04:26.720 And I don't think seventy five thousand is politically palatable. 0:04:26.880 --> 0:04:30.160 I agree with you. So the risk here is additional 0:04:30.200 --> 0:04:32.800 rate cuts in twenty twenty six, and the bond market 0:04:32.839 --> 0:04:34.160 will start to sniff that out. 0:04:34.200 --> 0:04:35.720 I think so how do you. 0:04:35.640 --> 0:04:37.080 Think the FED here? I mean again, I'm looking at 0:04:37.080 --> 0:04:37.679 the WORP function. 0:04:37.720 --> 0:04:39.839 We're kind of going in today thinking one, maybe two 0:04:39.920 --> 0:04:43.520 rate cuts. Sure, I'm all over the WORP function. How 0:04:43.520 --> 0:04:46.000 do you think that maybe changes in the coming days. 0:04:46.920 --> 0:04:49.240 I think you're going to get more priced in in 0:04:49.320 --> 0:04:52.400 our view at the unemployment rate continues to trend up, 0:04:52.520 --> 0:04:55.680 and we in our forecast we do have inflation moderating. 0:04:55.720 --> 0:04:58.400 I think that's important to note as well. The Fed 0:04:58.800 --> 0:05:00.440 we have, you know, in our base case to been 0:05:00.520 --> 0:05:03.440 cutting three times in twenty twenty six. So WORP is 0:05:03.480 --> 0:05:06.839 probably under price at this stage, and that four point 0:05:06.920 --> 0:05:09.640 six percent unemployment rate that bolsters that view. 0:05:09.680 --> 0:05:11.320 I think we let's jump ahead here. I mean, that's 0:05:11.360 --> 0:05:13.760 what That's what Paul Sweety wants and I want on 0:05:13.839 --> 0:05:17.280 Jeffrey Cleveland, Well, it's camp Benny's taken notes from Invesco here. 0:05:17.320 --> 0:05:20.200 We'll get to Christina in a moment. But the bottom line, 0:05:20.240 --> 0:05:23.240 in two days, I get a legit am I right, 0:05:23.320 --> 0:05:27.960 It's a legit CPI report on December eighteenth, Is that right? Jeffrey? 0:05:28.240 --> 0:05:31.120 Yeah, Well, we get our We get CPI on December 0:05:31.560 --> 0:05:36.760 eighteenth for November. So I mean definitely, that'll be interesting. 0:05:36.279 --> 0:05:37.160 To take in. 0:05:37.520 --> 0:05:39.400 You know, we do think when we look at the 0:05:39.440 --> 0:05:42.600 main components of CPI what we think will drive inflation 0:05:42.640 --> 0:05:45.920 in twenty twenty six. We think goods prices will cool off. 0:05:46.279 --> 0:05:49.640 We think non housing services prices will also cool given 0:05:49.680 --> 0:05:52.800 the weaker labor market, and we do think housing. Housing 0:05:52.839 --> 0:05:54.800 has been a big thorn in the side of the 0:05:55.320 --> 0:05:59.360 CPI the policy maker community, so we expect some relief 0:05:59.839 --> 0:06:02.760 in the housing component. So when we tie that all together, 0:06:03.160 --> 0:06:05.680 we do get core inflation trended back towards two percent 0:06:06.160 --> 0:06:06.680 next year. 0:06:07.320 --> 0:06:09.200 So that's kind of how we're looking at. 0:06:09.160 --> 0:06:12.640 Things, Jeffrey, I mean, it's inflation again. We're going to 0:06:12.640 --> 0:06:15.160 hear some more inflation later on. We're hearing that you 0:06:15.279 --> 0:06:17.560 made that cost of housing is coming down. How does 0:06:17.560 --> 0:06:20.279 that housing figure into just kind of inflation, because for 0:06:20.320 --> 0:06:22.760 a lot of people, that's a big, big component. 0:06:23.920 --> 0:06:26.159 Yeah, I mean for the CPI, it's a big chunk. 