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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

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Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jaily we bring you

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Speaker 1: insight from the best and economics, finance, investment and international relations.

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Speaker 1: Find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg dot Com,

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Speaker 1: and of course on the Bloomberg terminal. I sent a

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Speaker 1: note to h Lee Brody, who does all of our booking.

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Speaker 1: Uh with the types of Leon Cooperman, and I said, Uh,

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Speaker 1: Lee Brody, get Leon Cooperman on. There's any number of

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Speaker 1: reasons we can always speak with a gentleman from Goldman

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Speaker 1: Sachs and of course now chairman, chief executive officer at

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Speaker 1: the aged seventy eight of Omega Family Office. But far

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Speaker 1: more it's about the never ending debate of a wealth

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Speaker 1: tax and of going after the billionaires. Mr Cooperman has

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Speaker 1: been more than vocal marketing back to a letter of

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Speaker 1: two three years ago to the Senator from Massachusetts. It

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Speaker 1: is a five page, single line doozy where Leon Cooperman

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Speaker 1: takes on the liberals, the Progressives, and Senator Warren. We

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Speaker 1: are honored that Leon Cooperman could join us on Bloomberg

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Speaker 1: surveillance this morning, Lee Cooperman, the debate is the same,

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Speaker 1: and yet it's different. What's different now versus when you

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Speaker 1: wrote that letter to three years ago. Well, I think

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Speaker 1: it's becoming a little bit clearer that the general populace

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Speaker 1: UH is not in alignment with the progressive You know,

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Speaker 1: you saw that election in New Jersey, you saw the

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Speaker 1: election in Virginia, UM and they dropped the proposal to

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Speaker 1: have this tax on unrealized games. But I'd like to

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Speaker 1: take a second, with your permission, I'm not involved in politics.

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Speaker 1: About two years ago, I gave a speech at a

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Speaker 1: Hedge Fund conference at a time when Elizabeth Warren was

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Speaker 1: running strongly in the polls, and none of my speech

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Speaker 1: was directed towards politics. At the end of my spee,

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Speaker 1: each the moderator asked me, what do I think the

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Speaker 1: market would do if for Ludith Warren presidency? And I said,

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Speaker 1: you know, maybe I was optimistic. I said the mark

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Speaker 1: would drop at least the very next day. Not knowing

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Speaker 1: anything about me, she treats Leon, I'm only looking for

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Speaker 1: two give others a chance of the American dream. And

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Speaker 1: I made a decision to take the high road and

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Speaker 1: basically uh. Michelle Obama once observed that when they go low,

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Speaker 1: we go high. And I wrote her a very good

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Speaker 1: letter and let her you decided a moment ago, and

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Speaker 1: she showed to me that in the best sense, you know,

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Speaker 1: if I wanted to be polite, I would say, uh,

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Speaker 1: and respectful, I would say that she's a politician in

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Speaker 1: the worst sense of the word. Uh. And if I

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Speaker 1: wanted to be a bit more shop tongue, I would

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Speaker 1: say that she's a nasty fool. But let me explain,

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Speaker 1: you know, um, when I wrote the letter. Basically, her

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Speaker 1: response was, you know, inside a trader and owned stock

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Speaker 1: and navigant, totally unresp answer to the intellectual contract letter.

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Speaker 1: You know, the fact that you live with me. I

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Speaker 1: won the case with the sec Yeah, I'm sorry to leon.

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Speaker 1: This is really important at a moment when what you

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Speaker 1: call the vilification of the rich is gaining steam, that

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Speaker 1: the idea that people feel like there is a fair

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Speaker 1: share to be paid and that the wealthiest individuals are

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Speaker 1: not paying it. What is the backdrop leading to the

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Speaker 1: increasing calls for the fair share rather than trying to

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Speaker 1: close loopholes and some of the other proposals that you've

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Speaker 1: put out there. It's a good question. I think it's

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Speaker 1: results of income disparity and the income disparity lodging results

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Speaker 1: and government policies. You know, go back to two thousand eight.

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Speaker 1: Mr Bernankee figured out the economy is going down the toilet.

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Speaker 1: He had to rescue the economy. You think the best

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Speaker 1: way to rescue the economy was to get wealth up.

