WEBVTT - Bloomberg Surveillance TV: December 11th, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.520 --> 0:00:18.720 with Lisa Bromwitz and Amerie Hordern. Join us each day 0:00:18.760 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:35.880 Terminal and the Bloomberg Business App. 0:00:36.159 --> 0:00:39.280 Howard Marks, co founder and co chairman of oak Tree 0:00:39.320 --> 0:00:42.440 Capital Market, issuing a warning at his latest memo, I 0:00:42.479 --> 0:00:46.360 find the resulting outlook for employment terrifying. I am enormously 0:00:46.400 --> 0:00:49.240 concerned about what will happen to the people whose jobs 0:00:49.280 --> 0:00:53.040 AI renders unnecessary or who can't find jobs because of 0:00:53.080 --> 0:00:56.000 it at this moment of transformation. Howard joins us now 0:00:56.040 --> 0:00:58.560 after writing a memo that I really recommend everybody read. 0:00:58.600 --> 0:01:01.440 It really was one of the absolute best you've ever written. 0:01:01.480 --> 0:01:03.040 Thank you for being here with us, So I can 0:01:03.080 --> 0:01:05.959 stop now, No, please don't, I want to keep reading 0:01:06.000 --> 0:01:08.560 your membos. I want to start with this idea of 0:01:08.720 --> 0:01:11.920 different types of bubbles, and you talk about there are 0:01:12.040 --> 0:01:16.240 productive bubbles and unproductive bubbles. What's the difference and how 0:01:16.280 --> 0:01:18.240 does that make it either something you want to invest 0:01:18.240 --> 0:01:18.720 in or not. 0:01:19.080 --> 0:01:19.280 Well. 0:01:19.319 --> 0:01:23.800 I think that the unproductive bubbles I would describe as 0:01:24.200 --> 0:01:29.880 financial fads. Portfolio insurance was one, subprime mortgages was another. 0:01:31.120 --> 0:01:37.360 Just you know, financial activities that become fashionable, zoom into popularity, 0:01:37.840 --> 0:01:44.360 get over hyped, and then recede. But then there are 0:01:44.959 --> 0:01:48.880 bubbles which are based on technological progress, the starting with 0:01:49.000 --> 0:01:54.640 the steam engine, the railroad, the radio, the automobile, computers, internet, etc. 0:01:55.240 --> 0:02:01.320 And these actually push society ahead and change it irreversibly. 0:02:02.280 --> 0:02:06.000 But in the process there is a bubble surrounding their implementation, 0:02:06.480 --> 0:02:12.440 which is overly accelerated and overly financed and goes to 0:02:13.240 --> 0:02:18.240 excess and end up destroying a lot of capital, but 0:02:18.480 --> 0:02:22.800 leave society greatly changed. And I'm sure that AI is 0:02:22.840 --> 0:02:26.080 in the latter category in terms of effect on society. 0:02:26.320 --> 0:02:29.880 And the question is will the implementation prove to have 0:02:29.960 --> 0:02:33.959 been excessive in scope and in the way it's financed. 0:02:34.080 --> 0:02:36.119 Just because something is excessive doesn't mean that you can't 0:02:36.160 --> 0:02:36.760 invest in it. 0:02:37.200 --> 0:02:37.680 No, But. 0:02:43.680 --> 0:02:47.480 When investors hate everything and we'll touch it with the 0:02:47.520 --> 0:02:50.720 ten foot poll, chances are it's going to be on 0:02:50.800 --> 0:02:53.200 sale because nobody has pushed up the price. In fact, 0:02:53.200 --> 0:02:56.120 their disinterest has pushed down the price. But when everybody 0:02:56.200 --> 0:02:59.239 likes something, he's excited about something, chances are it may 0:02:59.280 --> 0:03:00.839 be overhyped and overpriced. 0:03:01.200 --> 0:03:03.679 So you just have to be careful. So that's where 0:03:03.680 --> 0:03:04.320 we are right now. 0:03:04.360 --> 0:03:06.520 You said you can invest and you campaticipate, but you 0:03:06.560 --> 0:03:09.640 just have to be careful. What does being careful look like? 0:03:09.720 --> 0:03:12.400 Does it mean focusing more on debt versus equities, more 0:03:12.400 --> 0:03:15.160 on equities versus debt, more on small companies versus big ones. 0:03:15.160 --> 0:03:15.920 What does that look like? 0:03:16.320 --> 0:03:20.799 Well, what I say in the memo is that it's 0:03:20.880 --> 0:03:25.480 okay to lend for activities even if they're uncertain, but 0:03:25.680 --> 0:03:29.040 not if they are if the outcomes are purely conjectural. 