1 00:00:02,520 --> 00:00:13,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 2 00:00:13,840 --> 00:00:17,920 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:21,240 Speaker 1: on Apple car Play or Android Auto with the Bloomberg 4 00:00:21,320 --> 00:00:24,840 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:25,280 --> 00:00:27,320 Speaker 1: or watch us live on YouTube. 6 00:00:27,400 --> 00:00:31,800 Speaker 2: We're thrilled did Is Taylor drops here? Our surveillance Swift 7 00:00:31,800 --> 00:00:35,600 Speaker 2: correspondent Amy was Silverman joining us today. But the timing 8 00:00:35,640 --> 00:00:37,160 Speaker 2: you're so important, I'm not going to give you any 9 00:00:37,159 --> 00:00:40,239 Speaker 2: Taylor chat much today. Amy, She's had a derriv of 10 00:00:40,280 --> 00:00:45,159 Speaker 2: strategy RBC. What did do the cross moment say about 11 00:00:45,159 --> 00:00:46,960 Speaker 2: this moment for America? 12 00:00:48,320 --> 00:00:51,240 Speaker 3: Well, look, the last time I came, Tom, we talked 13 00:00:51,280 --> 00:00:53,640 Speaker 3: a little bit about the left tail and the right tail, 14 00:00:53,760 --> 00:00:56,640 Speaker 3: and you know, part of our conversation was that I 15 00:00:56,720 --> 00:00:59,640 Speaker 3: still felt like investors were more worried about that right tail. 16 00:01:00,160 --> 00:01:01,360 Speaker 4: Here we are with over. 17 00:01:01,400 --> 00:01:04,840 Speaker 3: With markets at all time highs SKEW is relatively low. 18 00:01:04,959 --> 00:01:07,200 Speaker 3: You know, all the hedges that had been placed were 19 00:01:07,240 --> 00:01:11,200 Speaker 3: not monetized because the markets kept going up. And when 20 00:01:11,200 --> 00:01:13,760 Speaker 3: I talked to investors, they say, this just feels like 21 00:01:13,800 --> 00:01:15,360 Speaker 3: the most reluctant rally. 22 00:01:15,760 --> 00:01:20,440 Speaker 2: Roman Friedman, NYU I think he's very controversial. In economics, 23 00:01:20,760 --> 00:01:25,560 Speaker 2: he would say the rehedge will kill you. Inside baseball, 24 00:01:26,040 --> 00:01:29,720 Speaker 2: we've had this bull market, the hedges weren't monetized. They 25 00:01:29,800 --> 00:01:34,959 Speaker 2: got to go out and rehedge. Can they rehedge opportunistically here? 26 00:01:35,760 --> 00:01:39,680 Speaker 3: They certainly can. And of course, because everything's come in 27 00:01:39,680 --> 00:01:42,800 Speaker 3: from a volatility perspective, it's not that expensive. But the 28 00:01:42,840 --> 00:01:46,200 Speaker 3: reality is nobody's going to because markets are very short. 29 00:01:47,640 --> 00:01:52,880 Speaker 5: Very I love it, yeah. 30 00:01:52,760 --> 00:01:55,440 Speaker 3: Because because you know, when you're burned once twice, then 31 00:01:55,640 --> 00:01:57,800 Speaker 3: shame on you. And so you know, you see it 32 00:01:57,800 --> 00:01:59,480 Speaker 3: in some aspects of the market. You do see it 33 00:01:59,520 --> 00:02:01,800 Speaker 3: in goal, but you don't see it as much in 34 00:02:01,920 --> 00:02:03,640 Speaker 3: VIX and you don't see it as much in s 35 00:02:03,680 --> 00:02:07,120 Speaker 3: and p hedges because that concentration risk keeps pushing the 36 00:02:07,200 --> 00:02:09,360 Speaker 3: right tail to be more the fear than. 37 00:02:09,280 --> 00:02:09,720 Speaker 6: The left hand. 38 00:02:09,800 --> 00:02:12,720 Speaker 2: Can I editorialize from one Sweeney and Keene, we are 39 00:02:12,760 --> 00:02:14,359 Speaker 2: so lucky, we're not running. 40 00:02:14,080 --> 00:02:14,919 Speaker 5: Money running out. 41 00:02:16,200 --> 00:02:19,239 Speaker 6: So are your clients looking to buy protection or is 42 00:02:19,280 --> 00:02:22,480 Speaker 6: it or not? Because again I look at a VIX. 43 00:02:22,520 --> 00:02:23,839 Speaker 6: That's the only thing I kind of look at because 44 00:02:23,840 --> 00:02:25,640 Speaker 6: I'm simple and I don't see a lot of fear 45 00:02:25,639 --> 00:02:27,560 Speaker 6: out there, So what are you seeing on your desk? 46 00:02:27,919 --> 00:02:30,880 Speaker 3: So I will tell you post Liberation Day, we did 47 00:02:30,919 --> 00:02:34,440 Speaker 3: have that big rally, and investors did hedge, and a 48 00:02:34,440 --> 00:02:35,840 Speaker 3: lot of it was longer term, so a lot of 49 00:02:35,919 --> 00:02:39,280 Speaker 3: it was for that September FOMC and then when that 50 00:02:39,320 --> 00:02:41,600 Speaker 3: came and went not in the direction they had hoped 51 00:02:41,600 --> 00:02:44,440 Speaker 3: from a hedging perspective, none of that premium was rolled. 52 00:02:44,760 --> 00:02:48,200 Speaker 3: What investors tell me right now is they're looking at 53 00:02:48,240 --> 00:02:51,080 Speaker 3: alternate venues, so that could be you know, call options 54 00:02:51,120 --> 00:02:53,320 Speaker 3: on gold. Even though that's run too, they at least 55 00:02:53,320 --> 00:02:56,359 Speaker 3: feel like it's a little bit less correlated. And then 56 00:02:56,639 --> 00:02:59,240 Speaker 3: what they're waiting for is and I'm interested in what 57 00:02:59,280 --> 00:03:01,160 Speaker 3: consensus is here, but I think if we get any 58 00:03:01,200 --> 00:03:03,800 Speaker 3: sort of five to ten percent draw down, investors are 59 00:03:03,800 --> 00:03:06,640 Speaker 3: actually going to buy that dip still. It's actually that's 60 00:03:06,760 --> 00:03:10,200 Speaker 3: why I think you get this market that feels nosebleed, 61 00:03:10,280 --> 00:03:12,600 Speaker 3: and yet we're still doing that retail chase. 62 00:03:12,720 --> 00:03:15,120 Speaker 2: So in the Greek letter, someone that I look at, folks, 63 00:03:15,120 --> 00:03:18,240 Speaker 2: this is from aerospace engineering, is THETA, which is time 64 00:03:18,919 --> 00:03:22,600 Speaker 2: guessing the time function, measuring the time function on the 65 00:03:22,800 --> 00:03:25,960 Speaker 2: X axis. Can you do of theta study now or 66 00:03:26,000 --> 00:03:30,240 Speaker 2: with a shutdown, no jobs report, all the other distractions 67 00:03:30,480 --> 00:03:34,200 Speaker 2: tailors drop. You can't measure out on the X axis 68 00:03:34,280 --> 00:03:36,400 Speaker 2: right now? Is that what this is really about? 69 00:03:36,720 --> 00:03:36,960 Speaker 5: Yes? 70 00:03:36,960 --> 00:03:38,320 Speaker 3: And no? And you know what I would say, Tom, 71 00:03:38,480 --> 00:03:42,280 Speaker 3: in terms of THETA it's good from the perspective of 72 00:03:42,480 --> 00:03:45,920 Speaker 3: if you were selling that Volatiley premium low as it 73 00:03:46,000 --> 00:03:50,120 Speaker 3: is because everything's been can kicked. It's good for someone 74 00:03:50,120 --> 00:03:52,840 Speaker 3: who's just writing it out right because all the event 75 00:03:53,000 --> 00:03:55,880 Speaker 3: risk has now been pushed out. The question and options 76 00:03:56,040 --> 00:03:59,400 Speaker 3: is always a timing question. Right now, the options market 77 00:03:59,520 --> 00:04:03,200 Speaker 3: is pricing that we will get a resolution before the October. 78 00:04:03,320 --> 00:04:05,080 Speaker 2: I'm going to get one more nerd question in here 79 00:04:05,160 --> 00:04:07,760 Speaker 2: with Amy with Silverman RBC, Good morning across the nation, 80 00:04:07,880 --> 00:04:11,240 Speaker 2: Good morning Global and American Wall Street. We're thrilled you 81 00:04:11,280 --> 00:04:14,360 Speaker 2: whether where they work at Princeton and all that she's 82 00:04:14,360 --> 00:04:16,920 Speaker 2: done for the Royal Bank of Canada. Amy, was Silverman 83 00:04:17,120 --> 00:04:20,760 Speaker 2: really treasured here as well? What tal Love would say, 84 00:04:21,680 --> 00:04:24,640 Speaker 2: fooled by randomness is forget about all this pro Wall 85 00:04:24,640 --> 00:04:27,400 Speaker 2: Street thing. Look at the hedge fund report from Catherine 86 00:04:27,600 --> 00:04:31,760 Speaker 2: Burton yesterday, the non performance of hedge funds. Tala would say, 87 00:04:31,800 --> 00:04:34,440 Speaker 2: you can't figure it out, you take little bits of 88 00:04:34,480 --> 00:04:38,240 Speaker 2: money and go way out, THEATA way out and buy 89 00:04:38,480 --> 00:04:39,799 Speaker 2: the bet you want to bet. 90 00:04:40,080 --> 00:04:41,080 Speaker 5: Is that efficacious? 91 00:04:41,120 --> 00:04:41,320 Speaker 2: Now? 92 00:04:41,920 --> 00:04:45,280 Speaker 3: Look, and there are tail funds that do that. And 93 00:04:45,480 --> 00:04:47,520 Speaker 3: it's a function of why do we go so far 94 00:04:47,640 --> 00:04:50,080 Speaker 3: up because we don't know exactly when the timing is, 95 00:04:50,120 --> 00:04:53,240 Speaker 3: but we do feel like that reckoning could occur, and 96 00:04:53,320 --> 00:04:56,279 Speaker 3: of course it's not that expensive. But again, markets are 97 00:04:56,360 --> 00:04:59,000 Speaker 3: very short term. We just got burned on the September 98 00:04:59,080 --> 00:05:01,479 Speaker 3: FMC not going your way, and you place those hedges 99 00:05:01,520 --> 00:05:04,239 Speaker 3: and now you're dragging a little on something that's ripped. 