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Speaker 1: And his wealth leads to consumption. Uh. And the best

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Speaker 1: way to get wealth up was to get the stock

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Speaker 1: walking up. The trouble was the stocks very much one

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Speaker 1: was sent to the people, and so income disparity group, right,

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Speaker 1: And I'm gonna try to get that money back by

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Speaker 1: creating an environment where there's been no return for maybe

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Speaker 1: Leon I want to. I've got to get to the

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Speaker 1: heart of the matter. In two thousand twenty one, and

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Speaker 1: here's the bottom line. We've got a definition in this

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Speaker 1: nation that four hundred thousand is filthy rich. It's St.

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Speaker 1: Barnabus Hospital in New Jersey. If you've got a full

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Speaker 1: line doctor, surgeon, whatever, and the spouse is working as well,

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Speaker 1: or even if it's a single person, they're paying four

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Speaker 1: hundred thousand, and they're deemed by liberals to be rich

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Speaker 1: with all your experience growing up dirt poor is four

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Speaker 1: hundred thousand and two thousand, twenty two rich. I don't

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Speaker 1: think so. I don't think so. I think doctors have

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Speaker 1: gotten totally screwed by the government when I look at

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Speaker 1: what they have to go through to get their degree

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Speaker 1: and be able to practice, and then with the controls

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Speaker 1: over their income. Look, I believe in the progressive income

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Speaker 1: tax structure. I believe rich people should pay more in

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Speaker 1: tax is you know the question we have to deal

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Speaker 1: with is a nation is coalesced around the question what

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Speaker 1: should the maxim tax rate be unwealthy people, because that

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Speaker 1: will be that will define the revenue to the government,

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Speaker 1: that government exercize themselves that revenue. You okay, and all

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Speaker 1: of this talk about wealth taxes, it's all bolay. They said,

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Speaker 1: let them close the loopholes. You mentioned it a moment ago, Lisa,

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Speaker 1: did you know ten thirty one billy a roll forward

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Speaker 1: and definitely real estate gains, you know, get rid of that,

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Speaker 1: get rid of carrot interest for head, raise a tax rate.

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Speaker 1: We don't need new forms of taxation. Okay, we just

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Speaker 1: deal with the loopholes. I do want to just go

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Speaker 1: into something that you were talking about the idea of

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Speaker 1: monetary policy pushing up equity pricing and that that does

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Speaker 1: not reach everybody. Do you think that monetary policy where

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Speaker 1: it has been has exacerbated the divide that has led

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Speaker 1: to the discussion that you were talking about right now. Yeah,

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Speaker 1: I would say, so, Look, you gotta go back. You know,

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Speaker 1: Bill Clinton didn't vilify wealthy p people. Ronald Reagan didn't

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Speaker 1: vilify wealthy people. George Bush didn't vilify wealthy people. I

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Speaker 1: respect Obama as an individual, but he started the whole thing.

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Speaker 1: I become a letter write I wrote him a letter

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Speaker 1: nine years ago and I said, you know, you're basically

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Speaker 1: telling you they being screwed by the one percent. Why

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Speaker 1: do you tell the ent with a lot of hard

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Speaker 1: work and luck, they could become part of the one

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Speaker 1: percent instead of vilifying the wealthy. I think the world

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Speaker 1: has been a place because of Bill Gates, Jeff Bezos,

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Speaker 1: Bernie mark As, Kenn ln God and people like that.

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Speaker 1: You know, I don't see a reason to veloped by

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Speaker 1: them tax him. I have no problem with taxes. You know.

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Speaker 1: I'm actually have taken the giving pledge to the Buffett

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Speaker 1: and I've taken another giving pledge by friend Mike Leavin,

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Speaker 1: the Jewish giving pledge. I'm giving away all my money,

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Speaker 1: you know, so it's not a selfish motivation. Leon, we

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Speaker 1: gotta leave it there. We are out of time. We'd

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Speaker 1: like to continue this discussion as well. Leon, We've got

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Speaker 1: to get you into our studios here in Manhattan when

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Speaker 1: you decide to leave the acreage in New Jersey. Leon Cooper,

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Speaker 1: Man with Omega Family Office. At the heritage of Credit

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Speaker 1: Sweets and Derivatives is immense, It's dominant, constant and any

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Speaker 1: number of other people, including I believe not seeing till

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Speaker 1: ab ages, ago, derivatives and the mathness of it has

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Speaker 1: always been front and center at Credit Suis Holding Court

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Speaker 1: is their chief equity derivative strategist, the statistician and economist. Man.