0:06:26.320 --> 0:06:29.200 We're talking about a third of core of core CPI. 0:06:29.720 --> 0:06:31.800 It's a little bit less of an issue in core PC, 0:06:32.080 --> 0:06:35.359 which is the FEDS preferred inflation gauge, but the data 0:06:35.920 --> 0:06:38.640 is slow and sticky. At least the government data, and 0:06:38.680 --> 0:06:41.440 we do see scope for the housing component of those 0:06:41.440 --> 0:06:44.880 indices to continue to cool off. That's good news, but 0:06:44.960 --> 0:06:47.520 I think it's more of the government data catching up 0:06:47.560 --> 0:06:49.839 with the reality on the ground. I think we've already 0:06:49.839 --> 0:06:52.960 seen in private sector metrics of rent and things of 0:06:52.960 --> 0:06:57.000 that nature cooling in the housing component. But that should 0:06:57.200 --> 0:06:59.440 you know, people have said to be we're sticky. Inflation 0:06:59.520 --> 0:07:01.599 is sticky, stuck at three percent. I think a portion 0:07:01.680 --> 0:07:05.160 of that is housing. As that cools off, cor inflation 0:07:05.240 --> 0:07:06.400 will head back to two percent. 0:07:06.960 --> 0:07:10.040 Jeffrey, I've been in awe of Paul Sweeney. He's out 0:07:10.080 --> 0:07:14.760 in a frigid wetsuit surfing in the ice cold New 0:07:14.840 --> 0:07:18.440 Jersey serf. Sure, but Jeffrey Cleveland has outdone you. I 0:07:18.480 --> 0:07:21.840 know he's done the twenty bridge swim in Manhattan. Razy. 0:07:22.200 --> 0:07:25.960 He's done twenty miles to the Catalina Channel, probably tuned 0:07:25.960 --> 0:07:28.920 into the Dodgers. Well he did that. What's it like, 0:07:29.040 --> 0:07:32.480 Jeffrey Cleveland's swimming the English Channel. I mean, that's from 0:07:32.480 --> 0:07:33.800 our youth. That's amazing. 0:07:34.800 --> 0:07:35.480 Well, it's cold. 0:07:35.560 --> 0:07:38.400 I mean you're you're looking at about twenty five miles 0:07:38.400 --> 0:07:41.840 from England to France. I think the day that I 0:07:41.840 --> 0:07:44.520 did the swim. It was fifty eight degrees at the start. 0:07:45.400 --> 0:07:48.600 No wetsuits are allowed on that swim. You'll be disqualified. 0:07:49.160 --> 0:07:51.600 And so you do have one support boat, but you 0:07:51.640 --> 0:07:52.400 can't touch the boat. 0:07:52.400 --> 0:07:53.320 You can't take breaks. 0:07:53.600 --> 0:07:55.880 See touch the boat. Unbelievable. 0:07:55.960 --> 0:07:57.440 You can't touch the boat because that's cheatie. 0:07:57.520 --> 0:07:59.000 You know, you just have to you want to take 0:07:59.000 --> 0:08:01.720 a break, you do a boat and someone throws you 0:08:01.760 --> 0:08:04.480 a little bit of a high octane gatorade and then 0:08:04.560 --> 0:08:06.560 you take a quick swig and then you move on. 0:08:06.800 --> 0:08:09.840 Do you see this about ten hours across June or July? 0:08:10.120 --> 0:08:13.119 I mean this, screams Lisa Mateo. Can you see Lisa 0:08:13.160 --> 0:08:15.240 Mateo swimming the Indus Channel. 0:08:16.720 --> 0:08:20.120 We did it in September, September, mid September. That was 0:08:20.160 --> 0:08:23.400 the warmest and we thought that would be the warmest period. 0:08:23.480 --> 0:08:24.360 What an accomplishment. 0:08:25.760 --> 0:08:29.000 It's a triple crown of swimming. One of only thirty. 0:08:28.920 --> 0:08:32.160 Normal people don't do this, Jeffrey, thirty six people in 0:08:32.200 --> 0:08:32.880 the world have done. 0:08:33.040 --> 0:08:35.520 Jeffrey Cleveland, thank you for the insight on the jobs 0:08:35.520 --> 0:08:40.400 report and the spirit of that accomplishment of swimming around 0:08:40.440 --> 0:08:43.360 Manhattan is one of the things as we all stay 0:08:43.400 --> 0:08:47.280 with us. More from Bloomberg Surveillance coming up after this. 0:08:54.520 --> 0:08:58.080 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:08:58.160 --> 0:09:01.679 weekday afternoons from seven to ten den listen on Apple 0:09:01.720 --> 0:09:05.080 Karplay and Android Otto with the Bloomberg Business app, or 0:09:05.200 --> 0:09:06.720 watch us live on YouTube. 