100 00:05:04,520 --> 00:05:07,240 Speaker 3: It's very hard to talk people into stuff like that, nerd. 101 00:05:07,000 --> 00:05:09,280 Speaker 2: Folks, But I just tell you you're getting a window 102 00:05:09,400 --> 00:05:13,159 Speaker 2: here into the real world. Jordan Rochester over at Namura, 103 00:05:13,440 --> 00:05:16,839 Speaker 2: you can't miszoo. Excuse me, miszoo. You can't even understand 104 00:05:16,880 --> 00:05:18,440 Speaker 2: his report. It's just Greek to. 105 00:05:18,400 --> 00:05:19,280 Speaker 5: Make too much Greek there. 106 00:05:19,320 --> 00:05:23,640 Speaker 6: Yeah, Amy, who who your typical clients on your desk? 107 00:05:23,720 --> 00:05:26,520 Speaker 6: Are they hedge funds? Are they long only funds? Who's 108 00:05:26,520 --> 00:05:29,120 Speaker 6: a typical client of yours that really wants to talk 109 00:05:29,120 --> 00:05:31,360 Speaker 6: about options and hedging and that type of thing. 110 00:05:31,839 --> 00:05:33,960 Speaker 3: Yeah, I would say it's a good mix So there's 111 00:05:34,000 --> 00:05:37,359 Speaker 3: long only as asset managers, there's pensions, and then there's 112 00:05:37,360 --> 00:05:40,400 Speaker 3: hedge funds. I'll tell you know, hedge funds can be 113 00:05:40,440 --> 00:05:42,880 Speaker 3: a little bit more nimble and what they do, and 114 00:05:43,120 --> 00:05:45,920 Speaker 3: what we've seen a lot of them do is rent 115 00:05:46,000 --> 00:05:48,360 Speaker 3: the small cap rally, so you know, they don't want 116 00:05:48,360 --> 00:05:50,120 Speaker 3: to go all in. So you're seeing a lot of 117 00:05:50,120 --> 00:05:53,320 Speaker 3: these IWM call spreads, which on an absolute level have 118 00:05:53,360 --> 00:05:56,279 Speaker 3: actually done fine because they're saying, we don't want to wait, 119 00:05:56,400 --> 00:05:58,680 Speaker 3: we don't want to sit on this concentration risk. When 120 00:05:58,720 --> 00:06:02,040 Speaker 3: we do see some sort of spread whining. In that case, 121 00:06:02,040 --> 00:06:05,640 Speaker 3: it was a volatility spread between IWM and q's let's 122 00:06:05,680 --> 00:06:09,400 Speaker 3: take advantage of that. So you are seeing nimbleness from 123 00:06:09,440 --> 00:06:11,760 Speaker 3: the community that can do it. I think it's a 124 00:06:11,800 --> 00:06:14,520 Speaker 3: little bit of a struggle, you know, for the long only. However, 125 00:06:14,680 --> 00:06:17,960 Speaker 3: if they've been in the right handful of names, uh, 126 00:06:18,040 --> 00:06:20,600 Speaker 3: they've done okay. And if they haven't, that that drag 127 00:06:20,680 --> 00:06:21,400 Speaker 3: is quite painful. 128 00:06:21,800 --> 00:06:23,560 Speaker 5: Dumb question of the day. 129 00:06:23,720 --> 00:06:26,560 Speaker 6: Do your clients want to hedge their fixed income portfolios 130 00:06:26,600 --> 00:06:27,920 Speaker 6: as well? And if so, how do they do that? 131 00:06:28,400 --> 00:06:31,080 Speaker 3: They certainly do, That just wouldn't be my Alley and 132 00:06:31,160 --> 00:06:33,919 Speaker 3: the sense that we only focus on equities. Okay, but 133 00:06:33,960 --> 00:06:36,080 Speaker 3: I will tell you there's been a lot of translation 134 00:06:36,279 --> 00:06:39,480 Speaker 3: because there's so many liquid fixed income proxies, So an 135 00:06:39,640 --> 00:06:43,919 Speaker 3: HyG or a TLT, you're seeing fixed income focused hedge 136 00:06:43,920 --> 00:06:47,600 Speaker 3: funds and asset managers actually traffic more in equity derivatives 137 00:06:47,920 --> 00:06:50,240 Speaker 3: because there is a decent amount of liquidity in these 138 00:06:50,279 --> 00:06:51,720 Speaker 3: proxy ETFs. 139 00:06:51,560 --> 00:06:56,839 Speaker 6: On the equity side, do they hedge with ETFs? 140 00:06:57,520 --> 00:06:59,919 Speaker 5: And so how do they? How are ETFs? How's that 141 00:07:00,080 --> 00:07:00,760 Speaker 5: change your world? 142 00:07:01,720 --> 00:07:03,600 Speaker 3: I mean for us, it's changed for the better because 143 00:07:03,600 --> 00:07:05,920 Speaker 3: I just feel like there's more tools in our toolbox. 144 00:07:05,960 --> 00:07:08,560 Speaker 3: You know, twenty years ago, I couldn't say, hey, go 145 00:07:08,600 --> 00:07:11,120 Speaker 3: out and buy an HyG so the high yield proxy 146 00:07:11,160 --> 00:07:15,560 Speaker 3: ETF foot spread you wouldn't get that liquidity nowadays, especially 147 00:07:15,600 --> 00:07:18,320 Speaker 3: because I think the end of the day, everything is 148 00:07:18,440 --> 00:07:21,600 Speaker 3: rates focused, no matter if you're a tourist or you're 149 00:07:21,640 --> 00:07:25,240 Speaker 3: specializing in it. Thank you use these as something that 150 00:07:25,280 --> 00:07:28,040 Speaker 3: you would do instead of CDX, and it's relatively liquid 151 00:07:28,080 --> 00:07:29,080 Speaker 3: and it gives you timing. 152 00:07:29,440 --> 00:07:32,120 Speaker 2: So with that brilliant phrase which I totally agree with 153 00:07:32,160 --> 00:07:36,200 Speaker 2: from Painful Losses, can I suggest that part of the 154 00:07:36,320 --> 00:07:40,840 Speaker 2: rates focus is what's driving MEG seven higher, which is 155 00:07:40,920 --> 00:07:45,280 Speaker 2: a recalculation of their cash flows in terminal. 156 00:07:44,880 --> 00:07:46,559 Speaker 5: Value one hundred percent. 157 00:07:46,640 --> 00:07:48,680 Speaker 3: And you know, the one thing I'll say, the big 158 00:07:48,840 --> 00:07:52,000 Speaker 3: change to me post COVID is you can't rely on 159 00:07:52,040 --> 00:07:55,239 Speaker 3: these traditional correlations, right, you can't rely on your heads 160 00:07:55,360 --> 00:07:58,040 Speaker 3: just being a sixty to forty portfolio. I think MAG 161 00:07:58,160 --> 00:08:01,040 Speaker 3: seven changed a lot of that. And then you look 162 00:08:01,040 --> 00:08:04,800 Speaker 3: at the intercorrelation between MAG seven which has then relatively low, 163 00:08:05,080 --> 00:08:07,600 Speaker 3: and people are scratching their heads and they say, how 164 00:08:07,640 --> 00:08:09,840 Speaker 3: is it that you're all integrated into each other's supply 165 00:08:10,000 --> 00:08:13,200 Speaker 3: chains that yet this correlation isn't that high. And so 166 00:08:13,360 --> 00:08:15,960 Speaker 3: I do think that's why you're seeing these different expressions 167 00:08:15,960 --> 00:08:18,560 Speaker 3: of hedges Tom that weren't necessarily the case five years ago. 168 00:08:18,720 --> 00:08:21,440 Speaker 2: I mean it was silver an RBC with this extended conversation, 169 00:08:21,560 --> 00:08:24,120 Speaker 2: a treat on it. On Jobs Day Friday at a 170 00:08:24,320 --> 00:08:27,760 Speaker 2: thirty Claudia sum will be with us. We're honored to 171 00:08:27,800 --> 00:08:32,120 Speaker 2: have doctor Sam with us today. So within the MAG 172 00:08:32,280 --> 00:08:36,280 Speaker 2: seven and all that, there's a recalculation here. How do 173 00:08:36,320 --> 00:08:39,600 Speaker 2: you take the fundamental story and how does that look 174 00:08:39,880 --> 00:08:41,640 Speaker 2: like when you look at it? Can you look at 175 00:08:41,679 --> 00:08:44,800 Speaker 2: the cross moments of Microsoft. I mean, what do they 176 00:08:44,840 --> 00:08:45,240 Speaker 2: look like? 177 00:08:45,679 --> 00:08:46,280 Speaker 3: Absolutely? 178 00:08:46,520 --> 00:08:46,640 Speaker 5: So. 179 00:08:46,840 --> 00:08:50,280 Speaker 3: One thing I'll tell you is when we were looking, 180 00:08:50,440 --> 00:08:52,800 Speaker 3: you know, basically four or five years ago, at this 181 00:08:52,880 --> 00:08:55,960 Speaker 3: point when the AI news was slowly starting to become 182 00:08:56,040 --> 00:08:59,360 Speaker 3: part of the conversation. The first time you really saw 183 00:08:59,400 --> 00:09:03,160 Speaker 3: that bullish element was in Nvidia calls. So they started 184 00:09:03,160 --> 00:09:05,480 Speaker 3: to skew invert. All that means is the call option 185 00:09:05,600 --> 00:09:08,880 Speaker 3: bid became so vast relative to the put option bid. 186 00:09:08,960 --> 00:09:11,840 Speaker 3: Before that happened, the only time we saw that level 187 00:09:11,840 --> 00:09:14,800 Speaker 3: of exuberance was in the meme stocks. And when people 188 00:09:14,840 --> 00:09:16,600 Speaker 3: saw it on the meme stocks, they said, this is 189 00:09:17,120 --> 00:09:19,680 Speaker 3: a tempest and a teapot. This isn't going to happen 190 00:09:19,760 --> 00:09:22,480 Speaker 3: on bigger names. And then guess what it happened on 191 00:09:22,559 --> 00:09:25,000 Speaker 3: all the Mag seven names. And so now the market 192 00:09:25,080 --> 00:09:27,360 Speaker 3: has really start to pay attention to the Mag seven 193 00:09:27,400 --> 00:09:30,440 Speaker 3: cross moments because they determine the cross moments of the 194 00:09:30,600 --> 00:09:32,880 Speaker 3: entire index. You know, this is twenty five to fifty 195 00:09:32,920 --> 00:09:35,440 Speaker 3: percent depending on your index, and you have to watch it. 196 00:09:35,600 --> 00:09:36,439 Speaker 5: The cross moments. 197 00:09:36,520 --> 00:09:41,800 Speaker 2: Folks are starting with variants, the different dynamics of the moment. 