WEBVTT - Hotter CPI Unlikely to Deter Rate Cuts - For Now 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. 0:00:27.280 --> 0:00:30.360 Ren Mac or Renaissance Macro does as good a job 0:00:30.400 --> 0:00:35.240 as anybody worldwide. It blending the two in the back 0:00:35.280 --> 0:00:41.839 and forth daily grind of following markets and executing market economics. 0:00:41.920 --> 0:00:45.320 Jeffrey DeGraf is chairman Neil Dudda ahead of economic research, 0:00:45.360 --> 0:00:47.120 and to have both of them in our studio, Wow, 0:00:47.360 --> 0:00:51.239 is it real? Treat? How has Renaissance Macro invented? That 0:00:51.360 --> 0:00:55.640 famous picture of Lehman falling apart? Was Renmac invented right there? 0:00:56.160 --> 0:00:57.160 It was not. Tom. 0:00:57.160 --> 0:01:00.840 I had actually left Lehman Brothers buddy year prior to 0:01:00.960 --> 0:01:05.080 the demise of Lehman, and I went over to ed 0:01:05.120 --> 0:01:09.600 Heiman Shops sorry at Isi, because he was creating this 0:01:09.720 --> 0:01:11.960 kind of Macro juggernaut, and I said I want to 0:01:12.000 --> 0:01:14.000 be a part of that, and so I was there 0:01:14.040 --> 0:01:16.080 for four years. He started building it out into more 0:01:16.080 --> 0:01:18.399 fundamental research and just wasn't something that. 0:01:18.360 --> 0:01:19.120 Really appealed to me. 0:01:19.200 --> 0:01:22.319 So we pulled the ripcord and started Redmack and had 0:01:22.319 --> 0:01:24.200 the good fortune of picking up my friend over here, 0:01:24.400 --> 0:01:25.120 Neil Dutta. 0:01:25.040 --> 0:01:26.800 I mean Neil Dunda with all of his work as 0:01:26.840 --> 0:01:29.360 well full disclosure a couple of years ago, my Economist 0:01:29.760 --> 0:01:31.440 of the year. We're not going to do like what's 0:01:31.440 --> 0:01:33.319 a FED going to do? Here? I want to talk 0:01:33.400 --> 0:01:38.440 for Global Wall Street about the synthesis of research. Jeff, 0:01:38.520 --> 0:01:41.480 let me start with you, because Dunna is putting out 0:01:41.520 --> 0:01:45.520 three charts an hour. You and I are technical animals. 0:01:45.600 --> 0:01:48.520 I mean it goes back to John Maggie and aw 0:01:48.640 --> 0:01:51.800 Cohen and that what is a trend of the market 0:01:51.920 --> 0:01:54.840 right now? That overlays on Neil Dutta economics. 0:01:55.040 --> 0:01:58.000 Well, I'd say the trend of the market's clearly positive. 0:01:58.000 --> 0:01:59.320 And I think a lot of that has to do 0:01:59.400 --> 0:02:02.800 with Neil's call on the FED right which is expecting 0:02:02.840 --> 0:02:04.440 that the Fed's going to come to the rescue and 0:02:04.480 --> 0:02:06.840 certainly start to ease. And I think the market's seeing that, 0:02:07.200 --> 0:02:10.160 and you're seeing that in cyclicality versus a defensive still, 0:02:10.200 --> 0:02:12.520 which I think is important. The real call for us 0:02:12.600 --> 0:02:14.880 is going to be in this fourth quarter is do 0:02:14.919 --> 0:02:18.120 we lose that cyclicality for defensives. If that's the case, 0:02:18.200 --> 0:02:20.640 then I think the FED is behind, way behind. And 0:02:20.680 --> 0:02:23.160 I think that's that's the issue. So far, that's not happening, 0:02:23.480 --> 0:02:25.960 and we're keeping a bullish posture. But that's certainly on 0:02:26.000 --> 0:02:27.840 the top of the radio. That is entourage to send 0:02:27.880 --> 0:02:30.080 me a notes, ask Neil a question. Put a cork 0:02:30.120 --> 0:02:31.040 into Graph's mouth. 0:02:31.280 --> 0:02:32.320 Okay, let's go there. 0:02:32.680 --> 0:02:35.920 Right now. You're a big one. You were a mister optimist, 0:02:36.280 --> 0:02:38.639 and about twelve months ago, eighteen months ago, you said, 0:02:38.680 --> 0:02:40.960 wait a minute, I'm looking at the tea leaves and 0:02:41.040 --> 0:02:46.040 I'm cautious into Q four into twenty twenty six, which 0:02:46.080 --> 0:02:48.480 way do you tilt with optimism or caution? 