1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along 2 00:00:09,200 --> 00:00:13,200 Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you 3 00:00:13,280 --> 00:00:18,600 Speaker 1: insight from the best and economics, finance, investment, and international relations. 4 00:00:18,960 --> 00:00:23,759 Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot com 5 00:00:23,920 --> 00:00:31,040 Speaker 1: and of course on the Bloomberg terminal. Secondly, well, some 6 00:00:31,120 --> 00:00:33,800 Speaker 1: police to say joined us right now. Seculd be great 7 00:00:33,800 --> 00:00:36,760 Speaker 1: to catch up with your sir. Really decent payroll support 8 00:00:36,760 --> 00:00:39,199 Speaker 1: in the view of so many people your perspective, police, sir. 9 00:00:39,479 --> 00:00:42,519 Speaker 1: First of all, no, it was a good report. I 10 00:00:42,560 --> 00:00:44,560 Speaker 1: think the couple of things that that I'm very happy 11 00:00:44,600 --> 00:00:47,559 Speaker 1: to see. In the private sector. We're seeing UH employment 12 00:00:47,560 --> 00:00:50,400 Speaker 1: back to pre pandemic levels in the manufacturing sector. The 13 00:00:50,400 --> 00:00:53,080 Speaker 1: same thing in the childcare sector for the first time. 14 00:00:53,159 --> 00:00:54,960 Speaker 1: Quite honest, in a little bit we've seen some gains, 15 00:00:55,120 --> 00:00:57,520 Speaker 1: which means that our childcare facilities are getting a little 16 00:00:57,560 --> 00:00:59,400 Speaker 1: bit back to I wouldn't call them back to what 17 00:00:59,520 --> 00:01:02,880 Speaker 1: they were pandemic, but we're seeing some growth there. Warehousing 18 00:01:03,000 --> 00:01:06,080 Speaker 1: and obviously manufacturing we've seen some great growth there as well. 19 00:01:06,360 --> 00:01:10,480 Speaker 1: So we're seeing our job economy moving float forward. The 20 00:01:10,800 --> 00:01:13,360 Speaker 1: wage growth we're seeing the biggest well some of the 21 00:01:13,360 --> 00:01:16,680 Speaker 1: biggest gain and the lowest income earners, which is good. Obviously, 22 00:01:16,680 --> 00:01:19,760 Speaker 1: we're still dealing with inflation and and the wage growth 23 00:01:19,840 --> 00:01:21,760 Speaker 1: isn't quite keeping up inflation. But I think what we 24 00:01:21,760 --> 00:01:24,560 Speaker 1: want to do is actually bring inflation down. Uh So 25 00:01:24,680 --> 00:01:27,280 Speaker 1: we have to continue to move forward. But this is 26 00:01:27,520 --> 00:01:31,080 Speaker 1: this shows that where the country is quite with President 27 00:01:31,120 --> 00:01:33,160 Speaker 1: Biden laying out the plans when he took office, is 28 00:01:33,160 --> 00:01:35,399 Speaker 1: still moving forward on the job side. But as you 29 00:01:35,600 --> 00:01:38,000 Speaker 1: just mentioned, there's still a lot of unanswered questions about 30 00:01:38,040 --> 00:01:40,360 Speaker 1: the economy. It's still the kind of in a very 31 00:01:40,440 --> 00:01:42,959 Speaker 1: you know, interesting place. Secondly, well, Chelf for light on 32 00:01:42,959 --> 00:01:44,520 Speaker 1: you over the last few months to give me updates 33 00:01:44,520 --> 00:01:47,080 Speaker 1: on what's happening on the West Coast. I understand the 34 00:01:47,080 --> 00:01:49,520 Speaker 1: contract with the West Coast Port Union expired and talks 35 00:01:49,560 --> 00:01:52,440 Speaker 1: around going. You've said a few times on this program 36 00:01:52,520 --> 00:01:55,960 Speaker 1: that you're not concerned. You concern Now, No, I'm not 37 00:01:56,000 --> 00:01:59,120 Speaker 1: gonnacern because both sides, both parties put a statement out 38 00:01:59,120 --> 00:02:01,680 Speaker 1: to Wite two statements now letting people know that they're 39 00:02:01,680 --> 00:02:04,800 Speaker 1: going to continue negotiations when the contract expired July. First, 40 00:02:05,320 --> 00:02:07,040 Speaker 1: I've spoken I didn't speak to them this week. I 41 00:02:07,040 --> 00:02:09,480 Speaker 1: spoke to both sides last week. They both said it's 42 00:02:09,480 --> 00:02:12,320 Speaker 1: moving in the right direction. Both sides, I should say, 43 00:02:12,400 --> 00:02:15,720 Speaker 1: the unions and the companies. Uh. And obviously we haven't 44 00:02:15,720 --> 00:02:17,679 Speaker 1: had that issue yet that might pop up that will 45 00:02:17,919 --> 00:02:21,280 Speaker 1: cause little indigestion for for both sides. But I like 46 00:02:21,440 --> 00:02:23,359 Speaker 1: that where it's going. You know, the interesting thing about 47 00:02:23,400 --> 00:02:26,600 Speaker 1: this negotiation, it doesn't start until six weeks prior to 48 00:02:26,639 --> 00:02:29,000 Speaker 1: the expiration of contract. And that's one of the things 49 00:02:29,000 --> 00:02:30,760 Speaker 1: that you know, a little different than most contracts. Some 50 00:02:30,760 --> 00:02:34,360 Speaker 1: contracts you can start negotiation at six months prior to expiring. 51 00:02:34,639 --> 00:02:36,240 Speaker 1: But but I feel good with were going. I know 52 00:02:36,320 --> 00:02:38,520 Speaker 1: there's a lot at steak. Clearly we don't want to 53 00:02:38,520 --> 00:02:41,120 Speaker 1: have any issues like we did last holiday season and 54 00:02:41,200 --> 00:02:43,840 Speaker 1: last fall with with with boats out in the with 55 00:02:43,840 --> 00:02:45,600 Speaker 1: with ships out in the harbor and not getting supplies, 56 00:02:45,600 --> 00:02:48,040 Speaker 1: and so I do feel good where we are. Today's 57 00:02:48,600 --> 00:02:50,240 Speaker 1: during today the second well shod You know, this is 58 00:02:50,240 --> 00:02:52,760 Speaker 1: a really important topic. And I can take your word 59 00:02:52,760 --> 00:02:54,280 Speaker 1: for the youth feel good, but other members of the 60 00:02:54,280 --> 00:02:57,280 Speaker 1: audience might not. Can you help them understand what's at 61 00:02:57,280 --> 00:03:00,839 Speaker 1: stake here and the details of the nego seations. What's 62 00:03:00,840 --> 00:03:03,760 Speaker 1: stopping this one from closing, what's the gap, how bigs 63 00:03:03,760 --> 00:03:06,480 Speaker 1: the gap, and what's it over? Yeah, and so just 64 00:03:06,520 --> 00:03:08,880 Speaker 1: so everyone understands, when you when they do the negotiations 65 00:03:08,880 --> 00:03:11,200 Speaker 1: on the port UH, they generally go on for a 66 00:03:11,240 --> 00:03:15,040 Speaker 1: long periods of time. And historically, UH under the two 67 00:03:15,080 --> 00:03:17,600 Speaker 1: thousand and fourteen UH it went on for a long time. 68 00:03:17,760 --> 00:03:20,320 Speaker 1: There was no strikes or slowdowns or lockouts. But what 69 00:03:20,360 --> 00:03:22,440 Speaker 1: we want to do right now in the time that 70 00:03:22,440 --> 00:03:25,400 Speaker 1: we're living and making sure that people's pressures, they feel 71 00:03:25,400 --> 00:03:27,919 Speaker 1: the pressure price pressures at home, they're paying for goods 72 00:03:27,960 --> 00:03:31,519 Speaker 1: and services where they're seeing inflation obviously impacting their families. 