198 00:09:41,880 --> 00:09:46,520 Speaker 2: For example, kretosis is the fungus Lisa Matteo's daughter. 199 00:09:46,400 --> 00:09:48,160 Speaker 5: Has between her toes. 200 00:09:48,240 --> 00:09:54,880 Speaker 2: It's also I think it's the third cross moment or mesocrtatic, leptokritatic, 201 00:09:55,640 --> 00:09:57,920 Speaker 2: something like that. Paul Amy did. 202 00:09:57,800 --> 00:09:59,560 Speaker 5: Better on this than me, exactly. 203 00:09:59,679 --> 00:10:02,240 Speaker 6: A talk to us about liquidity in your marketplace. If 204 00:10:02,240 --> 00:10:04,320 Speaker 6: you come up with a nice strategy for your client 205 00:10:05,160 --> 00:10:08,400 Speaker 6: and that actually get executed efficiently in the markets today, 206 00:10:08,440 --> 00:10:10,240 Speaker 6: how has it liquidity changed in the future As an 207 00:10:10,280 --> 00:10:11,640 Speaker 6: options market it you. 208 00:10:11,679 --> 00:10:15,040 Speaker 3: Know, it's been incredible. So first, liquidity depending on what 209 00:10:15,080 --> 00:10:18,240 Speaker 3: you're trading, your standard suite of indices or mag seven, 210 00:10:18,280 --> 00:10:21,400 Speaker 3: what have you highly liquid from an options perspective. The 211 00:10:21,440 --> 00:10:23,880 Speaker 3: second thing I would say is we've had a lot 212 00:10:23,920 --> 00:10:26,760 Speaker 3: of duration shrinkage, so the folks. 213 00:10:26,440 --> 00:10:27,640 Speaker 5: That creation shrink. 214 00:10:27,559 --> 00:10:30,920 Speaker 3: Yes, duration, so the tenors of the options that are traded. 215 00:10:31,160 --> 00:10:33,439 Speaker 3: And this is a huge theme for us. It used 216 00:10:33,480 --> 00:10:35,840 Speaker 3: to be that one month was your short duration, and 217 00:10:35,840 --> 00:10:37,840 Speaker 3: then it used to be one week, and then Cibo 218 00:10:38,000 --> 00:10:39,599 Speaker 3: came out with a lot of zero day to x 219 00:10:39,760 --> 00:10:43,360 Speaker 3: rate and that's been the duration. So things happened very 220 00:10:43,480 --> 00:10:46,880 Speaker 3: rapidly in our markets. But at the same time, guys, 221 00:10:47,200 --> 00:10:49,560 Speaker 3: we also get less of a signal, so you know 222 00:10:49,640 --> 00:10:52,040 Speaker 3: that GPS that used to give you maybe one thousand 223 00:10:52,040 --> 00:10:53,800 Speaker 3: feet to make that left turn, we're getting like a 224 00:10:53,920 --> 00:10:56,920 Speaker 3: day now because you don't see people place those bets 225 00:10:57,000 --> 00:11:00,319 Speaker 3: until one day before. So I as a strategist can't 226 00:11:00,679 --> 00:11:01,920 Speaker 3: on the one day paper that I. 227 00:11:01,880 --> 00:11:04,679 Speaker 2: Don't understand if you get a jump condition one way 228 00:11:04,760 --> 00:11:07,320 Speaker 2: or the other, how does that affect mere mortals out 229 00:11:07,320 --> 00:11:09,920 Speaker 2: there with a long term horizon of one week or 230 00:11:09,920 --> 00:11:10,439 Speaker 2: one month? 231 00:11:11,120 --> 00:11:13,480 Speaker 3: You know, That's why if you look back to what 232 00:11:13,520 --> 00:11:16,040 Speaker 3: I would consider crises, so where the market kind of 233 00:11:16,040 --> 00:11:19,640 Speaker 3: gives you these one two standard divation moves, the velocity 234 00:11:19,720 --> 00:11:23,120 Speaker 3: tom is much faster. So think back to April twenty 235 00:11:23,120 --> 00:11:26,200 Speaker 3: twenty four, think back to Liberation Day this year. The 236 00:11:26,320 --> 00:11:28,840 Speaker 3: velocity of those moves up and down, that's a really 237 00:11:28,840 --> 00:11:29,240 Speaker 3: sharp V. 238 00:11:29,440 --> 00:11:32,160 Speaker 5: Can I go full NERD to end? So it's slew rates. 239 00:11:32,360 --> 00:11:32,839 Speaker 5: That's what you do. 240 00:11:33,000 --> 00:11:35,720 Speaker 2: You take electrical engineering folks and bring You're sitting in 241 00:11:35,760 --> 00:11:38,080 Speaker 2: a classroom with Princeton and you're going, why am I 242 00:11:38,120 --> 00:11:41,319 Speaker 2: in an engineering course? If I'm looking at finance, it's 243 00:11:41,360 --> 00:11:44,880 Speaker 2: about slur rates? Are the slur rates for our four 244 00:11:44,880 --> 00:11:47,600 Speaker 2: to oh one k the same as they used to be? 245 00:11:48,400 --> 00:11:51,040 Speaker 3: I think in the sense that if you're if you 246 00:11:51,120 --> 00:11:53,000 Speaker 3: have a four oh one K, you're supposed to kind 247 00:11:53,000 --> 00:11:55,319 Speaker 3: of close your eyes and not worry about it. So 248 00:11:55,760 --> 00:11:58,280 Speaker 3: in that sense, if you're a long term investor, I 249 00:11:58,280 --> 00:12:01,280 Speaker 3: don't think it really changes anything. However, if you're us 250 00:12:01,640 --> 00:12:04,000 Speaker 3: and you live and breathe this day day at, day 251 00:12:04,040 --> 00:12:05,920 Speaker 3: in and day out, and then you know you're someone 252 00:12:05,960 --> 00:12:07,600 Speaker 3: on the other side who's got a quarter end to 253 00:12:07,600 --> 00:12:10,400 Speaker 3: worry about or month in Mars, it does become a 254 00:12:10,400 --> 00:12:13,600 Speaker 3: little bit problematic because you do have these potholes, you know, 255 00:12:13,679 --> 00:12:15,920 Speaker 3: I like driving Analoga's even though I don't drive, and like, 256 00:12:15,960 --> 00:12:19,360 Speaker 3: there's a lot more potholes that could happen than when 257 00:12:19,400 --> 00:12:20,680 Speaker 3: the Tenors were a lot longer. 258 00:12:20,840 --> 00:12:24,360 Speaker 2: Rockton's daughter has Taylor coming in new from Target today. 259 00:12:24,480 --> 00:12:28,040 Speaker 2: Target's promise they'll deliver it today. How will the. 260 00:12:28,040 --> 00:12:31,480 Speaker 5: Silverman House consume the new Tailor. 261 00:12:31,679 --> 00:12:34,840 Speaker 3: Tom I have sixteen tickets to the Tailor Swafe release 262 00:12:34,880 --> 00:12:38,640 Speaker 3: party tonight, Wow for for my seven year old and 263 00:12:38,720 --> 00:12:41,440 Speaker 3: my eleven year old and their friends. So I'm you're 264 00:12:41,520 --> 00:12:45,360 Speaker 3: welcome to go. You're old, go get a movie theater 265 00:12:45,480 --> 00:12:48,040 Speaker 3: where they I don't even know at this point, but everyonce. 266 00:12:48,080 --> 00:12:51,680 Speaker 3: There's a lot of glitter involved in nail art and tattoos. 267 00:12:51,800 --> 00:12:54,679 Speaker 3: So I'm getting ready. I might need a drink before then. 268 00:12:55,240 --> 00:12:56,840 Speaker 5: Your offspring address appropriately. 269 00:12:57,520 --> 00:12:59,920 Speaker 3: They've been planning this outfit, you know, it's part of 270 00:13:00,160 --> 00:13:01,079 Speaker 3: this is part of the arc. 271 00:13:01,240 --> 00:13:03,200 Speaker 5: So what are you smiling about over there? 272 00:13:03,400 --> 00:13:04,000 Speaker 4: He's right. 273 00:13:04,960 --> 00:13:08,559 Speaker 5: The girl's plan for this were very like, very cool. 274 00:13:08,640 --> 00:13:10,720 Speaker 2: That is, so they all go to a movie theater 275 00:13:10,960 --> 00:13:12,800 Speaker 2: and there's a video of something. 276 00:13:13,040 --> 00:13:15,720 Speaker 3: I believe she's got some you know, behind the scenes. 277 00:13:15,720 --> 00:13:17,720 Speaker 3: I don't know, but that's my guest Beatles. 278 00:13:18,080 --> 00:13:19,679 Speaker 5: I think it's a same you were. 279 00:13:20,200 --> 00:13:21,920 Speaker 6: I mean, I haven't seen anything like. 280 00:13:21,880 --> 00:13:26,840 Speaker 2: This that's brilliant, and that the only equivalent was Beatlestone's 281 00:13:26,920 --> 00:13:27,880 Speaker 2: nineteen sixty four. 282 00:13:27,960 --> 00:13:30,480 Speaker 5: Yeah, I will say this, folks. 283 00:13:30,640 --> 00:13:32,760 Speaker 2: And I listened on the headphones. I previewed all those 284 00:13:32,800 --> 00:13:35,280 Speaker 2: songs to give you the songs. Amy called up and said, 285 00:13:35,280 --> 00:13:37,920 Speaker 2: I'm not coming on unless you do all Taylor, and 286 00:13:38,360 --> 00:13:42,319 Speaker 2: it's all out of Virginia Beach. There are these miracle 287 00:13:42,440 --> 00:13:47,240 Speaker 2: people in Virginia Peach, John Haynes, a giant named Serban 288 00:13:47,280 --> 00:13:52,360 Speaker 2: Ganeo who's very private, and Taylor's albums are manufactured essentially 289 00:13:53,000 --> 00:13:57,839 Speaker 2: by three geniuses in Virginia Beach and the sound when 290 00:13:57,880 --> 00:14:01,320 Speaker 2: you put it on, She's nobody sparing a penny here. 291 00:14:01,920 --> 00:14:05,840 Speaker 2: It's world class. It's world class fidelity. 292 00:14:06,080 --> 00:14:09,200 Speaker 5: Amy was sober. Thank you so much. Stay with us. 293 00:14:09,440 --> 00:14:12,680 Speaker 2: More from Bloomberg Surveillance coming up after this. 294 00:14:19,920 --> 00:14:23,520 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 295 00:14:23,560 --> 00:14:26,760 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 296 00:14:26,800 --> 00:14:30,480 Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or 297 00:14:30,600 --> 00:14:32,080 Speaker 1: watch us live on YouTube. 