0:03:29.360 --> 0:03:31.480 I mean, in order to be a smart lender, you 0:03:31.600 --> 0:03:36.320 have to have good visibility on the extent to which 0:03:36.360 --> 0:03:40.600 the thing is likely to repay interest. In principle, if 0:03:40.600 --> 0:03:45.080 it's just purely conjectural, it's not you shouldn't be a lender. 0:03:45.560 --> 0:03:50.200 And in fact, I think the memo says that where 0:03:50.240 --> 0:03:53.360 that's the case, you should actually, if you want to participate, 0:03:53.400 --> 0:03:54.840 you should be in the equity so at least you 0:03:54.880 --> 0:03:55.640 get the upside. 0:03:55.840 --> 0:03:58.040 The lender has no upside. 0:03:58.800 --> 0:04:01.080 You make it a nine percent own all you're going 0:04:01.120 --> 0:04:02.800 to get is nine percent, no matter how well the 0:04:02.840 --> 0:04:03.360 thing does. 0:04:03.640 --> 0:04:09.600 You certainly shouldn't do that in activities that have a high. 0:04:09.520 --> 0:04:12.120 Probability of not paying off at all, because then you 0:04:12.200 --> 0:04:16.160 have unlimited downside and limited upside. That's absolutely the wrong combination. 0:04:16.520 --> 0:04:19.120 So you think, right now, in some circumstances, the equity 0:04:19.600 --> 0:04:23.120 might actually be a better option than the debt because 0:04:23.160 --> 0:04:23.960 of that potential level. 0:04:24.120 --> 0:04:27.360 Exactly, because the point is that if you go into 0:04:27.400 --> 0:04:31.800 some startup which has a possibility, you know, let's say 0:04:31.839 --> 0:04:38.359 a small possibility of a raging success, you know you 0:04:38.400 --> 0:04:40.560 wouldn't lend to it because you have a high probability 0:04:40.600 --> 0:04:43.760 of losing all your money and no probability of participating 0:04:43.760 --> 0:04:44.640 in the success. 0:04:44.920 --> 0:04:46.760 That's a bad trade. 0:04:47.000 --> 0:04:49.960 So you always talk about this risk reward pendulum, the 0:04:50.080 --> 0:04:53.280 risk and fear, this sort of fear and greed pendulum. 0:04:53.360 --> 0:04:56.359 Right now, and yesterday we saw Oracle come out and 0:04:56.400 --> 0:04:58.559 talk about having to borrow more money, having to spend 0:04:58.560 --> 0:05:00.719 more and people are selling off the shares. 0:05:01.400 --> 0:05:02.560 Does this make you feel good? 0:05:02.800 --> 0:05:05.200 Does this make you feel like there actually is some discretion? 0:05:05.720 --> 0:05:06.000 Well? 0:05:06.200 --> 0:05:09.360 Well, yeah, well I think that I think that it's 0:05:11.200 --> 0:05:14.000 you know, Buffett says, the less prudence for which others 0:05:14.000 --> 0:05:16.440 conductor affairs, the greater the prudence with which we must 0:05:16.440 --> 0:05:18.800 conduct our own affairs. So when other people are acting 0:05:18.839 --> 0:05:23.840 imprudently and mindlessly and care free, we should be worried. 0:05:24.480 --> 0:05:28.080 When other people are showing appropriate concern, that's a positive 0:05:28.120 --> 0:05:30.719 sign that the market is applying some discipline. The greatest 0:05:30.960 --> 0:05:34.840 some of the greatest moments that I've seen, some of 0:05:34.880 --> 0:05:38.240 the greatest signals of danger in the markets have been 0:05:38.279 --> 0:05:42.120 when people were not applying any prudence at all, like 0:05:42.200 --> 0:05:47.279 in six for example. So if people are reacting harshly 0:05:47.400 --> 0:05:56.799 to aggressive, possibly risk indicating activities, yes, that's a healthy sign. 0:05:56.880 --> 0:06:01.880 And this market is seems healthy year than the two 0:06:01.960 --> 0:06:02.760 thousand market. 