73 00:03:31,720 --> 00:03:33,160 Speaker 1: We want to make I want to make sure the 74 00:03:33,160 --> 00:03:35,120 Speaker 1: President Fine wants to make sure that we don't have 75 00:03:35,160 --> 00:03:38,760 Speaker 1: a breakdown negotiation at the point to add additionally to inflation, 76 00:03:38,800 --> 00:03:42,360 Speaker 1: additionally to cost. And that's that's what's at stay, quite honestly. 77 00:03:42,600 --> 00:03:46,119 Speaker 1: And what the contract that they negotiating is everything from wages, 78 00:03:46,360 --> 00:03:49,240 Speaker 1: to working conditions to everything that you can imagine. So 79 00:03:49,320 --> 00:03:53,040 Speaker 1: it's a massive contract. There are tens of thousands of workers. 80 00:03:53,080 --> 00:03:56,440 Speaker 1: There are nine shipping companies involved in this in this negotiation, 81 00:03:56,800 --> 00:03:59,440 Speaker 1: so it is. It's a very long negotiation. Let's just 82 00:03:59,480 --> 00:04:03,080 Speaker 1: say long. It's a very very challenging negotiation at the table. 83 00:04:03,400 --> 00:04:05,640 Speaker 1: But when when I hear from both sides the same 84 00:04:05,680 --> 00:04:08,880 Speaker 1: exact thing that it's moving along, I'm pleased with that. 85 00:04:09,440 --> 00:04:12,440 Speaker 1: I'm not concerned about the contract expiring last on the 86 00:04:12,480 --> 00:04:15,400 Speaker 1: first of this month. Certainly next month I come on 87 00:04:15,440 --> 00:04:17,480 Speaker 1: this show. If we don't have a contract, and we're 88 00:04:17,480 --> 00:04:19,200 Speaker 1: not close to a contract, then you and I might 89 00:04:19,240 --> 00:04:21,120 Speaker 1: be having a very different conversation. But right now I 90 00:04:21,120 --> 00:04:23,440 Speaker 1: feel good. Well, let's talk about that. As you know, 91 00:04:23,520 --> 00:04:25,479 Speaker 1: you can't take their word for it either. Are you 92 00:04:25,560 --> 00:04:28,560 Speaker 1: preparing for the possibility of a strike? Can you continue 93 00:04:28,600 --> 00:04:31,960 Speaker 1: talk to me about what those preparations look like. Yeah, 94 00:04:32,000 --> 00:04:34,040 Speaker 1: I'm really honestly, I'm really not concerned about strike. The 95 00:04:34,120 --> 00:04:35,600 Speaker 1: last time there was a strike of the ports of 96 00:04:35,800 --> 00:04:38,120 Speaker 1: l A and Long Beach it was in nineteen seventy two, 97 00:04:38,160 --> 00:04:40,280 Speaker 1: I believe, so we haven't had a strike there in 98 00:04:40,360 --> 00:04:41,960 Speaker 1: quite some time. And the way I look at this, 99 00:04:42,120 --> 00:04:45,039 Speaker 1: these workers and these shipping companies and these suppliers and 100 00:04:45,080 --> 00:04:47,919 Speaker 1: everyone work at the point, particularly the workers, they've lived 101 00:04:47,920 --> 00:04:49,680 Speaker 1: through and work through a pandemic like a lot of 102 00:04:49,760 --> 00:04:51,719 Speaker 1: us have. They want to work every day, they were 103 00:04:51,760 --> 00:04:55,200 Speaker 1: still unloading ships. The supply chain issues or the shortages 104 00:04:55,240 --> 00:04:57,600 Speaker 1: at the at the ports weren't necessarily because they weren't 105 00:04:57,640 --> 00:05:01,080 Speaker 1: unloading the ships. It was because the manufacturing stopped in China. 106 00:05:01,120 --> 00:05:04,080 Speaker 1: They shut down manufacturing, just like they did earlier this year. 107 00:05:04,320 --> 00:05:06,440 Speaker 1: So workers want to go to work. If workers don't work, 108 00:05:06,440 --> 00:05:08,880 Speaker 1: they don't get paid. They're not a salary bunch of people. 109 00:05:09,000 --> 00:05:10,760 Speaker 1: If they don't work the hours, they don't get paid 110 00:05:10,760 --> 00:05:13,560 Speaker 1: the hourly workers. And that's why for them, there's an 111 00:05:13,600 --> 00:05:15,480 Speaker 1: interest for the for the people that work on the 112 00:05:15,520 --> 00:05:17,760 Speaker 1: ports to make sure this contract gets resolved and they 113 00:05:17,800 --> 00:05:19,960 Speaker 1: continue to work. A secondly was just quickly and briefly, 114 00:05:20,120 --> 00:05:21,800 Speaker 1: and I respect your time, and I just want to squeeze, 115 00:05:21,800 --> 00:05:24,880 Speaker 1: they say, And you mentioned China. The President, we understand, 116 00:05:25,040 --> 00:05:28,120 Speaker 1: will be meeting with advices today to consider removing tariffs 117 00:05:28,120 --> 00:05:30,920 Speaker 1: on China. We've been told many times over the last 118 00:05:30,960 --> 00:05:33,719 Speaker 1: few years from the previous administration on this one that 119 00:05:33,800 --> 00:05:36,839 Speaker 1: a lot of this is about fairness and also protecting 120 00:05:36,880 --> 00:05:38,880 Speaker 1: American jobs. Do you have a seat at the table 121 00:05:39,240 --> 00:05:42,120 Speaker 1: in that conversation. No, I'm not necessary at the table. 122 00:05:42,120 --> 00:05:44,240 Speaker 1: I've been involved in some conversations and I think that, 123 00:05:44,320 --> 00:05:46,559 Speaker 1: you know, I'm not sure exactly what's gonna happen today 124 00:05:46,680 --> 00:05:48,200 Speaker 1: at the White what's your view want it? What if 125 00:05:48,240 --> 00:05:50,440 Speaker 1: you sent back to them? I mean, I think I 126 00:05:50,480 --> 00:05:52,520 Speaker 1: think you know, it's it's about my paid grade as 127 00:05:52,520 --> 00:05:54,200 Speaker 1: far as where I am right now. But I think that, 128 00:05:54,360 --> 00:05:56,400 Speaker 1: you know, I think having this conversation is really important 129 00:05:56,400 --> 00:05:59,919 Speaker 1: because we're thinking about the pressures of of of inflation, 130 00:06:00,240 --> 00:06:02,359 Speaker 1: but we're also going to keep an eye on the 131 00:06:02,440 --> 00:06:04,440 Speaker 1: jobs that are here in the United States. And the 132 00:06:04,480 --> 00:06:06,640 Speaker 1: President has certainly laid out in the beginning of his 133 00:06:06,720 --> 00:06:10,680 Speaker 1: presidency a big opportunity to create more opportunities in manufacturing 134 00:06:10,720 --> 00:06:14,000 Speaker 1: United States of America. One thing that's indirectly related the 135 00:06:14,360 --> 00:06:17,120 Speaker 1: Bipartisan Innovation Act that's in front of Congress right now. 136 00:06:17,360 --> 00:06:19,839 Speaker 1: That's an important piece of legislation to pass because that 137 00:06:19,839 --> 00:06:22,400 Speaker 1: would allow us the opportunity to build more in America 138 00:06:22,440 --> 00:06:24,960 Speaker 1: and have more products built America. Somewhat we're seeing right 139 00:06:25,000 --> 00:06:26,839 Speaker 1: now in America is the computer chips that are in 140 00:06:26,880 --> 00:06:30,240 Speaker 1: all of our phones and our doorbells, and and we're 141 00:06:30,279 --> 00:06:32,719 Speaker 1: doing it right now on tv UM. We should be 142 00:06:32,760 --> 00:06:34,960 Speaker 1: making those United States of America. That's an opportunity for 143 00:06:35,040 --> 00:06:38,160 Speaker 1: us to help leave long term inflationary pressures down the road. 144 00:06:38,520 --> 00:06:40,600 Speaker 1: Next time we're in Washington day, say Tom Kate and 145 00:06:40,680 --> 00:06:42,440 Speaker 1: I would love to catch up with these secretaries. Great 146 