0:02:49.720 --> 0:02:50.040 Caution? 0:02:50.280 --> 0:02:52.320 I mean, for me, I think right now we have 0:02:52.440 --> 0:02:56.480 sort of a housing centered view of the world out 0:02:56.600 --> 0:02:59.720 and I think what's interesting is, you know, interest rates 0:02:59.720 --> 0:03:03.480 have been coming down, but you haven't really seen housing 0:03:03.520 --> 0:03:08.160 demand improve in any meaningful way. And to me, that's 0:03:08.919 --> 0:03:11.440 that's sort of a yellow flag on the outlook. You know, 0:03:11.520 --> 0:03:13.880 builders seem to have sort of hit their pivot point 0:03:13.919 --> 0:03:18.160 on margins, and I think that's going to mean less 0:03:18.160 --> 0:03:21.880 construction activity. And I think that's going to bleed into employment. 0:03:21.919 --> 0:03:24.400 I do. And if you. 0:03:24.360 --> 0:03:28.800 Start seeing construction workers, let go in an environment where 0:03:29.040 --> 0:03:31.840 you're not really creating much jobs growth to begin with, 0:03:33.800 --> 0:03:36.680 I think that's sort of another potential source of upward 0:03:36.680 --> 0:03:39.800 pressure on the unemployment rate. So I would, I do 0:03:39.840 --> 0:03:43.360 think the FED is a little bit behind here. You know, 0:03:43.440 --> 0:03:45.320 the fact that they're kind of taking a meeting by 0:03:45.320 --> 0:03:48.440 meeting approach as opposed to just giving guidance into the 0:03:48.480 --> 0:03:50.200 first half of next year, I think is a little 0:03:51.400 --> 0:03:54.320 you know, it's a bit of a mistake. But yeah, 0:03:54.440 --> 0:03:56.720 I would just say that the housing market is softening, 0:03:57.400 --> 0:04:00.320 that's going to bleed into the labor markets. That's going 0:04:00.400 --> 0:04:02.920 to mean weaker real income growth, which kind of challenges 0:04:03.080 --> 0:04:03.800 consumer spending. 0:04:04.280 --> 0:04:07.720 So should the FED be more aggressive than maybe the 0:04:07.760 --> 0:04:10.680 market's pricing in right now? Should they maybe be a 0:04:10.680 --> 0:04:12.040 little bit more front end loaded? 0:04:12.440 --> 0:04:12.920 I think so. 0:04:13.120 --> 0:04:15.840 I mean, I think they, I mean they will go 0:04:15.920 --> 0:04:18.040 more than the markets expect, I believe. I mean, that's 0:04:18.120 --> 0:04:19.880 ultimately the whole point, right is like, what do you 0:04:19.880 --> 0:04:22.160 think what is the market pricing in? That's what our 0:04:22.160 --> 0:04:23.960 business is, right, what is the market pricing in? And 0:04:23.960 --> 0:04:25.479 what do you think the likely outcome is going to 0:04:25.480 --> 0:04:27.599 be right, and you know, the market I think is 0:04:27.640 --> 0:04:29.880 probably on side for what's going to happen this year. 0:04:29.920 --> 0:04:33.000 But if you look at twenty twenty six, it looks 0:04:33.040 --> 0:04:36.760 like the markets are barely priced for two cuts on sides. 0:04:36.960 --> 0:04:40.520 It's the word that data uses year to date, NaSTA 0:04:40.680 --> 0:04:45.240 comp not the one hunderd eighteen percent. It's going to 0:04:45.279 --> 0:04:48.520 be a tough year. We're single digit de Graphs pulling 0:04:48.640 --> 0:04:51.520 his hair out, saying no, get on board. I mean 0:04:51.560 --> 0:04:52.880 that's what we saw. Continue. 0:04:52.960 --> 0:04:55.719 So Jeff, again, as Tom says, there's a lot of 0:04:56.560 --> 0:04:59.840 crosswinds out there. Let's call it crosswinds, geopolitical issues. We've 0:04:59.839 --> 0:05:04.800 got domestic issues with tariff policies, and just on and 0:05:04.839 --> 0:05:07.880 on and on. If the markets are ripping other than 0:05:07.920 --> 0:05:10.680 the dollar, she's still kind of cautious. What do you 0:05:10.720 --> 0:05:12.520 make of just as you step back and look at 0:05:12.560 --> 0:05:13.080 the markets. 