298 00:14:32,360 --> 00:14:35,120 Speaker 2: Our conversation of the Day on the American economy, Claudia 299 00:14:35,200 --> 00:14:38,440 Speaker 2: sam joins us chief economists at New Century Advisors. 300 00:14:38,680 --> 00:14:42,200 Speaker 5: Normally jobs day. What do you think, Dad, No, we're 301 00:14:42,240 --> 00:14:43,040 Speaker 5: not going to do that. 302 00:14:43,160 --> 00:14:45,560 Speaker 2: She's out of Michigan with all of her front rate 303 00:14:46,200 --> 00:14:50,320 Speaker 2: Federal Reserve academics, doctor somem not in a recession, but 304 00:14:50,400 --> 00:14:51,520 Speaker 2: on the spirit. 305 00:14:51,280 --> 00:14:53,200 Speaker 5: Of the American economy. 306 00:14:53,520 --> 00:14:55,920 Speaker 2: Claudia got a great line which alludes to my book 307 00:14:56,000 --> 00:14:59,240 Speaker 2: years Ago, which is a steal from Ken Rogoff. Are 308 00:14:59,240 --> 00:15:02,760 Speaker 2: we flying on one engine? You say we're not. You say 309 00:15:02,760 --> 00:15:09,960 Speaker 2: we have impaired vision. Define America's impaired vision? Right? 310 00:15:10,040 --> 00:15:12,320 Speaker 4: Well, I mean this is the time where we come 311 00:15:12,360 --> 00:15:16,680 Speaker 4: together every month and wait to find out the latest, 312 00:15:16,720 --> 00:15:19,360 Speaker 4: the best reading that we have on what's happened in 313 00:15:19,360 --> 00:15:22,760 Speaker 4: the labor market, and we don't have it today, Like 314 00:15:22,800 --> 00:15:25,920 Speaker 4: we're not going to have that discussion. So that's to me, 315 00:15:26,120 --> 00:15:29,560 Speaker 4: we're not flying blind. There's a lot of information about 316 00:15:29,640 --> 00:15:33,280 Speaker 4: the economy that we're getting, you know, even as the 317 00:15:33,280 --> 00:15:36,400 Speaker 4: federal government has shut down, but we're missing a really 318 00:15:36,440 --> 00:15:40,600 Speaker 4: important piece of information. So our vision is impaired. And 319 00:15:40,680 --> 00:15:45,880 Speaker 4: what's really frustrating is the September employment report exists right like, 320 00:15:45,960 --> 00:15:49,120 Speaker 4: these numbers are sitting there. It's just because the workers 321 00:15:49,120 --> 00:15:52,440 Speaker 4: who would normally put that up weren't deemed essential. You know, 322 00:15:52,480 --> 00:15:55,720 Speaker 4: we're just speculating connection, and that's really unfortunate. 323 00:15:55,400 --> 00:15:57,880 Speaker 2: On a news basis, Doctor some does a president of 324 00:15:57,880 --> 00:16:01,160 Speaker 2: the United States get briefed on the numbers that exist 325 00:16:01,240 --> 00:16:02,760 Speaker 2: that we don't see. 326 00:16:03,960 --> 00:16:06,600 Speaker 4: Given the timing of the shutdown, it should not have 327 00:16:06,800 --> 00:16:08,840 Speaker 4: made its way all the way to the president. Typically 328 00:16:08,880 --> 00:16:12,240 Speaker 4: the president also the FED chair would see this employment 329 00:16:12,280 --> 00:16:16,120 Speaker 4: report the night before, so Thursday night and the government 330 00:16:16,120 --> 00:16:19,400 Speaker 4: shutdown on Wednesday. But again, but it is the choice 331 00:16:19,440 --> 00:16:20,800 Speaker 4: of the White House at the end of the day. 332 00:16:20,840 --> 00:16:23,280 Speaker 4: Who are the essential federal workers. So it is a 333 00:16:23,400 --> 00:16:25,120 Speaker 4: choice of the White House as to whether or not 334 00:16:25,160 --> 00:16:26,800 Speaker 4: we have these data this morning or not. 335 00:16:27,400 --> 00:16:28,640 Speaker 5: All right, Claudia. 336 00:16:28,720 --> 00:16:31,400 Speaker 6: In the absence of the government data, maybe a little 337 00:16:31,400 --> 00:16:35,600 Speaker 6: bit more attention is focused on the ADP employment number. 338 00:16:35,600 --> 00:16:37,720 Speaker 6: A decline of thirty two thousand in September and a 339 00:16:37,880 --> 00:16:42,280 Speaker 6: downwardly revised decline of three thousand in August. I think 340 00:16:42,320 --> 00:16:44,960 Speaker 6: that caught some people by surprise. How did you look 341 00:16:44,960 --> 00:16:45,560 Speaker 6: at that number? 342 00:16:47,120 --> 00:16:47,320 Speaker 2: Right? 343 00:16:47,440 --> 00:16:51,360 Speaker 4: So absolutely we should be looking at the private sector numbers. 344 00:16:51,720 --> 00:16:54,760 Speaker 4: ADP often gets a lot of interest and attention. One 345 00:16:54,800 --> 00:16:57,360 Speaker 4: thing that ADP does is in September, it's a time 346 00:16:57,400 --> 00:17:01,200 Speaker 4: where they update their model to help them take you know, 347 00:17:01,320 --> 00:17:04,240 Speaker 4: the what they're looking at are the clients of ADP. 348 00:17:04,480 --> 00:17:07,520 Speaker 4: They're a large payroll processor, but they don't process every 349 00:17:07,560 --> 00:17:10,200 Speaker 4: payroll in the country, and so they need to use 350 00:17:10,400 --> 00:17:13,560 Speaker 4: data from the pure of labor statistics to take their 351 00:17:13,560 --> 00:17:17,280 Speaker 4: client data and make it more representative all you know, 352 00:17:17,680 --> 00:17:22,359 Speaker 4: all payrolls, all businesses. And unfortunately that happens in September. 353 00:17:22,440 --> 00:17:24,679 Speaker 4: So and they told us in the press release that 354 00:17:24,800 --> 00:17:28,960 Speaker 4: updating their model that actually shaved a good bit off 355 00:17:29,000 --> 00:17:32,520 Speaker 4: of their September and also their their August numbers, So 356 00:17:32,600 --> 00:17:35,199 Speaker 4: I think it's important. In the release they stress that, 357 00:17:35,640 --> 00:17:38,359 Speaker 4: you know, even after they did the benchmark revision pulled 358 00:17:38,359 --> 00:17:43,639 Speaker 4: in their new data, the trend was unchanged, right, So 359 00:17:43,760 --> 00:17:47,359 Speaker 4: they are seeing a slowing in job creation. But I 360 00:17:47,359 --> 00:17:50,560 Speaker 4: think if you look at the headline numbers that ADP printed, 361 00:17:50,640 --> 00:17:53,560 Speaker 4: you might be like, oh, wow, the slowing is really 362 00:17:53,600 --> 00:17:56,480 Speaker 4: picking up, right, that sign of detrioration that we're all 363 00:17:56,520 --> 00:17:59,080 Speaker 4: so worried about and watching for, and even ADP in 364 00:17:59,119 --> 00:18:01,520 Speaker 4: their release that was not the way they interpret their data. 365 00:18:01,600 --> 00:18:04,120 Speaker 4: So it was just another market like, you know, job 366 00:18:04,160 --> 00:18:07,520 Speaker 4: creation is really slow, and that feeds this narrative of 367 00:18:07,520 --> 00:18:08,320 Speaker 4: the downside risk. 368 00:18:08,480 --> 00:18:10,520 Speaker 2: Claudia sim with this. So we're getting briefed here, and 369 00:18:10,560 --> 00:18:13,200 Speaker 2: of course we do better with Claudia some Governor Myron 370 00:18:13,240 --> 00:18:15,840 Speaker 2: will be with us at nine point thirty two this morning, 371 00:18:15,880 --> 00:18:17,400 Speaker 2: that is scheduled. 372 00:18:17,440 --> 00:18:18,960 Speaker 5: Claudia, back in your ute. 373 00:18:19,000 --> 00:18:22,520 Speaker 2: I'm sure at Michigan you were doing the University of 374 00:18:22,560 --> 00:18:29,560 Speaker 2: Michigan's research seminar and quantitative economics the Michigan State output gap. 375 00:18:30,000 --> 00:18:34,560 Speaker 2: Can we measure the output gap that Myron of Harvard 376 00:18:34,640 --> 00:18:35,600 Speaker 2: is so fired up. 377 00:18:35,520 --> 00:18:41,879 Speaker 4: About well output gaps are any measure of slack. Slack 378 00:18:41,960 --> 00:18:44,520 Speaker 4: frankly is going to be an estimate, right, You're going 379 00:18:44,520 --> 00:18:45,919 Speaker 4: to need a model, You're going to need to make 380 00:18:45,960 --> 00:18:49,280 Speaker 4: a lot of assumptions. So we can certainly have differences 381 00:18:49,320 --> 00:18:51,919 Speaker 4: of opinion about how those are put together, but you 382 00:18:51,960 --> 00:18:55,720 Speaker 4: know the ingredients of because at the end of the day, 383 00:18:55,720 --> 00:18:58,280 Speaker 4: the thing that we don't observe we get measures of, 384 00:18:58,359 --> 00:19:01,480 Speaker 4: say GDP growth, These are estimates, they get revised, but 385 00:19:01,560 --> 00:19:04,360 Speaker 4: we can go out and measure that. The thing that's 386 00:19:04,359 --> 00:19:06,399 Speaker 4: important for the gap is you have to get an 387 00:19:06,480 --> 00:19:10,320 Speaker 4: estimate of what's potential, like what's the best we could 388 00:19:10,359 --> 00:19:13,080 Speaker 4: be doing. And that's the piece that you know, you 389 00:19:13,119 --> 00:19:17,199 Speaker 4: can have discussions and changes. Big changes in immigration like 390 00:19:17,320 --> 00:19:20,080 Speaker 4: that can affect what potential output is, big changes in 391 00:19:20,200 --> 00:19:23,639 Speaker 4: technology and productivity that can affect what potential output is. 392 00:19:24,080 --> 00:19:26,920 Speaker 4: So you know, I think it's it's an art more 393 00:19:27,080 --> 00:19:31,040 Speaker 4: like science to get at those but you know that 394 00:19:31,080 --> 00:19:34,320 Speaker 4: these measures of slacker are really important. And I will 395 00:19:34,359 --> 00:19:36,800 Speaker 4: mention bringing it back to today and the data we're missing. 