0:06:03.080 --> 0:06:05.680 To me, How concerned are you that we get a 0:06:05.680 --> 0:06:08.880 federal reserve that's more accommodative for a variety of reasons 0:06:09.440 --> 0:06:12.400 that leads to even more risk taking. This idea that 0:06:12.480 --> 0:06:14.720 not only did the Fed cut rates indicated more rate 0:06:14.760 --> 0:06:17.479 cuts but also is adding to its balance sheet in 0:06:17.480 --> 0:06:19.240 a way that could potentially prop up demand. 0:06:20.200 --> 0:06:22.919 Well, you know, I was thinking about this when I 0:06:23.000 --> 0:06:27.800 was waiting to see you today. You know, most of 0:06:27.839 --> 0:06:32.080 the people listening to this program, including me and you, 0:06:33.000 --> 0:06:35.360 are interested in the free markets, and we think free 0:06:35.400 --> 0:06:40.600 markets should set the prices of things. And the FED 0:06:40.640 --> 0:06:44.400 manipulations are a form of price controls. You know, they 0:06:44.440 --> 0:06:49.320 control the price of money. And if the FED puts 0:06:49.400 --> 0:06:54.880 money artificially cheap, then it induces behavior like risk taking. 0:06:56.080 --> 0:06:57.800 It forces people into risk. 0:06:57.680 --> 0:07:01.200 Of your activities because the returns on safe activities are 0:07:01.200 --> 0:07:06.039 so low. It tends to reinforce the view that there's 0:07:06.080 --> 0:07:08.960 a FED put that if there's a problem, the FED 0:07:09.000 --> 0:07:12.280 will solve it, and that contributes to risky behavior. 0:07:12.320 --> 0:07:14.280 These are all bad things. 0:07:14.680 --> 0:07:16.800 And you know, I believe that the FED should be 0:07:18.240 --> 0:07:21.800 passive most of the time and only come to the 0:07:21.840 --> 0:07:26.520 rescue if the market is if the economy is seriously 0:07:26.560 --> 0:07:35.600 overheated and tending towards hyperinflation, or seriously under active and 0:07:35.640 --> 0:07:39.960 not creating jobs. I don't think that's the case right now. 0:07:40.000 --> 0:07:41.640 I don't think there's a and you can see in 0:07:41.680 --> 0:07:45.560 the divided Open Market Committee that there's a difference of opinion. 0:07:46.160 --> 0:07:48.080 So I don't think that action on the part of 0:07:48.080 --> 0:07:51.920 the Fed is compelling right now. And you know, there 0:07:51.960 --> 0:07:53.880 are people who think that rates should be a lot 0:07:53.920 --> 0:07:55.760 lower than they are today. 0:07:56.640 --> 0:07:59.320 I just don't see that the merit in that right now. 0:07:59.360 --> 0:07:59.880 Going forward. 0:08:00.000 --> 0:08:04.480 I remember back in two thousand and fifteen, sixteen seventeen, 0:08:04.480 --> 0:08:07.040 more rates were incredibly low. You were saying people just 0:08:07.080 --> 0:08:10.520 need to lower their expectations for returns because ultimately you 0:08:10.600 --> 0:08:12.120 have to look at the risk free rate. You don't 0:08:12.120 --> 0:08:14.120 want to reach too much at a time where people 0:08:14.120 --> 0:08:16.800 are greedy. Where are we right now in terms of 0:08:16.840 --> 0:08:19.840 what types of returns people ought to expect based on 0:08:20.120 --> 0:08:21.520 the current income rates? 0:08:22.920 --> 0:08:29.160 Well, the lower base interest rates are everything scales off that, 0:08:29.760 --> 0:08:35.079 so you know, I mean the FED funds rate at 0:08:35.080 --> 0:08:38.480 three and a half is below history. It's these are 0:08:38.480 --> 0:08:41.680 not high rates, They're only high relatives the last fifteen years. 0:08:42.000 --> 0:08:47.720 But this is a low rate, So everything scales off that. 0:08:47.880 --> 0:08:51.560 Most things will give moderate returns in the dead area. 0:08:52.880 --> 0:08:59.520 I think prospective returns are moderate, okay, not lush, but 0:09:00.040 --> 0:09:04.040 not inadequate. The trouble is that the S and P, 0:09:05.240 --> 0:09:08.040 based on its pe ratio relative to history, appears to 0:09:08.080 --> 0:09:15.960 be priced to provide a very low prospective return. Historically, 0:09:15.960 --> 0:09:20.719 if you bought at this pe ratio, your return over 0:09:20.760 --> 0:09:23.640 the next ten years averaged in the very low single digits. 