00:06:42,480 --> 00:06:44,400 Speaker 1: to catch up with you now, Secondary Wolfs there from 147 00:06:44,400 --> 00:06:52,560 Speaker 1: outside the White House, we moved to the government's former 148 00:06:52,560 --> 00:06:55,160 Speaker 1: governor of the Federal Reserve and Boost School, Randall Crossing, 149 00:06:55,279 --> 00:06:59,279 Speaker 1: for brief comments. You're as well, Randy. We had gradualism 150 00:06:59,400 --> 00:07:02,520 Speaker 1: and a measure moment with green Span. Is that history 151 00:07:02,600 --> 00:07:07,200 Speaker 1: now with this art economy, that's history that is long 152 00:07:07,360 --> 00:07:09,320 Speaker 1: long behind us. You can see that the FIT now 153 00:07:09,400 --> 00:07:12,160 Speaker 1: is trying to move expeditiously exactly as she said. This 154 00:07:12,240 --> 00:07:17,400 Speaker 1: is completely consistent with their their desire to move fast, 155 00:07:17,600 --> 00:07:19,800 Speaker 1: and I think they are very likely to go seventy 156 00:07:19,800 --> 00:07:22,200 Speaker 1: five basis points at the next meeting. Obviously we'll get 157 00:07:22,200 --> 00:07:24,320 Speaker 1: some inflation data between now and then. They're also going 158 00:07:24,320 --> 00:07:27,119 Speaker 1: to get a GDP report because they'll know the numbers 159 00:07:27,200 --> 00:07:30,400 Speaker 1: before we know them when they make their decision on Wednesday. 160 00:07:30,440 --> 00:07:32,480 Speaker 1: Will find out on Thursday and at the end of 161 00:07:32,480 --> 00:07:34,960 Speaker 1: the month. But I think they're gonna go seventy five 162 00:07:35,080 --> 00:07:36,920 Speaker 1: and I think there's nothing in this report that would 163 00:07:36,960 --> 00:07:38,880 Speaker 1: slow them down from that. Randy, that's just a question 164 00:07:38,920 --> 00:07:40,000 Speaker 1: I have. I don't want to make too much of 165 00:07:40,000 --> 00:07:41,960 Speaker 1: a big Databa. It's just something that keeps jumping out 166 00:07:41,960 --> 00:07:44,440 Speaker 1: to me. We keep churning out really robust jobs growth, 167 00:07:44,520 --> 00:07:48,680 Speaker 1: payrolls three seventy two, unemployment's really stabilized at three point 168 00:07:48,760 --> 00:07:50,880 Speaker 1: six percent. I'd love your thoughts on what you make 169 00:07:50,920 --> 00:07:55,720 Speaker 1: of that. Well, I mean, this is exactly as Mike said. 170 00:07:55,800 --> 00:07:59,480 Speaker 1: You've got two different surveys, uh, and different ways of 171 00:07:59,520 --> 00:08:02,000 Speaker 1: gathering the data, so they're not always exactly the same. 172 00:08:02,200 --> 00:08:05,200 Speaker 1: And uh, we don't always know months a month why 173 00:08:05,280 --> 00:08:07,520 Speaker 1: one is going one direction one's going in another direction. 174 00:08:07,880 --> 00:08:10,920 Speaker 1: But I think both of them point to pretty robust, 175 00:08:11,160 --> 00:08:14,560 Speaker 1: robust job job market right now. But I do see 176 00:08:14,600 --> 00:08:17,640 Speaker 1: that weakening by the fall. And what do you make 177 00:08:17,720 --> 00:08:22,440 Speaker 1: of a lower participation rate sixty two percent? Randy, Well, 178 00:08:22,480 --> 00:08:24,680 Speaker 1: it's sort of been bouncing around sixty two point two, 179 00:08:24,800 --> 00:08:27,320 Speaker 1: sixty two point three. I think you know that's it's 180 00:08:27,360 --> 00:08:29,640 Speaker 1: small enough to and and it's only months a month 181 00:08:30,360 --> 00:08:34,240 Speaker 1: movements to that. It's too difficult to make too much 182 00:08:34,400 --> 00:08:36,880 Speaker 1: of that. But I think what it says, is that 183 00:08:37,040 --> 00:08:38,679 Speaker 1: there's a large number of people who I think are 184 00:08:38,720 --> 00:08:40,400 Speaker 1: just not going to come back into the labor market. 185 00:08:40,679 --> 00:08:43,839 Speaker 1: I think especially older workers that had come in really, 186 00:08:43,880 --> 00:08:48,360 Speaker 1: really robustly before the before the pandemic struck. I've just 187 00:08:48,400 --> 00:08:51,400 Speaker 1: said this is just too risky. There's really no need 188 00:08:51,440 --> 00:08:54,040 Speaker 1: for me to be in the in the job market 189 00:08:54,040 --> 00:08:56,560 Speaker 1: and being exposed. I want to be spending time with 190 00:08:56,559 --> 00:08:58,440 Speaker 1: my kids, I want to be spending time traveling with 191 00:08:58,520 --> 00:09:01,080 Speaker 1: my my loved ones, and and I think we're just 192 00:09:01,120 --> 00:09:03,960 Speaker 1: not going to see the labor force participation rate move 193 00:09:04,040 --> 00:09:06,120 Speaker 1: up to where it was pre pandemic. Randy, great to 194 00:09:06,120 --> 00:09:08,480 Speaker 1: have you with us run across that of the investitis. 195 00:09:08,520 --> 00:09:10,960 Speaker 1: You kind of both skill responding to that upside supprime. 196 00:09:15,880 --> 00:09:19,000 Speaker 1: Jeffrey Rosenberg now leads us forward. Here's with black Rock. 197 00:09:19,600 --> 00:09:24,760 Speaker 1: He's co lead portfolio manager of the Systematic multi Strategy 198 00:09:25,040 --> 00:09:28,280 Speaker 1: fun Jeff, that's a mouthful. Let's cut to the chase. 199 00:09:28,440 --> 00:09:32,920 Speaker 1: How do devolve this odd economy and the new volatility 200 00:09:32,960 --> 00:09:39,760 Speaker 1: you're living in the bond market down to a systematic strategy. Well, Tom, 201 00:09:39,840 --> 00:09:42,400 Speaker 1: it's an odd economy as you as you point out, 202 00:09:42,480 --> 00:09:45,920 Speaker 1: but it's it's a it's a payroll report, as Jonathan 203 00:09:46,000 --> 00:09:50,120 Speaker 1: nailed right at the beginning, that solidifies seventy five basis points. 204 00:09:50,400 --> 00:09:53,040 Speaker 1: You know, going into this, the market is expecting a 205 00:09:53,160 --> 00:09:56,880 Speaker 1: slowdown in in payrolls. You heard, uh, Randy talked about 206 00:09:56,920 --> 00:09:59,480 Speaker 1: that into the fall. That's still the case, but it's 207 00:09:59,559 --> 00:10:02,760 Speaker 1: it's not slowing fast enough, and so you know that 208 00:10:02,760 --> 00:10:05,760 Speaker 1: the Fed is going to have to do more. And 209 00:10:06,440 --> 00:10:10,840 Speaker 1: when you see the lack of labor force participation, and 210 00:10:10,880 --> 00:10:13,199 Speaker 1: I agree with Randy, we don't want to over interpret 211 00:10:13,320 --> 00:10:16,480 Speaker 1: you know point one, yes, yes here there, but you 212 00:10:16,559 --> 00:10:19,720 Speaker 1: haven't really seen that, uh, and that's a real problem 213 00:10:19,760 --> 00:10:22,959 Speaker 1: on the wage inflation front. So you know, the the 214 00:10:23,840 --> 00:10:29,040 Speaker 1: lack of payroll slowing here and the lack of an 215 00:10:29,080 --> 00:10:33,000 Speaker 1: increase in participation is just again highlighting the pressures on 216 00:10:33,040 --> 00:10:36,800 Speaker 1: the FED here that you have an overheating economy and 217 00:10:36,840 --> 00:10:39,520 Speaker 1: they need to really push on the demand side. And 218 00:10:39,559 --> 00:10:42,280 Speaker 1: so you're seeing the reaction in the front end. Uh. 219 00:10:42,320 --> 