0:05:13.279 --> 0:05:16.400 Well, you hit a really important point which gets underappreciated, 0:05:16.400 --> 0:05:19.080 which is there's a global bull market happening. Right, So 0:05:19.480 --> 0:05:21.880 all the concern about tariffs and I get it, I mean, 0:05:22.120 --> 0:05:24.440 you know we all know it that just is not 0:05:25.000 --> 0:05:27.640 is not resonating with markets which are saying there's something 0:05:27.680 --> 0:05:30.479 else here that's happening, right, and this isn't this isn't 0:05:30.560 --> 0:05:32.400 just the G seven or even the G twenty. 0:05:32.480 --> 0:05:33.880 Look at the frontier markets, they. 0:05:33.760 --> 0:05:37.880 Look fabulous, right, right, So I think, you know, to 0:05:38.200 --> 0:05:40.000 put the narrative on it, we try not to do. 0:05:40.240 --> 0:05:42.719 We're trying to be purest and how we look at 0:05:42.839 --> 0:05:46.040 things in the world. Now, I'm a little concerned about gold. 0:05:46.080 --> 0:05:48.400 We entered bubble territory, but the rest of it looks 0:05:48.400 --> 0:05:51.280 pretty good to us. So look, I'm in the camp 0:05:51.360 --> 0:05:55.200 that we get a consolidation. But if Neil's world ends 0:05:55.279 --> 0:05:59.320 up developing, I think that's extraordinarily bullish for equities because 0:05:59.600 --> 0:06:04.279 we have not seen, you know, the markets fall apart 0:06:04.320 --> 0:06:07.039 when we've got yields coming in. And I think that's 0:06:07.080 --> 0:06:09.200 one thing when people are talking about bubbles, they miss 0:06:09.440 --> 0:06:11.920 the idea that, yeah, look, housing bubble yields were going 0:06:12.000 --> 0:06:14.000 up for a year, dot com yields were going up 0:06:14.040 --> 0:06:16.960 for nine months. Twenty twenty one yields were going up. 0:06:17.080 --> 0:06:19.719 Right here, we're actually on the cusp of the potential 0:06:19.760 --> 0:06:22.919 of yields coming down in what is i'd say a 0:06:23.040 --> 0:06:25.719 bit of a specuative market, But not nearly anything what 0:06:25.760 --> 0:06:26.520 we've seen before. 0:06:26.680 --> 0:06:29.760 Special treat for Bloomberg surveyans across the nation, around the 0:06:29.760 --> 0:06:33.520 world on YouTube. Subscribe to Bloomberg Podcast. Jeffrey de Graph, 0:06:33.560 --> 0:06:37.280 Neil Dudda of Renaissance Macro together in our studios with 0:06:37.400 --> 0:06:41.440 their remits of economics and following the market. So I'm 0:06:41.480 --> 0:06:45.080 interviewing Chris Waller in a speech accounts ont foreign relations. 0:06:46.040 --> 0:06:47.719 I'm going to switch this here. I'm gonna go to 0:06:47.760 --> 0:06:51.040 you on economics, Jeff ok to create some wonderful tension. 0:06:51.160 --> 0:06:54.960 There's a single sentence which is Marty's YG one oh one, 0:06:55.640 --> 0:06:58.960 don't fight the Fed. I mean, we're really right back 0:06:59.000 --> 0:07:01.880 to that with a modeled four or five rate cuts 0:07:02.080 --> 0:07:04.839 from Governor Waller. Yeah, I one hundred percent agree. 0:07:04.880 --> 0:07:06.920 And I think you can distill that down to how 0:07:06.960 --> 0:07:09.960 does discretionary act on a relative basis? And right now, 0:07:10.200 --> 0:07:12.720 while it's not a lock, discretionary is still in an 0:07:12.800 --> 0:07:15.200 up trend on a relative basis, and I think that's 0:07:15.240 --> 0:07:16.239 good news, which. 0:07:16.040 --> 0:07:17.800 It says continue to say. 0:07:17.800 --> 0:07:19.960 It just says to us that the FED is still 0:07:19.960 --> 0:07:22.440 playing this game, that they're not behind yet to the 0:07:22.440 --> 0:07:24.679 point that it's affecting those consumer names. 0:07:24.680 --> 0:07:27.240 We go to financial analyst Neil Duttar right now and 0:07:27.520 --> 0:07:30.480 on the markets here come on nominal GDP, pops right 0:07:30.560 --> 0:07:33.320 over to it. Somebody at a bartchchart and the zeitgeist 0:07:33.320 --> 0:07:37.320 in the last two days of the complete misjudge on 0:07:37.360 --> 0:07:41.760 what GDP and nominal GDP have done. Does that continue 0:07:42.120 --> 0:07:44.679 to spur revenues and down the income statement? 