396 00:19:37,200 --> 00:19:39,760 Speaker 4: The big thing that we don't have from the private sectors. 397 00:19:39,800 --> 00:19:43,399 Speaker 4: We don't have a measure of slack in the labor market. 398 00:19:43,440 --> 00:19:47,679 Speaker 4: The unemployment rate is one of those you know, fits 399 00:19:47,680 --> 00:19:50,919 Speaker 4: in that measure of like workers looking for work that 400 00:19:51,040 --> 00:19:53,520 Speaker 4: don't have it versus workers who do have work. 401 00:19:54,240 --> 00:19:56,399 Speaker 6: Claudia, what do we know now with a little bit 402 00:19:56,440 --> 00:20:00,439 Speaker 6: of experience here about the closing of the southern border 403 00:20:00,480 --> 00:20:06,280 Speaker 6: and that's impact on the US labor force? Uh? 404 00:20:07,359 --> 00:20:15,320 Speaker 4: The the immigration statistics, you know, we what we need 405 00:20:15,359 --> 00:20:19,639 Speaker 4: are the information from the federal government on the you know, 406 00:20:21,400 --> 00:20:25,440 Speaker 4: unauthorized immigration in the country, the deportations. I mean, there 407 00:20:25,480 --> 00:20:28,240 Speaker 4: are there are data that are published. I think some 408 00:20:28,520 --> 00:20:31,280 Speaker 4: of those have been more lagged than in the past, 409 00:20:31,280 --> 00:20:35,400 Speaker 4: but it really is our population estimates, which the immigration 410 00:20:35,520 --> 00:20:38,240 Speaker 4: is just one piece into it. They tend to come 411 00:20:38,320 --> 00:20:41,480 Speaker 4: with very long lags. So I think this because policy 412 00:20:41,520 --> 00:20:44,440 Speaker 4: has changed so much and so rapidly that there's both 413 00:20:44,480 --> 00:20:47,600 Speaker 4: you know, reporting, the reporting lags, and then just putting 414 00:20:47,600 --> 00:20:50,320 Speaker 4: all the pieces together. So I think this we know 415 00:20:50,480 --> 00:20:53,760 Speaker 4: the direction, Like we can sign this in terms of 416 00:20:53,840 --> 00:20:57,320 Speaker 4: like immigration has slowed down dramatically, but to get really 417 00:20:57,359 --> 00:21:00,600 Speaker 4: precise and particularly in these decompositions of like oh well, 418 00:21:00,680 --> 00:21:02,960 Speaker 4: job creation is down to twenty thousand, you know, is 419 00:21:03,760 --> 00:21:05,760 Speaker 4: this high or is it low? What's the break even? 420 00:21:05,840 --> 00:21:05,959 Speaker 7: Right? 421 00:21:06,040 --> 00:21:09,120 Speaker 4: Those very precise calculations. We just don't have the input 422 00:21:09,200 --> 00:21:11,800 Speaker 4: data to make you know those fine points, and we 423 00:21:11,880 --> 00:21:13,440 Speaker 4: probably won't for some time. 424 00:21:14,680 --> 00:21:17,640 Speaker 6: And Claudia, just away from the labor discussion for a moment. 425 00:21:17,680 --> 00:21:20,680 Speaker 6: The other side of the FED discussion is inflation. What's 426 00:21:20,720 --> 00:21:25,960 Speaker 6: your view of inflation right now in this economy? 427 00:21:26,160 --> 00:21:29,640 Speaker 4: Right Well, inflation is elevated. It's it's and it has 428 00:21:29,640 --> 00:21:32,000 Speaker 4: been elevated for some time. I think it's in the 429 00:21:32,119 --> 00:21:36,399 Speaker 4: space of it's still a problem. Three percent inflation is 430 00:21:36,440 --> 00:21:38,920 Speaker 4: still higher than what people have been used to, particularly 431 00:21:39,000 --> 00:21:41,720 Speaker 4: before the pandemic, and the longer it last, it does 432 00:21:41,760 --> 00:21:45,200 Speaker 4: add up, right, and so it's a problem. I wouldn't 433 00:21:45,200 --> 00:21:48,520 Speaker 4: put wouldn't assign it being an acute problem, and I 434 00:21:48,560 --> 00:21:51,560 Speaker 4: think there are reasons to expect it to come to 435 00:21:51,640 --> 00:21:52,560 Speaker 4: come down. 436 00:21:54,440 --> 00:21:54,600 Speaker 3: Now. 437 00:21:54,680 --> 00:21:56,840 Speaker 4: On inflation, I think this is a place where we 438 00:21:56,960 --> 00:21:59,919 Speaker 4: really are much more flying blind. If the federal government 439 00:22:00,040 --> 00:22:02,639 Speaker 4: stays closed, we do not have as much data to 440 00:22:02,680 --> 00:22:04,399 Speaker 4: here watching this, Claude, You've. 441 00:22:04,240 --> 00:22:06,480 Speaker 5: Got to run. I can't wait to have you on 442 00:22:06,560 --> 00:22:08,200 Speaker 5: for a real jobs Day again. 443 00:22:08,320 --> 00:22:11,760 Speaker 2: Doctor Sam has been one of our foundation supporters here 444 00:22:11,800 --> 00:22:15,960 Speaker 2: her academics at New Century Advisor, of course iconic on 445 00:22:16,119 --> 00:22:19,159 Speaker 2: measuring slowdowns in America. 446 00:22:19,280 --> 00:22:20,000 Speaker 5: Stay with us. 447 00:22:20,240 --> 00:22:30,560 Speaker 2: More from Bloomberg Surveillance coming up after this. 448 00:22:30,560 --> 00:22:34,439 Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday 449 00:22:34,480 --> 00:22:37,520 Speaker 1: starting at seven am Eastern on Apple Coarclay, and Android 450 00:22:37,520 --> 00:22:40,560 Speaker 1: Auto with the Bloomberg Business App. You can also listen 451 00:22:40,640 --> 00:22:43,920 Speaker 1: live on Amazon Alexa from our flagship New York station. 452 00:22:44,440 --> 00:22:47,119 Speaker 1: Just say Alexa play Bloomberg eleven thirty. 453 00:22:47,400 --> 00:22:49,720 Speaker 5: Priam is isery here on a jobs day? Folks? It's 454 00:22:49,720 --> 00:22:50,640 Speaker 5: a non jobs day. 455 00:22:50,840 --> 00:22:53,639 Speaker 2: But as pri as you and I were talking, the 456 00:22:54,040 --> 00:22:57,679 Speaker 2: dynamics of full faith and credit is price up and 457 00:22:57,760 --> 00:22:58,399 Speaker 2: yield down? 458 00:22:58,720 --> 00:23:02,520 Speaker 5: What's the x axislo like? When is the when of lower? 459 00:23:02,600 --> 00:23:07,600 Speaker 8: Yields have been declining in the last few months. You know, 460 00:23:07,640 --> 00:23:09,520 Speaker 8: if you compare it to say where we were at 461 00:23:09,520 --> 00:23:12,080 Speaker 8: the start of the year or even after Liberation Day, 462 00:23:12,359 --> 00:23:15,959 Speaker 8: when the concern was inflation may skyrocket, the Fed may 463 00:23:16,000 --> 00:23:18,119 Speaker 8: not be able to cut at all. They may be 464 00:23:18,200 --> 00:23:21,760 Speaker 8: the Cell America trade. What happens to the deficit? So 465 00:23:22,000 --> 00:23:24,639 Speaker 8: that's how the tenure got above four and a half? 466 00:23:25,400 --> 00:23:26,440 Speaker 9: Why has it come down? 467 00:23:26,560 --> 00:23:29,320 Speaker 8: Well, inflation has not picked up as much, So I 468 00:23:29,320 --> 00:23:31,760 Speaker 8: think that's allowing the FED to at least reduce the 469 00:23:31,840 --> 00:23:35,080 Speaker 8: level of restriction, and the deficit is marginally better because 470 00:23:35,080 --> 00:23:39,000 Speaker 8: we are statif as we've heard this, the tariff revenues 471 00:23:39,000 --> 00:23:42,000 Speaker 8: are improving the deficit, not the long run entitlement issue, 472 00:23:42,040 --> 00:23:44,120 Speaker 8: but at least near terms, So you know, I think 473 00:23:44,359 --> 00:23:46,560 Speaker 8: three seventy five to four and a quarter is our 474 00:23:46,720 --> 00:23:49,199 Speaker 8: range for now, so it is below where we are 475 00:23:49,280 --> 00:23:49,760 Speaker 8: right now. 476 00:23:49,880 --> 00:23:52,520 Speaker 9: We like owning duration. One of the things. 477 00:23:53,040 --> 00:23:54,960 Speaker 8: The reason we like it is even though you're in 478 00:23:55,000 --> 00:23:58,280 Speaker 8: that range, there's asymmetry, meaning there's more of a case 479 00:23:58,280 --> 00:24:01,879 Speaker 8: of rates to fall if you get either permanent lay 480 00:24:01,880 --> 00:24:04,760 Speaker 8: offs due to the shutdown or a slowing in you know, 481 00:24:04,840 --> 00:24:08,640 Speaker 8: the job market continues. There's a nonlinearity. I know, Tom, 482 00:24:08,680 --> 00:24:11,560 Speaker 8: you like to talk about nonlinearities in the job market. 483 00:24:11,640 --> 00:24:13,480 Speaker 8: Typically in the uneployment rate starts to go up and 484 00:24:13,560 --> 00:24:16,280 Speaker 8: goes up much faster. So for that asymmetry, we like 485 00:24:16,320 --> 00:24:16,800 Speaker 8: going in too. 486 00:24:16,760 --> 00:24:18,760 Speaker 2: So silent controller and put me in the time out here. 487 00:24:18,760 --> 00:24:22,560 Speaker 2: I didn't introduce ms Messer correctly. Premium miser folks, corplus 488 00:24:22,560 --> 00:24:25,200 Speaker 2: fund at G. People are going to asset management. 489 00:24:24,840 --> 00:24:29,040 Speaker 6: Very good the markets seem to be ignoring a shutdown, 490 00:24:29,080 --> 00:24:32,440 Speaker 6: it seems like, and is that something that is reasonable 491 00:24:32,440 --> 00:24:35,119 Speaker 6: from your perspective, given what's what could happen? I guess so. 492 00:24:35,320 --> 00:24:38,359 Speaker 8: Historically shutdowns have been a bit of political theater, so 493 00:24:38,440 --> 00:24:42,600 Speaker 8: the market ignores it. President trum signed something in law 494 00:24:42,680 --> 00:24:45,200 Speaker 8: saying that they will be in twenty nineteen, saying. 