Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordert. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
Speaker 2: from our global headquarters in New York City. We are
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Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or
Speaker 2: anywhere else you listen, and as always on the Bloomberg
Speaker 2: Terminal and the Bloomberg Business App. Francis Donald of RBC
Speaker 2: has this to say, The timing of the government shutdown
Speaker 2: is not ideal for the Federal Reserve. Limited visibility into
Speaker 2: the September data increases the probability of an October pause.
Speaker 2: Francis joins us now from More Francis, good morning.
Speaker 3: It's good morning.
Speaker 2: So this is a slightly different say because we've had
Speaker 2: a guests come on the program and say they're not
Speaker 2: going to deviate from the dot plot. Ultimately they're expecting
Speaker 2: a raid cut still in our Why wou'd this lead
Speaker 2: to a pause.
Speaker 4: Well, let's remember chir Powell has talked a lot in
Speaker 4: the past, when you're walking in a room and it
Speaker 4: goes dark, you go more slowly, you don't necessarily speed up.
Speaker 4: And at the end of the day, we have to
Speaker 4: remember this shutdown is compounding an existing problem, which is
Speaker 4: that our data is being substantially distorted by tariff developments
Speaker 4: front loading inventories. We know that companies, clients that we
Speaker 4: talk to and others are finding ways to navigate around
Speaker 4: that using things like bonded warehouses for example, or changing
Speaker 4: the timing of their purchases. And then on top of that,
Speaker 4: now we're going to miss probably a month of solid
Speaker 4: evidence as to what actually happened in there. So from
Speaker 4: our point of view, just like a company or a
Speaker 4: consumer at the end of the day is maybe going
Speaker 4: to say, let's be a little bit more cautious. To us,
Speaker 4: this is going to raise more questions than it is
Speaker 4: make it very clear what the definitive path ahead should be.
Speaker 2: So A Marie was talking about this earlier on this morning.
Speaker 2: The data itself has been a problem. How dependable is
Speaker 2: the data anyway for this federal Well, this is.
Speaker 4: The thing for economists right now is there is already
Speaker 4: a giant question mark around what data should we be using,
Speaker 4: are there biases within the data? Were there will there
Speaker 4: be on a go forward basis. We've already for years
Speaker 4: been dealing with low response rates, and we know that
Speaker 4: the economy is operating in a way that changes the
Speaker 4: way we need to use data. Confidence data, for example,
Speaker 4: in our view, is still very valuable. It explains how
Speaker 4: consumers are feeling. But if the top ten percent of
Speaker 4: consumers are spending fifty percent of all of the consumption,
Speaker 4: then confidence data is not the same valuable tool it
Speaker 4: was in the past. Layer on top of that tariffs
Speaker 4: and we've been really in a dark place with respect
Speaker 4: to how we can read visibly. And that's why, in
Speaker 4: a way, John, I'm not that upset that we're going
Speaker 4: to miss a month of data because I think there's
Speaker 4: so much obsession over this month to month, in part
Speaker 4: driven by the FED, that's highly data dependent. We need
Speaker 4: to focus on some of the bigger trends, and the
Speaker 4: bigger trends are clear. This is a labor market that
Speaker 4: is structurally very different. We don't need the same amount
Speaker 4: of job growth as we did before. We only believe
Speaker 4: that this needs This economy needs to create forty thousand
Speaker 4: jobs a month the unemployment rate to stay stable. We
Speaker 4: know growth is slowing off the back of tariffs and
Speaker 4: some price pressures that are coming through, and we know
Speaker 4: inflation is likely to reaccelerate into year end. And I
Speaker 4: could for a month go dark on data and tell
Speaker 4: you that I'm still fairly confident that will be the
Speaker 4: story thirty days from now. But when, of course we're
Speaker 4: hypersensitive and we're in an environment where policy makers are
Speaker 4: really trying to move months to month, of course the
Speaker 4: market is going to feel a little more uncomfortable with
Speaker 4: that lack of visibility.
Speaker 5: Are you saying the FED is too data dependent?
Speaker 4: Well, no, What we're saying is that the month to
Speaker 4: month variability in data, this has always been true, sometimes
Speaker 4: leads us in the wrong directions. And I think what's
Speaker 4: really challenging right now is that that tariff distortion is
Speaker 4: very much still in play. We hear all the time, oh,
Speaker 4: tariffs are not inflationary. That may turn out to be true,
Speaker 4: it's not our view, but we won't know that till
Speaker 4: the middle of twenty twenty six. So the issue with
Speaker 4: data dependence right now isn't data dependence in and of itself.