00:10:45,679 Speaker 1: You know, reflective of that, Jeff, I want to go 220 00:10:45,920 --> 00:10:48,360 Speaker 1: to the wheelhouse of what you do, which is Lincoln 221 00:10:48,360 --> 00:10:51,320 Speaker 1: full faith and credit into trying to not lose money here. 222 00:10:51,800 --> 00:10:56,720 Speaker 1: Pria misera over TV securities talks about a very serious inversion, 223 00:10:56,920 --> 00:11:01,080 Speaker 1: perhaps even a greater inversion than we saw within two 224 00:11:01,120 --> 00:11:03,600 Speaker 1: thousand folks. This is where the two year yield is 225 00:11:03,640 --> 00:11:07,680 Speaker 1: substantially higher than the ten year yield. What does each 226 00:11:07,840 --> 00:11:13,160 Speaker 1: basis point mean of larger inversion going forward? What does 227 00:11:13,200 --> 00:11:16,040 Speaker 1: that mean the real world of not trying to lose 228 00:11:16,080 --> 00:11:20,480 Speaker 1: money and fixed income? Yeah, well, the first part of 229 00:11:20,480 --> 00:11:22,520 Speaker 1: that of what it means, and you're seeing a bit 230 00:11:22,559 --> 00:11:27,000 Speaker 1: of that movement in reaction to today's print, where bigger 231 00:11:27,040 --> 00:11:30,320 Speaker 1: increases in the short end, lower increases in the long end, 232 00:11:30,320 --> 00:11:33,160 Speaker 1: and the flattening of the curve. Is really the market 233 00:11:33,200 --> 00:11:38,199 Speaker 1: expecting the Fed to tighten into a recession. And this 234 00:11:38,280 --> 00:11:41,000 Speaker 1: isn't a new expectation, but it's certainly the reaction again 235 00:11:41,040 --> 00:11:43,560 Speaker 1: to today's data, where you know, as I just said, 236 00:11:43,600 --> 00:11:46,320 Speaker 1: the economy is labor markets are very hot. The Fed 237 00:11:46,360 --> 00:11:48,560 Speaker 1: has to do more. And if you look at kind 238 00:11:48,559 --> 00:11:51,400 Speaker 1: of what's priced into the market in a forward basis, 239 00:11:51,640 --> 00:11:54,280 Speaker 1: it has the one year or the FED funds rate 240 00:11:54,360 --> 00:11:57,679 Speaker 1: two years out from now lower than where it's expected 241 00:11:57,760 --> 00:11:59,760 Speaker 1: in one year. So what is that saying. It's saying 242 00:11:59,760 --> 00:12:01,920 Speaker 1: that the market is expecting the Fed to push us 243 00:12:01,920 --> 00:12:04,360 Speaker 1: into a recession. And that's the same message that you 244 00:12:04,400 --> 00:12:07,400 Speaker 1: see when you talk about an inverted yield curve, that 245 00:12:07,720 --> 00:12:10,360 Speaker 1: front end interest rates are going to reflect FED policy, 246 00:12:10,440 --> 00:12:12,520 Speaker 1: the longer end interest rates are going to reflect that 247 00:12:12,720 --> 00:12:17,080 Speaker 1: future expectation of recession. And and you've heard Powell, you know, 248 00:12:17,200 --> 00:12:20,400 Speaker 1: basically admit and and and really in the minutes that 249 00:12:20,600 --> 00:12:24,199 Speaker 1: they're willing to take that risk because the bigger risk 250 00:12:24,559 --> 00:12:28,160 Speaker 1: is letting inflation become entrenched. And I think that's right, Kayley. 251 00:12:28,200 --> 00:12:30,320 Speaker 1: It's so important here and I'll have the chart for Monday. 252 00:12:30,320 --> 00:12:31,920 Speaker 1: Folks will do it in the five am hour if 253 00:12:31,920 --> 00:12:34,480 Speaker 1: they let me in the building. Kayley. I look at 254 00:12:34,600 --> 00:12:38,679 Speaker 1: curve inversion, and we forget how rare this is. I've 255 00:12:38,679 --> 00:12:41,679 Speaker 1: really got to go back thirty years to get out 256 00:12:41,720 --> 00:12:45,360 Speaker 1: to a half a percentage point inversion the curve. That's 257 00:12:45,400 --> 00:12:48,280 Speaker 1: how rare what some of these strategists are talking about. Yeah, 258 00:12:48,280 --> 00:12:50,720 Speaker 1: we're talking nineteen eighties, the last time we saw yield 259 00:12:50,720 --> 00:12:52,920 Speaker 1: curve inverted by fifty basis points. And yet that is 260 00:12:52,960 --> 00:12:55,760 Speaker 1: what we heard from Priamiser earlier. She basically echoed the 261 00:12:55,760 --> 00:12:57,880 Speaker 1: sentiment that the FED is going to be focused on inflation. 262 00:12:57,880 --> 00:13:00,240 Speaker 1: They're going to continue to be aggressive even if we 263 00:13:00,320 --> 00:13:04,280 Speaker 1: do see that softening in the economy. Therefore, you continue 264 00:13:04,280 --> 00:13:06,360 Speaker 1: to see the short end a lot higher than than 265 00:13:06,400 --> 00:13:08,240 Speaker 1: the long end. So, Jeff, do you agree with that 266 00:13:08,240 --> 00:13:11,119 Speaker 1: that we could ultimately end up at half a percentage 267 00:13:11,120 --> 00:13:15,080 Speaker 1: point inverted with the Fed tolerate that? Well, you know, 268 00:13:15,160 --> 00:13:18,800 Speaker 1: it's really about the broader question of how will as 269 00:13:18,920 --> 00:13:21,280 Speaker 1: we get into the fall and you start to see 270 00:13:21,480 --> 00:13:25,640 Speaker 1: the impact of a slowing economy, how will the Fed balance? 271 00:13:25,880 --> 00:13:31,600 Speaker 1: It's two objectives between inflation fighting, which is front and center. 272 00:13:31,760 --> 00:13:34,720 Speaker 1: What they're saying is the number one objected. Kind of 273 00:13:34,760 --> 00:13:37,440 Speaker 1: easy to do that when the labor markets are red hot, 274 00:13:37,480 --> 00:13:40,040 Speaker 1: and the Secretary Walsh, as you're gonna have later on 275 00:13:40,080 --> 00:13:42,400 Speaker 1: the program, takes a victory lap, it's gonna be a 276 00:13:42,400 --> 00:13:44,800 Speaker 1: lot harder for the Fed, and therefore for the market 277 00:13:45,320 --> 00:13:48,680 Speaker 1: to still talk about inflation is the only objective when 278 00:13:48,720 --> 00:13:51,880 Speaker 1: we're looking at an environment when inflation the year of 279 00:13:51,920 --> 00:13:55,599 Speaker 1: a year basis is coming down, but unemployment UH is 280 00:13:55,640 --> 00:13:57,960 Speaker 1: potentially going up, or at least these payroll figures are 281 00:13:58,000 --> 00:14:00,840 Speaker 1: going down. So you know, pre as call on the 282 00:14:00,880 --> 00:14:05,560 Speaker 1: inversion is really a statement that they're gonna maintain into 283 00:14:05,600 --> 00:14:11,280 Speaker 1: a slowing economy, this very aggressive stance on FED tightening. 