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Speaker 1: As you joins us this morning, many thrilled to have

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Speaker 1: you with us. Can you explain the voll that you

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Speaker 1: see in the cross moment Skew to mere mortals. Explain

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Speaker 1: the oddities of the third cross moment Skew. We're not

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Speaker 1: doing crotosis, we're cretosis ray today, but your world of skew.

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Speaker 1: Explain how skewed Skew is to mere Mortals, so thanks

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Speaker 1: for that introduction. Tom. You know, I can say definitely

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Speaker 1: Skew is us Skew right now. Um. But you know,

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Speaker 1: when you talk about all the macro risks and you

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Speaker 1: guys let off with all the macro risk that's facing markets, inflation,

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Speaker 1: the Fed, et cetera, I would say, you know, what

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Speaker 1: was currently priced into the equity market is actually fairly bullish. Um. So,

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Speaker 1: one of the more notable things that we've seen the

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Speaker 1: equity market right now is that on market rallies, volatilities

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Speaker 1: actually going up. Now that's very unusual because typically vaulting

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Speaker 1: umply volatility decline on market rally and on the surface

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Speaker 1: you might think that, you know, more of a cautious

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Speaker 1: signal that people are you know, buying puts or you know,

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Speaker 1: pricing in more downside risk. But actually, over the past

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Speaker 1: week on the market rally, implying vaults are going higher

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Speaker 1: on the back of demand for upside calls. And this

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Speaker 1: is I would say particularly pronounced in small caps. So

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Speaker 1: if you look at the Russell Index, for example, Russell

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Speaker 1: had a very large breakout move last week up six percent.

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Speaker 1: Russell Skew actually flattened to not just a one year low,

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Speaker 1: but actually towards a ten year low. Right, this was

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Speaker 1: primarily driven by demand for those upside calls um and

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Speaker 1: call vollowing thing. They're very elevated and rustle as well.

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Speaker 1: Many can you describe the character of that upside position

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Speaker 1: where it's coming from. Is it primarily retail? Is it

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Speaker 1: short dated coal options? What does it look like? Yeah? Sure,

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Speaker 1: so at the index level, I don't think it's primarily retail.

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Speaker 1: I mean at the single stock level. So you know,

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Speaker 1: when we talk about skew flattening, this is a dynamic

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Speaker 1: that we're seeing not just you know, for the Russell Index,

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Speaker 1: but actually at the single stock level SMP, you know,

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Speaker 1: top fifty, top one hundred stocks, we've also seen a

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Speaker 1: very pronounced flattening in the skew and again primarily driven

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Speaker 1: by the call side. And at the single stock level,

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Speaker 1: we do think mostly this is coming from retail because

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Speaker 1: in terms of the institutional flow that we see, it's

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Speaker 1: actually the opposite. A lot of institutional investers, asset managers, pensions,

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Speaker 1: hedge funds are actually coming into cell calls to overwrite

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Speaker 1: their position. So taking advantage of that did to the

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Speaker 1: upside that is I believe you know, primarily driven by

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Speaker 1: retail man. You're taking a step back. Throughout the year,

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Speaker 1: people have been talking about options being the tail that

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Speaker 1: wags the dog, the idea that on a single stock name,

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Speaker 1: You've seen the options market really overwhelmed the fundamentals and

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Speaker 1: dictate some of the moves. Are we seeing that on

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Speaker 1: a broader basis more than we have typically in the past.

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Speaker 1: We have definitely seen more pronounced, you know, single stock moves.

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Speaker 1: I don't necessarily attribute that to the option positioning, so

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Speaker 1: I would say no, recently, it's really been driven by earning.