0:07:44.720 --> 0:07:47.880 Well, I don't think nominal GDP is really growing as 0:07:47.960 --> 0:07:50.720 rapidly as the GDP tracking numbers are are kind of 0:07:50.760 --> 0:07:53.440 telling us. I mean, I think one rule in business 0:07:53.480 --> 0:07:56.120 economics is, you know, when there's a big disconnect between 0:07:56.160 --> 0:08:00.200 GDP and employment, you tend to go at the employment data. Obviously, 0:08:00.280 --> 0:08:03.240 the fact that you know, total hours worked are barely 0:08:03.320 --> 0:08:05.720 positive over the last three months, I mean they may 0:08:05.720 --> 0:08:10.480 in fact be negative. That would suggest that, you know, 0:08:10.560 --> 0:08:14.560 GDP growth is probably overstated, and so you know, I 0:08:14.560 --> 0:08:17.240 tend to put more weight on employment. So but I 0:08:17.240 --> 0:08:19.320 do think that's an important question for the market, right 0:08:19.320 --> 0:08:21.440 I mean, obviously the bond market is pricing in a 0:08:21.520 --> 0:08:24.960 much different nominal growth outlook than equities, and you know, 0:08:25.000 --> 0:08:27.960 how that reconciles I think will be an important question 0:08:28.000 --> 0:08:31.120 for next year. And you know, I mean basically, what 0:08:31.200 --> 0:08:33.520 square is the circle? I think is a productivity boom. 0:08:33.960 --> 0:08:35.160 That's really what what? 0:08:35.160 --> 0:08:35.360 What? 0:08:36.640 --> 0:08:36.880 You know? 0:08:37.360 --> 0:08:40.120 What kind of resolves all these tensions I think in 0:08:40.160 --> 0:08:44.120 the market, because you know, if if let's say the 0:08:44.120 --> 0:08:47.520 ten year yield is whatever below four percent, if that's 0:08:47.559 --> 0:08:50.200 the nominal growth outlook, how do you justify the earnings 0:08:50.240 --> 0:08:54.200 expectations that are embedded in current market pricing? Only productivity 0:08:54.200 --> 0:08:58.000 makes that happen. And if productivity doesn't show up, then 0:08:58.120 --> 0:09:00.280 you know, there may be there's some risk equities. 0:09:00.160 --> 0:09:02.640 It's all AI. Maybe that's doing it for us. Jeff, 0:09:02.640 --> 0:09:03.720 what do you make of the dollar here? 0:09:03.720 --> 0:09:07.160 We've had it stabilized, but equities that bounce back to 0:09:07.160 --> 0:09:10.840 all time highs, yields are coming in. The dollars just 0:09:10.880 --> 0:09:12.760 kind of hanging down here. What does that tell you? Yeah, 0:09:12.800 --> 0:09:14.240 it doesn't tell us a lot, honestly. 0:09:14.880 --> 0:09:17.160 You know, I think there's there's flow data with tariffs 0:09:17.200 --> 0:09:20.040 and the leverage points that as we still negotiate our 0:09:20.080 --> 0:09:22.960 ways through this, I think it's important to realize that 0:09:23.000 --> 0:09:24.959 gold got into a parabolic state, you know, over the 0:09:25.040 --> 0:09:28.000 last called six weeks as the dollar actually strengthened and 0:09:28.080 --> 0:09:31.000 certainly firmed right, So you know, there's more to the 0:09:31.040 --> 0:09:34.320 gold story than it's just the week dollar story. And frankly, 0:09:34.320 --> 0:09:35.920 one of the things that I like about Gold, I 0:09:35.920 --> 0:09:38.000 do think that it's going to take a pretty significant 0:09:38.040 --> 0:09:40.280 pause here. But I think one of the things that's 0:09:40.360 --> 0:09:43.680 interesting is that there hasn't been a single narrative. Usually 0:09:43.679 --> 0:09:46.280 when you get into these bubbles, it's everybody knows what 0:09:46.320 --> 0:09:49.160 the single narrative is, right, and you can ask the 0:09:49.240 --> 0:09:52.160 question and I think there's three or four probably correct answers, 0:09:52.160 --> 0:09:54.679 but it's not the market hasn't decided on one, and 0:09:54.720 --> 0:09:57.160 that's where you get into trouble usually. So I'm actually 0:09:57.160 --> 0:09:58.240 still optimistic about that. 0:09:58.320 --> 0:10:00.480 Okay, can we go on Narro O'Neil? Is it okay? 0:10:00.520 --> 0:10:04.040 If I go like nuts to graph right now? You're talking, 0:10:04.160 --> 0:10:06.400 I mean the micro analysis of his note get us 0:10:06.440 --> 0:10:11.280 note from Renaissance macrofolks. And you mentioned Gilead silent science. 