495 00:24:44,920 --> 00:24:46,479 Speaker 9: That people will get back paid. 496 00:24:46,600 --> 00:24:49,280 Speaker 8: So you don't get paid whether you're working or four load, 497 00:24:49,760 --> 00:24:51,760 Speaker 8: but you will get paid at some point. If it's 498 00:24:51,800 --> 00:24:54,040 Speaker 8: a short shutdown, I think it's fine for the market 499 00:24:54,040 --> 00:24:56,080 Speaker 8: to ignore it. Why it could be a little bit 500 00:24:56,119 --> 00:24:58,760 Speaker 8: different this time is we've not historically heard during a 501 00:24:58,800 --> 00:25:03,120 Speaker 8: shutdown that the administration may actually have permanent layoffs. Now 502 00:25:03,160 --> 00:25:07,280 Speaker 8: maybe it's a negotiating stance, but if it actually results 503 00:25:07,320 --> 00:25:10,320 Speaker 8: in permanent layoffs, I think the market's not going to 504 00:25:10,359 --> 00:25:10,840 Speaker 8: ignore it. 505 00:25:11,080 --> 00:25:13,479 Speaker 9: And the other one is how long does it last. 506 00:25:14,000 --> 00:25:16,640 Speaker 8: You know, if it's a short shut down, you don't 507 00:25:16,680 --> 00:25:19,000 Speaker 8: really miss a paycheck, it's okay. You start to miss 508 00:25:19,240 --> 00:25:22,280 Speaker 8: one or two paychecks, the military starts to not get paid. 509 00:25:22,320 --> 00:25:25,360 Speaker 8: They're putting their lives on the line. I think then 510 00:25:25,440 --> 00:25:28,000 Speaker 8: the market's going to say, okay, Congress has to get 511 00:25:28,000 --> 00:25:30,320 Speaker 8: their act together. I think then the market will start 512 00:25:30,359 --> 00:25:34,240 Speaker 8: to increase risk premiums and you'll see an impact in rates, 513 00:25:34,240 --> 00:25:36,159 Speaker 8: and you'll see an impact in the agree market. 514 00:25:36,280 --> 00:25:39,800 Speaker 6: All right, So we're not getting the nonfarm payroll data today, 515 00:25:39,800 --> 00:25:42,679 Speaker 6: but neither is the FED. I'm assuming unless they get 516 00:25:42,720 --> 00:25:45,040 Speaker 6: some little somebody's passes them a note under the desk. 517 00:25:46,080 --> 00:25:48,280 Speaker 6: So they're kind of flying blind a little bit too. 518 00:25:48,440 --> 00:25:51,280 Speaker 6: So how does that if we go a week or 519 00:25:51,320 --> 00:25:53,120 Speaker 6: two and they're not getting the data that they need 520 00:25:53,119 --> 00:25:55,840 Speaker 6: because they are data dependent, how do you think. 521 00:25:55,680 --> 00:25:57,520 Speaker 5: The FED has How does that impact the FED? 522 00:25:57,560 --> 00:25:58,160 Speaker 7: Either? Right? 523 00:25:58,240 --> 00:26:01,320 Speaker 8: Great point, because this FED has set time and time 524 00:26:01,359 --> 00:26:03,199 Speaker 8: again that they are data dependent. They don't want to 525 00:26:03,240 --> 00:26:06,120 Speaker 8: rely on a model, they want to base it on data. 526 00:26:06,160 --> 00:26:08,719 Speaker 8: But you know, payrolls is a very important data release, 527 00:26:09,000 --> 00:26:12,119 Speaker 8: so is claim, so is CPI. But if we don't 528 00:26:12,160 --> 00:26:14,640 Speaker 8: have that, we look at what we call second tier 529 00:26:14,720 --> 00:26:17,840 Speaker 8: data releases. And on the labor market, I actually think 530 00:26:17,840 --> 00:26:21,040 Speaker 8: there's been a remarkable amount of consistency. We're not seeing 531 00:26:21,080 --> 00:26:25,240 Speaker 8: the layoffs, but we are seeing low hiring, whether it's surveys, 532 00:26:25,320 --> 00:26:28,480 Speaker 8: whether it's you know, actual hiring trends in the last 533 00:26:28,480 --> 00:26:29,960 Speaker 8: few months. So I think the FED looks at the 534 00:26:29,960 --> 00:26:32,520 Speaker 8: totality of the data and says there's some risks to 535 00:26:32,520 --> 00:26:35,440 Speaker 8: the labor market building. This is why they cut in September. 536 00:26:35,520 --> 00:26:38,240 Speaker 8: The risk management argument. I think you can make that 537 00:26:38,320 --> 00:26:40,840 Speaker 8: case for an October cut as well. I think given 538 00:26:40,880 --> 00:26:44,400 Speaker 8: that BLS is not collecting data, we shouldn't really expect 539 00:26:44,400 --> 00:26:47,600 Speaker 8: a very reliable, you know, October payroll report as well. 540 00:26:47,600 --> 00:26:50,000 Speaker 8: So I think this might be for the next few months. 541 00:26:50,000 --> 00:26:51,359 Speaker 8: They're going to have to look at a lot of 542 00:26:51,400 --> 00:26:54,280 Speaker 8: other data. I think given the starting point, we're at 543 00:26:54,280 --> 00:26:56,600 Speaker 8: four and a quarter on FED ones, they can cut 544 00:26:56,640 --> 00:26:59,280 Speaker 8: a few more times before it starts to get difficult 545 00:26:59,280 --> 00:27:01,520 Speaker 8: for them because now you're in the vicinity of neutral. 546 00:27:01,760 --> 00:27:04,320 Speaker 8: Now you need a much better credible sense of data. 547 00:27:04,480 --> 00:27:07,400 Speaker 5: How do you respond? And I believe Governor Myron sy 548 00:27:07,480 --> 00:27:09,080 Speaker 5: help me here. We got Governor Myron in. 549 00:27:09,080 --> 00:27:11,679 Speaker 2: The nine o'clock hour. I think, how do There's a 550 00:27:11,800 --> 00:27:18,240 Speaker 2: rangy debate, fabulous to moralic article in Bloomberg yesterday on 551 00:27:18,320 --> 00:27:21,360 Speaker 2: the neutral rate. The plug ins of the tailor rule 552 00:27:21,440 --> 00:27:24,680 Speaker 2: in that it's tangential to what you do, but when 553 00:27:24,720 --> 00:27:29,560 Speaker 2: you synthesize Ferulean chasm in and prea misra. Is there 554 00:27:29,560 --> 00:27:32,159 Speaker 2: anything we can believe it in the neutral rate or 555 00:27:32,240 --> 00:27:33,800 Speaker 2: is it just the fog out there? 556 00:27:34,320 --> 00:27:36,960 Speaker 5: You just see the fog, the fog on Park Avenue. 557 00:27:37,080 --> 00:27:40,800 Speaker 2: Yeah, comes down, sure, and you know it avoids the 558 00:27:40,880 --> 00:27:44,640 Speaker 2: JP market building special fog removerent is. 559 00:27:44,560 --> 00:27:47,480 Speaker 5: A very nice fog in our neutral rate analysis. 560 00:27:47,840 --> 00:27:51,240 Speaker 8: So there is always large amounts of uncertainty around the 561 00:27:51,240 --> 00:27:51,840 Speaker 8: neutral rate. 562 00:27:52,400 --> 00:27:54,640 Speaker 9: It does move with structural reasons. 563 00:27:54,680 --> 00:27:56,680 Speaker 8: So there's been this argument for the last few years 564 00:27:56,680 --> 00:27:59,879 Speaker 8: of the neutral rate is higher because corporate and business balance, 565 00:28:00,080 --> 00:28:03,640 Speaker 8: it's are better that there's more fiscal expansion, and then 566 00:28:03,680 --> 00:28:06,200 Speaker 8: Governor Myron is making the point that actually it's going 567 00:28:06,320 --> 00:28:11,120 Speaker 8: down because of tariffs and lower immigration. I think we're 568 00:28:11,119 --> 00:28:14,879 Speaker 8: not going to know, But what I am taking away 569 00:28:14,880 --> 00:28:17,320 Speaker 8: from that is whether it's three or two and a 570 00:28:17,359 --> 00:28:19,560 Speaker 8: half at funds, is it four and a quarter? You're 571 00:28:19,560 --> 00:28:24,000 Speaker 8: not hearing much from people saying actually, policy is not restrictive. 572 00:28:24,160 --> 00:28:26,359 Speaker 8: I think this will be the key question next day 573 00:28:26,359 --> 00:28:29,240 Speaker 8: of the fact that's three four times they get into 574 00:28:29,240 --> 00:28:31,440 Speaker 8: the vicinity of neutral, which I would say is two 575 00:28:31,440 --> 00:28:32,840 Speaker 8: and a half to three and a half. That's how 576 00:28:32,880 --> 00:28:35,920 Speaker 8: we're thinking about it, and so they can still cut 577 00:28:35,960 --> 00:28:39,240 Speaker 8: for now and then watch to see how do different 578 00:28:39,320 --> 00:28:42,080 Speaker 8: parts of the economy respond to interest rates. That's going 579 00:28:42,120 --> 00:28:44,920 Speaker 8: to be the best metric of how neutral how restrictive 580 00:28:44,960 --> 00:28:46,920 Speaker 8: are rates, And it's going to vary. If you're in 581 00:28:47,000 --> 00:28:50,840 Speaker 8: AI investment and may not be that restrictive. Housing it's 582 00:28:50,920 --> 00:28:51,600 Speaker 8: very restrictive. 583 00:28:51,720 --> 00:28:52,000 Speaker 5: Also. 584 00:28:52,080 --> 00:28:56,280 Speaker 2: Three stooges monetary policy step by steps exactly. 