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Speaker 1: So what we have seen over the past month is

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Speaker 1: actually one of the biggest increase in single stock dispersion

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Speaker 1: during earning season in five quarters. When I say seeing

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Speaker 1: stock dispersion, I mean, you know, large single stock moves

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Speaker 1: relative to the index UM and and this you know

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Speaker 1: this quarter was not just the largest in five quarters,

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Speaker 1: the third largest going back fifteen quarters UM And I'm

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Speaker 1: going out thinking that thinking of that is that you know,

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Speaker 1: a correlation, realized correlation in SMP, you know, has fallen

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Speaker 1: significantly as we get these vidiosyncratic moves on earnings. So

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Speaker 1: correlation SMP is currently at a one year low. On

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Speaker 1: both an implied and realized basis, and again the moves

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Speaker 1: are I say, pretty broad based. It is not really

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Speaker 1: driven by one particular sector. The correlation is currently at

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Speaker 1: a one year low for seven of the ten SMP

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Speaker 1: sectors as well, Mandy, on a broad basis, looking at

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Speaker 1: cash derivatives versus the huge nominal gross up of what

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Speaker 1: all that papers really worth. Are we at a point

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Speaker 1: of derivative speculation now? Or is it rather a contained

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Speaker 1: normal market? You know, That's that's always kind of the

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Speaker 1: the question, right, I think at certainly at the index level, UM,

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Speaker 1: I do not think you know, we're in a situation

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Speaker 1: where the derivatives market is overwhelming. UM, certainly, no, you're

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Speaker 1: not not as a market like SMP as deep and

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Speaker 1: liquid s the SMP certainly on single names, UM, particular

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Speaker 1: single names you might, you know, make that case where

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Speaker 1: your option activity has been very concentrated. But at the

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Speaker 1: induct level, you know, we do not think so, Mandy.

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Speaker 1: Always quite to hear from you have mischion. It's been

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Speaker 1: too long, Mandy, see that I have quite swaste on

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Speaker 1: the sanquity market. Thank you very much. Chrisma Rangi joining

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Speaker 1: us now. Cacio of Gabelly Funds on the sanquity market. Chris,

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Speaker 1: We've got to start there, haven't weight. How did you

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Speaker 1: react when you saw that six handle on CPI in America? Well,

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Speaker 1: unfortunately not with a lot of surprise. We're just getting

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Speaker 1: through Q three earning season now, and unquestionably the theme

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Speaker 1: of all these calls, whether it's autos or food or

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Speaker 1: even the Walt Disney Company last night, is inflation and

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Speaker 1: supply chain issues um, which inflation being one manifestation um

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Speaker 1: so um. Everything is transitory along enough timeframe. This is

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Speaker 1: changing anytime soon from what we're hearing from companies. Uh.

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Speaker 1: Fred is probably gonna loose it up first. Uh but

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Speaker 1: Semis we're gonna take a longer time. And labor we

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Speaker 1: don't know. Chris Sperring, How do you inflation proof of portfolio?

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Speaker 1: A measured value? Mario Gabelli's a certified starred portfolio. How

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Speaker 1: do you inflation proof it? Well, the reality is that

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Speaker 1: there's no way to inflation proof it um and not

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Speaker 1: something that equity managers have had to think about for

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Speaker 1: decades really. Notwithstanding that there are ways to to uh

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Speaker 1: limit the impact of inflation. Looking for companies with pricing

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Speaker 1: power in particular. Uh. And then the nirvana is really

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Speaker 1: defined companies with both the pricing power and fixed fixed

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Speaker 1: costs UM. You know, waste companies I've talked about before.

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Speaker 1: It doesn't cost more to to get rid of garbage

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Speaker 1: in a landfill that's already paid for UM. So we're

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Speaker 1: looking for those, We're looking for stores of value, just

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Speaker 1: like everybody else. I think the whole inflation the prospect

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Speaker 1: of inflation is driven the crypto market. So if you

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Speaker 1: look at gross margin, or you're bringing even down to

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Speaker 1: a healthy but big percentage margin, that helps you with

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Speaker 1: the inflation proofing. Does that steer you back to big tech? Well,

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Speaker 1: there's no question that least some of the big tech

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Speaker 1: companies Google comes to mind, have enormous pricing power. Uh.

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Speaker 1: And and are many ways inflation conduits UM that we

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Speaker 1: think about. Okay, well, what's the what's the impact of

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Speaker 1: interest rates? And obviously the higher interest rates probably more

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Speaker 1: impactful on those companies that have cash flow as well

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Speaker 1: into the future. So we've got to balance those things. Chris.

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Speaker 1: It was Warren Buffett who came out and said, only

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Speaker 1: when the tide rolls out to discover who's been swimming naked.