Speaker 4: It's data dependence in an environment where we don't have
Speaker 4: good reads and our month to month data is not
Speaker 4: telling us the true story of the amare economy or
Speaker 4: the American consumer.
Speaker 5: So what do you look at in daylight today? You're
Speaker 5: not getting the job support. What's your north star in
Speaker 5: terms of directing you towards these trends?
Speaker 4: Well, today's not actually the problem. So any economists would
Speaker 4: have released their estimate for where jobs would be last
Speaker 4: week and everybody's week ahead. Our estimate was fifty two thousand.
Speaker 4: The problem will be next month when we don't have
Speaker 4: the aggregate amount of data that helps us forecast what
Speaker 4: happens next. At the end of the day, we tail
Speaker 4: clients focus on the trend. We think the unemployment rate
Speaker 4: will rise gradually to four and a half four point
Speaker 4: six percent. But we've been through a few cycles, all
Speaker 4: of us at this table, if I may say that,
Speaker 4: we know that four point six percent unemployment is still
Speaker 4: very low, very tight labor market underneath the surface. So
Speaker 4: we are doing what we've been doing for the last year,
Speaker 4: much more bottom up work, much more sector focus. Look
Speaker 4: at your actual end consumer, which one are you servicing,
Speaker 4: which one are you investing in? And look at their
Speaker 4: individual stories, and then of course we have a table
Speaker 4: of all the indicators that we look at, from warn
Speaker 4: notices to LinkedIn postings that help us get a little
Speaker 4: bit more of a month to month gauge. But the
Speaker 4: message here is actually one of leef focus on the
Speaker 4: big picture that's probably going to guide you towards better
Speaker 4: investment decisions and better operating decisions if you're running a business.
Speaker 2: You'll forgive me for bringing out the shutdown then, but
Speaker 2: we do have to talk about it just a little bit,
Speaker 2: the government shut down in Washington. It can't have implications
Speaker 2: for the economy. Typically we know how the movie goes.
Speaker 2: Economy has a bit of a blit, then we accelerate,
Speaker 2: we pick up again, and we look through the whole thing.
Speaker 2: And that's ult to me. How markets play this story too?
Speaker 2: Do you see it's delayed deferred activity? Or are we
Speaker 2: at this point where things are a little bit more
Speaker 2: frenchiolet than where things could be somewhat derailed.
Speaker 4: Well, I watch your show in the mornings, and I'll
Speaker 4: repeat what just about every economist has told you. Our
Speaker 4: traditional rule of thumb is the shutdown is worth aboute
Speaker 4: point one percentage points of GDP each week that it
Speaker 4: goes on, and then it becomes nonlinear, likely around the
Speaker 4: middle of the month. The longer it's out, the more
Speaker 4: it bleeds. For the economy. We're focused on some of
Speaker 4: the things related to contract workers as well, so all
Speaker 4: the economy that circulates around the government that may see
Speaker 4: a pause at the end of the day. You know,
Speaker 4: I talk about the shutdown being emblematic of larger trends,
Speaker 4: and there's two that sort of worry us. This economy
Speaker 4: was already slowing down, so these additional bumps, they exacerbate
Speaker 4: the problem. They exacerbate the uncertainty component.
Speaker 6: But under the.
Speaker 4: Surface, we've also in the past year again we're thinking
Speaker 4: about how this relates to the bigger trends, been much
Speaker 4: more focused on the fiscal side of the picture, the
Speaker 4: policy side of the picture, than the monetary policy side
Speaker 4: of the picture. And that's largely because this economy is
Speaker 4: becoming less sensitive to the Fed's next move and much
Speaker 4: more sensitive to what's happening in Washington.
Speaker 3: We see this in the yield curve.
Speaker 4: We see this at the long end of the curve,
Speaker 4: but many Americans are leveraged to the belly and the
Speaker 4: long end of the yield curve with the FED is
Speaker 4: not successfully being able to influence at this point of view,
Speaker 4: So acrimonious Washington, to me, is not necessarily about the
Speaker 4: GDP impact for September or October. It's about this transformation
Speaker 4: where we move away from monetary policy being the core
Speaker 4: driver of the business cycle and realize that if we
Speaker 4: really want to know where are we, we have to
Speaker 4: watch fiscal spending, the deficit and the path for that ahead.