0:09:06.920 --> 0:09:09.240 Paul Quincy's never seen this before. He's never seen a 0:09:09.280 --> 0:09:12.199 double jobs report. Wait, none of us have as well. 0:09:12.360 --> 0:09:16.240 He is global head of Equities. Let's speak for JP 0:09:16.360 --> 0:09:20.240 Morgan Asset Management, and you have the best single sentence. 0:09:20.600 --> 0:09:23.000 I hate outlooks. There's a guy I don't know if 0:09:23.040 --> 0:09:26.200 you know, Sam row Ro. He's in America and his 0:09:26.360 --> 0:09:29.480 job is to read every outlook, including yours. We're going 0:09:29.520 --> 0:09:31.200 to get a report from Sam row here. 0:09:31.440 --> 0:09:35.320 But I love Paul in your global note. 0:09:35.679 --> 0:09:39.240 You only have a belief factor in the equity markets forward, 0:09:39.360 --> 0:09:43.240 Only nine percent of our investors are expecting above average 0:09:43.280 --> 0:09:44.160 games in the market. 0:09:44.440 --> 0:09:47.600 Are we really that gloomy out there? I wouldn't go 0:09:47.600 --> 0:09:50.000 good morning. I wouldn't call it gloomy. I would call 0:09:50.040 --> 0:09:54.280 it realistic. So when we look at that, fundamentals drive markets, 0:09:54.320 --> 0:09:57.760 and to us, the fundamentals look pretty good. But you're 0:09:57.800 --> 0:09:59.760 really paying for it. Now, that's what's got our attention. 0:10:00.000 --> 0:10:01.959 I think that note of caution comes in from a 0:10:02.040 --> 0:10:05.360 combination of twenty three times next year's earnings. We think 0:10:05.400 --> 0:10:07.720 earnings are fine, but it's tough to see that twenty 0:10:07.760 --> 0:10:10.120 three going up too much. And then you look at 0:10:10.760 --> 0:10:12.880 earnings have been a triumph of the optimists this year 0:10:13.000 --> 0:10:15.920 yet again. But within the market there's a lot of 0:10:16.080 --> 0:10:18.800 very optimistic thinking, particularly when you get into the small 0:10:18.800 --> 0:10:20.760 cap space. So those two things give us a little 0:10:20.760 --> 0:10:23.880 bit of pause for caution. So we think staying invested, sure, 0:10:24.200 --> 0:10:28.280 but you want to diversify by geography, diversified by style, 0:10:28.800 --> 0:10:30.719 and think about where the returns are going to come from, 0:10:30.760 --> 0:10:32.320 not just where they have come from in the past. 0:10:32.679 --> 0:10:36.920 So in global equities, what's your US versus maybe rest 0:10:36.920 --> 0:10:38.880 of the world allocation? How do you think about it 0:10:38.960 --> 0:10:40.240 geographic these days? 0:10:40.320 --> 0:10:41.760 Yeah, So we do all that bottom up, right, We 0:10:41.840 --> 0:10:43.720 look company by company, and when you do that, you 0:10:43.800 --> 0:10:45.760 find it really hard to get too far away from 0:10:45.760 --> 0:10:49.760 the United States. So the US on average has better 0:10:49.800 --> 0:10:54.040 companies in better businesses, and that isn't going to change 0:10:54.760 --> 0:10:57.040 the reason the US market is two thirds of everything 0:10:57.080 --> 0:10:59.360 these days. It's come the right way, right, It's come 0:10:59.360 --> 0:11:03.120 through superior earnings growth over the last fifteen years. So 0:11:03.360 --> 0:11:06.880 