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Speaker 1: Is the tide starting to roll out right now? Uh? Well,

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Speaker 1: we know, we know that the tides come in and out.

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Speaker 1: We don't have a great schedule for that at at

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Speaker 1: the present time. But yeah, I think we're probably closer

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Speaker 1: to the tide going out. Um. I was saying that listen,

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Speaker 1: Ribbean's got an eighty five billion dollar marketing gap. So, um,

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Speaker 1: this isn't this isn't changing yet. At what point do

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Speaker 1: we start to see some real disruptions however, where we

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Speaker 1: see the most vulnerable players shaken out? Yeah, I think

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Speaker 1: I think we're already ready to see that. Um. You

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Speaker 1: know this will uh, an inability to pass along costs

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Speaker 1: will cause financial pressure, will cause pressure on debt service

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Speaker 1: for a lot of companies that that have leverage, and

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Speaker 1: you know is the as the debt markets perhaps tightened up, Um,

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Speaker 1: they might not be there for those companies. So this

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Speaker 1: is a process that probably plays out over over time.

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Speaker 1: Can you weigh in on that just briefly, Chris, that

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Speaker 1: we've got an eighty six billion dollar market camp on

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Speaker 1: an automaker that only just started delivering vehicles a couple

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Speaker 1: of months ago. How do you respond to that, Chris?

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Speaker 1: Someone like you Yeah, someone like me who you know

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Speaker 1: owns GM with which is a very similar market cap

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Speaker 1: and obviously a much larger market share. Um, it's puzzling

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Speaker 1: with without Amazon, I don't think they have nearly the

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Speaker 1: market cap that they do. But rib It appears to

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Speaker 1: be a real company. But it's challenging to actually make stuff,

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Speaker 1: make cars, get them delivered to customer, service them, and

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Speaker 1: all those other things. So I think it's gonna be

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Speaker 1: a bumpy road for that company. But um, you know,

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Speaker 1: they're probably gonna be a good competitor. Have you built

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Speaker 1: it us? Did you find a stock? Now? You know?

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Speaker 1: We have Uh. We like to participate in some of

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Speaker 1: these stories through suppliers. And one of the suppliers Tribbian

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Speaker 1: as a company called Tenneco, a little teeny tiny auto

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Speaker 1: supplier that makes a suspension for them. So that's a

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Speaker 1: long way one way we play it. Let's see if

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Speaker 1: they can run pump production in a big way, Chris

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Speaker 1: cried to catch up. Remarkable moment for that industry. Chris

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Speaker 1: Marangi Belly funds right now an important voice on your

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Speaker 1: inflation Chairman Paul's inflation as well. Julia Cornado is president

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Speaker 1: and founder of macro policy perspectives out of Texas, Austin,

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Speaker 1: and of course always vetted for a position with the Fed,

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Speaker 1: where she's worked for a good number of years. Of course,

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Speaker 1: iconic at BMP Perry BA really talking a tepid GDP

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Speaker 1: A crisis ago. Dr Coronado, thank you so much for

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Speaker 1: joining us today. You are read worldwide for itty bitty

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Speaker 1: charts on page seven where you go. Oh and your

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Speaker 1: O chart this week is old and new guestimates of

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Speaker 1: rent inflation. What is the dynamic of rent inflation in America? Well,

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Speaker 1: it looks like we have a hot rent cycle on

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Speaker 1: our hand as well. So we've had a couple two

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Speaker 1: months of prints. We came basically a month earlier than

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Speaker 1: we were expecting, but you know, a lot of the

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Speaker 1: indicators have been pointing in this direction. This isn't a surprise,

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Speaker 1: of course, Calibrating the magnitude is always the trick. So

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Speaker 1: it came in a bit hotter uh in October. But

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Speaker 1: it looks like we're going to have a surgeon rents

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Speaker 1: in the first half of next year, starting now, going

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Speaker 1: into the first half of next year. Um, you know,

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Speaker 1: like many things this cycle, there was a surge of

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Speaker 1: demand early in the cycle, we are seeing a building response,

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Speaker 1: but of course the building response takes some time always,

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Speaker 1: and it's going to take even more time given supply

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Speaker 1: chain bottlenecks. So that's also going to probably be three

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Speaker 1: issue before we see that moderate back down. So that's

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Speaker 1: adding to the other pressures that were coming more related

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Speaker 1: to COVID disruptions and civilizing issues that have renewed an

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Speaker 1: intensity because of the delta variant. So it's sort of

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Speaker 1: a combination of things that look more transitory and things

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Speaker 1: that look more cyclical that are combining to produce some

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Speaker 1: pretty Oh and the third factor, of course energy prices.