Speaker 5: Is this shut down different though? If Trump decides to
Speaker 5: make these furloughs permanent.
Speaker 4: Absolutely, And so when we look at the numbers, for example,
Speaker 4: if we were to see and this is the extreme example,
Speaker 4: this wouldn't happen. But if by October seventeenth, that'll be
Speaker 4: the reference week for next month's job number, if we
Speaker 4: haven't seen folks come back, you could see the unemployment
Speaker 4: rate jump to four point eight percent. Now, our estimate
Speaker 4: is that it would then come back down. But these
Speaker 4: are the types of numbers that begin to skew the
Speaker 4: story we're certain down.
Speaker 5: I'm saying, if he decides to say, I actually want
Speaker 5: to move more people into the private sector, and I'm
Speaker 5: getting rid of these offices, these jobs. Isn't that more
Speaker 5: of a permanent effect.
Speaker 4: Absolutely, that would be more permanent, but that number is
Speaker 4: ultimately probably going to be quite small. But the most
Speaker 4: extreme thing, let's say every person would be laid off,
Speaker 4: which is not going to happen, you would see that
Speaker 4: number jump to four point eight. Again, this is emplematic
Speaker 4: of the bigger picture, which is job growth is slowing.
Speaker 4: We are going to see less job creation on a
Speaker 4: go forward basis, with the exception of healthcare. Healthcare is
Speaker 4: going to continue to be fairly robust there. So this
Speaker 4: is the trend continuing. Slower job growth, slower overall growth,
Speaker 4: less confidence in the economy, and reduced data visibility. It is,
Speaker 4: as we say, stagflation.
Speaker 6: Light stay with us.
Speaker 2: More Bloomberg surveillance coming up after this. Let's get to Tesla.
Speaker 2: I promise you an update. Shares recovering this morning high
Speaker 2: by a little more than one percent of following yesterday's slide,
Speaker 2: which followed the company reporting record third quarter deliveries. Dan
Speaker 2: ives of Webbush maintaining is outperform rating and writing the
Speaker 2: following with must now driving Tesla into its next stage
Speaker 2: of growth. As Wartime CEO, we estimate the AI and
Speaker 2: autonomous opportunity is worth at least one trillion dollars alone,
Speaker 2: Dan joins us. Now for more, Dan welcome, Let's just
Speaker 2: start with yesterday's move. Then we'll get to the future
Speaker 2: and all that great stuff. How much of that story
Speaker 2: with the deliveries, which is a massive pull forward in demand.
Speaker 7: I think probably about thirty percent of it was maybe
Speaker 7: a pull forward your relative to incremental b But look,
Speaker 7: the demands story is stabilizing, and now I think you're
Speaker 7: starting to see that turnaround happen.
Speaker 8: But as we've talked about, that's just the appetizer.
Speaker 7: The main event is the AI revolution coming to Tesla
Speaker 7: with the autonomous and then the robotics piece. I mean,
Speaker 7: I think there's gonna be a three trillion dollar mark cav.
Speaker 7: That's why I think six hundred dollars is almost a
Speaker 7: be's keys for where we see it.
Speaker 2: So Dan, you understand the tension well. I feel like
Speaker 2: we've covered this together a million times, But it's the
Speaker 2: tension between the near term fundamentals and the long term
Speaker 2: hope and dreams. The fundamentals at the moment when you
Speaker 2: say the demand story stabilizing, stabilizing demand, it's not the
Speaker 2: kind of story we'd associate with a multiple like the
Speaker 2: one on Tesla right now, Now, Dan, how are we
Speaker 2: going to.
Speaker 6: Resolve those issues?
Speaker 2: Do we just keep the faith in the multiple and
Speaker 2: the stock and the hopes and dreams, or at some
Speaker 2: times do we have to reconcile these issues.
Speaker 8: Yeah, it's a great point. Look, you're gonna have ten.
Speaker 7: Million Teslas on the root and when you think about
Speaker 7: since the beginningonomous value, as you start to see robotaxis
Speaker 7: to point thirty thirty five cities, you see full self driving,
Speaker 7: get the forty fifty percent of the actual Tesla's out there,
Speaker 7: that's the game changer because ultimately I think they're going
Speaker 7: to own eighty ninety percent of the autonomous world over
Speaker 7: the coming years as we get the true what I've
Speaker 7: used level for Look, I.