0:10:11.440 --> 0:10:14.199 I mean the healthcare I mean healthcare has been an 0:10:14.240 --> 0:10:17.880 absolute train wreck sector. Yes, How does someone like you, 0:10:18.480 --> 0:10:23.640 combining fundamentals and particularly technical dynamics, know when to pull 0:10:23.720 --> 0:10:26.680 the trigger and go long healthcare? How do you do that? 0:10:26.760 --> 0:10:28.800 Well, it's a process and so The first thing that 0:10:28.840 --> 0:10:30.960 we start with, Tom is we look at what we 0:10:31.000 --> 0:10:33.640 call our SERM standardized excess return, and that's really just 0:10:33.640 --> 0:10:37.880 a fancy way to say a longer term alpha generation model. 0:10:37.920 --> 0:10:38.320 Right now, that word. 0:10:38.360 --> 0:10:40.080 We're looking at how much ALPH has been generated for 0:10:40.160 --> 0:10:43.120 the sector, in this case healthcare over the last three 0:10:43.120 --> 0:10:45.800 to five years, and if we compare that to the 0:10:45.840 --> 0:10:49.560 sector since the nineteen sixties, we've got singularly the worst 0:10:49.640 --> 0:10:51.959 alpha generation we've ever seen, right, and that's I mean, 0:10:51.960 --> 0:10:54.719 that's capital markets. It's going to result in bankruptcy, is 0:10:54.800 --> 0:10:56.560 is going to result in M and A everything else. Okay, 0:10:56.640 --> 0:10:59.160 So that's the contrarian that unless you believe that these 0:10:59.200 --> 0:11:00.880 things are going to zero or as a sector which 0:11:00.880 --> 0:11:02.800 doesn't happen, that's not going to happen. That we wait 0:11:02.840 --> 0:11:04.920 for momentum. We wait for we wait for trends, we 0:11:04.960 --> 0:11:07.280 wait for momentum to confirm that. And that's where we 0:11:07.360 --> 0:11:09.360 lead into it. We did it with China about a 0:11:09.440 --> 0:11:11.560 year ago. We're doing it with health care now. I mean, 0:11:12.200 --> 0:11:15.600 this is so important, folks. This goes back to Adheim 0:11:15.640 --> 0:11:18.400 and this goes back to John Murphy. The melding of 0:11:18.480 --> 0:11:22.079 this of Neil Dudda's economics. Jeff deographs, I'm going to 0:11:22.160 --> 0:11:25.520 call it technical bias, and then over to fundamental analysis. 0:11:25.920 --> 0:11:29.800 Is the religion here? Okay, so you're there, but value 0:11:29.880 --> 0:11:35.760 investing is basically cratered and only does well given down markets. 0:11:35.800 --> 0:11:38.320 We haven't had a down market, are you? Is you 0:11:38.480 --> 0:11:43.480 tone at the shop growthiness or is it a value search? No, no, 0:11:43.720 --> 0:11:44.120 it is. 0:11:44.480 --> 0:11:46.760 We will take what the market gives us. I mean 0:11:46.760 --> 0:11:48.720 we will go with the cart giving you. Right now, 0:11:48.760 --> 0:11:51.600 the market is giving you growth. It's giving you it's 0:11:51.640 --> 0:11:53.560 not giving you it's not giving you value. It's giving 0:11:53.600 --> 0:11:56.280 you beta. But we think beta's actually stretched, and we 0:11:56.280 --> 0:11:59.120 we actually believe that the market is going to transition 0:11:59.280 --> 0:12:03.680 from at any price and transition that into momentum. And 0:12:03.720 --> 0:12:06.280 that'll be an interesting play because it's usually what happened, 0:12:06.320 --> 0:12:08.080 and that's where you get into the final stages of 0:12:08.080 --> 0:12:09.840 a ball market. And we're not there yet. 0:12:10.120 --> 0:12:12.840 Neil, you've been talking a lot this morning about labor. 