0:09:24.240 --> 0:09:29.480 So I think we're in a moderate return scenario. The 0:09:29.600 --> 0:09:32.679 problem is that how do you get a high return 0:09:32.840 --> 0:09:38.240 in a moderate return scenario? And most people's resort is 0:09:38.280 --> 0:09:41.880 to take a lot more risk, and that's something I 0:09:41.920 --> 0:09:45.439 don't like to do, other than when it's compelling. 0:09:46.120 --> 0:09:49.040 You had a personal note in a dentum at the end, 0:09:49.040 --> 0:09:53.040 and we let off with that idea of what artificial 0:09:53.080 --> 0:09:55.400 intelligence and machine learning will do to the labor market, 0:09:55.679 --> 0:09:58.560 it's something clearly on the Fed's mind, clearly on investor's mind, 0:09:58.720 --> 0:10:01.720 talking about concerns that there is going to be cannibalization 0:10:01.760 --> 0:10:04.720 from human jobs. How do you see this playing out? 0:10:04.760 --> 0:10:06.720 How are you kind of grappling with this when you 0:10:06.760 --> 0:10:09.200 look at investments, when you look at fiscal deficit, when 0:10:09.240 --> 0:10:11.600 you look at the backdrop for the financial system. 0:10:11.679 --> 0:10:15.640 Well, look, Lisa, here, I'm not talking about investing or economics. 0:10:15.640 --> 0:10:19.160 I'm talking about society. And it's very worrying to me. 0:10:19.640 --> 0:10:22.559 And you know, I've gotten some very nice response from 0:10:22.720 --> 0:10:25.880 people I respect to the memo, and one of them 0:10:26.360 --> 0:10:29.880 said he thinks we've seen this in response to the 0:10:29.920 --> 0:10:35.480 Internet over the last twenty five years, but it has 0:10:35.559 --> 0:10:40.559 not raised unemployment because the Internet eliminated white collar jobs 0:10:40.600 --> 0:10:43.400 that were replaced by blue collar jobs, like you know, 0:10:43.480 --> 0:10:47.240 people who pick stuff in warehouses and send it out 0:10:47.280 --> 0:10:51.559 in e commerce. So the job count is not down, 0:10:51.760 --> 0:10:56.960 but job quality is down. And I think that this 0:10:57.080 --> 0:11:05.320 is very worrisome. And as I said the addendum, when 0:11:05.360 --> 0:11:11.080 we lost jobs to automation and offshoring, I think that 0:11:11.080 --> 0:11:18.720 that coincided with the opiate epidemic, and not only in 0:11:18.720 --> 0:11:22.319 the amount, but also in location. And I think it's 0:11:22.320 --> 0:11:29.000 a natural consequence of people sitting around all day. And 0:11:29.120 --> 0:11:31.480 even if we we can find a replace, a way 0:11:31.520 --> 0:11:36.920 to replace their income, I worry about purposelessness. And you know, 0:11:37.480 --> 0:11:41.240 we get so much job, so much from our jobs 0:11:42.480 --> 0:11:46.080 other than a paycheck, and you can't replace that stuff. 0:11:47.520 --> 0:11:49.199 So I worry for society. 0:11:49.760 --> 0:11:53.200 Stay with us more Bloomberg surveillance coming up after this. 0:12:01.920 --> 0:12:04.160 Joining us now for more, Libby, thank you so much 0:12:04.200 --> 0:12:04.839 for being here. 0:12:05.080 --> 0:12:06.040 Why not just give the role to. 0:12:06.080 --> 0:12:08.840 Kevin Hassett at this point, Well, I mean, look, I 0:12:08.840 --> 0:12:11.880 think that this is obviously President Trump loves a horse race, 0:12:12.600 --> 0:12:15.439 and I think he loves the drama. And of course 0:12:15.480 --> 0:12:18.800 he doesn't need to nominate anybody until Powell's term is up, 0:12:18.840 --> 0:12:21.079 which is, of course, as you know, until May of 0:12:21.160 --> 0:12:24.520 twenty twenty six, and so there really is no rush here. 0:12:25.440 --> 0:12:26.760 But I do think this is, you know, sort of 0:12:26.800 --> 0:12:31.240 speaks to the dramatic that the president, that the President likes. 