Speaker 8: Think that's the reality. I think investors are looking.
Speaker 7: Autonomous is truly what I view is really you know,
Speaker 7: the Goldilock scenario for Tesla because AI physical AI. There's
Speaker 7: two great physical phenomenal AI plays out there.
Speaker 8: It's in Nvidia and it's Tesla. When it comes to
Speaker 8: physical AI.
Speaker 5: When it comes to EVS. For Tesla, one of the
Speaker 5: biggest competitors is BID, which is absolutely crushing them in Europe.
Speaker 5: When it comes to autonomous, who is going to be
Speaker 5: their biggest competitor? Is it coming from China?
Speaker 7: Look, I think it comes from China ultimately, you know,
Speaker 7: when you think about all the technology, you know insis
Speaker 7: that we've seen there, But globally, no one has a
Speaker 7: scaling the scope of Tesla not you know, Look, I
Speaker 7: think dy D is obviously going to be the main competition.
Speaker 7: But when I think about scale and scope globally, especially
Speaker 7: not just in the US, but what we see around
Speaker 7: the world, I think Tesla continues to win that battle.
Speaker 8: But we don't.
Speaker 7: Also, we don't view this as one where there's just
Speaker 7: one winner. And I think when you think about autonomous
Speaker 7: and you think about this next wave of AI, you know,
Speaker 7: from the chips to the software to the ripple e fact,
Speaker 7: it speaks to our view like this AI revolution, we're
Speaker 7: still in the second inning of a nine inning game
Speaker 7: and ultimately Yankees end up winning that game.
Speaker 2: Don't encourage it to. We'll get to that later. Then
Speaker 2: let's say you're right, let's find some common ground. The
Speaker 2: autonomous opportunity is massive drivelist vehicles, all of that stuff
Speaker 2: I think a lot of people can get on board
Speaker 2: with that. But I want to understand why you think
Speaker 2: the Tesla path that road is the road's success. So
Speaker 2: they're using cameras, Weymous using landa. What kind of technology
Speaker 2: do you ultimately think wins out look?
Speaker 7: I think it's ultimate Tesla from a data perspective.
Speaker 8: When you look at the AI engineers and you look.
Speaker 7: At all the improvements that they're going to make on
Speaker 7: these next you know sometime.
Speaker 6: Let's just give me a second. What dates are you
Speaker 6: looking at?
Speaker 2: Because I can go off the weekly trips that Weymous
Speaker 2: do in at the moment and that kind of dates,
Speaker 2: it looks pretty decent.
Speaker 6: What are you stacking that up against?
Speaker 7: I look at as Weimo, there're two hundred thousand dollar
Speaker 7: cars and essentially five cities.
Speaker 8: The scaling scope that Tesla has.
Speaker 7: Given, the millions and millions of miles driven and the
Speaker 7: ten million vehicles in the road, and everything that they're
Speaker 7: doing in Moscow is being wartime CEO. That's where I
Speaker 7: think we see there six months from now, the breakthroughs
Speaker 7: will happen, and ultimately when it comes to scale, especially
Speaker 7: when you look at robotax and cybercaps.
Speaker 8: No one's going to be able to match, Tessa.
Speaker 7: I view that as just basically what was fact as
Speaker 7: it plays out.
Speaker 5: So Dan, when it comes to deliveries, they don't even
Speaker 5: matter Anymoreks, everyone's so focused on what's going to happen
Speaker 5: in the future.
Speaker 7: Look, they matter in terms of just we'll call it.
Speaker 7: I guess a signal from a stabilization respective, especially after
Speaker 7: what we've seen over the last six nine months. But
Speaker 7: I think from an investor perspective, it's all about to
Speaker 7: a PHARAOHSTO might just like give me marks on autonomous
Speaker 7: show me the technology innovations, on the AI story, show
Speaker 7: me that we're going to get the full scale, and
Speaker 7: optimists show me in November to shareolder me that they're
Speaker 7: going to have a big piece of XAI. I mean,
Speaker 7: that's why you see Musk. It's a different mood now.
Speaker 7: It's that wartime CEO that we're seeing. Those are the marks,
Speaker 7: and that's how we're going to be looking at six hundred,
Speaker 7: seven hundred and ultimately you know a stock I think
Speaker 7: three trillion.
Speaker 6: That's the lots of play for the road ahead.
Speaker 7: Dan.