0:12:13.040 --> 0:12:17.439 How does the change in immigration policy affect kind of 0:12:17.480 --> 0:12:20.559 the the analysis of the labor market here, because that 0:12:20.679 --> 0:12:23.000 was a lot of folks coming into this country taking 0:12:23.240 --> 0:12:25.920 a lot of jobs, and they're not coming in anymore. 0:12:26.720 --> 0:12:29.280 I mean, I personally think that's more of a red herring. Honestly. 0:12:29.440 --> 0:12:32.200 I mean, to me, it's interesting because we're talking about 0:12:32.200 --> 0:12:34.840 how break even rates unemployment have come down, meaning what 0:12:34.840 --> 0:12:37.559 do you need to keep the unemployment rate flat precisely 0:12:37.600 --> 0:12:39.440 at the time where the unemployment rate has been actually 0:12:39.520 --> 0:12:41.960 rising a little bit more rapidly than it hasn't, you know, 0:12:42.040 --> 0:12:45.280 over the last year or so. It's basically you know, 0:12:45.320 --> 0:12:47.480 had the September data been released, it probably would have 0:12:47.480 --> 0:12:49.000 been up three months in a row by a ten. 0:12:49.720 --> 0:12:52.440 So yeah, I mean, the break even rate has come down, 0:12:52.559 --> 0:12:55.720 but it hasn't come down enough to keep the unemployment 0:12:55.760 --> 0:12:58.280 rate from going up in the first place. And you know, 0:12:58.320 --> 0:13:00.480 that to me is what's important. And if you look 0:13:00.480 --> 0:13:03.600 at you know, these areas of the economy that are 0:13:04.080 --> 0:13:07.520 sensitive to immigration, you don't really see upward wage pressure 0:13:08.000 --> 0:13:12.800 in construction employment and sort of you know, sanitation, these 0:13:12.840 --> 0:13:15.440 sort of sectors where there's a lot of no scaled work. 0:13:16.520 --> 0:13:18.840 So I don't know, I mean, I think it's to me, 0:13:18.840 --> 0:13:20.320 it's a bit of a red herring. And of course, 0:13:21.640 --> 0:13:24.200 look at what people are saying about like job finding rates. 0:13:24.920 --> 0:13:27.520 They're telling you it's getting more difficult to find work. 0:13:27.760 --> 0:13:30.520 And when when consumers tell you labor markets are getting worse, 0:13:30.559 --> 0:13:31.719 I think it pays to believe them. 0:13:31.760 --> 0:13:33.679 I mean here it is from listeners and viewers as well. 0:13:33.720 --> 0:13:35.720 So Neil dot I ss At Waller, let me ask 0:13:36.520 --> 0:13:39.680 of you. Are we so polarized in our John Edwards 0:13:39.760 --> 0:13:42.959 two Americas that we literally have to operate with a 0:13:43.080 --> 0:13:47.000 study of to our starts that have and they have nots. 0:13:47.040 --> 0:13:51.280 Are we that separate now where aggregation of data doesn't work? 0:13:52.520 --> 0:13:52.720 Well? 0:13:52.840 --> 0:13:54.440 I don't believe so. 0:13:54.520 --> 0:13:58.000 I mean I think ultimately, you know, all of these 0:13:58.000 --> 0:14:00.440 things will kind of net out over time, you know, 0:14:01.080 --> 0:14:03.160 I mean what you're talking about basically is this sort 0:14:03.200 --> 0:14:05.959 of K shaped economy, right, like this idea that the 0:14:06.040 --> 0:14:08.199 upper income I mean, and that's and that's a that's 0:14:08.240 --> 0:14:09.880 a huge source of pushback that I get in our 0:14:09.880 --> 0:14:10.600 own client meetings. 0:14:10.720 --> 0:14:15.960 Right, throw a tape dispenser, Adam says, shaped. We usually 0:14:16.000 --> 0:14:21.120 mud wrestle for the shape. Remember V shaped. We got 0:14:21.200 --> 0:14:23.280 a real treat and it's too short of visit Jeff 0:14:23.240 --> 0:14:25.760 to graph with this and Neil douta of Renmack. I'm 0:14:25.760 --> 0:14:28.080 going to go to you, Jeff quickly neel you quickly 0:14:28.080 --> 0:14:30.720 because Paul wants to get one in before the market opening. 