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Speaker 1: And that really wasn't coming from the Google or from

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Speaker 1: the U S situation. That's really you know, China European

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Speaker 1: driven dynamic, but it sort of rolls into the US

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Speaker 1: and UH and hits US consumers. Tell me about the

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Speaker 1: timeline of FED and waiting for an inflation to turn

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Speaker 1: around and become disinflation? Is it out to January of

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Speaker 1: next year? The FED meeting of March sixteen or dare

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Speaker 1: I say can they be data dependent to May fourth? Yeah?

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Speaker 1: I think I think they can be data dependent. This

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Speaker 1: is really an uncomfortable situation because again, the inflation is

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Speaker 1: being frontloaded near term, anything they do today isn't going

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Speaker 1: to have an effect for a year or more. And meanwhile,

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Speaker 1: what we know is in train, we're still surfing this

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Speaker 1: epic wave of fiscal support that will fade over two,

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Speaker 1: that that money will be spent, that consumers will demand

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Speaker 1: will cool off to some extent um. That's what everybody's forecasting,

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Speaker 1: including the Fed. So uh, you know, as these forces

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Speaker 1: come together, do you want to pile on to this

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Speaker 1: front loaded tightening? Do you want to bide your time

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Speaker 1: and wait for some of those forces to play out. Uh,

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Speaker 1: It's going to be a tough road for the a

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Speaker 1: tough balance for the Fed to strike. We we do

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Speaker 1: think they will lift off in two, but we don't

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Speaker 1: We don't think it will be towards till towards the end.

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Speaker 1: We've got a taper. The we we are putting in

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Speaker 1: a lot of global removal of accommodation and we haven't

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Speaker 1: yet seen its impact on markets or the economy. Uh.

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Speaker 1: And so you know, I think the FED proceeds. I

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Speaker 1: think still the bar is pretty high to accelerating a

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Speaker 1: tapering um. But you know, look, The good news is

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Speaker 1: that some of this reflects a US recovery that's pretty

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Speaker 1: darn resilient. As delta fades, we're seeing demand uh stay strong,

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Speaker 1: and that bodes well for the staying power of the

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Speaker 1: recovery through this verston inflation. In other words, you know,

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Speaker 1: one thing you might worry about, and and some a

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Speaker 1: few handful of analysts do, is that this could be

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Speaker 1: demand destroying. This burst of global inflation tends to be

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Speaker 1: sort of a harbinger of of recessions. We don't think

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Speaker 1: that's the case because there's just such a good foundation

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Speaker 1: for for the US recovery. Judy. And the next st

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Speaker 1: off for this market, as you know, is the December meeting.

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Speaker 1: At that meeting will get some forecasts. We get the

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Speaker 1: summary of economic projections, and I'm just looking at the

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Speaker 1: full for cole p c A at the FED for

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Speaker 1: next year. It's two point. I just wanted from your perspective, Ju,

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Speaker 1: how much does that need to change. I mean, that's

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Speaker 1: actually our forecast, so it's um not that is a

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Speaker 1: strong forecast. That's a forecast that includes a very strong

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Speaker 1: rent cycle. But the key there is that goods inflation

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Speaker 1: moderates as the year progresses, so that remember that's above

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Speaker 1: target inflation, that that is strong inflation. All it builds

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Speaker 1: into it is that the supply chain issues ease, that

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Speaker 1: semiconductors become more available, that car prices flatten out, maybe

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Speaker 1: cool off a little bit. But all you have to

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Speaker 1: do is have goods prices stop going up at the

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Speaker 1: pace they've been going up to get to that forecast.