Speaker 2: Before we leave here, the baseball you want to finish
Speaker 2: there Yankees when getting it done? Who do you think
Speaker 2: it's this all done world series like of this year?
Speaker 7: Look, I mean I think Yankees obviously have a great
Speaker 7: each to go. I think they're going to surprise many
Speaker 7: out there. I think this could be their year. And look,
Speaker 7: Emory there obviously is a good walk charm.
Speaker 8: So we got to see how the players out Have.
Speaker 6: We given up on Penn State?
Speaker 7: Dan?
Speaker 6: Are we done with that?
Speaker 2: Now?
Speaker 8: Look?
Speaker 7: I'm here, Ombassady at u c A the bounds back starts.
Speaker 7: That's another one Penn State Yankees.
Speaker 8: At the at the end, they'll be whole troupe.
Speaker 6: Stay with us.
Speaker 2: Mulblinpax surveillance coming up after this. Janet Loo Shatikas joins
Speaker 2: us now for more Janet. As you know, as is
Speaker 2: often the case, this is one or lost in the
Speaker 2: court of public opinion.
Speaker 6: Who's winning to lose in right now?
Speaker 8: Yeah?
Speaker 1: I mean right now? I think if you look at
Speaker 1: the poll, do you do see that Republicans are getting
Speaker 1: a little bit more blame than Democrats are currently, But
Speaker 1: both parties are getting a hit from this, and in
Speaker 1: general we do see that both per generally do get
Speaker 1: some backlash for a government shutdown. The same thing happened
Speaker 1: in twenty thirteen, with President Obama getting some of the blame.
Speaker 1: Even the Republicans kind of put the government into a shutdown.
Speaker 1: So both parties may ultimately suffer from this, and that's
Speaker 1: how they kind of have to figure out who's suffering more.
Speaker 1: Is where their the pain point may be to actually
Speaker 1: get the government to reopen.
Speaker 5: Jennett, what do you say is the off ramp?
Speaker 1: So this is going to be kind of a difficult situation.
Speaker 1: So the parties are kind of far apart right now.
Speaker 1: The Republicans do agree that probably something does need to
Speaker 1: be done to extend the ACA subsidies, probably a short
Speaker 1: term extension, maybe a year, maybe a year, with some
Speaker 1: amendments of reforms to the process, and so the Democrats
Speaker 1: are pushing for that, but the Republicans are also saying
Speaker 1: that they can't do anything until the government is reopened,
Speaker 1: while the Democrats are nervous that the Republicans will not
Speaker 1: hold their word on this. So what we're thinking is
Speaker 1: that probably what you're going to have to see is
Speaker 1: either a major political pressure coming in, which would mean
Speaker 1: we're seeing missed paychecks in the middle of the month
Speaker 1: for our military members for Congressional staff, which will also
Speaker 1: put pressure. But then also do the moderate members come
Speaker 1: together to figure out how they can figure out some
Speaker 1: sort of agreement to get us out of this shutdown.
Speaker 1: It probably will have to be in some form around
Speaker 1: the AC subsidies. The longer this goes on, this could
Speaker 1: last two to three weeks, just depending if we don't
Speaker 1: see any momentum towards a deal. As we get later
Speaker 1: into the month, you have the miss paychecks that as pressure.
Speaker 1: You start to maybe get some of these premium increase
Speaker 1: announces that will add pressure and that could be where
Speaker 1: we see the ultimate solution.
Speaker 5: Well, the Republicans already picked up three votes in terms
Speaker 5: of Democrats willing to vote for the clean stopgap funding measure.
Speaker 5: Who else should we be looking at?
Speaker 1: Yeah, I think you look at retiring members, So members
Speaker 1: like Senator Shaheen from New Hampshire, Senator Peters from Michigan
Speaker 1: also watching the Virginia senators since they have a significant
Speaker 1: portion of the workforce in their constituencies. Those will also
Speaker 1: be key members to watch, so we would want to
Speaker 1: see if there are they have a vote today. Do
Speaker 1: more Democratic senators join on to the clean CR or
Speaker 1: do we go into the weekend and have no movement
Speaker 1: at all. If we do see more Democratic centers join,
Speaker 1: then obviously that would be showing a sign that there
Speaker 1: is more pressure to get to a deal at some point.
Speaker 1: But if we don't, this could definitely start to linger
Speaker 1: a lot longer into next week and potentially even the
Speaker 1: following week.