0:14:31.040 --> 0:14:33.960 Jeff to graph, what's the biggest mistake people make it, 0:14:34.000 --> 0:14:37.720 particularly the young kid's day trading with technical analysis. 0:14:38.040 --> 0:14:41.720 I think they have an illusion of control, selling high, 0:14:41.840 --> 0:14:45.120 buying low, selling high buying low versus writing the trends. 0:14:45.280 --> 0:14:48.160 Well, it's a technical riding the trend trends. What's a 0:14:48.240 --> 0:14:52.720 technical stochastic failure of all this computer garbage today? 0:14:53.000 --> 0:14:55.400 Well, again, it's that illusion of control that you think 0:14:55.400 --> 0:14:57.640 that you can predict what's going to happen, versus just 0:14:57.760 --> 0:15:00.960 riding the wave of earnings and everything else. 0:15:01.080 --> 0:15:04.760 It's the biggest mistake in our nation's economic analysis right now. 0:15:05.480 --> 0:15:08.520 Is that you assume that relationships are stable from one 0:15:08.520 --> 0:15:10.040 cycle to the next. 0:15:09.880 --> 0:15:12.120 One cycle to the next boom. I like that a lot. 0:15:12.240 --> 0:15:13.560 That's true too, Jeff. 0:15:14.000 --> 0:15:16.080 A lot of people have been talking about AI and 0:15:16.120 --> 0:15:19.240 it's created a bubble in the market, and I don't 0:15:19.240 --> 0:15:20.840 even know what a bubble is anymore. How do you 0:15:20.920 --> 0:15:23.880 define a bubble? How do you try to identify a 0:15:23.960 --> 0:15:25.800 bubble in whatever market you're looking at. 0:15:25.840 --> 0:15:27.920 Yeah, it's a great question. It's a very hard thing 0:15:27.960 --> 0:15:30.680 to quantify. One of the things that we've come up with. 0:15:30.800 --> 0:15:34.240 It's very simple and it's been very very effective. And 0:15:34.520 --> 0:15:36.520 I'll leave it for you and you can put it 0:15:36.560 --> 0:15:39.840 in your back pocket. If an asset doubles in two years, 0:15:39.920 --> 0:15:42.280 you're in bubble territory. That doesn't mean it's done, but 0:15:42.320 --> 0:15:44.120 it means that you have to start talking about it 0:15:44.160 --> 0:15:44.720 as a bubble. 0:15:46.760 --> 0:15:50.640 YouTube love here, tom Key, please do a little more 0:15:50.680 --> 0:15:53.960 often like this with the graph and Dutta, they're loving it. 0:15:54.200 --> 0:15:56.960 I got tears to my eyes, they're loving it. A 0:15:57.080 --> 0:15:59.960 question to Neil Dutta exactly so Nea wanted that they. 0:16:00.200 --> 0:16:03.720 I think that our federal Reserve is looking at is inflation? 0:16:03.920 --> 0:16:06.160 Obviously we haven't really seen it. 0:16:06.400 --> 0:16:07.840 Are we missing something here? 0:16:07.960 --> 0:16:11.400 Or are corporations bearing the brunt of whatever inflation? 0:16:11.760 --> 0:16:14.160 The hawks are missing it? Okay, the hawks are missing it. 0:16:14.240 --> 0:16:18.760 I mean ultimately, I think, what's you know, we're talking 0:16:18.760 --> 0:16:25.400 about big budget deficits, tariffs, policy, risk premium, and yet 0:16:26.160 --> 0:16:28.400 the ten year yield is below four percent? Yeah, so 0:16:28.560 --> 0:16:32.680 I think that to me, it just basically demonstrates that, 0:16:34.000 --> 0:16:35.440 you know, a lot of that bad stuff was in 0:16:35.440 --> 0:16:37.520 the price. What's not And I mean, what the what 0:16:37.560 --> 0:16:39.640 the bond market probably has yet to have, you know, 0:16:39.800 --> 0:16:42.640 meaningfully contend with is some kind of material slow down 0:16:42.640 --> 0:16:46.800 in the economy, because remember the consensus has been revising 0:16:46.840 --> 0:16:49.080 up their GDP estimates for the last like five or 0:16:49.120 --> 0:16:52.560 six months. So you know, to me, that's what's interesting. 