0:12:31.480 --> 0:12:32.679 I mean, I do you know, you're kind of a 0:12:32.720 --> 0:12:35.600 broader issue though, is sort of this these rumors that 0:12:35.640 --> 0:12:38.400 there has been kind of pushed back on on Hassett. 0:12:38.400 --> 0:12:41.679 I think it does show that even though the market 0:12:41.679 --> 0:12:44.839 has been pretty sanguine about FED independence, that there may 0:12:44.880 --> 0:12:47.559 be some concerns and that when you have somebody from 0:12:47.600 --> 0:12:50.480 the White House that then rotates to the FED, that 0:12:50.559 --> 0:12:54.160 there could be some politicization of the institution. 0:12:54.480 --> 0:12:56.360 Libya here from the President saying that what he cares 0:12:56.360 --> 0:12:59.320 about somebody honest about interest rates. There's more to it 0:12:59.360 --> 0:13:01.000 than that, of course, and I think that there was 0:13:01.040 --> 0:13:02.480 a narrative for a while that this was going to 0:13:02.480 --> 0:13:04.960 be a reformer, and I think Kevin Warsh represents that 0:13:04.960 --> 0:13:06.680 he somebody's talked a lot about the way the FED 0:13:06.720 --> 0:13:10.559 is structured and what could change. Do other candidates share 0:13:10.600 --> 0:13:12.959 those same inclinations. How much does the president price I 0:13:12.960 --> 0:13:14.920 should say, weve heard from the Treasury Secretary he's interested 0:13:14.960 --> 0:13:16.920 in reforming the way the whole system is set up. 0:13:16.960 --> 0:13:19.800 Who can be regional presidents and the like. How big 0:13:19.800 --> 0:13:21.240 an issue is that? Do you think for the presidents 0:13:21.240 --> 0:13:21.960 he goes through the search? 0:13:22.480 --> 0:13:24.960 Yeah, I mean, maybe not for the president himself, but 0:13:25.000 --> 0:13:27.200 I do think for this administration, and I think for 0:13:27.320 --> 0:13:29.360 you know, many folks on the Hill as well. I mean, 0:13:29.360 --> 0:13:31.880 this has been a long time in coming. Obviously, Congress 0:13:31.920 --> 0:13:35.880 has tried to pass legislation to reform the FED that 0:13:36.080 --> 0:13:38.120 requires sixty votes, so they haven't been able to get 0:13:38.160 --> 0:13:40.199 kind of by a partisan support. But I do think 0:13:40.200 --> 0:13:42.760 we could see some reforms. But I do you know, 0:13:42.800 --> 0:13:45.800 it's important to contextualize what the reforms could be and 0:13:45.840 --> 0:13:49.440 what is possible. There's just not as much that the 0:13:49.480 --> 0:13:53.760 president or a FED chair can do unilaterally without actually 0:13:53.880 --> 0:13:56.160 changing the law, and of course you need Congress to 0:13:56.240 --> 0:13:58.720 change the law. So could we see sort of incrementally 0:13:58.920 --> 0:14:03.720 how reserved presidents are chosen, maybe a little bit more 0:14:03.760 --> 0:14:06.560 pressure on reserve presidents. Of course, the FED Board does 0:14:06.600 --> 0:14:11.320 have authority over who stays as a regional president. But 0:14:11.400 --> 0:14:13.640 I think just by and large, there's probably I think, 0:14:13.679 --> 0:14:17.400 you know, we're expecting more incremental reform, if any, just 0:14:17.440 --> 0:14:18.640 given some of those constraints. 0:14:18.720 --> 0:14:21.080 Let's say cast as the front runner, which Bloomberg has reported, 0:14:21.160 --> 0:14:22.880 and you point out the fact there's been this kind 0:14:22.920 --> 0:14:25.280 of growing concern within the bond mark about him as 0:14:25.320 --> 0:14:27.840 potential FED share that kind of became so we first 0:14:27.880 --> 0:14:30.800 saw on the ftpiece a couple of days ago. Now 0:14:30.800 --> 0:14:32.920 seeing that brought in a little bit more. What does 0:14:32.920 --> 0:14:34.760 the bond market want to see? I think of what 0:14:34.800 --> 0:14:37.800 Anna Wong, our colleague at Bloomberg Economics roads, saying she 0:14:37.880 --> 0:14:39.760 knows Kevin Asse, She's worked alongside him. 0:14:40.080 --> 0:14:41.400 Actions speak louder than words. 