Speaker 5: And how are you thinking about the president's meeting with
Speaker 5: russ Vote yesterday and whether or not he was going
Speaker 5: to be making layoffs that usually historically are just furloughs
Speaker 5: and those individuals come back to their job permanent.
Speaker 1: Yeah, I mean, this is obviously at least a threat.
Speaker 1: So this is something that they think the administration would
Speaker 1: like to do, and they see this as an opportunity.
Speaker 1: This is one of the reasons that Democrats were actually
Speaker 1: worried about having a government shut down the first place,
Speaker 1: because they thought that this could be a tactic that
Speaker 1: the administration would use. But then at the same time,
Speaker 1: you're also seeing demo prats getting some support among the
Speaker 1: federal worker unions saying it's okay that you're doing the
Speaker 1: shutdown because we know we're under attack anyways from this administration.
Speaker 1: So there's a little bit of We could probably definitely
Speaker 1: see some layoffs, some permanent layoffs, but then they also
Speaker 1: may be challenged by the courts and that also could
Speaker 1: play into public opinion as well. So that also could
Speaker 1: be something that depending on how these play out, that
Speaker 1: could be key to which side actually gets more blane
Speaker 1: and where the pressure ends up being longer.
Speaker 6: Term stay with us.
Speaker 2: More Bloomberg surveillance coming up after this. Let's turn back
Speaker 2: to market. So the S and P five hundred is
Speaker 2: looking for a sixth consecutive day of gains. It's on
Speaker 2: a five day winning run, the longest street gone back
Speaker 2: to late July. Jeff Rosenberg of black Rock has this
Speaker 2: to say. We believe the current market backdrop masks the
Speaker 2: high level of dispersion within the economy today. Jeff, John
Speaker 2: just now for more. Jeff, welcome to the program, sir,
Speaker 2: No payrolls.
Speaker 6: We're gonna have to get me deep and all the
Speaker 6: other stuff. Jeff.
Speaker 2: I think that what you just said in that quote
Speaker 2: kind of builds on what we were discussing with regards
Speaker 2: to the airlines. How much dispersion are you seeing?
Speaker 9: Yeah, this is really about the difference between what you're
Speaker 9: seeing on the on the top.
Speaker 3: Line and the headline and what's going on underneath.
Speaker 9: And we've talked about it a lot, you know, when
Speaker 9: we do have payrolls or when we do have FMC meetings,
Speaker 9: when Tom's with us, we talk a lot about the
Speaker 9: K shaped recovery, about the differences between something you were
Speaker 9: just talking about the top end and the bottom end.
Speaker 3: And you see that.
Speaker 9: Both for consumers but also within businesses. You have the
Speaker 9: winners and you have the bottom end that is struggling,
Speaker 9: and that is the recipe for dispersion.
Speaker 3: And so when you take away kind of.
Speaker 9: The big headline that we might have been talking about today,
Speaker 9: which is good for the economy, bad for the economy,
Speaker 9: of stocks going up, stocks going down, you go underneath
Speaker 9: the surface and there's a tremendous amount of churn.
Speaker 3: Going on underneath.
Speaker 9: And that when you take away kind of beta investing
Speaker 9: and you focus on alpha investing, has created a tremendous
Speaker 9: amount of opportunity. And you see that in some of
Speaker 9: the returns that look at, say factor returns, stripping out
Speaker 9: kind of directionality in the markets.
Speaker 5: When you've joined us in July, you were talking about
Speaker 5: a tricky environment ahead for the FED. How tricky, is
Speaker 5: it now that they might miss an entire month of data.
Speaker 9: Yeah, So if we shift back to kind of the
Speaker 9: data problem it is, it's tricky for the FED, it's
Speaker 9: tricky for us in investors. You know, I was going
Speaker 9: to suggest that, you know, if we wanted to look
Speaker 9: at and maybe your producers can do this quickly. The
Speaker 9: one area that might be benefiting from this lack of
Speaker 9: data is interest rate uncertainty. So maybe put up a
Speaker 9: chart of the move index, which is collapsed here.
Speaker 3: But you look at kind of.