284 00:14:11,480 --> 00:14:13,199 Speaker 1: They may or may not do that. I think it's 285 00:14:13,200 --> 00:14:15,920 Speaker 1: an open question as we get into data that is 286 00:14:15,960 --> 00:14:18,480 Speaker 1: a little bit more mixed in terms of the growth 287 00:14:18,520 --> 00:14:22,240 Speaker 1: inflation trade off. But clearly, if they maintain this degree 288 00:14:22,480 --> 00:14:26,720 Speaker 1: of inflation fighting focus into an environment that is clearly slowing, 289 00:14:26,760 --> 00:14:29,120 Speaker 1: than yes, you could see that degree of inversion in 290 00:14:29,120 --> 00:14:32,160 Speaker 1: the curve. Okay, So the operative word there being if 291 00:14:32,400 --> 00:14:34,920 Speaker 1: the question of whether or not that the Fed is 292 00:14:34,960 --> 00:14:36,960 Speaker 1: going to blink It used to be a conversation of 293 00:14:36,960 --> 00:14:39,680 Speaker 1: September that clearly has shifted with some people still looking 294 00:14:39,680 --> 00:14:42,560 Speaker 1: for fifty basis points in September. How long, Jeff, do 295 00:14:42,600 --> 00:14:45,840 Speaker 1: you think it will take the data to deteriorate enough 296 00:14:46,400 --> 00:14:50,200 Speaker 1: that there is a potential that the Fed thinks twice? Yeah, 297 00:14:50,400 --> 00:14:52,880 Speaker 1: you know, I think we're looking at a slowdown in 298 00:14:52,920 --> 00:14:55,720 Speaker 1: the jobs market into the fall. I think that sets 299 00:14:55,800 --> 00:15:00,520 Speaker 1: up September, October, November periods where we see need that 300 00:15:00,640 --> 00:15:04,040 Speaker 1: kind of tradeoff really starting to show up, and these 301 00:15:04,760 --> 00:15:08,800 Speaker 1: reports become a lot more important. Um, the FED meetings 302 00:15:08,960 --> 00:15:11,200 Speaker 1: are going to get a lot more interesting when you 303 00:15:11,320 --> 00:15:14,800 Speaker 1: have that tension and they're starting to think about and 304 00:15:14,800 --> 00:15:17,640 Speaker 1: and talk about slowing the pace. A lot of that's 305 00:15:17,640 --> 00:15:21,120 Speaker 1: going to depend on the pace of slowdown in the 306 00:15:21,160 --> 00:15:23,920 Speaker 1: inflation side, and there's an expectation that you get that 307 00:15:24,040 --> 00:15:26,560 Speaker 1: slow down. And so that's this kind of movement in 308 00:15:26,640 --> 00:15:30,000 Speaker 1: two sides here. Falling inflation and rising unemployment is going 309 00:15:30,040 --> 00:15:32,840 Speaker 1: to make a very difficult period for the FED. It's 310 00:15:32,880 --> 00:15:34,840 Speaker 1: not where they are today. So I think later this 311 00:15:34,920 --> 00:15:38,240 Speaker 1: month it's gonna be seventy five basis points and and 312 00:15:38,320 --> 00:15:41,320 Speaker 1: you know, a more clear path. But I think as 313 00:15:41,360 --> 00:15:43,680 Speaker 1: we get into the fall and the impact of the 314 00:15:43,720 --> 00:15:46,800 Speaker 1: tightening and financial conditions shows up in the labor markets, 315 00:15:46,840 --> 00:15:50,160 Speaker 1: then we're gonna see this tradeoff manifest in the Fed's 316 00:15:50,200 --> 00:15:53,520 Speaker 1: decisions on radio and television. If it's joining us Jeffrey Rosenberg, 317 00:15:53,520 --> 00:15:56,000 Speaker 1: where US is black rock after a buoyant jobs report, 318 00:15:56,040 --> 00:15:59,480 Speaker 1: two year react sharply where they higher two year yield 319 00:15:59,520 --> 00:16:02,840 Speaker 1: out eleven basis points three point one two, with some 320 00:16:03,240 --> 00:16:07,240 Speaker 1: substantial negative four basis points curve and version as well. 321 00:16:07,280 --> 00:16:10,240 Speaker 1: Equities on the chin ever so slightly not done. A 322 00:16:10,240 --> 00:16:13,080 Speaker 1: lot of futures down twenty six down, futures down one 323 00:16:13,160 --> 00:16:15,760 Speaker 1: or three. The vix comes up point three six points 324 00:16:15,840 --> 00:16:19,400 Speaker 1: twenty six point four four. Jeff, you're living a Bloomberg 325 00:16:19,440 --> 00:16:22,600 Speaker 1: total return all in index of a negative twelve percent. 326 00:16:22,680 --> 00:16:24,880 Speaker 1: I'm going to chart it out from two thousand twenty 327 00:16:25,360 --> 00:16:30,600 Speaker 1: is negative six percent an annualized in bonds. How do 328 00:16:30,640 --> 00:16:35,040 Speaker 1: you hide? Do you hide by going short duration? Well, 329 00:16:35,040 --> 00:16:37,400 Speaker 1: on the on the rates side, you know so much 330 00:16:37,400 --> 00:16:41,760 Speaker 1: of that is the combination of two extraordinary things. Tom. First, 331 00:16:41,760 --> 00:16:46,880 Speaker 1: we came into this bond market with very low inflation expectations. 332 00:16:46,920 --> 00:16:50,440 Speaker 1: You know, this transitory was priced into the bond market, 333 00:16:50,480 --> 00:16:52,920 Speaker 1: and so when you have low coupon and you have 334 00:16:53,000 --> 00:16:57,920 Speaker 1: a reset in inflation expectations, uh, that that's the impact. 335 00:16:58,240 --> 00:17:01,760 Speaker 1: So bond markets do a really bad job of placing 336 00:17:02,120 --> 00:17:05,679 Speaker 1: unexpected inflation, and that's what we got. The good news, 337 00:17:05,840 --> 00:17:08,359 Speaker 1: if there is some going forward, is we've priced a 338 00:17:08,400 --> 00:17:12,720 Speaker 1: lot more inflation here into into bonds, and so you've 339 00:17:12,760 --> 00:17:16,480 Speaker 1: seen increases across the curve in yields, a lot of 340 00:17:16,560 --> 00:17:19,880 Speaker 1: increases in the short end. And yes, shortening duration here 341 00:17:19,920 --> 00:17:22,320 Speaker 1: makes a lot of sense because duration has been a 342 00:17:22,320 --> 00:17:25,879 Speaker 1: tough environment and an absolute return environment, and so the 343 00:17:25,960 --> 00:17:28,480 Speaker 1: yields are getting to a better place. Now. We need 344 00:17:28,520 --> 00:17:32,960 Speaker 1: to see the inflation forecast validated for that to manifest, 345 00:17:33,040 --> 00:17:37,119 Speaker 1: there's still, you know, a risk there, but certainly we've 346 00:17:37,160 --> 00:17:40,960 Speaker 1: priced in a better inflation expectation trajectory. If we start 347 00:17:41,040 --> 00:17:44,960 Speaker 1: to realize these forecasts and inflation coming down, some of 348 00:17:45,000 --> 00:17:46,919 Speaker 1: that yield increase is going to be a little bit 349 00:17:46,920 --> 00:17:49,239 Speaker 1: more protective in the front end of Kelly, what I'm 350 00:17:49,320 --> 00:17:52,199 Speaker 1: hearing here from Mr Rosenberg is the immense amount of 351 00:17:52,240 --> 00:17:55,199 Speaker 1: uncertainty going forward, and let's already sell it here up 352 00:17:55,240 --> 00:17:58,000 Speaker 1: to the inflation report of next week. Yeah, an inflation 353 00:17:58,040 --> 00:18:00,919 Speaker 1: report that could hear a nine handle on cp I 354 00:18:01,000 --> 00:18:03,000 Speaker 1: tom on Wednesday. So that's going to be something that 355 00:18:03,040 --> 00:18:05,680 Speaker 1: this bond market is watching carefully. And talking of the 356 00:18:05,760 --> 00:18:08,439 Speaker 1: uncertainty that's out there, the amount of volatility we have 357 00:18:08,520 --> 00:18:12,159 Speaker 1: seen and continue to see, we've almost gotten used to 358 00:18:12,200 --> 00:18:14,840 Speaker 1: the idea that we see double digit basis point moves 359 00:18:15,080 --> 00:18:17,399 Speaker 1: on yields, the two year yield right now doing the 360 00:18:17,440 --> 00:18:20,600 Speaker 1: exact same thing today up whopping eleven basis points on 361 00:18:20,640 --> 00:18:24,040 Speaker 1: the back of this data. It is remarkable the extent 362 00:18:24,080 --> 00:18:27,359 Speaker 1: to which we see the bond market moving and the 363 00:18:27,440 --> 00:18:30,560 Speaker 1: uncertainty that is out there. Jeff, I'm wondering when you 364 00:18:30,600 --> 00:18:32,560 Speaker 1: think we will get a clear enough read that the 365 00:18:32,600 --> 00:18:37,159 Speaker 1: bond market can make a decision either way. Yeah, you know, 366 00:18:37,200 --> 00:18:40,920 Speaker 1: look at the consensus forecasts. Uh, you can find them 367 00:18:40,920 --> 00:18:46,080 Speaker 1: on Bloomberg ecst. Uh. Sorry for the product plug there 368 00:18:46,080 --> 00:18:49,760 Speaker 1: for you guys, but the consensus forecasts have inflation on 369 00:18:49,800 --> 00:18:51,600 Speaker 1: the year of the year basis, you know, coming down. 370 00:18:51,720 --> 00:18:54,680 Speaker 1: So we need to see that. And as you point out, 371 00:18:54,720 --> 00:18:57,960 Speaker 1: you know, the CPI reports are as important now than 372 00:18:57,960 --> 00:19:01,480 Speaker 1: these payroll reports, arguably even more important as inflation is 373 00:19:01,520 --> 00:19:06,040 Speaker 1: really the central issue for the outlook for financial markets. 