0:14:41.400 --> 0:14:43.240 He's somebody who has talked a lot about fit independent 0:14:43.280 --> 0:14:45.920 since prized it through the entirety of his career. He 0:14:45.920 --> 0:14:49.000 did advise some more traditional Republicans in years past. What 0:14:49.080 --> 0:14:50.920 does he have to do to kind of assuage or 0:14:50.920 --> 0:14:53.120 pacify those who are concerned about the prospects of him 0:14:53.120 --> 0:14:53.680 being the next. 0:14:53.600 --> 0:14:56.200 FED shir Yeah, I think, as you know, there's what 0:14:56.240 --> 0:14:59.040 he says publicly, and what he says, you know, to 0:14:59.080 --> 0:15:02.480 the media and in this you should he get nominated, 0:15:02.520 --> 0:15:05.480 That all important confirmation hearing, but also what he says 0:15:05.520 --> 0:15:12.080 privately and to the very key Republican senators who will 0:15:12.160 --> 0:15:17.240 effectively cast sort of the vote whether he gets nominated 0:15:17.320 --> 0:15:19.040 or not. So I think what they want to see 0:15:19.240 --> 0:15:22.880 is again just reassurances that they know that he will 0:15:22.960 --> 0:15:26.640 uphold independence, that he will not be sort of suaged 0:15:26.640 --> 0:15:28.880 by the whomever is in the president who's ever in 0:15:28.880 --> 0:15:31.120 the White House beaks. Of course, this next FED chair 0:15:31.520 --> 0:15:35.440 will outlive President Trump's term and will be in for 0:15:35.520 --> 0:15:38.880 whomever is president in twenty twenty nine. And then also 0:15:39.120 --> 0:15:42.240 that some of these rumors about the regional presidents and 0:15:42.280 --> 0:15:45.360 what have you may again maybe the reforms will be 0:15:45.400 --> 0:15:47.720 more incremental and not necessarily existential. 0:15:48.080 --> 0:15:49.640 I mean, how do you think about the bond market 0:15:49.680 --> 0:15:51.760 and it's reaction all of this, For all the kind 0:15:51.760 --> 0:15:55.600 of rumors of pushback since Bloomberg broke the kind of 0:15:55.640 --> 0:15:59.160 hasset news, ten year yield has been relatively well behaved, 0:15:59.200 --> 0:16:02.680 two year yields relatively well behaved. I think, you know, 0:16:02.720 --> 0:16:05.120 the work is still pricing in kind of a three 0:16:05.120 --> 0:16:07.800 percent terminal rate. It seems like the bond market is 0:16:08.600 --> 0:16:12.040 taking the kind of measure of Hassett and saying it's 0:16:12.080 --> 0:16:16.120 not a really significant shift in policy, and bond market 0:16:16.160 --> 0:16:18.400 seems relatively comfortable. How do you. 0:16:18.320 --> 0:16:18.720 React to that? 0:16:18.840 --> 0:16:20.920 Yeah, I think we do what I just said earlier. 0:16:20.960 --> 0:16:22.080 I mean, I do think the bond market has been 0:16:22.120 --> 0:16:25.920 relatively sanguine about this is just about in general, this 0:16:26.120 --> 0:16:29.320 fear about FED independence, and I think that you know, 0:16:29.400 --> 0:16:32.320 kind of you know, maybe underscores two things. One is 0:16:32.360 --> 0:16:35.000 that oftentimes the market doesn't believe anything until they actually 0:16:35.080 --> 0:16:36.880 see it, and so they're not going to necessarily just 0:16:36.920 --> 0:16:39.040 trade on speculation or on rumor. And of course we 0:16:39.040 --> 0:16:41.640 don't even have a FED chair nomine yet. It's all 0:16:41.720 --> 0:16:44.000 just been kind of those and of course you know 0:16:44.120 --> 0:16:47.160 the drama. But I also think the number two is 0:16:47.200 --> 0:16:50.560 that the market understands some of these guardrails that are 0:16:50.560 --> 0:16:52.600 in place, and that while the chair, of course is 0:16:52.720 --> 0:16:56.400 very important, the chair is not kind of almighty in 0:16:56.520 --> 0:16:59.720 terms of changing monetary policy, and that of course it 