Speaker 9: What we've been talking about this morning around the lack
Speaker 9: of data, and you have a lot of agreement. The
Speaker 9: good news is you've got a lot of alternative data,
Speaker 9: but kind of the bad news is none of us
Speaker 9: can agree as to what that alternative data means. Good
Speaker 9: example is, and I saw this morning two different estimates
Speaker 9: from alternative data, one using state filings, the other looking
Speaker 9: at extrapolating initial claims forecasts off a challenger layoffs. They
Speaker 9: came up with completely different conclusions. Another example, on the
Speaker 9: earlier segment, you were talking to Manpower talking about switchers
Speaker 9: and the lack of switching, but you look at the
Speaker 9: Atlanta FED wage data and you know, switching wages actually
Speaker 9: went up a little bit, so in the cacaphony, I
Speaker 9: think the benefit might accrue to uncertainty, although that doesn't
Speaker 9: make the FEDS job any easier.
Speaker 5: Well, if you had to decide what your top three
Speaker 5: data points were, what would they be?
Speaker 9: You know, when we're talking about the payroll data and
Speaker 9: the lack of payroll data, you know, I turned to
Speaker 9: the wage data and looking at inferences from that.
Speaker 3: We have the Atlanta Fed wage data.
Speaker 9: We have a lot of private sources in terms of
Speaker 9: what you can scrape.
Speaker 3: I'd like that alternative data.
Speaker 9: We've used that a lot in terms of both frequency
Speaker 9: and turning points. That would be you know, kind of
Speaker 9: data point number one. I think, And Jonathan, you made
Speaker 9: reference to this earlier about the inflation data, and you know,
Speaker 9: whether we're going to start to lose some of that.
Speaker 9: I think the good news there is that with the
Speaker 9: webscrape data, we have a lot of uh, you know,
Speaker 9: kind of consistency around where what people are looking at.
Speaker 9: In terms of alternative forms of data, people talk about
Speaker 9: the price stats data.
Speaker 3: I think that's a that's a good form.
Speaker 9: And then I think the pivot to the private data
Speaker 9: that you mentioned where we hope will continue to get
Speaker 9: that the survey data, the PMIS, they take on a
Speaker 9: heightened you know, importance in this environment of the lack
Speaker 9: of the government data. We have to caveat that with
Speaker 9: the notion that the kind of accuracy that we've seen
Speaker 9: from the survey data the PMI data in terms of
Speaker 9: its importance for this kind of economy, that's that's really
Speaker 9: kind of gone down. And we've seen a decrease in
Speaker 9: the correlation between the PMI data and say, the industrial
Speaker 9: production data in this cycle, so that that's sort of
Speaker 9: a caveat to that third data point.
Speaker 2: And Jeff, we've talked about five six, seven minutes about
Speaker 2: economic data. If I'd given you the payrolls dates or
Speaker 2: the start of the year for the next nine months,
Speaker 2: I think you would have tried it this market and
Speaker 2: completely the wrong way. So I just wanted to Jeff,
Speaker 2: what is the relevant data point right now, because clearly
Speaker 2: some dates is more important than others.
Speaker 9: Yeah, that's that's absolutely you know, it's absolutely the case.
Speaker 9: And it's you know, the classical sort of break between
Speaker 9: kind of growth and inflation and the pivot as to
Speaker 9: which one has the focus of the market, and you know,
Speaker 9: going into before we had the shutdown, you know, the
Speaker 9: other conversation would have been that this is the pivot
Speaker 9: away from the inflation concerns towards the growth concerns, and
Speaker 9: that the kind of you know, top tier data point
Speaker 9: on payrolls is giving us that read on the growth
Speaker 9: and the Fed's pivot towards a focus more on the
Speaker 9: growth and less on the inflation.
Speaker 3: And I think that's kind of the read here.
Speaker 9: In contrast to the beginning of the year, where the
Speaker 9: focus was on inflation the impact on tariffs and tariff
Speaker 9: passed through, we really shifted that focus and I think
Speaker 9: that's really the driver behind the directionality here and interest
Speaker 9: rates really the fear and the concerns to your earlier
Speaker 9: conversation with Seth Carpenter around you know, is there this
Speaker 9: lagged slow down, the lagged effect.
Speaker 3: Remember, the tariff.
Speaker 9: Impact that Seth's talking about is not about the inflation piece,
Speaker 9: but it's on the real wage piece. That the temporary,
Speaker 9: even if it is temporary impact in terms of the
Speaker 9: inflation from tariffs, its impact.
Speaker 3: Is on real wage growth.
Speaker 9: And that's really about the growth side, and that's what's
Speaker 9: driving the rates markets right now.
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