374 00:19:06,040 --> 00:19:08,080 Speaker 1: So that's what we need to see. That's what the 375 00:19:08,119 --> 00:19:11,560 Speaker 1: bond market needs to see in these monthly figures. Uh, 376 00:19:11,600 --> 00:19:15,560 Speaker 1: you know, coming down into the forecast range uh and 377 00:19:15,600 --> 00:19:20,600 Speaker 1: seeing the broadening of inflation story start to start to 378 00:19:20,080 --> 00:19:23,040 Speaker 1: to to pull back. It's been a bad set to 379 00:19:23,280 --> 00:19:26,199 Speaker 1: sce in a row where it's been the opposite, and 380 00:19:26,240 --> 00:19:28,720 Speaker 1: that's why we've gotten this this change from the Fed. 381 00:19:28,920 --> 00:19:33,120 Speaker 1: As Jonathan pointed out, expecting fifty and getting seventy, that's 382 00:19:33,119 --> 00:19:36,160 Speaker 1: because you've had inflation really show up on the surprise 383 00:19:36,200 --> 00:19:38,600 Speaker 1: to the upside. So we will be able to have 384 00:19:38,640 --> 00:19:41,960 Speaker 1: a little more confidence that we're not getting these persistent 385 00:19:42,600 --> 00:19:46,320 Speaker 1: UH inflation surprises when you see it in those CPI reports. 386 00:19:46,480 --> 00:19:55,800 Speaker 1: Jeff Frozenberg, thank you so much. I mean political moment, folks. 387 00:19:56,119 --> 00:19:59,119 Speaker 1: It is important at Bloomberg Savella's to speak truly to 388 00:19:59,200 --> 00:20:02,479 Speaker 1: those steep in experience. I think of Robert Feldman at 389 00:20:02,480 --> 00:20:05,480 Speaker 1: Morgan Stanley or David pilling X of the f T 390 00:20:05,680 --> 00:20:10,280 Speaker 1: with his wonderful blending adversity, bending adversity. But also on 391 00:20:10,280 --> 00:20:13,399 Speaker 1: that list is Tobias Harris. To say, he's senior Fellow 392 00:20:13,440 --> 00:20:16,879 Speaker 1: for Asia at the Center for American Progress, barely describes 393 00:20:16,920 --> 00:20:21,600 Speaker 1: the study from Brandeis to Cambridge to his book The Econoclast. 394 00:20:21,960 --> 00:20:25,479 Speaker 1: Mr Abe, We're thrilled that Tobias could join us UH 395 00:20:25,640 --> 00:20:30,120 Speaker 1: this morning. Tobias, this is someone who took what Kazumi did, 396 00:20:30,560 --> 00:20:35,520 Speaker 1: which was drag rural Japan into a modern urban history. 397 00:20:35,640 --> 00:20:39,800 Speaker 1: That's what Kazuomi did, a modern immediacy of the urban landscape. 398 00:20:40,240 --> 00:20:43,000 Speaker 1: And then Abe said we have to go further, we 399 00:20:43,080 --> 00:20:46,240 Speaker 1: have to go beyond the legacy of World War Two. 400 00:20:46,640 --> 00:20:52,000 Speaker 1: Was he successful? I think in a very broad sense. 401 00:20:52,160 --> 00:20:55,000 Speaker 1: I think there's certainly no going back to what Japan 402 00:20:55,119 --> 00:20:58,320 Speaker 1: was like before Abe returned to the premiership in and 403 00:20:58,640 --> 00:21:01,080 Speaker 1: so in that sense, I think you very much a success. 404 00:21:01,200 --> 00:21:04,560 Speaker 1: And you know that that Abe was very fond of 405 00:21:04,560 --> 00:21:07,080 Speaker 1: of Mrs Thatcher's line there is no alternative when he 406 00:21:07,080 --> 00:21:09,480 Speaker 1: talked about his own policies, and I think that is 407 00:21:09,520 --> 00:21:13,320 Speaker 1: what Japan has now. You have uh An economic policy, 408 00:21:13,680 --> 00:21:16,760 Speaker 1: in foreign policy. He laid a blueprint for his successors, 409 00:21:16,880 --> 00:21:19,000 Speaker 1: and no one really has thought of anything better. You 410 00:21:19,040 --> 00:21:22,560 Speaker 1: wrote in Foreign Affairs magazine of the arch moment of Japan, 411 00:21:22,800 --> 00:21:27,640 Speaker 1: which is malaise. Their voter turnout is appallingly low compared 412 00:21:27,680 --> 00:21:31,720 Speaker 1: to recent history. How did he and how does anybody 413 00:21:31,840 --> 00:21:35,639 Speaker 1: new in Japan bring a new spirit to political Japan? 414 00:21:35,760 --> 00:21:39,560 Speaker 1: It seems to be gone. I think there's gonna be 415 00:21:39,600 --> 00:21:42,760 Speaker 1: a lot of questions about Japanese democracy after today's events, 416 00:21:42,800 --> 00:21:46,360 Speaker 1: and and um, you know, it's it's shocking. I think 417 00:21:46,480 --> 00:21:49,120 Speaker 1: everyone is is think trying to think through what it means. 418 00:21:49,520 --> 00:21:53,520 Speaker 1: Um And in some ways obvious assassination is a reflection 419 00:21:53,680 --> 00:21:55,399 Speaker 1: of one of the one of the best things about 420 00:21:55,560 --> 00:21:59,280 Speaker 1: Japanese democracy, which is how accessible it's elected officials are 421 00:22:00,080 --> 00:22:02,960 Speaker 1: to the public. You know, Japanese election campaign, yes, they 422 00:22:03,000 --> 00:22:04,720 Speaker 1: you know, they use the internet more than they used 423 00:22:04,720 --> 00:22:08,879 Speaker 1: to uh their tv ads, but they're still based largely 424 00:22:08,920 --> 00:22:12,360 Speaker 1: on politicians getting out there on their feet and interacting 425 00:22:12,359 --> 00:22:14,480 Speaker 1: with voters directly. And you know, I think there's some 426 00:22:14,520 --> 00:22:16,920 Speaker 1: concern does this mean the end of that? Is there 427 00:22:16,960 --> 00:22:18,920 Speaker 1: going to be you know, security court on this, you know, 428 00:22:18,960 --> 00:22:21,040 Speaker 1: are you not going to have that accessibility? And I 429 00:22:21,080 --> 00:22:23,159 Speaker 1: certainly hope not. I think it was a strength of 430 00:22:23,200 --> 00:22:26,040 Speaker 1: Japanese democracy that voters had as much access to their 431 00:22:26,040 --> 00:22:30,320 Speaker 1: representative to this day. He was an arched conservative and 432 00:22:30,359 --> 00:22:34,240 Speaker 1: also there was great liberality on social policy. I'm going 433 00:22:34,280 --> 00:22:37,960 Speaker 1: to suggest he tried to drag his LDP to the center. 