0:16:59.760 --> 0:17:02.760 is the majority of as you know, the FOMC twelve members, 0:17:02.800 --> 0:17:06.359 not just the seven FED Board governors. And then also 0:17:06.720 --> 0:17:11.360 not to overstate the sort of confirmation process. But something I, 0:17:11.440 --> 0:17:15.000 maybe to their chagrin, always reinforce to our Investment Committee 0:17:15.280 --> 0:17:17.480 is that this advice and consent role that the US 0:17:17.520 --> 0:17:21.159 Senate plays is very important. And actually, if you just 0:17:21.240 --> 0:17:24.239 look at the number of nominees that this president has 0:17:24.240 --> 0:17:28.000 had to withdraw, it's really unprecedented, and it's all kind 0:17:28.000 --> 0:17:31.200 of been backchanneling and private. But that sort of speaks 0:17:31.240 --> 0:17:32.760 to the fact that the Senate, they have not had 0:17:32.920 --> 0:17:35.280 the votes in the Senate to confirm those nominees. So 0:17:35.480 --> 0:17:37.840 I think if somebody were to be nominated, who would 0:17:37.840 --> 0:17:40.960 be too political, who would really compromise the independence of 0:17:41.000 --> 0:17:43.520 the foot I think the bomb market is reassured that 0:17:43.840 --> 0:17:44.880 the Senate would push back. 0:17:44.920 --> 0:17:47.080 This goes to a bigger question, and I was glad 0:17:47.080 --> 0:17:49.920 that you went there about how much Republicans are starting 0:17:49.920 --> 0:17:52.439 to push back on President Trump after some of the 0:17:52.520 --> 0:17:54.919 recent elections and some of the recent losses on the 0:17:54.920 --> 0:17:57.560 part of certain Republican candidates. Do you get the sense 0:17:57.600 --> 0:18:00.600 that there is a greater constraining of some of the 0:18:00.680 --> 0:18:04.199 more extreme policies by Congress as a result of some 0:18:04.240 --> 0:18:05.920 of the recent elections, You. 0:18:05.840 --> 0:18:06.320 Know, I do. 0:18:06.400 --> 0:18:10.120 I think the political runway for this president is absolutely shortening. 0:18:10.520 --> 0:18:13.240 But I would also say that this is very consistent 0:18:13.359 --> 0:18:17.159 with history. If you look at Biden's administration, you know, 0:18:17.280 --> 0:18:20.159 the Democrats, of course had both the House and the 0:18:20.200 --> 0:18:24.200 Senate in his first two years, and they basically allowed 0:18:24.359 --> 0:18:26.480 Biden to do whatever he kind of wanted to do, 0:18:26.560 --> 0:18:30.640 right to really advance his policy agenda that first year. However, 0:18:30.760 --> 0:18:33.200 as you got closer to the midterms, as you had 0:18:33.320 --> 0:18:36.720 some of these off cycle elections, the Democrats really did 0:18:36.760 --> 0:18:39.359 start pushing back on President Biden. I think that's the 0:18:39.359 --> 0:18:42.439 corollary here. The kind of the parallel is that, you know, 0:18:42.520 --> 0:18:45.680 Republicans have been pushing back on the president sort of privately, 0:18:45.920 --> 0:18:48.359 but I think we expected them to do that more 0:18:48.640 --> 0:18:52.320 more publicly. But again, this is not necessarily President Trump's specific. 0:18:52.600 --> 0:18:55.880 This is kind of just the political cycle in Washington. 0:18:56.760 --> 0:19:00.239 Stay with US multlempag Savannah's coming up of this. 0:19:09.720 --> 0:19:14.280 The team at MasterCards Economic Institute predicting moderate global GDP 0:19:14.480 --> 0:19:17.080 growth at three point one percent and twenty twenty six. 0:19:17.400 --> 0:19:20.840 A key dynamic is continued trade realignment between the US 0:19:21.119 --> 0:19:23.720 and China. Joining US now is Michelle Meyer and Michelle 0:19:23.760 --> 0:19:25.920 wonderful to see you as always. I would love to 0:19:25.920 --> 0:19:28.000 get your take on what Steve Shiverin was just talking about, 0:19:28.040 --> 0:19:30.760 which is he thinks the stealth story is the recovery 0:19:30.760 --> 0:19:33.919 and acceleration in the consumer in twenty twenty six. Are 0:19:34.000 --> 0:19:36.800 you seeing that in any of the data that you're collecting. 