that's where we are. But you also now have high prices, 0:11:07.240 --> 0:11:09.920 and I think you can legitimately balance your US exposure 0:11:09.920 --> 0:11:11.560 these days with the rest of the world, and we're 0:11:11.600 --> 0:11:13.520 not so sure investors are doing that. I think a 0:11:13.520 --> 0:11:16.440 lot of investors, including by the way, investors in Europe 0:11:16.440 --> 0:11:19.240 and Asia, have kind of become a little over fixated 0:11:19.280 --> 0:11:20.959 on the US and have forgotten you can also make 0:11:21.000 --> 0:11:22.680 money in those markets too. 0:11:23.520 --> 0:11:23.960 Earnings. 0:11:24.040 --> 0:11:26.520 We've had some really good earnings out of the US 0:11:27.000 --> 0:11:30.160 companies here this year, particularly second and third quarter double 0:11:30.160 --> 0:11:33.760 digit kind of earnings. Looking forward, is the earnings outlook 0:11:33.840 --> 0:11:35.360 enough to support this market here? 0:11:35.720 --> 0:11:38.000 Yeah, you need those earning earnings growth to continue where 0:11:38.000 --> 0:11:40.280 you're paying twenty three times, right, So, but yeah, we 0:11:40.280 --> 0:11:42.520 think it is. When I look at forecasts, it's not 0:11:42.559 --> 0:11:45.080 just what the forecast is, it's where it's going. And 0:11:45.160 --> 0:11:47.959 our forecasts, all the work our analysts do, have been 0:11:48.120 --> 0:11:51.040 edging up all year and they're still edging up. And 0:11:51.160 --> 0:11:54.520 most importantly, I think it's not just the usual suspects. 0:11:54.840 --> 0:11:58.520 So yes, these seven incredible companies will yet again drive 0:11:58.559 --> 0:12:00.880 plenty of earnings growth next year, So we think S 0:12:00.920 --> 0:12:03.400 and P two seventy this year, three ten next year, 0:12:03.480 --> 0:12:06.360 so we need forty dollars of extra earnings. We've got 0:12:06.400 --> 0:12:09.040 the mag seven down for sixteen dollars of that, so 0:12:09.120 --> 0:12:10.480 the rest of it has to come from the other 0:12:10.480 --> 0:12:13.080 four hundred and ninety three. And I think that's happening. 0:12:13.120 --> 0:12:15.439 And we're seeing expectations edging up a little bit there 0:12:15.440 --> 0:12:17.640 as well, So yeah, we feel good about the earnings 0:12:17.640 --> 0:12:18.000 part of it. 0:12:18.080 --> 0:12:20.079 What are you with cash? Paul was looking at cash. 0:12:20.320 --> 0:12:23.600 Did you ever get above five percent on money market funds? 0:12:23.760 --> 0:12:24.360 No? 0:12:24.360 --> 0:12:26.800 No, but that was nice though. That was nice. 0:12:26.840 --> 0:12:29.520 And now it's three dollars six Yeah, if you've seen 0:12:29.559 --> 0:12:34.120 a behavioral change and how we address cash, Stan Fisher 0:12:34.120 --> 0:12:36.960 would go on a percentage basis, it's one point four 0:12:37.040 --> 0:12:40.760 divided by five. Wow, that's a percentage move. What's a 0:12:40.880 --> 0:12:44.000 change in cash appreciation? Yeah? 0:12:44.040 --> 0:12:46.679 I think Look, investors have become more comfortable with this market. 0:12:46.760 --> 0:12:49.360 I think right now investors are pretty comfortable with stocks. Again, 0:12:49.520 --> 0:12:52.120 look at the prices they're paying, look at the types 0:12:52.160 --> 0:12:54.800 of stocks people have been buying. The theme in the 0:12:54.840 --> 0:12:57.240 market this year has been the risk risk rules, right, 0:12:57.280 --> 0:12:59.840 the risk the better in some cases, particularly in small cap. 0:13:00.280 --> 0:13:03.840 That again makes us a little bit nervous looking forward. 