434 00:22:38,520 --> 00:22:42,639 Speaker 1: Is there a political center in Japan in two thousand 435 00:22:42,760 --> 00:22:46,840 Speaker 1: twenty three. I don't know if it's so much the 436 00:22:47,000 --> 00:22:50,439 Speaker 1: center as it was. You know, you know, fundamentally, he 437 00:22:50,520 --> 00:22:53,720 Speaker 1: was someone who wanted his country to be strong, and 438 00:22:54,040 --> 00:22:56,200 Speaker 1: basically he would do what it what it would take, 439 00:22:56,400 --> 00:22:58,360 Speaker 1: whatever it would take to do that. And if that 440 00:22:58,400 --> 00:23:01,920 Speaker 1: meant globalizing Japan, if it meant opening Japan to the world, 441 00:23:01,960 --> 00:23:05,439 Speaker 1: if it meant welcoming investment and tourism, and you know, 442 00:23:05,520 --> 00:23:07,639 Speaker 1: opening Japan to trade through something like a tv P, 443 00:23:08,119 --> 00:23:11,120 Speaker 1: he was going to do that even if you know instinctively, 444 00:23:11,160 --> 00:23:13,440 Speaker 1: you know, you look at traditional conservatives and you talked 445 00:23:13,440 --> 00:23:18,360 Speaker 1: about uh former Prime Minister Koizumi's war with oral japan Um. 446 00:23:18,440 --> 00:23:20,640 Speaker 1: You know, even if it meant taking on those core 447 00:23:20,800 --> 00:23:24,080 Speaker 1: LDP interest to bring uh, you know, to open Japan 448 00:23:24,119 --> 00:23:25,879 Speaker 1: to the world, Abe was willing to do that. I 449 00:23:25,880 --> 00:23:28,040 Speaker 1: don't think he was a reformer quite the way that 450 00:23:28,040 --> 00:23:31,399 Speaker 1: that Koizumi was, but he did recognize that that Japan 451 00:23:31,520 --> 00:23:33,760 Speaker 1: had to open to foreign influences more than it had 452 00:23:33,800 --> 00:23:37,240 Speaker 1: been in the past. Tobias, please explain to us how 453 00:23:37,400 --> 00:23:41,200 Speaker 1: the response will be from the emperor and his family. 454 00:23:41,359 --> 00:23:46,159 Speaker 1: It is such a unique, original relationship. How will Emperor 455 00:23:46,359 --> 00:23:52,720 Speaker 1: Aruhito respond to this assassination? What a what a fascinating question, because, 456 00:23:52,760 --> 00:23:54,560 Speaker 1: of course, I mean, there were plenty of moments with 457 00:23:54,960 --> 00:23:58,520 Speaker 1: uh the current emperor's father, some moments of tension between 458 00:23:59,080 --> 00:24:04,080 Speaker 1: Uh miss Rabe and the former Emperor Um. But you 459 00:24:04,119 --> 00:24:06,720 Speaker 1: know what it comes down to it in moments like 460 00:24:06,760 --> 00:24:10,000 Speaker 1: this that are you're just genuinely shocking, tragic moment for 461 00:24:10,040 --> 00:24:13,639 Speaker 1: the entire nation. The imperial household has generally stepped up 462 00:24:14,200 --> 00:24:17,840 Speaker 1: and served as basically given voice to those feelings of 463 00:24:17,880 --> 00:24:20,800 Speaker 1: the entire nation, and I would expect as much from 464 00:24:20,880 --> 00:24:22,720 Speaker 1: from emperor. And I don't think this is gonna be 465 00:24:22,720 --> 00:24:24,600 Speaker 1: a moment of political tension. I think this will be 466 00:24:24,640 --> 00:24:28,679 Speaker 1: a moment, uh, you know where where uh the Emperor 467 00:24:28,720 --> 00:24:32,560 Speaker 1: speaks on behalf of public sorrow. Just quickly to Bias, 468 00:24:32,600 --> 00:24:34,080 Speaker 1: we only have about a minute left. But you were 469 00:24:34,080 --> 00:24:36,800 Speaker 1: talking about how Abe looked globally, and I've heard from 470 00:24:36,840 --> 00:24:39,080 Speaker 1: many people this morning that he was a unique figure 471 00:24:39,320 --> 00:24:42,919 Speaker 1: in Japanese politics in that he did have that global recognition. 472 00:24:42,960 --> 00:24:46,760 Speaker 1: I mean, people knew who Shinzo Abe was. Where does 473 00:24:47,160 --> 00:24:53,200 Speaker 1: Japan stand in terms of global politics in his absence, Well, certainly, 474 00:24:53,320 --> 00:24:55,879 Speaker 1: you know, he was probably the most powerful figure in 475 00:24:55,960 --> 00:24:58,400 Speaker 1: Japanese politics right up until the moment he died. I mean, 476 00:24:58,400 --> 00:25:01,359 Speaker 1: even more powerful in somebodys than then Prime Minister Kishida. 477 00:25:01,400 --> 00:25:04,560 Speaker 1: And he was pushing, uh, you know, for more defense spending, 478 00:25:04,600 --> 00:25:07,920 Speaker 1: pushing for a more sort of defense posture. And it's 479 00:25:07,920 --> 00:25:09,880 Speaker 1: hard to see who's gonna fill his shoes in terms 480 00:25:09,920 --> 00:25:12,400 Speaker 1: of making that case. And so I think it introduces 481 00:25:12,440 --> 00:25:14,359 Speaker 1: maybe just a little uncertainty what we're gonna get out 482 00:25:14,359 --> 00:25:16,480 Speaker 1: of the policy making process. I think there's gonna be 483 00:25:16,480 --> 00:25:18,560 Speaker 1: a lot of pressure on Kishida to maybe continue his 484 00:25:18,600 --> 00:25:22,760 Speaker 1: agenda UH and to fulfill Abbe's mission. But there's still 485 00:25:22,760 --> 00:25:24,560 Speaker 1: work to do, and Kishida is going to really have 486 00:25:24,640 --> 00:25:26,840 Speaker 1: to step up in the moment UH and continue to 487 00:25:26,880 --> 00:25:28,760 Speaker 1: live up to the blueprint that Abbe outlined when he 488 00:25:28,760 --> 00:25:31,600 Speaker 1: was Prime Minister. Thank you for bam of this this morning, 489 00:25:31,640 --> 00:25:39,200 Speaker 1: Savice House that the sense of for American progress. We're 490 00:25:39,280 --> 00:25:42,440 Speaker 1: Helene Becker owns the high Ground and Counting Company and 491 00:25:42,520 --> 00:25:44,880 Speaker 1: joins us UH this morning. Helena. I want to look 492 00:25:44,920 --> 00:25:48,600 Speaker 1: forward into earnings as well. With all this chaos and 493 00:25:48,680 --> 00:25:52,240 Speaker 1: with the airlines full, are they actually bringing anything down 494 00:25:52,320 --> 00:25:57,440 Speaker 1: the income statement to make what we call airline profit? Yes, yes, 495 00:25:57,520 --> 00:26:00,280 Speaker 1: Actually we think that most of the airlines will be profitable. 496 00:26:00,320 --> 00:26:03,720 Speaker 1: A couple will report losses in the quarter um but 497 00:26:04,440 --> 00:26:07,520 Speaker 1: in our earnings preview which we published yesterday, we think 498 00:26:07,520 --> 00:26:11,160 Speaker 1: there are some positive surprises ahead even with the flight 499 00:26:11,200 --> 00:26:14,960 Speaker 1: cancelations and delays that they experienced a Memorial Day weekend 500 00:26:15,119 --> 00:26:18,400 Speaker 1: and over Father's Day weekend. And I will just point 501 00:26:18,400 --> 00:26:22,720 Speaker 1: out that the delays last weekend we're smaller than the 502 00:26:22,840 --> 00:26:25,840 Speaker 1: number of delays we saw those two weekends. So the 503 00:26:25,880 --> 00:26:29,920 Speaker 1: airlines are cutting capacity, which obviously has the effect given 504 00:26:29,960 --> 00:26:33,160 Speaker 1: that demand is still very very strong. UM, it has 505 00:26:33,240 --> 00:26:36,160 Speaker 1: the effect of raising ticket prices, and we think that 506 00:26:36,160 --> 00:26:40,040 Speaker 1: they're recovering between sev and a d pent of the 507 00:26:40,160 --> 00:26:43,040 Speaker 1: rise and the cost of fuel UM. As we go 508 00:26:43,160 --> 00:26:45,480 Speaker 1: through the year, we're getting a little more concerned with 509 00:26:45,680 --> 00:26:50,439 Speaker 1: wage inflation UM. The contract that United Pilots may vote 510 00:26:50,440 --> 00:26:54,440 Speaker 1: on later this month UM provided for and almost fifteen 511 00:26:54,440 --> 00:26:59,000 Speaker 1: percent increase. American offered their pilots seventeen percent increase. So 512 00:26:59,040 --> 00:27:03,639 Speaker 1: we're definitely seeing significant wage inflation UM. And and that 513 00:27:03,720 --> 00:27:07,760 Speaker 1: won't that won't be UM, not not for the foreseeable future, 514 00:27:08,520 --> 00:27:13,480 Speaker 1: and and so UM with demand still strong, although we're 515 00:27:13,800 --> 00:27:16,879 Speaker 1: a little worried what happens after after somes What I 516 00:27:16,880 --> 00:27:19,520 Speaker 1: want to talk about, Helene, as you know, the price 517 00:27:19,600 --> 00:27:21,720 Speaker 1: tolerance in this industry right now for the consumer just 518 00:27:21,760 --> 00:27:24,560 Speaker 1: seems to be unlimited. It's immense. I'm just wondering whether 519 00:27:24,560 --> 00:27:26,400 Speaker 1: it's there in the back half of this year. How 520 00:27:26,400 --> 00:27:29,200 Speaker 1: do you gauge that? Yeah, I don't think it will 521 00:27:29,280 --> 00:27:33,320 Speaker 1: be Frankly, UM, we're worried about that because consumers you 522 00:27:33,359 --> 00:27:35,200 Speaker 1: guys talk about it on the show all the time. 523 00:27:35,280 --> 00:27:38,440 Speaker 1: Consumers have a lot of financial pressure right now. They've 524 00:27:38,480 --> 00:27:41,640 Speaker 1: got higher UM prices when they fill up their car 525 00:27:41,720 --> 00:27:44,240 Speaker 1: when they went to get to work, and then they 526 00:27:44,280 --> 00:27:47,920 Speaker 1: have UM cooling their home is going up. Eventually heating 527 00:27:47,920 --> 00:27:49,760 Speaker 1: their homeless is going to go up. And I think 528 00:27:49,760 --> 00:27:52,359 Speaker 1: there are a lot of people who really wanted to 529 00:27:52,400 --> 00:27:56,240 Speaker 1: travel this summer. They haven't traveled for a couple of years, um, 530 00:27:56,359 --> 00:27:59,399 Speaker 1: and they just wanted to get out and about. And 531 00:27:59,520 --> 00:28:02,359 Speaker 1: as you go through the year, I think that after 532 00:28:02,680 --> 00:28:05,639 Speaker 1: after people start returning to the office again. I noticed 533 00:28:05,680 --> 00:28:08,400 Speaker 1: when I'm in the city it's so much more crowded 534 00:28:08,400 --> 00:28:10,720 Speaker 1: than it was just you know, three months ago, two 535 00:28:10,720 --> 00:28:14,520 Speaker 1: months ago, um. And And so I think we're gonna 536 00:28:14,560 --> 00:28:17,880 Speaker 1: we're gonna see pressure on on on traffic growth as 537 00:28:18,000 --> 00:28:20,320 Speaker 1: as we head into the holiday season. So how does 538 00:28:20,359 --> 00:28:23,080 Speaker 1: an airline make longer term decisions? Then? Because I think 539 00:28:23,080 --> 00:28:25,880 Speaker 1: about the retailers which struggled for so long to get 540 00:28:25,880 --> 00:28:28,520 Speaker 1: adequate supply and now they're left with too much inventory. 541 00:28:28,640 --> 00:28:30,320 Speaker 1: Is demand is waning? Are we're going to see a 542 00:28:30,359 --> 00:28:32,520 Speaker 1: situation where airlines try to get more pilots, they try 543 00:28:32,520 --> 00:28:35,119 Speaker 1: to get more flight attendants, just labor in general, and 544 00:28:35,160 --> 00:28:37,320 Speaker 1: as soon as they get all of that, the demand's 545 00:28:37,320 --> 00:28:40,880 Speaker 1: gone and they're overstaffed. Yeah, that's of course we worry 546 00:28:40,880 --> 00:28:43,840 Speaker 1: about that too. I think the pilot issue is is 547 00:28:43,880 --> 00:28:45,800 Speaker 1: going to be with us for at least another two years, 548 00:28:45,840 --> 00:28:48,880 Speaker 1: So I'm not so worried about them, UM, and I'm 549 00:28:48,920 --> 00:28:51,920 Speaker 1: not really that worried about the flight attendants. To your point, though, 550 00:28:52,200 --> 00:28:55,080 Speaker 1: I think focus on the capacity and the number of 551 00:28:55,080 --> 00:28:58,760 Speaker 1: aircraft in the air. During the pandemic, the industry retired 552 00:28:58,760 --> 00:29:01,080 Speaker 1: about eight hundred plants at the u S system and 553 00:29:01,120 --> 00:29:04,040 Speaker 1: those are never coming back. And then there are still 554 00:29:04,080 --> 00:29:07,360 Speaker 1: delivery delays from Airbus and Boeing on the especially the 555 00:29:07,440 --> 00:29:10,000 Speaker 1: narrow body aircraft. I was reading an article earlier this 556 00:29:10,040 --> 00:29:14,240 Speaker 1: morning that the manufacturers can't get enough engines. The engine 557 00:29:14,320 --> 00:29:17,440 Speaker 1: manufacturers are having trouble keeping up with the supply, so 558 00:29:17,520 --> 00:29:22,280 Speaker 1: you're not delivering as many aircraft and UM as you reported. 559 00:29:22,560 --> 00:29:27,160 Speaker 1: Uh last week you saw that the airlines cut capacity 560 00:29:27,640 --> 00:29:30,520 Speaker 1: UM for the summer months and that will probably continue, 561 00:29:30,600 --> 00:29:33,440 Speaker 1: and that's that's their big weapon, right, It's just keeping 562 00:29:33,480 --> 00:29:36,800 Speaker 1: a lid on how much capacity can go up. UM. 563 00:29:37,200 --> 00:29:40,600 Speaker 1: And then we also published yesterday the number of employees 564 00:29:40,880 --> 00:29:44,040 Speaker 1: as of April. We're back to two nineteen levels. It's 565 00:29:44,120 --> 00:29:49,240 Speaker 1: just they're in the wrong places there there right, everybody went, um, 566 00:29:49,360 --> 00:29:52,640 Speaker 1: I mean think about pre pandemic. Everybody was going to Chicago, 567 00:29:52,680 --> 00:29:56,480 Speaker 1: New York, San Francisco, Boston business centers. And now everybody's 568 00:29:56,520 --> 00:30:03,160 Speaker 1: going to leisure destination's Miami, California, Southern California, Sona. And 569 00:30:03,280 --> 00:30:06,560 Speaker 1: so you're you're seeing that chip. So people are people 570 00:30:06,560 --> 00:30:09,680 Speaker 1: are just misplaced, Elaine Thomas. So jealousy hasn't on a 571 00:30:09,720 --> 00:30:15,800 Speaker 1: vacation yet. Your own decision the fetish front. Remember you 572 00:30:15,800 --> 00:30:20,080 Speaker 1: went to Paris Etiam in the year Yeah, back to 573 00:30:20,160 --> 00:30:25,400 Speaker 1: that of Cowen. This is the Bloomberg Surveillance Podcast. Thanks 574 00:30:25,440 --> 00:30:28,760 Speaker 1: for listening. Join us live weekdays from seven to ten 575 00:30:28,840 --> 00:30:33,320 Speaker 1: am Eastern on Bloomberg Radio and on Bloomberg Television each 576 00:30:33,400 --> 00:30:37,120 Speaker 1: day from six to nine am for insight from the 577 00:30:37,160 --> 00:30:42,360 Speaker 1: best in economics, finance, investment, and international relations. And subscribe 578 00:30:42,400 --> 00:30:47,360 Speaker 1: to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com, 579 00:30:47,440 --> 00:30:50,680 Speaker 1: and of course on the terminal. I'm Tom Keene and 580 00:30:50,800 --> 00:31:00,080 Speaker 1: this is Bloomberg e