0:19:37.040 --> 0:19:39.080 Yeah, I would say it's probably not a stealth story. 0:19:39.119 --> 0:19:42.239 It's a reality, and I think it has been the 0:19:42.240 --> 0:19:47.160 reality that consumer has been extraordinarily engaged. You just heard 0:19:47.200 --> 0:19:49.600 it from Robert Eisam in the interview you aired that 0:19:49.720 --> 0:19:52.960 consumers are still traveling, You are still seeing the embrace 0:19:53.000 --> 0:19:56.840 of discretionary spending in addition to the necessities. So it's 0:19:57.400 --> 0:20:00.479 consumers that you know, again it's going to vary depending 0:20:00.520 --> 0:20:03.199 on income cohort. It's a big part of the narrative 0:20:03.240 --> 0:20:06.639 that it's not even It never is even, frankly, but 0:20:07.040 --> 0:20:09.560 you have consumer spending that is still running at a 0:20:09.600 --> 0:20:12.720 healthy clip. For the holiday shopping season. We're looking for 0:20:12.760 --> 0:20:15.359 a mid three percent pace for holiday sales. Black Friday 0:20:15.359 --> 0:20:17.040 came in with our data. We saw a four point 0:20:17.119 --> 0:20:19.200 one percent increase in spending on Black Friday. 0:20:19.240 --> 0:20:21.520 How much is this inflationary? How much is this because 0:20:21.520 --> 0:20:24.639 simply the prices were higher, not necessarily more items for ticketed. 0:20:25.119 --> 0:20:27.560 So you know, we'll find out for sure once we 0:20:27.600 --> 0:20:30.760 get the CPI report at some point. 0:20:31.160 --> 0:20:32.360 Do you know when it's going to be bad? 0:20:33.320 --> 0:20:34.120 Well, no, at some point. 0:20:34.280 --> 0:20:37.640 But in the inrum, what we know as of now 0:20:37.720 --> 0:20:41.720 in terms of the basket of holiday shopping items that 0:20:41.760 --> 0:20:45.159 we typically see inflations running maybe around two percent or 0:20:45.200 --> 0:20:48.400 so year of the year. So certainly there's very much 0:20:48.440 --> 0:20:51.320 still real spending and growth. 0:20:50.960 --> 0:20:53.520 In terms of volume. Would you look at where people 0:20:53.560 --> 0:20:55.720 are spending money, what's the story that emerges from that? 0:20:55.920 --> 0:20:58.879 So you talk about how kind of discerning consumers are 0:20:58.880 --> 0:20:59.959 being about where they're spending it on? 0:21:00.080 --> 0:21:00.119 What? 0:21:00.520 --> 0:21:03.320 Yeah, can you break that down by I don't know, 0:21:03.359 --> 0:21:05.640 strato or sector? What can that tell us just about 0:21:05.640 --> 0:21:06.800 people's habits at this moment. 0:21:07.080 --> 0:21:10.119 Yeah, So I certainly think that consumers are savvy. I 0:21:10.119 --> 0:21:13.520 think they have been savvy this whole period of time 0:21:13.520 --> 0:21:15.920 coming out of the pandemic. Once they experienced that price 0:21:16.000 --> 0:21:20.080 level shock that was, you know, challenging for them. It 0:21:20.119 --> 0:21:22.879 was a first time consumers are a significant increase in 0:21:22.920 --> 0:21:27.200 the price of goods across the board, and since then, 0:21:27.280 --> 0:21:29.399 I think consumers have been really mindful in terms of 0:21:29.440 --> 0:21:31.359 what they buy, when they buy, why they buy it. 0:21:31.400 --> 0:21:34.800 They certainly concentrate spending around promotional periods, which is what 0:21:34.840 --> 0:21:38.400 we saw during the Black Friday period, But you know, 0:21:38.520 --> 0:21:41.160 making those choices, making those choices that work for them. 0:21:41.320 --> 0:21:43.200 As you look at kind of the evolution of consumer 0:21:43.240 --> 0:21:45.800 psychology in this moment, I think there was a lot 0:21:45.800 --> 0:21:48.920 of anxiety surrounding the prospect of what tariffs might mean 0:21:49.280 --> 0:21:51.639 for all of us. Has that eroded it' staved just 0:21:51.640 --> 0:21:54.200