0:13:03.920 --> 0:13:06.200 But do you want stocks over cash over any time? Friend? 0:13:06.240 --> 0:13:06.760 Of course you do. 0:13:07.360 --> 0:13:07.600 Yep. 0:13:07.679 --> 0:13:13.040 So here it's interesting here outside what screens well for 0:13:13.120 --> 0:13:13.559 you guys? 0:13:13.679 --> 0:13:17.920 Right here you know the best returns on our platform. 0:13:18.040 --> 0:13:20.439 So we run a lot of strategies by style and geography, 0:13:20.880 --> 0:13:25.480 best returns this year international value, cheap stocks and cheap markets. 0:13:25.640 --> 0:13:29.440 You made almost fifty percent European banks, that's a part 0:13:29.480 --> 0:13:29.720 of it. 0:13:30.000 --> 0:13:34.240 They're shaking at the JP Morgan digital experiment that Paul 0:13:34.320 --> 0:13:37.560 Quincy is launching across Europe right now. The future of 0:13:37.600 --> 0:13:39.880 European banks, what do you see? Are you allowed to 0:13:39.920 --> 0:13:40.480 talk about that? 0:13:40.679 --> 0:13:44.040 Yeah, of course. So look, first of all, the recent 0:13:44.120 --> 0:13:46.920 history of European banks incredibly successful, right, So you've made 0:13:46.920 --> 0:13:48.720 a lot more money in those stocks, even in the 0:13:49.200 --> 0:13:52.080 much vaunted MAC seven over the last five years. It's 0:13:52.080 --> 0:13:54.560 not that they've suddenly become amazing companies. It's that the 0:13:54.600 --> 0:13:56.800 market left them for dead. It took them fifteen years 0:13:56.840 --> 0:14:00.320 to get over the damage inflicted by the GFC. But 0:14:00.360 --> 0:14:04.520 now they've restructured, they've got back to the core businesses. 0:14:04.600 --> 0:14:07.240 Interest rates have gone up a bit, profitability goes up. 0:14:07.760 --> 0:14:10.400 If you go from being a left for dead company, 0:14:10.400 --> 0:14:12.080 he's just an okay company. You can make a lot 0:14:12.080 --> 0:14:12.360 of money. 0:14:12.400 --> 0:14:14.959 Key question I asked this is my Davos question. Are 0:14:14.960 --> 0:14:19.040 they changing because it's an more Anglo American management style 0:14:19.360 --> 0:14:20.680 yet relationship? 0:14:20.720 --> 0:14:23.560 I think they're more realistic. So rather than trying to 0:14:23.560 --> 0:14:26.040 compete investment banking with you know some of those other 0:14:26.080 --> 0:14:28.440 guys that dominate those markets, these days, they focus more 0:14:28.480 --> 0:14:30.520 on the local markets, on their car They've done a 0:14:30.520 --> 0:14:30.920 good job. 0:14:31.000 --> 0:14:33.640 Paul Auston, are you going to have as many food 0:14:33.680 --> 0:14:36.760 courts that you're going do Palace in London as you've 0:14:36.760 --> 0:14:37.840 got on Park Avenue. 0:14:37.880 --> 0:14:40.240 Well, we're still working on that. As you know, the 0:14:40.280 --> 0:14:42.600 food greers. 0:14:42.160 --> 0:14:45.160 Is that the little like you're a Piccadilly and you 0:14:45.160 --> 0:14:46.480 can buy your griers little? 0:14:46.600 --> 0:14:49.440 Yeah, that's right. Maybe we'll weave that in careers time. 0:14:49.560 --> 0:14:51.960 I mean, Paul's a graduated University of Durham, which I 0:14:52.320 --> 0:14:55.440 just googles northeast part of England. I found our spot 0:14:55.640 --> 0:14:57.880 the Woodman Inn Pub for you and I it is 0:14:57.960 --> 0:14:58.600 that's where we're going. 0:14:58.680 --> 0:14:59.960 Absolutely, there are many great pubs. 0:15:00.520 --> 0:15:03.400 The Arab studies their first rate, and the cathedral is 0:15:03.480 --> 0:15:06.960 arguably the best in uninety Kingdom. YEP, Don't be a stranger, 0:15:07.000 --> 0:15:09.200 Come back, Bring your friends with you from JP Morgan. 