0:16:52.920 --> 0:16:56.000 I'm not concerned about inflation. I mean, ultimately, I think 0:16:56.320 --> 0:16:59.920 nominal growth is sluggish, and if you put tariffs on 0:17:00.160 --> 0:17:03.320 it'll just you know, I mean, force people to go 0:17:03.600 --> 0:17:05.119 pay more for one thing and then they'll have to 0:17:05.119 --> 0:17:07.280 cut back on something else to get in before. 0:17:07.000 --> 0:17:09.159 The market open. And with Jeff de Graph, that's a 0:17:09.160 --> 0:17:13.920 great proofot to have him in the studio today. Retail 0:17:14.280 --> 0:17:17.240 right fear missing out to shut up and buy, and 0:17:17.359 --> 0:17:21.400 institutions with all their sophistication maybe falling behind. How big 0:17:21.480 --> 0:17:25.280 is that gap right now between retail success and CTA 0:17:25.440 --> 0:17:28.520 and hedge funds. OMG, we're not getting it done well. 0:17:28.720 --> 0:17:32.800 I think you hear the You hear the the successes 0:17:32.840 --> 0:17:35.679 of the retail crowd, right, you don't hear the numerous failure. 0:17:36.359 --> 0:17:39.960 So I think that's really important. Look, we are now 0:17:40.520 --> 0:17:42.600 and with the help of AI, we are now distinguishing 0:17:42.640 --> 0:17:47.480 between retail sentiment and the Reddit crowd and the ex 0:17:47.560 --> 0:17:48.440 crowd and. 0:17:48.280 --> 0:17:50.440 What the institutions are saying. Right, So that is a. 0:17:50.359 --> 0:17:53.119 Part of our analysis now that we are using is 0:17:53.160 --> 0:17:56.720 what's happening to the crowd sourcing versus what's happening to 0:17:56.720 --> 0:17:59.760 the institutions. And that's that's important because that's got that 0:18:00.320 --> 0:18:02.840 army is a you know, is is real. They've got 0:18:02.880 --> 0:18:05.480 bayonets and pitchforks, and it's important. 0:18:05.200 --> 0:18:08.480 To get twenty seconds. It's too important question. A listener 0:18:08.560 --> 0:18:13.479 emails in Jeff to graph. Can AI replace Neil Dotta? No, 0:18:14.240 --> 0:18:20.680 no is a cervict wines. Cervict is unreplaceable. I think 0:18:21.080 --> 0:18:22.960 I like a tweet that was out there today that 0:18:23.080 --> 0:18:26.960 said AI will replace bad science and will probably replace 0:18:27.040 --> 0:18:30.520 bad economics. Neil Dutta. You know I'm snarky there. But 0:18:30.920 --> 0:18:35.040 AI is it a productivity plus? And are we underestimating 0:18:35.200 --> 0:18:39.880 America's productivity as we folded into business efficiency? 0:18:40.840 --> 0:18:41.480 I don't think so. 0:18:41.600 --> 0:18:45.399 I mean, I think right now, AI is probably a 0:18:45.520 --> 0:18:50.120 productivity suck because because you're spending so much time trying 0:18:50.160 --> 0:18:52.480 to figure out how to actually integrate it properly into 0:18:52.520 --> 0:18:55.520 your workflow, and that process is time consuming and keeps 0:18:55.520 --> 0:18:58.440 you maybe from doing more productive things. 0:18:59.040 --> 0:19:00.560 You know, i'd really right right now. 0:19:00.600 --> 0:19:04.080 So you know, typically in a productivity boom, you don't 0:19:04.119 --> 0:19:08.960 tend to see productivity rising alongside the adoption of said technology. 0:19:09.200 --> 0:19:10.280 It usually happens after. 0:19:10.359 --> 0:19:13.280 So if you think about like the desktop computer that 0:19:13.400 --> 0:19:16.439 was probably making its way in corporate America sometime in 0:19:16.480 --> 0:19:19.000 the early nineties, it wasn't really until the late nineties 0:19:19.040 --> 0:19:23.160 that productivity really took off. So, you know, I think 0:19:23.200 --> 0:19:27.040 it's not you know, it's I don't think it's actually 0:19:27.160 --> 0:19:28.560 driving productivity right now. 0:19:28.800 --> 0:19:31.280 My first earnings models of pain Webber nineteen eighty six 0:19:31.320 --> 0:19:33.600 were on pencil and page. 0:19:33.600 --> 0:19:37.280 Did you use a slide roll paper? You want to 0:19:37.359 --> 0:19:39.000 change your estimates? You had to do it? 0:19:39.119 --> 0:19:39.640 Think long. 0:19:39.760 --> 0:19:42.600