585 00:28:56,880 --> 00:28:59,880 Speaker 6: If I'm a credit analyst in the Core plus bond fund, 586 00:29:00,240 --> 00:29:02,440 Speaker 6: so I haven't even bothered to get from my cubicle, 587 00:29:02,560 --> 00:29:04,880 Speaker 6: go to your corner office and it's you ideas, are 588 00:29:04,880 --> 00:29:06,240 Speaker 6: you open to taking credit risk? 589 00:29:06,560 --> 00:29:06,760 Speaker 7: Oh? 590 00:29:06,840 --> 00:29:09,400 Speaker 8: Absolutely, so we do like credit risk. We think we're 591 00:29:09,400 --> 00:29:12,920 Speaker 8: in a subtrend growth environment one to two percent. So 592 00:29:13,200 --> 00:29:17,120 Speaker 8: you know, the overall macro pictures positive for risk. Company 593 00:29:17,160 --> 00:29:20,400 Speaker 8: fundamentals look fabulous. I mean a few months ago I 594 00:29:20,440 --> 00:29:23,240 Speaker 8: was nervous that do company margins come down because they 595 00:29:23,320 --> 00:29:26,680 Speaker 8: absorb tariffs. We haven't seen that they've absorbed tariffs and 596 00:29:26,760 --> 00:29:30,480 Speaker 8: they've managed to keep margins high. So company fundamentals are strong. 597 00:29:30,560 --> 00:29:32,160 Speaker 8: But here's why I need to talk to the analysts 598 00:29:32,160 --> 00:29:36,000 Speaker 8: all the time. Dispersion is increasing, whether it's securitized credit, 599 00:29:36,040 --> 00:29:39,240 Speaker 8: whether it's investment grade credit with the LBO risk, whether 600 00:29:39,280 --> 00:29:41,840 Speaker 8: it's high yield. You are seeing some defaults. So we 601 00:29:41,920 --> 00:29:45,320 Speaker 8: need the analysts, We need the research to do the work, 602 00:29:45,560 --> 00:29:47,560 Speaker 8: not just at the broad sector level, but at the 603 00:29:47,600 --> 00:29:50,440 Speaker 8: company level, and then tell us this is what you overweight, 604 00:29:50,520 --> 00:29:52,600 Speaker 8: and importantly, this is what you underweight. 605 00:29:52,720 --> 00:29:55,840 Speaker 2: Can I beg We'll give you three segments, will blow 606 00:29:55,840 --> 00:29:59,160 Speaker 2: out an hour. I want you to come here, the 607 00:29:59,200 --> 00:30:02,560 Speaker 2: guy that's wor guy of the woman walking into your office, 608 00:30:02,560 --> 00:30:07,080 Speaker 2: as Paul brilliantly describes who's looking at private credit. The 609 00:30:07,120 --> 00:30:12,000 Speaker 2: shadows there, the new CMBs tranches and all that. Bring 610 00:30:12,000 --> 00:30:16,280 Speaker 2: that mathematical beast with you. The two of you together 611 00:30:16,320 --> 00:30:19,160 Speaker 2: would be a real surveillance street. That would be really great. 612 00:30:19,560 --> 00:30:20,080 Speaker 9: I like that. 613 00:30:20,240 --> 00:30:23,040 Speaker 8: Yeah, I think I like that you bring up CMBs 614 00:30:23,080 --> 00:30:25,840 Speaker 8: because there you don't just have to look at the collateral. 615 00:30:26,040 --> 00:30:29,160 Speaker 8: If you look at the collateral, the servicer, the structure, 616 00:30:29,560 --> 00:30:31,280 Speaker 8: and see which tranch you're buying. 617 00:30:31,320 --> 00:30:32,320 Speaker 9: So it requires a lot of work. 618 00:30:32,360 --> 00:30:34,360 Speaker 2: We're going to make that happen. I think Eric still 619 00:30:34,440 --> 00:30:36,360 Speaker 2: he lost so much money last night in the game. 620 00:30:36,400 --> 00:30:37,800 Speaker 2: I'm not sure he's listening. 621 00:30:37,840 --> 00:30:40,560 Speaker 5: Priam Israel had a non jobs they thank you so much. 622 00:30:40,560 --> 00:30:44,680 Speaker 5: She is with JP Morgan Asset Management. Stay with us. 623 00:30:44,880 --> 00:30:55,560 Speaker 2: More from Bloomberg Surveillance coming up after this. 624 00:30:55,560 --> 00:30:59,400 Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday 625 00:30:59,480 --> 00:31:02,800 Speaker 1: starting at an am Eastern on Applecarplay and Android Auto 626 00:31:02,920 --> 00:31:05,760 Speaker 1: with the Bloomberg Business app. You can also watch us 627 00:31:05,800 --> 00:31:09,600 Speaker 1: live every weekday on YouTube and always on the Bloomberg Terminal. 628 00:31:09,720 --> 00:31:13,160 Speaker 2: The last time Tiffany Wilding was on, Folks, she was riveting. 629 00:31:13,480 --> 00:31:16,240 Speaker 2: I cannot it's a blur, folks like Paul and I 630 00:31:16,360 --> 00:31:19,280 Speaker 2: staggered from guests to guests, But I had the clearest 631 00:31:19,400 --> 00:31:24,360 Speaker 2: memory that she just absolutely nailed the tension out there. Yeah, 632 00:31:24,560 --> 00:31:27,080 Speaker 2: is witnessed by price and yield in. 633 00:31:27,080 --> 00:31:28,320 Speaker 5: The American and absolutely. 634 00:31:28,360 --> 00:31:31,440 Speaker 6: Tiffany Wilding joins us. She's an econmress for North America 635 00:31:31,560 --> 00:31:35,760 Speaker 6: for Pimco. Tiffany, were not getting the economic data that 636 00:31:35,840 --> 00:31:38,880 Speaker 6: we're used to getting that the market kind of feeds 637 00:31:38,920 --> 00:31:40,840 Speaker 6: off of. So let me ask you to step back 638 00:31:40,880 --> 00:31:43,400 Speaker 6: and just kind of give us your thirty thousand foot 639 00:31:43,480 --> 00:31:46,280 Speaker 6: view that you share with your clients these days about 640 00:31:46,320 --> 00:31:47,520 Speaker 6: this US economy. 641 00:31:49,720 --> 00:31:52,400 Speaker 7: Yeah, well, so, yeah, I think taking a step back 642 00:31:52,480 --> 00:31:57,000 Speaker 7: what we've noticed is that the economy is behaving, you know, 643 00:31:57,080 --> 00:31:59,720 Speaker 7: somewhat differently than I think most people expected, just given 644 00:31:59,760 --> 00:32:03,120 Speaker 7: the veryious policy pivots that the Trump administration is implemented. 645 00:32:03,560 --> 00:32:06,960 Speaker 7: So obviously we've gotten really large tariff increases, we have 646 00:32:07,160 --> 00:32:11,360 Speaker 7: immigration policy, U turns, we have various other things, And 647 00:32:11,360 --> 00:32:14,560 Speaker 7: I think the surprising thing for many is that, you know, 648 00:32:14,720 --> 00:32:18,800 Speaker 7: the manifestation of those policy changes in the economy would 649 00:32:18,800 --> 00:32:21,560 Speaker 7: be through price level adjustments. And I think what we're 650 00:32:21,600 --> 00:32:23,760 Speaker 7: seeing as we go through the year and we're gaining 651 00:32:23,800 --> 00:32:28,000 Speaker 7: more information, is that companies aren't necessarily increasing prices by 652 00:32:28,040 --> 00:32:30,280 Speaker 7: as much as people expected. They are doing it on 653 00:32:30,320 --> 00:32:34,000 Speaker 7: the margin, but they're also trying to reduce costs. And 654 00:32:34,120 --> 00:32:36,360 Speaker 7: part of the way that they're reducing costs is they're 655 00:32:36,520 --> 00:32:39,640 Speaker 7: just maintaining their labor costs, so they're even trying to 656 00:32:39,680 --> 00:32:43,560 Speaker 7: actually reduce labor costs. So we've seen a pretty material 657 00:32:43,640 --> 00:32:48,040 Speaker 7: deceleration in labor market activity this year. We think that 658 00:32:48,240 --> 00:32:51,000 Speaker 7: part of the reason why they're choosing to do this 659 00:32:51,600 --> 00:32:54,560 Speaker 7: is that you have clashing forces. You have this immigration 660 00:32:55,160 --> 00:32:58,080 Speaker 7: you turn, there's less labor supply, less people coming into 661 00:32:58,080 --> 00:33:01,120 Speaker 7: the labor market, but you also have this technology boom, 662 00:33:01,120 --> 00:33:03,680 Speaker 7: that's also that's happening in the background, and so they're 663 00:33:03,720 --> 00:33:06,000 Speaker 7: trying to figure out how can we save money through 664 00:33:06,320 --> 00:33:09,560 Speaker 7: implementation of technology, and we think that's also having an 665 00:33:09,560 --> 00:33:11,920 Speaker 7: effect here. So I think that's why you're seeing more 666 00:33:11,920 --> 00:33:14,520 Speaker 7: concern at a federal Reserve officials more recently. We think 667 00:33:14,520 --> 00:33:17,240 Speaker 7: it's why they, you know, lowered took the first step 668 00:33:17,240 --> 00:33:21,200 Speaker 7: to start lowering interest rates again in September, and ultimately 669 00:33:21,240 --> 00:33:23,160 Speaker 7: we think that will be a reason for them to 670 00:33:23,480 --> 00:33:26,040 Speaker 7: cut a couple more times this year as that labor 671 00:33:26,080 --> 00:33:28,280 Speaker 7: market stays weak. But you know, twenty twenty six I 672 00:33:28,320 --> 00:33:31,040 Speaker 7: think does look a lot better as you get some 673 00:33:31,080 --> 00:33:34,480 Speaker 7: more of the one big beautiful bill stimulus that's you know, 674 00:33:34,520 --> 00:33:36,360 Speaker 7: that's hitting the economy to offset all of this. 675 00:33:36,560 --> 00:33:39,320 Speaker 6: Yeah, that's kind of where I wanted to go, Tiffany 676 00:33:39,360 --> 00:33:42,840 Speaker 6: about twenty twenty six and the tax cuts, the credits, 677 00:33:42,880 --> 00:33:46,040 Speaker 6: those things that were in fact included in that tax bill. 678 00:33:47,080 --> 00:33:49,360 Speaker 6: Are you putting that into your model in twenty twenty 679 00:33:49,360 --> 00:33:51,120 Speaker 6: six as a driver of this economy. 