0:15:09.280 --> 0:15:11.960 Paul Quincy with us with JP Morgan here on an 0:15:12.000 --> 0:15:16.360 important jobs stay with us. More from Bloomberg Surveillance coming 0:15:16.440 --> 0:15:24.520 up after this. 0:15:24.520 --> 0:15:28.440 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:15:28.440 --> 0:15:31.760 starting at seven am Eastern on Applecarplay and Android Auto 0:15:31.880 --> 0:15:34.840 with the Bloomberg Business app. You can also listen live 0:15:34.920 --> 0:15:38.520 on Amazon Alexa from our flagship New York station, Just 0:15:38.560 --> 0:15:41.080 Say Alexa Play Bloomberg eleven thirty. 0:15:41.400 --> 0:15:44.400 Martha Gimble's on fire. The Budget Lab at yells you know. 0:15:44.440 --> 0:15:46.000 I'm going to call it my think tank of the year. 0:15:46.040 --> 0:15:49.160 Their work on tariffs was frightening. We're looking for a 0:15:49.240 --> 0:15:53.880 tariff update here off of November from Martha. But right 0:15:53.920 --> 0:15:57.120 now she's beginning what I think will be a Yale 0:15:57.200 --> 0:16:00.720 Budget Lab effort on AI. Mar to just give us 0:16:00.760 --> 0:16:03.720 the three x five card of the Yale Budget Lab 0:16:03.920 --> 0:16:07.640 study of AI. In Lisa Matteo's Future job. 0:16:09.600 --> 0:16:12.280 Well future who knows five to ten years down the 0:16:12.320 --> 0:16:15.160 line could be anything. But at the moment, we're really 0:16:15.200 --> 0:16:20.480 not seeing AI showing up in the labor market overall. So, 0:16:20.720 --> 0:16:23.000 you know, there's been a lot of stromanbong, a lot 0:16:23.000 --> 0:16:25.520 of hype about how people are currently losing their jobs 0:16:25.560 --> 0:16:27.960 due to AI, and we're just not seeing that at 0:16:27.960 --> 0:16:28.680 all in the data. 0:16:29.440 --> 0:16:31.640 Is there an expectation that we will at some time 0:16:31.720 --> 0:16:34.480 in the future, Because I just think about my early 0:16:34.560 --> 0:16:36.280 days on Wall Street, it seems like most of the 0:16:36.360 --> 0:16:40.000 tasks I performed as an investment banker can be done 0:16:40.000 --> 0:16:40.480 by AI. 0:16:42.200 --> 0:16:44.360 I mean, it'd be unusual, right for there to be 0:16:44.560 --> 0:16:49.080 no labor market disruption when you introduce a major new technology. 0:16:49.600 --> 0:16:52.360 I think the thing that everyone keeps forgetting right is 0:16:52.360 --> 0:16:57.280 that it takes time for technological disruption to happen. It 0:16:57.320 --> 0:17:01.720 took decades for electricity to throughout the labor market. It 0:17:01.760 --> 0:17:04.560 even took a pretty long time for the Internet to 0:17:04.640 --> 0:17:07.880 kick in, right. It wasn't like immediately in nineteen ninety seven, 0:17:08.000 --> 0:17:10.960 we were changing all the things, and so you know, 0:17:11.000 --> 0:17:14.960 a I feel so big and people are expecting to see, 0:17:15.480 --> 0:17:18.000 you know, impacts immediately. That's just not how companies work. 0:17:18.080 --> 0:17:20.879 So you don't have a guess out two years or 0:17:20.960 --> 0:17:22.440 five years. You're that blind. 