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Speaker 1: So it's not an unreasonable forecast that's set. I do

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Speaker 1: think they raise the near term. Uh. The current year

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Speaker 1: forecast looks too low. Uh. And I do think in

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Speaker 1: the like half a hike, we do get a full

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Speaker 1: hike in the baseline. It becomes the modal outcome for

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Speaker 1: the committee. Uh. And and then you know, steady as

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Speaker 1: she goes, it's gonna be. They're gonna feel the heat

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Speaker 1: from all the questions. But I think the Fed's job

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Speaker 1: here is to be the steady hand and keep their

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Speaker 1: eye on that medium term. Julia, the idea of them

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Speaker 1: being a steady hand when it's not as if they're

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Speaker 1: not affecting some of these dynamics, I mean the idea

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Speaker 1: of rent inflation we're talking about at a time when

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Speaker 1: they're buying mortgage debt. They're buying bonds that actually reduces

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Speaker 1: the yield on the margins of like the loans that

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Speaker 1: people take out elevating prices. At what point will be

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Speaker 1: staying the course, not be adding accommodation and will they

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Speaker 1: be forced to end the taper sooner? I mean, to me,

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Speaker 1: this is going to be an increasing question, especially since

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Speaker 1: they didn't give guidance as to how much they were

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Speaker 1: going to be pulling back at the beginning of the

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Speaker 1: year yet again, at least I think, you know, if

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Speaker 1: you think about what the choices are here, slamming on

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Speaker 1: the brakes, will that be better? And you know, letting

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Speaker 1: demand run a little hotter for a little longer. You know, what,

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Speaker 1: what are the pros and cons of these scenarios? I

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Speaker 1: think ideally, if the Fed could calibrate policy, you know,

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Speaker 1: with a fine point in a timely way, they would

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Speaker 1: have been maybe less accommodative now and then more accommodative,

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Speaker 1: you know, towards the end of two when when fiscal

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Speaker 1: the fiscal impulse becomes a drag. You know, when you

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Speaker 1: model out the fiscal impulse, We've just had this epic impulse.

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Speaker 1: But from a growth perspective, that's going to run out

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Speaker 1: of gas. Even with this new you know fiscal packages.

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Speaker 1: These are medium term, longer term packages. They don't have

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Speaker 1: anything to do with really the near term demand profile.

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Speaker 1: So if the FED could you know, fine tune things,

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Speaker 1: they would do a little less now and then maybe

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Speaker 1: a little more later to pass that baton between fiscal

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Speaker 1: and monetary and smooth the recovery. They don't have that luxury,

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Speaker 1: So you know, what, what is the best thing to do. Obviously,

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Speaker 1: you know, if there are signs of you know, wage

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Speaker 1: price dynamics becoming more entrenched in the economy, they can

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Speaker 1: lift off in June and go pretty steadily. That would

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Speaker 1: be a pretty significant tightening. And monetary policy we can

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Speaker 1: kill inflation, that's not the question. We could kill this recovery.

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Speaker 1: The FED could kill this recovery anytime they want. That's

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Speaker 1: not what they want to do. Uh. And you know,

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Speaker 1: if we we the good news is the other important

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Speaker 1: piece of October data was a really strong jobs report. Uh.

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Speaker 1: And that's creating the foundation for the FED to pull

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Speaker 1: away eventually and hand the responsibility for for growth back

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Speaker 1: to do you know, the private sector and the labor market.

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Speaker 1: Organic momentum, UH, and you know they're they're in process

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Speaker 1: of doing that. But ripping away stimulus and slamming on

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Speaker 1: the brakes probably won't be good for anybody in the

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Speaker 1: glow economy. What one thing that I think the FED

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Speaker 1: is well aware of this cycle is that the US

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Speaker 1: is outperforming. We have more support and more momentum than

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Speaker 1: most other countries and regions, and yet we are the

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Speaker 1: keeper of the global currency. So that's a pretty important responsibility.

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Speaker 1: If we slam on the brakes and that hits the

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Speaker 1: global economy which is more fragile, uh, then you know

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Speaker 1: that's going to roll back onto our shores as well

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Speaker 1: and destabilized global markets. So you know that means the

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Speaker 1: US runs a little hotter for a little longer, and

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Speaker 1: that's probably a price well worth paying. Running hot right now, Judia,

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Speaker 1: it's gonna catch up. Judy Karnado, Micro Policy Perspectives. This

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Speaker 1: is the Bloomberg Surveillance Podcast. Thanks for listening. Join us

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Speaker 1: the Terminal. I'm Tom keene In. This is Bloomberg.