680 00:33:52,560 --> 00:33:55,560 Speaker 7: Yeah, I mean so if you look at you know, 681 00:33:55,800 --> 00:34:00,400 Speaker 7: the tax cuts were retroactive, which is which means means 682 00:34:00,480 --> 00:34:03,840 Speaker 7: that you know, both businesses and households will get a 683 00:34:03,920 --> 00:34:08,200 Speaker 7: one time larger check. You're seeing that in the business 684 00:34:08,640 --> 00:34:13,160 Speaker 7: tax data already that the Treasury publishes, but you're also 685 00:34:13,239 --> 00:34:16,000 Speaker 7: going to see it when consumers, when households file for 686 00:34:16,080 --> 00:34:18,960 Speaker 7: refunds early next year. The refund checks are going to 687 00:34:18,960 --> 00:34:22,480 Speaker 7: be large, especially those households that work jobs that where 688 00:34:22,520 --> 00:34:25,680 Speaker 7: they work overtime. Any tax is paid in twenty twenty 689 00:34:25,680 --> 00:34:28,239 Speaker 7: five on overtime is basically going to be rebated back 690 00:34:28,239 --> 00:34:30,440 Speaker 7: to them at the beginning of twenty twenty six. So 691 00:34:30,520 --> 00:34:33,080 Speaker 7: that's going to be a pretty large refund check. In 692 00:34:33,120 --> 00:34:36,319 Speaker 7: addition to the enhanced child tax credits, et cetera. So 693 00:34:36,680 --> 00:34:39,239 Speaker 7: we think that will help. It's a one time thing 694 00:34:39,440 --> 00:34:42,279 Speaker 7: for sure, you know, in terms of the retroactiveness of it, 695 00:34:42,480 --> 00:34:45,120 Speaker 7: but it will help to sort of bridge the economy 696 00:34:45,160 --> 00:34:48,120 Speaker 7: through this period of weakness we think, you know, as 697 00:34:48,680 --> 00:34:50,479 Speaker 7: you know, as you have the tariffs that are also 698 00:34:50,520 --> 00:34:51,080 Speaker 7: starting to bite. 699 00:34:51,600 --> 00:34:54,680 Speaker 2: Our global technical director wants to know if he can 700 00:34:55,000 --> 00:34:57,120 Speaker 2: you know the rebate he's going to get for overtime. 701 00:34:57,400 --> 00:35:00,320 Speaker 5: Yeah, I mean, you know, is that incoming boom boom. 702 00:35:00,320 --> 00:35:02,320 Speaker 2: I think that's going to be a brilliant Tiffany Wilding 703 00:35:02,400 --> 00:35:04,800 Speaker 2: with us with Pimco. Tiffany I just brought up Atlanta 704 00:35:04,880 --> 00:35:09,279 Speaker 2: GDP now three point eight four to two percent. I 705 00:35:09,320 --> 00:35:12,920 Speaker 2: did a regression back to the end of twenty twenty 706 00:35:12,920 --> 00:35:16,680 Speaker 2: two the Yardnni and Campora low and the answer is 707 00:35:16,719 --> 00:35:21,799 Speaker 2: where plus a solid one point two standard deviations. We've 708 00:35:21,800 --> 00:35:24,840 Speaker 2: been there. This is a third time. I mean, is 709 00:35:24,880 --> 00:35:27,759 Speaker 2: that a one off kind of boom? Do you think 710 00:35:27,760 --> 00:35:31,520 Speaker 2: it just pulls back or do we just completely misjudge 711 00:35:31,920 --> 00:35:36,200 Speaker 2: this sustained real GDP is Tarsan slock of Apollo mentioned 712 00:35:36,200 --> 00:35:37,520 Speaker 2: earlier this week. 713 00:35:39,640 --> 00:35:42,279 Speaker 7: Yeah, well, I think we've gotten we got really good 714 00:35:42,320 --> 00:35:46,600 Speaker 7: news with the recent revisions to second quarter GDP, which 715 00:35:46,760 --> 00:35:50,799 Speaker 7: also included you know what the BEA calls annual benchmark revisions, 716 00:35:50,920 --> 00:35:54,000 Speaker 7: and they kind of knew data that's more complete that 717 00:35:54,239 --> 00:35:56,880 Speaker 7: is included in that. And one of the big things 718 00:35:56,920 --> 00:36:01,319 Speaker 7: that was revised higher was the savings rate over the 719 00:36:01,400 --> 00:36:04,799 Speaker 7: last several years. So it just suggests that, you know, 720 00:36:04,880 --> 00:36:08,359 Speaker 7: consumers have a bigger buffer here. We've been talking about 721 00:36:08,360 --> 00:36:10,640 Speaker 7: this sort of K shaped economy now for a couple 722 00:36:10,719 --> 00:36:13,960 Speaker 7: of years where you have you know, higher end consumers 723 00:36:14,000 --> 00:36:17,520 Speaker 7: that have you know, higher wealth as a result of 724 00:36:17,560 --> 00:36:20,919 Speaker 7: increasing housing prices and equity markets since the pandemic, et cetera. 725 00:36:21,200 --> 00:36:23,320 Speaker 7: And so you have consumers that have a bigger buffer 726 00:36:23,360 --> 00:36:26,000 Speaker 7: coming into this period, and that argues for them just 727 00:36:26,000 --> 00:36:29,000 Speaker 7: to be more resilient. We think that the resilience and 728 00:36:29,040 --> 00:36:32,520 Speaker 7: the consumer that you're seeing is related to that. You know, ultimately, 729 00:36:32,560 --> 00:36:34,480 Speaker 7: we think you still will see some slow down in 730 00:36:34,520 --> 00:36:37,960 Speaker 7: the fourth quarter, but yeah, the consumer looks better, Tiffany. 731 00:36:38,000 --> 00:36:39,759 Speaker 5: I'm sorry, it wasn't focused there. 732 00:36:39,840 --> 00:36:43,520 Speaker 2: Amory Horning just came up to our gorgeous studio and 733 00:36:43,640 --> 00:36:47,480 Speaker 2: placed your New York Yankees jacket like the one Lisa 734 00:36:47,560 --> 00:36:53,320 Speaker 2: has on the glass. Wow, Tiffany said, I was a rattle. Tiffany, 735 00:36:53,440 --> 00:36:57,240 Speaker 2: I got an average line and that regression of Atlanta GDP. 736 00:36:57,480 --> 00:37:01,120 Speaker 2: Now the average line back to the Denny and Compori 737 00:37:01,239 --> 00:37:05,840 Speaker 2: stock market low October twenty twenty two, Ready, Paul, two 738 00:37:05,920 --> 00:37:07,400 Speaker 2: point six percent? 739 00:37:07,600 --> 00:37:09,440 Speaker 5: Yeah is average? Yeah? 740 00:37:09,480 --> 00:37:13,279 Speaker 2: Have we just misjudged, Tiffany the boom that we're in 741 00:37:13,320 --> 00:37:14,520 Speaker 2: because of technology. 742 00:37:16,160 --> 00:37:16,600 Speaker 5: Yeah? 743 00:37:16,640 --> 00:37:19,879 Speaker 7: Well, so, I think that you're absolutely right. Growth has 744 00:37:19,960 --> 00:37:23,400 Speaker 7: been since the pandemic closer to two and a half 745 00:37:23,440 --> 00:37:27,120 Speaker 7: to three percent. But we think one of the reasons 746 00:37:27,120 --> 00:37:31,040 Speaker 7: why that's happening is because you've all over that period, 747 00:37:31,120 --> 00:37:34,400 Speaker 7: you also had an immigration boom that was happening, and 748 00:37:34,440 --> 00:37:38,319 Speaker 7: that people come into the country, they consume, They not 749 00:37:38,360 --> 00:37:42,319 Speaker 7: only work, but they consume, and so you had those 750 00:37:42,360 --> 00:37:47,160 Speaker 7: inflows that were also resulting in higher growth performance. So 751 00:37:47,200 --> 00:37:49,960 Speaker 7: we do think that part of the reason why growth 752 00:37:50,040 --> 00:37:52,759 Speaker 7: was so elevated in that period that is coming off 753 00:37:52,840 --> 00:37:55,200 Speaker 7: now as you have a U turn in that policy. 754 00:37:55,520 --> 00:37:57,600 Speaker 7: So we think the underlying level of growth in the 755 00:37:57,719 --> 00:38:00,560 Speaker 7: US economy has stepped down from that two and a 756 00:38:00,640 --> 00:38:03,320 Speaker 7: half to three percent pace, you know, to something closer 757 00:38:03,360 --> 00:38:06,520 Speaker 7: to two percent where we were pre pandemic, you know. 758 00:38:06,560 --> 00:38:09,800 Speaker 7: And then I think that broader question is how much 759 00:38:10,080 --> 00:38:13,439 Speaker 7: is you know, the technology related investment trends that we're 760 00:38:13,440 --> 00:38:16,399 Speaker 7: seeing associated with AI. How much room does that have 761 00:38:16,440 --> 00:38:18,080 Speaker 7: to run? And how much of a boost could we 762 00:38:18,120 --> 00:38:20,040 Speaker 7: have from that? And we think that there is some 763 00:38:20,160 --> 00:38:22,799 Speaker 7: room for that to run. It does look like we're 764 00:38:22,840 --> 00:38:24,960 Speaker 7: in the early stages of that. Even though the equity 765 00:38:25,000 --> 00:38:28,719 Speaker 7: markets have have been trading that theme for quite some time. 766 00:38:28,960 --> 00:38:31,920 Speaker 7: The actual investment that we're getting in terms of data centers, 767 00:38:32,680 --> 00:38:34,759 Speaker 7: you know, and the hard investments, we think that is 768 00:38:35,120 --> 00:38:37,160 Speaker 7: actually just kind of more in the early days here, 769 00:38:37,400 --> 00:38:38,719 Speaker 7: so that has some more room to run. 770 00:38:38,880 --> 00:38:40,600 Speaker 5: Tiffany well, and thank you so much. 771 00:38:40,680 --> 00:38:42,399 Speaker 2: Love when you come on, I kind of thank you 772 00:38:42,480 --> 00:38:45,000 Speaker 2: North America, pim Co, just absolutely brilliant. 773 00:38:45,360 --> 00:38:50,239 Speaker 1: This is the Bloomberg Surveillance Podcast, available on Apple, Spotify, 774 00:38:50,360 --> 00:38:54,600 Speaker 1: and anywhere else you get your podcasts. Listen live each weekday, 775 00:38:54,760 --> 00:38:57,960 Speaker 1: seven to ten am Easter and on Bloomberg dot com, 776 00:38:58,160 --> 00:39:01,960 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 777 00:39:02,239 --> 00:39:05,360 Speaker 1: You can also watch us live every weekday on YouTube 778 00:39:05,640 --> 00:39:07,680 Speaker 1: and always on the Bloomberg terminal