0:17:23.880 --> 0:17:26.400 I don't think any of us really know where technology 0:17:26.480 --> 0:17:28.639 is going. I will say I think the thing to 0:17:28.720 --> 0:17:34.520 look for is a broader recession, because in recessions is 0:17:34.640 --> 0:17:39.880 often when employers take advantage of that opportunity to make 0:17:40.119 --> 0:17:44.080 you know, quote unquote labor saving productivity enhancements. They fire workers, 0:17:44.400 --> 0:17:48.360 they you know, et cetera. And I think that's when 0:17:48.400 --> 0:17:51.080 we'll have a better sense of how AI could be 0:17:51.080 --> 0:17:52.160 impacted the labor market. 0:17:52.480 --> 0:17:56.080 You led the charge from that Rose Garden moment in 0:17:56.240 --> 0:18:01.000 April on tariff analysis. What you and Erny Tedesky did 0:18:01.160 --> 0:18:03.919 was just just an act of God. What did you 0:18:04.119 --> 0:18:07.800 fail at from April to December? When you look back, 0:18:07.920 --> 0:18:11.520 Martha Gimble, what'd you get wrong? What'd you nail? What'd 0:18:11.560 --> 0:18:12.120 you get right? 0:18:13.080 --> 0:18:17.720 Oh my gosh, you know, I do think that actually, 0:18:17.720 --> 0:18:20.080 I'm going to pick a kind of nerdy thing here 0:18:20.119 --> 0:18:22.960 on tariffs. So one of the things that we got 0:18:22.960 --> 0:18:27.280 wrong on tariffs was that we didn't realize how many 0:18:27.400 --> 0:18:31.840 exceptions there were in the law currently for companies to 0:18:31.920 --> 0:18:35.280 take advantage of that. They weren't filing the paperwork for 0:18:35.920 --> 0:18:38.240 because it just wasn't worth it to them at previous 0:18:38.320 --> 0:18:43.320 tarif phrase. But once the tariffs were high enough, companies started, 0:18:43.359 --> 0:18:46.480 for instance, filing the paperwork to take advantage of the USMCA. 0:18:47.080 --> 0:18:49.600 And so we've seen the share of goods coming into 0:18:49.640 --> 0:18:52.080 the US from Canada and Mexico that are exempt under 0:18:52.080 --> 0:18:55.959 the USMCA go from fifty percent to ninety percent. That 0:18:56.080 --> 0:18:58.359 is not something we thought about. That is not something 0:18:58.400 --> 0:19:00.560 we anticipated, and that is one of the reasons why 0:19:00.560 --> 0:19:02.280 tariffs have had less of an impact than many of 0:19:02.359 --> 0:19:03.160 us anticipated. 0:19:03.840 --> 0:19:07.080 How do you expect tariffs to impact the economy, if 0:19:07.080 --> 0:19:08.720 at all, in twenty twenty six. 0:19:10.280 --> 0:19:12.760 That's partly a question for the Supreme Court, and we're 0:19:12.800 --> 0:19:17.320 all to find out. You know, it's kind of interesting 0:19:17.560 --> 0:19:21.040 because you know, yes, we think that tariffs are slowing 0:19:21.080 --> 0:19:25.800 down the economy, but also if the Supreme Court overthrows 0:19:25.840 --> 0:19:28.800 the tariffs, that's going to throw much more uncertainty back 0:19:28.840 --> 0:19:30.600 into the economy because we're going to be back where 0:19:30.600 --> 0:19:33.560 we were beginning middle of this year with like new 0:19:33.600 --> 0:19:39.320 tariff announcements every day as the administration starts using other 0:19:39.440 --> 0:19:41.960 tariff authorities. It's got Kevin Hassett was just out there 0:19:41.960 --> 0:19:45.200 today saying they have a plan if the Supreme Court 0:19:45.240 --> 0:19:51.760 overrules them. So you know, I think my team in 0:19:51.800 --> 0:19:54.639 some ways is hoping the Supreme Court upholds the tariffs. 0:19:54.680 --> 0:19:57.639 They don't have to go back to doing tariff o. 0:19:58.040 --> 0:20:01.000 It just congratulations is think of the year. You guys 0:20:01.040 --> 0:20:03.240 just absolutely killed it. I have no idea what you're 0:20:03.240 --> 0:20:06.560 doing for next year. Folks follow Martha Gimble g I 0:20:06.760 --> 0:20:09.760